However, over the past week, the company's GMP, or
While grey market premiums, which are commonplace in India and shadow companies ahead of their IPOs, are unofficial and unregulated, what does it mean for retail investors like yourself? Should it impact your decision to participate in Hyundai Motor India's IPO, which most experts are recommending to subscribe from a long-term perspective? We decode this for you.
What do you mean by GMP?
Think of GMP as an unofficial gauge of the investors perception of how valuable a stock is, ahead of its listing on the bourses. Simply put, GMP is the difference between the price of shares of an IPO-bound company, while it is trading in the grey market, and its estimated issue price (price at which the company sells its shares to public for the first time).Generally, a higher GMP is seen as positive, indicating that there is increased demand and optimism for the company's shares in the market, which also means that investors are potentially expecting hefty listing day gains. A lower, or negative GMP reflects diminished demand for the company's share in the markets. It also shows that investors, too, are not very gung-ho on achieving good listing day gains.
Hyundai's GMP, and its estimated listing price has been toppling down since October 10, 2024. From an expected listing price of Rs 2,092 and a GMP of Rs 132, the company's GMP in has come down to Rs 50, with an expected listing price of Rs 2,010, which is just Rs 50 over the upper limit of its IPOs price band (Rs 1,865-1,960).
Why the dip?
Experts are suggesting multiple reasons behind the plunge. First off, this IPO, seen as the mother of all IPOs in Indian history, is entirely an As such, investors are on tenterhooks, given that an IPO of such magnitude can suck away significant liquidity from Indian markets.
Secondly, things don't look bright for automobile sales in the country at the moment, even as we step into the festive season. Recent data from SIAM (Society of Indian Automobile Manufacturers) shows that sales of passenger vehicles are in a freefall. Their domestic sales dipped by 1.4% YoY in September, down to 3,56,752 units. SIAM president has also noted that sales of passenger vehicles is set to remain below the 5% mark in FY24-25.
Moreover, many believe that the IPO is on the expensive side. Hyundai India's current PE (price to earning) valuation, per its FY25 earnings is at 26x, which is higher than its listed peer Maruti Suzuki, which stands at 22x per its FY25 earnings. This is also higher than the industry's average PE of 24.41x. PE metric helps you compare whether a stock is overvalued or undervalued as compared to its peers, and whether its current price is commensurate its expected earnings growth.
If you are expecting heavy listing day gains, its possible you'd be disappointed. However, investing in the world's third largest OEM (original equipment manufacturer) and India's second biggest automobile seller for the long term can certainly yield significant gains.