Hyundai India gears up for record-breaking IPO

Hyundai Motor India is said to launch its IPO (Initial Public Offering) in the first half of October. An IPO is where shares of a private company are offered to the public and also enables the company to raise equity capital from public investors. This IPO is likely to reach a valuation of around Rs $3 billion (Rs 25,000 crore), which could become India's largest IPO to date. Hyundai Motor Company is planning to sell 142.2 million shares for 75.5 per cent stake of its Indian subsidiary.

Ahead of the introduction of its IPO, the brand has received feedback from the Securities and Exchange Board of India (SEBI) regarding the risks associated with the IPO and its growth projections. Hyundai had listed 82 risk factors in its Draft Red Herring Prospectus (DRHP) and is preparing responses to SEBI's observations, as per sources of CNBC-TV18.

The funds raised from the IPO are expected to be used for several purposes, including investment in research and development, the development of new product lines, and the creation of vehicles specifically designed for the Indian market. This increased investment by Hyundai is likely to trigger a response from its competitors, such as Maruti Suzuki, Tata Motors, and Mahindra & Mahindra. These companies may choose to ramp up production, increase their own investments, and re-evaluate their product offerings to stay competitive with Hyundai.

The increased focus on the Indian auto sector because of Hyundai's IPO could also lead to a price war among car manufacturers. This could benefit consumers in the short term with potentially lower car prices, but it could also put pressure on the profit margins of the companies involved. Investors may also find the shares of Hyundai's rivals more attractive thanks to the excitement surrounding Hyundai's IPO. Thus, the share prices of their rivals may experience greater fluctuations.

However, there are concerns from a section of Hyundai's workers' union. They were not consulted about the IPO and are seeking details on how they might benefit from the proceeds. The union has requested this information within 10 days, as the initial IPO documents did not mention any specific employee compensation or stock options.

The company's chief manufacturing officer has opened discussions with the union. While protests have remained peaceful so far and have not impacted production, the situation is delicate. Hyundai may need to make concessions to address worker concerns, similar to a recent wage deal in South Korea that resulted in their highest-ever wage increase without a protest.

With inputs from CNBC-TV18 and Trade Brains

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