Hyundai Motor India IPO Review: Should You Apply?

Hyundai Motor India Limited (HMIL), a subsidiary of Hyundai Motor Company (HMC) based in South Korea, is set to make a significant mark in the Indian capital market with its initial public offering (IPO). As the second-largest car manufacturer in India, HMIL is known for its wide range of vehicle models, from hatchbacks and sedans to SUVs and electric vehicles (EVs). In this review, we’ll take a closer look at the Hyundai Motor India IPO and whether it’s worth considering for investment.

Hyundai Motor India IPO Details

• IPO Date: October 15, 2024 – October 17, 2024
• Listing Date: October 22, 2024
• Price Band: ₹1,865 to ₹1,960 per share
• Lot Size: 7 shares
• Minimum Investment: ₹13,055 (for 1 lot of 7 shares)
• Issue Size: ₹27,870.16 crore
• Offer Type: Offer for Sale (OFS) – 142,194,700 shares
• Listing: BSE, NSE

Also Read: What Lies Ahead for Hyundai Motor India?

About Hyundai Motor India

Hyundai Motor India Limited is a major player in India’s automotive market, with a diverse range of products, including popular models like the Creta, Venue, i20, Verna, and the electric Ioniq 5. The company operates a large manufacturing facility near Chennai and exports vehicles to over 150 countries. Hyundai’s strong presence in India, along with its extensive sales and service network, has helped it maintain a significant market share in the country’s competitive automotive sector.

Key Facts:

• Hyundai Motor India has exported 3.53 million passenger vehicles since its inception.
• It operates through 1,366 sales outlets and 1,550 service centers across India.
• The company’s product lineup includes 13 models, including hatchbacks, sedans, SUVs, and EVs.
• It plays a crucial role in Hyundai’s global sales, contributing to around 18.19% of the global volumes in 2023.

Also Read: Pranik Logistics IPO Review: Apply or Not?

Financial Performance

Hyundai Motor India has shown consistent financial growth over the past few years:

• Revenue from Operations:
• FY21: ₹40,972.25 crore
• FY22: ₹47,378.43 crore
• FY23: ₹60,307.58 crore
• Profit After Tax (PAT):
• FY21: ₹1,881 crore
• FY22: ₹2,902 crore
• FY23: ₹4,709 crore
• Total Assets:
• FY21: ₹26,731 crore
• FY22: ₹28,358 crore
• FY23: ₹34,573 crore

The company has demonstrated strong revenue growth, driven by the increased demand for its popular models, particularly SUVs and EVs. Additionally, Hyundai’s profit margins have grown considerably, reflecting its dominant position in India’s automotive market.

Strengths of Hyundai Motor India

1. Strong Market Presence: Hyundai is the second-largest automaker in India, with a well-diversified portfolio of cars across various segments, including sedans, hatchbacks, and SUVs. This broad product range helps Hyundai cater to different customer preferences.
2. Robust Export Capabilities: As a major export hub, Hyundai Motor India serves more than 150 countries, making it a key player in Hyundai’s global strategy.
3. Technological Edge: Hyundai has been investing in electric vehicles (EVs), with models like the Ioniq 5 contributing to its leadership in the growing EV segment.
4. Expanding R&D Capabilities: The R&D center in Hyderabad plays a vital role in developing new technologies and models for Hyundai globally, further strengthening its competitive edge.

Risks Associated with Hyundai Motor India IPO

1. Supplier Dependency: Hyundai relies on a limited number of suppliers for critical components. Any disruption in the supply chain could significantly affect the company’s production and operations.
2. Legal Risks: The company is involved in several legal proceedings, with potential liabilities amounting to ₹5,469.80 crore. Any adverse outcomes could affect its financial standing.
3. Single Manufacturing Facility: Hyundai’s manufacturing operations are concentrated in its Chennai plant. Any disruption at this plant could severely impact production and lead to financial losses.
4. SUV Dependency: The company’s revenue is heavily dependent on its SUV models. A downturn in the SUV market could negatively impact sales and profitability.
5. Competition: Hyundai faces strong competition from its affiliate Kia Motors and other global automakers operating in India, which could lead to pricing pressures and impact profitability.

IPO Objectives

The Hyundai Motor India IPO is a pure Offer for Sale (OFS), meaning that the company will not receive any proceeds from the issue. Instead, the promoter, Hyundai Motor Company, will receive the proceeds. This IPO provides an exit opportunity for the promoter while offering retail and institutional investors a chance to invest in a well-established automotive brand.

Valuation Metrics

• Market Capitalization: ₹1,59,258.06 crore (post-IPO)
• Return on Capital Employed (ROCE): 13.69%
• Return on Net Worth (RoNW): 12.26%
• Price-to-Book Value (P/BV): 14.93

These metrics show that Hyundai Motor India is a high-value company with solid returns, but its P/BV ratio of 14.93 suggests the stock is priced at a premium, reflecting its market leadership and growth potential.

Should You Apply for Hyundai Motor India IPO?

Based on the company’s consistent financial performance, strong market position, and future growth prospects, the Hyundai Motor India IPO presents an attractive investment opportunity, especially for long-term investors.

Pros of Applying:

• Strong brand: Hyundai is a globally recognized automotive leader with a solid foothold in India’s growing car market.
• Steady financial growth: The company has consistently increased its revenue and profits, showcasing its resilience and growth potential.
• Diversified product portfolio: Hyundai’s mix of EVs, SUVs, and sedans makes it well-positioned to capture different segments of the Indian and global market.

Cons of Applying:

• High Valuation: The stock appears to be fully priced, with a high P/BV ratio, which may limit short-term upside.
• Legal risks: The company’s significant involvement in legal proceedings could lead to future financial liabilities.
• Dependence on SUVs: Hyundai’s heavy reliance on SUV sales could pose a risk if there’s a shift in consumer preferences or market conditions.

Final Verdict

Hyundai Motor India’s IPO is a strong contender for long-term investors seeking exposure to the booming automotive sector. With its global export network, expanding EV footprint, and robust financial performance, Hyundai is well-positioned for future growth. However, potential investors should be mindful of the high valuation and legal risks. For medium to long-term gains, this IPO could be a valuable addition to a diversified portfolio.

Recommendation: Apply for Long-Term Gains

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