17 october 2024 : Hyundai Motor Co.’s $3.3 billion initial public offering (IPO) for its Indian subsidiary has faced challenges in attracting investors, reflecting broader market sentiment issues.
As of two days into the offering, only 42% of the shares for Hyundai Motor India Ltd. have been subscribed, marking it as India’s largest IPO to date. With the offering set to close on Thursday, the tepid demand and poor gray market performance have dampened expectations for the stock’s debut.
This disappointing interest follows a period of underperformance in Indian equities, as investor focus shifts toward potential stimulus in China. Despite high hopes for Hyundai’s deal, which comes amid a wave of excitement for IPOs in India, it has not lived up to expectations.
The South Korean parent company is looking to sell up to a 17.5% stake in its Indian unit, valuing Hyundai Motor India at approximately $19 billion at the upper end of the IPO price range. Shares are scheduled to begin trading on October 22.
Hyundai’s IPO could still gain traction, as large IPOs in India often see increased subscriptions on the final day, with retail investors catching up to institutional bids. By Wednesday, institutional bids accounted for 58% of the shares, while the retail segment had reached only 38%. Indian regulations require at least 90% of the total offering to be subscribed for the IPO to proceed.
Analyst Astha Jain from Hem Securities expressed confidence that the issue would ultimately succeed, noting that weak demand stems from the shares being priced at a “hefty valuation,” offering little for quick-profit-seeking retail traders.
Before the public offering, Hyundai raised approximately 83.2 billion rupees ($990 million) through anchor investors at the top price of 1,960 rupees per share. Confirmed buyers include BlackRock Inc. and Baillie Gifford.
With Hyundai’s proceeds, Indian IPOs have collectively raised over $12 billion this year, surpassing the total volumes of the past two years, although still falling short of the record $17.8 billion raised in 2021. Upcoming IPOs include food delivery company Swiggy Ltd. and the renewable energy division of state-run power producer NTPC Ltd.