Company Profile:
Hyundai Motor India Ltd is a key player in the Indian automotive market and operates as a fully-owned subsidiary of South Korea’s Hyundai Motor Company. Since its establishment in 1996, it has grown into one of the country’s top car manufacturers. The company is known for its innovation, advanced technology, and a wide range of vehicles that cater to various segments, including hatchbacks, sedans, SUVs, and electric cars.
Popular models from Hyundai’s Indian portfolio include the Creta, Venue, Verna, i10, i20, Aura, Tuscon etc. These vehicles are appreciated for their reliability, modern features, and strong performance, contributing to Hyundai’s reputation as one of the most trusted brands in the Indian market.
The company’s production facility is located in Sriperumbudur, Tamil Nadu, which is among the largest integrated car manufacturing plants in India. Equipped with advanced robotics, automation, and eco-friendly practices, this plant ensures that Hyundai produces vehicles of global standards. Hyundai also prioritizes research and development, continually bringing in new technologies to enhance both the driving experience and environmental sustainability.
Hyundai Motor India boasts an extensive sales and service network, with dealerships and service centers spread across the country. It also focuses on sustainability by offering electric and hybrid vehicles, alongside actively pursuing green initiatives to reduce its carbon footprint.
Promoters & Shareholding:
The promoter of the company is Hyundai Motor Company.
| Particulars | Pre – Issue | Post – Issue |
| Promoters & Promoters Group | 100% | 82.5% |
Public Issue Details:
Offer for sale: OFS of approx. 142,194,700 equity shares at Rs. 10, aggregating up to Rs. 27,870.16 Cr.
Total IPO Size: Rs. 27,870.16 Cr.
Price band: Rs. 1865 – Rs. 1960.
Objective: Augmenting its capital base to meet its future capital requirements and for general corporate purposes.
Bid qty: minimum of 7 shares (1 lot) for Rs. 13,720 and maximum of 14 lots.
Offer period: Tuesday, October 15, 2024 – Thursday, October 17, 2024.
Date of listing: Tuesday, October 22, 2024.
Pros:
- Hyundai Motors India Limited (HMIL) has held the position of being the second-largest automobile original equipment manufacturer (OEM) in India by domestic sales volume since the 2009 fiscal year.
- Hyundai Motors India Limited (HMIL) has led the mid-size SUV segment in sales from FY19 to June 2024, with the Creta capturing a 38% market share.
- In 2023, Hyundai Motors enhanced its competitive edge by launching the IONIQ 5 in the premium electric vehicle market.
- Export sales significantly boost revenue with higher average selling prices, offering a natural hedge against currency fluctuations.
- Hyundai’s leadership in the competitive Indian automotive market is strengthened by its scale, extensive dealer network, operational efficiency, and strong customer loyalty.
Risks:
- Rising prices of key parts and materials could adversely affect business operations and outcomes.
- As of June 30, 2024, the company relies on Mobis India Limited for 17.91% of spare parts. Delivery failures could disrupt operations, and ties with other HMC Group Companies may cause conflicts of interest.
- HMIL imports around 20% of its parts, mainly engine components and transmission assemblies, from HMC and its affiliates. It enjoys reduced customs duties of 0% to 15% under the Comprehensive Economic Partnership Agreements between Korea and India. Any reduction or removal of these concessions or new tariffs could significantly raise sourcing costs.
- Supply chain disruptions, such as chip shortages and shipping delays, could threaten HMIL’s plant operations and profitability
Subscribe or avoid?
Sectorial outlook – The Indian automotive industry, particularly the passenger vehicle (PV) sector, is set for continued growth, with domestic sales volume increasing at a compound annual growth rate (CAGR) of 5% from FY19 to FY24. Despite experiencing a contraction of 10% CAGR between FY19 and FY21, the industry rebounded strongly in FY23, reporting a 27% year-on-year recovery driven by pent-up demand, heightened personal mobility needs, and improved supply conditions. This momentum continued into FY24, with a projected growth rate of 8% YoY, reaching record sales of 4.2 million units. According to CRISIL Research, overall PV volumes are expected to grow at a CAGR of 4.5-6.5% between FY24 and FY29, potentially reaching 5.2-5.7 million units by FY29. This growth is supported by rising average vehicle ex-factory prices, which have increased at a CAGR of 7-9% due to factors like consumer preferences shifting towards mid- and high-end vehicles, the emergence of compact SUVs, and the introduction of advanced technologies.
Hyundai Motors India Limited (HMIL) is well-positioned to benefit from these positive trends in the Indian auto market for several reasons. The SUV segment has seen remarkable growth, expanding at a CAGR of 23%, significantly outpacing the overall industry growth rate of 5%. With HMIL’s strong SUV offerings, such as the Creta and Venue, the company is set to capture a larger share of this lucrative market. Additionally, HMIL has a robust range of vehicles across key categories, including hatchbacks, sedans, and SUVs, allowing the company to cater to varying consumer preferences, particularly as demand shifts towards larger vehicles with enhanced features. Furthermore, India’s car penetration remains low at approximately 26 cars per 1,000 people, compared to much higher figures in markets like China, the US, and Europe. This presents significant growth potential for HMIL as rising per capita income drives more consumers to purchase vehicles. Lastly, the healthy recovery in the PV industry and the continued demand for personal mobility position HMIL to leverage these favorable market conditions, enhancing its market share and profitability in the expanding Indian automotive landscape.
The financials (revenue and net profit) are shown in the graph below:
Valuation – For the last 3 years average EPS is Rs. 56.3 and the P/E is around 34.8x on the upper price band of Rs. 1960. EPS for FY24 is Rs. 75 so on the upper band price the current P/E is around 26x. It has Maruti Suzuki India Ltd (MSIL) (27x), Tata Motors (10x) and Mahindra & Mahindra (M&M) (35x)as listed peers as per the RHP. The company’s P/E is between 26x and 35x. Revenue and margins has been growing consistently.
Recommendation – We advise a “Buy on Dips” approach following Hyundai Motors India’s listing due to several key concerns. The grey market premium (GMP) for its shares has sharply declined to around ₹45, reflecting only a modest 3% premium over the issue price. This is a significant drop of over 89% from its previous high of ₹570, suggesting dampened investor enthusiasm as the IPO nears.
The IPO, which is an offer for sale (OFS), involves the sale of 14.2 crore shares by Hyundai’s Korean parent. As a result, the Indian operations will not receive any of the funds raised, raising questions about the immediate benefits of the listing for Hyundai Motors India. This structure has led to doubts about the growth prospects and long-term value of the IPO.
Additionally, Hyundai’s ₹27,870 crore IPO offers limited appeal when compared to Maruti Suzuki, which dominates the market with three times the passenger vehicle share, 2.5 times the sales volume, and comparable profitability. At ₹1,960, the upper end of the IPO price band, we believe the valuation is steep, especially given Maruti’s stronger market position and scale.
In summary, while Hyundai Motors India is a well-established player with a strong brand and product offering, the current pricing doesn’t provide immediate value for investors. We recommend waiting for potential post-listing price corrections, making it more attractive to Buy on Dips and capture long-term growth at a more favorable valuation.
Disclaimer:
This article should not be construed as investment advice, please consult your Investment Adviser before making any sound investment decision.
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