South Korean auto giant Hyundai Motor Co’s Indian subsidiary, Hyundai Motor India Limited (HMIL), has filed draft papers with the Securities and Exchange Board of India (SEBI) to raise approximately $3 billion through an initial public offering (IPO).
This IPO is set to be the largest in India’s history, surpassing the previous record of $2.7 billion set by the state-owned Life Insurance Corporation (LIC) in 2022.
Multiple sources have confirmed this development to Moneycontrol on the condition of anonymity.
Overview of the IPO
The IPO will be a pure offer for sale (OFS) by the promoter, involving the sale of up to 142,194,700 equity shares with a face value of Rs 10 each.
According to the draft red herring prospectus (DRHP) reviewed by Moneycontrol, the primary objectives of the offer are to execute the OFS and to list the equity shares on the Indian stock exchanges.
The company anticipates that the listing will enhance its visibility, bolster its brand image, and provide liquidity and a public market for its shares in India.
Hyundai Motor India Limited has enlisted the services of several top-tier investment banks for this transaction.
Citi, HSBC Securities, JP Morgan, Kotak Mahindra Capital, and Morgan Stanley are the advising i-banks, while Shardul Amarchand Mangaldas and Latham and Watkins serve as the company counsel and international counsel, respectively.
Financial Performance and Market Position
Hyundai Motor India Limited is a significant player in the Indian automobile market, ranking as the second-largest carmaker after Maruti Suzuki in FY24 in terms of passenger vehicle sales volumes.
The company achieved revenue of Rs 60,000 crore and a profit of Rs 4,653 crore in FY23, marking the highest figures among non-listed car manufacturers in India, as reported by Autocar Professional.
Hyundai’s Indian unit has been a cornerstone of the company’s global operations, contributing around 13% of its worldwide sales in 2023.
The company’s portfolio in India includes popular models such as the i20, Verna, Creta, Aura, and Tucson.
In 2023, Hyundai Motor India Limited recorded its highest-ever domestic sales, surpassing the six-lakh mark, a testament to its strong market presence and consumer demand.
Comparison with Maruti Suzuki
Maruti Suzuki, the market leader in India, has seen a 24.35% rise in its share price over the past six months and boasts a market capitalization of approximately Rs 4,00,000 crore (nearly $48 billion).
The performance of Hyundai’s IPO will inevitably be compared to Maruti Suzuki, given their direct competition in the Indian market.
Strategic Implications
Enhancing Corporate Value and Brand Image
The IPO is expected to enhance Hyundai’s corporate value and brand image. Listing on the Indian stock exchanges will provide HMIL with greater visibility and access to a broad investor base.
This move is aligned with Hyundai Motor Co’s broader strategy of reviewing various activities, including the potential listing of overseas subsidiaries, to increase corporate value.
Financial De-risking
Depending on market conditions and feedback from roadshows, HMIL might explore a pre-IPO round as a de-risking strategy.
This approach would allow the company to secure funds and gauge investor interest ahead of the full IPO, providing a cushion against market volatility.
Investment in Mobility Strategies
Hyundai Motor Group’s Executive Chair, Euisun Chung, recently visited India to review the company’s mid to long-term mobility strategies.
This visit underscores the strategic importance of the Indian market to Hyundai’s global operations.
The funds raised from the IPO could be directed towards expanding HMIL’s footprint in the mobility sector, including electric vehicles (EVs), autonomous driving technology, and other innovations.
Industry Context
Growth of the Indian Automobile Market
The Indian automobile market has been on a growth trajectory, driven by increasing urbanization, rising disposable incomes, and favorable government policies.
The market for passenger vehicles, in particular, has shown robust growth, with significant potential for future expansion.
Hyundai’s strong performance in this market positions it well to capitalize on these trends.
Competition and Market Dynamics
Hyundai faces stiff competition from both domestic and international players in the Indian market.
Maruti Suzuki remains the dominant force, but other global manufacturers like Toyota, Honda, and emerging players in the EV segment, such as Tata Motors, are intensifying the competition.
Hyundai’s focus on innovation, quality, and consumer satisfaction will be critical in maintaining and growing its market share.
Regulatory Environment
The regulatory environment in India has been evolving to support the growth of the automobile industry.
Policies aimed at promoting EVs, reducing emissions, and enhancing safety standards are influencing market dynamics.
Hyundai’s proactive approach in aligning with these regulations and its investment in future mobility solutions will be crucial for its long-term success.
Market Reaction and Investor Sentiment
The announcement of Hyundai’s IPO has generated significant interest in the financial markets.
Analysts are keenly watching the developments, given the scale of the offering and its potential impact on the Indian stock market.
The success of this IPO could set a precedent for other multinational companies considering listing their subsidiaries in India.
Potential Challenges
Despite the optimistic outlook, there are potential challenges that Hyundai might face.
Market volatility, regulatory hurdles, and competitive pressures are factors that could influence the success of the IPO.
Additionally, investor sentiment can be unpredictable, especially in the context of global economic uncertainties.
Opportunities for Investors
For investors, Hyundai’s IPO presents an opportunity to invest in a leading automobile manufacturer with a strong track record and significant growth potential.
The company’s robust financial performance, market position, and strategic initiatives make it an attractive investment prospect.
Future Outlook
Expansion Plans
Post-IPO, Hyundai is likely to focus on expanding its production capacity, enhancing its distribution network, and investing in new technologies.
The company’s commitment to innovation and sustainability will be pivotal in driving its future growth.
Technological Advancements
Hyundai’s investment in EVs, autonomous vehicles, and smart mobility solutions positions it at the forefront of the automotive industry’s technological revolution.
The IPO proceeds could accelerate these initiatives, helping Hyundai maintain its competitive edge.
Global Integration
As part of Hyundai Motor Co’s global strategy, the Indian subsidiary’s listing will integrate more closely with the parent company’s operations.
This integration could lead to more efficient resource allocation, knowledge transfer, and strategic alignment.
Hyundai Motor India Limited’s upcoming IPO is a landmark event in the Indian financial markets. It not only represents the largest IPO in the country’s history but also underscores the strategic importance of the Indian market to Hyundai Motor Co.
The success of this IPO will hinge on multiple factors, including market conditions, investor sentiment, and the company’s strategic execution.
For Hyundai, the IPO is a step towards greater visibility, enhanced corporate value, and increased financial flexibility.
For investors, it offers a chance to be part of a dynamic and growing company that is at the forefront of the automotive industry.
As the IPO process unfolds, all eyes will be on Hyundai to see how it navigates this significant milestone and leverages it for future growth and success.
