Hyundai Motor India is launching the largest Initial Public Offering (IPO) in India's history, open for bidding from October 15-17, 2024. The ₹27,870-crore IPO will be listed on both the BSE and NSE with the price range fixed between ₹1,865 and ₹1,960 per share. The Gray Market Premium (GMP) is currently at ₹75, translating into an estimated listing price of ₹2,035 per share, potentially offering a gain of 3.83%. The IPO is strictly an Offer for Sale (OFS) of 142,194,700 shares and Hyundai Motor Company's shareholding will decrease from 100% to 82.50% after the IPO.

IPO structure and important details

Investors can bid for a minimum of 7 stocks with the minimum retail investment being ₹13,720 and the maximum investment being ₹192,080. High Net Worth Individuals (HNIs) can place bids for 105 or more shares, with larger bids potentially exceeding ₹1 million. Hyundai raised ₹8,315.28 crore from anchor investors through allotment of 42,424,890 shares. Blocking periods apply to these shares, with 50% blocked until November 17, 2024 and the remaining shares blocked until January 16, 2025.

The IPO allocation is divided into categories with up to 50% reserved for qualified institutional buyers (QIBs), a minimum of 35% for retail investors (RIIs) and 15% for non-institutional investors (NIIs). The basis for the allocation will be determined on October 18th. Refund and crediting of shares to demat accounts is scheduled for October 21.

The shares are expected to be listed on October 22nd.

Should you invest? Remember that

Hyundai Motor India is a major player in the domestic passenger car market but operates in a highly competitive environment alongside Tata Motors, Maruti Suzuki and Mahindra & Mahindra. Competition has intensified with the entry of players like Kia Motors and MG. Investors should be aware of potential conflicts of interest as Hyundai operates in the same segment as Kia Corporation and Kia India, both of which are part of Hyundai Motor Company (HMC).

Hyundai Motor India relies on its parent company HMC for essential parts and research and development. Any strain in this relationship could have a negative impact on Hyundai's business. In addition, Hyundai pays a 3.5% royalty on revenue to HMC. Any increase beyond the SEBI regulated cap of 5% could impact profitability and earnings per share (EPS).

Supply chain risks are also a concern. Hyundai relies on a limited number of suppliers for critical materials and parts and any disruptions could impact production. Rising raw material costs, such as steel, could further impact Hyundai's operating costs and profit margins.

Hyundai is expanding its production capacity and is targeting annual production of 1.07 million units by 2028. The company is also making significant strides in the electric vehicle (EV) market with the upcoming launch of the Creta EV in FY2025, in addition to its premium EV model Ioniq. With a strong market share of 15% in India and leading EBITDA margins of 13.8% in Q1FY25, Hyundai is well positioned for future growth. At the higher end of the price range, the IPO is priced at a P/E of 26.3x FY24 earnings, which compares favorably to Maruti Suzuki's 30.8x.

Hyundai stock performance post-IPO will be influenced by general market conditions. The automotive sector is currently facing inventory buildups and weakening demand, which could impact stock valuations. However, Hyundai's long-term prospects remain promising in both the internal combustion engine (ICE) and electric vehicle markets, making the company an attractive option for long-term investors.