Hyundai Motor India shares slump 6% in market debut

Hyundai Motor India’s shares stumbled in their market debut on Tuesday, dropping as much as 6% below their initial public offering price, highlighting investor concerns about aggressive valuation in what marked India’s largest-ever IPO.

The automotive giant’s shares opened at 1,934 rupees on the National Stock Exchange, falling short of its ambitious 1,960 rupees offer price. By 0548 GMT, the stock had settled at 1,882.10 rupees, down 4%, resulting in a market valuation of 1.53 trillion rupees (USD 18.2 billion) – notably below the company’s targeted USD 19 billion valuation.

The disappointing debut comes despite the IPO being oversubscribed more than two-fold last week, primarily driven by institutional investors. However, retail investors remain cautious, deterred by pricing concerns and doubts about potential listing gains. Market analyst Arun Kejriwal, founder of Kejriwal Research, noted, “Hyundai’s issue has been stiffly priced and that seems to be weighing down on its listing as well. The volumes seen so far are driven only by institutional investors, and are rather poor for an IPO of Hyundai’s size.”

This Mumbai listing marks a significant milestone as Hyundai Motor’s first venture outside its home market of South Korea. The timing coincides with India’s buoyant equity markets, though recent weeks have seen automotive sector shares decline amid slowing car sales following two years of record highs, with customers increasingly postponing purchases due to persistent inflation concerns.

The IPO’s performance aligns with a broader trend in India’s major public offerings. Data from Dealogic reveals that seven of India’s ten largest IPOs, including Hyundai India, have experienced listing day losses ranging from 5% to 27%.

Despite the initial setback, several major brokerages maintain an optimistic long-term outlook. Nomura initiated coverage with a “buy” rating and a price target of 2,472 rupees, citing Hyundai’s strong SUV portfolio, which represented 67% of sales in the April-to-June 2024 quarter. Similarly, Macquarie analysts began coverage with an “outperform” rating and a 2,235 rupees price target, arguing that the company’s SUV-centric strategy justifies a premium valuation.

Market analysts have expressed concerns about the valuation gap between Hyundai and market leader Maruti Suzuki. While Hyundai’s market capitalisation remains significantly below