Hyundai Motor India Ltd’s (HML) gray market premium (GMP) has dropped significantly just ahead of the company’s much-anticipated initial public offering (IPO).

The GMP has fallen by nearly 75% in the past two weeks, from Rs 570 in late September to Rs 140-145 as of October 9, just days before the Rs 28,000 crore IPO launch. 

The gray market, an unofficial platform where shares of unlisted companies are traded, often acts as a barometer for investor sentiment ahead of IPOs. The recent plunge in the premium for Hyundai Motor India share could signal dampening demand in the unregulated market.

Despite this, the official listing, scheduled for next week, is still expected to attract significant attention from institutional and retail investors. 

In response to the falling GMP, Tarun Garg, COO of Hyundai Motor India, expressed confidence in the company’s growth prospects. Garg highlighted that Indian subsidiaries of global corporations, such as Hyundai Motor India, tend to command higher valuations due to the country’s robust consumption patterns and economic growth. On the financial front, Hyundai Motor India has delivered solid results. For the year ending March 2024, the company posted a net profit of Rs 6,060 crore, up 28.7% from the previous year.

Revenues increased by 15.8% to Rs 69,892 crore year-on-year, signaling steady growth. These figures have reinforced investor expectations for the company’s IPO, even as the gray market activity suggests a more cautious approach. 

 

A note from Aequitas Investments points out that while Hyundai Motor India contributes just 6.5% to Hyundai’s global revenue and 8% to its global profitability, it is expected to be valued at around 42% of the parent company’s market capitalization upon listing. This highlights the substantial importance of Hyundai Motor India within the global operations of the South Korean automaker. 

As the IPO approaches, the market will be closely watching investors' reactions. Despite the gray market volatility, Hyundai’s strong financial position and growth potential in India continue to make the company an attractive investment option for many.