Is Hyundai Motor India IPO Good or Bad - Detailed Review
29 September 2024
7 min read
00:00 / 00:00
The second largest carmaker in India, Hyundai Motors has gotten approval from SEBI for its initial listing offer which will be one of the largest listings in India with an issue size of Rs.25,000 crores. The company has filed its draft red herring prospectus (DRHP) with the regulator in June and with this, we will try to understand if the Hyundai Motor India IPO is Good or Bad and what we can expect from Hyundai Motor IPO.
In this article, we'll provide a comprehensive Hyundai Motor India IPO review, diving into its business operations and fundamental analysis to help you make a well-informed investment decision.
Hyundai Motor India IPO - Company Overview
Hyundai Motor India is a part of Hyundai Motor Group which is the third largest auto original equipment manufacturer (“OEM”) in the world based on passenger vehicle sales in CY23 (Crisiil Report). In India, the company has maintained its position as the second-largest auto OEM in the passenger vehicle segment in terms of domestic sales volumes since FY09.
The company portfolio comprises 13 models that range from various segments, including sedans, hatchbacks, sports utility vehicles (SUVs), and battery electric vehicles (EVs), catering to the diverse preferences of consumers in India. Furthermore, the company also manufactures key components like transmissions and engines, further showcasing its integrated approach to automotive production.
The company conducts its business through its three manufacturing plants of which two operate in Irrungattukottai, Sriperumbudur in Tamil Nadu; and one plant at Talegaon in Pune in Maharashtra, which is under redevelopment. For the purpose of its domestic sales, the company has partnered with 363 dealer companies as of December 31, 2023.
Furthermore, the company exports its passenger vehicles and has been its largest exporter in India from Fiscal 2005 to the first 11 months of FY24 (Crisil Report). Since 1998 and up to FY24, the company has cumulatively sold nearly 12 million passenger vehicles in India and through exports.
Apart from the sale of its vehicles, the company offers high-quality service through its dealer showrooms, service centers, and digital platforms. As of December 31, 2023, customers can browse, test drive, and buy vehicles from 1,366 sales outlets across 1,031 cities and towns in India, or conveniently purchase online through the "Click to Buy" section on Hyundai’s website or the "myHyundai" app. Furthermore, the company provides after-sale services through its 1,550 service centers spread across 962 locations in India.
Hyundai Motor India IPO - Financial Overview
The following table shows you the key financial details of Hyundai Motor India for three financial years:
Metric | Dec 31, 2023 (9 months) | FY23 | FY22 | FY21 |
Financial metrics | ||||
Revenue from operations (in Rs cr) | 52,157.91 | 60,307.58 | 47,378.43 | 40,972.25 |
Domestic (in %) | 76.34 | 76.59 | 78.8 | 81.21 |
Exports (in %) | 23.66 | 23.41 | 21.2 | 18.79 |
Profit for the period/year (in Rs cr) | 4,382.87 | 4,709.25 | 2,901.59 | 1,881.16 |
Profit for the period/year margin (in %) | 8.22 | 7.67 | 6.05 | 4.54 |
EBITDA (Excluding Other Income) (in Rs cr) | 6,601.71 | 7,548.79 | 5,468.09 | 4,245.62 |
EBITDA Margin (Excluding Other Income) (in %) | 12.67 | 12.67 | 11.58 | 10.36 |
EBIT (Excluding Other Income) (in Rs cr) | 4,906.69 | 5,358.91 | 3,316.50 | 2,272.50 |
EBIT Margin (Excluding Other Income) (in %) | 9.51 | 8.89 | 7 | 5.55 |
Net Worth (in Rs cr) | 19,777.92 | 20,054.82 | 16,856.26 | 15,311.34 |
Return on Capital Employed (in %) | 27.19 | 28.75 | 20.37 | 15.38 |
Operating metric | ||||
Total sales volume (in numbers) | 584,159 | 720,565 | 610,760 | 575,877 |
Domestic (in numbers) | 454,404 | 567,546 | 481,500 | 471,535 |
Exports (in numbers) | 129,755 | 153,019 | 129,260 | 104,342 |
Sales outlets (in numbers) | 1,366 | 1,366 | 1,282 | 1,167 |
Service outlets (in numbers) | 1,550 | 1,498 | 1,422 | 1,307 |
If we take a look at the financials of Hyundai Motor India, we can see that the company has increased its revenue, from Rs.40,972.25 crores in FY21 to Rs.60,307.58 crores in FY23 with the total cars sold increasing from 5,75,877 to 720,565 during the same duration. Of the total operating revenue, 76.34% was contributed by domestic sales.
Similarly, its profits have increased from Rs.1,881.16 crores in FY21 to Rs.4,709.25 crores in FY23 with the final margins increasing from 4.54% to 7.67% during the same duration. The rising margins along with the increasing profits suggest an improvement in the company’s efficiency and reduction in its manufacturing costs.
As of the 9 months ended of FY24, the company has generated an operating revenue of Rs. 52,157.91 crores, with the net profit standing at Rs. 4,382.87 crores at a net margin of 8.22%.
past three years. Furthermore, the company’s ROCE of 28.75% as of FY23 suggests that the company is using its resources efficiently to generate income.
Hyundai Motor India IPO - Industry Overview
The passenger vehicle segment in India has witnessed significant growth in recent years, reaching a vehicle sale of 3.4 million in FY19. This growth was driven by various factors including, an increase in disposable incomes and new model launches, stable cost of vehicle ownership, as well as rising traction for SUVs.
Between FY19 to FY24, domestic passenger vehicle sales volume in India increased at a CAGR of 5. This growth was achieved despite the sales contraction (at 10% CAGR) witnessed during FY19 to FY21. From the low base of FY21, passenger vehicle sales have bounced back and have grown at a healthy pace to reach 3.9 million vehicles in FY23. In FY24, the industry is expected to have grown by 8.4% to reach the historic high of 4.2 million units.
Hyundai Motor India IPO - Peer Comparison
The company faces intense competition in India from both domestic and multinational automobile manufacturers, with Maruti Suzuki, Hyundai, Tata Motors, and Mahindra & Mahindra controlling around 80% of the market. In recent years, competition has increased due to competitively priced and feature-rich vehicle launches by all players, including new entrants. In the export market, competitors include Maruti Suzuki, Kia Motors, Volkswagen, Nissan, and Honda.
The following table gives you a comparison of Hyundai Motor India with its listed industry peers as of FY23:
Name of the company | Revenue from operations (Rs crores) | EPS (Rs) | NAV (Rs) | RoNW |
Hyundai Motor India Limited | 60,307.58 | 57.96 | 246.82 | 23.48% |
Maruti Suzuki India Limited | 1,17,571.30 | 271.82 | 2,045.53 | 13.29% |
Tata Motors Limited | 3,45,966.97 | 6.3 | 118.34 | 5.33% |
Mahindra & Mahindra Limited | 1,21,268.55 | 92.41 | 506.6 | 18.24% |
From the above table, you can see that, despite being the second-largest domestic car manufacturer, Hyundai Motor India stands last in terms of operating revenue. However, the company has reported a RoNW of 23.48% during FY23 which is the highest in comparison to its peers and also indicates that the company is effectively using the shareholder's capital to generate profits
Hyundai Motor India IPO-Objects of the Issue
As the entire IPO of Hyundai Motor India is conducted through an offer for sale, the company will not receive any proceeds from the IPO. The entire proceeds of the IPO will be received by the selling shareholders of the company after deducting the offer-related expenses and relevant taxes thereon.
Hyundai Motor India IPO Details
Hyundai Motor India IPO Date
The exact dates for Hyundai Motor India IPO are yet to be announced but the IPO is expected to be open for subscription in October and is also expected to list in October.
Hyundai Motor India IPO Issue Price
The issue price of Hyundai Motor India IPO is yet to be announced
Hyundai Motor India IPO Size
Hyundai Motor India is offering a total of 142,194,700 shares for this IPO which will be completely through an offer for sale.
Hyundai Motor India GMP
Many investors look at the Grey Market Premium (GMP) before applying for the Hyundai Motor India IPO. The GMP gives an idea of market sentiment and can hint at the possible listing price. However, it should be noted that it does not reflect how financially strong a company is. Thus, it is important to analyze the stock financially before investing in it.
Is Hyundai Motor India IPO a Good or Bad Investment? Final Thoughts
Hyundai Motor India IPO Review: The Hyundai Motor India IPO presents a promising investment opportunity, thanks to its position as the second-largest carmaker in India, steady revenue growth, and solid profitability. Hyundai’s diverse vehicle lineup, including electric cars and its strong presence in domestic and export markets further enhance its appeal. However, it faces stiff competition from established Indian brands like Maruti Suzuki, Tata Motors, and Mahindra & Mahindra, along with global players such as Kia and Volkswagen.
While the IPO shows strong potential based on Hyundai’s market position and financial performance, investors should conduct their own research and carefully assess all factors before making any investment decisions.
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