Hyundai Motor India IPO subscribed 25% on Day 2 so far, check latest GMP & more

The initial public offering (IPO) of Hyundai Motor India saw mixed response from investors during the second day of bidding process. The issue, which kicked-off for bidding on Tuesday, October 15, was initially off to a muted start and was booked 18 per cent on day one.

Hyundai Motor India is selling its shares in the price band of Rs 1,865-1,960 apiece. Investors can apply for a minimum of seven shares and its multiples thereafter. It is looking to raise Rs 27,856 crore via IPO, making it the largest ever IPO in Indian markets. It is entirely an offer-for-sale (OFS) of 14,21,94,700 shares by its South Korean parent Hyundai Motor Company.

According to the data from BSE, the investors made bids for 2,46,70,695 equity shares, or 25 per cent, compared to the 9,97,69,810 equity shares offered for the subscription by 12.15 pm on Wednesday, October 16. The three-day bidding for the issue will conclude on Thursday, October 17.

The allocation for retail investors was subscribed 35 per cent, while the portion reserved for non-institutional investors (NIIs) saw a subscription of 19 per cent. The allocation for employees was booked 1.18 times. However, the quota set aside for qualified institutional bidders (QIBs) quota saw bids only 9 per cent for their allocations as of the same time.

Chennai-based 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).

The grey market premium (GMP) for Hyundai Motor India has seen a mild rebound on the second day of bidding. Last heard, the company was commanding a premium of Rs 60-65 in the unofficial market, suggesting a listing pop of merely 3 per cent. The GMP stood at Rs 45 on the first day.

Brokerages mostly have a positive view on the issue and suggest subscribing for a long-term citing its sound financial record, strong brand recall, expansion plans, firm market share and focus on premiumization of the products. However, aggressive pricing, depleting cash reserves, large issue size, potential stake sale in future and complete offer for sale nature go against it.

"We expect HMIL to be a key beneficiary of growth in the PV segment due to its strong presence in the SUV segment. It is also planning a slew of launches in the EV space. The company has planned an overall capex of Rs 32,000 crore to develop capabilities in EV and ramp up overall manufacturing capacity over FY23-32," said Motilal Oswal with ‘subscribe for long term’ tag.

Ahead of its IPO Hyundai Motor India raised Rs 8,315.3 crore from 225 anchor investors by allocating 4.24 crore shares to 225 funds at Rs 1,960 apiece. Hyundai India reported a net profit of Rs 1,489.65 crore with a revenue of Rs 17,567.98 crore for Q1FY25. It reported a net profit of Rs 6,060.04 crore with a revenue of Rs 71,302.33 crore for the year ended on March 31, 2024.

HMIL is the second largest PV player in the domestic markets, while third largest PV player internationally according to sales volumes. It has been in the Indian markets for almost three decades and has gone through the ups and downs of the industry. HMI is a well-entrenched player in India with almost equal penetration in rural as well as the urban markets, said LKP Securities.

Since the PV industry is slightly in a slow lane currently, this may augur well for the company, as HMIL is expanding its capacity by 30 per cent in the next 2 to 3 years. With new model launches, HMIL should give a strong fight to its rivals. HMIL should trade at 26 times which is a fair value as compared to peers, it added with a 'subscribe for long term' rating.

The issue includes a reservation of 7,78,400 equity shares for the eligible employees of the company, who will get a discount of Rs 186 per share. Hyundai Motor India has reserved 50 per cent of the net offer for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) have 15 per cent of the allocation. Retail investors will get the remaining 35 per cent.

The price to book value ratio for Maruti Suzuki India is 4.79 times, while it is 13.11 times for Hyundai Motor India. This reduces the margin of safety despite Hyundai's better return on equity (ROE), said Amar Nandu, Research Analyst, SAMCO Securities, who called the IPO fairly-valued and not aggressively priced.

"Furthermore, the promoter is offering a 17.5 per cent stake in the issue, and an additional 7.5 per cent stake sale is anticipated within three years to meet regulatory requirements, which will create selling pressure. Considering these factors, investors may choose to avoid this IPO," he said.

Kotak Mahindra, JP Morgan India, Citigroup Global Markets India, HSBC Securities & Capital Markets and Morgan Stanley India are the book running lead managers of the Hyundai Motor IPO, while Kfin Technologies is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE with October 22, Tuesday as the tentative date of listing.