New Delhi: Hyundai India entered the stock market with a loss. It had a lackluster start on the day of listing. The company’s shares closed with a decline of more than 7 percent compared to its issue price of Rs 1,960. Despite being India’s largest IPO till date, it had to face indifference from investors. This was due to the large size of the IPO and valuations that did not leave much hope for investors. Low interest from retail investors also contributed to the stock’s poor performance. However, brokerage firms are confident of the company’s long-term prospects given its strong fundamentals and strategic focus on the SUV segment. Hyundai India’s IPO was worth Rs 27,856 crore. This makes it the largest IPO in the history of India. Earlier, big IPOs like LIC and Paytm also closed with losses on the day of listing. Same factors were there with them too. In the case of Hyundai, the share IPO price slipped 7.12 per cent from Rs 1,960 to close at Rs 1,820.40. Interestingly, on the day of listing itself, three brokerage firms namely Nomura, Morgan Stanley and Motilal Oswal started coverage on the stock with ‘Buy’ ratings. Then why did the stock perform so poorly despite so much positive sentiment?
Analysts believe that one reason for the poor performance of the IPO is its huge size. Large supply of shares in the market can put pressure on prices. Apart from this, some people argue that the IPO was priced at a very high price. This reduced the scope for earning profits for investors. Emkay Global’s estimates suggest Hyundai’s valuation is at 27.4 times FY2024-25 earnings, while Maruti Suzuki’s valuation is at 25.7 times PE.
Why did history repeat itself?
This trend is not new. Of the seven largest IPOs before Hyundai, only one, Coal India, managed to make a profit for investors on the day of listing. LIC, Paytm, GIC Re, SBI Cards, Reliance Power and The New India Assurance, among others, all closed in the red.
An important factor in all this has been the large size of the IPO. The supply of shares increases due to large public float. This negatively impacts share prices. Valuation is another aspect where Hyundai falls short.
Additionally, lack of interest from retail investors contributed to Hyundai’s poor performance. The retail portion of the IPO was subscribed only 50%. Whereas the overall issue was subscribed more than twice. Experts say retail investors generally look for listing gains. This seemed impossible due to high valuation.
However, the initial shock can be disappointing. But, analysts believe that long-term growth prospects remain intact for Hyundai India. The company has a strong presence in India. It is focusing on the fast growing SUV segment. Hyundai’s parent company Hyundai Motor Group plans to invest heavily in electric vehicles.
How was today’s show?
The company’s shares were listed at Rs 1,931 on BSE. This is a decline of 1.47 percent from its issue price. Later there was some improvement in it. It reached Rs 1,968.80 with a gain of 0.44 percent. However, he failed to maintain the momentum. It fell by 7.80 percent to Rs 1,807.05. Finally it slipped 7.12 percent and closed at Rs 1,820.40.
The company’s shares opened 1.32 per cent lower at Rs 1,934 on NSE. During trading it fell 7.80 percent to Rs 1,807. However, at the end of trading it closed at Rs 1,819.60 with a decline of 7.16 per cent. The market valuation of the company stood at Rs 1,47,914.98 crore.
During the day, 15.87 lakh shares of the company were traded on BSE and 286.20 lakh shares were traded on NSE. Hyundai Motor India Limited‘s IPO received 2.37 times subscription on the last day of the offer i.e. last Thursday. The price range of Rs 1,865-1,960 per share was fixed for the Rs 27,870 crore IPO.