Cooldown in the Grey Market: Hyundai Motors India IPO Loses Momentum

In a remarkable move, Hyundai Motor India is preparing for India's largest stock market debut, a capital market transaction amounting to $3.3 billion. However, despite high expectations, the initial euphoria in the unregulated grey market, where shares are bought and sold before their official market debut, seems to be fading. Recent trading data shows that Hyundai Motor India's shares are now trading at a premium of only 60 rupees over the upper end of the price range of 1,960 rupees. Two weeks ago, the premium was an impressive 1,000 rupees. This fluctuation reflects the uncertainties faced by the automaker in a competitive market, especially as the pandemic-induced demand surge wanes. Once again, it becomes apparent that the excitement around large initial public offerings can be fleeting. Gaurav Thakker, an experienced trader based in Mumbai, aptly describes the current situation: 'The initial euphoria is over.' Geopolitical tensions in the Middle East and weak car sales in India have dampened investor confidence and clouded hopes for explosive price gains following the IPO. The upcoming trading debut of Hyundai Motor India in Mumbai on October 22 is accompanied by the potential sale of 142.2 million shares by the Korean parent company Hyundai Motor, representing a 17.5% stake. At the highest price evaluation, this could catapult the company's value to about $19 billion. How the proceeds will be used remains unclear. It is only known that Hyundai Motor has already announced plans for the buyback of its shares listed in Seoul. Nevertheless, analysts advocate for participation in Hyundai Motor India, as it is likely to benefit from the support and expansion efforts of the parent company, according to Mihir Manek of Aditya Birla Money. However, the steep valuation at 26 times the expected 2024 earnings offers investors little room for significant gains, warns Manek.