Hyundai Motor India’s Shares GMP Plummeted by 75%, as IPO Announced

Hyundai Motor India Ltd’s upcoming Initial Public Offering (IPO), the first by an automobile company in over two decades, has sparked significant interest. The IPO, which is entirely an offer-for-sale (OFS) of existing shares, is set to raise approximately ₹28,000 crore, making it one of the largest public issues in India. However, despite the initial excitement, the Grey Market Premium (GMP) for Hyundai Motor India’s shares has plummeted by 75% in the past two weeks.

The GMP, which reflects unofficial investor sentiment ahead of an IPO, has fallen from ₹570 in late September to ₹140-145 as of early October. This sharp decline suggests that demand for Hyundai Motor India’s shares in the grey market may wane. The price band for the IPO has been set between ₹1,865 and ₹1,960 per share, valuing the company at ₹1.6 lakh crore.

Despite the falling GMP, Hyundai Motor India’s financial performance remains robust. The company recorded a net profit of ₹6,060 crore for the financial year ending March 2024, reflecting a 28.7% increase from the previous year. Revenue grew by 15.8% year-on-year to ₹69,829 crore, underscoring the company’s strong market position. Hyundai is the second-largest carmaker in India, trailing only Maruti Suzuki, and contributes 6.5% to its parent company Hyundai Motor’s global revenue.

The IPO is expected to list with a modest premium of around 7%, though market conditions could influence the outcome. Tarun Garg, Chief Operating Officer of Hyundai Motor India, expressed optimism about the IPO’s prospects, citing strong growth in the Indian market as a driver for higher valuations of Indian units of multinational corporations.

Key details of the IPO include that it is entirely an OFS, meaning Hyundai Motor India will not receive any proceeds from the offering. The IPO opens for subscription on October 15 and closes on October 17, with anchor investors set to bid on October 14.

As the first automobile IPO in India since Maruti Suzuki’s listing in 2003, Hyundai’s public issue has drawn significant attention from investors. However, the declining GMP highlights potential uncertainties in market sentiment ahead of the listing, scheduled for October 22.

This IPO presents an opportunity for investors to tap into one of India’s leading automobile companies. However, the drop in GMP suggests that caution may be warranted as market volatility persists.