Hyundai Motor India IPO is garnering a lot of attention, especially because it is one of the largest public offerings in the Indian automotive sector. Investors have until October 17, 2024 to apply for the IPO, and it has garnered a lot of interest due to the company’s strong market presence. Below is a detailed look at key information about the IPO and how to know if it is a suitable investment.
Key Details of Hyundai Motor India IPO
Grey Market Premium (GMP): As of today, Hyundai Motor India shares are trading at a premium of ₹65 in the grey market. While this reflects some demand, it does suggest that potential listing gains may not be particularly substantial. GMP can indicate investor sentiment ahead of an official listing but does not guarantee future performance.
Price Band: The price band for the Hyundai Motor India IPO has been set between ₹1865 and ₹1960 per share. This pricing reflects the company’s valuation given its market leadership in India’s automobile sector. Investors will need to assess whether this price range suits their investment objectives, especially if they are looking for long-term value.
IPO Subscription Timeline: The IPO opened for bidding on October 15, 2024 and will remain open till October 17, 2024. Interested investors can place bids within this window. Typically, the last day of bidding sees a surge in subscriptions, especially from institutional investors.
Hyundai Motor India IPO: Issue Size
With this IPO, Hyundai Motor India hopes to raise ₹27,870.16 crore. The offer is structured as an Offer for Sale (OFS), which means no new shares will be issued, and the company will not receive any proceeds. Instead, existing shareholders will sell their shares. Investors should note that OFS does not contribute to the company’s balance sheet, which means the proceeds will not be used for expansion or capital investments.
Hyundai Motor India IPO: Lot Size
Investors can bid in lots, with one lot consisting of 7 shares. This means the minimum investment at the lower end of the price band (₹1865) would be ₹13,055. Retail investors can apply for multiple lots, but it is more accessible to individual investors due to the smaller lot size.
Hyundai Motor India IPO: Subscription Status (Day 1)
As of 2:48 pm on the first day, the IPO was subscribed 0.15 times, with the retail portion 0.23 times, the non-institutional investor (NII) portion 0.10 times and the qualified institutional buyer (QIB) portion 0.01 times. These figures reflect early interest in the IPO, but most institutional demand often comes on the last day.
Hyundai Motor India IPO: Important Dates
The expected allotment date for the IPO is October 18, 2024, with the shares likely to be listed on both BSE and NSE on October 22, 2024. The ‘T+3’ rule applies here, meaning the listing takes place three days after the final allotment.
Hyundai Motor India IPO: Lead Managers and Registrars
The IPO is being managed by several leading investment banks, including Kotak Mahindra Capital, Citigroup Global Markets and Morgan Stanley. KFin Technologies is the registrar responsible for handling the share allotment process.
Hyundai Motor India IPO: Should you apply?
Several market experts have opined on whether investors should apply for the Hyundai Motor India IPO, giving insights into its long-term prospects and short-term gains potential.
Hyundai Motor India IPO: Gaurav Garg (Lemon Markets)
Garg has given a ‘subscribe’ rating to the IPO, citing Hyundai Motor India’s operational efficiency and strong financial performance. The company sources nearly 90% of its components locally, a factor that has played a key role in maintaining high levels of profitability. Hyundai’s return on capital employed (RoCE) is over 50% for FY24, and its revenue grew at a 19.4% CAGR between FY21 and FY24. They suggest that even though short-term listing gains may be modest, the IPO offers a good long-term investment opportunity.
Master Capital
The firm also rates the IPO as a ‘Buy’, pointing to Hyundai’s strategic plans to maintain its leadership in the passenger vehicle segment. Hyundai is increasing its focus on premiumisation and electric vehicles (EVs), which positions it well for future growth. Master Capital acknowledges that the IPO is perfectly priced, meaning the stock’s valuation is reasonable relative to market expectations, but it still recommends the stock for long-term investors.
Shivani Nyati (Swastik Investments)
Nyati offers a more cautious view, pointing out that the fully priced nature of the IPO could limit substantial short-term gains. However, she notes that long-term investors who are patient and willing to tolerate potential listing volatility should consider applying. Given the offer-for-sale structure, the proceeds will not directly benefit the company, and this could limit immediate growth opportunities.
Other analysts: Several brokerages, including Aditya Birla, ICICI Direct, SBI Capital and Anand Rathi, have also issued positive reviews for the IPO, particularly highlighting Hyundai’s strong market position and future prospects in the EV space.
Hyundai Motor India IPO: A Long-Term Prospects
Hyundai Motor India presents a strong case for long-term investors due to its solid fundamentals, strategic initiatives and market leadership.
Market Leadership
Hyundai is the second-largest carmaker in India, behind Maruti Suzuki. The company has a well-diversified product portfolio, which includes everything from budget-friendly hatchbacks to premium SUVs. Hyundai’s market dominance in both conventional internal combustion engine (ICE) vehicles and its increasing focus on electric vehicles puts it in a favorable position for long-term growth.
Operational Efficiency
One of Hyundai’s strengths is its high level of localization. By sourcing 90% of its parts from within India, the company has managed to keep costs low while maintaining strong relationships with local suppliers. This has also protected it from global supply chain disruptions that have impacted other automakers.
Electric Vehicle Strategy
As India moves towards greener transportation options, Hyundai is well-positioned to gain market share in the EV segment. The company is expanding its EV offerings and premiumizing its vehicle lineup, which could lead to higher margins in the long term.
Strong Financial Position
Over the past three years, Hyundai has demonstrated strong revenue growth, achieving a CAGR of 19.4% between FY21 and FY24. The company’s RoCE of over 50% in FY24 reflects its ability to efficiently generate returns on invested capital, an attractive factor for investors.
Risk Factors In Hyundai Motor India IPO
Although Hyundai presents a compelling case, there are risks that potential investors should be aware of:
Fully priced IPO: As noted by several analysts, the IPO is fully priced, which could limit the immediate upside potential. Investors looking for quick listing gains may find that the stock does not provide enough short-term gains.
Offer for Sale Structure
Since this IPO is an OFS, the company will not receive any fresh capital from the proceeds. Investors looking for companies using IPO proceeds for expansion or growth projects should consider this.
Intense Competition
Hyundai faces competition from both traditional automakers and new entrants in the EV market. Companies like Tata Motors are ramping up their EV efforts, and new players like Ola Electric are also entering the space. Hyundai will need to constantly innovate to maintain its market position.
Macroeconomic Conditions
The automotive industry is highly sensitive to macroeconomic conditions, including interest rates, inflation, and consumer spending. Any slowdown in the economy could negatively impact Hyundai’s sales and profitability.
Conclusion
In summary, the Hyundai Motor India IPO is an attractive option for long-term investors who believe in the company’s ability to maintain market leadership, especially in the evolving EV landscape. The company’s strong financial position, local sourcing strategy, and operational efficiency all contribute to its appeal. While short-term gains may be limited due to the full-price nature of the IPO, Hyundai’s solid fundamentals and future growth prospects make it an attractive option for those with a long-term investment horizon.
Investors seeking quick listing gains may find this IPO less attractive, but for those looking to invest for the long term, Hyundai offers an opportunity to participate in the growth of one of India’s top automotive companies.
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