Hyundai Motor shares made a modest debut on the stock exchanges on Tuesday, October 22, 2024, listing at ₹1,934 on the National Stock Exchange (NSE), which represents a 1.3% discount compared to the issue price of ₹1,960. Similarly, on the Bombay Stock Exchange (BSE), the shares opened at ₹1,931, reflecting a 1.5% discount. This initial listing followed the highly anticipated initial public offering (IPO) of Hyundai Motor India, the largest IPO in India’s history, valued at ₹27,870.16 crore.
The IPO was open for subscription from October 15 to October 17, with shares priced between ₹1,865 and ₹1,960 each. However, despite the large scale of the IPO, it received a lukewarm response from retail and non-institutional investors, leading to a rather muted market debut.
Hyundai Motor Shares and IPO Performance
Hyundai Motor shares saw subdued demand during the IPO period. Overall, the public offering received bids for 23.63 crore shares compared to the 9.89 crore shares on offer, resulting in a total subscription of 2.37 times. While this may seem respectable, it fell short of expectations, particularly in the retail and non-institutional investor segments, which were undersubscribed. The retail investor category received bids amounting to only 0.50 times the shares on offer, while non-institutional investors subscribed to 0.6 times the shares available.
The only segment that saw a strong demand was the qualified institutional buyers (QIB) category, which was fully subscribed at 6.97 times. This indicates that institutional investors showed confidence in Hyundai Motor shares, but the broader retail market was less enthusiastic.
IPO Details and Employee Reservation
Hyundai Motor India’s IPO was entirely an offer for sale (OFS), with no fresh issuance of shares. The offer comprised 14.22 crore shares being sold by the promoter, and as a result, the promoter’s stake in the company will be reduced to 82.5% after the IPO. One of the notable aspects of this public offering is that the company itself will not receive any proceeds from the sale. Instead, all the proceeds will go to the Promoter Selling Shareholder. After deducting offer-related expenses and taxes, the remaining funds will be allocated to the promoter.
The company raised ₹8,315.28 crore from anchor investors on October 14, 2024, a few days before the IPO opened for public subscription. For retail investors, the minimum lot size was set at seven shares, requiring an investment of at least ₹13,720.
A portion of the IPO was reserved for employees of Hyundai Motor India, with up to 778,400 shares available to them at a ₹186 discount to the issue price. This reservation provided a more affordable entry point for employees, further encouraging their participation in the company’s equity.
Brokerage Analysis of Hyundai Motor Shares
Ahead of the listing of Hyundai Motor shares, several brokerage firms provided their analysis and recommendations. Among them, Nomura initiated coverage on Hyundai Motor India with a ‘buy’ rating and set a target price of ₹2,472 per share, which represents a potential upside of 26% over the issue price. Nomura highlighted the company’s strengths, particularly in the areas of technology and design. The brokerage also emphasized the ongoing trend of premiumisation in the automotive industry, which they believe will drive high-quality growth for Hyundai Motor shares in the long run.
Nomura expects the Indian automotive market to have significant room for growth, noting that the country has a relatively low car penetration rate, with just 36 vehicles per 1,000 people. This presents an opportunity for Hyundai Motor India to expand its presence and capitalize on the growing demand for vehicles.
The brokerage also projected an 8% compound annual growth rate (CAGR) in volume for Hyundai Motor India over FY25-FY27, driven by the launch of 7-8 new models, including facelifts. Furthermore, Nomura foresees an improvement in the company’s EBITDA margins, rising from 13.1% in FY24 to 14% by FY27. This improvement is expected to be fueled by a better product mix, cost reduction initiatives, and operating leverage.
Nomura’s forecast for Hyundai Motor India also includes a 17% earnings CAGR over FY25-FY27, underscoring the brokerage’s confidence in the company’s long-term prospects.
Macquarie, another global brokerage firm, also shared a positive outlook on Hyundai Motor shares. The firm initiated coverage with an ‘outperform’ rating and set a target price of ₹2,235 per share, representing a 14% potential upside from the issue price. Macquarie believes that Hyundai Motor India is well-positioned to trade at a premium price-to-earnings (P/E) ratio compared to its competitors, owing to its strong portfolio mix and premium market positioning.
Macquarie identified several key growth drivers for Hyundai Motor shares, including the company’s diversified powertrain options and upcoming model launches. Additionally, the brokerage pointed out Hyundai’s strong domestic demand in the passenger vehicle segment and the potential for further market share gains. The combination of these factors is expected to lead to consistent earnings growth, which Macquarie believes will help Hyundai maintain its premium valuation over other domestic passenger vehicle manufacturers.
Hyundai Motor Shares: Company Overview and Growth Prospects
Hyundai Motor India, founded in May 1996, is a subsidiary of Hyundai Motor Group, the world’s third-largest automobile manufacturer by passenger vehicle sales. The company has established itself as a leader in the Indian automotive market, known for producing reliable, feature-rich, and technologically advanced vehicles. Hyundai Motor India also manufactures key automotive components, including engines and transmissions, which contribute to its robust product portfolio.
The company has an extensive sales and service network across India, with 1,366 sales points and 1,550 service outlets. As of March 31, 2024, Hyundai Motor India had sold nearly 12 million passenger vehicles, both in the domestic market and through exports.
Between the financial years ending March 31, 2023, and March 31, 2024, Hyundai Motor India reported strong financial performance. The company’s revenue increased by 16%, while profit after tax (PAT) grew by 29%. These figures reflect the company’s ability to adapt to market trends and maintain profitability in a competitive environment.
In conclusion, Hyundai Motor shares may have had a muted debut, but the company’s long-term growth potential, bolstered by strong broker recommendations, positions it as a key player in India’s rapidly evolving automotive landscape.
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