Hyundai Motor gearing up to drive into Indian capital market

The Indian unit of Korea’s Hyundai Motor is likely to file a draft red herring prospectus (DRHP) with market regulator Sebi over the next two weeks, initiating the process for an initial public offering, said people familiar with the matter.If successful, this would mark the first IPO by an automaker in India in more than two decades since the listing of the country’s largest carmaker Maruti Suzuki in 2003.

After filing the DRHP, the management of Hyundai Motor India is likely to commence investor roadshows in India and overseas starting next month, an investment banker said. The person declined to be named as the ongoing talks are confidential.

Sebi is expected to give its approval within 60-90 days after the DRHP filing, suggesting that Hyundai Motor India’s IPO could potentially hit the market in September or October.

The company has hired investment bankers – Citibank, Morgan Stanley, Kotak Mahindra, HSBC, and JPMorgan to manage the IPO.

Hyundai Motor India did not respond to ET’s queries.Hyundai would be seeking to tap a runway rally in the Indian equities market, which delivered an annual return of 14% over the last decade, ranking it among the top five best-performing markets globally. ET reported this February that Hyundai is targeting a valuation of $22-28 billion for the Indian subsidiary and is considering selling a 15-20% through the IPO, which would be entirely an offer for sale by the Korean parent.

A senior fund manager at a top domestic fund said if Hyundai manages to get its desired valuation, it could lead to a rerating of the Indian automobile sector, particularly benefiting Maruti Suzuki, besides enhancing the domestic auto market’s depth.

In the absence of too many pure play listed carmakers, Hyundai’s closest rival among domestically listed firms is Maruti Suzuki, an analyst at a domestic brokerage said, adding Hyundai’s valuation is likely to be at a steep premium to Maruti and for a reason.

“Over the last few years, Hyundai has really capitalised the growing preference for SUVs seen in the Indian market,” said the analyst. Compared to Maruti, Hyundai has been a lot more proactive with regards to introducing new models, latest technologies, and vehicle features. This has helped it command a better pricing power and fortify its premium positioning, he said.

The share of SUVs in Hyundai’s total sales stood at a record 67% in May, the company’s chief operating officer Tarun Garg said in a monthly sales call with the media earlier this month. The company’s SUVs range includes Exter, Venue, Creta, Alcazar, Tucson and Ioniq 5.