[denzdm]

Hyundai Motor Co is exploring the possibility of listing its Indian unit in India's booming IPO market. The move could potentially become India's largest IPO. The listing is expected to take place between September and November this year, pending market conditions.

This move, which comes after nearly three decades since the the launch of Hyundai Motor India (HMIL).

News link:
http://timesofindia.indiatimes.com/a.../107418118.cms

[amtak]

It would be a fantastic thing. Indians have been buying Hyundai cars for 3 decades with no return on their investments. When listed, I am sure it will follow TaMo/Maruti trajectory; Indian markets will benefit and investors will get return on their investments.

[GTO]

Gurus, out of curiosity, Hyundai HQ can easily fund this expansion themselves. Why would they want to raise money from the public market, and subject themselves to all that scrutiny?

Or are there geo-political reasons? After all, from the Top 5 car manufacturers in India who control 80 - 85% of the car market, Hyundai-Kia are the only "non Indian" car manufacturers (Maruti, Tata, Mahindra are Indian & publicly listed).

[shortbread]

Originally Posted by GTO

Gurus, out of curiosity, Hyundai HQ can easily fund this expansion themselves. Why would they want to raise money from the public market, and subject themselves to all that scrutiny?

I can think of two reasons,

1) Debt is comparably expensive, the days of cheap money are over. For almost two decades now the Bank of Korea has held rates really low, now it's at 3.5%. Perhaps Hyundai wants to avoid more borrowing at higher rates.

2) Time to list the growing Indian entity separately from the likely laggard global business. 2024 economic forecasts the world over aren't rosy, perhaps the parent company does not want to lose the attraction of the growing Indian business in-between all that noise.

[anjan_c2007]

Maruti, India's largest carmaker went public in mid 2003. The IPO price was set at Rs 125 per share. The IPO was over-subscribed 13 times. Those who were lucky to get allotment, were rewarded with a much higher ( soon reached three times the IPO value) opening price upon listing. On July 9th 2003, Maruti was first listed on the stock exchanges in India. Maruti Suzuki India Ltd (MSIL) share price in the year 2003 was about Rs 350 to Rs 375. The Maruti Suzuki India share has now been trading in the price range of Rs 10,708.70 & Rs 10,540.70 according to news from the bourses.

On the other hand, Tata Motors quotes at between Rs 900 to Rs 950 presently while Mahindra (rise?) is quoting at around Rs 1700.

During their monopolistic rule, Premier Automobiles Ltd quoted at around Rs 50 to Rs 100, while Hindustan Motors Limited quoted at Rs 15- Rs 30. Mahindra and Mahindra quoted at around Rs 50 to Rs 100 sometimes breaching the three figure mark.

Hence, despite the rosy scenario around and hoopla over the MSIL share price, as will be evident from the above values, not all car makers can manage to be like Maruti. MSIL though much criticised for their car's safety ratings over the past decade, is a darling of a majority of the car buyers. The company is very well managed and has been reporting healthy profits since decades. These are ingredients for MSIL that have also made it into a darling of the bourses. A five figure share value is quoted only for a few select companies.

That rosy picture of the MSIL share value in the bourses is for Hyundai (HMIL) to follow and emulate. It is India's second or third largest car maker (Tata Motors overtakes it at times). It has a dominating presence like MSIL, both in the car and SUV segments.

Let's wait and watch how HMIL fares in the bourses. A lot of predictions may start emerging in the media that usually rely on past balance sheets, dissecting these and market presence and penetration of the company.

And lastly, South Korean chaebol Daewoo had unpredictably collapsed during the turn of the century that is a fact to remember.

[OrangeCar]

Originally Posted by GTO

Hyundai HQ can easily fund this expansion themselves. Why would they want to raise money from the public market, and subject themselves to all that scrutiny?

I think the ET article on this states:

Analysts tracking Hyundai Motor India (HMIL) said a listing of the Indian subsidiary would be part of South Korea's 'value-up' programme, aimed at improving the valuation of underperforming stocks and slashing the so-called 'Korea discount' in the financial markets.

South Korean automakers are trading at a low price-to-earnings (P/E) ratio of 4.1-4.6, compared with 7.3 for Japanese rivals and 5.4 for those in the US. Subsidiaries based in growth markets such as India could potentially trade at superior P/E multiples than their parents. For instance, Maruti Suzuki trades at 23 times its projected FY25 earnings, while parent Suzuki Motor Corp is at eight times.

This very well could be true. Indian subsidiary getting valued at 40PE, means a leg up in valuation for the Korean entity. I am not aware of 'Korean discount' issue, and why that happens. Listing the company and still having a majority control should ideally work in Hyundai's favor. It may also help in raising funds to foot the 7000 crore commitment made as part of MoU with Maharashtra govt to modernize GM's plant in Talegoan. And apparently HMIL has a total capital outlay of 20,000 crore for the plant, electrification plans, etc.

So the speculated 28,000 crore IPO (largest in India) could well be funded by Indian investors itself. That will derisk parent in Korea with not much loss of control in the subsidiary itself. The only downside is increased compliance, which should not be anything new to a large manufacturer which already would be following many other aspects of compliance.

Timing could not be wrong, given the recent flurry of IPOs and their thumping success. Even if investor mood is soured for whatever reasons in the next few months, HMIL IPO itself could lift market sentiment.

[mk600]

Originally Posted by GTO

Gurus, out of curiosity, Hyundai HQ can easily fund this expansion themselves. Why would they want to raise money from the public market, and subject themselves to all that scrutiny?

Many MNCs with deep pockets also fund India specific long term committed investments via India equity, whereas shareholding control is typically retained by HQ. Example, Bosch India (70% owned by Promoters), Siemens India (75% owned by Promoters), Proctor & Gamble India (70% owned by Promoters), as per moneycontrol.com

[diwakarmuthu]

Originally Posted by GTO

Gurus, out of curiosity, Hyundai HQ can easily fund this expansion themselves. Why would they want to raise money from the public market, and subject themselves to all that scrutiny?

Or are there geo-political reasons? After all, from the Top 5 car manufacturers in India who control 80 - 85% of the car market, Hyundai-Kia are the only "non Indian" car manufacturers (Maruti, Tata, Mahindra are Indian & publicly listed).

1. Borrowing is becoming more expensive. Though they have the market leadership to negotiate better terms, I feel they will not take that route as they are looking at unlocking value at a global scale.

2. Second reason I could think is that the family is big now (Hyundai & Kia) and going public will give them a good perception and also market cap that can enable them to eventually borrow globally at competitive rates.

3. This could be geo political too, with the Govt. pushing for more Make In India initiates, this could be their strategy to add more plants in India through this route.

Which ever way it goes, I feel this could be an overpriced offer which could go either way

[SmartCat]

Originally Posted by GTO

Gurus, out of curiosity, Hyundai HQ can easily fund this expansion themselves. Why would they want to raise money from the public market, and subject themselves to all that scrutiny?

The only reason multi-nationals listed in India is because of it was a regulatory requirement in the 1980s.
https://www.indiatoday.in/magazine/e...645-2002-03-24

many of these companies never wanted to get listed in the first place. In the 1970s, the government forced foreign companies to dilute their shareholding and go public if they wanted to continue doing business in the country Consequently a large number of foreign companies were listed on Indian stock exchanges not because they needed Indian capital, but because they were forced into doing so.

And once the stocks are listed in Indian stock markets, it is almost impossible to get delisted, if the company is doing well. Oracle Corp has been trying to delist 'Oracle Financial India' for a long time, but finally gave up. That's because Indian investors (both institutional & individual) generally tend to hold on to high quality stocks. No offer price is high enough for them to sell their shares.

I'm quite sceptical about this news to be honest.

1) $2 billion or $3 billion funds raised is small change for Hyundai. But in return, they will have to share 25% of Indian division's profits/dividends forever.

2) At the valuation mentioned in the news article, Hyundai would be offering shares at 50 times earnings. Maruti is trading at half the valuations.

3) Just because Hyundai India is trading at high valuations, it will not result in re-rating of Hyundai International or Hyundai Korea stock. For eg: Despite high valuations of Maruti Suzuki India, Suzuki Corp Japan is trading at a valuation of just $22 billion.

To me, listing is not making sense (from Hyundai's point of view). But this news is all over the business media and there is usually no smoke without fire.

[Cresterk]

Originally Posted by GTO

Gurus, out of curiosity, Hyundai HQ can easily fund this expansion themselves. Why would they want to raise money from the public market, and subject themselves to all that scrutiny?

Or are there geo-political reasons? After all, from the Top 5 car manufacturers in India who control 80 - 85% of the car market, Hyundai-Kia are the only "non Indian" car manufacturers (Maruti, Tata, Mahindra are Indian & publicly listed).

With the current state of the IPO market where even mediocre IPOs get oversubscribed by operators and clueless retailers looking to make a quick buck, why not? It’s basically free money at this point.

IPOs were supposed let the company raise capital to fund their expansion without taking on debt. Nowadays, everyone is in it for the listing gains.

I have applied to quite a lot of IPOs but I sat out the LIC ipo because it was clearly just a money grab. I will probably sit this one out too unless they price it aggressively. .

[rt363]

Originally Posted by anjan_c2007

Maruti, India's largest carmaker went public in mid 2003. The IPO price was set at Rs 125 per share. The IPO was over-subscribed 13 times. Those who were lucky to get allotment, were rewarded with a much higher ( soon reached three times the IPO value) opening price upon listing. On July 9th 2003, Maruti was first listed on the stock exchanges in India. Maruti Suzuki India Ltd (MSIL) share price in the year 2003 was about Rs 350 to Rs 375. The Maruti Suzuki India share has now been trading in the price range of Rs 10,708.70 & Rs 10,540.70 according to news from the bourses.

On the other hand, Tata Motors quotes at between Rs 900 to Rs 950 presently while Mahindra (rise?) is quoting at around Rs 1700.

During their monopolistic rule, Premier Automobiles Ltd quoted at around Rs 50 to Rs 100, while Hindustan Motors Limited quoted at Rs 15- Rs 30. Mahindra and Mahindra quoted at around Rs 50 to Rs 100 sometimes breaching the three figure mark.

Out of topic, but instead of us focusing on the price per share, the market cap of the companies should also be kept in mind. The market cap of TaMo is higher than that of Mahindra. Likewise, what would be the market cap that Hyundai is aiming for matters in the long run

[professortarzan]

I know this would sound silly, but the tag of 'Largest Ever IPO' scares the living hell out of me. Take a look at the companies sporting that badge. If you know, you know.


Source: Chittorgarh

We had our hands burnt in PayTM already, stood away from LIC at the last minute, made profits in Yes Bank. If valuations of Hyundai are reasonable (I know, silly me), I will be applying for sure.

[Katryks]

I think it's a very smart move by Hyundai. In addition to paying royalty and dividend to their parent company in South Korea, Hyundai SK would also be diluting their stake in their Indian arm.

This would mean a large part of the capital deployed in India would be recovered by this public issue. It would also ensure that the issue relating to royalty payment which has been a bone of contention in the recent past viz. Chinese mobile phone companies and Maruti Suzuki with regards to their Gujarat plant with the government could be reduced to a large extent by front ending their future payments.

Below is an article regarding the same.

https://auto.hindustantimes.com/auto...20data%20shows.

It would also ensure that there is adequate capital for their expansion plans in the erstwhile GM plant in Talegaon.

Guess its payback time for Hyundai India.

[srh]

I am circumspect that this will really happen. Most global companies avoid listing in multiple locations outside the major global financial centers and hardly anyone lists local subsidiaries unless arm twisted by regulators. I am sure India regulators aren't arm twisting Hyundai to list its India local entity. They are happier receiving FDI. They would maybe happy if at some appropriate time in future, Hyundai global gets listed at GIFT Gandhinagar.

I can think of some reasons why Hyundai could possibly look at listing its India entity:
- They foresee significant Fx rate risk (quite likely)
- The Indian entity growing fast means a higher PE multiple - maybe it also has better profit margins as well
- The credit rating of the parent is expected to go down leading to increase in cost of capital.

[VJ05]

I believe IPO move is mostly related to Make in India strategy. Last year there was too much noise of MG Motors being acquired by an Indian Company as the Government was not too keen on having chinese stake in the company. This move by Hyundai seems to be proactive measure by the company to avoid any anti-nationalist sentiments and project itself as a pure play Make in India player.

I don't think they are sort of funds for the expansion and need to raise money from public.