Hyundai Motor India IPO shows institutional players are excited to participate in India growth story: Deepak Jasani of HDFC Securities
Deepak Jasani, Head of Retail Research, HDFC Securities talks to BT about what the IPO indicates about the market and what other big IPOs can expect.
- Oct 19, 2024,
- Updated Oct 19, 2024 1:38 PM IST
The initial public offering (IPO) of Hyundai Motor India was subscribed over 2 times last week. The public offer received bids for 236.32 million shares against 99.76 million shares offered by the auto major. The company, which garnered Rs 27,856 crore through the public offer, is slated to list on the bourses on October 22. The quota reserved for qualified institutional buyers was oversubscribed by 6.97 times, while the retail individual investors’ category subscribed just 0.50 times.
So what are the key takeaways from the Hyundai Motor India IPO, which got subscribed despite the sluggish market sentiment and tepid premium in the unlisted market?
In an interaction with Business Today, Deepak Jasani, Head of Retail Research, HDFC Securities shared his insights. Edited excerpts:
Q. What does the oversubscription of the biggest-ever Hyundai IPO tell us about the market?
Jasani: It shows that for quality IPOs from large, reputed companies in consumer facing sectors, there is no dearth of money despite the sluggish market conditions. It also means that institutional players are excited to participate in the India growth story through an IPO which gives the opportunity to participate in the first listing outside of its home country. Even if the money is raised by OFS, investors are still ready to invest in deserving companies. The non institutional players however remained circumspect in participating wholeheartedly in the issue.
Q. What does the oversubscription mean for other big IPOs that will hit the market in the near term?
Jasani: As far as the size of the appetite of IPO investors is concerned, the subsequent IPOs need not worry. However, the companies should have a unique business model, provide visibility of growth over the long term, and have large moats in place. Also, they will have to be careful about pricing their IPOs after studying the current market conditions if they wish to have larger participation from the local investors (including non-institutional).
Q. Will it affect the liquidity of the market for the short term?
Jasani: Given the fact that the IPO application proceeds will be released in just two days under ASBA, we think that the short-term strain on the liquidity is quite manageable for the system as a whole. Also given the fact that the QIB portion has been oversubscribed almost 7 times (with foreign investors accounting for 60% of the application value), the strain on liquidity in the secondary market will also be limited.
Q. What does the oversubscription mean for the auto sector?
Jasani: Given the subdued latest monthly auto sales numbers, the sector could underperform till one gets a signal about the turnaround in the fortunes of the sector in the festive season or later. The valuations of auto companies were anyway not cheap till sometime back.
The initial public offering (IPO) of Hyundai Motor India was subscribed over 2 times last week. The public offer received bids for 236.32 million shares against 99.76 million shares offered by the auto major. The company, which garnered Rs 27,856 crore through the public offer, is slated to list on the bourses on October 22. The quota reserved for qualified institutional buyers was oversubscribed by 6.97 times, while the retail individual investors’ category subscribed just 0.50 times.
So what are the key takeaways from the Hyundai Motor India IPO, which got subscribed despite the sluggish market sentiment and tepid premium in the unlisted market?
In an interaction with Business Today, Deepak Jasani, Head of Retail Research, HDFC Securities shared his insights. Edited excerpts:
Q. What does the oversubscription of the biggest-ever Hyundai IPO tell us about the market?
Jasani: It shows that for quality IPOs from large, reputed companies in consumer facing sectors, there is no dearth of money despite the sluggish market conditions. It also means that institutional players are excited to participate in the India growth story through an IPO which gives the opportunity to participate in the first listing outside of its home country. Even if the money is raised by OFS, investors are still ready to invest in deserving companies. The non institutional players however remained circumspect in participating wholeheartedly in the issue.
Q. What does the oversubscription mean for other big IPOs that will hit the market in the near term?
Jasani: As far as the size of the appetite of IPO investors is concerned, the subsequent IPOs need not worry. However, the companies should have a unique business model, provide visibility of growth over the long term, and have large moats in place. Also, they will have to be careful about pricing their IPOs after studying the current market conditions if they wish to have larger participation from the local investors (including non-institutional).
Q. Will it affect the liquidity of the market for the short term?
Jasani: Given the fact that the IPO application proceeds will be released in just two days under ASBA, we think that the short-term strain on the liquidity is quite manageable for the system as a whole. Also given the fact that the QIB portion has been oversubscribed almost 7 times (with foreign investors accounting for 60% of the application value), the strain on liquidity in the secondary market will also be limited.
Q. What does the oversubscription mean for the auto sector?
Jasani: Given the subdued latest monthly auto sales numbers, the sector could underperform till one gets a signal about the turnaround in the fortunes of the sector in the festive season or later. The valuations of auto companies were anyway not cheap till sometime back.