Upcoming IPO aimed to Indianize operations, says Hyundai Motors
Oct 11, 2024, 18:27 IST
Hyundai's mammoth Rs 27,870 crore IPO, which will open for subscription between October 15-17, is set to be India's largest IPO ever, surpassing LIC's Rs 21,000 crore public offer, which came out in May 2022. This is also the first instance where an international giant (Hyundai Motor Group is based out of South Korea) will be listing its subsidiary (Hyundai Motor India) in an overseas market.
Additionally, the company is also looking to raise Rs 8,315.28 crore from anchor investors, who will begin bidding on October 14th, 2024. Hyundai is the third largest auto original equipment manufacturer (OEM) globally, based on passenger vehicle sales.
"We have been in India now for more than 26 years. We have a very high market share. We are at number two position in India in the passenger vehicle space. We have got so much love and affection from the people of India. So we believe this is the right time to take one step forward and even further Indianize our operations," Hyundai Motor India Ltd (HMIL) COO Tarun Garg told PTI in an interaction.
Garg further added that the whole aim is to really become the most trusted brand of India. On being asked why they choose India for launching their IPO, he noted that the brand Hyundai has really been accepted very well in India, which is why it is probably the right country to really go for the IPO.
Hyundai has set a price band of Rs 1,865-1,960 per share for the IPO, taking the company's valuation to Rs 1.6 lakh crore, or $19 billion. For retail investors, the minimum lot size is 7 shares, while the minimum investment amount is Rs 13,720. Out of the total issue, 35% has been reserved for retail investors, which will give them a fair shot at owning HMIL shares. Also, 7,78,400 shares have been allocated for employees, which will be offered at a discount of Rs 186 to the issue price.
Most experts are suggesting subscribing to the IPO from a medium to long-term perspective. According to Bajaj Broking's IPO note, "The issue relatively appears fully priced, but the company is poised for bright prospects post completion of its ongoing expansions. The company reported PAT margins of 6.05% (FY22), 7.67% (FY23), 8.50% (FY24), 8.48% (Q1-FY25), and RoCE (return on capital employed)margins of 20.37%, 28.75%, 62.90%, 13.69% for the referred periods, respectively. We recommend to subscribe the IPO with a long-term perspective".
Notably, the entire IPO is an OFS (offer for sale) meaning that the company will not receive anything from this. All proceeds will go towards the promoters who are offloading their shares.
Source: DRHP of Hyundai Motors India
HMIL’s current range of passenger vehicles consists of 13 models across key passenger vehicle segments by body type, including sedans (Aura and Verna), hatchbacks (Grand i10 NIOS, i20, and i20 N Line), and SUVs (Exter, Venue, Venue N Line, Creta, Creta N Line, Alcazar, Tucson, and IONIQ 5).
Per Anand Rathi Wealth's IPO note, "HMIL follows a premiumization strategy, concentrating on selling higher-end trims with a higher average selling price (ASP) for their respective passenger vehicles. HMIL aims to align their EV strategy with market demands in India by carefully timing the launch of suitable EV models across various price
segments. At the upper band company is valuing at 26.2x its FY24 earnings along with being valued at 26.7x if we annualize FY25 earnings. Following the issuance of equity shares, the company's market capitalization stands
at Rs 15,92,581 million, with a market cap-to-sales ratio of 2.28 based on its FY24 earnings. We believe that the issue is fully priced and recommend “Subscribe –Long Term” rating to the IPO".
History of large IPOs in India
Back in 2007, DLF came out with the then-largest IPO, which was worth Rs 9,187.50 crores and saw 3.5x overall subscription. This was soon eclipsed by Reliance Power's IPO worth Rs 11,563.20 crore in January 2008. At 70X+subscription, it was massively oversubscribed in retail, QIB and HNI segments. The company managed to garner Rs 7.5 lakh crore as against its issue size of Rs 11,000 crore.
Then came government's (GOI) disinvestment in Coal India in 2010, which had a book size of 15,199.44 crores. After a 10-year lull, Paytm's Rs 18,300 crore IPO broke this slumber in 2021. This was short lived because GOI decided to disinvest a small stake in LIC of India with a massive Rs 21,000 crore IPO in 2022, which was oversubscribed 2.95 times.
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Additionally, the company is also looking to raise Rs 8,315.28 crore from anchor investors, who will begin bidding on October 14th, 2024. Hyundai is the third largest auto original equipment manufacturer (OEM) globally, based on passenger vehicle sales.
"We have been in India now for more than 26 years. We have a very high market share. We are at number two position in India in the passenger vehicle space. We have got so much love and affection from the people of India. So we believe this is the right time to take one step forward and even further Indianize our operations," Hyundai Motor India Ltd (HMIL) COO Tarun Garg told PTI in an interaction.
Garg further added that the whole aim is to really become the most trusted brand of India. On being asked why they choose India for launching their IPO, he noted that the brand Hyundai has really been accepted very well in India, which is why it is probably the right country to really go for the IPO.
Hyundai has set a price band of Rs 1,865-1,960 per share for the IPO, taking the company's valuation to Rs 1.6 lakh crore, or $19 billion. For retail investors, the minimum lot size is 7 shares, while the minimum investment amount is Rs 13,720. Out of the total issue, 35% has been reserved for retail investors, which will give them a fair shot at owning HMIL shares. Also, 7,78,400 shares have been allocated for employees, which will be offered at a discount of Rs 186 to the issue price.
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Notably, the entire IPO is an OFS (offer for sale) meaning that the company will not receive anything from this. All proceeds will go towards the promoters who are offloading their shares.
| Period | Total Income (In Rs) | Net Profit (In Rs) |
| FY21 | 41,404.65 crore | 1,881.16 crore |
| FY22 | 47,966.05 crore | 2,901.59 crore |
| FY23 | 61,436.64 crore | 4,709.25 crore |
| FY24 | 71,302.33 crore | 6,060.04 crore |
| Q1FY25 (As of June 30, 2024) | 17,567.98 crore | 1489.65 crore |
HMIL’s current range of passenger vehicles consists of 13 models across key passenger vehicle segments by body type, including sedans (Aura and Verna), hatchbacks (Grand i10 NIOS, i20, and i20 N Line), and SUVs (Exter, Venue, Venue N Line, Creta, Creta N Line, Alcazar, Tucson, and IONIQ 5).
Per Anand Rathi Wealth's IPO note, "HMIL follows a premiumization strategy, concentrating on selling higher-end trims with a higher average selling price (ASP) for their respective passenger vehicles. HMIL aims to align their EV strategy with market demands in India by carefully timing the launch of suitable EV models across various price
segments. At the upper band company is valuing at 26.2x its FY24 earnings along with being valued at 26.7x if we annualize FY25 earnings. Following the issuance of equity shares, the company's market capitalization stands
at Rs 15,92,581 million, with a market cap-to-sales ratio of 2.28 based on its FY24 earnings. We believe that the issue is fully priced and recommend “Subscribe –Long Term” rating to the IPO".
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History of large IPOs in India
Back in 2007, DLF came out with the then-largest IPO, which was worth Rs 9,187.50 crores and saw 3.5x overall subscription. This was soon eclipsed by Reliance Power's IPO worth Rs 11,563.20 crore in January 2008. At 70X+subscription, it was massively oversubscribed in retail, QIB and HNI segments. The company managed to garner Rs 7.5 lakh crore as against its issue size of Rs 11,000 crore. Then came government's (GOI) disinvestment in Coal India in 2010, which had a book size of 15,199.44 crores. After a 10-year lull, Paytm's Rs 18,300 crore IPO broke this slumber in 2021. This was short lived because GOI decided to disinvest a small stake in LIC of India with a massive Rs 21,000 crore IPO in 2022, which was oversubscribed 2.95 times.