The initial public offering (IPO) of Hyundai Motor India Ltd (HMIL) received a slow but steady response from investors during the second day (Day 2) of bidding process, led by employees and institutional investors. As per BSE data available on Wednesday, the portion for employees was subscribed 1.31 times and qualified institutional buyers (QIBs) got bids to the tune of 58 per cent.
The categories kept for retailers and non-institutional investors (NIIs) saw 38 per cent and 26 per cent bids, respectively. The issue received 4,17,33,328 bids against 9,97,69,810 shares on offer with an overall subscription of 42 per cent.
"Hyundai, like Maruti Suzuki, is a global company and has access to R&D and the latest technological trends that are happening across the globe. This is important in the car industry which is going through a massive change such as electrification, battery storage, etc. Hyundai is the second-largest player in India after Maruti and has about 13-14 models. Apart from the global R&D access, it is developing battery storage technologies within India. Hyundai also has a range of EV models which will further propel future growth. If we add up all these things together, the company will trade at the IPO price of about 22-23x, reflecting a profit growth north of 20 per cent. So, for a company as large as Hyundai to trade at that kind of growth along with an (estimated) RoE (Return on Equity), which is in the 20s, are very decent numbers," Chakri Lokapriya, Managing Partner at RedStrawBerry LLP, told Business Today TV.
The market expert suggested that one should 'Subscribe' to the issue as it will still trade at a discount to Maruti.
A majority of brokerages have given a 'Subscribe' call for this IPO but only with a long-term view. "In the past two years, the PV (passenger vehicle) market experienced significant growth, but recently demand has slowed. Inventory levels at showrooms have risen from 28 days to 70 days, indicating a potential imbalance between supply and demand. The upcoming festive season will be the key monitorable for gauging the sustained expansion of the domestic PV market," Choice Broking said.
"At the higher price range, HMIL is seeking a P/E ratio of 25.6x, which is in line with its peer average. Thus the issue is fully priced. Historically, the company has reported profitable business growth and is consistently paying dividends. Further, with capacity expansion, new PV launches and a focus on premiumization, the company is well-placed to benefit in the long term. Thus considering the above observations, we assign a 'Subscribe for Long Term' rating for the issue," the brokerage also stated.
Grey market premium (GMP)
In the grey market, Hyundai Motor shares were last seen trading at a premium of merely 1.58 per cent (at Rs 1,991) against its issue price of Rs 1,960 (upper price band). The stock is likely to be listed on October 22.
Chennai-based Hyundai Motor India is selling its shares in the range of Rs 1,865-1,960 apiece and the offer is open till Thursday, October 17. Investors can apply for a minimum of 7 equity shares and in multiples thereafter.
The automaker aims to raise Rs 27,856 crore via the initial share sale, making it the largest-ever IPO in Indian markets. It is entirely an offer-for-sale (OFS) by its South Korean parent Hyundai Motor Company. Ahead of its IPO, the company raised Rs 8,315.3 crore from anchor investors.
Hyundai Motor India is a part of South Korea's Hyundai Motor Group, which is the third largest auto original equipment manufacturer (OEM) in the world based on passenger vehicle sales. It manufactures and sells four-wheeler passenger vehicles, including models such as sedans, hatchbacks, SUVs, and electric vehicles (EVs).