• Hyundai Motor India is set to launch its IPO, the first by an auto company in India in over two decades.
• Despite a drop in the grey market premium, Hyundai's COO Tarun Garg remains optimistic about the company's growth potential.
• Hyundai Motor India recorded a net profit of Rs 6,060 crore for the year ending March 2024, up 28.7 percent from a year ago.
• The IPO, set to be the largest in India, will open for subscription on October 15, marking a new chapter for Hyundai in India.

In a landmark development for the Indian automobile sector, Hyundai Motor India is preparing to launch its Initial Public Offering (IPO). This event marks the first public issue by an automobile company in India in over two decades, the last one being Maruti Suzuki's listing in 2003. The IPO, valued at Rs 28,000 crore, is entirely a sale of existing shares, with no fresh issue.

However, the lead-up to the IPO has seen Hyundai Motor India Ltd's unlisted share price experience a significant fall. The grey market premium (GMP), an unofficial indicator of the street sentiment ahead of a company's stock exchange listing, has fallen by as much as 75 percent in the last two weeks.

This drop coincides with the Indian unit of South Korean carmaker Hyundai Motor finalising the price band for the IPO and disclosing key details ahead of its much-anticipated public issue.

Data from platforms tracking GMP activities show that the premium for Hyundai Motor India's IPO shares has fallen into a range of Rs 140-145, as of October 9, marking a steep drop from Rs 570 in late September. This could signal moderating demand for the company's shares in the unregulated market.

Hyundai's Growth Prospects Amid Market Fluctuations

Despite the drop in GMP, Hyundai Motor India's Chief Operating Officer Tarun Garg expressed optimism about the company's growth potential. He stated that Indian units of foreign multi-national companies, such as Hyundai India, often command higher valuations due to strong growth prospects and the consumption story in Indian markets. The Price-to-Earnings (P/E) ratio for Hyundai Motor India stands at 27x, compared to 5x for the parent company, Hyundai Motor Company.

On the financial front, Hyundai Motor India recorded a net profit of Rs 6,060 crore for the year ending March 2024, up 28.7 percent from a year ago. The company's revenue grew 15.8 percent year-on-year to Rs 69,829 crore. Despite contributing only 6.5 percent to global revenue and 8 percent to global profitability, Hyundai Motor India is expected to be valued at around 42 percent of the parent company's market capitalisation upon listing.

The public offer will open for subscription on October 15 and conclude on October 17. Anchor investors will bid on October 14. The IPO is entirely an Offer-for-Sale (OFS) of 1.42 crore equity shares by promoter Hyundai Motor Company, with no fresh issue component. Since the public issue is entirely an OFS, Hyundai Motor India Ltd, the second-largest carmaker in India after Maruti Suzuki India, will not receive any proceeds from the IPO.

Hyundai's Future Plans and Market Impact

Hyundai Motor India commenced operations in India in 1996 and currently sells 13 car models across segments. The automaker has one factory outside of Chennai in southern Tamil Nadu state, also dubbed the Detroit of Asia.

The factory has a capacity of 824,000 units per year and is running at a utilisation rate of 94%, leaving little room for growth that would help compete with Maruti Suzuki. Hyundai's current factory is also a key export hub, which manufactures cars that are shipped to South Africa, the Middle East as well as Latin America.

The issue has a strategic allocation plan, with 50% of the shares reserved for Qualified Institutional Buyers (QIBS), 35% for retail investors, and 15% for non-institutional investors. Employees will receive up to 7,78,400 shares at a discounted rate of Rs 186 per share.

The company has plans to invest about Rs 32,000 crore here over the next decade and will be investing to make its Pune plant automated, aiming for a healthy mix of domestic and export sales. On commissioning the Pune facility, its capacity will be 1.07 million per annum, up from 8.24 lakh unit now, which is an addition of 30 per cent by FY28.

This IPO is set to be the largest in India, surpassing LIC's initial share sale of Rs 21,000 crore. HMIL stated that it expects that the listing of the equity shares will enhance our visibility and brand image and provide liquidity and a public market for the shares. Moreover, 63 companies have already mobilised around Rs 64,000 crore collectively via mainboard, marking a 29 per cent increase from Rs 49,436 crore collected by 57 firms through the route in the entire 2023.

The IPO is set to open for subscription on October 15, marking a new chapter in the company's journey in India.