In this week’s review, we take a closer look at the highly anticipated IPO of Hyundai Motor India Limited (HMIL), exploring the motivations behind the move, its projected market value, and the potential effects on India's rapidly growing automotive sector.
Hyundai Motor India’s Public Offering: All You Need to Know
The Securities and Exchange Board of India (SEBI) has given the green light for Hyundai Motor India’s ₹27,870 crore initial public offering (IPO), which is set to be the largest in Indian history. The offering is structured as an Offer for Sale by Hyundai Motor Company and is set to open on October 15. This public offering comes at a time when the Indian automotive sector is booming, with over 4 million cars sold in 2023, making India the third-largest car market globally.
Hyundai’s Draft Red Herring Prospectus (DRHP) was submitted in June 2024. The company plans to offer 142.2 million shares, equivalent to 17.5% of its stake, for sale.
Reasons for Hyundai Going Public
1. Leveraging India’s Automotive Growth
With India’s automotive market experiencing rapid expansion, Hyundai aims to capitalize on this momentum with its public offering.
2. EV Market Expansion
India is set to become the third-largest market for electric vehicles (EVs), and Hyundai’s IPO positions it as a major player in this high-potential segment.
3. Strategic Share Sale
Hyundai Motor Company is offering 17.5% of its stake in the Indian subsidiary, enabling Indian investors to partake in the company’s growth trajectory.
The Hyundai Motor India IPO is purely an Offer for Sale, which means that Hyundai Motor Company will receive all proceeds. Hyundai Motor India will not benefit directly from the funds raised.
Hyundai’s Premium Valuation: Is it Warranted?
Nomura India has observed that Hyundai Motor India deserves a premium valuation, especially as Maruti Suzuki’s market share continues to decline. Hyundai, the second-largest carmaker in India, has consistently maintained a market share of between 15% and 17% over the last decade. In 2023, the company achieved record domestic sales of 6,02,000 units, a 9% increase year-on-year.
Nomura also highlighted Hyundai’s successful models—particularly the Creta, Exter, and Venue—which were instrumental in its strong market performance. The company is expected to further strengthen its position with new launches in 2025, including the Creta EV and a hybrid SUV to be produced at the newly acquired Talegaon plant in 2026.
Hyundai Motor India’s Financials:
1. Declining Assets
Hyundai’s total assets have dropped from ₹34,573.34 crore in March 2023 to ₹25,370.24 crore in June 2024, a trend that investors should monitor closely.
2. Strong Revenue Growth
The company saw its revenue rise by 16%, from ₹61,436.64 crore in FY23 to ₹71,302.33 crore in FY24.
3. Profit After Tax (PAT) Growth
Hyundai’s PAT increased by 29%, reaching ₹6,060.04 crore in FY24 from ₹4,709.25 crore in FY23.
4. Net Worth Fluctuations
Despite some fluctuation, Hyundai’s net worth stood at ₹12,148.71 crore as of June 2024.
5. Reducing Borrowings
Hyundai’s debt levels have decreased, with total borrowings down from ₹1,158.6 crore in FY23 to ₹758.14 crore in June 2024, indicating growing financial independence.
Hyundai vs. Competitors: A Comparative Look
Hyundai Motor India holds a 16% market share in the domestic market and boasts a strong export mix, accounting for 25% of its overall volume. With the addition of the Talegaon plant, Hyundai’s production capacity is expected to grow significantly, reaching 10.74 lakh units by FY27.
Hyundai’s strong return on net worth (RoNW) and solid earnings per share (EPS) make it an attractive option for investors. However, its high price-to-book value (P/BV) ratio suggests that much of the stock’s value is already priced in. In contrast, competitors like Tata Motors and Maruti Suzuki may offer better value, but Hyundai’s strong product portfolio and market presence ensure its continued appeal.
Investment Outlook and Hyundai's Sales Performance
InCred Equities has noted that Hyundai’s IPO offers a significant opportunity for investors, especially given India’s under-penetrated automotive market. However, they caution that Hyundai Korea’s historical discounts, ranging from 23% to 48% compared to its global peers, should be taken into account when evaluating the Indian subsidiary’s IPO.
In September 2024, Hyundai Motor India sold 64,201 units, representing a 10% decline compared to the previous year. Despite this, the company has sold 5.77 lakh units so far this year, maintaining stable performance year-on-year.
Hyundai Motor India’s IPO represents the first public offering by an Indian car manufacturer since Maruti Suzuki’s IPO in 2003. This IPO arrives at a time when Indian markets are soaring, and the public offering will allow investors to be a part of this significant industry development.
Conclusion
Hyundai Motor India’s IPO is set to make waves in the Indian stock market, offering investors an exciting opportunity to participate in the rapidly growing automotive sector. With strong financial performance, an expanding product line, and plans for future capacity growth, Hyundai India is poised to attract significant attention from both domestic and international investors. This landmark offering will likely redefine the landscape of India’s public markets, solidifying Hyundai's place in the nation’s automotive industry.
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