Hyundai Motor India IPO: Key Insights into India’s Largest Public Offering

In this week's wrap-up, we delve into most awaited IPO of Hyundai Motor India Limited (HMIL), providing insights into why Hyundai India is going public, its expected valuations, & broader implications for Indian car market.

Highlights

1. Hyundai Motor India IPO is set to be the largest public offering in India, drawing significant interest from investors.

2. The Hyundai IPO price band is fixed between ₹1,865 and ₹1,960 per share, showcasing a strong valuation.

3. Investors can mark their calendars, as the Hyundai Motor India IPO date for subscription is from October 15 to October 17, 2024.

4. Breaking records, Hyundai Motor India’s IPO is anticipated to be the largest IPO in India, surpassing even the LIC IPO.

5. With a Hyundai Motor India share price valuing the company at around ₹1.59 lakh crore, this IPO is poised for a robust market entry.

6. Hyundai Motor India valuation places the company at nearly ₹1.6 lakh crore, confirming its high-growth trajectory in India’s automotive sector.

7. Investors can bid for IPO lot size and investment starting from seven shares, making it accessible for a range of investor types.

8. Hyundai IPO subscription details reveal that 50% of shares are reserved for institutional buyers, with a sizable portion for retail investors.

9. With a Hyundai Motor India market share of 14.6%, the company stands as a formidable competitor in India’s auto sector.

10. This is an IPO offer for sale by Hyundai Motor Company, with 14.2 crore shares being offered to the public for listing.

Hyundai India IPO

SEBI has approved Hyundai Motor India's ₹27,870 crore initial public offering (IPO), which is expected to be the biggest in Indian history. The offering will only include Hyundai Motor Company's offer to sell. The IPO Open in October 15 and may break earlier records recorded by Paytm and LIC. This move comes as India's car market booms, with 4 million cars sold in 2023, positioning country as third-largest car market globally.

The draft red herring prospectus (DRHP) for the nation's second-largest automaker was submitted to the regulator in June. The full public offering will be an offer-for-sale (OFS) of up to 142.2 million shares, or 17.5% of the company, made by Hyundai Motor Co., a South Korean company.

Reasons for Hyundai IPO

1. Market Potential: With India being rapidly growing car market, Hyundai aims to capitalize on this momentum.

2. Electric Vehicle Market: India is also set to become third-largest electric vehicle (EV) market, attracting significant interest from automakers.

3. Local Subsidiary Strategy: Hyundai Motors India, local subsidiary of Korea's Hyundai Motor Company, plans to offload 14.22 crore shares, amounting to 17.5% stake, providing local investors opportunity to participate in company’s growth.

Hyundai Motor IPO Objectives

The Promoter Selling Shareholder will receive all of the Offer Proceeds after deducting Offer-related expenses and applicable taxes, which will be paid by the Promoter Selling Shareholder. The firm will not receive any of the Offer Proceeds.

Does Hyundai Deserve the Premium Valuation? 

Nomura India stated that given Maruti Suzuki India Ltd.'s continuous loss of market share, Hyundai Motor India should be valued higher than the latter company. Hyundai Motor India, the country's second-largest carmaker, revealed that its market share has been steady between 15% and 17% since 2008. It also mentioned that in 2023, the firm achieved its highest-ever domestic sales of 6,02,000 units, representing a 9% YoY rise.

According to Nomura India, the compact and mid-size SUVs, especially the Creta, Exter, and Venue models, were the main drivers of the impressive performance. "It’s YTD August wholesales increased 2 per cent, slightly underperforming the industry sales +6 percent YoY, while we expect the growth to reaccelerate into 2025-26, thanks to the launch of new models including Creta EV in 2025 and petrol-HEV SUV(Ni1i) to be produced in the newly-acquired GM’s (GM US, Reduce) Galegaon plant in 2026," stated Nomura India.

Hyundai IPO Valuation 

Hyundai IPO Price Band: Between ₹1865 to ₹1960 per share.

Hyundai IPO Lot Size: 7 Shares

Minimum Investment for Hyundai IPO: ₹13055

Maximum Investment for Hyundai IPO: ₹13720

Hyundai IPO Issue Size: 142,194,700 shares (aggregating up to ₹27,870.16 Cr)

Hyundai Company Financial Performance

1. Assets

Analysis: Hyundai Motor India's assets decreased from ₹34,573.34 crores in March 2023 to ₹26,349.25 crore in March 2024, then slightly further to ₹25,370.24 crores by June 2024.

Investor Impact: The decline in assets suggests asset divestment or reallocation, which investors should monitor for strategic shifts impacting long-term asset utilization.

2. Revenue

Analysis: Revenue grew from ₹61,436.64 crores in FY23 to ₹71,302.33 crores in FY24, a 16% increase, with quarterly revenue for June 2024 at ₹17,567.98 crore.

Investor Impact: Strong revenue growth signals healthy demand and operational performance, presenting a positive investment outlook.

3. Profit After Tax (PAT)

Analysis: PAT increased by 29% from ₹4,709.25 crore in FY23 to ₹6,060.04 crore in FY24, with June 2024 PAT at ₹1,489.65 crore.

Investor Impact: The PAT growth reflects improved profitability, indicating potential for sustained returns and increased investor confidence in Hyundai’s profitability.

4. Net Worth

Analysis: Net worth rose from ₹20,054.82 crores in March 2023 to ₹10,665.66 crore by March 2024, with a June 2024 figure of ₹12,148.71 crores.

Investor Impact: The fluctuating net worth may suggest capital restructuring; investors should watch for stability in net worth to gauge Hyundai’s financial solidity.

5. Reserves and Surplus

Analysis: Reserves and surplus declined from ₹19,242.28 crore in March 2023 to ₹9,853.12 crore in March 2024 but rebounded to ₹11,336.17 crore by June 2024.

Investor Impact: Lower reserves could imply recent distributions or reinvestments; investors should assess if the surplus aligns with growth or dividend opportunities.

6. Total Borrowing

Analysis: Borrowing decreased from ₹1,158.6 crore in FY23 to ₹767.92 crore in FY24, remaining stable at ₹758.14 crore by June 2024.

Investor Impact: Reduced debt suggests Hyundai’s strengthening financial independence, a positive for investors favoring low-leverage companies.

Hyundai’s Market Share

Domestic Market Share: 16%.
Export Mix: 25% of volume, partly mitigating lower domestic market share.

Product Portfolio

UVs: 60% of HMIL’s volume mix.
EV Model: Ioniq5, selling 40-50 units per month.

Operational Capacity

Current Capacity: 8.25 lakh units in Chennai.

Future Capacity: Addition of Talegaon plant to increase capacity to 10.74 lakh units by FY27.

Investment in Talegaon Plant: ₹ 6,000 crore for 2.5 million capacity.

Hyundai Competitive Analysis

• Hyundai has a strong RoNW and reasonable EPS, but its high P/BV ratio and lower EPS may signal a premium valuation that’s priced in. The high RoNW implies solid returns, but the premium P/BV could indicate less upside potential.

• Tata Motors appears undervalued based on its low P/E and P/BV ratios, with a good RoNW and a respectable NAV, making it attractive if you’re looking for value in the sector.

• Maruti Suzuki has the highest NAV and EPS, suggesting strong fundamentals, especially for long-term stability, though its valuation is relatively high.

• Mahindra is also strong in EPS and NAV, with decent profitability, though less efficient on RoNW compared to Hyundai.

Investment Perspective

According to InCred Equities, Hyundai’s IPO widens investor opportunities in the low-penetrated Indian car industry, providing potential value growth. However, consistent high discount of 23-48% for Hyundai Korea compared to global peers in P/E & P/BV valuations must be considered when evaluating Indian entity’s IPO valuation.

How’s the sales performance of Hyundai? 

Hyundai Motor India's sales performance in September 2024 was 64,201 units, a 10% decrease from the previous year. The business has sold 5.77 lakh units so far this year, which is unchanged from the numbers from the previous year.

Hyundai's Place in the Market

Hyundai Motor India is the country's second-biggest Original Equipment Manufacturer (OEM) and its second-biggest exporter of automobiles. At now, the company's share in the domestic market is at 14.6%.

The Hyundai Motor India IPO: Why Is It Important? 

After Maruti Suzuki's debut in 2003, Hyundai's IPO will be the first public offering by an Indian carmaker in 20 years. The offering is being made at a time when a number of new firms are coming public and Indian stock markets are reaching all-time highs.

Conclusion

Hyundai India's IPO represents significant development in Indian automotive market, offering investors chance to be part of growing industry. With robust financial projections, diverse product portfolio, & strategic market positioning, Hyundai India’s public offering is poised to attract substantial interest from domestic & international investors alike