Hyundai eyes record-breaking Diwali IPO on India's stock exchanges

5 Feb 2024 , 01:43 AM

According to news reports, Hyundai Motor Co. of South Korea is considering listing its local unit in order to capitalise on the IPO boom in India. If the plan is successful, it would be the largest initial public offering in the history of the nation and would occur about three decades after Hyundai Motor India (HMIL) was first introduced. After Maruti Suzuki India, HMIL was the second-biggest seller of passenger cars in India during the previous year.

Reportedly, prominent international investment banks such as Citi, Goldman Sachs, HSBC, Deutsche Bank, JP Morgan, Bank of America, UBS, and HSBC were in Seoul last week to present their initial public offerings (IPOs) to the Hyundai executives. According to bankers, the corporation is worth $22-28 billion. Reportedly, Hyundai is considering dilution of between 15 and 20% in order to raise $3.3-5.6 billion (27,390 crore to 46,480 crore).

In Seoul, Hyundai’s global head of communications did not answer questions.

LIC of India set the record in 2022 with an offering size of ₹21,000 crore for an IPO. India has surpassed Hong Kong to become the world’s fourth-largest equities market. At the upper end of the $28 billion (₹23.2 lakh crore) valuation range, HMIL will be worth more than Adani Power, Bajaj Auto, and Mahindra & Mahindra.

Based on BSE data, the only large Indian automakers with bigger market values are Maruti Suzuki (₹ 33.4 lakh crore) and Tata Motors (₹ 29.3 lakh crore).

Hyundai Motor Co. (HMC) has a market capitalization of $39 billion and is listed in South Korea. Reports following Hyundai Motor India (HMIL) indicated that listing the Indian subsidiary would be a component of South Korea’s ‘value-up’ initiative, which aims to reduce the so-called ‘Korea discount’ in the financial markets and improve the price of underperforming equities.

Price-to-earnings (P/E) ratios for South Korean automakers are low, ranging from 4.1 to 4.6, whereas those of Japanese and US competitors are between 7.3 and 5.4. It is possible for subsidiaries situated in developing markets like India to trade at higher P/E multiples than their parent companies. For example, parent Suzuki Motor Corp is trading at eight times, whereas Maruti Suzuki is trading at 23 times its estimated FY25 earnings.

The aforementioned individuals stated that the strategy calls for a Diwali listing to occur between September and November of this year. But these are just discussions at this stage; final details will be decided upon after more debate. It will also be influenced by a number of outside variables, such as the health of the Indian financial markets and different macroeconomic variables.

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