Hyundai Motors India IPO Remains Undersubscribed On Second-day; Issue Closes On 17 Oct

The initial public offering (IPO) of Hyundai Motor India, the second-largest player with domestic market share of 14.6 per cent in the passenger vehicle market, is scheduled to close on 17 October for public subscription.

The Rs 27,870.16 crore IPO consisted exclusively of offer-for-sale (OFS) worth with the price band fixed at Rs 1.865 to 1,960 per equity share. 
 

During its subscription phase the Hyundai Motors India IPO remained undersubscribed till its second day. The IPO was filled only 45 per cent at the time of filing this report. Retail investors subscribed to the issue 41 per cent, while the subscription for qualified institutions category stood 0.63 per cent. 
 

The IPO opened on 15 October is scheduled to close on 17 October for the public bids. Subsequently, the allotment will be finalised on 18 October followed by the listing on the National Stock Exchange and Bombay Stock Exchange on 22 October.

Kotak Mahindra Capital, HSBC Securities, JP Morgan India, Morgan Stanley India and Citigroup Global Markets were the book running lead managers, while Kfin Technologies was the registrar to the offer. 

Expert Note 

“At the upper price band of Rs 1,960, Hyundai Motors India is available at a premium valuation of 26.7 times price to earnings ratio based on FY25 E post issue annualised EPS. We assign a ’subscribe’ rating to the issue for the long-term investment, given its strong parentage, healthy financial profile, sustained earnings, increased product mix in the SUV segment and enhanced focus towards electric vehicle space,” stated Geojit Financials. 

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. Fall in the GMP prices can be attributed to concerns over valuations and peak inventory levels followed by reduced its domestic dispatches by 8 per cent compared to the same month the previous year which is due to low consumer demand can be pressure to its Q2 earnings post listing. Considering the GMP trend there is a high possibility of flat debut or with the upside of 5 per cent,” said Prashanth Tapse, Sr VP Research, Mehta Equities.

Firm’s Financials

Hyundai Motors India reported consistent growth in both top-line and bottom-line. Revenue grew at a compounded annual growth rate (CAGR) of 21 per cent to Rs 69,829 crore (in FY24) and profit after tax (PAT) grew at a CAGR of 45 per cent to Rs 6,060 crore over FY22-24, led by better sales volume and operating efficiency.

EBITDA grew at a CAGR of 29 per cent while EBITDA margins were steady in the range of 12 to 13 per cent over FY 22-24, led by localisation, favorable mix and economies of scale.

India’s domestic PV (passenger vehicles) sales volume rose at 5 per cent CAGR (FY19-24) to reach 4.2 million vehicles in FY24 and is expected to clock 4.5 to 6.5 per cent CAGR over FY24 to 29E to reach 5.2-5.7 million domestic vehicle sales, according to CRISIL. 

Since the issue contained exclusively OFS components the firm will not receive any proceeds. However, the firm will get benefits on listing in the public market which will enhance the brand’s visibility and provide liquidity to the shareholders. 
 

About Firm

Hyundai Motor India, established in 1996, is a wholly owned subsidiary of Hyundai Motor Company (HMC) and the second largest automobile manufacturer in Indian passenger vehicles with 15 per cent market share FY24. Hyundai Motors India manufactures and sells four-wheeler passenger vehicles. Its portfolio includes 13 models across various segments along with EVs (electric vehicles) and sold nearly 12 million passenger vehicles both domestically and through exports.