Hyundai Motor India’s IPO had a disappointing debut, with shares listing at ₹1,934, 1.32% below the offer price of ₹1,960. Despite being oversubscribed more than two-fold, the stock closed at ₹1,819.60, marking a 7.2% drop on the first day of trading. This performance has raised questions about whether large IPOs, like Hyundai’s, truly deliver value for investors.
Hyundai’s Weak IPO Debut
Hyundai, India’s second-largest carmaker with a 15% market share, targeted a valuation of $19 billion through its initial public offering. Institutional investors heavily backed the IPO, but retail investors were deterred by concerns over the high valuation and the company’s future earnings potential.
The shares fell by 7.2% on the first day of trading, closing well below the IPO price. This weak debut follows a pattern seen in several other large IPOs in India.
Reasons Behind Hyundai’s Poor Performance
Analysts attribute Hyundai’s weak debut to a few key factors:
- High Valuation: The IPO was priced aggressively, with many investors feeling that the shares were overvalued compared to the company’s near-term earnings potential.
- Weakness in Car Sales: The Indian car market has been facing challenges, and Hyundai’s recent sales performance was weaker than expected.
- Increased Royalty Payments: Hyundai’s increased royalty rate paid to its South Korean parent company raised concerns among investors about the company’s future profitability.
Do Major IPOs Really Pay Off?
Hyundai’s weak listing has brought attention to the performance of India’s largest IPOs. According to Dealogic data, 7 out of 10 of India’s largest IPOs have seen a drop in share price on the first day of trading.
In a recent post, stock brokerage firm Zerodha highlighted that only 3 out of the 10 largest IPOs have managed to deliver listing gains, while the others have fallen short of investor expectations.
| IPO Performance | Listing Gain (%) |
|---|---|
| Largest 10 IPOs | 30% delivered gains |
| Hyundai IPO | -7.2% |
Conclusion: Are Large IPOs a Good Investment?
While large IPOs attract significant attention, they don’t always deliver immediate gains. Investors should be cautious about valuation concerns and market sentiment before investing in big IPOs. The Hyundai IPO serves as a reminder that strong institutional support doesn’t always translate into success for retail investors.
Disclaimer
This article is for informational purposes only. Please consult a financial advisor for professional investment advice.
