Hyundai Motor IPO: Key Details, Latest GMP, and Major Risks—Top 10 Things Investors Should Know Before the IPO Opens

The Hyundai Motor India IPO is set to be one of the most significant events in India’s capital markets this year, potentially surpassing the scale of the LIC IPO in 2022. The public issue, opening for subscription from October 15 to October 17, 2024, will see shares of the Indian subsidiary of Hyundai Motor Company listed for the first time on Indian exchanges. The listing of Hyundai Motor India Ltd on the BSE and NSE marks Hyundai’s first international stock market debut outside of South Korea. With a price band between ₹1,865 to ₹1,960 per share, the IPO is expected to draw considerable interest from institutional and retail investors alike.

Here’s an in-depth look at the 10 most important things you need to know before investing in this IPO, along with key risks and the latest grey market premium (GMP) updates.

Overview of Hyundai Motor India IPO

Hyundai Motor India’s IPO, set to launch on October 15, 2024, is already making headlines due to its expected scale and impact on the Indian stock market. The IPO will remain open for bidding until October 17, 2024, and its shares are expected to hit D-Street on October 22, 2024.

As the second-largest car manufacturer in India after Maruti Suzuki, Hyundai Motor India has been a dominant player in the country’s auto sector. It has a long history of operations, having been in the Indian market since 1996, and offers a range of passenger vehicles, including sedans, SUVs, hatchbacks, and electric vehicles (EVs).

This IPO is set to become the largest in India, surpassing the ₹21,000 crore LIC IPO from May 2022. Moreover, it is one of the biggest IPOs in Asia in recent times, reflecting the company’s robust position in the automotive industry.

Hyundai Motor India Company Details

Hyundai Motor India Ltd, a wholly-owned subsidiary of Hyundai Motor Company (South Korea), is a key player in the Indian automobile industry. Hyundai, along with Kia, forms part of the Hyundai Motor Group, the third-largest auto original equipment manufacturer (OEM) in the world, with total sales of 7.3 million vehicles in 2023.

Operations and Product Portfolio

Hyundai Motor India focuses on the manufacturing and selling of passenger vehicles and automotive components like transmissions and engines. The company’s current vehicle portfolio features 13 models, including:

Sedans
Hatchbacks
SUVs
Battery Electric Vehicles (EVs)

Hyundai operates a vast network of 1,366 sales points and 1,550 service centers across India, making it one of the most accessible brands for Indian consumers. Since its inception in India, Hyundai has sold nearly 12 million vehicles, with a significant portion of its output going towards exports.

Market Position and Competitiveness

According to a CRISIL report, Hyundai Motor India has consistently ranked as the second-largest OEM in the Indian passenger vehicle market in fiscal years 2022, 2023, and 2024 (up to June 30, 2024). Hyundai has maintained this position since 2009, and its dominance continues in the face of competition from local and foreign automakers.

While other global players like Ford and General Motors have struggled to penetrate the Indian market, Hyundai has managed to establish itself as a trusted and reliable brand among Indian consumers.

10 Things Investors Must Know Before Subscribing to the Hyundai Motor India IPO

1. Key Dates of Hyundai Motor India IPO

The IPO opens for subscription on Tuesday, October 15, 2024, and closes on Thursday, October 17, 2024. The IPO’s allocation to anchor investors will take place on Monday, October 14, 2024.

Key dates:

Basis of Allotment Finalization: Friday, October 18, 2024
Refunds Initiated: Monday, October 21, 2024
Shares Credited to Demat Accounts: October 21, 2024
Listing on BSE & NSE: Tuesday, October 22, 2024

2. IPO Price Band

The price band for Hyundai Motor India’s IPO is set at ₹1,865 to ₹1,960 per equity share, with a face value of ₹10 per share. The floor price is 186.5 times the face value, while the cap price is 196 times the face value.

The cap price is expected to be 120% of the floor price. The wide range offers some flexibility for both institutional and retail investors to participate.

3. IPO Lot Size

The minimum lot size is set at 7 shares per application, which means investors can bid for a minimum of 7 shares or multiples thereof. The minimum investment for retail investors is approximately ₹13,720, based on the lowest price in the band.

4. IPO Issue Details

Hyundai Motor India is looking to raise ₹27,870 crore (approximately $3.3 billion) through this IPO, which is an Offer for Sale (OFS). The IPO will not involve the issuance of new shares but will instead see Hyundai Motor Company, the South Korean parent, sell 14.22 crore shares or 17.5% of its stake in the Indian unit.

Even after the IPO, Hyundai Motor Company will retain 82.5% ownership of its Indian subsidiary. If shares are priced at the upper range of the price band, the company will be valued at ₹1,59,540 crore ($19 billion), making it the biggest stock offering in India this year.

5. IPO Reservation for Investors

50% of the IPO will be reserved for Qualified Institutional Buyers (QIBs).
15% is allocated to Non-Institutional Investors (NIIs).
35% is earmarked for Retail Investors.
7,78,400 equity shares will be reserved for the company’s employees.

6. Use of IPO Proceeds

Since the IPO is entirely an Offer for Sale (OFS), Hyundai Motor India will not receive any proceeds from the offering. The promoter-selling shareholder (Hyundai Motor Company) will receive the funds after deducting the IPO-related expenses and taxes.

7. Lead Managers and Registrar

The lead managers (BLRMs) for the Hyundai Motor India IPO are:

Kotak Mahindra Capital Company Limited
Citigroup Global Markets India Private Limited
HSBC Securities & Capital Markets Pvt Ltd
JP Morgan India Private Limited
Morgan Stanley India Company Pvt Ltd

The registrar for the issue is KFin Technologies Limited, which will handle share allocation, refunds, and other IPO-related activities.

8. Key Risks Associated with the IPO

There are several risks that potential investors should consider before subscribing:

Supplier Dependency: Hyundai Motor India depends heavily on a few suppliers for key parts and materials. Any increase in component costs or supply chain disruptions could adversely affect its operations.
Price Fluctuations: Hyundai is vulnerable to price volatility in materials, including parts required for manufacturing electric vehicles (EVs) and other automotive components.
Market Competition: Hyundai Motor India faces stiff competition from industry giants like Maruti Suzuki, Tata Motors, and Mahindra & Mahindra in the Indian passenger vehicle market.
Reliance on Parent Company: The Indian subsidiary depends heavily on the parent company for technology, operations, and materials. Any disruption in the parent company could affect the Indian unit’s performance.

9. Listed Peers

Hyundai Motor India’s key competitors in the Indian market, as per the Red Herring Prospectus (RHP), include:

Maruti Suzuki India: P/E Ratio – 17.93 (as of October 4, 2024)
Tata Motors: P/E Ratio – 11.36
Mahindra & Mahindra (M&M): P/E Ratio – 29.96

10. Latest Grey Market Premium (GMP)

As of today, Hyundai Motor India’s grey market premium (GMP) stands at ₹60. This suggests that the shares are trading at a premium of ₹60 over the upper price band of ₹1,960, implying a potential listing price of around ₹2,020 per share—3.06% higher than the IPO’s cap price.

However, the GMP has shown a downward trend over the last 15 trading sessions, ranging from ₹0 to ₹570. While the GMP provides insight into market sentiment, investors should exercise caution and not rely solely on this metric when making their investment decisions.