Hyundai Motor India Ltd.               

16 October 2024

By Majid Ahamed

About the Company

Hyundai Motor India Ltd is the second-largest automotive OEM in the country and one of the largest OEMs in the world. The company is headquartered in Gurugram, Haryana, India, and operates three manufacturing plants—two in Tamil Nadu and one in Telangana. The company’s main corporate office is in Gurugram, while its registered office is located at SIPCOT Industrial Park, Sriperumbudur Taluk, Kancheepuram District, Tamil Nadu.

Hyundai has a strong presence in the Indian market, with eight of its passenger vehicle models winning the prestigious Indian Car of the Year (ICOTY) award: i10 (2008), Grand i10 (2014), Elite i20 (2015), Creta (2016), Verna (2018), Venue (2020), i20 (2021), and Exter (2024).

The company operates generates sales as follows:

• Sale of Passenger Vehicles through Domestic Sales and Exports
• Sale of parts including transmissions and engines
• Sale of services such as engineering services, insurance broking business and transportation service
• Sale of Scrap

Sale of PV thorugh Domestic Sales and Exports

Majority of the income for the company comes from this division where the company sells currently 13 different model, where in 8 of those model have been awared ICOTY (Indian Car of the Year, From this alone the company generates 60,039.5 Crores in FY24, which contributes 85.9% of the total revenue.

Even Under the PV Vehicles it classified under as: 

• Sedans
  • Compact
  • Premium 
  • Luxury  
• Hatchbacks
  • Compact 
  • Premium

• SUVs
  • Compact 
  • Mid-Size 
  • Large 

Manufacturing Facilities

Geograhical Bifurcation

The company generates most of its revenue from the following countries

• India (77.66% in FY24 vs 76.59% in FY23)
• Middle East and Europe (11.21% in FY24 vs 6.42% in FY23)
• Latin America (6.66% in FY24 vs 9.23% in FY23)
• Africa (3.53% in FY24 vs 6.19% in FY23)
• Others (0.94% in FY24 vs 1.57% in FY24)

Sales of Parts:

This division nearly contribure around 6% of the total revenue around 4,300 Cr in FY24, where the company  sell parts, such as engines, transmissions, and other parts, to companies within the Hyundai Motor Group as well as to third parties.

Sale of Services:

The Services the company earn revenue from the provision of services as follows: Overall they have contribute 5.5% of the total revenue which is around 3,300 Cr of revenue.

• Engineering services: primarily includes revenue from consulting services related to engineering support provided by the subsidiary, Hyundai Motor India Engineering Private Limited, to companies within the Hyundai Motor Group. 

• Broking: Primarily includes brokerage fee collected from insurance companies by the subsidiary, Hyundai India Insurance and Broking Private Limited, when customers purchase vehicle insurance products through our dealers. The company incorporated the insurance broking subsidiary in Fiscal 2022 and began to generate revenue from this business in Fiscal 2023. 

• Transportation services: Primarily includes revenue for the transportation services that the company provide to dealers and distributors for facilitating the transportation of passenger vehicles and parts through a network of transportation providers

Object for Issue

The company is looking to raise capital of around ₹27,870.16 Crores in total in the IPO, of all of them 27,870.16 Cr is the Offer for Sale (OFS) where this amount is given to the existing shareholders or investors by selling the shares. The price band the company is looking to issue the share at ₹1960.

The Total share given for Offer For Sale is 142,194,700, by which 50% of the total issue is allocated to the QIB (Qualified Institutional Buyers), 15% of the total issue is allocated to NII (Non-Institutional Investors) and the remaining 35% of the total issue is for the Retail Investors.

The Lead Banker for the Issue is JM Financials, Kotak Investment Banking, Citigroup Global Markets India Private Limited, HSBC, JP Morgan for the public issue.

Valuation:

The company is targeting a market capitalization of ₹159,258.06 crore, with a P/E ratio of 26.73. In comparison, peers like Maruti Suzuki India Ltd have a trailing twelve months (TTM) P/E of 26.5. The company’s revenue from operations has grown by 15% year-on-year (YoY), while profits have increased by over 17% YoY.

With strong industry tailwinds, particularly in the mid-market  SUV segment where the company holds a leading market share of 37.9% with leading brands such as the “Creta”, the company plans to leverage this strength for future growth. However, competition is fierce, especially with the entry of new players like Kia and MG into the Indian market. How well the company can leverage its brand and scale operations across different regions will be key to driving future growth.

The company is also expanding into the electric vehicle (EV) market, which is still in its nascent stage. With a strong focus on EVs and strategic growth in the export market, particularly in the Middle East, the company expects significant revenue growth and margin expansion in the coming years.

However, investors should be cautious. The company faces several lawsuits, and there are concerns about its corporate governance. For instance, the company recently distributed its entire FY24 profits as dividends, coinciding with the timing of its IPO, and is conducting a complete Offer for Sale (OFS). These moves raise red flags regarding corporate integrity and suggest the company may be seeking to capitalize on a higher valuation in India compared to its parent company listed in Korea, which is currently trading at a P/E ratio of just 5.

In summary, while there are growth opportunities, especially in the SUV and EV segments, investors should be mindful of the corporate governance concerns before making an investment decision.