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The much-anticipated initial public offering (IPO) of Hyundai Motor India (HMIL) is facing headwinds as the grey market premium (GMP) has significantly slumped, raising concerns among investors about the potential success of the issue. The Rs 27,856 crore IPO, slated to open for bidding on Tuesday, October 17, was initially expected to garner substantial interest, with the company aiming for a market capitalization of about Rs 1.6 lakh crore. However, the declining GMP, which reflects the perceived value of the stock in the unofficial market, suggests a potential listing pop of just 3 per cent for investors.
The GMP, which stood above Rs 150 before the weekend, plummeted to a mere Rs 65 per share by early this week. This sharp decline points to growing concerns about the IPO's valuation and the fact that the entire offering is an offer for sale (OFS) by the promoters, Hyundai Motor Company. The OFS, which entails the sale of existing shares, means that the Indian entity will receive no proceeds from the issue, raising concerns about the long-term growth prospects of the company. Experts suggest that the IPO is fully priced, though they maintain that the company's strong track record could lead to decent returns in the long run.
The concerns surrounding the IPO's valuations and the OFS nature are further amplified by the current jittery sentiments in the broader markets. Investors, who have recently experienced some volatility, are hesitant to invest in an IPO that carries such a large scale and could potentially suck liquidity out of the Indian markets. While experts argue that there is no shortage of liquidity in the market, driven by strong SIPs and demat accounts, the prevailing uncertainty is contributing to the reluctance towards the Hyundai IPO. Despite the concerns, the IPO continues to generate buzz, with several brokerage firms expressing positive views about the company's long-term potential. IIFL Securities believes that Hyundai's valuations are attractive compared to other listed OEMs in India, highlighting the company's operational superiority. Nuvama Institutional Equities emphasizes Hyundai's commitment to innovation and its plans to expand its electric vehicle (EV) portfolio in India. Sharekhan, while recognizing the promoter's stake sale, points to HMIL's strong parentage, robust market positioning, and healthy financial profile as positives.
However, the concerns regarding valuation, the OFS nature, and the potential impact on market liquidity are clearly influencing investor sentiment. The declining GMP indicates that investors are seeking greater clarity and reassurance before committing their funds to the IPO. The success of the Hyundai Motor India IPO will depend on the company's ability to address these concerns and convince investors of its long-term growth potential.
Source: Hyundai Motor IPO GMP falls below Rs 100; what is hurting India's no. 2 PV player?