Hyundai Motor India’s Historic IPO: A Win for Its Parent, But What’s in It for Local Shareholders?

Hyundai Motor India’s IPO marks a big step for its parent company, Hyundai Motor Co. (HMC), and the Indian stock market. This IPO is the largest public offering in India to date and is part of Hyundai’s plan to improve the value of its global businesses. The South Korean government’s Corporate Value-Up Program aims to make large companies like Hyundai more efficient, increase their value, and return more cash to shareholders.

Despite the excitement, the stock’s performance on the first day was underwhelming, dropping nearly 5% from its listing price. Still, the IPO is seen as a major moment for the Indian stock market, showing the market’s ability to handle such a large offering.

Biggest IPO in India

Hyundai’s IPO raised ₹27,870 crore, making it the biggest in India’s history, surpassing the Life Insurance Corporation of India’s ₹21,000 crore IPO in 2022. The price range for Hyundai’s shares was set between ₹1,865 and ₹1,960 per share. The company sold 142.19 million shares, with Hyundai Motor Co. selling part of its stake in its Indian unit.

In March 2024, Hyundai Motor India paid a special dividend of ₹107.82 billion to its parent company due to strong earnings. This translated to ₹13,270 per equity share. Over the past three years, Hyundai has steadily increased dividends, from ₹1,838 per share in FY22 to ₹5,727 per share in FY23.

Market Reaction

The reaction to Hyundai’s IPO has sparked a lot of discussion. While institutional investors (like banks and large funds) were highly interested, with the Qualified Institutional Buyers (QIB) segment oversubscribed 6.97 times, retail investors (individual investors) were more cautious. The retail portion was only subscribed 0.5 times, indicating lower enthusiasm from smaller investors, who tend to look for quick profits from the listing. The stock’s weaker performance on debut day left some retail investors disappointed.

Deepak Jasani, head of retail research at HDFC Securities, said the IPO proves that India’s stock market can handle large offerings from reputable companies. However, retail investors are more hesitant, likely due to concerns about the stock’s valuation and market volatility.

Comparison with Maruti Suzuki

Hyundai’s IPO has drawn comparisons to Maruti Suzuki, the top player in India’s passenger vehicle market. Analysts have noted that while Hyundai has built a strong business in India, its IPO valuation is high, especially with slower earnings growth expected in the next 12–18 months. Hyundai’s strong profitability is seen in its 51% return on equity (RoE), compared to Maruti Suzuki’s 17%. However, the high price-to-book (P/B) ratio of 13.11 for Hyundai compared to Maruti’s 4.48 is a concern, as it leaves less room for potential gains.

Future for MNCs in India

The IPO also raises questions about the future of multinational companies (MNCs) listing in India. Some believe that other global brands, like LG and Whirlpool, might follow Hyundai’s path, as MNCs see value in securing higher valuations through the IPO process.

Several MNCs have already filed their papers for IPOs in India, including companies like Hexaware Technologies, Niva Bupa Health Insurance, and BMW Ventures. An investment banker mentioned that many MNCs are interested in IPOs, even if their stocks don’t perform well immediately, as they can still gain value over the long term.

Outlook for Indian IPOs

Hyundai’s IPO comes at a time when passenger vehicle sales in India are slowing down, with weaker demand in September compared to the previous year. However, the two-wheeler segment is expected to grow during the festive season.

According to analysts, smaller companies with high growth potential will still attract investor interest for both short-term gains and long-term growth. As Hyundai Motor India moves forward after its IPO, investors will be watching to see how the company performs and whether other MNCs will follow its lead in entering the Indian market.