Hyundai to Reduce 17.5% of $3 Billion IPO Stake: Source

In an effort to raise between $2.5 billion and $3 billion, Hyundai Motor Company is preparing to reduce up to 17.5% of its ownership in its Indian subsidiary through an initial public offering (IPO). The South Korean automaker intends to submit draft documents for the IPO on Friday, according to Reuters. This is a big deal because it will be the first vehicle manufacturing IPO in India in more than 20 years—the last one being Maruti Suzuki’s in 2003.

After the US and South Korea, India is Hyundai’s third-largest revenue market. As such, the company’s IPO is a calculated move to take advantage of India’s expanding market potential. Investment banks like Kotak Mahindra, Citibank, Morgan Stanley, JP Morgan, and HSBC have been enlisted by Hyundai to aid with the IPO. These institutions will support the success of the IPO by ensuring a seamless launch into the public market.

Within sixty to ninety days after receiving the draft documents, the Securities and Exchange Board of India (Sebi) is supposed to assess them and grant permission. The IPO might begin in September or October if it is allowed. The estimated valuation of Hyundai Motor India’s IPO is $18 billion, or over Rs 1.5 lakh crore. This puts it among the highest in the nation, second only to the $2.7 billion offering of the Life Insurance Corporation of India (LIC) in 2022.

For the past year, Hyundai has been painstakingly getting ready for its initial public offering (IPO). To that end, it has filed a draft red herring prospectus (DRHP) with Sebi, which details its strategies for obtaining money, its potential for expansion, and important financial data. Interestingly, Hyundai’s Indian subsidiary won’t be issuing additional shares; instead, the current shareholder will sell a chunk of its ownership to institutional and ordinary investors via a “offer for sale” process.

Although the pricing and valuation of the IPO are not specified in the draft prospectus, Hyundai hopes to raise between $2.5 and $3 billion, which may result in a $30 billion valuation for the company. A number of automakers have previously raised financing through the capital markets, including Maruti Suzuki, Mahindra & Mahindra, and Tata Motors. Ola has also been given the go-ahead by Sebi for its impending initial public offering.

With a focus on creating reasonably priced electric vehicles locally, Hyundai Motor India Limited (HMIL) has revealed its aspirational expansion plans, which aim to raise annual manufacturing in India to one million units by 2025. Hyundai has made $5 billion in investments in its Indian operations throughout the years, and it intends to make an additional $4 billion in the coming ten years.

After China and the US, India is the world’s third-largest market for automobiles. It also accounts for 33% of Hyundai’s total income. It is anticipated that Hyundai Motor India’s stock market listing will fortify the company’s position against rivals like Maruti Suzuki and Tata Motors. Hyundai Motor India will have more access to capital markets after going public, allowing it to raise money independently of its Korean parent firm in the future.

With the opening of its first manufacturing facility in 1998 and its second in 2008, Hyundai has been present in India for 28 years. Out of 812 million shares, the corporation intends to sell up to 142 million, or 17.5% of the total. The ultimate proportion could, nevertheless, be decreased. HMIL now offers 13 models in a variety of market niches. In May 2024, the company recorded a 7% year-over-year growth in overall sales, selling 63,551 units as opposed to 59,601 units in the same month the previous year. Furthermore, HMIL’s exports increased to 14,400 units in May from 11,000 units the previous year, a remarkable 31% increase.

The DRHP states that the purpose of the offer is to accomplish the advantages of listing the equity shares on stock exchanges as well as to carry out the Offer for Sale of up to 142,194,700 equity shares with a face value of Rs 10 each by the Promoter Selling Shareholder. The company anticipates that the listing will improve its reputation and visibility while offering liquidity and an Indian public market for its equity shares.

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