Hyundai IPO: India’s biggest public issue to hit D-Street before Diwali

Hyundai Motor India (HMI), which recently received the green signal from the Securities and Exchange Board of India (SEBI) for its initial public offering (IPO), is planning to hit Dalal Street before Diwali. The red herring prospectus (RHP) is expected to be filed this week and the issue is likely to be launched soon, said people close to the development.

The country’s second-largest carmaker by volume, after Maruti Suzuki India, filed preliminary papers with capital market regulator, SEBI, in June this year, looking to raise around ₹25,000 crore through share sale by its South Korean parent. As per the DRHP, HMI has set its valuation between ₹1.5 lakh crore to ₹1.7 lakh crore ($18 billion and $20 billion). The actual issue size will be determined once the company unveils the price band and bidding dates.

If this IPO becomes successful, this will be India’s largest public issue, surpassing the record ₹20,557 crore raised by the state-owned insurer Life Insurance Corporation (LIC) of India in 2022 when the government offloaded a 3.5% stake in the company. Also, this is the first automaker to file for IPO in 20 years, after Maruti Suzuki went public in 2003. 

As per the DRHP filed with the SEBI, the IPO will only see Hyundai Motor India’s South Korean parent dilute its stake. The IPO is entirely an offer for sale (OFS) of 142,194,700 equity shares by promoter Hyundai Motor Company, with no fresh issue component. Since the public issue is completely an OFS, Hyundai Motor India will not receive any proceeds from the IPO.

Ahead of the launch of the highly-anticipated IPO, shares of Hyundai Motor India were commanding a grey market premium (GMP) of ₹340 in the grey market on September 30. The GMP has declined from peak of ₹ ₹570 on September 27.

The GMP indicates that investors are eagerly waiting for the IPO and are willing to pay more than the issue price, said market observers.

“Hyundai India's ₹25,000 crore IPO is poised to be the largest in Indian history, expected to launch this November. The market is abuzz with excitement as Hyundai remains one of the strongest players in the Indian car market, consistently increasing its market share. We can expect Hyundai to receive a higher valuation compared to its peers like Maruti, which currently trades at a Price-to-Earnings (P/E) ratio of 23 for FY25,” says Santosh Meena, Head of Research at Swastika Investmart Ltd.

“Strong demand is anticipated for the IPO, with robust liquidity in the market. However, there are concerns that this could lead to a potential drying up of liquidity in the secondary market. Additionally, the recent buzz in the grey market has slightly tapered off in the past couple of days,” he adds.

HMI is a part of the Hyundai Motor Group, the third largest auto original equipment manufacturer (OEM) in the world based on passenger vehicle sales in CY2023, according to the CRISIL Report. India is Hyundai’s third-largest market followed by the U.S. and South Korea. In 2023, Hyundai Motor India's contribution to Hyundai Motors' global volume stood at 18% as against 14.5-15% four years back.

The company has invested ₹29,741 crore ($5.04 billion) in India operations as of December 31, 2023 in tangible fixed assets and capital work in progress since its inception. As of December 31, 2023, it had 5,475 full-time employees and largest supply chain outside Korea, which as of March 31, 2024, comprised of 194 tier-1 and 1,083 tier-2 suppliers by location in India. Its model line-up consists of cars across different customer segments, including Grand i10 Nios, i20, Aura, Exter, Venue, Verna, Creta, Alcazar, Tucson and the all-electric SUV IONIQ 5.

The company has manufacturing plants in Chennai (Tamil Nadu) and Talegaon (Maharashtra). The Chennai manufacturing plant had an annual production capacity of 824,000 units as of March 31, 2024.

“We are expanding our manufacturing capabilities in India with the recent acquisition of a manufacturing plant in Talegaon, Maharashtra (“Talegaon Manufacturing Plant”) which is expected to commence commercial operations partly in the second half of Fiscal 2026,” HMI said in its DRHP.

“We expect our annual production capacity across the Chennai and Talegaon manufacturing plants in aggregate to increase to 994,000 units when the Talegaon Manufacturing Plant is partly operational and to 1,074,000 units once the Talegaon Manufacturing Plant is fully operational,” the IPO document highlighted.

On the financial front, HMI posted net profit of ₹4,709 crore and ₹4,383 crore, in FY23 and nine months of FY24, respectively. The revenue from operations stood at ₹60,307.58 crore and ₹52,157.91 crore during the period under review.

The carmaker has hired investment banks such as Kotak Mahindra, Citibank, Morgan Stanley, JP Morgan, and HSBC to manage its IPO.