Hyundai Motor India IPO: Post-Listing Gains Capped But Long-Term Growth Intact

Shares of Hyundai Motor India Ltd. are likely to see limited upside after the listing of its IPO due to its fully priced issue. However, the stock offers long-term benefits to investors.

The company's IPO will hit the Indian primary market on Oct. 15, making it the first automaker to go public in over two decades. The record-breaking issue size of Rs 27,870 crore surpasses the IPO of Life Insurance Corp. of India's Rs 21,000 crore in 2022.

The entire offer proceeds will go to the promoters, as the issue consists of only an offer-for-sale component. The price band for the IPO of Hyundai Motor Unit was set in Rs 1,865-1,960 per share range. The company will be valued at nearly Rs 1.6 lakh crore of market capitalisation at the upper end of the price band.

The grey market premium of Hyundai Motor IPO was Rs 65 as of Oct 14 08:44 a.m. The estimated listing price is Rs 2,025, according to InvestorGain.

ICICI Direct Research assigned 'subscribe' rating on the auto major given steady growth prospects amid industry tailwinds, robust financials, and a healthy SUV product slate. The brokerage expects limited listing gains from this IPO.

"However, expect Hyundai India to deliver healthy double-digit portfolio returns over the medium to long term," the note said.

Hyundai India posted strong financials, with revenue last fiscal coming in at almost Rs 70,000 crore. The auto major also reported Ebitda margins at a tad over 13%.

Anand Rathi stated in a note that the Creta-maker's valuation at the upper band is 26.2 times its financial year 2024 earnings and 26.7 times its fiscal 2025 earnings.

Following the issuance of equity shares, the company's market capitalisation stands at Rs. 1.59 lakh crore, with a market cap-to-sales ratio of 2.28 based on its fiscal 24 earnings, the note said.

"We believe that the issue is fully priced and recommend a 'Subscribe-Long Term' rating to the IPO."

Hyundai India volume performance has been underperforming the industry and hence, the IPO is priced to perfection, according to Pramod Amthe, Head of Institutional Equity Research, Incred Capital.

Hyundai India has a unique proposition in the underpenetrated car industry and has better profitability despite lower gross profits, he said. "Hyundai's valuations seem on par with competition."

Advisers for the share sale include Kotak Mahindra Bank Ltd., Citigroup Inc., HSBC Holdings Plc., JPMorgan Chase & Co., and Morgan Stanley.

With about 14-15% market share, Hyundai is the second largest player in the domestic market and one of the prominent export players from India, according to Sharekhan. "HMIL has strong parentage, a relevant product profile, robust market positioning, and a healthy financial profile."

Hyundai Motor’s strong Hyundai brand in India and its ability to leverage new technologies to enhance operational and manufacturing efficiency could be key strengths, according to Nuvama Research. Its ability to expand into new businesses and respond to regulatory changes will also aid the company's growth trajectory.