New Delhi: Hyundai Motor India’s Rs 27,870 crore IPO, which will be India’s biggest public offering yet, is set to hit the markets Tuesday. The IPO (initial public offering), which is also the first from any major auto player in India in over two decades, is expected to be an important milestone for India’s auto industry—a market which traditionally has not been easy for foreign auto manufacturers to crack.
Hyundai Motor India (HMI) was incorporated about 28 years ago, in 1996—around the same time that two American automotive giants Ford Motor Company and General Motors, and Japanese major Honda had made their foray into the Indian market.
The American firms struggled to keep up the demand for their products in India and later had to shut operations. Ford, however, has now announced its re-entry into India with plans to restart manufacturing cars at the Chennai plant. Initially, this will be only for exports. Honda, too, has been struggling to maintain its foothold in the Indian market.
Meanwhile, HMI is currently the second largest car maker in the country with sales of over 7.77 lakh cars in the last financial year. According to the company’s RHP (Red Herring Prospectus), it registered a profit of Rs 6,060.04 crore in 2023-24.
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Hyundai’s ‘winning strategy’
According to a June 2024 report by CRISIL Market Intelligence & Analytics, the Indian domestic passenger vehicle (PV) industry is an oligopolistic market with few players dominating the entire industry. Maruti Suzuki leads the space in terms of domestic sales volumes. HMI is the second largest contributor to domestic sales, followed by Tata Motors and Mahindra & Mahindra. These four players together constitute 80 percent of the market.
“You have to judge us from the quality of growth, which is very important… Right from the time we have set foot in India, we have consistently grown. Our market share has been in the high double digits and we have maintained the position of second largest manufacturers,” said Tarun Garg, whole-time director & chief operating officer at HMI, responding to a query at a conference Friday. “You know India is not easy for global OEMs, but Hyundai has been successful.”
Sugato Sen, former deputy director general at the Society of Indian Automobile Manufacturers (SIAM), said that the three main factors that helped HMI succeed in India were focus on exports, superior products and strong leadership.
“They won because of exports. Normally, whoever else came, they had come on their own and were looking only at the domestic market. But Hyundai’s strategy, which I would say was the winning strategy, was that they focused not only on the domestic market, but also the international market. This gave them volumes…economies of scale were easily reached,” Sen, who was with the industry body for over two decades, said.
The company began its exports journey in 1999 by shipping a batch of 20 Santro cars—the first car to be launched from Hyundai’s stable in India a year earlier. The first major export, however, happened in July 2000, when the company shipped 760 units of Accent and Santro cars to Algeria. In October 2004, the company’s exports crossed one lakh cars, making it the largest exporter in India.
Today, HMI serves as a production and export hub for emerging markets for South Korean parent Hyundai Motor Corporation (HMC) for PVs and parts, particularly for PV models, such as Verna and Venue. “The exports market is a revenue driver for us as we earn higher average selling price for exports versus domestic products on an average,” the company has said in its RHP.
Export revenues contribute over 20 percent to the company’s revenue. Exports also help the company offset some impact of lower demand months in the domestic market. “For example, in December, which is a low sales season in India, we are able to manage our total sales relatively well by increasing exports during these months,” it noted in the RHP.
Hyundai was India’s second largest exporter of PVs from April 2021 to June this year and exported about 3.61 million such vehicles since its inception to over 150 countries, including those in Latin America, Africa, Middle East and Asia.
The company’s plans to enhance production capacity will give a further boost to exports. Currently, HMI manufactures all its passenger vehicles and parts at its Chennai plant with a capacity of 8,24,000 vehicles. It has GM’s Talegaon plant in Maharashtra, which is expected to become operational in 2025-26, adding a capacity of about 2.5 lakh vehicles.
“This is a capacity addition of about 30 percent. It will help us in domestic as well as international markets. For Hyundai, one key differentiator has also been exports. On a cumulative basis, we are the number one exporter from India and we are the production hub (HMC) for emerging markets,” Garg said.
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Technological edge
Besides exports, the company’s product strategy also worked in its favour. Sen pointed out that Hyundai brought technologically superior products to the Indian market. “They brought in the MPFI (multi-point fuel injection) engine… So they changed the technological standards at that point in time. They came with a lot of improvements in technologies, which gave them a strong foothold in the market.”
The company’s journey in India—which now hits another milestone with HMC’s first listing outside of South Korea—started with Santro, one of the most popular small cars in the country.
The Santro made its debut in India in September 1998, and became popular thanks to its tall boy design, powerful engine and the company bringing actor Shah Rukh Khan on board as the brand ambassador. Between 1998 and 2015, and then between 2018 and 2022, the car had cumulative sales of over 2 million units.
The Santro was launched with an MPFI engine—a departure from the carburetor engines that were used then—that became a big game-changer for the company. Hyundai Motor India was the first mass market OEM to introduce power steering in India by providing the option for their Santro model in 2006.
Other than these two factors, Sen attributed the initial success of the company to the leadership. “Mr BVR Subbu’s (former president of HMI) aggressive leadership, especially in the domestic market, was something that really helped them in beating the competition,” he said, adding that the “very diligent” A.P. Gandhi (another former president) played a strong role in Hyundai’s success.
“Hyundai’s success is on account of a variety of factors, such as value for money (a mixture of reliability, fuel efficiency, premium features, etc.), aspirational brand value, right portfolio strategy covering a wide spectrum of customer segments, coupled with a high share of fast-growing and dominant SUV segment, and a well spread out sales and service network,” said Ashim Sharma, senior partner and head of the business performance improvement unit at Nomura Research Institute India.
The CRISIL report added that HMI has maintained its position as the second largest contributor to Indian domestic PV sales since fiscal 2009 “due to continued traction for popular SUV models, like Creta and Venue, coupled with new vehicle launches and launch of upgrades of its popular models”.
IPO may pique global interest
The upcoming IPO isn’t just important for Hyundai, but could be a significant event for the country’s auto space by reassuring investors and attracting significant global interest, according to experts.
The IPO is an important milestone for India’s auto industry as its success will further showcase the strength and investor confidence in the Indian automotive prowess not just as a domestic market, but also as an export hub, Sharma said.
Saji John, senior research analyst at Geojit Financial Services, noted that Hyundai’s IPO being the first major auto IPO in India in over two decades could attract significant global investor interest. “This influx of foreign investment could further enhance the sector’s valuation,” he said.
John added that the company’s portfolio expansion and manufacturing capabilities highlight the growth potential and investment in the automotive market. “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.”
However, he added that if the listing has been perceived as overvalued, then it can “negatively impact”.
The upcoming IPO, which is an offer for sale by the promoter, will see all proceeds going to the South Korean HMC. However, Hyundai India leadership said that HMC will use the funds for investments in products, research and development capabilities, and advanced technology.
“As a key part of the Hyundai Motor Group, they (HMI) gain early access to global trends in automotive technologies and features, including from HMC’s dedicated technology arm covering passenger vehicle IT services, smart manufacturing, mobility services, data security services and enterprise IT services,” Axis Capital said in a note.
(Edited by Mannat Chugh)
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