Hyundai starts setting the stage for India’s greatest IPO

Hyundai Motor India, the country’s second-greatest carmaker, will file a draft purple herring prospectus for its $3-3.5-billion IPO by around June, aiming to entire its share market checklist ahead of Diwali, based mostly mostly on two people with teach recordsdata of the company’s plans.

As analysts and capacity investors will rapidly thought firsthand in Chennai, the India IPO is a pivotal second for the South Korean carmaker as it objectives to list against established car giants within the country.

Hyundai’s IPO in one amongst the realm’s fastest-increasing car markets will enable the company to enhance its market price constant with the South Korean govt’s so-known as ‘company price-up’ programme. The plot encourages companies to pursue foreign listings to grab their valuations and return more cash to shareholders.

“Itemizing its India subsidiary within the country indicates a indispensable capacity for price-realization from the realm’s third-greatest passenger car market, which has no longer yet been completely mirrored in Hyundai’s total market valuation," stated an commerce executive, declining to be identified.

“The India checklist is projected to enable a reevaluation of the (company’s) remaining operations and India’s weight within the industry, doubtlessly increasing Hyundai’s total market capitalization," this executive stated.

Hyundai Motor India and Hyundai Motor Co. didn’t reply to Mint’s queries.

While Hyundai is flush with cash at the parent stage, the India IPO is also intended to generate extra capital that the company can exhaust partly towards bettering shareholder returns thru dividend payouts and share buybacks.

South Korean brokerage agency Meritz Securities stated in a file in March that Hyundai’s company price enhancement belief will vastly pick the direction of its stock tag motion within the first half of the yr. 

"Hyundai Motor is anticipated to mark a brand new belief to toughen shareholder price in early June, the exhaust of elevated cash stir for capacity share buybacks or cancellations, which could per chance per chance extra enhance (return on equity). This raise in ROE would lead to a elevated comely tag-to-book ratio, strengthening the case for enhanced company price," Meritz stated in its file, written in Korean.

Hyundai’s India checklist no longer handiest affirms its decision to double down on its operations within the country—which entails establishing a battery assembly manufacturing facility and extending manufacturing capacity by its buyout of Overall Motor’s manufacturing facility in Talegaon, Pune—nonetheless also items a precedent for other Korean companies searching for to broaden their investor defective and toughen valuations thru world listings.

Passenger car makers entice nicely to do valuations in India due to surging question within the domestic market, particularly for premium gadgets. Hyundai Motor India has successfully leveraged this person preference with its utility vehicles equivalent to Creta, Venue and Exter, which accounted for approximately 60% of its entire domestic sales in FY24.

The India checklist would also enable Hyundai to search out other price-unlocking measures equivalent to exiting non-performing subsidiaries or non-core agencies. Hyundai Motor Co. trades at a greatly decrease tag-to-earnings ratio—5—as in contrast with other huge Indian automakers. Maruti Suzuki Ltd has a tag-to-earnings ratio of 32, Mahindra & Mahindra Ltd’s P/E ratio is set 20, and Tata Motors Ltd’s about 17.

“We continue to agree with that the shares (of Hyundai Motor Co.) are some distance smooth from its operations at ~5x 2024E P/E," JP Morgan stated in an 11 April file.

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