Hyundai Motor’s Indian subsidiary last Saturday sought regulatory approval for an initial public offering (IPO) in Mumbai that could be the largest in the country and would allow its South Korean parent to sell up to 17.5% of its stake in the company.
With the IPO, Hyundai will become the first carmaker in the country to be public since Maruti Suzuki in 2003, just as Indian stock markets are trading near their all-time highs.
The proposed IPO is an public offering (OFS) of 142,194,700 common shares of Hyundai Motor Company (HMC), according to the draft Red Herring Prospectus (DRHP).
Hyundai Motor Company aims to raise at least $3 billion (Rs 25,000 crore) through its IPO, surpassing the record set by Life Insurance Corporation’s (LIC) Rs 22,000 crore offering in May 2022.
Hyundai Motor India is the country’s second-largest passenger car maker.
Hyundai sees India as a key growth market, where it has two manufacturing plants and has invested $5 billion, with a commitment to pump in another $4 billion over the next decade.
The world’s largest automobile market, after China and the United States, is the company’s third-largest source of revenue worldwide.
The decision to go public is also influenced by Hyundai’s strategy to address the “Korean discount,” a term describing the lower valuation of South Korean companies compared to their international competitors.
By listing its Indian subsidiary, Hyundai Motor Company aims to achieve higher valuations and attract a broader investor base.
“The Korean stock market has long faced valuation disparities, with lower valuations and inflated risk premiums compared to global peers. This phenomenon, dubbed the “Korean discount,” can be attributed to several factors, including corporate governance issues, capital allocation practices and a lack of transparency by long-established family-run conglomerates called chaebols, an analyst said.
Hyundai Motor’s IPO is expected to take place around Diwali 2024 as Sebi takes three to six months to accept or reject a proposal, sources said.
“This timing corresponds with favourable market conditions and the festive season, which generally strengthens investor sentiment,” a market analyst said.
Banks such as JP Morgan, Citi, HSBC and Deutsche Bank, as well as Kotak Mahindra Capital, have been appointed as advisors.
The shares will be listed on the BSE and NSE.
According to DRHP, the company is currently undertaking several initiatives involving a total investment of Rs 32,000 crore. It currently serves as a manufacturing and export hub for the parent company to emerging markets, particularly passenger car models such as the Verna and Venue.
The company has a factory in Chennai, which had an annual production capacity of 824,000 units as of March 31, 2024.
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