Hyundai Motor India shares saw a steep decline of 7.6% on their debut, trading at 1,822 rupees by mid-morning, down from the issue price of 1,960 rupees. The drop follows a lukewarm response from retail investors, driven by concerns over high valuations and a slowing auto industry.
Hyundai’s Initial Public Offering (IPO), which raised a record $3.3 billion, was India’s largest but failed to meet expectations, giving the company a valuation of 1.48 trillion rupees ($17.6 billion), below its targeted $19 billion.
Key Highlights:
- Retail Hesitation: Despite being oversubscribed by institutional investors, retail investors were wary of high share prices relative to future earnings, leading to lower-than-expected listing gains.
- Industry Slowdown: Hyundai’s domestic sales dropped 2.6% in the April-September period, reflecting the broader slowdown in the Indian auto market.
- Concerns on Valuation: Analysts pointed to Hyundai’s 26x price-to-earnings (P/E) ratio, close to market leader Maruti Suzuki’s 29x, despite Hyundai’s smaller market share.
- Royalty Increase: Hyundai recently increased its royalty payments to its Korean parent from 2.5% to 3.5%, raising some investor concerns, though analysts deem it in line with market standards.
Despite the weak debut, brokerages like Nomura and Macquarie remain optimistic, citing Hyundai’s strong SUV lineup, which represents 67% of its sales. Both firms have issued “buy” and “outperform” ratings with price targets of 2,472 and 2,235 rupees, respectively, highlighting Hyundai’s long-term growth potential.
Inputs: Reuters
Last modified: October 22, 2024
