Hyundai Motor India IPO ‘Proceed with caution’

Hyundai’s IPO has finally opened for subscription today, While the dates and price band was finalised approximately 2 weeks, Now is the time to finally get a piece of Hyundai India (if you really want to).

While the IPO garnered a lot of cheer and optimism from investors in the beginning when the parent company was finally planning for the IPO, Ever since the price band came out, the IPO has been getting a lot negative reviews, With some people having concerns over the valuation-price band and others having an issue with this being a complete OFS. Things have not been looking good for Hyundai since the past couple of weeks. While the Korean car maker has been in the leading players of the automotive industry in India, People do not seem to be impressed by it. And as a result the GMP has also fallen down by a huge margin and as of writing this, If the GMP stays the same, We might be expecting a very flat listing or listing at a discount.

While all of these are definitely factors at play, I do have a very different opinion on it

Undoubtedly, All the reasons listed above are definitely a reasons for worry, But I think somewhere in this the pessimism has overshadowed the positives of the company, Honestly If such a large issue is coming out at a premium price point, You immediately have to stop thinking from the Listing Gain as well as the short term perspective as well because that would yield you absolutely no results. Instead strip down purely to the business and fundamentals of the company and then form an opinion, Before we dive into the business as well as the fundamentals of the company, Here’s a quick comparison with the listed peers

1. Hyundai Motor India	2. Maruti Suzuki India Limited	3. Mahindra & Mahindra Limited	4. Tata Motors Limited
Mkt Cap: 1.59 Lakh Crores	Mkt Cap: 3.93 Lakh Crores	Mkt Cap: 3.93 Lakh Crore	Mkt Cap: 3.38 Lakh Crore
Revenue FY24: 71,302 Crores	Revenue FY24: 1.41 Lakh Crores	Revenue FY24: 1.39 Lakh Crore	Revenue FY24: 4.37 Lakh Crore
PAT FY24: 6060 Crores	PAT FY24: 13,488 Crores	PAT FY24: 12,270 Crore	PAT FY24: 31,807 Crore
Mkt Cap/Revenue: 2.23x	Mkt Cap/Revenue: 2.78x	Mkt Cap/Revenue: 2.82x	Mkt Cap/Revenue: 0.77x
P/E: 26.4	P/E: 35.6	P/E: 35.6	P/E: 9.97

Now coming to the business model and my take on it, Hyundai honestly has been considered one of the more value for money brand in the Indian Market which the Indians Love! Bringing extraordinary features to a common man’s car at a very budget friendly price point is basically Hyundai’s way of taking over the markets. Every car they launch, It comes with at least a few segment first features which were unheard of at the time, Of course the competitors follow, But Hyundai has a first mover advantage in it.

Now Let’s go back a few decades, Remember when Maruti Launched Zen? Hyundai came in the same league and launched Santro

Then Maruti Launched Swift, Hyundai was again in the same league and launched i10

Now if you analyse closely, Maruti and Hyundai have always been competing in the same segment very closely with the same USP’s

Give Frugal cheap to maintain vehicles, Loaded with so many features that the customer loves it.

They have even been competing for the same market audience as well.

But in the last few years, The strategy has changed, While Maruti is still focused on having the most value for money audience, Hyundai has somewhat premiumsed itself, With launch of the brand Kia and cars like Creta and alcazar, In my honest opinion, they are on a better route than Maruti. Leading the EV as well Hyundai has stared launching it’s EV portfolio which Maruti is yet to do.

All of this coupled with Maruti’s recent negative image of providing absolutely poorly built cars has paved the way for Hyundai to come forward. So if you’re considering investing in this, Keep it purely for a long term view and compare it with this taking over Maruti’s market share someday, Maruti currently owns about 40% of the market share while Hyundai is trailing at 14%.

However this might take years and decades to execute and that too with very aggressive and strategic planning from Hyundai and in a bad case scenario, This might not happen at all, But if it does, We will be looking at around 2x Revenue and 2x Profit addition into the company.

But the uncertainty will loop around all these years in this

Hence the Title

Proceed with Caution