Could Hyundai command a higher valuation than Maruti?
₹25,000 crore or so, including an offer-for-sale (OFS) for more than 142 million existing shares, or around 17.5% of the company. All the proceeds will go to the giant parent firm, the world’s third-largest automaker after Toyota and Volkswagen. The retail quota for the IPO is 35%, and potential investors should consider some interesting points.
One, HMI will have to dilute its stake further to reduce the parent firm’s holding to 65% to comply with Sebi rules, so investors should brace for more share sales. Two, the market is trading near record levels, so if the IPO goes through quickly (it could take several months for Sebi to clear), the company should get a high valuation. The market expects HMI to command a valuation of around ₹1.45 trillion.
Based on sales and financial data, and the parent firm's brand value, HMI’s price-to-earnings multiple could be close to or even higher than that of Maruti Suzuki India. Maruti Suzuki generally trades at a PE multiple of 28-29x thanks to its dominant share of the passenger-car market, but HMI is second in terms of volume. Maruti sold 2,135,323 vehicles in FY24, up 8.6% from FY23.
Domestic sales were at 1,852,256 units and exports at 283,067 units. The company reported consolidated sales of ₹1,41,661 crore in FY24 and an operating profit of ₹17,964 crore. Its operating profit margin has hovered around 13-14% in FY24 after a poor Q1, in which it dipped to 9%, pulling the annual OPM down to 12.7%.
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