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The grey market premium (GMP) for Hyundai Motor India has seen a significant decline in the days leading up to its initial public offering (IPO). The shares, which previously commanded a GMP of around ₹400 per share at the beginning of October, have now dropped to approximately ₹139 per share, reflecting a modest 7% premium over the issue price. Although the premium recently improved slightly to ₹170 per share, the 76% fall in GMP has raised concerns among investors as the company approaches one of India’s most anticipated IPOs.
The IPO, scheduled to open next week, consists of a complete offer-for-sale (OFS) of 14.2 crore shares by Hyundai Motor India’s South Korean parent, Hyundai Motor Company. With the shares priced between ₹1,865 and ₹1,960, the company is valued at ₹1.6 lakh crore at the upper end of the price range. This IPO, entirely an OFS, has led some investors to question the aggressive pricing, which could impact market sentiment.
Why the GMP Drop?
Several factors have contributed to the sudden decline in Hyundai’s GMP. Analysts have attributed the fall to the complete OFS nature of the issue, which means there is no fresh equity infusion to boost growth. Furthermore, while Hyundai India is recognized for its consistent market performance and strong brand loyalty, the IPO’s aggressive pricing has created apprehension, particularly with regards to whether it provides sufficient value at the current levels.
Despite the declining GMP, leading brokerage firms remain optimistic about Hyundai India’s long-term prospects. Firms like Arihant Capital Markets have pointed out the company’s ability to optimize operations and expand distribution, bolstered by a cutting-edge R&D facility in Korea and a highly automated factory in Chennai. The company’s focus on premiumization, its dominance in the SUV segment, and its upcoming ventures into electric vehicles (EVs) are expected to drive future growth.
Strong Market Position Amid Challenges
Hyundai Motor India’s strong presence in the Indian automotive market is not in question. The company enjoys significant loyalty among Indian consumers, thanks to its reliable after-sales service and an appealing range of passenger vehicles. According to analysts, the company’s financial performance and product mix, especially in premium segments like SUVs, have set it apart from competitors.
In the coming years, Hyundai aims to capitalize on India’s growing passenger vehicle (PV) market by introducing a range of new models, including EVs. Anand Rathi Research noted that Hyundai’s strategy of focusing on premium trims and vehicles with higher average selling prices has been successful in expanding its consumer base. The upcoming IPO has received a “subscribe for long term” rating from several analysts, who believe that Hyundai is poised for consistent growth despite near-term valuation concerns.
Hyundai’s EV Strategy and Growth Plans
Hyundai Motor India’s growth strategy also revolves around its push into the electric vehicle market. By the end of FY25, the company plans to introduce the Creta EV, aimed at capturing a broader demographic of environmentally conscious consumers. Alongside this, Hyundai is developing an EV supply chain and charging infrastructure to support the growing demand for electric vehicles in India. Mirae Asset Capital noted that Hyundai’s superior operating margins relative to its competitors make it well-positioned to ride the wave of domestic PV sales.
Expert Opinions on the IPO’s Pricing
Although Hyundai India’s financials and market position are strong, many analysts believe that the IPO is fully priced, which could dampen investor enthusiasm. According to Bajaj Broking, the company’s asking price reflects a P/E ratio of 26.73 times based on projected FY25 earnings. Despite the seemingly high valuation, brokerage firms like Geojit Financial Services have noted Hyundai’s potential to disrupt the competitive landscape, particularly in the electric and premium vehicle segments.
Key Details of the IPO
Hyundai Motor India’s IPO is expected to close on Thursday, October 17, with shares listed on the BSE and NSE on October 22. Kotak Mahindra Capital Company, Citigroup Global Markets India, HSBC Securities, JP Morgan India, and Morgan Stanley India are serving as lead managers for the issue. A total of 7,78,400 equity shares have been reserved for eligible employees, who will receive a discount of ₹186 per share. Retail investors are expected to receive 35% of the allocation, while institutional investors will receive 50%.
As Hyundai India prepares to launch its IPO, analysts continue to express cautious optimism about its long-term growth prospects. The company’s expanding portfolio, strong brand recall, and focus on premiumization could position it as a leader in India’s evolving automotive landscape. However, the recent crash in GMP highlights the importance of careful pricing and investor sentiment in determining the success of this highly anticipated IPO.
