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Buying and selling on the planet’s second-largest IPO of 2024 begins on Tuesday, however retail traders have already given a lukewarm reception to the $3.3bn itemizing of Hyundai Motor India, amid a slowdown in automobile gross sales within the nation.
The retail phase of the Mumbai providing was solely 50 per cent subscribed final week as many baulked on the $19bn valuation for the Korean carmakers’ India unit, regardless of a publicity blitz that noticed wraparound front-page adverts emblazoned throughout India’s monetary newspapers.
By final Thursday’s cut-off, the Rs278.7bn challenge had drawn bids simply over two occasions the quantity supplied, shored up by institutional traders that had included Singapore’s authorities, the BlackRock funding firm and Constancy and Vanguard funds.
“The valuation was very full,” mentioned a senior Mumbai banker, highlighting Hyundai’s pricing at about 26 occasions the Indian unit’s earnings. It values the Indian unit at 40 per cent of the market capitalisation of its South Korean mother or father on the Seoul alternate. “They didn’t depart a lot on the desk,” the banker added.
The Indian debut, the place the Korean group is promoting a 17.5 per cent stake, is the nation’s third largest IPO ever in greenback phrases, the largest in Asia this yr and the world’s second-largest after warehouse operator Lineage’s $5.1bn US itemizing, in response to Dealogic knowledge.
The weak early bidding for Hyundai’s providing was in distinction to different blockbuster floats this yr in India, with its inventory market changing into the world’s largest itemizing venue outdoors the US. It has included the $782mn IPO of mortgage supplier Bajaj Housing Finance, which final month drew bids greater than 64 occasions the shares supplied.
Samuel Kerr, head of fairness capital markets at Ion Analytics, known as Hyundai’s itemizing “one other jewel within the crown after a marvellous yr for Indian deal exercise” at a time of “depressed” Asian itemizing volumes pushed by the “vital financial slowdown in China”.
Hyundai, India’s second-largest carmaker with a 14.6 per cent market share after Maruti Suzuki’s close to 40 per cent, plans to spend the IPO proceeds on growing its native presence. It’s increasing manufacturing capability for its sport utility automobile line-up and intends to introduce 4 EV fashions.
Hyundai has made vital inroads into India in comparison with different international carmakers — Ford and Normal Motors have deserted the market lately — however the itemizing has coincided with a slowdown in India’s motor business, with customers hit by cussed inflation.
The Nifty Auto Index has fallen 6.9 per cent this month and Bajaj Auto, one of many nation’s greatest sellers of bikes, noticed its shares plunge 13 per cent after it issued a gross sales warning on Thursday.
Indicators of weaker gross sales throughout India’s months-long competition season “undoubtedly hampered the state of affairs”, mentioned Abhishek Jain, head of analysis at Mumbai brokerage Arihant Capital, who added that Hyundai’s provide had been “aggressively priced” for such a big IPO.
The float marks the primary time Hyundai has listed outdoors its residence market and is a part of a world push following an erosion of gross sales in China over the previous decade, the place it has been hit by the fast rise of home rivals.
Hyundai mentioned its Indian unit accounted for about 18 per cent of worldwide gross sales final yr. With 1.4bn individuals and one of many fastest-growing massive economies, India not too long ago overtook Japan because the third-largest automobile market on the planet after China and the US, in response to knowledge from the Society of Indian Car Producers
Lee Cling-koo on the Jeonbuk Institute of Automotive Convergence Know-how, a South Korean analysis group, mentioned the IPO would assist Hyundai slim the market-share hole with Maruti Suzuki, a three way partnership arrange by the Japanese firm and India’s authorities in 1982.
“Hyundai is India in its place market to China,” he mentioned.
