Hyundai Motor India Deserves Valuation Premium Over Maruti Suzuki, Says Nomura

As Hyundai Motor India Ltd. makes headlines with its upcoming initial public offering, analysts at Nomura say the car maker deserves a valuation premium over Maruti Suzuki India Ltd. This is due to its market dynamics, especially considering Maruti's ongoing market share decline.

Expected to be the largest IPO in India's history, Hyundai Motor India aims to raise approximately $3 billion, further solidifying its position in the Indian automotive market, as highlighted by Nomura's latest report.

SEBI has officially given the nod for Hyundai's India IPO after a review of its draft documents submitted on June 15. With final observations received, the Creta-maker plans to launch the IPO in October 2024. Details regarding the pricing and timeline are forthcoming, promising to capture the attention of investors both domestically and internationally, according to insights from Nomura.

In its draft red herring prospectus, Hyundai Motor India has set its valuation between $18 billion and $20 billion. The IPO will consist of an offer for sale by the parent Hyundai Motor Co., with each share having a face value of Rs 10.

The primary objectives outlined for the IPO include enhancing visibility and liquidity in the Indian market, as well as bolstering Hyundai's brand image, as noted by Nomura.

As the second-largest automaker in India, Hyundai competes closely with Maruti Suzuki, which currently holds a dominant 41% market share, said the report. Maruti Suzuki's market capitalisation stands at $48 billion, reflecting a price-to-earnings ratio of 22.6 times for fiscal 2025.

Hyundai's market cap in Korea is valued at $39.6 billion. Should Hyundai Motor India achieve its targeted market cap of $18-20 billion, this would represent about 45-50.5% of Hyundai's consolidated value, attracting significant investor interest, said Nomura.

Despite the current low penetration of battery electric vehicles and hybrid electric vehicles in India, demand for these segments is anticipated to grow rapidly, aligning with global trends, holds Nomura.

As domestic competitors like Tata and Mahindra focus heavily on BEVs, Hyundai Motor India's strategic introduction of HEVs could position it favorably in an evolving market, said analysts.

A recent announcement by Hyundai's chief executive officer during an investor conference hinted at forthcoming plans regarding the deployment of IPO funds, underscoring the importance of investor confidence in the company's future trajectory, as noted by Nomura.

As Hyundai Motor India prepares for its landmark IPO, all eyes will be on how this move shapes the automotive landscape in India and whether it can further enhance the company's standing in a competitive market, said the brokerage.