Marquee world funding banks together with Goldman Sachs, Citi, Morgan Stanley, JP Morgan, Financial institution of America, HSBC, Deutsche Financial institution and UBS, had been in Seoul final week to make IPO pitches to the Hyundai management, mentioned the individuals cited above. Bankers valued the corporate at $22-28 billion, they mentioned. Hyundai is exploring a 15-20% dilution to boost $3.3-5.6 billion (₹27,390 crore to ₹46,480 crore), individuals mentioned.
Hyundai’s world head of communications in Seoul did not reply to queries.
The IPO report was set in 2022 by LIC of India with a problem dimension of ₹21,000 crore. India not too long ago grew to become the fourth-largest fairness market on this planet, overtaking Hong Kong. On the higher band of $28 billion (₹23.2 lakh crore), HMIL can be valued at greater than Mahindra and Mahindra, Adani Energy and Bajaj Auto.
Higher P/E Multiples
Amongst huge Indian auto firms, solely Maruti Suzuki (Rs 33.4 lakh crore) and Tata Motors (Rs 29.3 lakh crore) are valued increased at present market costs, as per BSE information.
Hyundai Motor Co (HMC) is listed in South Korea at a market capitalisation of $39 billion. Analysts monitoring Hyundai Motor India (HMIL) mentioned a list of the Indian subsidiary could be a part of South Korea’s ‘value-up’ programme, geared toward enhancing the valuation of underperforming shares and slashing the so-called ‘Korea low cost’ within the monetary markets.
South Korean automakers are buying and selling at a low price-to-earnings (P/E) ratio of 4.1-4.6, in contrast with 7.3 for Japanese rivals and 5.4 for these within the US. Subsidiaries primarily based in progress markets resembling India may probably commerce at superior P/E multiples than their mother and father. As an example, Maruti Suzuki trades at 23 occasions its projected FY25 earnings, whereas guardian Suzuki Motor Corp is at eight occasions.
The plan envisages a Diwali itemizing, between September and November this 12 months, mentioned the individuals cited above. Nonetheless, these are preliminary discussions and the ultimate contours will evolve upon additional deliberations. It is going to additionally rely on a number of exterior components, together with the vigour of the Indian capital markets and numerous macroeconomic components.
“However the work has begun on the headquarters. This can be a strategic market and Hyundai desires to deepen the connection. This, arguably, is the tentpole occasion for them in India,” mentioned one of many individuals cited above. “The momentum is predicted to choose up additional after the nationwide elections this summer season.”
Valuation Calculus
At $28 billion, HMIL can be valued at 48 occasions FY23 earnings, whereas on the decrease finish of the band at $22 billion, it could be 38.4 occasions.
Maruti Suzuki trades at 40 occasions FY23 earnings. HMIL could get pleasure from superior multiples as its FY23 EBIT per car was about twice that of Maruti Suzuki. Analysts attribute this to HMIL switching its focus to SUVs early, recognising the market shift away from entry-level hatchbacks.
The maker of the Creta and Venue SUVs offered 602,000 models in India in 2023, up 8.9% from the 12 months earlier than. It gained 13 foundation factors of market share in 2023, placing it at 14.7%. Maruti Suzuki led with 41.7%, with Tata Motors at third with 13.5%.
HMIL and Tata Motors have been swapping locations in latest months, with the Indian firm having improved home gross sales.
India was the third-biggest marketplace for the Hyundai Motor Group after the US and South Korea within the earlier calendar 12 months. In 2023, HMIL contributed 15% to the group’s world gross sales. The rise within the share of premium automobiles, and wholesome capability utilisation noticed the corporate registering its greatest working efficiency and gross sales in 2023.
The Creta and Venue SUVs helped Hyundai overtake mass-market chief Maruti Suzuki on working margins for the primary time in virtually a decade in FY21. It offered nearly half of Maruti Suzuki’s volumes that 12 months and has been closing in when it comes to income and profitability over the previous 5 years.
Strategic Market
India is more likely to emerge as the most important marketplace for the corporate within the close to future, HMIL managing director and chief govt Unsoo Kim had mentioned in November, including that Hyundai expects almost a fifth of its world gross sales to come back from the nation within the subsequent two to a few years.
Turnover crossed a milestone of Rs 60,000 crore ($7.2 billion) in FY23, up 27% from FY22. Revenue surged 62% to Rs 4,653 crore ($550 million), the very best amongst non-listed automotive firms within the nation.
With India gaining prominence in Hyundai’s ecosystem, the auto large elevated Tarun Garg, who spent 25 years in Maruti Suzuki, as chief working officer in January 2023. Gopala Krishnan CS was made chief manufacturing officer (CMO) on the identical time, overseeing manufacturing, high quality administration and provide chain. Each have been inducted onto the board of the Indian arm.
Reviewing FY23 operational efficiency, HMIL’s annual ministry of company affairs submitting famous, “2022-23 was a busy 12 months in your firm. New automobile fashions together with the Ioniq 5 had been launched, manufacturing capability was elevated and steps had been taken to speed up progress within the coming years via strategic investments, together with the proposed acquisition of a manufacturing facility.”
Gross sales hit a report final 12 months. “This 12 months, our whole gross sales (home and exports) can be a report 760,000 models, the very best seen since 2018, once we had offered 710,000 models,” Garg had instructed ET in November.
Home gross sales grew 18% in FY23, with fashions Creta, Venue, Alcazar, Tucson, Aura and Grand i10 Nios registering their highest-ever annual numbers. Exports grew 18.4% to 153,000 models, with India changing into a Hyundai manufacturing hub for markets resembling Africa and even Latin America.
Hyundai is forward of Maruti when it comes to electrical automobiles. The market chief would not but have an EV in its product vary.
“To cater to the rising demand and shift in direction of EVs, Hyundai Motor India is within the means of touching 8.5 lakh models in manufacturing capability and can also be accelerating its EV plan to take part on this fast-growing house,” mentioned the annual report for FY23, sourced from enterprise intelligence platform Tofler.
At this 12 months’s World Financial Discussion board in Davos, HMIL signed a memorandum of understanding with the Maharashtra authorities for a Rs 7,000-crore funding to modernise the previous Normal Motors Talegaon plant close to Pune that it acquired final 12 months. The Talegaon facility can be its second location in India after its two vegetation in Tamil Nadu.
That funding can be over and above the Rs 20,000 crore introduced in August, largely centered on electrification, after the go to of Hyundai Motor Group chairman Euisun Chung. The South Korean automobile maker has pledged to launch 5 EV fashions by the top of the last decade in India.
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