Hyundai Motor India Limited is set to debut in India's stock market.- The IPO will open on October 15, making it the first car company in over two decades to go public in India.
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Hyundai, which entered the Indian market in 1996 is one of the top automakers in India, moving between the second and third spots. The company emerged as the second biggest automaker in Hyundai. Since it entered the Indian market, the company has sold over 80 lakh cars in the country.
Hyundai intends to establish India as a global manufacturing and export hub for the company and this might be an initial step in this direction.
KFin Technologies is the registrar for the public issue and advisors for the issue include Kotak Investment Banking, Citi, HSBC, JP Morgan and Morgan Stanley.
India’s biggest IPO
Hyundai India is looking to raise ₹27,870 crore from the IPO, significantly higher than the ₹21,008 crore raised by the state-owned Life Insurance Corporation of India (LIC) in 2022, making it the biggest IPO in India’s history.About the IPO
The upcoming IPO from Hyundai is entirely an offer for sale (OFS), with the company looking to offload up to 17.5% of shares, which is 14.22 crore shares with a price band of ₹1865 to ₹1,960 per share. Bids can be made in a lot size of 7 shares or multiples of 7 shares.The IPO opens on October 15 and will close on October 18. While the allotment will be finalised on October 18, the shares will be listed on the stock exchange on October 22.
At the upper end of the price band, Hyundai Motor India will be valued at $18 billion (approx. ₹1.6 lakh crore), which is around 40% of its parent company, Hyundai Global’s $45 billion valuation.
As it is entirely an OFS, the company won’t receive any funds and all the funds raised will go to Hyundai Global. However, the company has said that part of the funds will be allocated towards research and development, especially in electric vehicles (EVs) and hybrid technologies.
The company has reserved 7.78 lakh shares with a value of ₹131 to ₹138 crore for employees. Employees will get these shares at a discount of ₹186 per share.
First carmaker in over two decades to go public
In addition to being the biggest IPO in the country’s history, this will also make the company the first car maker to go public in India in over two decades. The last car maker to go public was Maruti Suzuki, which held its IPO in 2003.With the IPO, the company will join other car makers such as Maruti Suzuki, Tata Motors and Mahindra & Mahindra to be listed in the Indian stock market.
Hyundai in India
The Indian market contributes to around 15% of the company’s global sales and is the third biggest market for the company after the United States and South Korea.The company has already invested around $5 billion in the country and plans to invest an additional $4 billion over the next few years.
Company’s financials
Amount in ₹ crore
Hyundai recorded a revenue of ₹71,302.33 crore in FY24, up from ₹61,436.64 crore in FY23 and ₹47,966.05 crore in FY22. During the 3-month period from April to June 2024, the company earned a revenue of ₹17,567.98 crore.
The company recorded a profit after tax (PAT) of ₹6,060.04 crore in FY24, up from ₹4,709.25 crore in FY23 and ₹2,901.59 crore in FY22. The company recorded a PAT of ₹1,489.65 crore from April to June 2024.
“Hyundai Motor India is seeking a slightly higher premium to Maruti and lower to M&M based on price earnings ratio while Hyundai stands to be expensive in terms of price to book value. Hyundai India justifies its premium ask considering its leadership in SUV sales, world-class brand image followed by better safety ratings, Multi-segment growth visibility largely been driven by its popular SUVs, particularly the Creta, Exter, and Venue models in the Indian market,” said Prashanth Tapse, Senior VP (Research), Mehta Equities.
Hyundai paid ₹10,780 crore dividend in FY24
Ahead of the IPO, Hyundai paid a ₹10,780 crore dividend in FY24, up from ₹4,653.42 crore dividend in FY23 and ₹1,493.45 crore dividend in FY22.With this, the company’s cash and bank balance has declined from ₹17,741.15 crore a year ago to ₹9,017.35 crore.
“As a result, our ability to utilise our internal accruals and cash and bank balances has been reduced. Any resultant insufficiency in our internal accruals and cash and bank balance may require us to borrow money to meet our growth requirements and incur borrowing costs, which may adversely impact our profitability, financial ratios and results of operations,” the company said in its Red Herring Prospectus (RHP).
Declining grey market premium
Grey market premium (GMP) is the premium at which IPO shares are traded in an unofficial market before they are listed on the stock exchanges. In essence, it is the premium above the issue price of a share.The GMP of Hyundai has been on a decline, from ₹570 around two weeks ago to ₹130.
Key risks to remember
Here are some of the key risks that the business faces:Rising part prices
There has been an increase in prices of key vehicle parts over the years, especially chipsets. A further rise in price may impact the company’s profitability in the coming years.Production disruptions
The company has said that any disruption to its Chennai plant will adversely impact the production and the company’s finances.Supplier dependency
Another risk to keep in mind is the company’s dependency on its suppliers. Any disruption in its supply chain will adversely impact its production and profitability.Competition
Hyundai alternates between the second and third position in the Indian car market. An increase in competition, with the increased sales of Mahindra and Mahindra, the company faces a new competitor.SEE ALSO:
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