Hyundai Motor India IPO Listing: A Landmark For The Indian Stock Market

October 22, 2024, marks a historic day for the Indian stock market, as Hyundai Motor India Limited (HMIL) makes its debut on both NSE and BSE. This IPO represents a significant milestone not just for Hyundai but for the Indian capital market as well. Here’s a deeper look into the significance of this event and what it could mean for investors and the automotive sector. Read: If Hyundai shares are overvalued or undervalued at PE 26.7 levels?IPO DetailsHyundai Motor India’s shares were listed with the BSE under the code 544274 and with the NSE under the symbol HYUNDAI.Priced at Rs.1,960 per share, this IPO managed to raise a total funds of Rs.27,870.16 crores. This volume of fund raising has made Hyundai the largest IPO in Indian history.At the time when I’m writing this blog post, the market capitalization of Hyundai Motor India was about Rs.1,54,139 Crore.Its closest like-to-like peer is Maruti Suzuki that has a market capitalization of Rs.3,78,657 Crore. Tata Motors (Market Cap Rs.327,957 Crore) and M&M (Market Cap Rs.3,67,680 Crore) are also its rivals but they also operate in commercial heavy-vehicle space.Hyundai is a trusted brand name in India.It has about 15% market share in the Indian passenger vehicle space. Moreover, Hyundai motors getting itself listed in the Indian market shows its confidence in India’s growing economy.Market Response and Industry SentimentDespite being the largest IPO in India, the initial market response was somewhat lukewarm.Market analysts predicted a modest premium over the issue price. Early estimates are suggesting the same trend. The share price is down about 1.5% on the listing day.Several factors have contributed to this cautious outlook. Two main reasons could be high valuations and the fact that the entire offer was an offer-for-sale (OFS). It means, no fresh capital was raised for business expansion.Yet, despite these headwinds, Hyundai’s strong position in the Indian automotive sector provides long-term optimism.The company’s plan to introduce five new electric vehicle (EV) models by 2030. It is in line with the global push toward sustainable transportation.Investor ReactionThe subscription numbers for the IPO were respectable, with an overall subscription of 2.37 times the shares on offer. Qualified Institutional Buyers (QIBs) showed strong interest. Retail participation remained subdued. This divergence reflects the general caution in the automotive sector due to concerns about slower demand and high inventory levels in the industry.Nevertheless, Hyundai has a robust market share of 15% in India’s passenger vehicle segment. Its presence, particularly in the SUV category, gives it a strong foundation for future growth.Investors with a long-term outlook may find value in the company’s strategy. One can rely on the decision making of the Hyundai Motors top management.Also, considering Hyundai’s focus on EVs, it is a segment expected to display above average growth rates in years to come.Implications for the Indian MarketHyundai’s listing sets a new benchmark for large-scale IPOs in India.I think, it will potentially encouraging other global automotive and manufacturing companies to consider listing on Indian stock exchanges. It also reflects India’s growing appeal as a destination for significant foreign investment and corporate expansion.For the Indian stock market, the successful listing of a global giant like Hyundai strengthens the market’s stature. Hyundai’s entrance could pave the way for similar listings from international companies, further boosting India’s image as a global financial hub.Analysis of Hyundai IPO From Perspective of a Long-Term InvestorHyundai Motor India’s IPO offers long-term investors an opportunity due to its strong market position.As the second-largest automaker in India, Hyundai has built a solid foundation. It is particularly true for the SUV segment, which positions it well for growth over the next 10-15 years.With rising income levels, increasing urbanization, the demand for personal vehicles in India is set to grow. Hyundai’s presence is already established in the Indian market. So I think, for a long-term investors, Hyundai’s shares is an asset for investors looking at the long-term horizon.Electric Vehicles (EVs)The global shift towards electric vehicles (EVs) adds another layer of growth potential for Hyundai. The company’s plans to introduce multiple EV models by 2030. This step will significantly boost its market share and profitability as India ramps up its adoption of electric vehicles.Early investments in this IPO could be well-timed. Another 8-10% correction from its listing price of Rs.1960 will bring it to a decent price levels.However, as a long-term investor we must also be mindful of the intense competition from players like Maruti Suzuki, Tata, and M&M. New entrants in the EV market will challenge the growth prospects of Hyundai Motors India.I personally feel that global companies like Hyundai generally carves out their own ways to stay at the top. Shareholders who can hold on to such shares for 10-15 years periods can really benefit from the power of compounding.Price ValuationManufacturerListed?Market SharePriceP/E RatioMarutiYes40.39%1195525.56HyundaiYes14.24%181926.7M&MYes14.23%288732.51TataYes11.44%8799.59Toyota–6.63%––Kia–6.55%––Honda–1.58%––MG–1.28%––VW–0.95%––Skoda–0.92%––Renault–0.90%––Nissan–0.59%––Citroen–0.20%––Jeep–0.10%––––100.00%––Source DataAs per sales data sourced for the Sep’2024 months, Maruti has the bigger market share (40.39%) of the passenger car sales in India. The second to Maruti in Hyundai Motors India with 14.24% market share. The third largest market share is with M&M of 14.23%.I’m not counting Tata Motors here because a large portion of sales of this company comes from the sales of heavy vehicles. So we can say, Tata Motors is half Hyundai and half Ashok Leyland, which has a PE of 25.75. [Note: I’m doing this comparison just for hypothesis].Some Analysts are saying Hyundai’s shares are expensive. Why? Their reasoning is as below:Maruti enjoys 40.39% market share and hence gets a P/E multiple of 25.56.M&M has a market share of 14.23% and gets a P/E multiple of 32.61.So, in terms of market share and P/E comparison, Hyundai might look expensive with respect to Maruti. But I do not think that P/E multiple of Hyundai can be compared to that of Maruti. Hyundai deserves a premium like M&M which trades at PE32 levels. Why?Hyundai Motors positions itself as a premium brand compared to Maruti and M&M. Maruti dominates the market with affordable cars. M&M is known for rugged utility vehicles. However, Hyundai’s moat is in advanced features, modern designs, and superior quality across its range.The brand’s attention to technology along with its stylish, well-built cars definitely stands at a premium to Maruti cars.Hence, I will say that Hyundai shares can get a premium valuation. For me, Hyundai shares at a PE ratio of around 25.5 can be a bargain buy for long-term investors (not a recommendation, it my POV). ConclusionHyundai Motor India’s IPO represents a bet on the future of mobility and India’s role in it.Think like a value-oriented investor.It is essential to recognize that Hyundai is at the intersection of major global shifts. Electric vehicles are on the rise which is the need for sustainable transportation.The true value of this investment will reveal itself through Hyundai’s execution in the face of disruptive technologies. Over the next 10-15 years, market fluctuations and competitive pressures will become bigger for all ICE engine based automobile companies. I think, companies like Hyundai are willing to withstand these cycles. Hyundai will balance between sustainable growth with evolving consumer demands.Great companies stays ahead of the curve.Hyundai’s IPO offers a unique opportunity for long-term investors who value steady growth and innovation.Have a happy investing.