Hyundai Motor India IPO: Does it deserve premium over Maruti Suzuki India? 

Hyundai Motor India, which has received nod from SEBI to float its proposed Rs 25,000 crore initial public offer (IPO), should command a valuation premium vis-a-vis Maruti Suzuki India Ltd, Nomura India said in its latest note. The mega IPO by the second largest auto major in India is seen enhancing Korean parent Hyundai Motor Company's visibility, brand image and liquidity in the Indian market.

Hyundai Motor India deserves a valuation premium vis-a-vis Maruti Suzuki India Ltd, considering latter's ongoing market share decline, Nomura India said. As the second-largest automaker in India, Hyundai Motor India's market share has been stable at 15-17 per cent since 2008, it said adding that the company recorded the highest-ever domestic sales of 6,02,000 units in 2023, a 9 per cent growth YoY.

The strong performance was driven by compact and mid-size SUVs, particularly Creta, Exter and Venue models, Nomura India said. "Its YTD August wholesales increased 2 per cent, slightly underperforming the industry sales +6 per cent YoY, while we expect the growth to reaccelerate into 2025-26, thanks to the launch of new models including Creta EV in 2025 and petrol-HEV SUV(Ni1i) to be produced in the newly-acquired GM’s (GM US, Reduce) Galegaon plant in 2026," Nomura India said.

The brokerage said the penetration of battery electric vehicle (BEV) and hybrid electric vehicle (HEV) is limited at 2 per cent and 3 per cent of new car sales in India. Yet, the demand for xEV will likely grow faster.

"While domestic OEMs Tata Motors (TTMT IN, Buy) and M&M (MM IN, Buy) have placed their bet on BEV, they may consider making HEVs in the future, in our view," it said.

Hyundai Motor's market cap in Korea stands at $39.6 billion, as of September 25. If Hyundai Motor India's market cap ends up at $18-20 billion, the value of the Indian entity would represent 45-50.5 per cent of the consolidated Hyundai Motor entity’s market cap.

In its draft red herring prospectus (DRHP), Hyundai Motor India has set the valuation between $18 billion and $20 billion. The offer would consist of a primary offering of an offer for sale (OFS) by Korea's Hyundai Motor Company with a face value of Rs 10 each.