Hyundai India IPO's grey market premium settles down to 3% a day before issue opening: Should you subscribe?

Hyundai will not issue new shares in the IPO, in which its South Korean parent will sell up to 17.5% of its stake in the wholly-owned unit that will be valued at up to $19 billion.

Hyundai Motor India Ltd (HMIL) initial public offer (IPO) will open for public subscription on October 15. The automaker has also fixed a price band of Rs 1,865-1,960 per share for its mega Rs 27,870-crore IPO, which will surpass LIC's initial share sale of Rs 21,000 crore to become the biggest ever.

Hyundai India's maiden share sale will conclude on October 17 and the bidding for anchor investors opened on October 14.

Hyundai India is a prominent and long-lasting automobile player holding a significant 15 percent market share in the domestic PV segment. Most of the brokerage houses have tagged 'Subscribe' rating to the IPO.

The analysts at ICICI Securities have given 'Subscribe' rating on steady growth prospects amid industry tailwinds, robust financials and healthy SUV product slate.

Hyundai India IPO grey market premium (GMP) is trading in the price range of Rs 65 in the unlisted market. It implies a massive drop of nearly 90% when compared to GMP of Rs 570 seen during the last week of September. However, the analysts believe it's a long-term play and expect it to deliver good returns over time.

"We expect limited listing gains to this IPO, however expect HMIL to deliver healthy double-digit portfolio returns over medium to long term," the analysts at ICICI securities said.

The low penetration of passenger vehicles domestically offers long runway of growth, with HMIL well equipped to capture this tangible growth story, it added.

The company also manufacture parts, such as transmissions and engines. They have also been India’s 2nd largest exporter of passenger vehicles from April 1, 2021 through June 30, 2024.

Sharekhan, in its report, said that beyond the domestic market, the company has built up healthy business in overseas markets as exports contributed 21 percent to its volumes in FY24.

The Indian unit of the South Korean auto major intends to leverage its local manufacturing capabilities to set itself as largest foreign production base in Asia, aiming to become an export hub for exports to emerging markets including South Asia, Latin America, Africa and Middle East with the potential to export to other global markets

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However, "rise in competition via new product launches by the competitors may impact its market share and profitability", it said.

While it has been a strong player in the domestic market, any sharp slowdown in the domestic PV industry may hamper its growth prospects, given the PV business is a cyclical business and
get impacted due to seasonality, the analysts said.

SBI Securities has tagged 'Subscribe for Long Term' rating for the issue saying strong brand, blockbuster models, advanced technology and high export potential are key differentiators.

"The capacity expansion at Talegaon will help HMIL in ramping up both domestic and export volumes. At the upper price band of Rs 1,960, HMIL is valued at 26.3x FY24 EPS," it added.

The proposed IPO is entirely an offer-for-sale (OFS) of over 14 crore equity shares by promoter Hyundai Motor Company (HMC), with no fresh issue component.

Hyundai India shares are set to be listed in October 22. This is the first initial share sale of an automaker in over two decades, following Japanese carmaker Maruti Suzuki's listing in 2003.

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