Hyundai Motor India Limited (HMIL) is a wholly owned subsidiary of Hyundai Motor Company (HMC). In line with HMC’s global brand vision of ‘Progress for Humanity,’ HMIL adopts sustainable and green manufacturing operations, offering mobility solutions with industry-leading technology.

Investment Details

The Hyundai Motor India IPO is a Book Built Issue amounting to ₹27,870.16 Crores, consisting entirely of an Offer for Sale of 1,421.94 Lakh Shares. The subscription period opens on October 15, 2024, and closes on October 17, 2024. Allotment is expected to be finalized on or about October 18, 2024, with shares listed on the BSE and NSE around October 22, 2024.

The share price band is set at ₹1,865 to ₹1,960 per equity share, with a minimum lot size of 7 shares. Retail investors are required to invest a minimum of ₹13,720, while High-Net-Worth Individuals (HNIs) need to invest in 15 lots (105 shares), totaling ₹2,05,800.

Kotak Mahindra Capital Company Limited, Citigroup Global Markets India Private Limited, HSBC Securities and Capital Markets (India) Private Limited, J.P. Morgan India Private Limited, and Morgan Stanley India Company Private Limited are the book-running lead managers, while KFin Technologies Limited is the registrar for the issue.

Grey Market Premium and Allotment Status

The Grey Market Premium (GMP) for Hyundai Motor India IPO is currently expected to be ₹0, reflecting subdued demand based on the company’s financial performance. It’s crucial to note that trading based on GMP is speculative, and no real price discovery can be done before the listing. The GMP is provided for educational and informational purposes only.

As of 9:00 PM on October 17, 2024, the live subscription status shows that the IPO has been subscribed 2.37 times on its third day of the subscription period.

Anchor Investors Report

Hyundai Motor India has raised ₹8,315.27 Crores from anchor investors at a price of ₹1,960 per share, allocating 42,424,890 equity shares to them.

Objectives of the Hyundai Motor India IPO

Hyundai Motor India will not receive any proceeds from the offer, and all the proceeds will go to the promoter selling shareholder after deducting related expenses and taxes.

Company Overview and Financial Performance

Financially, Hyundai Motor India has shown strong growth, with revenue for fiscal years 2024, 2023, and 2022 at ₹7,13,023.25 Million, ₹6,14,366.42 Million, and ₹4,79,660.48 Million, respectively. The EBITDA for these years was ₹91,326.16 Million, ₹75,487.80 Million, and ₹54,860.89 Million, respectively. The Profit After Tax (PAT) figures for the same periods were ₹60,600.44 Million, ₹47,092.50 Million, and ₹29,015.91 Million, indicating steady growth in financial performance.

For the Hyundai Motor India IPO, the pre-issue Earnings Per Share (EPS) is ₹74.58, and the post-issue EPS remains ₹74.58. The pre-issue Price-to-Earnings (P/E) ratio is 26.28x, with the same post-issue, compared to the industry P/E ratio of 23.57. The company’s Return on Capital Employed (ROCE) for FY24 is 62.90%, and Return on Equity (RoE) is 56.82%, suggesting that the IPO is fairly priced.

Risks and Concerns

Despite the solid financials, several concerns warrant attention:

Risk of Increased Royalty Payments: The parent company may increase royalty charges, impacting profitability.

High Promoter Holding and Pending Stake Sale: Promoters will retain 82.5% ownership, with a 7.5% stake sale still pending, which could increase market supply pressure.

Missed Wealth Creation Opportunity: Unlike Maruti Suzuki, which offered substantial early gains, Hyundai Motors is going public only after fully capitalizing on its growth potential.

Competition from KIA Motors: Hyundai faces direct competition from its sister brand, which could limit market share growth.

Valuation Concerns: Holding just a 6% share of total industry sales and 8% of profits, Hyundai seeks a 42% share in market capitalization.

P/E Valuation Mismatch: With a 14-15% market share in India, Hyundai is demanding a P/E ratio of 27x, similar to Maruti Suzuki, which holds 40% market share. In comparison, Tata Motors trades at a P/E of 11x, and Mahindra & Mahindra at 35x.

Conclusion

The Grey Market Premium (GMP) for Hyundai Motor India indicates potential listing gains of 0%. Given the financial performance and valuation of the IPO, we recommend investors to avoid the Hyundai Motor India Limited IPO for listing gains or long-term investment purposes.

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