Hyundai Motor IPO review: Brokerages' verdict on India’s biggest issue

The highly-awaited ₹27,870-crore initial public offering (IPO) of Hyundai Motor India is all set to be launched tomorrow, while the anchor book will open for subscription today. Ahead of the opening of the country’s largest-ever IPO, several brokerages such as ICICI Direct, Anand Rathi Research, LKP Securities, Aditya Birla Money, and SBI Securities have shared their views on the public issue, with most of them recommending “Subscribe” with a long-term perspective. They broadly remain optimistic about the issue, citing that the valuation of the country’s second-largest auto company appears at a discount to the industry leader, Maruti Suzuki India.

Anand Rathi Research in a note says that the issue is fully priced and recommends “Subscribe –Long Term” rating to the IPO. “At the upper band of ₹1,865-1,960, the company is valuing at 26.2x its FY24 earnings along with being valued at 26.7x if we annualise FY25 earnings. Following the issuance of equity shares, the company's market capitalisation stands at ₹1.59 lakh crore, with a market cap-to-sales ratio of 2.28 based on its FY24 earnings.”

Bajaj Broking has also recommended “Subscribe for Long Term”, saying that the issue relatively appears fully priced, but the company is poised for bright prospects post completion of its ongoing expansions. For the last three fiscals, the company has reported an average earnings per share (EPS) of ₹62.56, and an average RoNW of 39.11%. The issue is priced at a price-to-book value (P/BV) of 13.11 based on its NAV of ₹ 149.52 as of June 30, 2024, as well as post-IPO equity capital since this is a secondary issue.

“If we attribute FY25 annualised super earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 26.73, and based on FY24 earnings, the P/E stands at 26.28,” it says in a note.

LKP Securities has also given “Subscribe” to the IPO, recommending investors to remain invested over the long term for higher returns. “At the upper end of the price band, on FY 24 earnings, the stock should trade at 26x times which is a fair value as compared to its closest peer Maruti Suzuki (29x FY 24 earnings). Therefore, on all favourable parameters, we assign a SUBSCRIBE rating on the stock.”

Meanwhile, Shivani Nyati, Head of Wealth, Swastika Investmart Ltd, believes that the IPO is fully priced, it could limit the potential upside for investors. “Investors with a long-term perspective and a willingness to accept potential listing challenges may consider applying for the HMIL IPO.”

Hyundai Motor India, the country's second-largest car maker, looks to raise ₹27,870 crore via IPO route, which is entirely an offer for sale of 14.22 crore shares by Hyundai Motor India’s South Korean parent. 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. Also, this is going to be Hyundai Motor Company’s first IPO outside South Korea and also the first automobile issue in 20 years, after Maruti Suzuki’s listing in 2003.

The three-day IPO of Hyundai Motor India will open for subscription on October 15 and close on October 17, 2024. The allotment of Hyundai Motor shares to eligible applicants is expected to be finalised on October 18, 2024, while the tentative date for listing of the stock on the BSE and NSE is October 22, 2024.

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)