Hyundai IPO: QIBs drive demand in India’s largest offering, retail participation lags

The record-breaking IPO of Hyundai Motor India Ltd was largely supported by qualified institutional buyers (QIBs), while retail investors showed less enthusiasm. The portion set aside for QIBs was oversubscribed 6.97 times, but the retail section saw only 0.5 times subscription.

Retail Investors Hold Back

Retail investors, who can bid up to ₹2,00,000, showed little interest in Hyundai’s IPO, leading to an underwhelming subscription rate. Non-institutional investors, bidding between ₹2,00,000 and ₹10,00,000, subscribed at 0.65 times.

Grey Market Premium

The grey market premium (GMP), which was initially ₹1,001 when the IPO was announced, dropped sharply to just ₹10 by the time of the listing. This steep decline reduced expectations for listing gains, which may have led to the lacklustre response from retail investors.

IPO Pricing Impacted Retail Interest

The price range of ₹1,865 to ₹1,960 per share, higher than anticipated, contributed to retail investors’ reluctance to invest. Analysts noted that QIBs, with a longer-term investment focus, were more willing to commit to the higher pricing.

Strong Fundamentals

Despite the slow retail uptake, Hyundai Motor India’s solid financials were highlighted by analysts. The company’s valuation at the top price band is 26 times its FY24 earnings, making it more affordable compared to competitor Maruti Suzuki.

Hyundai’s Position in the Market

Hyundai Motor India is the second-largest passenger vehicle manufacturer in India, with a 14.6% market share. It also plays a significant role in Hyundai’s global operations, contributing 18% of total sales. The company plans to introduce four new electric vehicle models in India, starting with the Creta EV in FY25.

Hyundai Motor India’s ₹27,870.16 crore IPO broke records, surpassing Life Insurance Corporation of India’s ₹21,000 crore offering. It is the first car manufacturer IPO in India since Maruti Suzuki in 2003.