Hyundai eyes expansion, valuation boost with Rs 25,000 crore IPO

Hyundai Motor's ambitious Rs 25,000 crore initial public offering (IPO) is poised to achieve dual objectives: facilitating expansion in one of the world's fastest-growing automotive markets while addressing the perceived "Korea discount" that impacts its valuation domestically.

The planned IPO, which could become India's largest ever, marks Hyundai's maiden listing outside of its home market of South Korea. With India serving as the company's second-largest market and boasting 15 per cent market share, Hyundai aims to leverage the IPO to accelerate its growth trajectory and reduce dependency on its parent company for funding.

Industry analysts and insiders familiar with Hyundai's plans suggest that the IPO will play a key role in financing the launch of electric vehicles (EVs) in India, establishing a robust charging network, and expanding manufacturing capacity. Moreover, Hyundai's move to raise capital locally underscores its strategic understanding of the Indian market dynamics and the imperative to invest in EV infrastructure, according to Gaurav Vangaal of S&P Global Mobility and Kevin Yoo of Daol Investment & Securities.

While Hyundai has refrained from confirming the IPO plans, the move aligns with the company's commitment to exploring avenues to enhance corporate value. The buoyant Indian stock market, marked by major growth in recent years, offers Hyundai an opportune moment to capitalise on market optimism and address the "Korea discount" challenge.

The term "Korea discount" refers to the tendency for South Korean companies to receive lower valuations relative to their global peers due to factors such as lower dividend payouts, conglomerate dominance, and geopolitical risks. Hyundai's potential valuation of Rs 2.5 lakh crore for its India unit IPO represents a bold attempt to transcend this discount and potentially elevate valuations at home.

However, analysts caution that addressing the "Korea discount" may not be straightforward. Lee Jung-bin of Shinhan Securities emphasizes that while listing in India could enhance fundraising and local brand image, resolving valuation discrepancies will require a multifaceted approach.

(With Reuters inputs)