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The Rs 27,870 crore mega preliminary public providing (IPO) of India’s second largest carmaker, Hyundai Motor India Ltd (HMIL), closed on October 17 with an oversubscription of 237 per cent, or 2.4 occasions. The general public problem obtained purposes for 23.63 crore shares as towards a complete providing of 9.97 crore shares.
The IPO, which has been the nation’s largest-ever share providing, may sail via due to the Certified Institutional Patrons (QIBs), who secured 697 per cent of their allotted shares. The demand from retail traders for the IPO remained low as there have been considerations over excessive valuation, fall in gray market premium of shares and weak demand within the total auto sector in the course of the festive seasons, analysts stated.
The provide
HMIL’s IPO is the most important share providing within the historical past of the Indian capital market. The corporate fastened the worth band of the IPO within the vary of Rs 1,865 to Rs 1,960 per fairness share of the face worth of Rs 10, valuing the corporate at round Rs 1.5-1.6 lakh crore. The provide was opened for subscription from October 15-17.
The share sale comprised an Provide for Sale (OFS) of as much as 14.21 crore fairness shares of face worth of Rs 10 every by the promoter promoting shareholder. OFS is a mechanism the place promoters in a listed firm promote their shares via a bidding platform on inventory exchanges. It assist promoters scale back their holding in an organization.
Hyundai Motor Firm of South Korea will get all the proceeds of Rs 27,870 crore ($3.3 billion).
In line with the provide doc, traders had been allowed to use for at least one lot dimension or seven shares price Rs 13,720 and in multiples after that. The corporate had put aside 50 per cent of the online problem for certified institutional patrons or QIBs, 15 per cent for non-institutional traders (NIIs) and 35 per cent for retail particular person traders. The corporate additionally provided a most worker low cost of Rs 186 per fairness share.
HMIL, the second largest automaker in India after Maruti Suzuki, was the primary auto agency to go public in twenty years after Maruti Suzuki India Ltd’s itemizing in 2003. The automaker’s IPO surpassed Life Insurance coverage Company of India’s (LIC) IPO of Rs 21,000 crore in 2022 as India’s largest share providing ever.
Lukewarm response from retail traders
The retail quota of HMIL’s IPO remained undersubscribed, with purposes coming just for 50 per cent of the allotted shares beneath the retail class. Retail members positioned bids for two.49 crore shares, towards 4.95 crore shares provided. The muted response from retail traders was resulting from a number of causes, together with increased provide value resulting in an extreme valuation of HMIL’s, weak demand for passenger autos, particularly within the sport utility phase, and all the IPO proceeds going to the HMIL’s promoters, analysts stated.
“The weak from retail traders was as a result of such giant points up to now have upset post-listing. Crucial concern was that on the provide value, HMIL is commanding a premium valuation than Maruti Suzuki,” stated G Chokkalingam, Founder & Head of Analysis, Equinomics Analysis Non-public Ltd.
The opposite issue was the drop in gross sales of passenger autos. The SUV (sport utility automobile) phase, which is the main target space of Hyundai Motor India, used to develop in sturdy double-digit earlier however now the phase is rising within the single-digit, he stated.
“There have been quite a lot of pink flags. A few days earlier than the corporate introduced the ultimate numbers (on the variety of shares to be issued), it was anticipated that the IPO could be Rs 25,000 crore. With the ultimate IPO dimension of round Rs 28,000 crore, the pricing turned 11-12 per cent increased than what was anticipated. Resulting from this, the gray market value of the IPO additionally crashed,” stated market analyst Ambareesh Baliga.
The quantity of Rs 10,782 crore paid as dividend by HMIL to its promoter Hyundai Motor Firm (HMC) in March 2024 additionally weighed on investor sentiments.
Baliga stated HMIL may have taken out the cash within the type of dividend slowly because the IPO was deliberate effectively prematurely. Taking out near Rs 11,000 crore doesn’t go away style as there may be nothing left for traders on desk, he stated.
“Final result of #HyundaiMotorsIPO : These investing personal cash discovered the #IPO costly – These #investing others cash discovered it engaging ……,” he wrote on microblogging website X (previously Twitter).
The non-institutional traders (NIIs) class was additionally undersubscribed, as 1.27 crore bids had been obtained, towards the quota of two.12 crore shares, representing solely 60 per cent subscription.
A comparability of six giant points – Hyundai Motor India, Life Insurance coverage Company of India (LIC), One 97 Communications, Coal India, Reliance Energy and Common Insurance coverage Company (GIC) reveals that HMIL’s IPO obtained the bottom response from retail traders at 50 per cent. The retail class of Reliance Energy’s IPO was subscribed 14.87 occasions, adopted by Coal India at 2.31 occasions, LIC at 2.91 occasions, One 97 Communications at 1.66 occasions and GIC at 0.63 occasions.
QIBs come to the rescue
The IPO obtained a complete of 23.63 crore shares as towards 9.97 crore provided. Almost 83 per cent of the bids got here from QIBs. Institutional traders positioned bids for 19.72 crore shares, practically 7 occasions their allotted shares of two.82 crore. The worker quota was booked at 174 per cent, with the portion receiving 13.56 lakh purposes in comparison with 7.78 lakh shares provided.
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