Hyundai Motor India IPO Opens with 2% GMP Drop, Sparking Investment Concerns

The Hyundai Motor India Ltd. IPO (Initial Public Offering) opened for bidding today, October 15, 2024, and will remain open until Thursday, October 17. Ahead of the IPO, the company raised ₹8,315 crore from 225 anchor investors. Hyundai is offering its shares in a price range of ₹1,865 to ₹1,960 each. This IPO is a complete Offer For Sale (OFS), meaning the company won’t receive any money from the sale, as its South Korean parent is selling 14.2 crore shares or 17.5% of the total equity.

In the grey market, Hyundai’s shares are seeing a premium (GMP) of just ₹45 per share, suggesting a listing gain of only around 2.3%, which is lower than expected. The declining premium is due to concerns about the company’s high valuations and lower domestic sales. Additionally, Hyundai’s domestic dispatches dropped 8% compared to the same month last year, which could impact its earnings after listing.

Despite these concerns, many brokerage houses have given a ‘Subscribe’ rating to the IPO, calling it a good long-term investment. They believe that Hyundai’s strong financials, diverse product lineup, and leadership in the SUV market could make it a rewarding choice for those who are patient and willing to hold the stock for a longer period.

For instance, ICICI Securities and SBI Securities recommend the IPO for long-term gains due to Hyundai’s steady growth, strong brand, and potential to expand both in the domestic market and through exports. Analysts also noted that the company’s focus on SUVs aligns with consumer demand for larger, safer vehicles, which could help Hyundai grow faster than its competitors.

However, some analysts warn that initial listing gains may be modest. Still, they believe Hyundai is well-positioned for solid returns over time, thanks to its strong market presence and operational advantages. The stock is expected to list on the BSE and NSE on October 22, with the allotment likely to be finalized on October 18.

Overall, while immediate gains may be limited, analysts see Hyundai Motor India’s IPO as a good long-term investment opportunity due to its strong business fundamentals and future growth potential.