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Hyundai Motor India Ltd., poised to become India's largest initial public offering (IPO) to date, is set to launch its share offering on October 15th. The Indian subsidiary of South Korean carmaker Hyundai Motor aims to raise a substantial ₹27,856 crore through the IPO by selling shares in the range of ₹1,865-1,960 crore.
However, the excitement surrounding the IPO has been tempered by a significant decline in the grey market premium (GMP) for Hyundai Motor India shares. The GMP, a reflection of the anticipated price difference between the IPO price and the expected trading price on the stock market, has dropped by over 50% in the last week. As of October 11th, the premium stood at ₹170, a sharp decrease from ₹370 on October 4th, suggesting a cooling of investor enthusiasm.
The decline in GMP has sparked concerns about liquidity in the market. Mayuresh Joshi, Head of Equity Research at William O'Neil, points out that the Hyundai IPO will drain a substantial amount of liquidity from the market. This concern is further amplified by the upcoming Swiggy IPO, which is expected to withdraw another ₹31,000-32,000 crore from the market. Despite these liquidity concerns, Joshi maintains that Hyundai's IPO remains attractive from a valuation, product offerings, and pricing perspective. He recommends a 'Subscribe' rating for the IPO, indicating his confidence in the company's long-term prospects.
The IPO will be a complete Offer For Sale (OFS), where Hyundai Motor's parent company will sell 14.2 crore shares, representing 17.5% of the total equity. Investors will be able to bid for a minimum of seven shares, with multiples of seven thereafter. The three-day public offer will open for subscription on October 15th and close on October 17th. The anchor book for the IPO, which is set to be the largest ever in India, has been fully allocated, with domestic and international institutional investors subscribing to the anchor portion.
The IPO has garnered significant interest from both domestic and international institutional investors. BlackRock Inc. and Singaporean sovereign wealth fund GIC Pte have already placed bids to buy stock in Hyundai Motor India's IPO. The record-breaking IPO in Mumbai has attracted attention from various other local and international institutional investors. The allocation for the IPO is split into 50% for Institutional Investors (QIB), 15% for non-institutional investors (NII), and 35% for retail investors. Each Hyundai Motor India share will have a face value of ₹10, with eligible employees receiving a discount of ₹186 per share for their bids.
Hyundai Motor India stands as the second-largest original equipment manufacturer (OEM) and the second-largest exporter of passenger vehicles in India. It holds a 14.6% domestic market share. While Hyundai's sales figures for September showed a 10% year-on-year decline to 64,201 units, its overall sales for 2024 have remained relatively flat compared to last year, with a total of 5.77 lakh units sold. The IPO's success will hinge on investor confidence in Hyundai's future growth prospects amidst a challenging global economic landscape and intense competition in the Indian automotive market.
Source: Hyundai Motor India IPO: GMP falls by over 50% in a week ahead of issue opening