Hyundai Motor India goes public in bid to reinvest in regional hub

Hyundai Motor India made a weak debut, closing at some # percent down from its issue price as investors weighed future prospects against announced its business strategy.

From left: Hyundai Motor CEO Chang Jae-hoon, Hyundai Motor Group Executive Chair Euisun Chung, and NSE CEO Ashishkumar Chauhan during a bell-ringing ceremony celebrating Hyundai Motor India's initial public offering in Mumbai, Tuesday. [HYUNDAI MOTOR]

Hyundai Motor India raised $3.27 billion in the country's biggest initial public offering (IPO) on Tuesday as the Korean automaker seeks to bolster its footing in the third-largest automotive market in the world. Euisun Chung, executive chair of the automaker, said that the proceeds will be used for the development of EVs and hybrid cars.

On the first day of trading, Hyundai Motor India made a weak debut on Dalal Street as its Korean parent company's first overseas subsidiary to go public.

With a pricey valuation and lukewarm interest from retail investors, Hyundai Motor India's share price tumbled on the first day of trading, plunging by over 7 percent mid-trading from its issue price.

The automaker's subsidiary began trading on India's two largest stock exchanges, the National Stock Exchange of India (NSE) and the Bombay Stock Exchange (BSE), on Tuesday. The $3.27 billion IPO marked the largest public offering in the country's history.

Its listing price has been discounted by 1.3 percent to 1,934 rupees ($23) per share from the issue price, which was set at the upper end of its proposed price range. The company offered a total of 142,194,700 shares, representing a 17.5 percent stake, sold by parent Hyundai Motor in the IPO. Hyundai Motor India closed at 1,819.60 rupees on the NSE, down 7.16 percent from the issue price, after plunging as low as 1,807 rupees mid-trading. On the BSE, it dropped to as low as 1,807.05 rupees, before closing at 1,820.4, down 7.12 percent.

Emkay Global Financial Services cited Hyundai’s lack of major launches over the next year and a half, muted capacity growth and high royalty payments as possible growth-restricting factors.

However, some analysts remain optimistic about the company’s long-term potential.

“Despite the discounted listing, Hyundai Motor India’s strong fundamentals, being the second-largest passenger vehicle manufacturer in India, and its strategic focus on the SUV segment continue to support its long-term growth prospects,” said Shivani Nyati, Head of Wealth at Swastika Investmart, in a post-listing review note.

“Investors with a long-term perspective could consider holding the stock,” wrote Master Capital Services in its note, adding that its “future performance will most likely be driven by the company’s competitive market position and product enhancements.”

Hyundai Motor India is the second carmaker to be listed in the country and the first overseas IPO by a Hyundai Motor Group company. India is the world's third-largest automotive market, following China and the United States.

"Hyundai Motor India has grown to become part of the country since it first entered the Indian market [in 1996],” said Hyundai Motor Group Executive Chair Chung during an IPO celebration at the NSE in Mumbai, Tuesday.

“As we knew that India is the future, we have steadily increased investments in the country and expanded R&D capabilities, creating more than 250,000 new jobs and leading a variety of corporate social responsibility activities,” Chung said, promising an advanced corporate governance system and a transparent decision-making process with improved integrity.

Funds raised through the IPO will be invested in future growth segments and advanced technology development involving EVs, hydrogen fuel cells, software and more, according to Chung.

Hyundai Motor is currently refurbishing its production facility in Pune, which the company acquired from General Motors last year. With the addition of its plants in Chennai, the company aims to secure a production capacity of 1.1 million units by 2028.

As Hyundai aims to utilize its Indian operation as a strategic hub for expansion into emerging markets, the carmaker plans to launch EV models in the country, localize its EV supply chain and invest in advancing the domestic EV infrastructure.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]