Hyundai India's mega IPO set to overhaul D-Street records

We walk you through a comprehensive overview of Hyundai India's business

Hyundai India's mega IPO set to overhaul D-Street recordsAI-generated image

dhanak हिंदी में भी पढ़ें read-in-hindi

The IPO market is buzzing with companies making a beeline. A new offer is ready to knock on investors' doors, except this is a big one. Probably, the biggest India has ever seen. Hyundai Motor India has filed its DRHP with market regulator SEBI for what is seen as the country's largest IPO after LIC's Rs 21,000 crore float. The automobile giant is rumoured to raise around Rs 25,000 crore in the IPO, which will see its South Korean parent Hyundai Motor Corp (HMC) offloading around 14 crore shares or 17.5 per cent of its stake.

With such a record-breaking D-street debut on its way, we decided to take a look at Hyundai's business model and what lies ahead of it.

The business

Hyundai India is the country's second-largest automaker by volume, just behind market leader Maruti Suzuki . It has held this spot since FY09. The company manufactures and sells four-wheelers under the brand Hyundai. It currently has a portfolio of 13 models across multiple passenger vehicle segments. The company contributed 18.2 per cent to its parent's total sales volume in 2023.

It currently has one plant in the country located near Chennai, which had a total capacity of 8.2 lakh units as of March 2024. This is also the company's first integrated manufacturing plant outside South Korea. It recently acquired another manufacturing plant in Maharashtra from General Motors, which is expected to commission by the second half of FY26.

A snapshot of Hyundai India's financials

Financials (Rs cr) 9MFY24 FY23 FY22 FY21
Revenue 52,158 60,308 47,378 40,972
Operating profit 4,961 5,359 3,317 2,272
Operating margin (%) 9.5 8.9 7.0 5.5
Net profit 4,383 4,709 2,902 1,881
ROCE (%) 27.2 28.8 20.4 15.4
Cash from operations 4,558 6,564 5,138 5,423
Free cash flow 1,833 4,315 3,885 2,844

The parental linkage

Like market leader Maruti Suzuki, Hyundai India, too, leverages its parent for technology and innovation. Apart from the brand name, it gets access to HMC's globally recognised technologies. For example, the company uses its parent's 'smart factory' platform in its manufacturing facility to customise passenger vehicles in an automated process. It also benefits from its sister companies given it sources around 36 per cent of its raw materials from related parties. In exchange for this, Hyundai India pays a royalty fee to the parent. Between FY21-9M FY24, it paid a royalty fee of 2.4 per cent of its revenue that amounted to Rs 4,363 crore. The company has also been generous with dividend payouts. It has distributed Rs 18,289 crore (including withholding tax) as dividends between FY21-9M FY24, which is 9 per cent of its cumulative revenue! Combining both dividend and royalty, Hyundai India has shelled out 11.3 per cent of its revenue to its parent since FY21.

Comparing the titans

Hyundai India has been facing intense competition lately, especially from giants like Tata Motors and Mahindra & Mahindra , who have been gunning out new releases. In the table 'Racing to the top, we have laid out a head-to-head comparison of the top four industry players.

Racing to the top

Financials Hyundai Maruti Suzuki Tata Motors Mahinra & Mahindra
Revenue growth (% pa) 21.3 29.3 17.7 27.8
Operating profit growth (% pa) 53.6 83.5 75.8* 34.3
3Y median operating margin 7.0 3.5 -0.8 14.8
Profit after tax growth (% pa) 58.2 36.8 47.6* 75.3
3Y median ROCE 20.4 10.6 1.2 16.4
Volume growth (% pa) 9.7 11.4 55.8 51.2
3Y cumulative CFO (Rs cr) 17,125 19,948 78,671 20,082
3Y cumulative FCF (Rs cr) 11,044 8,049 24,933 3,370
Current market share (%) 15.0 43.0 11.1 11.2
Growth numbers for FY21-23
Market share for April 2023 - Feb 2024
*growth from loss to profit
Volume growth for Tata Motors and M&M includes only PVs

Gearing up for the next innings

Hyundai India has set concrete goals to support its growth trajectory:

  • The company wants to grasp Indian consumers' needs better to increase its market share. And it's already on track. The company recognised the increasing preference for SUVs and premium vehicles and shifted gears by slowly changing its product mix. This is evident in its sales volume and average selling price with its SUV volumes growing 18.7 per cent per annum between FY21-23 and the domestic average selling price rising by 8 per cent between FY21-9M F24.
  • It aims to increase its market share in the EV segment by leveraging its parent's portfolio and adding more charging stations. Further, it intends to make India its key export hub. The company's export volumes grew 21 per cent per annum between FY21-23, contributing around 20 per cent to total revenue during this period.

What's in store ahead?

It's the newly acquired plant in Maharashtra, which is expected to be the launchpad for Hyundai India's expansion goals. When fully operational it can increase the company's total capacity by 30 per cent to 10.7 lakh units.

That said, the company is not fully in the clear. It faces stiff competition, which is only expected to tighten. Due to these pressures, it has been losing market share. From 17.6 per cent in FY20, its market share has fallen to 15 per cent as of Feb 2024.

Note: This is not a recommendation for subscribing to the IPO. Please do the due diligence before subscribing.

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