 "Auto major Hyundai Motor India's IPO subscribed 42% a day before close")
Auto major Hyundai Motor India’s (HMIL) mega IPO was 42 per cent subscribed on Wednesday, a day before its close.
The offering has so far received bids for 41.74 million shares — worth Rs 8,180 crore — as against 99.77 million on offer. The company will need bids worth Rs 11,375 crore on the final day. The qualified institutional buyers (QIBs) portion of the IPO is subscribed 58 per cent, high net worth individual segment 26 per cent and retail investor portion 38 per cent.
On Monday, Hyundai Motor had allotted 42.4 million shares worth Rs 8,315 crore to anchor investors at Rs 1,960 apiece, the higher end of its price band. The price-range for the issue is Rs 1,865 to Rs 1,960 per share, which values the country’s second-largest passenger car maker at Rs 1.51 trillion to Rs 1.59 trillion.
In its IPO, HMIL is seeking a valuation of 26.3 times its 2023-24 (FY24) earnings, which is about 10 per cent lower than the market leader, Maruti Suzuki India (MSIL).
Some analysts are of the view that HMIL can command a similar or higher premium to MSIL given its superior margin and returns profile even as its volumes, market share, and distribution reach are about a third of MSIL. At the same time, they warn that the stock may not be able to generate eye-catching returns immediately after listing.
“We believe that the outlook for Hyundai remains strong due to its strong parentage, leveraging of parent technology and research and development capabilities, as well as a solid balance sheet. However, at the upper price band, Hyundai is available at a rich valuation of 26 times its FY24 earnings per share, leaving little on the table for investors,” said a note by Aditya Birla Capital, which is recommending investors with a longer holding period to subscribe to the issue.
ICICI Securities has also issued a ‘subscribe’ rating. However, the brokerage suggests that there may be limited listing gains, considering the large issue size and competitive landscape. The brokerage believes the company is poised to deliver healthy double-digit portfolio returns over the medium to long term.