Hyundai Motor India gearing up for a record-breaking public offering

Hyundai Motor India Gearing Up For A Record-Breaking Public Offering

The Indian stock markets are abuzz with anticipation as Hyundai Motor India Limited gears up for its massive initial public offering (IPO) that is poised to be the largest ever in India's history. Valued at up to ₹27,870 crore, the public issue has captured the attention of both domestic and international investors who are eager to get a part of India’s second largest carmaker’s journey. As the IPO subscription period opens on October 15, all eyes are on the numbers behind this humongous offering that will cement Hyundai India's position among the country's most valuable listed companies. Here's a deep dive into the scale and strategic significance of the automaker's market debut.

A Public Offering Of Epic Proportions

Simply put, the sheer size of Hyundai's IPO is unprecedented in India's capital markets. The company has set the price band at ₹1,865 to ₹1,960 per equity share, pegging the total issue size between ₹26,519 crore and ₹27,870 crore. This effectively makes it the largest IPO in India's history, surpassing the previous ₹21,000 crore record held by the Life Insurance Corporation. To put things in perspective, some of the largest IPOs in India before this include Coal India Limited (₹15,200 crore in 2010), Reliance Power (₹11,700 crore in 2008) and HDFC Bank (₹12,000 crore in 2017). Hyundai has now raised the bar substantially for public listings in the country.

As a pure offer for sale, the IPO will see Hyundai's parent company in South Korea, Hyundai Motor Company, sell up to 142.19 million shares to investors, divesting an approximately 17.5% stake in the Indian subsidiary. No funds will be raised by Hyundai India, but it will broaden the shareholding base and improve public float for its stock.

Valued Like Never Before

Thanks to its market-moving IPO, Hyundai India is headed for a valuation that seemed unimaginable just a few years ago. At the upper end of the price range, the total market capitalization of the company post-listing stands at a whopping ₹1,59,258 crore or nearly $19 billion.

This will make Hyundai India one of the top 10 most valued companies on Indian exchanges from day one. Moreover, it ascribes a market cap that is greater than its global peers like Honda, Renault and Fiat Chrysler. While the India business contributes just 6.5% to Hyundai's consolidated revenues and 8% to overall operating profit, it will account for 42% of the market value of the entire group after listing. This underscores the strong growth prospects and strategic importance of the Indian market for the automaker.

Dominant Player In India's Auto Sector

Hyundai Motor India's evolution over the last two decades has been nothing short of spectacular. Since entering the Indian market in 1996 with the launch of the Santro, it has emerged as the second largest carmaker in India after Maruti Suzuki. It sold over 5.5 lakh vehicles in FY2023, capturing a market share of around 15% in the passenger vehicle space.

The company has invested over $4 billion in India so far across facilities in Sriperumbudur, Tamil Nadu and Alwar, Rajasthan. Its production capacity stands at over 7.5 lakh units annually. Most of its popular models including the i10, i20 Elite, Verna, Creta and Venue are manufactured in India. Beyond passenger vehicles, Hyundai also offers commercial vehicles like trucks and buses to cater to the entire spectrum of mobility needs. It has over 2,500 sales and service outlets spread throughout the country.

Business Growth And Market Share

While Hyundai is already a dominant auto brand in India, the IPO and resultant funds infusion will turbocharge its growth trajectory allowing it to consolidate market share and expand production capacity. Its new facility in Tamil Nadu, operational from 2025, will add another 3 lakh units per year alongside existing plants. The company is targeting a domestic market share of over 20% in passenger vehicles over the next 5-7 years. It also has set a global sales goal of selling over 1 million made-in-India cars annually by 2030.

On the financial front, Hyundai has charted an ambitious revenue target of ₹1 lakh crore by 2027, reflecting an annual growth rate of over 10%. Profitability is also expected to improve with operating margins expanding from the current 8.5% to 12% by 2025. The funds raised will help accelerate R&D activities and new model development while also opening up export opportunities for Hyundai India. With economies of scale and its positioning as a volume player, the company is gearing up to beat rivals and widen its market share across vehicle categories.

Summing it up

Hyundai's IPO is an inflection point not just for the company but for India's capital markets as a whole. Its sheer size and valuation make it a harbinger of the country's economic progress. For Indian investors, it represents a rare opportunity to invest in an auto giant at an early growth stage. On the other hand, for Hyundai, India is the strategic launchpad for global expansion and profitability.

As the automaker shifts gears on its IPO journey, all eyes are on investor response and eventual listing gains. A successful debut on the bourses will underscore India's attractiveness as an investment destination and might just set the stage for more large issues in the future. Hyundai gearing up for its ascent is certainly a landmark event for Dalal Street.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their own research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.

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