Hyundai India’s Rs 27,870 Crore IPO: A Mixed Bag of Investor Sentiment
The initial public offering (IPO) of Hyundai India, valued at a staggering Rs 27,870 crore, concluded today with a subscription rate of 2.37 times. However, the turnout from retail individual investors (RIIs) was notably lackluster, raising questions about market sentiment and investor confidence in the automotive giant.
Subscription Overview
The IPO attracted a total of over 23.63 crore consolidated share bids against the 9,97,69,810 shares available for subscription. On the final day of bidding, retail investors subscribed to only 50% of the available shares, which amounted to 4,94,95,705 shares. This tepid response from RIIs was contrasted by robust participation from qualified institutional buyers (QIBs), who oversubscribed their portion by an impressive 6.97 times. The QIB segment saw bids totaling 19.72 crore shares against the 2,82,83,260 shares reserved for them.
Non-institutional investors also displayed a lack of enthusiasm, subscribing to only 60% of their reserved quota. This disparity in subscription rates raises concerns about the overall market appetite for the IPO, particularly among retail investors.
Offer Structure and Use of Proceeds
The Hyundai IPO is structured entirely as an offer for sale (OFS), with 14.2 crore shares being offloaded by the company’s parent, Hyundai Motor Global. Importantly, since the IPO is an OFS, all proceeds will go directly to the selling shareholder rather than the company itself. Despite this, Hyundai’s management has indicated that the funds will be directed towards research and development, as well as new innovative offerings, signaling a commitment to future growth.
Market Performance and Grey Market Premium
As the IPO concluded, Hyundai India’s grey market premium (GMP) had fallen to zero, suggesting a potential flat or negative listing price. The GMP had been on a downward trajectory throughout the offering period, peaking at around Rs 570 per share. This decline in GMP indicates a cautious outlook among investors regarding the stock’s immediate performance post-listing.
Pricing and Analyst Recommendations
Hyundai set a price band for the IPO between Rs 1,865 and Rs 1,960 per share, with a minimum bid requirement of 7 shares per lot. Analysts have generally recommended a long-term subscription to the IPO, citing Hyundai’s strong brand presence in India and its favorable position to capitalize on growth opportunities in the passenger car market.
ICICI Direct has assigned a "subscribe" rating to Hyundai, highlighting the company’s steady growth prospects amid favorable industry conditions, robust financials, and a healthy lineup of SUV products. They anticipate limited listing gains but expect the company to deliver healthy double-digit portfolio returns over the medium to long term.
Anand Rathi echoed similar sentiments, noting that at the upper price band, Hyundai is valued at 26.2 times its FY24 earnings and 26.7 times if FY25 earnings are annualized. They believe the issue is fully priced and recommend a "Subscribe – Long Term" rating.
Company Profile and Financial Performance
Hyundai is the second-largest carmaker in India, boasting a diverse portfolio of 13 passenger vehicle models, including sedans, hatchbacks, and SUVs. The company aims to leverage its strong local manufacturing capabilities to solidify its position as Hyundai Motor’s largest production base in Asia.
Operating two production facilities in Chennai, Hyundai has a combined installed capacity of 8.24 lakh units per annum, currently running at over 90% capacity utilization. For the quarter ending June 2024, Hyundai Motor India reported a revenue of Rs 17,344 crore, up from Rs 16,624 crore in the same period last year. Notably, 76% of this revenue was generated from the domestic market, with exports accounting for the remaining 24%. The company’s net profit for the quarter stood at Rs 1,489.65 crore, compared to Rs 1,329.19 crore in the previous year.
Conclusion
The conclusion of Hyundai India’s IPO marks a significant moment in the Indian automotive sector, reflecting both the challenges and opportunities that lie ahead. While the strong participation from institutional investors suggests confidence in the company’s long-term prospects, the lackluster response from retail investors raises important questions about market sentiment. As Hyundai continues to innovate and expand its presence in India, it remains to be seen how the stock will perform in the coming months and whether it can regain the confidence of retail investors.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own and do not represent the views of Economic Times.)