The initial public offering (IPO) of Hyundai Motor India Ltd (HMIL) was fully subscribed on the final day of bidding on Thursday, thanks to the strong participation by qualified institutional buyers (QIBs) even as retail investors decided to give the mega IPO a big miss. In total, investors placed bids for 23.63 crore shares as against 9.97 crore shares on offer of the Rs 27,870-crore issue, the largest in India’s capital market history.
The IPO was subscribed 2.37 times or 237% on the final day of its bidding. It was booked 42% on Day 2 and 18% on Day 1.
The retail investors' portion, 35% of the total issue size, was booked just 50% in three days as the likelihood of no major listing gain and high valuation concerns kept this category away. The non-institutional investors’ category was also subscribed to just 60% of the portion allocated to them.
Qualified institutional buyers swooped in on the last day as their portion was subscribed 6.97 times. The portion for this category was subscribed 58% at the end of Day 2 of bidding.
“Institutional investors participating on the last day is a common practice especially when other categories are showing no interest,” said a senior analyst and market veteran requesting not to be named.
He added that retail investors gave a reality check to Hyundai and merchant bankers as nothing was left for them to make money from the IPO. “You can’t take this category for granted. A firm like Hyundai raking in such low bidding numbers is kind of disappointing,” the analyst stated.
In the grey market, shares of HMIL were available at a discount of Rs 20 on Thursday, indicating a negative listing gain of 1%.
HMIL is selling its shares in the price band of Rs 1,865-1,960 apiece. At the top end of the price band, the IPO is valued at Rs 27,870 crore with the company’s market capitalisation estimated at approximately Rs 1.6 lakh crore post-listing.
According to market experts, there are many factors why the IPO received a lukewarm response despite HMIL being one of the strongest brands in the Indian car market.
Most analysts believe that valuation-wise, the issue is fully priced and leaves no room for investors to make money from listing. At the upper price band of Rs 1,960, HMIL is available at a premium valuation of 26.7x P/E ratio based on FY25E post-issue annualised earnings per share (EPS).
The street is also not excited given the entire issue is an offer for sale (OFS), meaning Hyundai Motor India will not receive any funds from the IPO. Analysts also stated that since the promoter -- Hyundai Motor Company -- is offering a 17.5% stake in the issue, an additional 7.5% stake sale is anticipated within three years to meet regulatory requirements. This may create selling pressure in future.
Most analysts gave a ‘subscribe for long term’ rating to the IPO. A few brokerages also advised investors to avoid the mega IPO.
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 and domestic mutual funds participated in the anchor round.
The allotment for the shares of Hyundai Motor IPO will be finalised on Friday, while the stock is likely to be listed on the BSE and the NSE on October 22, 2024.