Hyundai Motor India Ltd. shares will begin trading in Mumbai on Tuesday following a $3.3 billion initial public offering, the largest in the South Asian nation's history. The debut might set the tone for a slew of potential billion-dollar-plus deals to hit the market in India, one of the world's most active markets for new share sales this year. It also comes during the biggest week for Asia-Pacific listings in more than two years, as companies and significant shareholders hurry to complete transactions before the November 5 election in the United States.
The IPO valued Hyundai Motor Co.'s Indian unit at approximately $19 billion. The parent company sold a 17.5% share in India's second-largest automaker in the transaction. While the offering was eventually oversubscribed more than twice, the book-building process took longer than expected. Hyundai's deal drew substantial interest from institutions, which flooded in on the final day of sales. However, retail investors only purchased around half of the shares allotted for them in the IPO.
Individual traders were turned off by the parent business receiving all of the IPO funds, as well as a drop in demand in India's auto industry, analysts said. The low retail interest contrasts with the excitement observed in several recent IPOs, particularly smaller ones. The enthusiasm for share sales has generally translated into post-listing performance.
According to Bloomberg data, new listings in India are up an average of 39% on their first trading day this year. Among IPOs worth more than $500 million, the average gain was 66%. Initial trade for Hyundai Motor India faces valuation challenges.
Initial trade for Hyundai Motor India faces valuation challenges. Bloomberg Intelligence analyst Joanna Chen observes that the automaker's stock is around five times more costly than its Korean parent, but its value is comparable to that of Indian peers such as Maruti Suzuki India Ltd. ‘Long-Term Value’ India's emergence as the world's fastest-growing major economy, along with its burgeoning middle class, presents an opportunity for manufacturers.
In a July interview, Suzuki Motor Corp. Executive Vice President Kenichi Ayukawa stated that the nation's vehicle market is on track to surpass 20 million units by 2047. According to the Society of Indian Automobile Manufacturers, 4.2 million passenger automobiles were sold in India for the fiscal year ending March 31.
"Hyundai Motor India's IPO offers potential long-term value, but it is not suited for investors seeking quick gains," Devi Subhakesan, an analyst at Investory Pte, wrote in a Smartkarma report. "Valuation risks are expected" due to changing consumer preferences and increased competition in India's auto industry. The offer raised 279 billion rupees, making it the largest Indian IPO in local currency history. It topped the 205.6 billion rupees raised by the Life Insurance Corporation of India's IPO in 2022.
With Hyundai's proceeds, Indian IPOs have raised more than $12 billion this year, surpassing volumes from the previous two years but falling short of the record $17.8 billion raised in 2021, per Bloomberg statistics. Swiggy Ltd., a food delivery company, and the renewable energy unit of NTPC Ltd., a state-run power producer, are also set to make their debuts.
According to Bloomberg data, approximately 20 Asian Pacific companies will list shares this week in deals that could raise more than $8 billion, the most weekly volume since April 2022. Tokyo Metro Co. shares are set to begin trading on Wednesday, following a $2.3 billion sale.
