Hyundai’s IPO could top Life Insurance Corp.’s 2022 offering that raised a record $2.7 billion.
The Hyundai India IPO that was announced earlier this year has become a bellwether for the health of Indian stock markets and particularly its IPO market, now that the South Korean carmaker has reportedly filed a draft red herring prospectus with the Securities and Exchange Board of India (SEBI) on June 15.
Hyundai India expects to raise between $2.5 to $3 billion from this IPO, valuing its Indian operations (which is its third largest revenue generator after the US and South Korea) between $22 billion and $28 billion. Depending on the final amount raised, Hyundai India IPO could be the second largest or largest in India, following the $2.7 billion IPO of the Life Insurance Corporation of India in July 2022, which for now remains the country’s largest IPO ever. Hyundai’s IPO is being managed by investment banks Kotak Securities, JP Morgan, Morgan Stanley and HSBC.
Latest reports also indicate that Korean consumer electronics giant LG Electronics is also looking to list its Indian subsidiary and has hired JP Morgan and Morgan Stanley as advisors, though no formal announcement as to the timing of the IPO has been made. Several of the domestic companies looking to IPO this year are global private-equity backed where early investors are looking to cash out. This includes the IPO of OYO, India’s most successful hospitality startup that is looking to raise $1 billion and Ola Electric, another venture backed start up manufacturing electric scooters, looking to raise approximately $600 million. Ola is being advised by Bank of America Securities India, Goldman Sachs India, Citiglobal India and Kotak Securities.
While the Indian IPO market has been hot in the past few years, the rapidly growing depth of the market is attracting more attention from fast growing, but still privately held, companies as well as subsidiaries of multinational corporations. As of June 14, 136 companies had successful IPOs in India, raising $6.3 billion, this includes $2.2 billion in a follow-on issue of shares by Vodafone India in April. In the second half of 2023 the Indian equity market crossed the $4 trillion mark and is currently valued at $4.9 trillion as per the National Stock Exchange of India, pushing Hong Kong aside to become the world’s fourth largest stock market by market cap, behind Japan, China and the US. According to Bloomberg, the market capitalization of the Indian stock market has grown by $1 trillion in three years, while markets in China and Hong Kong have lost $6 trillion in market cap since 2021. This growth in Indian market cap was achieved by a combination of both rapidly expanding corporate earnings and a jump in valuations. Indian equity markets are also now among the most expensive in the world at over 23 times 1-year forward earnings, albeit being one of the best performing major global markets.
The booming Indian IPO trend says a lot about the health of the Indian retail investor. India has always seen strong IPO demand with enthusiastic retail participation. This has expanded in recent years, as now 140 million retail investment accounts are active, and this is being attributed to the growth in digital infrastructure. Retail investors have been pumping in approximately $2 billion a month into mutual funds and in the month of May pumped in $4.18 billion, an 83% year-on-year increase. Indian mutual fund assets now stand at 58.6 trillion rupees ($702 billion), having increased by six times between 2014 and 2024.
