Hyundai Motor India set to debut today after nation's largest-ever IPO

Shares of Hyundai Motor India Ltd. are set to start trading in Mumbai on Tuesday after a $3.3 billion initial public offering that was the South Asian nation’s largest ever.

The debut may set the tone for a string of other billion-dollar-plus deals coming to the market in India, one of the world’s most vibrant venues for new share sales this year. It also comes amid what is the busiest week for Asia-Pacific listings in more than two years, as companies and major shareholders rush to close deals before the Nov. 5 election in the US.

The IPO valued the Indian unit of South Korea’s Hyundai Motor Co. at about $19 billion. The parent sold a 17.5 per cent stake in India’s second-largest carmaker in the deal.

While the offering was eventually oversubscribed more than two times, book-building was slower than some had anticipated. Hyundai’s deal saw strong demand from institutions, which flooded in on the last day of sale. Retail investors, however, only bought about half the portion that had been reserved for them in the IPO.

Individual traders were turned off by the parent company getting all of the IPO proceeds as well as cooling demand in India’s auto industry, analysts have said. The poor retail interest stands in contrast to the frenzy seen in some recent IPOs, particularly smaller issues.

Enthusiasm for share sales has generally carried over to their post-listing performance. New listings in India have risen by an average of 39 per cent on their first trading day this year, according to data compiled by Bloomberg. Among IPOs of over $500 million, the average gain was 66 per cent.

Initial trading for Hyundai Motor India faces a challenge in valuations. Bloomberg Intelligence analyst Joanna Chen notes the automaker’s stock is about five times more expensive than its Korean parent’s, though its valuation is in line with those of Indian peers such as Maruti Suzuki India Ltd.

‘Long-Term Value’

India’s emergence as the world’s fastest-growing major economy as well as its expanding middle class present an opportunity for automakers. The nation’s car market is on track to reach 20 million units by 2047, Suzuki Motor Corp. Executive Vice President Kenichi Ayukawa said in an interview in July. A total of 4.2 million passenger vehicles were sold in India in the fiscal year ended in March, according to the Society of Indian Automobile Manufacturers.

“Hyundai Motor India’s IPO offers potential long-term value, but it is not suited for investors seeking quick gains,” Devi Subhakesan, an analyst at Investory Pte, wrote in a note on Smartkarma. “Valuation risks are expected” amid shifting consumer preferences and rising competition in India’s auto industry.

The deal raised Rs 27,900 crore, the biggest ever Indian IPO in local currency terms. It surpassed the Rs 20,560 crore raised by Life Insurance Corporation of India’s listing in 2022.

With Hyundai’s proceeds, Indian IPOs have raised more than $12 billion so far this year, eclipsing volumes for the past two years but still below the record $17.8 billion raised in 2021, according to data compiled by Bloomberg. Other pending debuts include food-delivery company Swiggy Ltd. and the renewable-energy arm of state-run power producer NTPC Ltd.

Around 20 companies from Asia Pacific are listing shares this week in deals that may raise more than $8 billion, the biggest weekly volume since April 2022, according to data compiled by Bloomberg. Shares of Japan’s Tokyo Metro Co. are scheduled to start trading on Wednesday after a $2.3 billion offering.