Hyundai Motor Co.’s Indian arm is experiencing a rocky start as its monumental $3.3 billion initial public offering (IPO) struggles to captivate investor interest amid a challenging market landscape.
In just two days, Hyundai Motor India Ltd. has managed to secure only 42% of the shares available in this landmark IPO—the largest in India’s history.
With the offering set to close on Thursday, this tepid demand, coupled with sluggish gray market activity, has dampened expectations for a strong stock debut.
This disappointing response reflects the broader trend of Indian equities faltering in recent weeks, as investors increasingly focus on the potential for stimulus measures in China.
Hyundai’s IPO had generated significant excitement, especially as India had recently emerged as the world’s most active IPO market.
The South Korean parent company is divesting up to a 17.5% stake in its Indian subsidiary, positioning Hyundai Motor India with a valuation nearing $19 billion at the upper limit of the IPO range.
Trading for the shares is scheduled to commence on October 22.
Despite the initial sluggishness, there remains a possibility for a turnaround.
Historically, large IPOs in India often see a surge in subscriptions as the deadline approaches, with retail investors stepping in to match institutional interest.
As of Wednesday, institutional investors had placed bids for 58% of the shares on offer, while retail subscriptions lagged at 38%.
Under local regulations, a minimum subscription of 90% of the total offering is required for IPOs to proceed with share allotment and listing.
“I’m pretty confident that the issue will sail through,” remarked Astha Jain, an analyst at Hem Securities Ltd., in an interview with Bloomberg.
She attributed the weak demand to the high valuation of the shares, which leaves little upside for potential investors.
Jain noted that retail traders, who typically seek quick returns, may be hesitant to engage.
Before the public offering launched, Hyundai successfully raised approximately 83.2 billion rupees ($990 million) by allocating shares to anchor investors at the upper price point of 1,960 rupees each.
Notable investors such as BlackRock Inc. and Baillie Gifford were confirmed as participants, following earlier reports from Bloomberg News.
With Hyundai’s IPO proceeds, the total capital raised from Indian IPOs this year has surpassed $12 billion, outpacing volumes from the previous two years, yet still falling short of the record $17.8 billion achieved in 2021, according to Bloomberg data.
Other significant IPOs in the pipeline include food delivery giant Swiggy Ltd. and the renewable energy division of state-owned power producer NTPC Ltd.
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