Strong buying interest from qualified institutional buyers (QIBs) helped Hyundai Motor India’s Rs 27,870-crore initial public offering (IPO) get fully subscribed on Thursday. The country’s largest IPO, which was subscribed 2.37 times, saw weak participation from both non-institutional investors (NIIs) and retail investors. The company received bids for 236.3 million shares vis a vis 99.8 million shares on offer.
The QIB portion was subscribed 6.97 times with strong interest from foreign institutional investors. Bids from retail investors and NIIs stood at just 50% and 60%, respectively, while the portion set aside for employees was subscribed 1.74 times.
Industry experts said that the dip in the grey market premium (GMP) of the stock to nil on Thursday from Rs 380 a month ago was one of the key reasons that dampened the spirits of retail investors and NII.
Brokerage firm ICICI Direct said, “We expect limited listing gains to this IPO; however, expect HMIL to deliver healthy double-digit portfolio returns over the medium to long term.”
The company set a price band of Rs 1,865-1,960 per share, and the anchor investors were allocated 42.4 million shares, or 30% of the issue, at the upper end of the price band, mobilising Rs 8,315.3 crore in the pre-IPO round on Monday.
Interestingly, Hyundai’s retail subscription at 0.5 times was the lowest compared to that of other big IPOs in India with issue sizes of over Rs 10,000 crore, as per the data. The second-lowest retail investor participation of 0.63 times was seen in the IPO of GIC in 2017.
Over the past few days, GMP of Hyundai India’s shares saw a sharp fall due to concerns over weak industry growth outlook, the company’s falling market share, the issue being a complete offer for sale, and revenue from spare parts being accounted in the parent company’s financials rather than the Indian unit.
Apart from this, experts also said the valuation at 26.3x FY24 earnings is expensive. However, most analysts recommended investors subscribe to the issue from a longer-term perspective. Hyundai Motor has offloaded a 17.5% stake in its Indian arm through the IPO, which is a complete offer for sale.