Hyundai India aims for growth despite market share erosion, competition, and IPO risks.
Hyundai Motor India (HMI), the second-largest passenger vehicle manufacturer in the country, is gearing up to raise significant capital through an OFS (Offer For Sale). The IPO opens for anchor bids on October 15th, 2024 and the closes on October 17th, 2024. Its parent company, Hyundai Motor Company of South Korea, will reduce its stake from 100% to 82.5%, with further dilution required to bring it below 75% in compliance with regulatory norms.
Read more: Why Korean Giants Are Eyeing India for IPOs?
Competitive Market & IPO Valuation
The Indian Passenger Vehicle market is fiercely competitive. Both Hyundai and its closest competitor, Maruti Suzuki, have experienced gradual market share erosion over the past five years. Reports indicate that HMI’s IPO valuation offers limited comfort compared to Maruti, which holds a stronger position with higher market share, sales volume, and similar profitability.
Despite these challenges, Hyundai is betting on new model launches, including ICE and EV platforms, along with capacity expansion. With the upcoming plant in Talegaon, Maharashtra, Hyundai’s production capacity will reach 10,74,000 units in the next three to four years, laying the foundation for future growth.
Also Read: LG Electronics India Files DRHP for ₹15,000-Crore IPO
Financial Performance
HMI’s sales grew by 8% in FY24, reaching 7,77,876 units. Its portfolio remains dominated by ICE and CNG vehicles, which accounted for 89.2% and 10.6% of sales, respectively, while EVs made up just 0.2%.
Between FY22 and FY24, HMI’s revenue grew by 21.4% to Rs 69,829 crore, while net profit surged 44.5% to Rs 6,060 crore. The company’s EBITDA margin improved to 13.1%, matching Maruti’s, despite intense market competition.
Market Challenges & Investor Outlook
HMI’s market share has declined from 17.6% in FY20 to 14.6% in FY24, which may pressure the company to offer higher discounts to sustain market presence, potentially affecting profitability.
The IPO is priced at a P/E multiple of 26.7, compared to Maruti’s 29.8. Risk-tolerant investors may find Hyundai’s growth strategy compelling, especially with capacity expansion and new product launches on the horizon. In contrast, cautious investors may prefer to observe how the stock performs post-listing.
