Hyundai Motor India makes weak D-Street debut. Hold for long-term gains or sell now?

Is Hyundai Motor India a long-term drive to profits, or should investors hit the brakes after its weak debut?

In Short

• Hyundai Motor India shares list at 1.5% discount
• Analysts recommend long-term hold for future growth and profitability
• Hyundai’s premiumisation strategy and market expansion key to future success

Hyundai Motor India’s much-anticipated stock market debut fell short of investor expectations on Tuesday, with shares listing at a 1.5% discount to their issue price of Rs 1,960.

The stock opened at Rs 1,931 on the Bombay Stock Exchange (BSE) and Rs 1,934 on the National Stock Exchange (NSE), falling in line with analyst predictions but lower than the grey market premium had suggested.

The lukewarm debut has left many investors questioning whether they should hold their positions for long-term gains or cut their losses early.

The Rs 27,870 crore IPO was subscribed 2.3 times, achieving full subscription only on the last day, reflecting a cautious approach from retail investors. Retail participation was particularly weak, with only 50% of their allocated shares subscribed, marking one of the least enthusiastic responses among recent large IPOs.

On the other hand, institutional buyers, particularly Qualified Institutional Buyers (QIBs), showed stronger support, subscribing seven times their allocation. This institutional backing wasn’t enough to prevent a muted listing, however, as broader market volatility and high valuations weighed on sentiment.

One of the key factors behind the IPO’s subdued performance is Hyundai’s high valuation. The issue was fully priced, leaving little room for immediate upside, especially since the IPO was a complete offer for sale (OFS), meaning the company will not receive any proceeds from the offering. This has added to short-term concerns, with many investors seeing limited near-term catalysts for the stock’s growth.

Moreover, Hyundai’s limited exposure to electric vehicles (EVs) and hybrid models—just 11% of its portfolio—has raised concerns about its ability to keep pace with the global shift towards EV adoption. With operational challenges such as constrained production capacity and a lack of new model launches, Hyundai’s near-term outlook appears less competitive compared to automakers with a stronger EV focus.

In addition to valuation concerns, Hyundai operates in an intensely competitive Indian auto market, where price cuts and incentives are commonplace. Jaspreet Singh Arora, Chief Investment Officer at Equentis, pointed out that the company faces stiff competition from both local and global players. Furthermore, regulatory requirements for promoters to reduce their stakes have created additional caution among investors, as such mandates often put downward pressure on stock prices.

WHAT ANALYSTS SAY

Shivani Nyati, Head of Wealth at Swastika Investmart Ltd., noted that while Hyundai Motor India's IPO listed at a slight loss (Rs 1,934 against the issue price of Rs 1,960), the outcome was largely in line with expectations. The IPO witnessed moderate subscription, and the subdued grey market premium (GMP) ahead of the listing had already signaled limited enthusiasm for short-term gains.

"Despite the discounted listing, Hyundai Motor India's strong fundamentals, being the second-largest passenger vehicle manufacturer in India and its strategic focus on the SUV segment, continue to support its long-term growth prospects," Nyati said. "Investors who entered with a long-term perspective may consider holding the stock, as future performance will likely be driven by the company’s competitive market position and product innovations."

Many brokerages share this long-term optimism. ICICI Direct and Nuvama Wealth Management see significant value in Hyundai’s future, driven by its strategic focus on expanding production capacity and its localisation efforts to improve margins. Choice Equity Broking has similarly advised investors to take a long-term view, highlighting Hyundai’s premiumisation strategy and market expansion as key drivers of future growth.

It is worth mentioning that Hyundai’s fundamentals remain strong. The company holds a 15% share of India’s passenger vehicle market, and it commands a dominant 63% share of its domestic utility vehicle (UV) sales. These figures reflect Hyundai’s strong competitive position in key market segments, giving it a solid foundation for growth, especially as it shifts focus toward SUVs and premium models.

While Hyundai’s limited exposure to the EV segment is a concern, its long-term growth prospects are buoyed by its established presence in the broader Indian auto market. With plans to expand production and increase localisation, Hyundai has the potential to enhance its profitability in the years to come. Analysts also see the company’s strong foothold in the fast-growing SUV segment as a key factor that could help it weather the current market challenges and deliver long-term value to investors.

HOLD OR SELL?

For investors who entered the IPO with a long-term view, holding Hyundai Motor India shares may still prove fruitful, despite the disappointing debut. Analysts maintain that the company’s strong market fundamentals, particularly its leading position in India’s passenger vehicle and utility vehicle markets, offer significant potential for future gains. Hyundai’s focus on premiumisation and capacity expansion further supports a long-term growth narrative.

However, short-term investors seeking immediate gains may find Hyundai’s stock performance underwhelming, especially given the company’s fully priced valuation and limited near-term growth catalysts. For those looking for quicker returns, selling now might be a more prudent option.

In summary, Hyundai Motor India’s IPO debut may have been underwhelming, but the company’s long-term prospects remain solid. Patient investors who focus on Hyundai’s strategic strengths and market position could still reap rewards in the future.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/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 choices.)