Automaker Hyundai Motor India has filed a preliminary application for initial public offering (IPO) with capital markets regulator SEBI. The company is going to raise a fund of 25 thousand crore rupees through this, and this is likely to be the biggest ‘mega-IPO’ in the country so far. Let’s know about this upcoming ‘Mega-IPO’.
How many shares will Hyundai sell?
The IPO of the subsidiary of the South Korean company will be the first time any automaker has tried the country’s capital market in the past 20 years. Before this, the IPO of Maruti Suzuki Company came in 2003. After this open share sale, Hyundai’s market value is estimated to go up to Rs 1.5 lakh crore. After the approval of the draft proposal filed with SEBI, the company is likely to hit the ‘mega-IPO’ market. Hyundai Motor India to sell 17.5 percent stake in South Korean parent company Hyundai is the second largest automobile manufacturer and exporter in the country after Maruti Suzuki. The company will not sell new shares through IPO. About 14.22 crore shares will be sold through OFS. That is, the stake from the promoters will be sold through a partial share sale (Offer for Sale – OFS). Existing shareholders will dilute their equity stake in the company and sell it to retail and institutional investors through an IPO. In this, 50 percent shares will be reserved for qualified institutional investors, 35 percent shares will be reserved for retail investors and the remaining 15 percent shares will be reserved for non-institutional investors.
Why did Hyundai decide to list?
Hyundai has taken this step to capitalize on the growing market potential in India. The main objective is to increase the valuation of the company. South Korea’s Hyundai has a low valuation compared to other passenger car manufacturers globally. is used to It plans to get listed on the Indian stock market and achieve high valuation. It also aims to attract a wider investor base and thereby recover value in Indian business. Given the optimism in the Indian capital market, the company believes that now is the right time for the promoters to partially dilute their stake. The company’s operations in India are growing faster than the rest of the world and the listing will further enhance the value.
How does earnings compare to other companies?
Hyundai has invested $5.04 billion i.e. around Rs 29,740 crore in its India business since inception till the end of December 2023. The annual revenue of Hyundai Motor India Limited has stood at Rs 59,761 crore. Her total assets are Rs 19,778 crore. Hyundai Motor India’s performance in the nine months ending December 2023 has been remarkable. Its revenue during this period was Rs 52,157.9 crore. The company had a profit of Rs 4,382.87 crore. The company’s earnings before interest, tax, depreciation and amortization stood at Rs 6,610.7 crore in the nine months of FY2023-24. The total assets of the South Korean company during this period were Rs 19,777.91 crore.
How does it compare to other car companies?
Hyundai India’s revenue at the end of FY23 was Rs 60,307.58 crore. Hyundai’s revenue and profitability are low compared to other automakers listed on the Indian stock market. Maruti Suzuki India, which exclusively manufactures passenger vehicles, reported revenue of Rs 1,17,571 crore at the end of FY23. Tata Motors earned Rs 3,45,967 crore and Mahindra & Mahindra earned Rs 1,21,268 crore. Hyundai India’s earnings per share (EPS) for 2023 was Rs 57.96. Among them, Maruti Suzuki was Rs 272.82, Tata Motors was Rs 6.3 and Mahindra was Rs 91.96.
What are the risks to consider?
In the draft red herring prospectus submitted by the company to capital markets regulator SEBI, the company has disclosed certain risks associated with its business. As follows:
1. Two of his group companies, Kia Corporation and Kia India Private Limited, are both in the same business line, which may create a conflict of interest and adversely affect their business.
2. Hyundai’s Chennai plant currently manufactures passenger vehicles and spare parts only. Any interruption in the manufacturing plant at Talegaon or any production stoppage for any reason after the production plant at Talegaon is operational, may adversely affect the production capacity, operations and financial condition of the Company.
3. Non-availability, reduction or elimination of government incentives may affect the financial condition, performance of the Company’s business. Cash flow may also be adversely affected. Hyundai Motor India is given many concessions by the Government of India and State Governments. The company benefits from several incentives, including subsidized electricity, tax concessions, investment promotion grants and customs duty concessions. However, this incentive may be reduced due to policy changes.
4. The company sells a large number of vehicles in the SUV category in India. The SUV category accounts for a large share of the company’s revenue. Any sales tax impact on SUV passenger vehicles in the future or any reduction or disruption in demand therefor could adversely affect the Company’s earnings.
5. Hyundai’s vehicle parts such as trims, engines and transmissions are manufactured domestically and abroad. Materials such as steel are produced through a combination of foreign suppliers. Supply may be affected if geopolitical tensions arise. An increase in the cost of spare parts (materials) may adversely affect its business.
What are the benefits for investors?
Only Maruti Suzuki India, which is listed on the capital markets, manufactures passenger vehicles. Now Hyundai Motor India is a good opportunity for investors. The other two listed companies, Tata Motors and Mahindra, which manufacture passenger vehicles as well as commercial vehicles, also have other businesses. Hyundai has shown strong growth over the past few years. Hyundai’s earnings per share increased from Rs 23.15 in FY 2020-21 to Rs 57.96 in FY 2022-23. Hyundai has a bright future due to strong cash flow, product development, excellent marketing and sales.
How does ‘E-V’ emphasize price competitiveness?
Hyundai Motor India is looking to increase competitiveness on the price front of electric vehicles (EVs) in India, focusing on developing local manufacturing capacity and building a local supply chain for key components such as cells, battery packs, power electronics and drivetrain. It plans to launch four EV models in the future, with the Creta EV in the last quarter of the financial year around the ‘IPO’ date, which will be ideal in each price segment.
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