Hyundai India IPO could trigger a sector-wide positive re-rating for auto stocks

The marquee IPO of Hyundai Motor India, which will be this country's biggest public offering, could attract significant global interest and with it an influx of foreign capital. This might trigger a sector-wide re-rating for the auto industry, according to analysts.

The Rs 27,870 crore IPO from Hyundai is the first from the major auto player in India in over two decades and thereby drawing a lot of eyeballs from foreign investors.

Hyundai's portfolio expansion and manufacturing capabilities highlight the growth potential and investment in the automotive market. The increased competition in the auto space also means that other automakers might have to innovate and enhance their product offerings.


"The increased competition and innovation driven by Hyundai’s enhanced financial strength post-IPO could push other automakers to reassess their growth potential and market positioning, positively re-rating the sector," said Saji John, Senior Research analyst, Geojit Financial Services.

Conversely, if the listing has been perceived as overvalued then it can negatively impact.

The re-rating will be driven by increased investor interest and capital inflows into the auto sector and higher valuation multiples for auto companies, reflecting their growth potential.
How Hyundai India IPO could keep listed rivals like Maruti on edge

Further, accelerated adoption of electric and hybrid technologies propelled by heightened competition could also play a significant role in positive re-rating for the sector.

"This re-rating would likely be gradual and dependent on how well Hyundai and its competitors succeed in harnessing new market dynamics gained once they go public," said Atul Parakh, CEO of Bigul.

Hyundai has planned an investment of Rs 32,000 crore in the country over the next 10 years as the company seeks to aggressively invest in new products, future advanced technology, and R&D capabilities in Indian operations.

"We expect a re-rating in the sector with the IPO debut. The re-rating would likely be driven by its strategic expansion plans, investment in new technologies and products, and prudent capital allocation. Such a rejig would intensify the competition in the sector, which would drive investor interest and valuation in the sector as a whole," said Sagar Shetty, Research Analyst, StoxBox.

Hyundai's IPO will see the Korean parent selling 17.5% stake or 14.2 crore shares, valuing the Indian unit at Rs 1.6 lakh crore at the upper end of the price band.

Bidding for the IPO will start on October 15 and the shares are expected to list on October 22.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)