Hyundai Motor India IPO: 10 Important Risks Investors Should Know Before Investing in the ₹27,856 Crore Offering

Hyundai Motor India is set to launch its IPO tomorrow, marking a major event in the Indian market. As a wholly-owned subsidiary of Hyundai Motor Company in Korea, Hyundai has been a leading car manufacturer in India since 1996, known for popular models like the i20, Creta, and Venue.

The Hyundai Motor India IPO is an attractive option for those interested in the automotive sector, especially as the company continues to gain market share in India. The IPO bidding will run from October 15 to October 17, 2024, with a price range set between ₹1,865 and ₹1,960. A minimum investment of ₹13,055 is needed for a lot of 7 shares, and the total issue size is estimated at ₹27,870.16 crore, making it one of the largest IPOs of the year. Anchor investors will be allocated shares today, October 14.

In the public offering, 50% of the shares are reserved for qualified institutional buyers (QIB), 15% for non-institutional investors (NII), and 35% for retail investors. There is also an employee reservation segment offering a discount of ₹186 per equity share to eligible employees.

Here are 10 key risks mentioned in the company’s Red-Herring Prospectus (RHP) that investors should consider before subscribing to the IPO:

1. Rising Costs: Increases in prices for parts and materials could hurt Hyundai Motor India’s operations and profits.
2. Competition with Group Companies: Kia Corporation and Kia India, which are part of the same group, could create conflicts of interest that might negatively impact Hyundai.
3. Legal Issues: The company and its promoters are involved in ongoing legal disputes, which could damage their reputation and finances if rulings go against them.
4. Dependence on Non-Electric Vehicles: Hyundai’s sales mainly rely on non-electric cars, and there’s no assurance that their electric vehicle strategy will succeed or be affordable.
5. Production Capacity: The company is operating at high capacity. If it cannot increase production at the Talegaon plant as planned, it may struggle to meet future demand.
6. Manufacturing Interruptions: The Chennai plant currently produces all of Hyundai’s vehicles. Any disruptions, including those at the future Talegaon plant, could significantly affect their operations.
7. Green Hydrogen Development: Hyundai is researching affordable green hydrogen technology, but its economic viability is uncertain.
8. Government Incentives: The company could face major setbacks if government incentives are reduced or eliminated, affecting its financial health and cash flow.
9. Intense Competition: The fast-changing automotive market poses challenges that could impact Hyundai’s ability to compete effectively.
10. Market Risks: Overall, the automotive industry is highly competitive, and Hyundai may face difficulties that could negatively affect its operations.

Investors should carefully consider these risks before participating in the IPO.