Hyundai Motor is set to launch India’s largest-ever IPO on October 15, 2024, making it a highly anticipated event in the stock market. The company, known for its strong brand and dominance in India’s car market, is opening this IPO with a price band between ₹1,865 and ₹1,960 per share. At the upper price band, the IPO size will be around ₹27,870 crore, and the company’s market capitalization will be around ₹1,59,258 crore.
Let’s take a closer look at Hyundai’s performance, its market position, and whether you should consider investing in this IPO.
Hyundai: India’s Second-Largest Car Manufacturer
Hyundai Motor is India’s second-largest car manufacturer, following Maruti Suzuki. It has a wide range of vehicles, from budget-friendly models to premium SUVs, catering to the needs of every type of consumer. The company holds a solid market share and has also built a significant export business. Unlike its competitors, Hyundai has consistently outperformed in several segments due to its extensive product lineup.
Leading the SUV Segment in India
One of the key factors behind Hyundai’s success is its dominance in the SUV market, a segment that has seen significant growth in recent years. Hyundai sold over 3,89,000 SUVs in India, making it the leading SUV brand in the country. The SUV segment is known for higher profit margins compared to other vehicle categories, which has helped Hyundai maintain strong financial health.
While other auto manufacturers are trying to capture more of the SUV market, Hyundai continues to stay ahead in the race.
Strong Margins and Sales Growth
Hyundai has managed to maintain strong sales growth, with SUVs contributing to 63% of its total sales in India. This is a significant lead over Maruti Suzuki, where SUVs account for only 36% of its total sales.
From FY22 to FY24, Hyundai’s compound annual growth rate (CAGR) for its average selling prices (ASPs) was 7.4%. Additionally, the company’s margins have improved by 100 basis points over the same period, thanks to a better product mix and efficient cost management. Hyundai has been relatively insulated from rising commodity prices due to its strong business model.
Reduced Dependency on Imports
Currently, about 20% of Hyundai’s components are imported, with semiconductors making up a significant portion of this. However, with India focusing on boosting domestic semiconductor production, Hyundai’s dependency on imports is expected to decline in the coming years. This reduction will likely lead to further improvement in the company’s margins.
Hyundai’s operational efficiency is another strong point. Its manufacturing plants run in three shifts, which allows it to achieve an asset turnover ratio of 10x, higher than Maruti Suzuki’s 8x.
IPO Valuation and Expected Listing Premium
At the IPO price band, Hyundai’s price-to-earnings (P/E) ratio is 19.3x based on the estimated earnings for FY27. When compared to Maruti Suzuki, Hyundai shares are being offered at a 12% discount based on FY24 trailing P/E. This discount suggests that Hyundai is offering investors value, which could result in the shares listing at a premium.
Moreover, Hyundai’s increasing focus on electric vehicles (EVs) is an important factor to consider. With governments around the world pushing for EV adoption, Hyundai’s investments in this area could drive growth in the coming years, making the stock even more attractive in the long term.
Should You Invest?
Hyundai Motor’s IPO offers an opportunity to invest in a strong, established brand with a dominant market position and clear growth prospects. The company’s strong presence in the SUV market, coupled with its focus on expanding its EV offerings, positions it well for future growth.
However, as with any investment, it’s essential to consider market conditions, the broader economic environment, and your investment strategy before making a decision. If you are a long-term investor looking for exposure to the automotive sector, especially with a focus on SUVs and electric vehicles, Hyundai’s IPO could be a compelling option.
