Hyundai Motor India IPO shares to list on Tuesday; here's what GMP suggest ahead of debut

Shares of Hyundai Motor India are set to make their Dalal Street debut on Tuesday and the company is likely to have a flat landing at the bourses, if one goes by the current grey market premium and volatility in the broader markets. The issue, which was shunned by retail and HNI bidders, is likely to have a muted debut at the bourses.

Grey market premium (GMP) of Hyundai Motor India has seen some rebound after a sharp correction following a disappointing bidding for the issue. Last heard, the company was commanding a premium of Rs 50-55 per share, suggesting a loss of around 2-3 per cent for the investors on listing. However, it was commanding a discount of Rs 50-60 on the last day of the bidding.

Hyundai Motor India received a decent subscription of 2.3 times, with a full subscription achieved on the last day. The current sentiments suggest a flat listing. The IPO valuation seems fully priced, and since the issue is a complete offer for sale (OFS), the company will not receive any proceeds from the offer, said Shivani Nyati, Head of Wealth at Swastika Investmart.

"Investors with a long-term outlook and the ability to navigate potential listing challenges may consider holding onto their investments post-listing for potential future growth," she said. "We anticipate a steady debut, and while immediate listing gains may be modest, Hyundai’s robust fundamentals make it an attractive long-term investment."

The IPO of Hyundai Motor India was open for bidding between October 15 and October 17. The company had offered its shares in the fixed price band of Rs 1,865-1,960 per share with a lot size of 7 shares. The car maker raised about Rs 27,856 crore via its primary offering was entirely an offer-for-sale (OFS) of 142,194,700 shares by its South Korean-parent Hyundai Motor Company.

The issue saw a muted bidding and was overall subscribed only 2.37 times. The quota for qualified institutional bidders (QIBs) was booked 6.97 times, while the reservation for employees was subscribed 1.74 times. The portion reserved for non-institutional investors and retail investors saw bidding for merely 60 per cent and 50 per cent during the bidding process.

Hyundai Motor India's behemoth issue was oversubscribed by 2.37 times, reflecting a tepid response from the participants. The GMP further underscores this sentiment, indicating a lower single-digit premium upon listing. The pessimistic approach towards the issue is largely due to the company's high valuation concern, said Sagar Shetty, Research Analyst at StoxBox.

"The lack of demand was further impacted by the pessimistic outlook towards the auto sector amidst the inventory buildup, particularly in the PV segment. We thus recommend investors who have been allocated with the shares to hold on to the shares and closely watch how the company performs in the upcoming quarters," he said.

Chennai-based Hyundai Motor India is a part of South Korea's Hyundai Motor Group, which is the third largest auto original equipment manufacturer (OEM) in the world based on passenger vehicle sales. It manufactures and sells four-wheeler passenger vehicles, including models such as sedans, hatchbacks, SUVs, and electric vehicles (EVs).

Brokerages mostly have a positive view on the issue and suggest subscribing for a long-term citing its sound financial record, strong brand recall, expansion plans, firm market share and focus on premiumization of the products. However, aggressive pricing, depleting cash reserves, large issue size, potential stake sale in future and complete offer for sale nature go against it.

Kotak Mahindra, HSBC Securities & Capital Markets, Citigroup Global Markets India, JP Morgan India and Morgan Stanley India were the book running lead managers of the Hyundai Motor IPO, while Kfin Technologies served as the registrar for the issue. Shares of the company shall be listed on both BSE and NSE on Tuesday, October 22.