Hyundai's IPO price does not provide significant valuation comfort compared to Maruti. (AI image)

Hyundai IPO: Hyundai Motor India (HMI), the second largest passenger vehicle (PV) manufacturer in the country, will raise a significant amount of capital through an Offer for Sale (OFS). The organizer, Hyundai Motor Company (HMC) from South Korea will reduce its stake from 100% to 82.5% after the OFS. To meet regulatory requirements, HMC will need to further dilute its stake to 75% or less in the future, which could impact HMI's share price.

Hyundai IPO analysis

HMI operates in a highly competitive market, and both Hyundai and its larger rival Maruti have seen their volume market shares gradually decline over the last five years.
Furthermore, the IPO price does not provide significant valuation comfort compared to Maruti, which has almost three times higher PV market share, two and a half times higher sales volume and similar profitability.
However, Hyundai has several new model launches planned in the coming quarters, spanning both internal combustion engine (ICE) and electric vehicle (EV) platforms. The company's capacity expansion plans also bode well for future growth.
Given these factors, risk-taking investors may find the IPO attractive, while risk-averse investors may prefer to watch the share price performance post-IPO, says an ET analysis.

Hyundai IPO details

Founded in 1996, HMI is a full-service manufacturer of PVs including hatchbacks, sedans and SUVs with various powertrains. The company operates a fully functional plant in Chennai with a capacity of 8,24,000 units and is currently setting up another plant in Talegaon, Maharashtra.
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Once fully operational, the total capacity will reach 10,74,000 units in the next three to four years. In FY24, HMI's PV sales grew 8% YoY to 7,77,876 units, with ICE and CNG powertrains contributing 89.2% and 10.6%, respectively, while EVs contributed 0.2%. The company's market share in hatchbacks, sedans and SUVs stood at 12.3%, 20% and 18.4%, respectively, in FY24.
HMI's revenue grew 21.4% annually to Rs 69,829 crore between FY22 and FY24, while net profit rose 44.5% to Rs 6,060 crore. The company's EBITDA margin improved from 11.6% to 13.1% in the same period, in line with its rival Maruti.
Intense competition in the market has resulted in a gradual decline in HMI's PV market share, from 17.6% in FY20 to 14.6% in FY24. This could force the company to offer higher customer discounts in the future to maintain its market share, potentially impacting profitability.
HMI's IPO price represents a price-to-earnings (P/E) ratio of up to 26.7 for FY24, while its closest competitor, Maruti, trades at a P/E ratio of 29.8.