Hyundai Motor IPO shows retail investors growing wiser as past mistakes haunt them

As expected, Hyundai Motor India made a muted debut on the stock exchanges, listing at a discount. In hindsight, retail investors — who largely steered clear of the Rs 27,870 crore IPO — appear to have made the smartest move, avoiding the hype surrounding India's largest public offering and sidestepping early losses.

Even though the IPO from India's second largest passenger vehicle maker sailed through on strong institutional interest, the retail portion was just subscribed 50%.

India's IPO market is red hot in the past few years with the fundraising already nearing Rs 1 lakh crore in the current fiscal. This is largely driven by massive retail appetite for the public offers, where subscription numbers are usually high.


In Hyundai's case, premium pricing and weak grey market signals turned out to be major dampeners, overshadowing the large scale of the IPO and the company's strong brand reputation.

Analysts said retail investors have learnt their mistakes from big IPOs in the past like Coal India, Paytm, and LIC where they burnt their hands.

"Hyundai also being a completely an OFS issue, investors didn't want to take any risk. Further, the auto companies are currently facing hurdles in the form of over inventory and lower demand, resulting in a decline of their share prices in the past one month. Retail investors might have seen that as a trend," said Prashanth Tapse of Mehta Equities.

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The Nifty auto index is down about 6% in the last one month with top players in the industry like Maruti Suzuki, Tata Motors and M&M losing up to 10% in this period.

The appetite of retail investors for IPOs is increasingly turning in favour of returns in the short term. A recent Sebi study found that nearly 54% of IPO shares are sold within a week from listing by non-anchor investors.

The study, which was conducted between April 2021 and December 2023, revealed that individual investors sold 67.6% of shares by value allotted to them within a week of listing, when returns were more than 20%, and sold 23.3% of shares by value when returns were negative.

Given the falling GMP and a near consensus from analysts that Hyundai India is a long-term play, retail investors didn't find any attraction in the IPO from a short-term point of view, which eventually turned out to be the case.

However, as a long-term investor, analysts said one cannot ignore India's auto story. Tapse said investors can buy shares of Hyundai not at current levels, but after a 10-15% correction.

Pos the listing, global brokerage firms Nomura and Macquaire have initiated coverage on Hyundai Motor with a 'Buy' rating. While Nomura has a of Rs 2,472, Macquarie sees an upside for the stock up to Rs 2235. Hyundai is currently trading at Rs 1880, down 4% from the issue price.

Analysts believe Hyundai is poised for healthy long-term growth due to its style and technology, where capacity expansion in the second half and the launch of several new models (including four EVs) over the next 3-4 years are the key catalysts.

Hyundai Motor's market share has ranged between 15-17% since it started operations in 2008, with monthly average car sales being nearly a third of market leader, Maruti Suzuki India.