Hyundai Motor India's IPO: Opportunities and Challenges Ahead
Explore Hyundai Motor India's landmark IPO as it is set to raise ₹27,870 crore.
The current Grey Market Premium (GMP) stands at ₹75, suggesting an estimated listing price of ₹2,035 per share, which could yield a 3.83% gain.
Hyundai Motor India is set to launch the largest Initial Public Offering (IPO) in Indian history, opening for bidding from October 15 to October 17, 2024.
The IPO, valued at ₹27,870 crore, will be listed on both the BSE and NSE, with a price band of ₹1,865 to ₹1,960 per equity share.
The current Grey Market Premium (GMP) stands at ₹75, suggesting an estimated listing price of ₹2,035 per share, which could yield a 3.83% gain.
This IPO is entirely an Offer for Sale (OFS) of 142,194,700 shares, reducing Hyundai Motor Company’s stake from 100% to 82.50% post-IPO.
IPO Structure and Key Details
Investors can bid for at least 7 shares, with a minimum investment of ₹13,720 and a maximum of ₹192,080.
High-net-worth individuals (HNIs) can bid for 105 shares or more, with some bids over ₹1 million.
Hyundai has raised ₹8,315.28 crore from anchor investors by offering 42,424,890 shares. Half of these shares will be locked until November 17, 2024, and the rest until January 16, 2025.
The IPO will allocate up to 50% of shares for Qualified Institutional Buyers (QIBs), at least 35% for Retail Individual Investors (RIIs), and 15% for Non-Institutional Investors (NIIs). The final share allotment will be announced on October 18, with refunds and shares credited to accounts by October 21.
The shares are expected to list on October 22.
Should You Invest?
Hyundai Motor India is an important company that makes cars. It competes with other big car companies like Tata Motors, Maruti Suzuki, and Mahindra & Mahindra.
There are also new companies like Kia Motors and MG that are joining the market and making things more competitive. Investors should be aware of possible conflicts of interest since Hyundai operates alongside Kia Corporation and Kia India, which are both part of Hyundai Motor Company (HMC).
Hyundai relies on Hyundai Motor Company (HMC) for important parts and research.
If there are problems in this relationship, it could hurt Hyundai’s business.
They also pay a 3.5% royalty on their earnings to HMC. If this fee goes over the SEBI limit of 5%, it could affect their profits.
Hyundai depends on a few suppliers for key materials, so any disruptions or rising costs, like for steel, could impact their production and profit margins.
The company aims to increase its production to 1.07 million cars per year by 2028. They are also making progress in the electric vehicle (EV) market, planning to launch the Creta EV in FY25, along with the premium Ioniq model. With a 15% market share in India and strong EBITDA margins of 13.8% in Q1 FY25, Hyundai looks set for future growth.
The IPO is priced at a PE ratio of 26.3x FY24 earnings, which is better than Maruti Suzuki’s 30.8x. Hyundai’s stock performance after the IPO will depend on the overall market conditions.
The automotive industry is facing excess inventory and lower demand. This could affect stock prices.
However, Hyundai has a positive outlook in both traditional and electric vehicle markets.
This makes it a good choice for long-term investors.
