Gearing up for jumbo IPO

Vijay C Roy

IN 1996, when South Korean giant Hyundai Motor Company, which was barely recognised in India then, set up Hyundai Motor India with a manufacturing plant near Chennai, it was difficult to imagine that the automaker would one day become India’s second-largest player in the passenger vehicle (PV) segment, after Maruti Suzuki India.

Now, Hyundai Motor India is all set to hit the capital market with India’s largest IPO to date. It has filed draft papers with the Securities and Exchange Board of India (SEBI) to raise around Rs 25,000 crore through an initial public offering (IPO). The automaker plans to dilute approximately 17.5 per cent of its equity stake. The IPO features an offer for sale comprising up to 14,21,94,700 equity shares, each with a face value of Rs 10. Also, the IPO will be an offer for sale by the existing shareholders. No fresh issue of shares has been planned. The timing is yet to be finalised and also depends upon SEBI’s approval.

On the upcoming IPOs, Mahavir Lunawat, managing director of Pantomath Capital Advisors Pvt Ltd, says, “Going by the depth of the Indian capital market, broad-based IPO participation by investors and sustained valuations are some of the attractions as large conglomerates and MNCs queue up to tap the capital market. We expect significant capital to be deployed in public markets in the months to come.”

The many firsts

If the listing proceeds as planned, Hyundai Motor India’s would be the largest IPO in India’s corporate history, surpassing the record set by LIC in 2022.

The IPO will also mark Hyundai Motor Company’s first listing outside of South Korea. The move also represents the first major IPO by a car manufacturer in India since Maruti Suzuki’s listing in 2003. With this, Hyundai will join Maruti Suzuki, Mahindra & Mahindra (listed in 1996, NSE) and Tata Motors (listed in 1998, NSE) in tapping the capital markets for raising funds.

So far, Maruti Suzuki has been the only listed pure-play passenger vehicle original equipment manufacturer (OEM) while the other listed players, Tata Motors and Mahindra & Mahindra, have exposure to multiple businesses. Tata Motors is also working on a separate listing of its PV business, which will include its passenger vehicles, electric vehicles and JLR.

India operations

Hyundai manufactures and sells four-wheeler PVs and parts, such as transmissions and engines, in India and abroad. Currently, the vehicle portfolio includes 13 PV models across sedans, hatchbacks, SUVs and battery EVs. The models include Grand i10 Nios, i20, i20 N Line, Aura, Verna, Exter, Venue, Venue N Line, Creta, Creta N Line, Alcazar, Tucson and Ioniq 5.

From 1998 and up to March 31 this year, the company has cumulatively sold nearly 1.2 crore passenger vehicles in India and through exports. It has been India’s largest exporter of passenger vehicles from fiscal 2005 to the first 11 months of fiscal 2024, according to CRISIL. Data from the Society of Indian Automobile Manufacturers (SIAM) reveals that Hyundai sold 6,14,717 PVs in India during FY24, a year-on-year growth of 8.3 per cent.

According to the CRISIL report, India’s domestic PV industry is an oligopolistic market, with few players dominating the entire industry. Maruti Suzuki leads in terms of domestic sales volumes, followed by Hyundai, Tata Motors and Mahindra & Mahindra. These four players together account for approximately 80 per cent of the market. However, in the past five years, the competition in the domestic PV market has intensified amid feature-rich PV launches by all players as well as recent entrants, says the CRISIL report. In addition, Hyundai’s competitors in the export market include Maruti Suzuki India, Kia Motors, Volkswagen, Nissan Motor, and Honda Cars India.

Expansion plans

Hyundai Motor India has invested Rs 29,741 crore in India operations as of December 31, 2023, in tangible fixed assets and capital work in progress since its inception. The company is a production and export hub for emerging markets, particularly for passenger vehicle models such as Verna and Venue. Hyundai has indicated an aggressive expansion plan ahead of the IPO, saying it will increase its annual production to one million units by 2025, with a focus on affordable EVs that it plans to locally produce.

As of March 31, the company’s Chennai plant had an annual production capacity of 8,24,000 units. It is expanding the capabilities with the recent acquisition of a General Motors plant in Talegaon, Maharashtra, which is expected to commence commercial operations partly in fiscal 2026. The company expects the annual production capacity in aggregate to increase to 9,94,000 units when the Talegaon plant is partly operational and to 10,74,000 units once it is fully operational.

The company has lined up Rs 32,000 crore for investments in India over the next 10 years. According to insiders, it may use the IPO proceeds for its Indian capex plan, which includes ramping up capacity. The money will also go into R&D and building an EV supply chain to hasten localisation.

According to Mrunmayee Jogalekar, research analyst (auto) at Asit C Mehta Investment Interrmediates Ltd, “As per the SIAM data for FY24, Hyundai Motor India has a domestic passenger vehicle market share of 14.6 per cent, a distant second to Maruti Suzuki’s 41.7 per cent. However, it has better profitability in terms of EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) margins and return on net worth. This is driven by a richer product mix as Hyundai has a higher share of SUVs, and is on a path of further growth.”

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