Hyundai Motor India Limited (HMIL), the Indian subsidiary of the South Korean auto manufacturer, received a tepid response on the stock exchanges on October 22, 2024, upon its listing. The company's shares are listed at a 1.32 per cent discount, opening at Rs 1,934 against the initial public offering (IPO) price of Rs 1,960 on the National Stock Exchange (NSE). After surging to Rs 1,971 on a single 5-minute candle, a quick plunge started. Within ten minutes the price reached Rs 1,882 and currently, it has stabilised at Rs 1,881 almost 5 per cent down from its listing price.
Why Muted Response At Bourses?
Advertisement
The muted retail response to HMIL's initial share sale is the main reason behind the tepid response, as retail investors subscribed to only about 50 per cent of their allotted shares. However, strong demand from Qualified Institutional Buyers (QIBs) helped boost the overall numbers, with the QIB portion oversubscribed by nearly 700 per cent, or 6.97 times, leading it to be ultimately oversubscribed 2.37 times. This significant institutional interest compensated for the lukewarm participation from retail investors but could not save the scrip on the listing day.
Investors had concerns about Hyundai's limited exposure to electric vehicles, which currently make up only 11 per cent of its portfolio. The IPO, which is recognized as the largest in Indian history, had an issue size of Rs 27,870 crore, largely comprising an offer for sale by Hyundai Korea, which led to Hyundai not receiving any proceeds from the IPO. This also led to an underwhelming response from investors.
Advertisement
Now the institutional buyers act as a strong support for the scrip. However, this institutional backing needs to be viewed with caution, as to if any promoters are selling the scrip. Money Control reported that Emkay Institutional Equities has issued a 'REDUCE' call for HMIL, setting a target price of Rs 1,750 per share. They noted that while Maruti Suzuki India Limited (MSIL) also encounters similar near-term growth challenges, they favor it over HMIL, due to its stronger performance on operational and financial metrics. The analysts believe that MSIL’s diversified product offerings and powertrain configurations provide it with better growth potential.
