Biggest Ever IPO Of India To Rival Tata Motors, Maruti; Will Hyundai Launch Rs 25,000 Cr IPO Before Diwali?

Hyundai IPO: The South Korean auto giant, Hyundai is going to launch India's biggest ever IPO worth Rs 25,000 crore, a title which was last held by insurance behemoth LIC India. Hyundai has received the green signal from the Indian market regulator SEBI, and it is only a matter of time before Hyundai's IPO will open. Expectations are that Hyundai will launch its IPO during the Diwali festival.

Demand for IPOs has been high throughout 2024, and Hyundai's IPO is one of the most awaited. Chances are that Hyundai would be competing against Swiggy and NTPC Green Energy IPO. However, these are only speculations.

What Do We Know So Far Of Hyundai IPO?

Market watchdog Sebi nodded to Hyundai IPO. As per the draft prospectus, Hyundai is planning to launch its IPO through a purely offer for the sale of up to 142,194,700 equity shares. The IPO size is expected to be around Rs 25,000 crore.

Hyundai Motor Company is the selling shareholder in the OFS. Companies like Kotak Mahindra Capital Company, Citigroup Global Markets India, HSBC Securities & Capital Markets, JP Morgan India, and Morgan Stanley India are acting as the book-running lead managers. The registrar of the IPO is KFin Technologies.

As per Motilal Oswal's blog, the Hyundai Motors IPO is anticipated to launch around Diwali 2024, which falls between September and November. This timing aligns with favourable market conditions and the festive season, which typically boosts investor sentiment.

Benefits and risks for Hyundai IPO for investors.

Motilal Oswal highlighted the potential risks and benefits of choosing the IPO.

Among the benefits, the brokerage highlighted that Hyundai has a solid foundation owing to its strong market leadership and successful pipeline of SUVs.

Currently, Hyundai is the second largest carmaker in the country.

Further, there is reliability in investing in Hyundai due to its consistent revenue and profitability growth. Also, the company's significant investments and modernization plans indicate a long-term commitment to the Indian automobile market which is the third largest for Hyundai globally.

In the case or risks, Motilal believes market volatility that is because the success of Hyundai IPO would depend on factors like favourable market conditions and broader economic factors. Not to forget, Hyundai is entering an already expensive Indian market.

Additionally, Hyundai is expected to face intense rivalry from domestic giants like Maruti Suzuki and Tata Motors.

Also, as per IIFL Securities, Hyundai is well-aligned to the segments in the PV industry, with a similar market-share in the fast-growing UV segment, as in non-UVs. Hyundai was capacity-constrained over the years; the Acquisition of GM's plant will add 250k capacity and position the company for growth.

IIFL expects the company's MPV segment to be a portfolio gap and may be addressed soon. Hyundai has several facets of operational superiority vs peers (detailed herein).

Will Hyundai's valuation be attractive?

In IIFL's view, if valuations of USD18-20bn being quoted in the media are accurate, adding, "We find it attractive, especially relative to listed OEMs in India. Potential weakness in the PV industry in FY25 is a concern."

Furthermore, as part of the IPO, IIFL believes that the parent is likely to offload a 17.5% stake. Official IPO pricing has not been announced yet. However,
media articles are quoting a valuation of USD18-20bn. Hyundai generated ~Rs44bn PAT in 9MFY24. Back-of-the-envelope calculation (annualisation of 9MFY24 PAT and 10% PAT Cagr over FY24-26) would peg FY26 PAT at ~Rs70bn.

"A value of USD18-20bn would imply FY26 PE of 21.3-23.7x. This is cheaper than most Auto OEMs listed in India. Maruti is at 25x; M&M trades at 28x core EPS. 2W OEMs range from 22- 40x. Only Tata Motors is relatively cheap at 14x, due to JLR," IIFL's report said.

Before Hyundai, Which Are The Largest IPO In India?

1. Life Insurance Corporation Of India (LIC) currently holds the title of the biggest IPO in India. In May 2022, the company launched its public offer of Rs 21,008.48 crore. Overall, the IPO was fully subscribed by 2.83 times.

2. Paytm: Vijay Shekhar Sharma launched the second biggest IPO of Rs 18,300 crore in November 2021. The IPO also fully subscribed by 1.89 times.

3. Maharatna PSU and largest coal producer, Coal India is the third largest IPO of Rs 15,199.44 crore which was launched in October 2010. Unlike LIC and Paytm, Coal India received great love from investors as the IPO oversubscribed by 15.28 times.

4. Yet another PSU is on the list of historic IPOs. At the fourth spot, the government-backed General Insurance Corporation launched its IPO of Rs 11,175.84 crore in October 2017. This IPO also fully subscribed 1.38 times.

5. A private life insurer backed by the largest PSU State Bank of India, SBI Cards and Payment Services holds the fifth rank in the biggest IPO. The card services provider launched its Rs 10,354.77 crore IPO in March 2020. The IPO oversubscribed by 26.54 times.