Auto major Hyundai sets ball rolling on India's biggest IPO at Rs 27,856 cr

The firm will be valued at Rs 1.59 trillion at the top-end of the price band of Rs 1,865-Rs 1,960

South Korean carmaker Hyundai Motor Company (HMC) will divest Rs 27,856 crore worth of shares through the maiden share sale of its domestic arm, Hyundai Motor India (HMIL), setting the stage for India’s biggest initial public offering (IPO).

India’s second-largest passenger vehicles firm will be valued at Rs 1.59 trillion at the top-end of the price band of Rs 1,865-Rs 1,960. The IPO will remain open between October 15 and October 17.

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 over 3x more demand than shares on offer in the anchor book, with marquee global names, such as Abu Dhabi Investment Aut­hority, Amundi, Singapore's GIC, Fidelity, and BlackRock, likely to participate.

 

Among domestic mutual funds, most of the large fund houses that include SBI MF, HDFC MF, ICICI Prudential MF, Axis MF, and Nippon India MF are also likely to bid for shares.

Currently, HMIL is a 100 per cent subsidiary of Seoul-headquartered HMC. Following the IPO, HMC’s stake will be reduced to 82.5 per cent.

The upcoming IPO will serve as a litmus test for the depth and allure of India’s domestic equity markets, while also paving the way for more multinational corporations 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 household appliances manufacturer, also exploring an Indian listing.

“We feel it is the right time to further Indianise our operations here and become a ‘home brand’. The IPO will ensure that HMIL is even more dedicated to succeeding in India,” said Unsoo Kim, president, chief executive officer, and managing director of HMIL, when asked about the rationale for listing in India.

HMIL, popular for its Creta SUV, is seeking valuations comparable to industry leaders MSIL and M&M. A dominant player in the SUV segment, HMIL has a market share of about 14.6 per cent compared to MSIL’s over 40 per cent of the passenger vehicle industry.

The IPO values HMIL at 2.3 times FY24 sales and 26.3 times FY24 profits. Meanwhile, MSIL and M&M are valued at about 2.7 times FY24 sales and 27x and 32x FY24 earnings, respectively.

Analysts believe HMIL’s superior product portfolio, recent market share growth, and the benefits of being part of the larger HMC group will underpin its valuations.

In a recent note, Nomura said HMIL’s sales were 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 EVs in India presents a significant opportunity for HMIL.

HMIL’s IPO is set to inject further momentum into India’s sizzling equity capital market. This year, 62 companies have already raised Rs 64,510 crore. With HMIL’s addition, the total is expected to surpass Rs 92,000 crore. The pipeline remains robust, with mega offerings from Swiggy, Afcons Infrastructure, and NTPC Green slated for next month, positioning 2024 to surpass the record Rs 1.19 trillion raised in 2021, when LIC’s landmark IPO debuted.