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South Korean automaker Hyundai Motor Company (HMC) will sell Rs 27,856 crore worth of shares in the first share sale of its domestic arm, Hyundai Motor India (HMIL), paving the way for the largest offering Initial Public Offering (IPO) of India.
India’s second largest passenger vehicle company will be valued at Rs 1.59 trillion at the upper end of the price band of Rs 1,865 to Rs 1,960. The IPO will remain open between October 15 and 17 .
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Around Rs 8,315 crore worth of shares reserved for anchor investors will be allotted on October 14. Investment banking sources said there was already more than 3 times more demand than shares on offer in the anchor book, with marquee global names including Abu Dhabi Investment Authority, Amundi, the Singapore GIC, Fidelity and BlackRock are likely to participate.
Among domestic mutual funds, most major fund houses including SBI MF, HDFC MF, ICICI Prudential MF, Axis MF and Nippon India MF are also likely to bid for shares.
Currently, HMIL is a wholly owned subsidiary of HMC, headquartered in Seoul. After the IPO, HMC’s stake will be reduced to 82.5 percent.
The upcoming IPO will serve as a litmus test for the depth and attractiveness of India’s domestic stock markets, while paving the way for more multinational companies to list in the country, which boasts the highest valuations among emerging markets. This trend is already gaining momentum, with South Korea’s LG Electronics, a leading home appliance maker, also exploring a listing in India.
“We believe this is the right time to further Indianise our operations here and become a ‘house brand’. The IPO will ensure that HMIL is even more committed to succeed in India,” said Unsoo Kim, Chairman, Managing Director and Managing Director of HMIL, when asked about the rationale for listing in India.
HMIL, popular for its SUV Creta, is looking for valuations comparable to industry leaders MSIL and M&M. A dominant player in the SUV segment, HMIL commands a market share of around 14.6 per cent, compared to over 40 per cent for MSIL in the passenger vehicle industry.
The IPO values HMIL at 2.3 times FY24 sales and 26.3 times FY24 earnings. Meanwhile, MSIL and M&M are valued at around 2.7 times sales of FY24 and at 27 times and 32 times FY24 earnings, respectively.
Analysts believe HMIL’s superior product portfolio, recent market share growth and benefits of being part of the larger HMC group will support its valuations.
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In a recent note, Nomura said HMIL sales are expected to accelerate, supported by the launch of new models, such as the Creta EV and the petrol-HEV SUV Ni1i. Additionally, the growing demand for electric vehicles (EVs) and hybrid vehicles in India presents a significant opportunity for HMIL.
HMIL’s IPO is expected to add further impetus to the booming Indian capital market. This year, 62 companies have already raised Rs 64,510 crore. With the addition of HMIL, the total is expected to cross Rs 92,000 crore. The pipeline remains strong, with mega offerings from Swiggy, Afcons Infrastructure and NTPC Green planned for next month, positioning 2024 to surpass the record Rs 1.19 trillion raised in 2021, when LIC’s historic IPO started.
First publication: October 9, 2024 | 8:34 p.m. STI