Hyundai Motor India is going to release an IPO soon. They submitted preliminary papers with Sebi. They are planning to release an IPO of almost $3 billion, which is likely to be India’s biggest IPO record after the Life Insurance Corp. of India’s $2.5 billion issue in 2022.
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Hyundai Motor India?
Hyundai Motor Company is the third largest auto original equipment manufacturer (OEM) in the world. Everyone knows about Hyundai Motors, they manufacture and sell four-wheeler passenger vehicles with the latest technology and reliable and innovative features. They deal in 13 models across all vehicles like sedans, hatchbacks, sports-utility vehicles (SUVs), and battery electric vehicles (EVs). Now, Hyundai is releasing some IPO shares for the public to raise funds. They are targeting a $3 billion raise, which would mark it as one of the largest IPOs in India’s history. However, the exact amount to be raised is not specified in the draft red herring prospectus (DRHP) submitted to the Securities and Exchange Board of India (SEBI). In addition, Hyundai has engaged in talks with major investment banks including JP Morgan, Morgan Stanley, Citi, and Bank of America to manage the IPO. However, no formal appointments have been made yet.
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Hyundai Motor India IPO
Hyundai Motor India’s IPO is confirmed. But there is no official release of IPO size. According to the bankers privy, they are aiming to raise approximately $2.5 – $3 billion in the upcoming IPO issue valuing the company at $25-30 billion. As per the DRHP, the proposed IPO is an OFS of 142,194,700 equity shares by Hyundai Motor Company, with no fresh issue component. Hence, they will offer up to 142.2 million equity shares, which is 17.5 per cent of the post-offer paid-up equity share capital. Hence, it is said that this public issue is completely of the IPO.Â
- Company: Hyundai Motor Company
- IPO Size: Approximately $3 billion
- Valuation: Targeting around $30 billion for the Indian unit
- Purpose: To expand operations in India, particularly in electric vehicles (EVs) and related infrastructure
- Expected Market Impact: Likely to become India’s largest IPO, surpassing the Life Insurance Corporation’s $2.7 billion IPO in 2022.
Strategic Reasons for the IPO
Here is the list of reasons for releasing the IPO by the Hyundai Motor Company.
- Expansion in India: Companies release IPO to become private to public and aim to raise funds. Hyundai Motor Company is planning to accelerate its growth in India with the IPO release. Hyundai Motor Company has been o[rational in the auto market for 25 years and is the second largest carmaker in India as per sale. Hyundai Motor Company is planning to become the first company and wants to expand its presence in the Indian market.
- Reducing Dependency on Parent Company: Hyundai wants to become independent. By releasing IPO shares and raising funds locally, they are trying to reduce their reliance on the parent company for capital and want to increase their financial status. By having a balanced financial status, they became financially independent and flexible.
- Competing with Local and Global Rivals: Hyundai holds a good place in the Indian Market, but due to increasing competition from local companies like Tata Motors and the anticipated entry of Tesla into the Indian market, they need to increase their presence. Hyundai is planning to bolster its presence, particularly in the EV sector with this IPO release.
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Usage of IPO Proceeds
Hyundai Motor is planning to expand and compete in the dynamic Indian automotive market. Below following are the primary usage of the IPO proceeds-
- Electric Vehicle (EV) Development: They are planning to dedicate some of the funds to the development and launch of new electric vehicles to stand out in the Indian market. They recognize the growing importance of sustainable transportation and aim to strengthen its position as a leader in the EV sector. They will work to introduce a range of electric cars to cater to different segments from affordable to premium. In addition, it also required a lot of Research and Development for the best products.
- Charging Infrastructure: Charging Infrastructure is required after a successful adoption of the electric vehicle. focusing only on the EV is not enough. A better Charging Infrastructure is also required. Hyundai is planning to invest in setting up a comprehensive charging infrastructure across India like in urban and rural areas. In addition, for convenience, they are developing and promoting home charging solutions at home. Fast Charging Technology is growing. Investing in the Fast Charging station is also a plan.
- Battery Pack Assembly Unit: The Company also focuses on the vertical integration of its supply chain, particularly in battery technology. For growth, it needs to set up a battery pack assembly unit in India, where Hyundai is thinking of it. It will reduce dependency on imported batteries by assembling battery packs locally, which can lead to cost efficiencies and quicker production cycles.
- Expansion of Manufacturing Capacity: Hyundai is the second largest carmaker in India. To fulfil the increasing demand for Hyundai vehicles in India, they required expansion for future growth. With the IPO, the company is planning to expand their manufacturing capacity. After IPO work, they are planning to establish new manufacturing plants or expand existing ones to increase production capacity. Hyundai has already acquired a plant from General, which will be upgraded in future to increase the manufacturing capacity of the product.
In summary, Hyundai’s planned IPO for its Indian unit is a strategic move to strengthen its market presence, become independent and increase the automotive market. This is going to be a huge IPO this time. Investors who invest in the IPO, must invest in the Hyundai IPO.Â