Hyundai IPO: Should you buy shares after its listing?

Hyundai Motor India’s much-anticipated initial public offering (IPO) opened today, October 15, and has been the talk of the town for some time. Priced between Rs 1,865 and Rs 1,960 per share, the IPO is expected to raise Rs 27,856 crore, making it the largest public offering in India’s history. Notably, this marks the first time an automaker has gone public in the country since Maruti Suzuki did so in 2003.
While the buzz surrounding the IPO is palpable, many brokerages are urging investors to take a cautious approach. They advise looking at Hyundai’s long-term growth potential rather than getting caught up in the excitement of quick listing gains.
Hyundai Motor India is planning to sell shares at a price-to-book value ratio of 13.11 times, compared to Maruti Suzuki’s 4.79 times. This higher valuation reduces the margin of safety for investors, even though Hyundai boasts a better return on equity (ROE), noted Amar Nandu, a Research Analyst at SAMCO Securities.
Nandu also pointed out that, due to the large size of the IPO, most applicants are likely to receive an allotment. This could limit any significant price surge after listing, dampening the prospects for those hoping for short-term gains. He added that Hyundai’s promoter is offering a 17.5% stake in this issue, with an additional 7.5% stake sale expected within three years to meet regulatory requirements. This could create selling pressure in the future, making the IPO less attractive for short-term investors.
Hyundai India has plans to expand, with a proposed Rs 32,000 crore investment. However, some concerns have been raised about its ability to fund this expansion. According to a note from StoxBox, Hyundai Motor India’s cash and bank reserves were significantly reduced after paying out hefty dividends to its South Korean parent company. This leaves the company dependent on external borrowing, which could affect its financial health in the future.
StoxBox recommended investors avoid the IPO for now, citing concerns about future financial performance, and stated that it would reassess its rating once there are clearer indications of business performance over the next few quarters.
Some brokerages, including ICICI Direct and Jefferies, are optimistic about Hyundai’s long-term potential. They argue that Hyundai’s solid market position and strong financials make it an attractive investment, especially for those willing to look beyond the initial listing performance. Hyundai’s current grey market premium (GMP) stands at Rs 40, a modest 2.04% premium over the issue price. This is a significant drop from the Rs 570 GMP seen just two weeks ago, reflecting some cooling in market sentiment.
Gaurav Garg, a Research Analyst at Lemonn Markets Desk, highlighted Hyundai’s operational strengths, particularly its local sourcing strategy and robust revenue growth. Garg pointed out that Hyundai has achieved a compound annual growth rate (CAGR) of 21.4% between FY22-24, driven largely by the popularity of its SUVs, which account for 67% of its 2024 revenue. Hyundai’s leadership in this segment, along with its focus on higher-value vehicles like SUVs, makes it a strong contender in the long run.
Garg also believes that Hyundai’s consistent efforts to adapt to market trends, including its expansion into electric vehicles (EVs) and new energy ventures, will help sustain its growth. This makes the IPO a compelling choice for long-term investors, even if the immediate listing gains appear modest.
Hyundai’s IPO is undeniably exciting, but experts caution that this is a long-term play rather than a quick win. The company’s broader strategy, which includes ventures into EVs and the potential listing of subsidiaries, could drive significant growth over time. For investors with a patient outlook, Hyundai’s future prospects are promising, even if the initial listing gains aren’t as spectacular.
As the IPO continues, investors should closely monitor Hyundai’s performance and overall strategy. While short-term gains may not be as high as expected, the company’s long-term growth story makes it a strong contender in India’s automotive market.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts and brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading decisions.)