 "Hyundai India’s Rs 27,870 crore IPO oversubscribed by 2.28X, largely driven by institutional investors")
Hyundai Motor India’s much-anticipated Rs 27,870 crore IPO has closed with an impressive oversubscription of 2.28 times, largely thanks to aggressive bids from institutional investors. Despite concerns over pricing deterring retail buyers, the public offering ended on a high note, becoming India’s largest-ever IPO and the world’s second-largest IPO in 2024.
The IPO, which began on Tuesday, attracted bids for 22.7 crore shares against the 9.97 crore shares available, highlighting the strong interest from Qualified Institutional Buyers (QIBs), QIBs, basically, are large financial institutions with the financial strength and expertise to invest in capital markets.
QIBs, including foreign investors, mutual funds, and domestic banks, bid for 6.76 times the shares allocated to them, driving the demand. In contrast, retail investors showed limited enthusiasm, with only 47 per cent of their quota subscribed, reflecting concerns about the issue’s pricing and market conditions.
Hyundai Motor India is set to price its shares at Rs 1,960, valuing the company at approximately $19 billion, or 40 per cent of the valuation of its Korean parent.
Analysts across several business news portals have pointed out that the IPO’s 26x earnings valuation is close to Maruti Suzuki’s 29x, despite Hyundai’s smaller market share of 15 per cent compared to Maruti’s 40 per cent.
This narrow gap in valuation has raised concerns, especially among retail investors and high-net-worth individuals, about the attractiveness of the offering.
Institutional interest drove demand
While QIBs eagerly snapped up shares, retail investors and non-institutional buyers (including high-net-worth individuals) were more reserved. Non-institutional investors subscribed to just 53 per cent of their quota, and analysts attribute this to worries about the company’s valuation, lack of new shares, and industry headwinds.
The slowdown in car sales after two years of record highs has also weighed on investor sentiment, with many buyers holding off on purchases amid inflation concerns.
Hyundai’s market debut on October 22 may not deliver quick listing gains or significant earnings growth in the near term, according to analysts, as the company’s next phase of expansion is not expected to come online for at least five quarters.
India’s IPO boom continues
Nevertheless, Hyundai’s blockbuster IPO is part of a broader trend in India, where over 260 companies have raised more than $9 billion through IPOs this year, surpassing the $7.42 billion raised in 2023. This surge in IPO activity has boosted India’s position in Asia’s equity capital markets to an all-time high.
Despite the muted interest from retail buyers, employee participation was robust, with the employee quota oversubscribed by 1.67 times. The strong institutional demand has been seen as a reflection of confidence in Hyundai’s business, even though the company faces near-term challenges.
With shares set to begin trading on October 22, the focus will shift to how Hyundai performs on its market debut. While retail investors have been cautious, the heavy institutional interest suggests optimism about Hyundai’s long-term growth, especially as it prepares to scale its operations in India.
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