By Nandan Mandayam
(Reuters) – Hyundai Motor India’s shares fell 6% on debut Tuesday, following a weak response from retail investors to the IPO pricing.
The stock opened at 1,934 rupees on the National Stock Exchange, below the offer price of 1,960 rupees, and was down 4% at 1,882.10 rupees by 5:48 AM GMT, putting the company’s valuation at 1.53 trillion rupees ($18.2 billion).
Hyundai, India’s second-largest carmaker with a 15% market share, aimed for a $19 billion valuation with its record $3.3 billion IPO, which was oversubscribed more than two-fold, mainly by institutional investors. However, retail investors were hesitant due to concerns about potential losses.
Shares of Indian competitors have also dropped recently as car sales slow after two strong years, with consumers delaying purchases amid inflation worries. “Hyundai’s pricing seems to be affecting its performance,” said Arun Kejriwal, founder of Kejriwal Research. “The activity is largely limited to institutional investors, which is poor for an IPO of Hyundai’s stature.”
This marks Hyundai’s first IPO outside South Korea and comes as India’s equity markets have surged. Competing against Tata Motors and Mahindra & Mahindra, Hyundai plans to use funds from its 17.5% stake sale in the Indian unit for R&D and new product launches.
CEO Jaehoon Chang emphasized the collaboration in R&D, design, and manufacturing for Hyundai Motor India’s growth during the listing ceremony in Mumbai.
Seven of India’s ten largest IPOs, including Hyundai India, experienced losses of 5% to 27% on their first day, according to Dealogic. While Hyundai’s valuation is smaller than market leader Maruti Suzuki’s $45 billion, analysts are concerned about the similarities in their price-to-earnings ratios, with Hyundai’s IPO valuing the company at 26 times fiscal 2024 earnings—close to Maruti’s 29.
Nonetheless, some brokerages see long-term potential. Nomura initiated coverage with a “buy” rating and a target of 2,472 rupees, citing Hyundai’s strong SUV focus, which made up 67% of their sales in April to June 2024. Macquarie also rated it “outperform” with a target of 2,235 rupees.
Hyundai India’s COO Tarun Garg highlighted the plan to expand their passenger vehicle lineup by understanding consumer preferences better.
Shares of Maruti and Tata Motors were also down 1%, reflecting trends in the Nifty Auto index.
($1=84.0700 Indian rupees)
(Reporting by Nandan Mandayam in Bengaluru; Editing by Jamie Freed and Sonali Paul)
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