Sure, both companies posted a compound annual growth rate (CAGR) of 13% in the two years to FY24. But the catch is that Hyundai's average selling price in FY24 is ₹7.7 lakh is much higher than Marutis ₹5.5 Lakh, indicating a premium product portfolio. Hyundai has a strong presence in the fast-growing, higher-priced, higher-ride SUVs. SUV sales as a percentage of total sales in the last two financial years were 63% and 52%, respectively, higher than the industry's 51% and 41%, respectively. Not surprisingly, Hyundai achieved higher Ebitda per vehicle ₹1,17,000 in FY24 as against ₹77,000 from Maruti. With more profit per vehicle, Hyundai's earnings growth is expected to be faster than that of its closest competitor.

Hyundai's South Korean parent company is selling 17.5% of its shares at a price of ₹1,865-1,960 in an Offer for Sale (OFS). At the upper end the value is ₹1.6 trillion and is cheaper than Maruti both in terms of EV/Ebitda at 17x vs 21x and P/E ratio of 26x vs 30x based on FY24 financials.

Hyundai's Return on Net Assets (RoNW) at 57% for FY24 appears to be much higher than Maruti's at 17%. This is because the Korean parent company Hyundai took cash via a special dividend of 1.5 million euros ₹10,800 crore in FY24 while Maruti has cash of nearly 10,800 crore ₹50,000 Crore.

While Hyundai India could account for around 40% of the parent company's market capitalization post-listing, Maruti's MCap is more than double the parent company's MCap. Hyundai's Korean parent company is trading at a price-to-earnings ratio of about six times compared to Maruti's parent company's 11 times, based on 2023 financials.

However, such comparisons are of little help in investment decisions, as the valuation depends on expected long-term growth rates at the macro and company levels. Therefore, investors looking to gain exposure to India, and Hyundai's growth story in particular, might avoid buying the parent company's shares, even if they are cheaper. Therefore, the barriers to entry for car imports in India are high: import duties are 60% for vehicles costing less than $40,000 and 100% for vehicles costing above that. Therefore, the passenger car industry was dominated by a few local companies like Maruti, Hyundai and Tata Motors.

A challenge for all automobile companies is to constantly keep up with technological changes in conventional and non-conventional vehicles and to have a good sales and service network. While Hyundai paid royalties worth nearly 3% of its revenue in FY24, it is in line with Maruti and other multinationals.

Hyundai's parent company also holds a 34% stake in Kia Motors, raising the question of a conflict of interest. Further, Sebi regulation mandates 25% shareholding by non-promoters. So, there is a technical overhang for further share offerings as the promoter shareholding in Hyundai India will be 82.5% after the OFS. These factors can limit the huge short-term gains from listing the shares.

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