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The much-anticipated initial public offering (IPO) of Hyundai Motor India is set to take place on October 22, with the market buzzing about the potential performance of its stock. However, the latest grey market premium (GMP) suggests a discounted listing, indicating that the initial price may be lower than the IPO offering of Rs 1,960, creating a cautious atmosphere among investors. Despite the hype surrounding the automaker's stock market debut, analysts and investors remain divided on whether the stock will exceed expectations or struggle, given the current market signals.
Hyundai's IPO, which opened on October 15, experienced a rocky start. Initial hesitation from retail investors led to a weak response, with only 50% of the shares allocated to them subscribed. This made it one of the weakest retail responses among India's top IPOs. However, the offering gained momentum from institutional buyers, culminating in an overall subscription of 2.37 times by its close on October 17. Qualified institutional buyers (QIBs) led the charge, subscribing nearly seven times their portion, while retail and non-institutional investors remained cautious, subscribing only 0.50 and 0.60 times, respectively. This lukewarm retail response has raised concerns about Hyundai's short-term prospects.
Market experts have pointed to several factors that could weigh on Hyundai's listing performance. Jaspreet Singh Arora, Chief Investment Officer at Equentis, highlights Hyundai's limited presence in electric vehicles (EVs), hybrids, and CNG cars—just 11% of its portfolio—as a major disadvantage compared to competitors who are faster to adapt to the EV shift. Additionally, Hyundai's operational challenges, including limited production capacity and a lack of new model launches, further dampen expectations. 'Hyundai operates in a highly competitive market where price cuts and incentives are common,' said Arora. He also mentions that historical trends from large IPOs like Paytm and LIC show that initial listing performances often struggle under the weight of high share float and regulatory requirements for promoters to reduce their stakes.
Despite the concerns, brokerages have offered a range of views on the Hyundai IPO. Nuvama Wealth Management and ICICI Direct see long-term potential in Hyundai's strong market presence and future growth plans. They believe Hyundai's capacity expansion and focus on localization will help improve profitability and maintain its competitive edge. Choice Equity Broking has rated the IPO as 'Subscribe for Long Term,' advising patient investors to focus on Hyundai's premiumization strategy and market expansion. The consensus seems to be that Hyundai offers stability for long-term investors, even if immediate gains remain uncertain.
While the short-term outlook appears challenging, long-term investors might find reasons to stay optimistic. Hyundai remains a dominant force in India's passenger vehicle (PV) market, holding a 15% share. In the fast-growing utility vehicle (UV) segment, Hyundai commands a 63% share of its domestic sales, outpacing both the industry average and rivals like Maruti Suzuki. Globally, Hyundai's portfolio of over 40 models provides a roadmap for future product expansion in India, where it currently offers 13 models. Hyundai's upcoming Creta EV and other electric vehicles signal that the automaker is finally shifting gears to embrace the future of mobility.
Moreover, Hyundai's plans to expand its production capacity are also likely to boost its valuation. The acquisition of General Motors' Talegaon plant is expected to add 0.17 million units to its capacity by FY26, with an additional 0.08 million units by FY28. This will increase Hyundai's overall production capacity to 1.07 million units, supporting both domestic demand and export markets, which currently account for 24% of the company's revenue. Hyundai's return on invested capital (RoIC) is another point of strength, standing at an impressive 177% in FY24, significantly higher than Maruti Suzuki's 71%. This high RoIC reflects Hyundai's efficient use of its manufacturing plants, which operate in three shifts, resulting in a net asset turnover ratio of 10x.
With the latest GMP indicating a discounted listing and concerns around its valuation, a positive listing seems unlikely. However, it should be noted that the GMP is not an accurate indicator for market listing. Despite the concerns, the automaker's strong position in the Indian market, coupled with its long-term growth plans, suggests that there may be potential for those willing to hold onto their shares. While short-term volatility is expected, Hyundai's fundamentals, capacity expansion, and focus on innovation could eventually lead to sustained growth, making it a stock worth watching.
Source: Hyundai IPO: Latest GMP signals discounted listing, but can it pull off a surprise?