Hyundai India IPO: Should You Subscribe to India’s Biggest Issue?

Much-awaited Hyundai India IPO (HMIL) is all set to launch on October 15, 2024. Priced between Rs 1,865 and Rs 1,960 per share, this IPO aims to raise a massive Rs 27,870 crore, overtaking LIC’s Rs 21,000 crore IPO to become India’s largest-ever offering.

The public subscription will close on October 17, while bidding for anchor investors began on October 14.

Despite a sharp drop in grey market premium (GMP), analysts remain bullish about the company’s long-term potential, citing Hyundai India’s strong market presence and sound financials.

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Hyundai India’s Market Performance

Hyundai India holds a solid 15% market share in the domestic passenger vehicle (PV) segment, positioning itself as a leading automobile player in the country.

With a strong portfolio of SUVs and steady growth over the years, the company has been a key performer in the Indian auto sector.

Additionally, Hyundai India was the second-largest exporter of passenger vehicles between April 2021 and June 2024.

The IPO is structured as an offer-for-sale (OFS) of over 14 crore equity shares by promoter Hyundai Motor Company (HMC), meaning there is no fresh issue of shares for funding business operations. The proceeds from the sale will go directly to the parent company, HMC.

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Changing Market Trends and GMP Decline

Hyundai India IPO has witnessed a significant drop in its grey market premium (GMP). In late September, the GMP was trading at Rs 570, but as of now, it has plunged to just Rs 65—a near 90% decline. This steep fall may raise concerns for short-term investors looking for immediate gains.

Despite the drop in GMP, most analysts maintain a positive outlook on Hyundai India’s long-term growth.

According to ICICI Securities, the company’s strong financials, impressive SUV portfolio, and the industry’s tailwinds make it a solid investment.

They expect the low penetration of passenger vehicles in India to provide significant growth potential for Hyundai India, both domestically and internationally.

The company’s export business has also been a key contributor to its growth, with 21% of its total volumes in FY24 coming from exports.

Hyundai India aims to expand its global presence by exporting to emerging markets in South Asia, Latin America, Africa, and the Middle East.

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Expert Insights on Hyundai IPO

Various brokerage firms have shared their views on the Hyundai India IPO. ICICI Securities has given it a ‘Subscribe’ rating for long-term investors, highlighting Hyundai’s healthy product lineup and favorable industry dynamics. They caution, however, that listing gains might be limited.

Similarly, SBI Securities recommends subscribing to the IPO for long-term gains. Their report emphasizes Hyundai India’s advanced technology, popular models, and high export potential as major strengths.

Hyundai India’s expansion plans, particularly the capacity increase at its Talegaon plant, are expected to drive higher domestic and export volumes in the coming years.

However, analysts have also flagged some risks. Increased competition from new product launches by rivals and the cyclical nature of the passenger vehicle industry could potentially impact Hyundai India’s market share and profitability.

Sharekhan notes that while Hyundai India has performed well in the domestic market, any slowdown in the industry may dampen its growth prospects.

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Conclusion

Hyundai India IPO presents a unique opportunity for long-term investors. The company’s strong market position, growing export capabilities, and expanding product lineup offer a promising growth trajectory.

While the drop in GMP has raised concerns for short-term gains, experts believe that Hyundai India’s fundamentals and growth potential remain intact.

Investors looking for long-term returns may find the Hyundai India IPO an attractive investment but should consider market risks before making a decision.