Hyundai Motor India IPO GMP Falls Below ₹100: What’s the Impact?

The Hyundai Motor India IPO has taken an unexpected turn as the grey market premium (GMP) continues to fall, suggesting a modest listing pop for investors. Despite the buzz surrounding India’s second-largest car manufacturer, the premium has gradually slumped, reflecting the market’s cautious outlook.

With the IPO set to open for bidding on October 17, 2024, and aiming to raise a massive ₹27,856 crore, it’s the largest primary offering in India’s stock market history. The issue is priced in the range of ₹1,865-₹1,960 per share, and the IPO will be available for bidding until October 19, with a lot size of seven equity shares.

Hyundai Motor India IPO GMP Falls Below ₹100: What’s Impacting India’s No. 2 Car Maker?

Why Is Hyundai’s GMP Falling?

As of the latest updates, Hyundai Motor India’s GMP stands at just ₹65 per share, which points to a small 3% listing gain above the higher end of the price band. This is a sharp decline from the ₹150+ GMP it was commanding just a few days ago. In fact, earlier this month, the GMP was hovering around ₹500, making the recent drop particularly noteworthy.

What’s Hurting Investor Sentiment?

Several factors are contributing to the fading enthusiasm for Hyundai’s IPO in the grey market:

1. Offer for Sale (OFS) Concerns: The entire IPO consists of an offer for sale (OFS), with promoters offloading 17.5% of their stake. Since no new funds will go to the Indian entity, the proceeds will flow directly to the South Korean parent company, which has made some investors hesitant.
2. Valuation Issues: At the upper price band, Hyundai Motor India is valued at around ₹1.6 lakh crore, and some market experts feel the IPO is fully priced. While long-term investors may see value, the rich valuation combined with the OFS nature has kept potential investors on edge.
3. Market Volatility: Broader market volatility is also impacting investor sentiment. With recent jitters in the stock market and concerns about liquidity being drained by such a large issue, the IPO is drawing cautious interest. Although India’s equity markets remain strong, with record SIP inflows and an increasing number of demat accounts, the sheer size of Hyundai’s IPO is raising concerns about liquidity.

Also Read: Hyundai Motor India IPO 2024: A Comprehensive Guide

Expert Opinions on Hyundai Motor India’s IPO

Despite these concerns, many analysts believe Hyundai’s long-term prospects remain solid. The company’s strong track record, robust financials, and pedigree have kept market sentiment positive.

According to Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, investors shouldn’t be too concerned about the OFS. “Promoters have been investing in the company for over three decades, and now they are reaping the rewards,” he said. He also emphasized Hyundai’s strong financial performance and its established position in India’s automotive market, suggesting that the IPO should perform well in the long run.

Brokerage Views on Hyundai’s Valuation

• IIFL Securities pointed out that Hyundai’s valuations are attractive compared to other listed OEMs in India. However, the MPV segment remains a portfolio gap that Hyundai might address soon. IIFL also flagged potential risks to the passenger vehicle (PV) industry in FY25, which could affect Hyundai’s performance.
• Nuvama Institutional Equities praised Hyundai for its innovative products and strong EV pipeline, which includes the highly anticipated Creta EV and three other electric vehicles. The report also highlighted Hyundai’s commitment to localization efforts, which are expected to reduce import costs and increase production capacity by 0.17 million units by H2FY26.
• Sharekhan noted that Hyundai’s 14-15% market share in the domestic PV segment positions it as a key player. The brokerage firm lauded Hyundai’s product lineup and strong market positioning, though it also acknowledged the challenges posed by the IPO’s high valuation.

What Investors Should Know

For those considering an investment in Hyundai’s IPO, it’s important to weigh both the short-term concerns and the long-term potential. While the falling GMP suggests a modest listing gain, Hyundai’s strong brand reputation, innovative product offerings, and leadership in the electric vehicle (EV) space could deliver solid returns in the future.

Additionally, Hyundai’s plans to expand its production capacity and reduce costs through localization make it a promising player in India’s evolving automotive landscape. The company’s robust financials and the support of its South Korean parent are likely to drive its growth in the coming years.

Conclusion

Despite a declining GMP, the Hyundai Motor India IPO remains an exciting opportunity for long-term investors. While some short-term concerns about valuation and the OFS structure may keep certain investors cautious, Hyundai’s track record, innovative product lineup, and strong market presence make it a solid bet for those willing to look beyond the initial listing pop.

As India’s second-largest car manufacturer, Hyundai is well-positioned to capitalize on the country’s growing automotive market, and its focus on electric mobility and localization could further strengthen its position in the years to come. For investors looking for a combination of stability and innovation, Hyundai’s IPO could be a valuable addition to their portfolio.

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