 |
|
The highly anticipated Initial Public Offering (IPO) of Hyundai Motor India, the largest in India's history, has opened for subscription, with investors displaying a mixed reaction. The IPO, which commenced on October 15th, has a price band of Rs 1,865 to Rs 1,960 per share, aiming to raise a staggering Rs 27,856 crore. However, the second day of the offering saw a relatively subdued response from investors, prompting concerns over the company's valuation.
On the second day, the IPO was subscribed only 0.42 times overall. The retail category witnessed 0.38 times subscription, while the Qualified Institutional Buyers (QIB) segment saw a subscription rate of 0.58 times. The Non-Institutional Investors (NII) category lagged behind with only 0.26 times subscription, according to data from the NSE website. This muted response reflects the concerns voiced by analysts regarding Hyundai's valuation. The company's price-to-book ratio of 13.11 times is significantly higher compared to Maruti Suzuki's 4.79 times, leading experts to advise caution. This discrepancy has raised concerns about the potential for significant gains, particularly for short-term investors.
The Grey Market Premium (GMP), an indicator of market sentiment, has also experienced a decline. While the GMP was initially reported at Rs 63, it dropped to Rs 31 by the end of the second day, indicating a waning investor excitement. Based on the price band of Rs 1,960, Hyundai Motor's estimated listing price stands at Rs 1,991, reflecting a modest 1.58% gain over the cap price. The reduced GMP further emphasizes the cooled market sentiment since the IPO was announced.
Market experts hold diverse views on the Hyundai IPO. Some highlight the higher valuation as a cause for concern, pointing out that it reduces the margin of safety for investors. Amar Nandu, a research analyst at SAMCO Securities, notes that Hyundai's valuation is significantly higher than that of Maruti Suzuki, potentially limiting gains for short-term investors. Additionally, the large size of the IPO, which will likely result in widespread allocation of shares, could further limit any post-listing price surge, reducing the potential for short-term profits. Furthermore, the promoter's decision to sell a 17.5% stake in this IPO, along with an additional 7.5% stake expected to be sold in the next three years to meet regulatory requirements, may create selling pressure in the market.
Despite the concerns surrounding short-term returns, some brokerages remain optimistic about Hyundai's long-term potential. ICICI Direct and Jefferies argue that Hyundai's strong market position, robust financials, and ambitious future growth plans make it an attractive investment for those with a long-term investment horizon. Hyundai Motor India has firmly established itself as one of the leading automakers in the country, with plans to expand its capacity, introduce new products, and focus on premium segments. Analysts believe these factors will drive growth in the long run.
Brokerages like Choice Equity Broking have rated the issue as 'Subscribe for Long Term,' highlighting Hyundai's focus on premiumisation and market expansion as potential benefits for patient investors. The company has a history of consistent growth and regular dividends, making it an attractive option for those seeking stable long-term returns. Investors must carefully consider their risk appetite and investment timeframe before making any investment decisions, seeking guidance from qualified financial advisors whenever necessary.