The country’s biggest-ever initial public offering (IPO) of Hyundai Motor India concluded with 2.37 times subscription amid muted response from retail as well as non-institutional investors (NII). The ₹27,870 crore issue, which was entirely an offer for sale of 14.22 crore shares by South Korean parent Hyundai Motor Company, at 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.
The lukewarm response to Hyundai India IPO also impacted GMP (grey market premium) of the stock in the unlisted market. The GMP dropped from its peak of ₹570 on September 27 to zero on October 17, indicating the listing price to be flat at ₹1,960.
The GMP of Hyundai India shares witnessed sharp correction after the auto major announced the price band for its upcoming IPO at ₹1,865-1,960 per share, falling from ₹270 on October 7 to ₹63 on October 15, when the issue opened for subscription. On the second day of bidding (October 16), the GMP slipped to ₹17 and further to nil today, after the issue received lower than expected response from investors.
The drop in the GMP of Hyundai Motor shares can be attributed to its “rich valuations” coupled with volatility in the domestic equity market amid escalated geo-political tensions. Investors also gave a miss to the one of the highly-anticipated IPO of the year as the issue was completely an OFS by promoter, which means the company will not receive any proceeds from the IPO.
However, analysts remained bullish on the company, with most brokerages including ICICI Direct, Anand Rathi, LKP Securities, and SBI Securities recommending “Subscribe” with a long-term perspective. They opine that the valuation of the country’s second-largest auto company appears at a discount to the industry leader, Maruti Suzuki India.
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.”
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.”
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.
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.”
Meanwhile, all eyes will be on listing of Hyundai Motor shares on the domestic bourses. 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.
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