Hyundai India (HYMTF) Faces Tepid IPO Launch Amid Investor Concerns

Hyundai Motor India’s initial public offering, the largest in India’s history, experienced a lukewarm reception upon its debut. The stock price dropped nearly 6% from its issue price of 1,960 rupees, reaching a low of 1,844.65 rupees. In this IPO, Hyundai Motor plans to sell 17.5% of its Indian subsidiary to the public, aiming to raise a total of $3.3 billion.

Despite India’s vibrant market environment, analysts expressed concerns over Hyundai India’s valuation, which stands at approximately five times that of its South Korean parent company, posing a risk of overvaluation. This caution was reflected in the stock’s reception by retail investors.

Institutional investors showed interest, but retail investors remained hesitant due to potential overvaluation and the fact that the proceeds from the IPO would go to the South Korean parent company without addressing the declining demand in India’s automotive sector. Analysts from Emkay Global noted that Hyundai India’s strong franchise is limited by the lack of significant new model releases over the next 12-18 months and royalty payments to its parent company, leading to a “reduce” rating.

Conversely, analyst Devi Subhakesan from Investory highlighted the long-term value of Hyundai India’s IPO, suggesting it might not be suitable for investors seeking quick profits. The stock’s decline also underscores the valuation risks amid shifting consumer preferences and intensifying competition in the Indian auto market.

This IPO is one of the few in India that saw a stock price decline on its first day, contrasting the average 39% increase seen in newly listed companies this year. So far, India’s IPOs have raised over $12 billion, outperforming the previous two years. Elsewhere in Asia, markets in Hong Kong and Japan are witnessing notable IPOs with approximately 20 companies set to debut, collectively raising over $8 billion, marking the largest weekly funding volume since April 2022. Investors are watching these IPO trends closely as indicators of the potential continued growth of Asian markets.