Hyundai Motor India Ltd, the most successful foreign automaker in a market where others have struggled, has reportedly received approval from the Securities and Exchange Board of India for its initial public offering (IPO), poised to be the largest in the country’s history. Hyundai, India’s second-largest carmaker behind Maruti Suzuki, aims to raise at least $3 billion (around ₹25,000 crore) through the IPO, valuing the company at approximately $18 billion (around ₹1.5 lakh crore).
Currently, the largest IPO in India is the ₹21,008 crore public issue of LIC, launched in May 2022. Hyundai’s IPO will be an offer for sale (OFS) of up to 142 million shares, or a 17.5% stake, by its South Korean parent, Hyundai Motor Company.
Where Hyundai Stands
Hyundai offers investors the chance to buy into a highly profitable passenger vehicle manufacturer, particularly at a time when auto companies are outperforming on the stock market. India is Hyundai’s third-largest revenue generator globally, after the U.S. and South Korea. The company has already invested $5 billion in India and plans to inject an additional $4 billion over the next decade.
Since entering India in 1996, Hyundai has thrived in a market where companies like Ford and General Motors struggled, largely due to its affordable hatchbacks like the Santro. As consumer preferences evolved, Hyundai shifted focus and launched its first locally-made SUV, the Creta, in 2015. The Creta became a significant success, driving much of Hyundai’s profits.
Currently, 66% of Hyundai’s domestic sales come from SUVs, outpacing the industry average. This shift has pushed its operating profit margins higher, reaching 9.5% in FY24 from an average of 7% over FY16-23. However, a 100-basis point increase in royalty could flatten earnings per share (EPS) over FY24-25, according to an ET Prime report. The same report estimates Hyundai’s EPS at ₹72 per share for the nine months of FY24.
If Hyundai is valued at the same forward multiple as Maruti Suzuki (26x FY25 EPS), the company could be worth around ₹1,950. However, considering Hyundai’s superior free cash flows compared to Maruti, it might be valued at a premium. Pricing the 142 million shares at ₹2,000 each could see the IPO raise as much as ₹28,000 crore.
Despite this, Hyundai’s volume growth (both domestic and exports) has been slow, at a compound annual growth rate (CAGR) of just 2.4% between FY14-24. Domestic sales grew at a CAGR of 4.9%, while exports declined by 3.5%. Hyundai has also lagged behind Maruti Suzuki in both volume and revenue growth during this period.
Hyundai’s monthly sales have remained steady since the launch of its small SUV, the Exter, in July 2023. Its next major product, the Creta EV, is scheduled for release in the last quarter of FY25.
Future Outlook
Hyundai has increased its annual production capacity at its Chennai plant to 824,000 units as of March 2023. The company’s new Talegaon plant, acquired from General Motors, will add another 170,000 units in its first phase, raising Hyundai’s total capacity to 994,000 units by FY27.
India is a critical market for Hyundai. As CEO Un Soo Kim stated earlier this year, expanding manufacturing capacity is key to Hyundai’s long-term growth in the country. The IPO will help Hyundai’s parent company execute its strategy of making India a key export hub while also gaining market share in the domestic market.
With the Talegaon plant expected to begin production in FY26, Hyundai plans to use some of the IPO proceeds to boost capacity across its plants in Tamil Nadu and Maharashtra. This includes developing affordable electric vehicles over the next decade, positioning the company to compete with market leader Maruti Suzuki, which is investing $5 billion to double its production capacity by 2031.
Hyundai also plans to regain market share from its growing domestic rivals by launching new SUVs and expanding its EV lineup. The rollout will begin with its first India-made electric vehicle next year and continue with at least two gasoline-powered models by 2026.
As Hyundai shifts towards more premium vehicles, it has seen profit margins rise, but at the cost of market share. Its India market share has dropped from 17.5% to 14.6% in the past four years, while competitors like Tata Motors and Mahindra & Mahindra have made gains. Despite this, Hyundai remains committed to its strategy of selling higher-priced vehicles to boost margins, even as it balances shareholder expectations around market share growth.
The company’s ambitious EV strategy includes launching five new electric vehicles in India by 2030, with plans to transform the country into a regional EV export hub. This aligns with Hyundai’s broader global goal of boosting sales by 30% by 2030, particularly as its market share declines in China and its home market, South Korea.
