Hyundai India drops 5% on debut after record US$3.3 billion IPO

Hyundai Motor India’s shares dropped 5 per cent in their market debut on Tuesday (Oct 22), after a tepid response from retail investors to the country’s largest ever initial public offering over its pricing.

The stock listed at 1,934 rupees on the National Stock Exchange, compared to its offer price of 1,960 rupees, and was last trading at 1,860 rupees at 0502 GMT, giving the company a valuation of 1.51 trillion rupees (US$17.96 billion).

Hyundai, India’s No 2 carmaker with a 15 per cent market share, was targeting a valuation of US$19 billion through the IPO.

Its record US$3.3 billion IPO was oversubscribed more than two-fold last week, led largely by institutional investors, but pricing concerns deterred participation by retail investors who worried they would not be able to make gains on the listing.

“Hyundai’s issue has been stiffly priced and that seems to be weighing down on its listing as well. Besides, the volumes seen so far are driven only by institutional investors, and is rather poor for an IPO of Hyundai’s size,” said Arun Kejriwal, founder of Kejriwal Research.

Tuesday’s listing in Mumbai is Hyundai Motor’s first such debut outside its home market of South Korea and comes at a time when India’s equity markets have risen sharply.

The two-biggest IPOs prior to Hyundai India – Life Insurance Corporation and Paytm parent One97 communications – both listed at steep discounts of 8 per cent and 9 per cent, respectively.

Overall, only two of India’s 10 largest IPOs have outperformed the S&P CNX 500 index since listing, according to a report published by Capitalmind last week.

While Hyundai’s market valuation is much smaller than Indian market leader Maruti Suzuki’s US$45 billion, analysts have expressed concerns over the narrower gap when valued by their price-to-earnings (P/E) ratios.

The issue had valued Hyundai at 26 times its fiscal 2024 earnings, not far off the 29 times multiple for market leader Maruti.

Some major brokerages, however, see long term value in the stock.

Nomura started coverage of Hyundai with a “buy” rating and price target of 2,472 rupees. The brokerage said it liked Hyundai’s high concentration of SUVs in the portfolio, which formed 67 per cent of its sales in the April-June 2024 quarter.

Similarly, Macquarie analysts began coverage with an “outperform” rating and price target of 2,235 rupees, arguing that Hyundai’s SUV-centric portfolio commanded a P/E premium.

Shares of rivals Maruti and Tata Motors were down 2 per cent. The Nifty Auto index was down 1.7 per cent.

Hyundai’s listing comes as car sales slow down in India after two years of record highs, with customers delaying purchases on worries about recalcitrant inflation.