Hyundai Motor India Limited (HMIL), the renowned Korean car manufacturer, plans to sell approximately 17% of its stake in its Indian subsidiary through an initial public offering (IPO).

This IPO, potentially the largest in India’s history, aims to raise up to Rs 25,000 crores (around $3 billion), valuing the company at approximately $18 billion, or Rs 1.5 lakh crores. The shares will be listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

However, unlike many other major IPOs, HMIL has not reserved any shares for its approximately 5,500 employees or offered any discounts.

Advertisement

According to HMIL’s draft red herring prospectus (DRHP) filed with SEBI on Friday (14 June, 2024), the public issue involves an offer for sale of 142.2 million equity shares priced at Rs 10 each, amounting to a 17.5% stake reduction by promoter Hyundai Motor.

HMIL has allocated 50% of the shares to qualified institutional buyers (QIBs), including anchor investors, 35% to retail individual investors, and the remaining 15% shares to non-institutional investors.

In comparison, when LIC launched its Rs 21,000 crore IPO in 2022, the largest IPO to date it reserved 1% of the shares for its employees and offered a Rs 45 discount per share.

Similarly, Coal India, General Insurance Corporation, and SBI Cards either provided discounts to their employees or reserved a small portion of the shares for them.

Why is Hyundai Launching its IPO?

Hyundai aims to capitalize on India’s growing market potential, enhance its valuation, and address the “Korean Discount,” which refers to the lower valuations of South Korean firms compared to their international counterparts.

By listing its Indian subsidiary, Hyundai seeks to achieve higher valuations and attract a wider investor base.

According to the draft red herring prospectus (DRHP), this is an offer for sale (OFS) by the existing promoters, intended to unlock value in the Indian business.

Also Read: Educational Loan Provider Avanse Financial Services Plans Rs 3,500 Crore IPO; Details Here

Hyundai has invested $5.04 billion (about Rs 29,740 crore) in its India business since its start until December 2023.

HMIL’s FY2023 financials reflect a profitable business established over two decades, with annual revenue nearing Rs 59,761 crore and a net worth of Rs 19,778 crore.

Given the optimism in the Indian equity markets, the company believes it is an ideal time for the promoters to partially dilute their stake.

Hyundai’s India operations have been growing faster than its global counterparts, and listing would enhance value recognition.

Want to learn the art and science of managing your money? The 1% Club can help. Details here

Disclaimer: The above content is for informational purposes only. Please consult a SEBI-registered investment advisor before investing.