Hyundai Motor India (HMIL), the country’s second-largest passenger carmaker, is gearing up for an initial public offering (IPO). The Gurugram-headquartered local subsidiary of Korean automaker Hyundai Motor Company (HMC) recently filed a draft red herring prospectus with the market regulator Sebi (Securities and Exchange Board of India) to dilute a part of its promoter stake. Although it has not announced any specific date for its IPO, sources indicate that HMIL, a 100% subsidiary of HMC, might make its market debut as early as 2025.
As per the DRHP, the company’s plan involves an offer for sale (OFS), through which the parent HMC intends to sell 142.2 million of its shares, representing 17.5% of HMIL. The company has not disclosed the expected proceeds from the IPO. However, according to estimates by Nomura, it could fetch the Korean parent a whopping $2.5-3 billion (up to `25,000 crore). If successful, the market debut of HMIL will go down as India’s largest IPO. State insurer Life Insurance Corporation of India’s (LIC) Rs 21,000-crore public offer in 2022 currently holds the record for the largest IPO in India.
As per experts, the automaker’s decision to enter the market through the OFS route means that HMC will receive all the proceeds; and HMIL, currently not allowed to issue new shares during the IPO, will not get anything. However, the move is expected to benefit HMIL, giving it the opportunity to secure additional funding from the market if needed later to support its future growth and capex requirements. “For HMC, the IPO of Hyundai Motor India will help the Indian entity easily raise funds in the future without the need for any dependence on the Korean parent. This, we believe, should help alleviate the capex and investment burden on the parent, which would have been necessary for any future expansion in India,” analysts at Nomura note.
According to Nomura, HMIL will be valued at $18-30 billion (Rs 1,50,000-2,50,000 crore) on its market debut. This “implies a 22-37 times FY24 (Forecast) price-to-earnings (P/E). Peers trade at 16-32 times FY24F P/E,” analysts at Nomura note. In comparison, market leader Maruti Suzuki India’s market capitalisation on June 27 was `3,83,153 crore; Mahindra & Mahindra followed closely behind with Rs 3,58,758 crore and Tata Motors with Rs 3,22,874 crore.
Saji John, Research Analyst at Geojit Financial Services, says that HMIL would command a premium to the industry, driving the sector’s valuation as a whole, due to the positive outlook on HMIL for the next four years with new launches in electric vehicles, lower capex and superior cash flow.
“HMIL has performed strongly, ranking among the Top 5 markets globally. The company has strategically capitalised on the increasing demand for SUVs in the domestic market by introducing new models, leveraging advanced technologies and expanding its range of vehicle variants,” he says, adding that the approach has “enhanced Hyundai’s ability to set competitive pricing and strengthen its premium brand image.” In June, SUVs accounted for 66% of HMIL’s total sales, positioning the company favourably for premium market listings.
When it comes to sales in India, Hyundai falls behind Maruti Suzuki, Tata Motors, and Mahindra & Mahindra (M&M), among its listed peers. In FY23, HMIL’s revenue was Rs 60,307 crore compared to MSIL’s Rs 1,17,571 crore, Tata Motors’ Rs 3,45,967 crore, and M&M’s Rs 1,21,269 crore. While its earnings per share (EPS) in FY24 (annualised) were Rs 72 against MSIL’s Rs 431.08, M&M’s `101.14 and Tata Motors’ Rs 81.95. In the local passenger vehicles market, HMIL currently holds 14.6% share, behind MSIL’s 41.7% and ahead of Tata Motors’ 13.9%.
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