Hyundai Motor India stock

Hyundai Motor India IPO Opens Tomorrow: Should You Bid for ₹27,856 Crore Issue?

Hyundai Motor India Ltd. (HMIL), the Indian subsidiary of South Korean auto giant Hyundai Motor, is launching its Initial Public Offering (IPO) from October 15 to October 17, 2024. The company aims to raise ₹27,856 crore, making it the largest IPO in India’s history. The price band for the IPO is set between ₹1,865 and ₹1,960 per share, with bids allowed in lots of seven shares.

Key Highlights of the IPO

Size of the IPO: ₹27,856 crore, making it the largest-ever IPO in India.
IPO Dates: Open for subscription from October 15, 2024, to October 17, 2024.
Price Range: ₹1,865 to ₹1,960 per share.
Offer for Sale (OFS): The IPO is a complete OFS, with the parent company selling 14.2 crore shares, or 17.5% of Hyundai India’s equity.
Grey Market Premium (GMP): The GMP has dropped significantly, from ₹365 on October 4 to ₹65 as of October 14.
Anchor Investors: Half of the anchor book is allocated to domestic institutions, and the other half to international investors. Key participants include BlackRock Inc. and Singapore’s sovereign wealth fund GIC Pte.

Brokerage Reviews

ICICI Direct:

- Rating: Subscribe
- Rationale: ICICI Direct believes Hyundai has strong growth potential due to industry tailwinds, solid financials, and a competitive SUV lineup. While listing gains might be limited, they foresee healthy double-digit returns over the medium to long term.
- Valuation: At the upper price band, HMIL commands a 26x P/E, 16.5x EV/EBITDA, and 2.3x P/S on FY24 estimates, which is slightly discounted compared to Maruti Suzuki.

SBI Securities:

- Rating: Subscribe for long-term
- Rationale: Hyundai is the second-largest market player in the Indian passenger vehicle segment, with a strong SUV lineup. Its high margins, brand strength, and export potential set it apart. SBI Securities sees Hyundai as well-positioned for long-term growth.
- Valuation: Hyundai is valued at 26.3x FY24 EPS at the upper price band.

Arihant Capital:

- Rating: Subscribe for long-term
- Rationale: Hyundai’s diversified offerings, along with its ambition to be a major player in the electric vehicle (EV) segment, make it a solid long-term bet. Arihant Capital also highlighted Hyundai’s high Return on Net Worth (RoNW) compared to its peers.

Mayuresh Joshi, William O’ Neil:

- Rationale: Joshi recommended subscribing, noting Hyundai’s attractive valuation, strong product offerings, and pricing. However, he raised concerns about the liquidity drain in the market due to large IPOs like Hyundai and the upcoming Swiggy IPO.

Company Overview

Hyundai Motor India is one of the largest Original Equipment Manufacturers (OEMs) in the country, with a 14.6% domestic market share. The company offers 13 models across various segments, with a focus on SUVs and electric vehicles. Hyundai is the second-largest passenger vehicle exporter from India, highlighting its strong international presence. In 2024, the company sold 5.77 lakh units, a figure almost flat compared to the previous year.

Advantages of the IPO

Second-Largest Player: Hyundai is the second-largest automaker in India, second only to Maruti Suzuki, giving it a competitive edge in the market.
SUV-Dominated Lineup: Hyundai’s strong presence in the SUV segment, with popular models like Creta, Venue, and Alcazar, is a key revenue driver due to higher profit margins.
Growth in EV Segment: Hyundai has expressed plans to expand its presence in the electric vehicle space, aligning with the growing demand for green technology.
Strong Financials: The company has robust financials, with high operating margins and return ratios compared to peers.
International Reach: Hyundai’s status as a top exporter from India reflects its strong international market potential, particularly in emerging markets.

Disadvantages of the IPO

Limited Listing Gains: ICICI Direct has highlighted that investors may not see significant short-term gains from the listing, making it less attractive for short-term traders.
Falling Grey Market Premium: The GMP for Hyundai’s IPO shares has declined by over 80% in the last 10 days, reflecting market concerns about the IPO’s pricing.
Market Liquidity Concerns: The large size of the IPO may drain liquidity from the Indian market, potentially impacting other stock investments and future IPOs.
Decline in Sales: Hyundai’s sales in September showed a 10% year-on-year decline, raising concerns about the company’s short-term growth trajectory.

Conclusion

Hyundai Motor India’s IPO presents a solid long-term investment opportunity due to its strong market position, diverse product portfolio, and plans to expand into the electric vehicle segment. While short-term listing gains may be limited, analysts from ICICI Direct, SBI Securities, and Arihant Capital recommend subscribing for long-term returns. However, investors should consider the declining grey market premium and the potential liquidity drain from this large IPO.

FAQs

When does the Hyundai Motor India IPO open and close for subscription?

- The IPO opens on October 15, 2024, and closes on October 17, 2024.

What is the price range for Hyundai Motor India’s IPO shares?

- The price band is set between ₹1,865 and ₹1,960 per share.

What is the size of Hyundai Motor India’s IPO?

- The IPO is worth ₹27,856 crore, making it the largest IPO in Indian history.

What is the grey market premium (GMP) for Hyundai’s IPO shares?

- The GMP has fallen sharply to ₹65 from ₹365 in the past 10 days.

What are analysts’ views on Hyundai Motor India’s IPO?

- ICICI Direct, SBI Securities, and Arihant Capital have all recommended subscribing for long-term growth. They expect robust returns over the medium to long term.