The success of India’s biggest-ever initial public offering from Hyundai Motor India Ltd came down to one key factor: a strong response from qualified institutional buyers (QIBs). But the portion set aside for retail investors, who have been driving demand in the primary market this year, wasn’t even fully subscribed.
QIBs, or large institutions, put in bids for 6.97 times the shares set aside for the category, according to the final subscription data on NSE. Muted enthusiasm from retail investors—bidding up to ₹2,00,000—meant the subscription for the category lagged at just 0.5 times.
The portion allocated to non-institutional investors, who put in bids ranging from ₹2,00,000 to ₹10,00,000, was subscribed 0.65 times.
What’s striking is how the grey market premium nosedived.
“The grey market premium when Hyundai Motor India announced their IPO was ₹1,001 and has now tumbled to merely ₹10,” said Krishna Patwari, founder of Wealth Wisdom of India, an online platform that facilitates trading in unlisted, pre-IPO, and delisted shares. This drastic decline suggests that expectations for listing gains are minimal, which likely explains the lack of interest from retail investors.
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When retail investors put money into an IPO, they often rely on the grey market premium to understand possible listing gains, which is typically based on the higher end of the IPO price band, he said. Additionally, he explained, given the size of the issue, the chances of securing an allotment are higher, resulting in capital being locked up longer without any opportunity for listing gains.
The IPO of Hyundai Motor India, the Indian subsidiary of South Korea’s Hyundai Motor Group, was open for bidding from 15 October to 17 October, with a price band set between ₹1,865 and ₹1,960.
The IPO pricing was higher than anticipated, which contributed to the tepid interest among retail investors, according to Narendra Solanki, head fundamental research-investment services, Anand Rathi Shares and Stock Brokers. In contrast, QIBs, often represented by mutual funds, typically have a longer holding period—around a year or so—and not all prioritize listing gains. This explains the robust interest from QIBs, he said.
Overall, analysts find Hyundai Motor India to have sound fundamentals.
“The company at the upper band will be at approximately 26 times FY24 earnings and around 16.5 times FY24 EV/Ebitda, which is at a discount to Maruti Suzuki’s,” said a report by Elara Securities (India).
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Hyundai Motor India is the second-largest passenger vehicle maker in India by volume, with a market share of 14.6% as of FY24, and is among the top 3 contributors to Hyundai Motor’s global sales at about 18%, the brokerage said. The car maker is planning to launch four new EV models in India, starting with Creta EV in Q4FY25.
This ₹27,870.16 crore IPO, the biggest in India to date, surpassed the previous record of ₹21,000 crore held by Life Insurance Corporation of India. It’s also the first IPO by a car manufacturer in the country since Maruti Suzuki India Ltd’s offer in 2003.
