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HMI has recently obtained Sebi approval to launch its IPO. (Photo: Shutterstock)
Hyundai Motor India (HMI), which is expected to make its stock market debut soon, may command a valuation multiple higher than market leader Maruti Suzuki India (MSIL), brokerage firm Nomura has said in a note.
MSIL, the largest automaker in the country, commands a market cap of Rs 4.13 trillion ($48 billion), 22.6 times its estimated earnings for FY25.
In its draft red herring prospectus (DRHP), HMI has set its valuation between Rs 1.5 trillion and Rs 1.7 trillion ($18 billion and $20 billion).
In FY23 and the first nine months of FY24, HMI posted a net profit of Rs 4,709 crore and Rs 4,383 crore, respectively.
Nomura’s note did not provide profit projections for HMI for FY25, but it expects sales to accelerate, driven by new car launches.
The ongoing market share growth and the potential benefits of being part of the larger Hyundai Motor Company group could mean that the country’s second-largest carmaker’s valuation premium might surpass that of the top carmaker, the brokerage has said.
HMI has recently obtained Sebi approval to launch its IPO. The maiden share sale—pegged at Rs 25,000 crore—is expected to be launched in early November.
Through the IPO, parent Hyundai Motor Company will divest a 17.5 per cent stake in its Indian arm. Besides raising funds for the Seoul-headquartered parent, the IPO is aimed at enhancing HMI’s visibility, brand image, and liquidity in the Indian market.
Hyundai Motor India’s market share has remained stable at 15-17 per cent since 2008. The company recorded its highest-ever domestic sales of 602,000 units in 2023, driven by strong performance in compact and mid-size SUVs like the Creta, Exter, and Venue, according to the brokerage.
Looking ahead, Nomura said the company’s sales are expected to accelerate, supported by the launch of new models such as the Creta EV and the petrol-HEV SUV Ni1i. Additionally, the growing demand for electric vehicles (EVs) and hybrid electric vehicles (HEVs) in India presents a significant opportunity for HMI.
The IPO is also expected to unlock value for the parent company.
“If HMI’s market cap ends up at $18-20 billion, the value of the Indian entity would represent 45-50.5 per cent of the consolidated HMC entity’s market cap. Equity method income from HMI has represented 7-8 per cent of HMC’s consolidated net income in 2023 and the first half of 2024. This will likely raise investors’ attention on HMC’s valuation, which we believe is underestimated by the market. Meanwhile, we think HMC shareholders are interested in whether HMC will return part of its IPO proceeds to shareholders,” said Nomura in the note.
At its Investor Day on August 28, HMC’s CEO indicated that the company would announce plans for the IPO proceeds after the offering.
First Published: Sep 26 2024 | 11:58 AM IST
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