Hyundai India IPO size may limit listing gains; attractive for long-term investment: Analysts

Shares of Hyundai Motor India Ltd (HMIL) are slated to make debut on the BSE and NSE on October 22, after raising ₹27,870 crore in the country’s biggest ever initial public offering (IPO). The Indian subsidiary of the South Korean automaker, Hyundai Motor Company, is expected to list with modest gain as indicated by its grey market premium (GMP) in the unlisted market.

Dalal Street is expecting HMIL to make a steady debut with limited listing gains, but maintained that robust fundamentals make it an attractive long-term investment.

“While Hyundai Motor India holds a strong market position as the second-largest passenger vehicle company in India, and its strategic focus on SUVs is promising, the overall market sentiment and IPO size may limit listing gains,” says Shivani Nyati, Head of Wealth, Swastika Investmart Ltd.

Nyati anticipates a steady debut for Hyundai, saying that immediate listing gains may be modest, but its robust fundamentals make it an attractive long-term investment.

“Investors with a long-term outlook and the ability to navigate potential listing challenges may consider holding onto their investments post-listing for potential future growth,” she says.

Another brokerage house, Master Capital Services in a note says that despite some concerns regarding short-term listing gains due to subdued grey market premium, the company offers steady growth prospects amid industry tailwinds, robust financials and healthy SUV product demand. “Hyundai’s leadership in India's passenger vehicle market, along with its strategic focus on electric vehicles makes a compelling investment for long-term investors.”

Meanwhile, Mehta Equities expects flat to negative market debut of Hyundai, citing sluggish undersubscription demand from NII’s & retail investors and market sentiments on overvaluation concern followed by lower demand and over supply scenario in the sector.

“For allotted investors, one should not expect a quick bucks on listing day. Hence, we recommend HOLD despite knowing short term volatility in the sector demand and supply scenario. For non-allottees, we advise to wait and watch for the price to settle and revisit the space with better discounted opportunity as for long-term investors, Hyundai’s growth story remains intact in line with India Growth,” says Prashanth Tapse, Senior VP (Research), Mehta Equities.

The mega IPO of HMIL, which was entirely an offer for sale of 14.22 crore shares by South Korean parent, concluded with 2.37 times subscription amid muted response from retail as well as non-institutional investors (NII). The issue, having a price band of ₹1,865-1,960 per share, received 0.50 times bids in the retail category and 0.60 times in the NII segment. The quota reserved for qualified institutions buyers (QIB) were booked 6.97 times, while the employee portion garnered 1.74 times subscription.

“We believe the majority of the investor especially NII's & retail stayed back on few reason like concern on over high valuations to peers followed by 100% offer-for-sale (OFS) component without any fresh issue leaving nothing on table for new investors to gain and industry concern on high inventory across the sector and slowing demand in the last 3-4 months and short term trend still looks dull and weak,” says Tapse of Mehta Equities.

GMP rebounds post IPO

Ahead of listing, shares of Hyundai Motor were commanding GMP of ₹75 in the grey market, estimating listing price to be around ₹2,035, a premium of 3.83% over the IPO price. The company has seen a sharp turnaround in its GMP price as it dropped into negative terrain to ₹32 last week after its issue closed with lukewarm demand from investors.

Before opening of the IPO, the GMP of Hyundai Motor shares touched a peak of ₹570 on September 27. But it gradually dropped to ₹270 on October 7 after the auto major announced the price band for its IPO at ₹1,865-1,960 per share, which according to some analysts was relatively “fully priced”. The GMP turned negative last week after the issue received a weak response from retail investors.