Hyundai India's record $3.3 billion IPO oversubscribed on final day

The $3.3 billion IPO of Hyundai Motor India, the country's largest yet, was fully subscribed on its final day on Thursday as institutional investors bid aggressively, though pricing concerns deterred retail investors.

As companies rush to go public after a sharp run-up in the Indian equities market this year, Hyundai Motor's first listing outside South Korea ranks as India's biggest ever and the world's second-largest IPO in 2024.

Hyundai India is set to price its shares at 1,960 rupees to secure a market valuation of $19 billion, said two sources with direct knowledge of the matter, speaking on condition of anonymity.

That values the company at about 40% of its Korean parent.

"This flotation was too big to fail," said Prashanth Tapse, senior vice president of research at Mehta Equities, adding that recent IPO successes and Hyundai's international image also helped.

Investors bid for more than twice the shares on offer by 3:21 pm, with qualified institutional buyers, including foreign investors, domestic banks and mutual funds, bidding for nearly seven times the 28.3 million shares reserved for them.

With no provision to allot more shares than those on offer, the oversubscription is a reflection of demand.

The exercise began on Tuesday but was led until early Thursday by employees, who bid for about 1.7 times the 778,400 shares earmarked for them.

Over 260 companies in India have raised more than $9 billion through IPOs so far this year, according to LSEG data, higher than the $7.42 billion raised in all of last year. That has propelled the country's share in Asia equity capital market deals to a record high.

Tapse was among the analysts who have pointed to retail investors' concerns about valuations, the lack of new shares in the issue, and recent industry woes, as sales slow and inventory grows.

Car sales have slowed in India after two years of record highs, with customers delaying purchases on worries about recalcitrant inflation.

The issue prices India's No. 2 carmaker at about 26 times earnings, close to 29 times for market leader Maruti Suzuki.

The slim difference in P/E ratios, despite the big gap in Indian car market share between Hyundai, at 15%, and Maruti, with 40%, spurred concern about the valuation.

"Hyundai's issue is not priced attractively for retail investors and high net worth individuals," said Arun Kejriwal, founder of Kejriwal Research.

They were unlikely to see any listing-day gains or major earnings growth for the next five quarters until the company's new capacity goes online, he added.

Retail investors, for whom the bulk of shares were earmarked, bid for about 48%, while non-institutional investor subscriptions stood at 59%.

The shares are set to make their trading debut on October 22.