Hyundai IPO on the cards? Hyundai Motor Co, the South Korean automaker, is considering listing its local unit in India to take advantage of the country’s booming IPO market, according to sources familiar with the matter quoted by ET. This move, which comes after nearly three decades since the launch of Hyundai Motor India (HMIL), could potentially become India’s largest initial public offering.
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HMIL was the second-largest passenger vehicle seller in India last year. Marquee global investment banks such as Goldman Sachs, Citi, Morgan Stanley, JP Morgan, Bank of America, HSBC, Deutsche Bank, and UBS recently made IPO pitches to the leadership of Hyundai in Seoul. The company is estimated to have a value of $22-28 billion and is exploring a 15-20% dilution to raise $3.3-5.6 billion (Rs 27,390 crore to Rs 46,480 crore). Hyundai’s global head of communications in Seoul has not responded to queries regarding the matter.
In 2022, LIC of India established an IPO record with an issue size of Rs 21,000 crore. India has recently climbed to become the fourth-largest equity market globally, surpassing Hong Kong. If priced at the upper band of $28 billion (Rs 23.2 lakh crore), HMIL’s valuation will exceed that of Mahindra and Mahindra, Adani Power, and Bajaj Auto.
Among major Indian auto companies, only Maruti Suzuki and Tata Motors have higher valuations at current market prices. Hyundai Motor Co, listed in South Korea with a market capitalization of $39 billion, aims to improve the valuation of its underperforming stocks and reduce the ‘Korea discount’ in the financial markets through the listing of its Indian subsidiary, feel analysts.
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South Korean automakers are currently trading at lower price-to-earnings (P/E) ratios compared to their Japanese and US counterparts. Subsidiaries based in growth markets such as India have the potential to trade at higher P/E multiples than their parent companies.
According to the financial daily’s report, the plan is to have the listing around Diwali, between September and November this year. However, these discussions are preliminary, and the final details will depend on factors such as the state of the Indian capital markets and various macroeconomic conditions. One source stated that this move is strategic for Hyundai in India and expects the momentum to increase after the national elections later this year.
With a valuation of $28 billion, HMIL would be valued at 48 times its projected FY23 earnings, while at the lower end of the band at $22 billion, it would be valued at 38.4 times.
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In 2023, HMIL sold 602,000 units in India, an increase of 8.9% from the previous year, and had a market share of 13.7%. Maruti Suzuki led the market with 41.7% share, with Tata Motors at 13.5%. HMIL’s turnover in FY23 surpassed Rs 60,000 crore ($7.2 billion), a 27% increase from FY22, and its profit surged 62% to Rs 4,653 crore ($550 million), making it the highest among non-listed automotive companies in India.
