Hyundai Motor India IPO: Grey Market Premium Plummets by 75% Ahead of Launch
News Synopsis
Hyundai Motor India Ltd. is preparing for its highly anticipated Initial Public Offering (IPO), but recent developments in the grey market suggest waning enthusiasm. The grey market premium (GMP) for the automaker’s unlisted shares has plummeted by 75% over the last two weeks, ahead of the launch. This drop coincides with Hyundai Motor India finalizing the details for its mega Rs 28,000 crore IPO, which is set to launch next week.
Data from platforms monitoring GMP activity indicate that as of October 9, the premium has dropped to a range of Rs 140-145 per share, a sharp decline from Rs 570 in late September. This significant fall hints at possible reduced demand for Hyundai Motor India’s shares in the unregulated market, though market observers suggest that grey market activity is only a rough indicator of actual market sentiment.
Insights from Hyundai Motor India’s Management
Despite the shrinking GMP, Tarun Garg, Chief Operating Officer of Hyundai Motor India, remains optimistic. He noted that Indian subsidiaries of global multinational corporations, such as Hyundai, typically attract premium valuations because of India's strong growth potential and robust consumption-driven market. In terms of valuations, Hyundai Motor India’s Price-to-Earnings (P/E) ratio stands at 27x, considerably higher than its parent company’s 5x. Garg emphasized the company’s potential for sustained growth, reinforcing confidence in the upcoming IPO.
Hyundai Motor India Financial Performance
Hyundai Motor India has shown strong financial performance in recent times. For the year ending March 2024, the company reported a net profit of Rs 6,060 crore, reflecting a 28.7% year-on-year increase. Additionally, the company's revenue grew by 15.8%, reaching Rs 69,829 crore. These impressive figures, coupled with Hyundai's longstanding reputation as a market leader, make the IPO a notable event in India's stock market.
According to analysts at Aequitas Investments, Hyundai Motor India may only contribute 6.5% to the global revenue and 8% to the global profitability of its parent company. However, it is expected to be valued at around 42% of the parent company’s market capitalization upon listing, indicating the significant importance of the Indian market.
Potential Listing and Hyundai Motor India IPO Dates
Given the recent grey market trends, market experts predict that Hyundai shares may list at a modest 7% premium if current market conditions remain stable. However, it is important to note that the final listing price could vary, as grey market trends are merely early indicators. The actual listing price will be determined when Hyundai Motor India's shares officially begin trading on October 22. The IPO will open for subscription on October 15, giving retail investors a window to participate until October 17.
Hyundai India IPO: Key Things to Know
Hyundai Motor India IPO Size:
At the upper end of the price band, Hyundai Motor India’s IPO is expected to raise approximately Rs 27,870 crore.
Hyundai Motor India IPO Price Band:
The automaker has set a price range of Rs 1,865-1,960 per share, which values the company at around Rs 1.6 lakh crore.
Hyundai Motor India IPO Subscription Dates:
The IPO will open for public subscription on October 15 and close on October 17. Anchor investors will have the opportunity to bid on October 14.
Hyundai Motor India IPO Offer-for-Sale (OFS):
The entire IPO is an OFS of 1.42 crore equity shares, meaning no fresh capital will be raised. The promoter, Hyundai Motor Company, is selling its shares, and Hyundai Motor India will not receive any proceeds.
First Automaker IPO in Two Decades: This is the first IPO by an automaker in India in more than 20 years, with the last being Maruti Suzuki in 2003.
No Proceeds for Hyundai India: Since the IPO is entirely an OFS, the second-largest carmaker in India after Maruti Suzuki will not retain any capital from the sale.
Hyundai Motor India Operations in India:
Hyundai Motor India, which began its operations in the country in 1996, currently sells 13 car models across multiple segments.
Conclusion
While the falling grey market premium signals caution, Hyundai Motor India's strong financial performance and growth potential in the Indian market position it as a major player in the automotive industry. Investors will be keeping a close eye on the final listing price when the company's shares debut on October 22.
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