India’s biggest IPO ever has flopped. Shocker. Or is it?
Its primary markets are in full-on comedy mode right now: a $1.42 million IPO for a company that owns two motorcycle showrooms in New Delhi was oversubscribed by more than 400 times. Hyundai India’s $3.3 billion IPO? It was oversubscribed only 2.37 times.
WOT?
You could argue that the flop was written in the stars for India’s second-largest carmaker. Its parent is pretty much shipping off all those sweet IPO $$$ back to Korea; car demand in India is hitting the brakes; and sky-high valuations are sending individual investors running for the hills.
These runners… err… individual investors, the real driving force behind this year’s IPO mania, basically ghosted Hyundai, snapping up just half of their allocation. Institutional investors aka banks and asset managers tried but even that was not enough.
The stock fell 5% on Tuesday morning – by far the worst showing for a big IPO in a while.
Rupees to Won
- Hyundai India’s valuation is five times bigger than its parent back in Seoul, but somehow in line with rival Maruti Suzuki India’s 30 times forward earnings.
- This is not sustainable – especially in a market where sales are slumping (FWIW, all auto stocks were down in Mumbai on Tuesday morning).
- Adding to the noise, the company also disclosed that it has shelled out $2.17 billion in dividends to its parent over the past three years.
- In the year of the IPO, these payments will total $1.83 billion.
The IPO might’ve been a total dud after all the hype, but does that mean Hyundai’s not a solid “buy” going forward? Not exactly.
Forget the IPO flop for a second. Hyundai’s still the second-largest carmaker in India, a country with a China-sized population but four times fewer cars on roads.
It is also not taking the market for granted. There are plans to launch six EVs by 2025, while Maruti, the market leader, plays catch-up, aiming for the same by 2030.
The numbers don’t lie either: Hyundai India’s profits have skyrocketed 150%, compared to Maruti’s 42.9% in the last year. So yeah, the IPO might’ve been a mess, but Hyundai’s still got plenty of gas in the tank.
