Planning to Invest in Hyundai Motor India IPO? Here’s How Previous Big IPOs Have Fared

Hyundai Motor India is gearing up to launch its highly anticipated initial public offering (IPO) worth Rs 27,870.16 crore on Tuesday, October 15. This IPO is set to be the largest in India's history, surpassing the previous record held by the Life Insurance Corporation of India (LIC).

Since FY09, Hyundai Motor India has held its position as the second-largest passenger vehicle manufacturer in the country. The Hyundai Motor India IPO is entirely an offer for sale (OFS) of 14.22 crore equity shares by its South Korean parent, Hyundai Motor Company. The shares are priced between Rs 1,865 and Rs 1,960.

Historically, many of India’s largest IPOs have struggled to provide substantial returns to investors. Major offerings like Paytm, Reliance Power, General Insurance Corporation of India, and New India Assurance have led to losses for investors. In contrast, only a few large IPOs, such as Coal India, Zomato, and HDFC Life Insurance, have generated positive returns, with their shares trading above the issue price.

Market analysts attribute the underperformance of large IPOs to aggressive pricing strategies and the significant proportion of shares offered through the OFS route. This trend could also affect the post-listing performance of Hyundai Motor India’s IPO.

Performance of the Five Biggest IPOs in India:

LIC IPO The Rs 21,008 crore LIC IPO remains India's largest to date. LIC shares debuted in May 2022 at Rs 904 per share, a discount to the issue price of Rs 948. As of October 14, LIC's stock trades around Rs 960, offering a modest 1.2% return since its listing.

Paytm IPO One97 Communications, the parent company of fintech giant Paytm, launched its Rs 18,300 crore IPO in November 2021 with an issue price of Rs 2,150 per share. However, Paytm's stock has significantly underperformed, trading at around Rs 724 per share, reflecting a decline of over 66% from its issue price.

Coal India Coal India stands out as one of the few IPO success stories. Its Rs 15,200 crore IPO in November 2010, priced at Rs 245 per share, has delivered exceptional returns. Coal India stock is currently trading at approximately Rs 500 per share, representing gains of over 104%, making it a multibagger for investors.

Reliance Power Reliance Power, an Anil Ambani Group company, listed in February 2008 following its Rs 11,560 crore IPO at an issue price of Rs 281 per share. Reliance Power stock has since experienced a steep decline, trading more than 84% below its issue price.

GIC India General Insurance Corporation (GIC) IPO was launched in October 2017 with an issue price of Rs 912 per share. Despite issuing a 1:1 bonus in 2018, the stock remains down approximately 14%, even after the adjustment for the bonus issue.

Hyundai Motor India IPO Details

The Hyundai Motor India IPO, opening from October 15 to 17, is set to break records with its Rs 27,870.16 crore offering. The price band is set at Rs 1,865 to Rs 1,960 per share.

At the upper price band of Rs 1,960, Hyundai Motor India IPO is priced at a P/E of 26.3x post-issue based on the FY24 EPS of Rs 74.58. While many analysts recommend subscribing to the issue for the long term, some expect a muted share listing and have raised concerns over high valuations and the IPO being entirely an OFS.

“Most of these large IPOs so far had a major portion of OFS. Hyundai IPO is 100% OFS, giving exit to prior investors. The IPO will have zero impact on the company’s balance sheet. The prior investors are just cashing in on the market hype with the IPO, and no proceeds will go to the company,” said Anshul Jain, Head of Research at Lakshmishree Investment and Securities.

He believes high valuation and the 100% OFS component are key negatives for Hyundai Motor India IPO.

Financial Performance

On the financial front, Hyundai Motor India posted a consolidated total income and net profit of Rs 71,302.33 crore and Rs 6,060.04 crore for FY24. For Q1 of FY25 ended on June 30, 2024, the company earned a net profit of Rs 1,489.65 crore on a total income of Rs 17,567.98 crore.

For Q1FY25, sales volume reached 192,055 units, up 4.72% from 183,403 units in Q1FY24. Full-year sales volume grew 7.96% YoY in FY24 to 777,876 units.

“The issue is priced at a P/BV of 13.11 based on its NAV of Rs 149.52 as of June 30, 2024, as well as post-IPO equity capital since this is a secondary issue. If we attribute FY25 annualized super earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 26.73, and based on FY24 earnings, the P/E stands at 26.28. The issue appears fully priced, but the company is poised for bright prospects post completion of its ongoing expansions,” said Bajaj Broking.

SMIFS also recommends subscribing to the issue, noting that the company’s leading market share in the SUV segment, premiumization of cars, increased production capacity, and foray into the EV segment will positively boost future prospects.

“We recommend subscribing to the issue as a good long-term investment as a pure play PV segment company with industry-leading market share in the SUV segment, premiumization, and launch of new EV models aiding revenue and margin improvement, though the valuations seem to be in sync with other listed peers,” SMIFS said.

Disclaimer: The views and recommendations above are those of individual analysts or broking companies, not of Business2Business. We advise investors to check with certified experts before making any investment decisions.

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