Shares of India’s second-largest carmaker Hyundai Motor India Ltd (HMIL) are expected to debut on the domestic stock exchanges with flat to modest listing gain on Tuesday, said multiple analysts after the recently concluded initial public offering (IPO) received a lukewarm response from retail investors and non-institutional investors (NIIs).
The Rs 27,870 crore IPO of HMIL, the largest in India’s capital market history, was subscribed 2.37 times during the recently concluded three-day bidding process.
"We believe listing could be at par for the IPO and since we had long term subscribe rating to the issue, long term investors who missed the opportunity in the IPO may look to get exposure on the same if there is an opportunity during the listing day," said Narendra Solanki, Head Fundamental Research - Investment Services, Anand Rathi Shares and Stock Brokers. "For investors who may have missed the chance to participate during the IPO, there could still be an opportunity to invest in the stock on the listing day," added Solanki.
In a positive development for investors who were allotted the shares, the grey market premium (GMP) on unlisted shares of Hyundai rebounded from falling in the negative the previous week. The GMP on Hyundai shares on Monday stood in the range of Rs 65-70 per share, a modest premium of 3.5% to the IPO price of Rs 1,960 per share. If the GMP is anything to go by, the estimated listing price of shares could be in the range of Rs 2,025 - 2,030 apiece.
Experts also believe that it won’t be a surprise if HMIL shares hit the bourses at a discount given that majority of 50% of the offer size received a sluggish response from the NIIs and retail investors which got undersubscribed. It was strong buying from Qualified Institutional Buyers (QIB) on Day 3 that helped the IPO to sail through.
"Considering sluggish undersubscription demand from NIIs & retail investors and market sentiments on overvaluation concern followed by lower demand and over supply scenario in the sector, there is a very high possibility of flat to negative market debut," said Prashanth Tapse Sr VP Research Analyst at Mehta Equities Ltd.
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. The qualified institutional buyers swooped in on the last day as their portion was subscribed 6.97 times.
“We believe the majority of investors, especially NIIs & retail, stayed back for a few reasons like concern on high valuations to peers followed by 100% offer-for-sale (OFS) component without any fresh issue leaving nothing on the table for new investors to gain, industry concern on high inventory across the sector, slowing demand in the last 3-4 months and the short term trend that still looks dull and weak,” said Tapse.
Shivani Nyati, Head of Wealth, Swastika Investmart Ltd, said, “The IPO valuation seems fully priced, and since the issue is a complete offer for sale (OFS), the company will not receive any proceeds from the offer. While Hyundai Motor India holds a strong market position as the second-largest passenger vehicle company in India, and its strategic focus on SUVs is promising, the overall market sentiment and IPO size may limit listing gains.”
