Hyundai IPO Day 2: Check latest subscription, GMP

Hyundai Motors India IPO: The bidding for the public issue will close on Thursday, with the allotment expected to be finalised by October 18.

In Short

• Investor interest low due to high valuation concerns for the IPO
• GMP for Hyundia IPO drops to Rs 31, indicating muted sentiment
• Experts suggest long-term potential despite short-term risks

The initial public offering (IPO) of Hyundai Motor India opened for subscription on 15 October. The price band has been set between Rs 1,865 and Rs 1,960 per share. Through this IPO, Hyundai aims to raise Rs 27,856 crore, making it the largest public offering in India’s history.

SUBSCRIPTION UPDATE

On the second day of the offering, Hyundai Motor India's IPO saw a relatively muted response from investors. By 5 PM on 16 October, the IPO was subscribed 0.42 times overall. The retail category was subscribed 0.38 times, the Qualified Institutional Buyers (QIB) segment was subscribed 0.58 times, and the Non-Institutional Investors (NII) category saw 0.26 times subscription, according to data from the NSE website.

Despite being the biggest IPO in India, investor interest appears subdued, with analysts expressing concerns over the company's valuation. Hyundai's price-to-book ratio of 13.11 times is significantly higher compared to Maruti Suzuki’s 4.79 times, which has led some experts to advise caution.

HYUNDAI IPO LATEST GMP

The Grey Market Premium (GMP) for the Hyundai IPO has dropped throughout the day. As of 4:23 PM on 16 October, the latest GMP stood at Rs 31. This has decreased from earlier levels, with the GMP being Rs 63 earlier in the day. Based on the price band of Rs 1,960, Hyundai Motor's estimated listing price is Rs 1,991, reflecting a modest 1.58% gain over the cap price.

This reduced GMP shows waning investor excitement compared to the Rs 570 GMP observed just two weeks ago, indicating that market sentiment has cooled since the IPO was announced.

SHOULD YOU SUBSCRIBE?

Market experts have mixed views on the Hyundai IPO. Some point out that the higher valuation reduces the margin of safety for investors. Amar Nandu, a research analyst at SAMCO Securities, notes that Hyundai is trading at a much higher valuation than Maruti Suzuki, which could limit potential gains for short-term investors.

Nandu also pointed out that, due to the large size of the IPO, a significant portion of applicants are likely to receive shares. This widespread allocation could further limit any post-listing price surge, reducing short-term profit potential. Additionally, Hyundai's promoter is selling a 17.5% stake in this IPO, with an additional 7.5% stake expected to be sold in the next three years to meet regulatory requirements, which may lead to selling pressure.

While there are concerns about short-term returns, some brokerages remain positive about Hyundai's long-term potential. ICICI Direct and Jefferies both argue that Hyundai's strong market position, solid financials, and future growth plans make it a viable investment for those willing to hold the stock for a longer period.

Hyundai Motor India has established itself as one of the leading automakers in the country, with plans to expand capacity, introduce new products, and focus on premium segments. Analysts believe these factors will drive growth in the long run.

Brokerages like Choice Equity Broking have rated the issue as 'Subscribe for Long Term,' stating that Hyundai’s focus on premiumisation and market expansion will benefit investors who are patient. The company has a history of consistent growth and regular dividends, making it an attractive option for those looking for stable long-term returns.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts and brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading decisions.)