Hyundai Motor India and its South Korean parent have launched a large-scale global roadshow to gauge investor interest for the Indian vehicle maker's planned US$3bn–$3.5bn IPO. It is leaving little to chance – and making sure participants eat well.
Investor meetings concluded recently in India and London and are underway in the US before moving to Asia in August. Hyundai Motor India is looking to launch the IPO, which would be India's largest, in September or October, subject to regulatory approval.
According to sources with knowledge of the transaction, around a dozen officials from the company and its parent are attending the meetings, compared with the usual four or five in an Indian IPO.
Hyundai Motor India's CEO Unsoo Kim and chief operating officer Tarun Garg are leading the delegation from the Indian side, while the parent is represented by senior officials from the investor relations and strategy teams. A translator is also on hand.
Members of the Indian ECM team and a Korean banker from the bank arranging the investor meeting are present in each meeting. The issuer is providing detailed profiles of the management teams to investors and asking investors to submit their own profiles well in advance as it prefers not to meet investors at short notice, unlike some Indian company managements.
"Everything is prepared in advance and is well rehearsed," a source said.
Sources also said two hotel conference rooms are booked for each meeting, one to host the management team making the presentation and the other for the remaining officials. Indian and Korean food is provided for participants.
"The arrangements are at a totally different scale. From guiding a dozen officials to each meeting to organising the menu, it's all very intensive," a person familiar with the situation said.
Citigroup, HSBC, JP Morgan, Kotak and Morgan Stanley are leading the transaction.
Hyundai Motor did not respond to a request for comment on the roadshow.
Preliminary interest
Bankers should be well rewarded for their efforts. Lead managers are expected to get a fee of 1.3% of the IPO size, slightly higher than the 1% that a large Indian IPO normally pays. A smaller deal of US$100m–$500m would command a 2%–3% fee.
ECM sources close to the transaction said many domestic and international long-only investors have shown interest in the IPO but the valuation has not yet been firmed up.
Local investor interest in multinational companies, India's booming stock market and appetite for primary issuance are working in the company's favour.
The increase in the short-term capital gains tax on equity investments announced last week in the Indian budget is not expected to dent demand for Hyundai Motor India, given its strong fundamentals. The company is the country's second-largest seller of cars after Maruti Suzuki, which listed in 2003. India's passenger vehicle sales are estimated to have grown by 8.4% in the year to March to a record 4.2 million units, according to the IPO filing.
KRX-listed Hyundai Motor is selling 142.2m shares, or 17.5% of the capital, according to the June 14 IPO filing. At the expected size of US$3bn–$3.5bn, the Indian unit's market capitalisation will be US$17bn–$20bn, around 38%–44% of the parent's W63trn (US$45bn) value.
The listing will enhance the company’s visibility and brand image, and provide liquidity and a public market for its shares in India, it said in the filing.
The deal will provide a valuation boost to the parent, which trades at 5.9 times its forecast 2024 earnings. Analysts forecast Hyundai Motor India to price its IPO at a forward P/E multiple of around 20.
The South Korean company is likely to use the IPO proceeds to strengthen shareholder returns through a large dividend or a share buyback instead of investing in the local unit, analysts said.
Hyundai Motor India has 13 passenger models including saloons, hatchbacks, SUVs and electric vehicles. From 1998 to March this year, it had sold nearly 12 million passenger vehicles in India and through exports.
The company reported revenue of Rs532.9bn and a net profit of Rs43.8bn for the nine months to December. The draft prospectus does not mention comparable figures for 2022 but for the year to March 2023, its revenue was Rs614.4bn and net profit was Rs47.1bn.
The deal will be the largest Indian IPO, beating state-owned Life Insurance Corp of India's Rs206bn (US$2.66bn at the time) float in May 2022.