The success of Hyundai Motor India Limited’s India’s largest-ever initial public offering was due to a key factor: strong response from qualified institutional buyers (QIBs). But this year, the portion set aside for retail investors who drove demand in the primary market was also not fully subscribed.
As per the last subscription data on NSE, QIBs or large institutions bid for 6.97 times the shares earmarked for the category. Retail investors’ enthusiasm fades – bidding up 2,00,000—means subscription for the category lagged only 0.5 times.
This portion was allotted to non-institutional investors who bid from 2,00,000 10,00,000, 0.65 times were subscribed.
What is surprising is how the gray market premium has reduced.
“Grey Market Premium When Hyundai Motor India had announced its IPO 1,001 and now it has reduced to just 1,001 10,” said Krishna Patwari, founder of Wealth Wisdom of India, an online platform that facilitates trading in unlisted, pre-IPO and delisted stocks.
This steep decline suggests that expectations of listing gains are minimal, which probably explains the lack of interest from retail investors.
Overall the issue was subscribed 2.37 times.
Unsold shares from retail and non-institutional categories will be offered to QIBs.
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He said, when retail investors put money into IPOs, they often rely on the gray market premium, which is generally based on the higher end of the IPO price band, to understand the potential listing gains. Additionally, he pointed out, given the size of the issue, the chances of achieving allotment are high, resulting in the capital being locked up for a long time without any opportunity for listing profits.
The IPO of Hyundai Motor India, the Indian subsidiary of South Korea’s Hyundai Motor Group, was open for bidding from October 15 to October 17, with the price band set at Rs. 1,865 more 1,960.
According to Narendra Solanki, head of fundamental research-investment services at Anand Rathi Shares and Stock Brokers, the valuation of the IPO was higher than estimates, which contributed to low interest among retail investors. In contrast, QIBs, often represented by mutual funds, typically have longer holding periods – about a year or more – and do not prioritize all listing gains. “This explains the strong interest of QIBs,” he said.
Overall, analysts believe Hyundai Motor India’s fundamentals are strong.
“At the upper band the company would trade at around 26x FY24 earnings and around 16.5x FY24 EV/Ebitda, which is at a discount to Maruti Suzuki,” said a report by Elara Securities (India).
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The brokerage said Hyundai Motor India is the second largest passenger vehicle manufacturer in India by volume, with a market share of 14.6% as of FY24, and one of the top 3 contributors to Hyundai Motor’s global sales with around 18%. Is. The carmaker plans to launch four new EV models in India, starting with the Creta EV in Q4FY25.
it IPO worth Rs 27,870.16 crore, largest ever in India, surpasses previous record Life Insurance Corporation of India has Rs 21,000 crore. This is the first IPO by a carmaker in the country since Maruti Suzuki India Limited’s offering in 2003.
Also read: Hyundai Motor India’s IPO to help parent move beyond ‘Korea discount’
