Hyundai Motor Company, the South Korean automotive giant, is gearing up to list its Indian arm, Hyundai Motor India and raise up to $3 billion (₹25,042 crore) in an IPO.
Hyundai Motor India, which is the second-largest passenger car maker in India, is set to list its shares on Indian stock exchanges soon in what could be India’s biggest IPO to date with a staggering $30 billion valuation (₹2.5 lakh crore).
Hyundai’s India listing has been in the works since February when reports suggested that the firm was looking to shore up capital to help it stay competitive in the nascent electric vehicle (EV) space amid expectations of Tesla’s entry into the Indian market — a move that has not materialised so far.
In this article, we break down what this IPO means and why it's a big deal.
Offer For Sale
Hyundai's upcoming IPO is structured as an offer for sale, where 17.5% of the parent company's stake in Hyundai Motor India will be sold.
This move isn't about raising new funds for expanding Hyundai Motor India's operations but rather about unlocking the value of Hyundai's already substantial investment in India. Since its inception, Hyundai has poured $5.04 billion into its Indian operations.
Hyundai Motor India is in robust financial health. For FY23, it reported an impressive revenue of ₹60,307.5 crore and a net profit of ₹4,709 crore. These figures highlight a profitable and well-established business in India, built over two decades. The IPO is also timely, given the current optimism in the Indian equity markets.
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Strategic Importance And Expansion Plans
India is a crucial market for Hyundai, not just because it's the third-largest car market globally after China and the USA, but also because of its rapid growth. Hyundai's sales in India grew by 11.5% year-on-year in Q1 2024, significantly outpacing its growth in the US and Europe.
Hyundai's Indian operations are operating at about 94% capacity, signalling a need for expansion. The acquisition of General Motors' facility in Maharashtra and plans to boost manufacturing capacity by 21% to 994,000 units per annum by FY2026 are steps in this direction. Additionally, HMIL is being positioned as an export hub, which is expected to enhance profitability.
Hyundai Motor India has been quick to adapt to market trends, particularly in the compact utility vehicles (CUV) and electric vehicles (EV) segments. It commands nearly a third of the CUV market and is a leader in EV launches and customer acceptance in India. Media reports indicate that Hyundai Motor India plans to launch four new EVs.
Why Invest In Hyundai’s IPO?
Unlike Tata Motors and Mahindra & Mahindra (M&M), which have diversified business interests, Hyundai Motor India is a pure play in the passenger vehicle segment, similar to Maruti Suzuki India. Analysts are optimistic about Hyundai Motor India’s growth potential, supported by its strong cash flows, which stood at ₹17,741 crore with a net profit of ₹4,654 crore in FY2023.
However, Hyundai Motor India operates in a highly competitive market with players like Toyota, BMW, Audi, and Volkswagen, among others. Despite this, it has carved out a significant niche, especially in the CUV and EV segments. The Indian market, traditionally cost-conscious, is evolving with consumers now prioritising features like safety, interiors and comfort over sheer cost.
Currently, Hyundai Motor Company's valuation trades at a discount compared to global peers like Toyota and BYD. However, the IPO is expected to improve its market valuation. Hyundai Motor India's earnings per share for FY2023 was ₹57.96, which, while lower than Maruti's ₹271.82, is competitive within the industry.
Hyundai’s price-to-earnings ratio is around 47, compared with M&M's 32.4 and Maruti’s 28.6, indicating a slightly higher but still reasonable valuation.
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