Hyundai India’s Historic IPO to Open on October 15: All You Need to Know

Hyundai Motor India Limited, the Indian subsidiary of South Korea's Hyundai Motor Company, is preparing for its much-anticipated Initial Public Offering (IPO). The IPO opens on October 15, 2024, marking Hyundai's stock market debut in India. Notably, this will be the first market outside South Korea where the company is listed.

Since it entered into India in 1996, Hyundai has become one of the leading automakers, consistently ranking second or third in the market. Over the years, the company has sold more than 8 million cars in India.

Hyundai's Vision for India

Hyundai aims to position India as a global manufacturing and export hub. The IPO is seen as a major step toward achieving this vision. KFin Technologies is the registrar for the public issue, while investment banks like Kotak, Citi, HSBC, JP Morgan, and Morgan Stanley are advising on the IPO.

India's Biggest IPO

Hyundai's IPO is set to raise Rs.27,870 crore, surpassing the Rs.21,008 crore raised by Life Insurance Corporation (LIC) in 2022, making it the largest IPO in Indian history. The entire offering is an Offer for Sale (OFS), where Hyundai plans to sell 14.22 crore shares, representing 17.5% of the company's stake. The price band is set at Rs.1,865 to Rs.1,960 per share, and investors can bid in lots of 7 shares.

The IPO will close on October 18, and the allotment will be finalized the same day. The shares are expected to be listed on the stock exchange on October 22, 2024. At the upper end of the price band, Hyundai Motor India will have a valuation of $18 billion (Rs.1.6 lakh crore), approximately 40% of its parent company's $45 billion valuation.

Employee Shares and EV Focus

Hyundai has set aside 7.78 lakh shares for employees, valued between Rs.131 to Rs.138 crore, offering them a discount of Rs.186 per share. Though the IPO proceeds will not directly benefit Hyundai India, some of the funds raised will be allocated to research and development, particularly in electric vehicles (EVs) and hybrid technologies.

First Car Manufacturer IPO in Two Decades

This IPO is not just the largest in India’s history but also marks the first time a carmaker has gone public in over two decades. The last automaker to list in India was Maruti Suzuki in 2003. Hyundai will now join major players like Maruti Suzuki, Tata Motors, and Mahindra & Mahindra on the stock exchange.

Hyundai in India: A Key Market

India is Hyundai's third-largest market globally, after the U.S. and South Korea, contributing 15% to the company’s global sales. Hyundai has already invested $5 billion in the Indian market and plans to invest an additional $4 billion in the coming years.

Hyundai's Financial Performance

Hyundai recorded impressive financial growth, with a revenue of Rs.71,302.33 crore in FY24, up from Rs.61,436.64 crore in FY23 and Rs.47,966.05 crore in FY22. For the April to June 2024 quarter, the company reported a revenue of Rs.17,567.98 crore.

The company’s profit after tax (PAT) also saw an increase, from Rs.2,901.59 crore in FY22 to Rs.6,060.04 crore in FY24. In the April-June 2024 quarter, Hyundai reported a PAT of Rs.1,489.65 crore.

Declining Grey Market Premium

The Grey Market Premium (GMP), which indicates the premium at which IPO shares trade in the unofficial market before listing, has been declining for Hyundai's IPO. The GMP fell from Rs.570 to Rs.130 in the last two weeks, which may reflect market sentiment, and currently is at around Rs. 60.

Key Risks to Consider

Here are some potential risks for investors to keep in mind:

• Rising Part Prices: The cost of vehicle parts, especially chipsets, has been rising. Any further increases could negatively impact Hyundai’s profitability.
• Production Disruptions: Hyundai’s production could be significantly affected if there are any disruptions at its Chennai plant, the company’s key manufacturing facility.
• Supplier Dependency: Hyundai relies on specific suppliers for essential parts. Any interruption in the supply chain could disrupt production and reduce profitability.
• Intensifying Competition: Hyundai frequently alternates between the second and third positions in the Indian car market. Increased competition, especially from Mahindra & Mahindra, poses a challenge to maintaining its market position.

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Hyundai’s IPO presents an exciting opportunity, but investors should consider both the potential rewards and the risks involved before making a decision.