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Imagine a bustling jewellery market teeming with diamonds and gold. Amidst this glittering chaos, a small stall is trying to sell handcrafted gemstones. Even as newer and shinier outlets keep cropping up, all vying for attention, this gemstone store offers some of the oldest yet valuable jewels at a discount. Though they lack immediate sparkle, these rare gems reveal their value to the discerning buyer. This is how South Korea appears for many experts in global capital markets: a trove of undervalued gems, overshadowed by brighter, more aggressively marketed investment options. This undervaluation, known as the "<keyword id="24399183" type="General" weightage="20" keywordseo="korean-discount" source="keywords">Korean Discount</keyword>," reflects how South Korean companies are priced much lower than their global peers despite robust fundamentals — strong financial performance and consistent profitability. Contributing factors are many, ranging from opaque governance structures to geopolitical risks. But the fact stays, if you are a seasoned conglomerate listed in South Korea, you are likely undervalued. <keyword id="19906087" type="General" weightage="20" keywordseo="hyundai" source="keywords">Hyundai</keyword> Motor India Ltd. (HMIL), a subsidiary of the Korean giant Hyundai Motor Company (HMC), recently sought to escape this valuation trap by listing in India, a market where investor optimism commands premium pricing. But its valuation raised many eyebrows! Now that a month and a half has gone by since its listing, time is apt to examine if this gamble paid off. Will <keyword id="93460" type="General" weightage="100" keywordseo="hyundai-india" source="Orion">Hyundai India</keyword> justify its high valuation? Or does the listing highlight broader questions about the overheated valuation dynamics of Indian markets? A record-breaking <keyword id="19898327" type="General" weightage="20" keywordseo="ipo" source="keywords">IPO</keyword> but questions remain Hyundai Motor India’s mega Initial Public Offering (IPO), launched in October 2024, broke records by raising ₹27,870 crore, making it India’s largest-ever IPO. The offer was oversubscribed by 2.37 times, highlighting robust demand. But many investors remained sceptical: was this IPO an honest attempt to expand Hyundai’s footprint in India or was it trying to offer a way to cashout for existing investors and promoters? Or perhaps, is it an attempt by the Korean chaebol — a large family-owned business conglomerate — to break free from the aforementioned “Korean Discount”? When shares listed on October 22, these concerns seemingly weighed on the minds of most investors and the stock promptly dipped 5% below the issue price on the day. A tepid grey market performance had already foreshadowed this muted debut in the Indian markets. Now, after almost 35 trading sessions on Indian market, the stock remains almost exactly at price it listed on October 22 at Rs 1820—no gain, no loss. <h3>The gamble of hyper-valuation</h3>Much of this hesitation stemmed from Hyundai’s valuation. On listing, Hyundai was valued at $18 billion, positioning it as one of India’s most valuable automotive companies. However, such high valuations often temper investor enthusiasm, resulting in more cautious short-term outcomes. For most investors, the Price-to-Earnings (P/E) ratio is the most preferred parameter to gauge if a company is overvalued or undervalued. With a P/E ratio of 26.3, HMIL was priced significantly above the Indian automotive industry average of 24.4. Globally, automotive companies operate with much lower P/E ratios, reflecting mature market conditions and slower growth trajectories. HMIL’s South Korean parent Hyundai Motor Company (HMC) trades at a meagre 3.07, believe it or not! For Indian investors, the high premium hinted at overvaluation despite Hyundai’s strong domestic position. Such stark difference in valuation obviously sparked debates — is the Indian market assigning a premium to Hyundai Motor India’s growth potential, or is it simply reflecting the general exuberance around the prospects of the Indian economy? Another concern is the allocation of IPO proceeds. Hyundai’s IPO was structured as an offer for sale (OFS), meaning all funds raised would flow to the parent company rather than Hyundai India’s operations. Although Hyundai has committed to investing in R&amp;D for EVs and hybrids, critics argue that the lack of immediate reinvestment in India’s operations reflects a missed opportunity for domestic growth. Despite the early disappointment, Hyundai was confident that the valuation was fair. It did have some factors going for it, in addition to the fact that other auto giants like Mahindra &amp; Mahindra and <keyword id="19909974" type="General" weightage="20" keywordseo="maruti-suzuki" source="keywords">Maruti Suzuki</keyword> command even higher P/E ratios. And looking at the company fundamentals, it does seem like Hyundai is playing a long-term game. <h3>Hyundai in India: A proven track record</h3>Despite the initial stumble, Hyundai India’s long-term story is compelling. Since entering the Indian market in 1996, the automaker has sold over 8 million vehicles and firmly occupies the second spot in the domestic passenger vehicle market, trailing only Maruti Suzuki. Hyundai’s blockbuster SUV offerings, like the Creta and Venue, have been critical in building this dominance. Despite some challenge from Maruti Suzuki Brezza and Tata Punch, Creta has retained the tag of ‘most-selling SUV in India’ successfully so far this year. <div type="image" title="Hyundai" agency="Business Insider India" msid="116156234" hostid="261" caption="&amp;lt;p&amp;gt;Selling over 17,000 units per month on average this year, Creta has edged past major competitors to be the most-selling SUV in India in 2024. As Indian consumers preference continues to shift gradually towards premium products over budget segments, Hyundai stands to benefit (Wikimedia Commons / Canva)&amp;lt;/p&amp;gt;"></div> Selling over 17,000 units per month on average, Creta has edged past major competitors to be the most-selling SUV in India in 2024. As Indian consumers preference continues to shift gradually towards premium products over budget segments, Hyundai stands to benefit (Wikimedia Commons / Canva) Hyundai India’s market share of 14% in October 2024 underscores its clout. The company’s ability to tap into India’s premiumisation trend, where consumers increasingly prefer high-end vehicles, positions it well for growth. With plans to expand in electric vehicles (EVs) and hybrid technology, Hyundai is poised to capitalise on both domestic demand and export opportunities. The company’s ability to capitalize on its strong brand, extensive dealer network, and leadership in segments like SUVs and exports will determine its future performance. Hyundai’s strategic focus on expanding electric vehicle production also aligns with global trends towards sustainability, potentially positioning it as a leader in the segment. By listing in India, Hyundai aims not only to expand its operations but also to make India a global manufacturing and export hub for its products, especially SUVs and EVs. Therefore, despite early setbacks, Hyundai’s gamble seems to have paid off. The stock has rebounded, gaining 5% in the past month. More good news came in this week, as positive projections from Morgan Stanley and JPMorgan forecast an impressive 17-28% upside for the stock over the next year, reflecting growing investor optimism. <h3>A strategic pivot from the Korean Discount?</h3>The Korean Discount has long plagued South Korea’s chaebols, including Hyundai. Experts attribute this to several factors: <ul> <li>Chaebol Governance: South Korea’s conglomerates, known as chaebols, are often criticised for opaque governance structures and excessive family control.</li> <li>Geopolitical Risks: Tensions with North Korea contribute to investor caution, adding a layer of perceived risk.</li> <li>Limited Domestic Liquidity: South Korea’s relatively small investor base can constrain market activity and valuation potential.</li> </ul> By listing in India, Hyundai sought to unlock better valuations for its subsidiary, leveraging the optimism of Indian markets. India’s stock market has a trailing P/E ratio of 24.4, far above South Korea’s Kospi average of 16-17. The Indian market’s appetite for high-growth stories provides a fertile ground for companies like Hyundai to escape the valuation constraints of their home market. A successful IPO could encourage other such conglomerates to follow suit, setting a precedent. While Hyundai India has a robust track record, its future success hinges on navigating key challenges: <ul> <li>Supply Chain Vulnerabilities: Hyundai relies heavily on its Chennai plant, making it vulnerable to disruptions.</li> <li>Intensifying Competition: Domestic rivals like <keyword id="19906967" type="General" weightage="20" keywordseo="tata-motors" source="keywords">Tata Motors</keyword> and MG Motors are making aggressive inroads into the EV market.</li> <li>Policy Risks: The automotive sector’s reliance on government incentives for EVs and hybrids adds a layer of unpredictability.</li> </ul> High valuations come with risks. Hyundai will need to prove that it can sustain its growth trajectory in India, fend off competition from established players like Maruti Suzuki and Tata Motors, and navigate challenges such as supply chain disruptions and regulatory hurdles. If Hyundai successfully capitalises on its strong brand and market leadership, it could not only redefine its value but also serve as a case study for other Korean companies seeking better recognition and valuations in global markets. <h3>Is Hyundai saga a reflection of overheated Indian markets?</h3>The bigger question here is, does Hyundai’s IPO highlights a broader narrative about Indian markets’ premium valuations? With a trailing P/E ratio of 24.4, Nifty 50 index is among the highest in emerging markets. India’s stock markets consistently command a premium due to robust retail participation, strong economic growth prospects, and a burgeoning middle class. While this premium reflects optimism about India’s long-term growth story, it also signals potential risks of overvaluation, particularly in sectors like technology, automotive, and consumer goods. With a record ₹94,017 crore outflow by Foreign Portfolio Investors (FPIs) in October 2024, concerns about overheated valuations are mounting. Sustaining such unprecedented valuations required companies to consistently perform above global averages, and retaining robust earnings growth quarter after quarter remains a challenge in today’s uncertain world. For Hyundai, the high valuation is both an opportunity and a risk. While it underscores investor confidence, it narrows the margin of safety, making the stock vulnerable to corrections during economic downturns. Take for example, the high-profile IPO of Life Insurance Corporation of India (LIC) that raised over ₹21,000 crore. Its listing was met with disappointment as the stock began trading at a 9% discount to its issue price, and subsequent performance has remained subdued. LIC’s post-IPO journey also highlights how inflated valuations can lead to long-term underperformance, as the stock gave only 12% return over the past 30 months when even the Nifty 50 index went up by over 44%. This happens when when the company's growth narrative fails to align with its pricing. Despite being a household name with a dominant market share, LIC's stock has struggled to meet expectations, partly due to concerns about its operating efficiency and the limited use of IPO proceeds for growth initiatives. Make no mistake, Hyundai Motor India’s IPO is a landmark event! It showcases the potential for Korean companies to leverage emerging markets like India for better valuations. It also shows that strong fundamentals can help justify a company such premium valuations even amidst bearish economic prospects. However, it also serves as a cautionary tale about the risks of overvaluation. For Hyundai, the next steps involve proving its long-term growth story, navigating competitive challenges, and maintaining investor confidence. For Indian markets, Hyundai’s IPO underscores the need to balance optimism with realistic expectations as they continue to evolve as global investment hotspots. To sustain the country’s economic narrative as a land of unmatched opportunities, corporate India must work on improving long-term fundamentals and mitigating long-term risks. As global investors watch closely, Hyundai India’s success or failure could shape how international companies view India as a listing destination in the years to come.

Tackling the 'Korean Discount': A deep dive into curious case of Hyundai Motor India's market listing

<a target="_blank" href="https://www.businessinsider.com/tesla-ceo-elon-musk">Tesla CEO Elon Musk</a> threw his money and influence behind Donald Trump.He gave speeches, <a target="_blank" href="https://www.businessinsider.com/elon-musk-private-jet-hits-swing-states-campaigns-donald-trump-2024-10">hosted rallies</a> in swing states, posted frequently on X, and funneled at least $119 million into a <a target="_blank" href="https://www.businessinsider.com/elon-musk-super-pac-america-continuing-after-election-midterms-2024-11">pro-Trump super PAC</a> called America PAC.When Trump won the election, Tesla's stock soared. Its share price is now up nearly 33% year to date.On Tuesday, President-elect <a target="_blank" href="https://www.businessinsider.com/trump-elon-musk-vivek-ramaswamy-department-government-efficiency-doge-2024-11">Trump announced</a> that Musk would take on an advisory role and co-lead the Department of Government Efficiency, or DOGE, alongside the entrepreneur Vivek Ramaswamy.Inside Tesla, the response to Trump's victory, and Musk's role in it, has been mixed. Business Insider spoke with nine current employees in states across the country, including California and Texas. Though they represent a sliver of the automaker's global workforce of more than 100,000 employees, the conversations offer a glimpse into the internal response to the election.Some of the workers said they wish Musk would pay more attention to Tesla. Others said the CEO's involvement with Trump could benefit the company.Most of them were celebrating the company's surging stock price, as Tesla stock makes up a significant share of most workers' <a target="_blank" href="https://www.businessinsider.com/tesla-salary-database-elon-musk-pay-strategy-2024-11">compensation</a>.<h2 id="f2ff1729-e00e-492e-a77e-d3344b215374">Hope, celebration, and conflict</h2>One engineer said that while they hadn't voted for Trump, they felt Musk could "supercharge" the US government. Another employee who did vote for Trump said they were "excited for what this could mean for Tesla and for our country."Another employee said Trump's win and the sudden surge in Tesla's stock price had many at the company feeling more hopeful."Since being hired, the stock has primarily trended sideways, and it was difficult for a lot of employees to see value in the company as many of us are given stock to compensate for lower hourly pay," one employee said. "Now that the stock is moving in a positive direction, there is a sense of renewed hope for the company with employees generally."For others who spoke to Business Insider, the rising share price led to conflicted emotions."On one hand, you want to celebrate the fact that the stock is up an insane amount, but on the other, it's difficult to be truly happy because of Trump and what it means for Tesla's mission," one engineer said. The employee said that Trump's climate-crisis denial could be a roadblock to Tesla's mission of transitioning to sustainable energy.Trump has <a target="_blank" href="https://www.reuters.com/world/us/trump-says-he-would-consider-ending-7500-electric-vehicle-credit-2024-08-19/">said</a> he plans to increase US oil production and may roll back vehicle-emissions standards and incentives designed to promote the production and adoption of electric cars. At an October rally in Detroit, Trump <a target="_blank" href="https://www.factcheck.org/2024/10/the-issues-trumps-proposal-to-lower-prices-by-increasing-energy-production/">said</a> he planned to "frack, frack, frack, and drill, baby, drill." Musk has <a target="_blank" href="https://www.cnbc.com/2024/05/23/tesla-ceo-elon-musk-says-he-favors-no-tariffs-on-chinese-evs.html#:~:text=Tesla%20has%20been%20struggling%20this,Q&amp;A%20session%20was%20being%20livestreamed.">said</a> in the past that he doesn't agree with tax incentives for electric cars.Tesla and Musk did not respond to a request for comment.<h2 id="2854b357-98e7-4ef9-ae66-46c451c3e979">Musk's growing list of commitments</h2>Some Tesla factory workers in Texas and California were given time off to vote on Election Day in compliance with state laws, multiple factory workers in both states said. Separately, Tesla managers were sent a guide on how to address political discussions in the workplace, one worker said.Postelection, three employees said the election hasn't been discussed much at work. "No one is saying anything," said one. "I think everyone is just waiting to see how this all plays out now.""There's this feeling that no one fully knows where anyone else stands," one manager told BI.Some Tesla-connected figures have been more open. Tesla's director of AI, Ashok Elluswamy, posted about Trump's victory on X.Kimbal Musk, Elon Musk's brother and a Tesla board member, also appeared to celebrate the win.The DOGE advisory role will be another time commitment for Musk, who's already involved with five companies. Musk's private jet has flown to and from Palm Beach, Florida, near Trump's estate in Mar-a-Lago, five times since November 5, according to data from the <a target="_blank" href="https://jetspy.com/">jet-tracking company JetSpy</a>. On Wednesday, Musk's jet flew from Palm Beach to an airport near Washington, DC, where he attended Trump's first postelection meeting with House Republicans.Six workers said they felt Musk had taken his focus off Tesla."It feels like a lot of political theater," one worker said. "We sell cars. Anywhere else you'd expect the CEO to be focused on that."Do you work at one of Musk's companies or have a tip? Reach out to the reporter via a non-work email and device at <a target="_blank" href="mailto:gkay@businessinsider.com">gkay@businessinsider.com</a> or 248-894-6012

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