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• Hyundai Motor India Ltd. has filed for an IPO, aiming to raise up to $3 billion.
• The decision to list is influenced by Hyundai's strategy to address the "Korea discount".
• Hyundai is the second-largest carmaker in India with a market share of 14.9% as of FY24.
   

The Indian unit of South Korea’s Hyundai Motor Co. has submitted a request for an initial public offering (IPO) to India’s financial regulatory body, marking a significant milestone for the car manufacturer on Dalal Street, Mumbai’s equivalent of Wall Street.

This move comes more than 20 years after Hyundai first entered the Indian market.

Details of the IPO

According to the draft red herring prospectus filed with the Securities and Exchange Board of India (SEBI) and reviewed by NDTV Profit, Hyundai Motor India Ltd.’s (HMIL) IPO includes an offer of 142 million shares, representing a 17.5% stake in the company.

Hyundai Motor Company will not be issuing any additional shares in this offering. If the IPO succeeds, it will become the largest public offering in India’s history, potentially raising between $2.5 billion to $3 billion.

Hyundai’s journey in India: from unknown to dominant player

As Hyundai Motor India prepares for one of the largest Initial Public Offerings (IPOs) in the country, we take a look at the Korean carmaker’s nearly 30-year journey in India from an unknown name to becoming the country’s second-largest passenger vehicle brand.

HMIL is scheduled to file the red herring prospectus for its IPO later on Friday with the country’s security and commodities regulator Securities and Exchange Board of India (SEBI).

The Indian arm of the Korean manufacturer is expected to raise between $2.5-$3 billion, which could lead to a dilution of about 17.5% of the parent company’s stake in HMIL, Reuters reported. HMIL is India’s second largest passenger vehicle manufacturer with a substantial market share of 14.9% as of FY24.

Notably, HMIL’s

IPOs will be the first initial share sale by an automaker in India since the country’s homegrown Maruti Suzuki India listed itself on the bourses in the year 2003.

1996: Hyundai’s launch in India

Hyundai arrived on the India scene in the year 1996 and set up a plant near the southern Indian city of Chennai.

Up till then, the Indian market, which had only recently began to experience the consumerist joys of globalisation after the 1991 reforms of the country opened it up to global trade, remained dominated by popular automobile manufacturers like the Maruti, Hindustan Motors, Premier Automobiles, etc.

Maruti virtually held a monopoly over the Indian automobile market with its Maruti 800 car, and the road to acceptance and popularity for Hyundai, hitherto an unknown brand for India, could not have been easy.

1998: Hyundai’s Santro and Shah Rukh Khan’s endorsement clicks

HMIL launched its first car, the ‘Santro’ in India in the year 1998 with the car making its world debut in the country. Within weeks of its arrival on the Indian market, the car became a runaway success.

Marketed as ‘The Complete Family Car’, the Santro would find itself pitted against the entrenched brands of Maruti 800 and Tata Indica.

To deliver the message home amongst the company’s target consumer, Hyundai decided to tie up with Shah Rukh Khan- the widely popular Indian actor who, with his charming screen-presence and amiable persona, appealed to all generations of the Indian society, making him the perfect face for the brand.

Ad-films of SRK with the cult red Santro stormed Indian televisions and soon enough, Santro became a name that most aspirational Indian households became familiar with.

This was also the beginning of the longest-running celebrity-brand partnerships in India as SRK is still associated with Hyundai.

HMI emerges as second largest automaker in India, then Small Car Export Hub for Hyundai

Within less than six months of the Santro’s launch in September, 1998, by March 31, 1999, HMIL had already become India’s second-largest automaker, poised for further success in the growing Indian market.

Five years after it launched the Santro and other brands like the Accent, Sonata etc., the HMIL had become a hub for small car export for its parent with exports to Latin America, Algeria and others.

By March, 2004, Santro crossed the 1 million mark in annual sales becoming the first Indian car in its segment to do so.

28 years later, an IPO to enhance valuation; address the “Korea Discount”

Over the years, India has become Hyundai’s third largest revenue generator after the US and the South Korea and its decision to list itself stems from a need to capitalise on the growing market potential in the subcontinent, and to enhance its valuation.

According to Motilal Oswal Financial Services,

“The decision to go public is also influenced by Hyundai’s strategy to address the “Korea discount,” a term used to describe the lower valuation multiples of South Korean firms compared to their international counterparts. By listing its Indian arm, Hyundai aims to unlock higher valuations and attract a broader investor base.”

Potential benefits and risks for investors

Investors in the Hyundai Motors IPO can anticipate several potential benefits. Hyundai’s strong market leadership as the second-largest carmaker in India, coupled with its successful SUV lineup, provides a solid foundation for continued growth.

The company’s consistent revenue and profit growth further enhance its reliability as an investment.

Additionally, Hyundai’s substantial investments and modernization plans reflect a long-term commitment to the Indian market, which is the third-largest for Hyundai Motor Group globally.

However, there are also risks to consider. Market volatility amid broader economic factors could impact the company’s performance.

Intense competition from Maruti Suzuki and Tata Motors could also affect Hyundai’s market share and profitability.

The automotive industry is highly competitive, and maintaining a leading position requires continuous innovation and adaptation to changing consumer preferences.

Historical context and market impact

The IPO will be the first initial share sale by an automaker in India since Maruti Suzuki India listed itself in 2003. Hyundai’s entry into the Indian market in 1996 came at a time when India was just beginning to open up to global trade following the 1991 economic reforms.

The success of the Santro and subsequent models established Hyundai as a significant player in the Indian automotive industry.

Hyundai’s consistent performance over the years, coupled with strategic expansions and investments, has solidified its position in the Indian market.

The company’s decision to list its Indian unit is seen as a move to capitalize on the growing market potential and enhance its valuation.

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