Investors eying Hyundai Motor India’s upcoming initial public offering (IPO) should be ready for a long-term investment as analysts believe significant returns may not be seen for at least a year. With the company’s IPO floating, market trends indicate a cautious outlook for the country’s second-largest car manufacturer.
What Does the Grey Market Premium (GMP) Indicate?
As of Monday evening, the grey market premium (GMP) for Hyundai shares stood at IN ₹30, indicating a slight increase of 1.5% over the upper limit of the issue price band, which ranges from IN ₹1, 865 to IN ₹1,960. This follows a more favorable GMP of IN ₹370 recorded on October 4. The GMP represents the additional amount that investors are willing to pay for shares in the unofficial market prior to their official listing. The IPO, which is valued at IN ₹27,870 crore, is opened on Tuesday and closed on Thursday.
Why has the Hyundai GMP Declined?
Krishna Appala, a senior research analyst at Capitalmind Research, attributes the recent drop in the GMP to increased market volatility and a decrease in demand.
“In the short term, Hyundai may face limited growth prospects as increased competition continues to erode market share.”
Krishna Appala
Analysts have observed that the IPO pricing offers minimal potential for a strong listing, akin to the recent offerings from firms such as Bajaj Housing Finance and Ola Electric Mobility. Consequently, the stock is considered a better investment option for those prepared to hold it over a longer duration.
What Should Investors Expect from the Hyundai IPO?
Bajaj Broking Research analysts indicate that although the stock seems fully valued, Hyundai is strategically positioned for substantial growth. The company’s ongoing expansion initiatives could yield long-term benefits. They recommend that investors should consider a holding period of 1 to 3 years to maximize potential rewards.
Shashank Kanodia, assistant vice president of research at ICICI Direct, emphasized the value of a long-term perspective.
“If held for over a year, the stock’s returns could reach double digits”.
Shashank Kanodia
Hyundai currently holds a strong market position, particularly in the Sports Utility Vehicle (SUV) sector, which accounts for 63% of its domestic passenger vehicle sales in FY24, surpassing the industry average of 60%. This gives Hyundai a competitive advantage in the mid-SUV market.
Should Investors Wait for Listing Day?
Certain analysts are recommending that investors exercise caution on the listing day. Aniruddha Sarkar, Chief Investment Officer at Quest Investment Advisors, explained, “Since it’s a large issue, there would be many sellers on the listing day, and the shares could be available at lower prices.” This situation could create a chance for investors aiming to buy into the market at a better price.
The Hyundai IPO offers potential investors a mix of opportunities and challenges. Given the current market volatility and increased competition, adopting a long-term strategy seems wise. Investors should carefully evaluate their choices, consider retaining the stock for at least a year, and stay informed about market developments.
As Hyundai Motor India launches its IPO, it marks an important moment for both the automotive industry and investors.
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Mallika Sadhu is a journalist committed to revealing the raw, unfiltered truth. Mallika's work is grounded in a dedication to transparency and integrity, aiming to present clear and impactful stories that matter. Through comprehensive reporting and honest storytelling, she strives to contribute to provide narratives that genuinely inform and engage. When not dwelling in the world of journalism, she is immersed in the colors of her canvas and pages of her journal.
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