Hyundai IPO 2024 Highlights: Hyundai Motor India IPO GMP falls to less than 1%, issue subscribed 42% on Day-2

The subscription of shares for Qualified Institutional Buyers saw a surge of 0.5 times. Similarly, Non-Institutional Investors also saw an increase i.e, 0.13 times of subscription. The shares allocated to Retail Individual were oversubscribed by 0.26 times. The shares reserved for employees also the oversubscription of 0.80 times

The number of shares offered to Qualified Institutional Buyers is 2,82,83,260, which includes foreign institutional investors, domestic financial institutions, mutual funds, and others. Non-Institutional Investors (NII) were offered 2,12,12,445 shares, comprising non-institutional investors, corporates, individuals (other than retail), and others. Retail Individual Investors were offered 4,94,95,705 shares, and 7,78,400 shares were allocated for employees.

The lot size for the retail investor for bidding is minimum 1 lot of 7 shares and maximum 14 lots of 98 shares. The small HNIs can bid for minimum 15 lots of 105 shares and maximum 72 lots of 504 shares. The big HNIs can minimum go for 73 lots of 511 shares.

Hyundai Motor India is the second largest auto Original Equipment Manufacturer (OEM) in the Indian passenger vehicle (PV) market since FY09 in terms of domestic sales volumes and has been the second largest exporter of Passenger vehicles from India since FY22. It has sold 12 million units till date since 1998. Currently, the company has a portfolio of 13 models across multiple segments. It has a track record of manufacturing and selling Passenger vehicles that are reliable, feature-rich, innovative and backed by latest technology. They have a capacity of 811 thousand units as on FY24 to be expanded to 1.1 million units per annum by 2028.

The total Issue size for Hyundai Motor India IPO is 142,194,700 shares which total to Rs 27,870.16 Crores. The offer for sale (OFS) shares equals the amount of total issuance size which is 142,194,700 shares. The minimum lot size consists of 7 shares which is for retailers(min). The shareholding of pre and post issues saw no change and remained stable at 812,541,100.

“We assign Subscribe rating on HMIL (Hyundai India) given steady growth prospects amid industry tailwinds, robust financials & healthy SUV product slate. We expect limited listing gains to this IPO, however expect HMIL to deliver healthy double-digit portfolio returns over medium to long term,” said ICICI Direct in a research report.

The grey market premium of Hyundai Motor India has increased in value by Rs 10. The stocks of Hyundai India are fetching a premium of Rs 55 or 2.8% to the issue price compared to Rs 45 in the morning.

Hyundai Motor India‘s sales and PAT has grown at a CAGR of 19.4% and 47.7%, respectively, over FY21-24, led by 11% sales volume CAGR and consistent improvement in EBITDA margin profile. “The company clocked an EBITDA margin of 13.1% in FY24 with RoCE placed at 50%. At the upper end of the price band, HMIL will command a valuation of 26x P/E, ~16.5x EV/EBITDA & ~2.3x P/S on FY24 basis which is at a tad discount to industry leader i.e. Maruti Suzuki India,” said ICICI Direct Research in an IPO note.

Hyundai Motor India is just trailing Maruti Suzuki in market share in the Indian PV industry and it is also the 2nd largest exporter of cars from India. SUVs (higher margin vehicles) contribute a large share of the company’s volumes which is reflected in the relatively higher material and operating margins as well as return ratios. The company is differentiated by strong brand and blockbuster models such as Creta, Alcazar, Venue, and Verna along with advanced technology and high export potential.

The issue of the automobile giant has been subscribed 34% on the first day. The IPO received bids worth Rs 2,836.150 crore. The issue retail portion was booked 0.23 times more than the offered shares. The employee part was subscribed 0.67 times.

The brokerage firm met with Hyundai India’s managing director Unsoo Kim, CFO Wangdo Hur, and COO Tarun Garg. During the meeting the management said that the company is well placed to ride the domestic PV sales upcycle with 63% exposure to high-growth UVs (utility vehicles). Also, the company is increasing capacity from 0.82 million to 1.07 million units to support growth in domestic and overseas markets. Thirdly, the company’s focus is on expanding the model portfolio, with four EVs planned over the next few years. They are also considering launching some global models in India. Nuvama doesn’t have any rating on the stock.

“We believe that the outlook for Hyundai continues to be strong owing to its strong parentage and leveraging HMC’s technology and R&D capabilities and strong balance sheet,” said Aditya Capital Money in an IPO note. However, according to the brokerage house at the upper price band, Hyundai is available at a rich valuation of 26x its FY24 EPS, leaving little on the table for investors. Aditya Birla Money has given a “subscribe” rating to the issue with a “long-term” view.

Strong brand and blockbuster models such as Creta, Alcazar, Venue, and Verna along with advanced technology and high export potential are the key differentiator for Hyundai Motor India. According to the brokerage house SBI Capital, the capacity expansion at Talegaon will help the company ramp up both domestic and export volumes. The broking firm has given a subscribe rating to the IPO with a “long-term” view.

The shared business activities of Kia Corporation and Kia India Private Limited, both part of the same group, could create potential conflicts of interest that may adversely impact Hyundai Motor India.

Additionally, the company and its subsidiaries, including its promoters, are currently facing ongoing legal disputes, and unfavorable outcomes in these cases could harm their business, reputation, financial stability, and operational performance.

Hyundai’s sales are primarily dependent on non-electric passenger vehicles, and there are no assurances that the company will successfully develop a viable and cost-effective electric vehicle (EV) strategy.

The initial public offering (IPO) of Hyundai Motor India has seen a subscription rate of 13% on its first day, as of 1:24 PM, according to BSE data. The retail investor segment has performed well, achieving a 20% subscription, while the non-institutional investors’ quota was subscribed at 9%. The portion allocated for qualified institutional buyers (QIBs) recorded a mere 1% subscription. In contrast, the employee segment showed strong interest, with a subscription rate of 58%.

Hyundai Motor India reported a net profit of Rs 6,060.04 crore in the financial year 2024, a jump of almost 29% compared to a net profit of Rs 4,709.25 reported a year ago. The company saw an increase of 62.3% in net profit in FY23 from Rs 2,901.59 reported in FY22.

Shares of Garuda Construction and Engineering made a strong debut on the stock exchanges today. The stock listed at Rs 105 on the NSE, marking a 9.5% premium over its IPO price of Rs 95. On the BSE, it opened at Rs 103.20, reflecting an 8.63% gain from the issue price.

The company’s Rs 264.10 crore initial public offering (IPO) was open for subscription from October 8 to October 10, 2024, with the price band set between Rs 90 and Rs 95 per share.

The Hyundai Motor India IPO, structured as an offer for sale (OFS), involves 14.2 crore shares being offloaded by its Korean parent, with none of the proceeds directed toward the Indian unit. This has sparked concerns about whether the IPO meets expectations, as the funds won’t immediately fuel growth for the Indian company.

Though an OFS allows existing shareholders to cash in, it doesn’t generate new capital for growth. However, Hyundai Motor India can still leverage its cash reserves for strategic expansions in the Indian market. The Korean parent, the world’s third-largest original equipment manufacturer, plans to use the IPO proceeds to invest in new products, technology, and research, potentially benefiting its Indian operations in the long term.

By 12 pm, Hyundai Motor India’s Rs 27,870.16-crore IPO had received bids for 95,60,628 shares, representing 10% of the total issue size of 9,97,69,810 shares. On Monday, the company raised Rs 8,315 crore from anchor investors, ahead of the public offering.

The overlapping business activities of Kia Corporation and Kia India Private Limited, which are part of the same group, may lead to potential conflicts of interest that could negatively affect Hyundai Motor India.

The company and its subsidiaries, including its promoters, are currently involved in ongoing legal disputes. Adverse rulings in these cases could harm their business, reputation, financial standing, and operational performance.

Hyundai’s sales heavily rely on non-electric passenger vehicles, and there are no guarantees that the company will successfully implement an effective and affordable electric vehicle (EV) strategy.

Hyundai Motor India has allocated shares worth Rs 8,315.3 crore to 225 funds and investors in its anchor round, ahead of the country’s largest IPO set to open on Tuesday. Notable investors in the anchor round include the Government of Singapore, Fidelity Securities Funds, Vanguard Investments Funds, BlackRock, Canada Pension Plan Investment Board, JP Morgan Funds, Abu Dhabi Investment Authority, Societe Generale, and Goldman Sachs.

With the company’s production facilities already running at high capacity, the successful launch of the Talegaon plant is vital to meet future demand. Any misjudgment in forecasting demand could lead to either under- or over-utilization of manufacturing capacity, which could disrupt production schedules and increase associated costs.

The Hyundai Motor India IPO is the largest IPO in India so far. It has also surpassed LIC, that was the largest till date. Valued at Rs 27000 crore, this issue is an Offer for Sale and there are no fresh issuances.

Hyundai‘s Rs 27,870 crore IPO is viewed as providing limited valuation comfort when compared to Maruti Suzuki, which boasts nearly three times the passenger vehicle market share, two-and-a-half times the sales volume, and comparable profitability. Analysts argue that the pricing at Rs 1,960, the upper end of the price band, is steep.

Hyundai is seeking a price-to-earnings (PE) valuation of 26x FY25 earnings, whereas Maruti Suzuki trades at a PE of 22x for the same period. This PE ratio exceeds the industry average of 24.41x and is significantly higher than the 5x PE of its parent company, Hyundai Motor Global.

Elara Securities recommends Subscribe to HMIL IPO.

“The Key positives are

– 1) Higher share of SUV than peers like MSIL

-2) Capability across powertrain and transmission

-3) Capacity expansion when industry growth is likely to revive in FY26

-4) Healthy margin & return ratios

-5) Good mix of higher margin exports.”

That said Elara Securities also listed the key negatives. These include

“1) Industry growth is weak in medium term (Vahan retail growth for H1FY25 stands at 1% YoY)

2) falling market share as HMIL has lost a 230bp retail market share during FY22-25 YTD to 14.1% as per Vahan

3) No major volumetric model launch in the next 6-12 months

4) Related party transactions like royalty rate rose (2.8% of sales in Q1FY25 from 2.2% in FY24) & spare parts revenue to get accounted out of listed company. It gets accounted in group company Hyundai Mobis

5) Presence of sister firm Kia India in competing segments

Motilal Oswal has recommended a ‘Subscribe for long term’ on Hundai Motor India IPO. According to them, “at the upper price band of Rs 1960, the issue is priced at 26.3x FY24 P/E and looks reasonably priced compared to Maruti which is trading at 29.8x. We expect HMIL to be a key beneficiary of growth in PV segment due to its strong presence in the SUV segment. It is also planning a slew of launches in the EV space. The company has planned an overall capex of ₹320bn to develop capabilities in EV (including battery assembly and charging stations) and ramp up overall manufacturing capacity over FY23-32.”

“The domestic PV industry is an oligopolistic market with few players dominating the entire industry. Hyundai Motor India is the second largest contributor to the domestic sales. With 14% to 15% market share HMIL is the second largest player in the domestic market and one of the prominent export players from India. This is due to continued traction for popular SUV models. HMIL has strong parentage, relevant product profile, robust market positioning and healthy financial profile. At upper price band the IPO is coming with an underlying P/E valuation of 26.3x on its FY24 earnings compared to Maruti Suzuki’s P/E valuation at 30.4x its FY24 earnings,” said Sharekhan Securities in an IPO note.

Motilal Oswal on Hyundai Motor IPO

According to Motilal, the strong group support and diverse product portfolio should help. “Being part of the Hyundai Motor Group (HMC), HMIL gets support of its parent in many aspects including R&D, design, product planning, supply chain, etc. In addition, it benefits from the strength of the “Hyundai” brand. HMIL has a diverse portfolio of 13 models. It aims to launch 4 new EV models including Creta EV in Q4FY25,” the report added.

Hyundai Motor India reported a net profit of Rs 6,060.04 crore in the financial year 2024, a jump of almost 29% compared to a net profit of Rs 4,709.25 reported a year ago. The company saw an increase of 62.3% in net profit in FY23 from Rs 2,901.59 reported in FY22.

The automobile giant Hyundai Motor India is dedicated to investing in R&D and introducing new passenger vehicles to enhance their market position and increase the appeal of their vehicles to customers. 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, the company is valued at 26.2x its FY24 earnings along with being valued at 26.7x if we annualize FY25 earnings. We believe that the issue is fully priced and recommend a “Subscribe – Long Term” rating to the IPO.,” said Anand Rathi Research in an IPO note on October 15.