Tue Oct 15 10:10:05 UTC 2024: ## Hyundai India IPO’s Grey Market Premium Plummets 89%, Investors Turn Cautious

**MUMBAI:** The much-anticipated Hyundai Motor India IPO, set to be India’s largest, has seen a dramatic drop in its grey market premium (GMP). The GMP, which reflects anticipated gains in the IPO listing price, has fallen by a whopping 89% from ₹570 to just ₹45, marking a significant decline in investor enthusiasm.

The IPO, which opens for subscription on Tuesday, aims to raise ₹27,870.16 crore through an Offer for Sale (OFS) of 14.21 crore shares by Hyundai Motor Company, its South Korean parent. The company has set a price band of ₹1,865 to ₹1,960 per share.

Experts attribute the decline in GMP to several factors. Firstly, the IPO is entirely an OFS, meaning Hyundai India will not receive any proceeds from the issue. This has raised concerns among investors as the money raised will not be directly invested in the Indian unit’s growth.

Secondly, the pricing of the IPO has been deemed expensive by many analysts. Hyundai is demanding a price-to-earnings (PE) ratio of 26x on its FY25 earnings, while Maruti Suzuki, a key competitor, trades at a PE of 22x. This valuation is also significantly higher than the industry average of 24.41x. Furthermore, Hyundai Motor Company, the parent entity, is currently trading at a PE of only 5x.

Adding to investor concerns is the fact that Hyundai currently manufactures all its passenger vehicles and parts at its Chennai plant. The company’s plans to begin manufacturing at its Talegaon plant in Maharashtra have raised questions about potential disruptions in production and their impact on financial performance.

While the IPO is expected to generate significant interest due to Hyundai’s brand recognition, the sharp decline in GMP suggests a cautious approach from investors. This caution is driven by concerns about the IPO’s structure, valuation, and potential risks associated with its manufacturing strategy.

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