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Missing some action, adrenaline rush, and thrill in your life? Are the good old, albeit mundane money investment avenues like mutual funds and fixed deposits not making the cut for you? Want to experience a heart-pounding, financial rollercoaster that will constantly keep you and your portfolio on tenterhooks? Well then, welcome to the world of initial public offers (IPOs), especially those brought to you by SMEs, or <keyword id="6375845" type="General" weightage="20" keywordseo="Small-and-Medium-Enterprises" source="Orion">small and medium enterprises</keyword>. Truth be told, <keyword id="3704207" type="General" weightage="100" keywordseo="SME-IPOs" source="Orion">SME IPOs</keyword> have been all over the bourses this year. So far, 2024 has seen 206 SMEs debuting on both BSE and NSE, out of which 146 listed in gains and 46 listed in losses. Odds seem good, right? In contrast, the year has only seen 63 IPOs from the elder brother i.e. mainboard, only 48 of which managed to post any listing gains. And getting an allotment has also been a major uncertainty, given the unusually high demand this year. <h2>So, what's an SME <keyword id="6354763" type="General" weightage="20" keywordseo="IPO" source="Orion">IPO</keyword>, you ask?</h2>Think of a mainboard company as Shah Rukh or Salman Khan—well-established, financially stable, strong legacy of profitability, and fairly well-known. On the other hand, SMEs are your Prateek Gandhi (Harshad Mehta, Scam 1992), Siddhant Chaturvedi (MC Sher, Gully Boy) or Avinash Tiwary (Majnu, Laila Majnu). While they are doing super well, they are yet to make it big like the Khans. They’re currently underdogs, lesser known, but who knows? They can be the next big thing in the future! And SME IPOs are getting a stellar reception. In 2023, 182 such IPOs had raised a substantial Rs 4,967 crore. In 2024, more than 200 companies have already raised over Rs 7,500 crore, and we have four months to go. This, with one quarter of the year still remaining. <div type="image" title="In 2024, India leads IPO activity in the Asia-Pacific region" height="900" width="1200" msid="113875643" hostid="261" caption="&amp;lt;p&amp;gt;In 2024, India leads IPO activity in the Asia-Pacific region&amp;lt;/p&amp;gt;"></div> But what does it take for a company to be classified as a small enterprise? The company has to have an annual turnover/income of up to Rs 50 crore, and for a medium enterprise to be called so, its annual income has to be up to Rs 250 crore. When such companies go public, in a bid to raise funds from investors and expand their operations, they launch an IPO, but not on the main exchange, but separately, on NSE’s Emerge and BSE’s SME platform. As of September 2024, <keyword id="4484133" type="General" weightage="20" keywordseo="NSE-Emerge" source="Orion">NSE Emerge</keyword> has 147 listed participants, while <keyword id="1885131" type="General" weightage="20" keywordseo="BSE-SME" source="Orion">BSE SME</keyword> has 155 market makers. Mounting an SME’s IPO is comparatively less stringent than their mainboard counterparts, as far as regulations are concerned since their DRHPs (draft <keyword id="12225712" type="General" weightage="20" keywordseo="Red-herring-prospectus" source="Orion">red herring prospectus</keyword>) are not filed with SEBI. So, wouldn’t a lenient treatment make them inherently riskier? Why are they so appealing, you ask? <a href="https://www.businessinsider.in/stock-market/news/a-company-with-8-employees-looking-to-raise-12-crore-ended-up-getting-applications-worth-over-4700-crore/articleshow/112824522.cms">Delhi firm with just 8 employees seeks ₹12 crore via IPO, gets ₹4,700 crore worth of investor applications!</a> Well, for one, some of them have delivered exceptional returns—we’re talking 100%, 200%. Consider this—Owais Metal and Mineral Processing, which launched its IPO in February this year, delivered a whopping listing gain of 201%. Another SME, Maxposure, whose IPO was out in January 2024, had earned its investors listing gains worth 317.40%! Apparently, higher risks also mean higher returns, and also super high investment. Most SME IPOs need a minimum investment of Rs 1,00,000 or more, as opposed to mainboard IPOs, where you can buy one lot of shares for anywhere between Rs 14,000-15,000. Even the minimum trading lot size for SME shares is about 10,000. In short, you’d have to potentially empty your pockets to invest in an SME IPO. And still, there’s no guarantee that the listing will fill your wallets. For all you know, your pockets before and after the IPO is listed might stay the same - EMPTY! There's also the question of whether or not these SMEs are able to maintain their listing day mojo, or do they just fizzle out thereafter? Data from Prime Database highlights more instances of the latter. As of August 2024, about 166 SME IPOs had made it to the exchanges. Around 72 of them, or close to 50%, could not sustain their momentum going ahead, and were trading below their listing day prices. Consider this. The post listing gains of Medicamen Organics, whose IPO came out in June 2024, earned its investors massive listing gains of over 300%, by listing at Rs 137.85, significantly higher than its price issue price, which was set between Rs 32-34. But as of October 1, 2024, the stock was trading at Rs 64.2. Talk about falls. Additionally, risks of pump-and-dump, and illiquidity, among others makes SME IPOs dangerous See, you're largely venturing into unknown, pitch-dark territories, without much light to guide you. For starters, SME IPOs face less scrutiny from market watchdog SEBI. This also means they are able to list quickly, just 3-4 months. On the other hand, mainboard IPOs can take upto a year before they are cleared for listing. Also, there is far less information and disclosures available about their financials, fundamentals and performance to investors for making an informed decision, as compared to mainboard stocks. Then there’s the issue of illiquidity. Once purchased, you might find it hard to sell off your SME stocks, since they are not traded as frequently in the market, which means lower liquidity. Trivesh D, COO, Tradejini explains that liquidity is a major concern for such stocks. “These stocks typically have a smaller free float, and are traded in lots, which can lead to volatility and sharp price swings. This means it can be challenging for investors to buy or sell shares without significantly impacting prices. Additionally, speculative trading practices, like 'pump-and-dump' schemes, can inflate stock prices, leaving retail investors vulnerable to sudden drops”. Recently, SME IPOs have gained notoriety for price manipulation via showing fictitious sales and revenue in their books of accounts, selling of promoter holdings at inflated prices, and being the facade for many infamous <keyword id="10663340" type="General" weightage="20" keywordseo="Pump-and-Dump" source="Orion">pump and dump</keyword> schemes. This is where select people create frenzy, or mass euphoria over a particular stock or company, causing its prices to soar, and then dumping them, or selling their shares at this massive price to make a killing! Infact, it's not just the promoters, but also the investment banks floating these IPOs. At present, SEBI is investigating around 6 investment banks which have allegedly charged SMEs a staggering 15% of funds raised via IPOs as fee, as opposed to the standard 1-3%. In March 2024, SEBI chairperson Madhabi Puri Buch had also highlighted witnessing signs of manipulation in the SME space. “We do see signs of manipulation in the SME segment. We are able to see certain patterns.” Buch had observed back then. Adds Kresha Gupta, Founder &amp; Director, StepTrade Share Services, “Investing in SME IPO comes with significant risks, despite their impressive returns in recent years. Limited participation from institutional investors and public in some SME IPOs also mean that those companies may lack the support and stability that comes with larger-scale investments” “Additionally, many SMEs may not have strong fundamentals to justify their valuations. High P/E ratios can be misleading, and while some IPOs have delivered impressive returns, they often come with significant volatility, continues D of Tradejini. <h2>So, should I stay away? </h2>Yes, and No. Yes, if you don't want to do your homework of researching the company thoroughly beforehand. Anand K. Rathi, Co-Founder of MIRA Money suggests asking a couple of questions before investing your hard earned money: <ul><li>What is the company's financial performance over the past 3-4 years?</li><li>What is the company's governance structure?</li><li>Is the financial success driven by the IPO, or is it a result of consistent performance?</li><li>Does the company have what it takes to scale its operations to the next level?</li><li>Are the company’s promoters trustworthy, capable and experienced?</li><li>What is the level of participation by large, institutional investors?</li></ul> But staying away completely? Not necessary. Gupta adds that retail investors, in particular, should avoid viewing SME IPOs as quick money-makers based on their short-term performance, as this can certainly lead to poor investment decisions. “To mitigate risks, investors should always focus on long-term fundamentals rather than just short-term price movements. Key indicators include the participation of institutional investors like DIIs and FIIs. This often signals confidence in the stock”, she continues. A red flag you should look out for is if a company is only offering OFS, or Offer for Sale. This can indicate early investors looking to exit, potentially signaling weaker future growth. That's why it is better to look for companies which are raising capital for expansion purposes. This is a sign of healthy business growth prospects and improving fundamentals. In conclusion, backing the underdog, or SMEs, is not a bad proposition, but not without its risks. Investing in SME IPOs is like riding a unicorn—but you don't know whether you're riding it to rags or riches! So, take your pick.

Why investing in SME IPOs should not be on top of your adventure to-do list!

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

<div type="image" title="In 2024, India has seen around $12.2 billion worth of IPOs, including mainboard and SMEs" msid="113878163" hostid="261" sizebytes="45300" caption="&amp;lt;p&amp;gt;In 2024, India has seen around $12.2 billion worth of IPOs, including mainboard and SMEs&amp;lt;/p&amp;gt;"></div> Missing some action, adrenaline rush, and thrill in your life? Are the good old, albeit mundane money investment avenues like mutual funds and fixed deposits not making the cut for you? Want to experience a heart-pounding, financial rollercoaster that will constantly keep you and your portfolio on tenterhooks? Well then, welcome to the world of initial public offers (IPOs), especially those brought to you by SMEs, or <keyword id="6375845" type="General" weightage="20" keywordseo="Small-and-Medium-Enterprises" source="Orion">small and medium enterprises</keyword>. Truth be told, <keyword id="19938687" type="General" weightage="20" keywordseo="sme" source="keywords">SME</keyword> IPOs have been all over the bourses this year. So far, 2024 has seen 206 SMEs debuting on both BSE and NSE, out of which 146 listed in gains and 46 listed in losses. Odds seem good, right? In contrast, the year has only seen 63 IPOs from the elder brother i.e. mainboard, only 48 of which managed to post any listing gains. And getting an allotment has also been a major uncertainty, given the unusually high demand this year. <h2 style="margin-bottom: 0.7em; line-height: 1.3; color: rgb(0, 0, 0); font-size: 24px; background: 0px 0px; text-rendering: optimizelegibility;">So, what's an <keyword id="5559702" type="General" weightage="100" keywordseo="SME-IPO" source="Orion">SME IPO</keyword>, you ask?</h2>Think of a mainboard company as Shah Rukh or Salman Khan—well-established, financially stable, strong legacy of profitability, and fairly well-known. On the other hand, SMEs are your Prateek Gandhi (Harshad Mehta, Scam 1992), Siddhant Chaturvedi (MC Sher, Gully Boy) or Avinash Tiwary (Majnu, Laila Majnu). While they are doing super well, they are yet to make it big like the Khans. They’re currently underdogs, lesser known, but who knows? They can be the next big thing in the future! And SME IPOs are getting a stellar reception. In 2023, 182 such IPOs had raised a substantial Rs 4,967 crore. In 2024, more than 200 companies have already raised over Rs 7,500 crore, and we have four months to go. This, with one quarter of the year still remaining. <div type="image" title="In 2024, India leads IPO activity in the Asia-Pacific region" height="900" width="1200" msid="113875643" hostid="261" caption="&amp;lt;p&amp;gt;In 2024, India leads IPO activity in the Asia-Pacific region&amp;lt;/p&amp;gt;"></div> But what does it take for a company to be classified as a small enterprise? The company has to have an annual turnover/income of up to Rs 50 crore, and for a medium enterprise to be called so, its annual income has to be up to Rs 250 crore. When such companies go public, in a bid to raise funds from investors and expand their operations, they launch an <keyword id="19898327" type="General" weightage="20" keywordseo="ipo" source="keywords">IPO</keyword>, but not on the main exchange, but separately, on NSE’s Emerge and BSE’s SME platform. As of September 2024, <keyword id="4484133" type="General" weightage="20" keywordseo="NSE-Emerge" source="Orion">NSE Emerge</keyword> has 147 listed participants, while <keyword id="1885131" type="General" weightage="20" keywordseo="BSE-SME" source="Orion">BSE SME</keyword> has 155 market makers. Mounting an SME’s IPO is comparatively less stringent than their mainboard counterparts, as far as regulations are concerned since their DRHPs (draft red herring prospectus) are not filed with SEBI. So, wouldn’t a lenient treatment make them inherently riskier? Why are they so appealing, you ask? <a href="https://www.businessinsider.in/stock-market/news/a-company-with-8-employees-looking-to-raise-12-crore-ended-up-getting-applications-worth-over-4700-crore/articleshow/112824522.cms">Delhi firm with just 8 employees seeks ₹12 crore via IPO, gets ₹4,700 crore worth of investor applications!</a> Well, for one, some of them have delivered exceptional returns—we’re talking 100%, 200%. Consider this—Owais Metal and Mineral Processing, which launched its IPO in February this year, delivered a whopping listing gain of 201%. Another SME, Maxposure, whose IPO was out in January 2024, had earned its investors listing gains worth 317.40%! Apparently, higher risks also mean higher returns, and also super high investment. Most SME IPOs need a minimum investment of Rs 1,00,000 or more, as opposed to mainboard IPOs, where you can buy one lot of shares for anywhere between Rs 14,000-15,000. Even the minimum trading lot size for SME shares is about 10,000. In short, you’d have to potentially empty your pockets to invest in an SME IPO. And still, there’s no guarantee that the listing will fill your wallets. For all you know, your pockets before and after the IPO is listed might stay the same - EMPTY! There's also the question of whether or not these SMEs are able to maintain their listing day mojo, or do they just fizzle out thereafter? Data from Prime Database highlights more instances of the latter. As of August 2024, about 166 SME IPOs had made it to the exchanges. Around 72 of them, or close to 50%, could not sustain their momentum going ahead, and were trading below their listing day prices. Consider this. The post listing gains of Medicamen Organics, whose IPO came out in June 2024, earned its investors massive listing gains of over 300%, by listing at Rs 137.85, significantly higher than its price issue price, which was set between Rs 32-34. But as of October 1, 2024, the stock was trading at Rs 64.2. Talk about falls. Additionally, risks of pump-and-dump, and illiquidity, among others makes SME IPOs dangerous See, you're largely venturing into unknown, pitch-dark territories, without much light to guide you. For starters, SME IPOs face less scrutiny from market watchdog SEBI. This also means they are able to list quickly, just 3-4 months. On the other hand, mainboard IPOs can take upto a year before they are cleared for listing. Also, there is far less information and disclosures available about their financials, fundamentals and performance to investors for making an informed decision, as compared to mainboard stocks. Then there’s the issue of illiquidity. Once purchased, you might find it hard to sell off your SME stocks, since they are not traded as frequently in the market, which means lower liquidity. Trivesh D, COO, Tradejini explains that liquidity is a major concern for such stocks. “These stocks typically have a smaller free float, and are traded in lots, which can lead to volatility and sharp price swings. This means it can be challenging for investors to buy or sell shares without significantly impacting prices. Additionally, speculative trading practices, like 'pump-and-dump' schemes, can inflate stock prices, leaving retail investors vulnerable to sudden drops”. Recently, SME IPOs have gained notoriety for price manipulation via showing fictitious sales and revenue in their books of accounts, selling of promoter holdings at inflated prices, and being the facade for many infamous pump and dump schemes. This is where select people create frenzy, or mass euphoria over a particular stock or company, causing its prices to soar, and then dumping them, or selling their shares at this massive price to make a killing! Infact, it's not just the promoters, but also the investment banks floating these IPOs. At present, SEBI is investigating around 6 investment banks which have allegedly charged SMEs a staggering 15% of funds raised via IPOs as fee, as opposed to the standard 1-3%. In March 2024, SEBI chairperson Madhabi Puri Buch had also highlighted witnessing signs of manipulation in the SME space. “We do see signs of manipulation in the SME segment. We are able to see certain patterns.” Buch had observed back then. Adds Kresha Gupta, Founder &amp; Director, StepTrade Share Services, “Investing in SME IPO comes with significant risks, despite their impressive returns in recent years. Limited participation from institutional investors and public in some SME IPOs also mean that those companies may lack the support and stability that comes with larger-scale investments” “Additionally, many SMEs may not have strong fundamentals to justify their valuations. High P/E ratios can be misleading, and while some IPOs have delivered impressive returns, they often come with significant volatility, continues D of Tradejini. <h2 style="box-sizing: border-box; border: 0px; outline: 0px; padding: 0px; margin: 0px 0px 0.7em; font-family: &quot;Open Sans&quot;, sans-serif; font-weight: 700; line-height: 1.3; color: rgb(0, 0, 0); font-size: 24px; list-style: none; background: 0px 0px; text-rendering: optimizelegibility; text-transform: none; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; letter-spacing: normal; orphans: 2; text-align: start; text-indent: 0px; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; white-space: normal; text-decoration-thickness: initial; text-decoration-style: initial; text-decoration-color: initial;">So, should I stay away?</h2>Yes, and No. Yes, if you don't want to do your homework of researching the company thoroughly beforehand. Anand K. Rathi, Co-Founder of MIRA Money suggests asking a couple of questions before investing your hard earned money: <ul><li>What is the company's financial performance over the past 3-4 years?</li><li>What is the company's governance structure?</li><li>Is the financial success driven by the IPO, or is it a result of consistent performance?</li><li>Does the company have what it takes to scale its operations to the next level?</li><li>Are the company’s promoters trustworthy, capable and experienced?</li><li>What is the level of participation by large, institutional investors?</li></ul> But staying away completely? Not necessary. Gupta adds that retail investors, in particular, should avoid viewing SME IPOs as quick money-makers based on their short-term performance, as this can certainly lead to poor investment decisions. “To mitigate risks, investors should always focus on long-term fundamentals rather than just short-term price movements. Key indicators include the participation of institutional investors like DIIs and FIIs. This often signals confidence in the stock”, she continues. A red flag you should look out for is if a company is only offering OFS, or Offer for Sale. This can indicate early investors looking to exit, potentially signaling weaker future growth. That's why it is better to look for companies which are raising capital for expansion purposes. This is a sign of healthy business growth prospects and improving fundamentals. In conclusion, backing the underdog, or SMEs, is not a bad proposition, but not without its risks. Investing in SME IPOs is like riding a unicorn—but you don't know whether you're riding it to rags or riches! So, take your pick.

SIMPLY PUT: Why investing in SME IPOs should not be on top of your adventure to-do list!

<ul><li><keyword id="19906087" type="General" weightage="20" keywordseo="hyundai" source="keywords">Hyundai</keyword> Motor India Limited is set to debut in India's stock market.</li><li>The IPO will open on October 15, making it the first car company in over two decades to go public in India.</li><li>Here’s everything you need to know about the South Korean automaker ahead of its IPO.</li></ul> Hyundai Motor India Limited, the Indian arm of South Korean automaker Hyundai Motor Company is all set to make its stock market debut in India as its initial public offering (IPO) opens on October 15. This will be the first market outside South Kores where the country is listed. 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. <h2>India’s biggest IPO</h2>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. <div type="Article" hostid="261" msid="111690863" title="The biggest IPOs in India’s history – LIC to Paytm, companies that have raised the most funds" mstype="2" mssubtype="0"></div> <h2>About the IPO</h2>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. <h2>First carmaker in over two decades to go public</h2>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. <div type="Article" hostid="261" msid="114120828" title="The Ola Electric Saga: Are surge in complaints and declining market share a wake-up call for Bhavish Aggarwal?" mstype="2" mssubtype="0"></div> With the IPO, the company will join other car makers such as Maruti Suzuki, Tata Motors and Mahindra &amp; Mahindra to be listed in the Indian stock market. <h2>Hyundai in India</h2>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 <table style="border-width: initial; border-style: none;"></colgroup><tbody><tr><td style="border-left:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:bottom;background-color:#000000;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Period ended </td><td style="border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:bottom;background-color:#000000;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Revenue </td><td style="border-right:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:bottom;background-color:#000000;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">PAT </td></tr><tr><td style="border-left:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Mar-22 </td><td style="border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹47,966.05 </td><td style="border-right:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2,901.59 </td></tr><tr><td style="border-left:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Mar-23 </td><td style="border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹61,436.64 </td><td style="border-right:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹4,709.25 </td></tr><tr><td style="border-left:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Mar-24 </td><td style="border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹71,302.33 </td><td style="border-right:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹6,060.04 </td></tr><tr><td style="border-left:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">June-24 </td><td style="border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹17,567.98 </td><td style="border-right:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹1,489.65 </td></tr></tbody></table> 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&amp;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. <h2>Hyundai paid ₹10,780 crore dividend in FY24</h2>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. <div type="Article" hostid="261" msid="113925972" title="September Auto sales – Automakers report a decline, Mahindra and Mahindra overtakes Tata Motors" mstype="2" mssubtype="0"></div> “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). <h2>Declining grey market premium</h2>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. <h2>Key risks to remember</h2>Here are some of the key risks that the business faces: <h3>Rising part prices</h3>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. <h3>Production disruptions</h3>The company has said that any disruption to its Chennai plant will adversely impact the production and the company’s finances. <h3>Supplier dependency</h3>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. <h3>Competition</h3>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: <a href="https://www.businessinsider.in/business/auto/news/the-ola-electric-saga-are-surge-in-complaints-and-declining-market-share-a-wake-up-call-for-bhavish-aggarwal/articleshow/114120828.cms">The Ola Electric Saga: Are surge in complaints and declining market share a wake-up call for Bhavish Aggarwal?</a> <a href="https://www.businessinsider.in/business/auto/webstories/top-selling-cars-in-india-in-september-2024-maruti-suzuki-dominates-with-seven-cars/slidelist/114112295.cms">Top selling cars in India in September 2024 – Maruti Suzuki dominates with seven cars</a> <a href="https://www.businessinsider.in/tech/mobile/news/samsung-leads-the-first-phase-of-festive-sales-with-a-20-market-share/articleshow/114070723.cms">Samsung leads the first phase of festive sales with a 20% market share</a>

Hyundai IPO review – Everything you need to know about India’s biggest IPO

Think Initial Public Offers (IPOs) are a sure-shot, quickfire method to make a quick buck? If so, then investing in some of India's biggest IPOs to date would have created multiple millionaires. However, if the data is to be believed, 18 out of India's top 30 IPOs by way of size have failed to deliver on the returns front. Recent data from Capitalmind PMS suggests that of all the mega IPOs India has seen in the past 2 decades, only 12 IPOs i.e. stocks of 12 companies have delivered more returns that what you would have received, had you bought and held your investments in Nifty500(which invests in biggest 500 companies by market size). Infact, Paytm (54%), <keyword id="20024191" type="General" weightage="20" keywordseo="Reliance-Power" source="keywords" meta.keywordsubtype="org" meta.entityname="Reliance Power" meta.hostid="261" meta.entityid="Reliance Power">Reliance Power</keyword> (81%), General Insurance Corporation (2%) actually generated negative total returns to date. The only outliers in the list of top 10 IPOs were Zomato (listed in July 2021) and Coal India (listed in April, 2010), which managed to generate excess returns i.e. more than what was generated by Nifty500. While Zomato's total return to date, which is considered a comprehensive gauge of a stock's profitability, stands at 265%, Coal India total returns are a massive 443%. In these cases, had you simply bought and held the Nifty500 index for a similar duration, your returns would've been 73%, and 435% respectively. Also, 5 of the biggest IPOs India has ever seen (Bajaj Housing Finance, Bharti Hexacom, Brainbees, Ola Electric) have come in the last 2 years. In some cases, having stayed put in your index investments would have yielded you far better returns. Consider this, FSN E-Commerce, Nykaa's parent company, listed on the exchanges on November 2021. Its total returns till date have been 2%, while had you invested in Nifty500 index, your returns would've been 53%. Similarly, the total returns to date on Bandhan Bank's stock, which listed in March 2018, was a negative 43%. But, the index has delivered a whopping 163% returns during the same time. Hits and Misses <table class="redcator-table-advance"><tbody><tr><td>Company Name</td><td>Total Returns to Date (In %)</td><td>CNX (Nifty500) Returns (In %)</td></tr><tr><td>Reliance Power (Feb 2008)</td><td>-81</td><td>961</td></tr><tr><td>Zomato (July 2021)</td><td>265</td><td>73</td></tr><tr><td>Gland Pharma (November 2020)</td><td>14</td><td>124</td></tr><tr><td>NHPC (September 2009)</td><td class="se-table-selected-cell">389</td><td>961</td></tr><tr><td>Indian Railways Finance Corporation (January 2021)</td><td>582</td><td>109</td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table>Source: CapitalMind PMS <h2>Surge in IPOs? Not really </h2>It is impossible to overlook the sheer number of public offerings seen in the Indian markets over the past 2 years. Around 600 share sale offers have already hit the market since 2023. Out of these, 335 have come in this year, as of October 2024. While over Rs 50,000 crores have been raised by these share sales so far since 2023, only 22% of these funds raises have come from companies who are hitting the market for the first time i.e. bringing out their IPOs. The rest have come from already listed companies seeking to raise more funds. The biggest IPO that India has seen to date, that of <keyword id="19906087" type="General" weightage="20" keywordseo="Hyundai" source="keywords" meta.keywordsubtype="org" meta.entityname="Hyundai" meta.hostid="261" meta.entityid="Hyundai">Hyundai</keyword> Motor India, closes for subscription today. With an offer size of Rs 27,870.16 crore, it is 35% bigger than the previous biggest IPO in the country(LIC in May 2022). As of 12:30 pm today, Hyundai's offer had been 87% subscribed, with significant interest from QIBs and employees. At 0.43x, participation of retail investors remained largely subdued. Notably, an IPO is considered cancelled and withdrawn, if it fails to meet the 90% subscription threshold.

Do large IPOs guarantee large returns? Data suggests that 18 of India's biggest 30 IPOs did not generate solid returns

<ul><li><keyword id="596" type="General" weightage="20" keywordseo="Hyundai" source="Orion">Hyundai</keyword> Motor India received approval from SEBI for its initial public offering (IPO).</li><li>The automaker is expected to raise $3 billion (approx. ₹25,000 crore) through its IPO.</li><li>This will make it the biggest IPO in India, beating the state-owned Life Insurance Corporation of India’s IPO.</li></ul> Hyundai Motor India Limited (HMIL), the Indian arm of the South Korean automaker Hyundai has received approval from the Securities and Exchange Board of India (SEBI) for its initial public offering (IPO). The automaker had<a href="https://www.businessinsider.in/stock-market/news/hyundai-motor-india-files-draft-papers-with-sebi-for-indias-biggest-ipo/articleshow/111014559.cms"> filed papers</a> with SEBI in June 2024 and has finally received approval. The company plans on raising $3 billion (approx. ₹25,000 crore) at a valuation of $20 billion. The company established its first manufacturing plant in India in 1998, followed by a second plant in 2008. In FY24, Hyundai Motor India was the country’s second-largest carmaker after Maruti Suzuki. Hyundai is offering 14.2 crore shares with a face value of ₹10 each, which is around 17.5% stake in the company. While there is no official announcement yet, the IPO is expected to hit the street in October 2024. "The objects of the offer are to carry out the Offer for Sale of up to 142,194,700 Equity Shares of the face value of Rs 10 each by the Promoter Selling Shareholder and to achieve the benefits of listing the Equity Shares on the Stock Exchanges," the company said in the DRHP. <div type="Article" hostid="261" msid="111519009" title="Reliance Jio IPO – Mukesh Ambani-led telco might be gearing up for India’s biggest IPO" mstype="2" mssubtype="0"></div> This will make the <keyword id="20457114" type="General" weightage="100" keywordseo="Hyundai-ipo" source="Orion">Hyundai IPO</keyword> the country’s biggest IPO, beating the state-owned Life Insurance Corporation of India’s (LIC) $2.7 billion (approx. ₹21,000 crore) listing in 2022. That is until Reliance Jio’s IPO hits the street. Jio is expected to raise around ₹55,000 crore from the market. Hyundai has become 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. Apart from this, Tata Motors and Mahindra and Mahindra are listed in the Indian stock market. Over the past year, Hyundai Motor Group has announced new investment plans in India totalling approximately $3.75 billion. The company has already invested around $5 billion in the country. India is the third biggest market for the company, after the US and South Korea. <div type="Article" hostid="261" msid="113016216" title="August auto sales – Maruti Suzuki, Tata Motors and others report a decline in sales" mstype="2" mssubtype="0"></div> Hyundai emerged as the second biggest automaker in August 2024 with nearly 50,000 cars sold during the month. A Reuters report revealed that the company plans on launching its first India-made electric vehicle in the country in 2025. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/webstories/krn-heat-exchanger-ipo-price-band-to-risk-factors-all-you-need-to-know/slidelist/113653270.cms">KRN Heat Exchanger IPO – Price band to risk factors, all you need to know</a> <a href="https://www.businessinsider.in/stock-market/news/sebi-report-reveals-the-ugly-truth-of-fo-trading-in-india-93-of-retail-traders-incurred-losses/articleshow/113620397.cms">SEBI report reveals the ugly truth of F&amp;O trading in India – 93% of retail traders incurred losses</a> <a href="https://www.businessinsider.in/business/auto/news/tata-nexon-ev-with-a-bigger-battery-launched-starting-at-13-99-lakh/articleshow/113631992.cms">Tata Nexon EV with a bigger battery launched starting at ₹13.99 lakh</a>

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Why investing in SME IPOs should not be on top of your adventure to-do list!

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