Hyundai Motor India announces IPO details as GMP drops 75%

Hyundai Motor India Ltd's unlisted share price has experienced a notable decline in anticipation of its upcoming IPO. As investors look to invest in stocks, the grey market premium (GMP) for the company's shares has plummeted by 75% over the past two weeks. The Indian arm of the South Korean automotive giant is set to launch a ₹28,000-crore IPO next week, with the price band now confirmed.

Grey market signals declining demand

The grey market often reflects market sentiment before a company's official listing. Current data shows that the GMP for Hyundai Motor India's IPO shares has dropped to ₹140-145 as of October 9, down from ₹570 in late September. This drastic reduction suggests weakening demand for the shares in the unregulated market.

Optimism amid challenges

Tarun Garg, Hyundai Motor India's Chief Operating Officer, remains positive about the company's growth prospects. He noted that Indian subsidiaries of multinational corporations like Hyundai often achieve higher valuations due to the country's robust growth and consumption patterns. Currently, Hyundai Motor India has a Price-to-Earnings (P/E) ratio of 27x, while its parent company, Hyundai Motor Company, stands at just 5x.

Financial performance highlights

Hyundai Motor India posted a net profit of ₹6,060 crore for the year ending March 2024, reflecting a 28.7% increase year-on-year. Additionally, revenue grew by 15.8% to ₹69,829 crore. According to Aequitas Investments, despite contributing only 6.5% to global revenue and 8% to global profitability, Hyundai Motor India is projected to represent around 42% of its parent company's market capitalisation at the time of listing.

Market predictions for the IPO

Given current trends, Hyundai shares may debut with a modest 7% premium if market conditions remain stable. However, experts warn that grey market performance is merely a preliminary indicator. The actual listing price on October 22 could differ significantly, as the IPO opens for subscription on October 15 for retail investors.

Key takeaways

1. IPO size: At the upper price band, Hyundai's IPO is estimated at ₹27,870 crore.
2. Price band: Shares are priced between ₹1,865-₹1,960, valuing the company at ₹1.6 lakh crore.
3. Subscription dates: The public offer opens on October 15 and closes on October 17, with anchor investors bidding on October 14.
4. Offer structure: This IPO is entirely an Offer-for-Sale (OFS) of 1.42 crore equity shares from promoter Hyundai Motor Company, with no fresh issue.
5. Market context: This marks the first initial share sale for an automaker in over 20 years since Maruti Suzuki's listing in 2003.
6. Proceeds: As this is an Offer-for-Sale (OFS), Hyundai Motor India will not acquire any funds from the IPO.
7. Company background: Hyundai began operations in India in 1996 and currently offers 13 car models across various segments.

As investors prepare to invest in stocks, Hyundai's upcoming IPO stands as a significant event in the automotive industry.