Read more at: https://auto.economictimes.indiatimes.com/news/passenger-vehicle/hyundai-explores-usd-3-bn-ipo-for-india-unit-at-up-to-usd-30-bn-valuation-sources-say/107446981 Read more at: https://auto.economictimes.indiatimes.com/news/passenger-vehicle/hyundai-explores-usd-3-bn-ipo-for-india-unit-at-up-to-usd-30-bn-valuation-sources-say/107446981

This IPO is set to make its South Korean parent, the auto giant Hyundai Motor Company (HMC), very rich. HMC plans to sell up to 17.5% of its 100% stake in HMIL, and it could make between Rs 21,000 crore and Rs 25,000 crore (US$2.5–3 billion) from the sale by year’s end.

Hyundai Motor’s India unit sought regulatory approval on Saturday for a stock market listing in Mumbai, which could be the nation’s biggest and will see the South Korean parent sell a stake of up to 17.5% in the company.

The initial public offering (IPO) will make it the country’s first car maker to go public in two decades since Maruti Suzuki in 2003, and would come just as Indian stock markets are trading near record highs.

Hyundai counts India as a crucial growth market where it has two manufacturing units and has invested $5 billion, with commitments to pump in another $4 billion over the next decade. The world’s biggest car market after China and the United States is the company’s third-biggest revenue generator globally.

The Hyundai draft prospectus filed gave no details of the pricing of the IPO or the company’s valuation, but sources have said Hyundai aims to raise around $2.5 to $3 billion at a valuation of up to $30 billion.

Hyundai, India’s second-biggest car maker behind Maruti Suzuki, will not issue new shares in the IPO, which will involve its South Korean parent selling part of its stake in the wholly owned unit to retail and other investors via a so-called “offer for sale” route.

The listing is seen putting Hyundai Motor India on a stronger footing versus Maruti Suzuki, Tata Motors and other rivals as it could make future fundraising easier, without the need to depend on its Korean parent.

In Short

  • Hyundai Motor’s India arm files for Rs 25,000 crore IPO
  • Parent company to sell 17.5% stake via offer for sale
  • IPO to enhance visibility, liquidity, and unlock value
 

Hyundai expects the listing of the equity shares in India “will enhance our visibility and brand image,” and “provide liquidity and a public market” for the shares, the company said in the draft prospectus filed on Saturday.

It did not provide a timeline for the listing, but typically India’s markets regulator, the Securities and Exchange Board of India, takes three to six months to approve, reject or seek more information on IPOs.

The company said it plans to focus on “premiumisation” — selling more expensive cars, as well as increasing its EV market share and adding charging stations, where it lags behind Tata Motors. Hyundai India also said it wants to ship more cars, “strengthening” its position as an export hub.

IPO objective – Hyundai aims to increase its visibility and brand recognition in India by listing its equity shares on the Indian stock market.

The IPO is designed to create liquidity and establish a public market for the shares. Additionally, this move is intended to unlock the value of Hyundai’s Indian operations and help the Korean automaker address its valuation gap compared to its global and Asian competitors.

IPO reservation – No more than 50% of the issued shares will be allocated to qualified institutional buyers (QIBs), at least 35% will be set aside for retail individual investors (RIIs), and a minimum of 15% will be reserved for non-institutional investors (NIIs).

Lead manager – The entities overseeing the book-running for the offer are Kotak Mahindra Capital Company, Citigroup Global Markets India, HSBC Securities and Capital Markets (India), JPMorgan India, and Morgan Stanley India.

Registrar – KFin Technologies is responsible for the issue’s registration.

Financial Performance – Hyundai Motor India Limited ranks as the second-largest car manufacturer in India, following Maruti Suzuki in terms of passenger vehicle sales for FY24. In FY23, Hyundai’s Indian division reported revenues of Rs 60,000 crore and profits of Rs 4,653 crore, making it the most profitable among non-listed car manufacturers in the country.

Affordable cars

Indian Prime Minister Narendra Modi sees the automotive industry as a cornerstone to boosting growth in the world’s fifth-largest economy. His government has built hundreds of kilometers of new roads and is incentivising car makers to increase local manufacturing, especially of electric vehicles.

Hyundai entered India 28 years ago and has won over buyers with its affordable cars such as Santro and sports-utility vehicle Creta. The company has plans to launch new electric vehicles, establish charging stations and a battery pack assembly unit.

The South Korean parent will sell up to 142 million of the total 812 million shares, or 17.5%, in the IPO. The sources have said the final percentage could be lower.

With the IPO, Hyundai aims to unlock value for the Indian business and also help the Korean automaker shed its valuation discount compared to global and Asian peers.

Benchmark Indian stock indices have doubled between 2019 and 2023, while Seoul’s KOSPI index has risen just 30% over the same period.

Automaker Hyundai Motor’s India unit has filed preliminary papers with Sebi for a Rs 25,000 crore public offering in what could be the country’s biggest IPO.

Hyundai’s background – Hyundai has been in India for 28 years, winning customers over with popular models ranging from the Santro to the SUV Creta. The company is now gearing up to introduce new electric vehicles, build charging stations, and establish a battery pack assembly unit.

Several automotive companies like Maruti Suzuki, Mahindra & Mahindra, and Tata Motors have already raised funds through the capital markets. Ola, the ride-hailing service, has also secured approval from Sebi for its forthcoming IPO.

Hyundia Motor’s India unit has unveiled ambitious plans to expand its operations, aiming to boost its annual production in India to one million units by 2025, with a focus on manufacturing affordable electric vehicles locally.

Over the years, Hyundai has invested $5 billion in its Indian operations and has committed to investing an additional $4 billion over the next decade.

The firm is the first automaker to file for IPO in 20 years, after Maruti Suzuki went public in 2003. The IPO will value the company at around Rs 1.5 lakh crore.

Let’s look at what all we know about the initial public offering (IPO) of Hyundai Motor’s India unit.

Hyundai is being advised on the IPO by investment banks Citi, JP Morgan, HSBC, Morgan Stanley and India’s Kotak. 

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