The initial public offering (IPO) of India’s second-largest carmaker -- Hyundai Motor India Ltd (HMIL) -- received a dull response from investors on Day 1 as the issue was subscribed to just 18%. The issue received bids for 1.78 crore shares as against 9.97 crore shares that are up for grabs. The three-day bidding for the issue will conclude on Thursday, October 17.
The retail portion was booked 26% on Day 1 as this category placed bids for 1.30 crore shares as against 4.94 crore shares on offer. The portion set aside for qualified institutional buyers (QIBs) was subscribed to just 5%.
Meanwhile, non-institutional investors (NII) placed a bid for 27.66 lakh shares as against 2.12 crore shares on offer or 13% of their allocated portion. Employees placed 80% bids with 6.19 lakh shares subscribed as against 7.78 lakh shares on offer.
HMIL is selling its shares in the price band of Rs 1,865-1,960 apiece. Investors can apply for a minimum of seven shares and multiples thereafter.
The muted response is on expected lines given most analysts have given a ‘subscribe for long term’ rating to the IPO and expect no major listing gains. A few brokerages have also advised investors to avoid the mega IPO.
“The trailing-twelve-month P/E ratio of Hyundai is 25.6 after considering the June 2024 quarter results, whereas the P/E multiple for peer Maruti Suzuki is 27.6. While the P/B ratio for Maruti Suzuki is 4.79, it is 13.11 for Hyundai, which reduces the margin of safety despite Hyundai's better ROE. Therefore, from a valuation perspective, the issue is fairly valued and not aggressively priced,” said Amar Nandu, Research Analyst, SAMCO Securities.
“Additionally, due to the large size of the IPO -- Rs. 27,870.16 crore, the largest to date -- there is a high chance of allotment to most applicants, so post-issue demand for the shares is not expected to surge. Furthermore, the promoter is offering a 17.5% stake in the issue, and an additional 7.5% stake sale is anticipated within three years to meet regulatory requirements, which will create selling pressure. Considering these factors, investors may choose to avoid this IPO,” added Naidu.
Added to this, the grey market premium (GMP) for HMIL has come down to just Rs 30 in the unofficial market, suggesting a listing gain of merely 1-2% for the investors. The GMP was hovering around Rs 400 at the start of the month.
Through the IPO, the world’s third-largest carmaker by volume -- Hyundai Motor Company -- is divesting its 17.5% stake to raise Rs 27,870 crore. The initial share sale does not include any fresh fundraising.
Ahead of the IPO launch, Hyundai on Monday raised Rs 8,315 crore from anchor investors. Hyundai allotted 4.24 crore shares to 225 funds at Rs 1,960 apiece, the higher end of its issue price band.
Marquee global investors such as Baillie Gifford, Vanguard, City of New York Group Trust, Moorea Fund, Blackrock, Aegon Investment Management, Schroder, Canada Pension Plan Investment Board, JP Morgan, Eastspring Investments, Goldman Sachs, Copthall Mauritius, Societe Generale, Morgan Stanley, Citigroup Global, Abu Dhabi Investment Authority, and HSBC Global participated in the anchor round.
The allotment also included 21 domestic mutual funds (MFs), such as ICICI Prudential MF, SBI MF, and HDFC MF, which applied through 83 schemes.