MUMBAI: Hyundai Motor India has announced the price band for its initial share sale worth Rs 27,870 crore, making it the biggest ever share sale in Dalal Street’s history at Rs 1,865-1,960 a share.
This will value the second largest domestic car-maker at Rs 1.59 trillion or a little less than USD 19 billion, which is as much as 42 per cent of its parent Hyundai Motor Corp’s USD 44-billion current valuation.
The issue, which is only an offer for sale, through which the parent will sell 17.5 per cent or 14.2 crore of its equity in the issuer and has no fresh issue therefore the entire proceeds will to the selling shareholder and not to the company. The issue opens on October 15 and employees have a Rs 186 discount from the declared price band.
While at the upend of the price band, the company will raise Rs 27,870 crore, making it the largest ever IPO, breaking the record set by LIC in May 2022, raising Rs 23,000 crore. At the upper end, the company is commanding a premium of 159x.
When asked about such a high premium valuing it 42 per cent of its parent’s value, which is the world’s third largest carmaker, both the investment bankers and Tarun Garg, the chief operating officer of Hyundai, said many MNCs that have subsidiaries operating here have at different valuations to that of the parent.
One of the bankers on the issue, Citigroup's Rahul Saraf said the consumption story offered here is very different and so the valuations command a higher multiple.
"We have also been the country’s largest exporter of passenger vehicles from fiscal 2005 to the first 11 months of fiscal 2024, having exported the highest cumulative number of passenger vehicles. Since 1998 and up to March 2024, we have cumulatively sold nearly 12 million passenger vehicles in the country and through exports. In 2023, we were among the top three contributors to our parent’s global sales volumes, and our contribution to its sales volumes has increased from 15.48 per cent in 2018 to 18.19 percent in 2023," Unsoo Kim, the managing director of Hyundai India said.
Kim also said the company has plans to invest about Rs 32,000 crore here over the next decade and will be investing to make its Pune plant automated, aiming for a healthy mix of domestic and export sales. On commissioning the Pune facility, its capacity will be 1.07 million per annum, up from 8.24 lakh unit now, which is an addition of 30 per cent by FY28.
The P/E ratio for Hyundai India is at 27x, while that of the parent Hyundai Motor Company is at 5x, according to note by Mumbai-based brokerage Aequitas Investments. It also said Hyundai India, despite contributing only 6.5 per cent to global revenue and 8 percent to global profitability, will be valued at around 42 per cent of the parent company's market capitalisation on the listing.
The Chennai plant, where it has two units is the largest single-location auto plant in the whole of Asia, Garg said.
Hyundai was the second largest carmaker in the country after Maruti Suzuki in FY24 in terms of sales volumes. It sells passenger vehicles and has a portfolio of 13 models across multiple segments by body type such as sedans, hatchbacks, and sports-utility vehicles. It manufactures parts such as transmissions and engines
Kim said its first EV (a Creta variant) will be launched in the first quarter of 2025 and three more will follow soon. It also has plans to set up a complete EV ecosystem.
He also said the IPO is the beginning of the next phase of growth for the company, which net as much as 68 percent of its volume from SUVs, which come equally from the rural and urban markets. The industry average of SUV sales is around 50 per cent.
Calling India 'one of the most exciting auto market in the world', Hyundai said it is the 'right time to further Indianize its operations' and the public issue will ensure that it is even more dedicated to success in India, offering opportunity for growth to shareholders and investors.
On the financial front, the company had net profit of Rs 6,060 crore in fiscal 2024, up 28.7 per cent, on a revenue of Rs 69,829 crore, up 15.8 per cent over fiscal 2023.