Hyundai Motor India IPO sets record with $3.3 billion listing today

Shares of Hyundai Motor India Ltd. are set to trade on the Mumbai exchange on Tuesday, marking a significant milestone with the largest-ever initial public offering (IPO) in South Asia.

The $3.3 billion IPO places Hyundai Motor India in the spotlight and sets the stage for a wave of high-profile listings in the Indian market.

This development unfolds amid the busiest week for Asia-Pacific listings in over two years, as companies and investors rush to complete deals ahead of the November 5 US election.

The IPO valued the Indian subsidiary of South Korea’s Hyundai Motor Co. at approximately $19 billion, with the parent company selling a 17.5% stake in the Indian unit.

IPO oversubscribed, but retail interest underwhelms

While the IPO was oversubscribed more than twice, the book-building process took longer than expected.

Institutional investors accounted for the bulk of the demand, especially on the final day of the sale.

However, retail investors only purchased half of the shares allocated to them, reflecting a more cautious sentiment.

Analysts attribute the weaker retail participation to concerns about the parent company taking all IPO proceeds and cooling demand in India’s auto market.

This contrasts with the frenzy seen in smaller IPOs, where retail enthusiasm has significantly boosted subscription levels.

Hyundai’s trading debut may face valuation challenges

The Hyundai IPO faces challenges as it begins trading at 10 a.m. on Tuesday, particularly regarding its valuation.

The automaker’s stock is priced five times higher than its Korean parent, though its valuation remains in line with Indian peers like Maruti Suzuki India Ltd.

New listings in India have typically performed well, with shares rising 39% on average on their first day this year.

IPOs exceeding $500 million have seen even stronger gains, averaging 66%, but Hyundai's valuation concerns may temper such expectations.

India’s auto market offers long-term growth prospects

India’s economic growth and expanding middle class present significant opportunities for automakers.

The car market in the country is expected to reach 20 million units by 2047, according to Suzuki Motor Corp.’s Executive Vice President Kenichi Ayukawa.

In the fiscal year ending March 2024, Indian car sales totaled 4.2 million passenger vehicles, demonstrating steady demand.

India’s IPO market surges beyond expectations

With Hyundai’s listing, Indian IPOs have raised over $12 billion so far in 2024, surpassing volumes from the previous two years.

However, the total remains short of the record $17.8 billion raised in 2021.

Hyundai’s IPO alone brought in 279 billion rupees, making it the largest-ever IPO in India by local currency terms, surpassing Life Insurance Corporation of India’s 2022 listing, which raised 205.6 billion rupees.

Other high-profile IPOs are in the pipeline, including Swiggy Ltd. and NTPC Ltd.’s renewable energy arm, signaling continued momentum in India’s market for new listings.

Asia-Pacific IPO activity hits two-year high

Hyundai’s listing coincides with a surge in Asia-Pacific IPOs, with around 20 companies set to debut this week, potentially raising over $8 billion. This marks the largest weekly volume for the region since April 2022.

Notable upcoming listings include Tokyo Metro Co., which plans to start trading on Wednesday after a $2.3 billion offering.

The increase in IPO activity reflects both investor enthusiasm and a race to finalize deals before geopolitical events, such as the US presidential election, introduce potential market volatility.