The grey market premium (GMP) for Hyundai Motor India’s IPO stands at a negative 3%, suggesting a potential discount on listing day. Currently, the GMP is around Rs 1,903 compared to the issue price of Rs 1,960. This indicates a lackluster demand for the offering, potentially leading to a negative listing when shares debut on October 22nd. Share allotment will be finalized today.
While GMP provides a glimpse into market sentiment, it’s crucial to remember it’s not a guaranteed predictor of listing performance and can fluctuate rapidly. This Rs 27,870 crore IPO, India’s largest to date, barely scraped through the final bidding stages, relying heavily on non-institutional investors. Both retail and non-institutional investor categories were undersubscribed.
Despite the lukewarm response, many analysts maintain a positive long-term outlook for Hyundai, citing the company’s strong position in India’s growing passenger vehicle market. Consumers are increasingly drawn to larger, more premium vehicles, a trend that favors Hyundai’s offerings. At least ten analysts recommend a long-term investment in the IPO.
However, the premium price-to-earnings (P/E) ratio of 26x FY25 earnings, coupled with the negative GMP, raises concerns for short-term gains. Investors seeking quick returns may be disappointed. Hyundai’s historical stability in the Indian market, strong customer loyalty, and affordable after-sales service contribute to its long-term appeal.
Leveraging Korean research and development, along with its automated Chennai factory, Hyundai has optimized operations and expanded its distribution network. The company also plans to expand its presence in the electric vehicle (EV) market. Arihant Capital, for instance, recommends a long-term subscription, believing Hyundai is well-positioned to capitalize on the Indian PV market.
The IPO consisted entirely of an offer for sale (OFS) of 14.2 crore shares by parent company Hyundai Motor Global. While proceeds will go to the selling shareholder, management indicates funds will be allocated to research, development, and innovative offerings.
In conclusion, while the current GMP of Go Fashion’s, rather Hyundai’s, IPO today paints a less-than-optimistic picture for the immediate future, long-term prospects for Hyundai in the Indian market remain positive according to analyst predictions. The negative GMP and high P/E ratio suggest caution for short-term investors.
