The report highlighted several concerns, pointing to broader industry challenges and the valuation mismatch as reasons for caution…reports Asian Lite News
The upcoming Initial Public Offering (IPO) of Hyundai Motors India has sparked significant interest in the Indian markets, but a recent report by Aequitas Investments suggests it may not be as promising for Indian investors as anticipated.
The report highlighted several concerns, pointing to broader industry challenges and the valuation mismatch as reasons for caution.
It said “Given the headwinds that the Global Automobile Industry is facing coupled with signs of a slowdown in India, the upcoming IPO might not be a great deal for Indian Investors”
Hyundai Motor Company, the parent firm based in South Korea, is set to offload shares worth Rs 25,000 crore through an Offer for Sale (OFS) in the Indian market.
However, the report suggested that the current global headwinds facing the automobile industry, combined with signs of a slowdown in India, may make this IPO less attractive for Indian investors.
One of the key issues flagged in the report is the valuation of Hyundai Motors India. The report noted that despite contributing only 6.5 per cent of Hyundai’s global revenue and 8 per cent of its overall profitability, the Indian unit is expected to be valued at approximately 42 per cent of the parent company’s market capitalization upon listing.
This valuation discrepancy raises concerns about whether the IPO price is justified given the Indian unit’s relatively modest contribution to Hyundai’s global business.
“Despite contributing only 6.5 per cent of the global revenues and 8 per cent of the profitability, Hyundai’s India unit will be valued at approx. 42 per cent of the Parent Co.’s MCap on listing” the report added.
From Hyundai’s perspective, the move makes sense. In South Korea, Hyundai’s stock currently trades at a price-to-earnings (P/E) ratio of just 5x, making the sale in India potentially more lucrative. The report argues that Hyundai is looking to take advantage of the relatively higher valuations in India.
It said “From Hyundai’s perspective it’s a no-brainer as their stock in S.Korea trades at a measly 5x P/E”
Hyundai Motor Group, which includes both Hyundai and Kia, is the third-largest automaker globally, having sold 7.3 million vehicles in 2023. While Hyundai Motors India does not have a stake in Kia Motors India, the parent company owns a controlling 34 per cent stake in Kia Motors globally and fully owns Genesis Motors, a luxury brand in South Korea. (ANI)
Hyundai’s Global Sales Fall
Hyundai Motor, South Korea’s biggest carmaker, said on Wednesday its sales fell 3.7 per cent last month from a year earlier on weak overseas demand.
Hyundai Motor sold 343,824 vehicles in September, down from 357,133 units a year earlier, the company said in a statement.
Domestic sales rose 3.5 percent to 55,805 units from 53,911 during the cited period, while overseas sales declined 5 percent to 288,019 from 303,222, the statement said, reports Yonhap news agency.
“In particular, high lending rates suppressed vehicle demand and increased incentives to woo customers from rivals weighed on the monthly results in overseas markets,” it said.
Hyundai said it will flexibly respond to changes in global markets by adjusting production and sales systems depending on local conditions.
While focusing on increasing sales of high-end models, Hyundai plans to launch the Casper Electric, named Inster for overseas markets, in global markets and develop gasoline hybrid models amid the slowdown in electric vehicles.
From January to September, its sales declined 1.6 percent to 3,075,861 autos from 3,127,036 during the same period last year.
Domestic sales dropped 8.5 per cent to 515,605 autos in the first nine months from 563,519 units a year earlier. Its overseas sales were down 0.1 percent to 2,560,256 from 2,563,517 during the same period.
Meanwhile, Kia said its sales fell 4.5 per cent last month from a year earlier due to weak domestic demand. Kia sold 249,842 vehicles in September, down from 261,479 units a year ago on decreased production and fewer working days due to the Chuseok holiday.
Domestic sales declined 14 per cent on-year to 38,140 units last month from 44,123, while overseas sales were also down 2.7 percent to 211,002 from 216,792 during the cited period, it said.
The monthly sales figures include special-purpose vehicle sales results.
In the fourth quarter, the company plans to boost sales by launching the upgraded Sportage SUV along with the planned global launch of the all-electric EV3 compact SUV.
From January to September, sales dropped 1.5 per cent to 2,319,332 autos from 2,354,229 units in the same period of last year.
ALSO READ: Incubators Ignite India’s Startup Boom