India's IPO record shattered with $5.5 billion launch

What happened with Hyundai's India IPO?

The South Korean auto giant Hyundai launched its initial public offering (IPO) on Tuesday, billed as India's biggest stock market debut, and was projected to be worth about $3.3 billion (€3.05 billion). 

The first carmaker to go public in the South Asian country since Maruti Suzuki in 2003, Hyundai offered 142 million shares for sale, representing about 17.5% of the total shares of its Indian arm.

By the end of Thursday, the IPO was twice oversubscribed, drawing bids of $5.51 billion.

Reuters news agency cited unnamed sources linked to the listing as saying that Hyundai would price its shares at 1,960 rupees ($23.31, €21.49t), giving it a market valuation of $19 billion. That would value the Indian unit at about 40% of its Korean parent.

In a sign of the popularity of Hyundai's listing on the Bombay Stock Exchange, institutions, including foreign investors, bid nearly seven times the shares reserved for them.

Nearly $1 billion in shares were snapped up by institutional investors on Monday alone, including the government of Singapore and BlackRock, the giant US investment firm, which picked up stakes worth a total of $77.3 million. 

Fidelity, meanwhile, bought shares worth $76.5 million and domestic mutual funds were allocated shares worth $340 million.

Hyundai India shares are expected to start trading on Tuesday (October 22).

Why has Hyundai launched an IPO in India?

Already India's second-largest carmaker by sales, Hyundai is keen to build on the advantage gained by its early entry into the national market in 1996. Last year, Hyundai sold over 605,000 vehicles in India, a 9% increase from the previous year. It hopes the additional funds will help close the market share gap with leader Maruti Suzuki.

India already has the third-largest auto sector in the world — and it is growing fast. Last year, more than 4.1 million vehicles were sold. The auto sector is a major pillar of the economy and the country's large, growing consumer base and urbanization rate, along with relatively low production costs, make it an ideal location for Hyundai to manufacture and sell its vehicles.

India's government is keen to boost domestic electric vehicle production, which aligns with the Korean carmaker's strategy.

Hyundai also sees India as a critical alternative to China and Russia, where sales have dropped because of geopolitical issues. The South Asian country offers a more stable environment to its peers.

How does the IPO compare with others?

Globally, Hyundai's IPO beats July's US listing by Lineage Logistics, the world's largest cold-storage firm, which was worth $5.1 billion.

Hyundai's listing will also eclipse the 2022 IPO of the state-run Life Insurance Corporation of India, in which the government sold a 3.5% stake and raised $2.7 billion.

Other top domestic listings in recent years include fintech giant Paytm, whose IPO was worth $2.2 billion in November 2021, and Coal India, which went public in 2010 at $1.8 billion. 

India's stock market has been booming over the past four years, growing by 210% between April 2020 — during the first pandemic lockdown — and last month. On Tuesday, the SENSEX, the index of the Top 30 stocks on the Bombay Stock Exchange, was trading at 81,820.

India recently pipped Hong Kong to become the fourth-largest stock market in the world.

What are Hyundai's plans in India?

India's auto market has rapidly become ultracompetitive, and smaller domestic rivals Tata Motors and Mahindra & Mahindra have eaten into Hyundai's market share.

"India is one of the most exciting auto markets in the world," Unsoo Kim, managing director of Hyundai's Indian unit, told a news briefing in Mumbai last week. "[The] IPO will ensure that Hyundai Motor India is even more dedicated to succeed in India."

Hyundai plans to use proceeds from the IPO to enhance its research efforts and develop new cars, seeking to transform the country into a production hub for other countries in the Global South. 

Hyundai already delivers its India-made vehicles to more than 90 countries.

"We intend to become a global manufacturing hub for Hyundai for the emerging markets," Tarun Garg, chief operating officer of Hyundai India, told the Reuters news agency. "In [the] next 3-4 years, [a] 30% increase in production will improve our domestic and export volumes."

The Korean automaker has already invested $5 billion in the country and plans to pump in another $4 billion over the next decade to help make its Indian operations a key plank of its electric vehicle (EV) production, as well as building EV infrastructure such as charging stations and a battery assembly plant.

Hyundai currently has one manufacturing plant in India for local sales and exports. Production at a second plant is expected to begin operations in 2025, which will help take the firm's total capacity in India to beyond 1 million units a year.

Edited by: Rob Mudge

Editor's note: This article was first published on October 15 and was updated on October 18 with new developments.