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Indian investors give short shrift to Asia’s biggest IPO of 2024


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Trading in the world’s second-largest IPO of 2024 begins on Tuesday, but retail investors have already given a lukewarm reception to the $3.3bn listing of Hyundai Motor India, amid a slowdown in car sales in the country.

The retail segment of the Mumbai offering was only 50 per cent subscribed last week as many baulked at the $19bn valuation for the Korean carmakers’ India unit, despite a publicity blitz that saw wraparound front-page adverts emblazoned across India’s financial newspapers.

By last Thursday’s cut-off, the Rs278.7bn issue had drawn bids just over two times the amount offered, shored up by institutional investors that had included Singapore’s government, the BlackRock investment company and Fidelity and Vanguard funds.

“The valuation was very full,” said a senior Mumbai banker, highlighting Hyundai’s pricing at about 26 times the Indian unit’s earnings. It values the Indian unit at 40 per cent of the market capitalisation of its South Korean parent on the Seoul exchange. “They didn’t leave much on the table,” the banker added.

The Indian debut, where the Korean group is selling a 17.5 per cent stake, is the country’s third largest IPO ever in dollar terms, the biggest in Asia this year and the world’s second-largest after warehouse operator Lineage’s $5.1bn US listing, according to Dealogic data.

The weak early bidding for Hyundai’s offering was in contrast to other blockbuster floats this year in India, with its stock market becoming the world’s largest listing venue outside the US. It has included the $782mn IPO of mortgage provider Bajaj Housing Finance, which last month drew bids more than 64 times the shares offered.

Samuel Kerr, head of equity capital markets at Ion Analytics, called Hyundai’s listing “another jewel in the crown after a marvellous year for Indian deal activity” at a time of “depressed” Asian listing volumes driven by the “significant economic slowdown in China”.

Hyundai, India’s second-largest carmaker with a 14.6 per cent market share after Maruti Suzuki’s near 40 per cent, plans to spend the IPO proceeds on increasing its local presence. It is expanding production capacity for its sport utility vehicle line-up and intends to introduce four EV models.

Hyundai has made significant inroads into India compared to other foreign carmakers — Ford and General Motors have abandoned the market in recent years — but the listing has coincided with a slowdown in India’s motor industry, with consumers hit by stubborn inflation.

The Nifty Auto Index has fallen 6.9 per cent this month and Bajaj Auto, one of the country’s biggest sellers of motorcycles, saw its shares plunge 13 per cent after it issued a sales warning on Thursday.

Bar chart of Deal value ($bn) showing India's IPO market ranks second in 2024

Signs of weaker sales during India’s months-long festival season “definitely hampered the situation”, said Abhishek Jain, head of research at Mumbai brokerage Arihant Capital, who added that Hyundai’s offer had been “aggressively priced” for such a large IPO.

The float marks the first time Hyundai has listed outside its home market and is part of a global push following an erosion of sales in China over the past decade, where it has been hit by the rapid rise of domestic rivals.

Hyundai said its Indian unit accounted for about 18 per cent of global sales last year. With 1.4bn people and one of the fastest-growing large economies, India recently overtook Japan as the third-largest car market in the world after China and the US, according to data from the Society of Indian Automobile Manufacturers

Lee Hang-koo at the Jeonbuk Institute of Automotive Convergence Technology, a South Korean research group, said the IPO would help Hyundai narrow the market-share gap with Maruti Suzuki, a joint venture set up by the Japanese company and India’s government in 1982.

“Hyundai is looking at India as an alternative market to China,” he said.



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