Hyundai IPO: Big drop in GMP on day 3, should you subscribe?

Hyundai Motor IPO: Despite concerns about short-term gains, some brokerages are optimistic about Hyundai's future. Read on to know whether you should subscribe to the public issue.

In Short

• Grey Market Premium for Hyundai IPO drops sharply
• Analysts suggest Hyundai is a long-term play for patient investors
• Hyundai IPO unlikely to deliver short-term listing gains

Hyundai Motor India's initial public offering (IPO), the largest in India’s history, is struggling to gain traction on its final day, with just 46% subscription so far. Despite its size, the IPO hasn't attracted much interest from investors, unlike other recent public issues that saw massive oversubscriptions.

So far, qualified institutional buyers (QIBs) have subscribed to only 65% of the shares reserved for them, while non-institutional buyers (like high net worth individuals) have subscribed 29%. Retail investors have subscribed to 41% of the shares allotted to them, while only the employee portion has been oversubscribed.

According to market analysts, the Hyundai IPO is struggling due to concerns about its valuation. Many analysts believe the company is overvalued at its current price range, which has made potential investors cautious.

LATEST GREY MARKET PREMIUM (GMP)

The grey market premium (GMP), a common measure of investor sentiment, has also dropped significantly. As of now, the GMP stands at just Rs 17, suggesting a mere 0.87% listing gain at Rs 1,977 compared to the IPO price of Rs 1,960. While GMP is not always a reliable indicator of how a stock will perform on listing day, this drop aligns with analysts' views on the IPO's valuation.

SHOULD YOU SUBSCRIBE?

Most analysts caution investors against expecting quick gains from Hyundai's listing, recommending instead that they focus on the company's long-term growth potential. With a solid presence in the Indian market, Hyundai plans to expand its product lineup and focus on premium vehicles.

However, some experts caution that the high valuation of the IPO leaves less room for short-term gains. Amar Nandu from SAMCO Securities points out that Hyundai is priced much higher than its competitor Maruti Suzuki, which could limit returns for investors looking for a quick profit.

Moreover, because the IPO is so large, many applicants are expected to receive shares. This wide distribution could prevent a big price surge after the listing, reducing short-term profit potential.

LONG-TERM PLAY?

Despite concerns about short-term gains, some brokerages are optimistic about Hyundai’s future. ICICI Direct and Jefferies believe Hyundai’s strong market position and future growth plans make it a solid long-term investment.

Hyundai is one of the top automakers in India and has plans to expand its capacity and product range, which could boost its stock over time.

Brokerages like Choice Equity Broking recommend subscribing for the long term. They highlight Hyundai's focus on premiumisation and market expansion as reasons why patient investors may see solid returns in the future.

Additionally, the company’s consistent growth and regular dividends make it an attractive option for those looking for stable, long-term gains.

(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.)