The much-anticipated Hyundai Motor India IPO officially opened for subscription on 15 October 2024, setting a price band between ₹1,865 and ₹1,960 per share. Through this IPO, Hyundai aims to raise ₹27,856 crore, marking the largest public offering in India’s history.
Subscription Update: A Muted Response on Day 2
As of the second day of the IPO on 16 October 2024, investor participation has remained tepid. By 5 PM, the IPO was subscribed 0.42 times overall, according to data from the NSE website.
- Retail Investors: Subscribed 0.38 times
- Qualified Institutional Buyers (QIB): Subscribed 0.58 times
- Non-Institutional Investors (NII): Subscribed 0.26 times
Despite its historic size, investor enthusiasm appears subdued. Analysts have attributed this tepid response to concerns surrounding Hyundai’s valuation.
Valuation Concerns and Market Sentiment
Market experts are closely scrutinizing the valuation of Hyundai Motor India. The price-to-book ratio of 13.11 times places Hyundai well above Maruti Suzuki, which has a P/B ratio of 4.79 times. This steep valuation has prompted some analysts to advise caution, as it may limit potential returns for short-term investors.
Amar Nandu, a research analyst at SAMCO Securities, noted that the higher valuation reduces the margin of safety, making it less attractive for retail investors seeking quick gains.
Hyundai IPO Grey Market Premium (GMP): Declining Trend
The Grey Market Premium (GMP) for Hyundai Motor India’s IPO has been on a downward trend. As of 4:23 PM on 16 October, the latest GMP was ₹31, indicating muted post-listing expectations. This figure had dropped significantly from earlier in the day, when the GMP stood at ₹63.
Based on the cap price of ₹1,960 per share, Hyundai’s estimated listing price would be ₹1,991, reflecting a modest 1.58% premium over the IPO price. However, this pales in comparison to the ₹570 GMP observed just two weeks ago, indicating waning investor sentiment.
Factors Affecting Hyundai’s IPO Performance
Hyundai Motor India’s IPO faces multiple challenges despite its potential long-term value:
- High Promoter Stake Sale:
Hyundai’s promoters are offloading 17.5% of their stake through this IPO. Additionally, another 7.5% stake must be sold over the next three years to meet regulatory norms, which could create selling pressure in the market. - IPO Size and Allocation Impact:
Due to the large size of the offering, a significant number of applicants are likely to receive shares. This widespread allocation could limit post-listing price increases, reducing the potential for short-term profits. - Valuation Risks:
Hyundai’s high price-to-book ratio leaves limited room for near-term appreciation. Comparisons with Maruti Suzuki further highlight these valuation risks, with experts urging caution for investors focused on quick returns.
Analyst Recommendations: Should You Subscribe?
While short-term concerns have dampened enthusiasm, long-term investors may still find value in Hyundai Motor India’s growth prospects. Leading brokerages such as ICICI Direct and Jefferies have expressed optimism about Hyundai’s future, citing the company’s strong market position and growth strategy.
Hyundai has outlined plans to expand production capacity and introduce premium models, which aligns with its focus on capturing higher market share in premium segments. Analysts believe these strategies will drive long-term growth and ensure consistent returns.
Choice Equity Broking has given the IPO a ‘Subscribe for Long Term’ rating, advising investors to look beyond short-term volatility. Hyundai’s history of strong financial performance and regular dividends also makes it an attractive option for patient investors seeking stable returns.
Company Overview: Hyundai Motor India’s Market Presence and Future Plans
Founded in 1996, Hyundai Motor India has established itself as a leading automaker in the Indian market. The company is known for its popular models across various segments, including compact SUVs, sedans, and electric vehicles.
Looking ahead, Hyundai has announced its intention to expand production capacity and increase focus on EVs. It plans to launch new premium models to cater to evolving consumer preferences and strengthen its foothold in high-growth segments.
Hyundai’s consistent focus on innovation and market expansion positions it well for long-term success, despite near-term challenges.
Conclusion: Long-Term Value Despite Short-Term Volatility
While Hyundai Motor India’s IPO has encountered subdued investor interest due to valuation concerns, the company’s solid fundamentals and expansion plans make it a viable investment for those willing to hold the stock for the long term.
Investors should weigh the risks of short-term volatility against Hyundai’s growth potential and dividend history. With leading brokerages recommending a long-term approach, this IPO offers an opportunity for patient investors to benefit from Hyundai’s strategic initiatives and market leadership.
(Disclaimer: Opinions and recommendations in this article are those of experts and brokerages and do not reflect OSTP Media’s views. Please consult a financial advisor before making investment decisions.)
Read More: OSTP Media | Tech, Auto, and Trending News