Potential Large-Scale IPO in India Originates from South Korean Automaker, Hyundai
Hyundai Motor's India division is shooting for a stock market debut in Mumbai on Saturday, aiming for the country's largest initial public offering (IPO) and potentially the nation's biggest listing. The South Korean parent company stands to sell up to 17.5% of the Indian unit's shares.
This IPO would make Hyundai the first Indian car manufacturer to go public in two decades, following Maruti Suzuki's 2003 listing, and comes at a time when Indian stock exchanges are hovering near all-time highs.
India, a key growth market for Hyundai, houses two manufacturing facilities and has received $5 billion in investment from the automaker, with a commitment to invest an additional $4 billion over the next decade. Indian markets, the world's third-largest after China and the United States, are the company's third-biggest revenue source globally.
The IPO's pricing and company valuation details are undisclosed in the draft prospectus, but sources report that Hyundai aims to raise around $2.5 to $3 billion, with a potential valuation of up to $30 billion.
Unlike other IPOs, Hyundai will not be issuing new shares, instead, its South Korean parent will sell part of its stake in the wholly-owned Indian unit to retail and other investors via a "offer for sale" approach.
The successful listing could provide Hyundai Motor India with an advantage over competitors such as Maruti Suzuki, Tata Motors, and others by simplifying future fundraising, reducing reliance on its Korean parent.
Hyundai anticipates that this equity share listing in India will boost its brand image, increase visibility, and offer a public market for its shares, as stated in the draft prospectus filed on Saturday. A timeline for the listing is yet to be announced, but regulatory approval generally takes between three to six months.
In terms of future strategies, Hyundai India plans to emphasize "premiumization" by selling premium cars, increasing its electric vehicle market share, and expanding charging station infrastructure, where it currently lags behind Tata Motors. Additionally, the company aims to escalate car exports, solidifying its position as an export hub.
The Indian government, under Prime Minister Narendra Modi, views the automotive industry as essential for economic development in the fifth-largest economy in the world. Modi's administration has constructed hundreds of kilometers of new roads and is offering incentives for car manufacturers to enhance local production, particularly electric vehicles.
Hyundai has gained a following in India by offering affordable cars like Santro and SUV Creta. The company also plans to enter the electric vehicle market, set up charging stations, and establish a battery pack assembly unit. Approximately 142 million out of 812 million shares, or 17.5%, will be sold in the IPO, with the final percentage potentially being revised.
The goal of this IPO is to unlock value for the Indian business and help the Korean automaker close its valuation gap relative to global and Asian sector peers. Indian stock indices have seen a substantial rise between 2019 and 2023, while South Korea's KOSPI index has only increased by 30% over the same period.
Hyundai is being assisted in its IPO by investment banks Citigroup, JP Morgan, HSBC, Morgan Stanley, and India's Kotak.
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This IPO could significantly boost Hyundai's business operations in India by providing access to additional funds, potentially attracting more investors and increasing their market visibility.
Hyundai's decision to go public with its Indian car business comes at a time when the price of cars in India is closely tied to the performance of the Indian stock market, which is currently hovering near all-time highs, suggesting a positive outlook for the auto industry.
