Hyundai plans to sell up to 17.5% stake in India Unit through IPO: sources

Hyundai Motor, the South Korean automotive giant, is preparing for a significant move in the Indian market. The company is planning to launch an initial public offering (IPO) of its Indian subsidiary, Hyundai Motor India Ltd, which could potentially be the largest IPO in India’s history.

According to three sources familiar with the matter, Hyundai is looking to sell up to 17.5 per cent of its stake in the Indian unit. This sale could raise an impressive sum of up to USD 3 billion. The company is expected to file the necessary paperwork with India’s stock market regulator as early as Friday, paving the way for a listing on the Mumbai stock exchange once approved.

Hyundai Motor India Ltd, which holds the position of India’s second-largest carmaker after Maruti Suzuki, will not be issuing new shares as part of this IPO. Instead, the South Korean parent company will be selling a portion of its stake in its wholly-owned Indian subsidiary through what is known as an “offer for sale” route. This means that retail and other investors will have the opportunity to purchase existing shares from Hyundai.

This IPO marks a significant milestone for Hyundai, as it will be the company’s first such listing outside of South Korea. The sources indicate that Hyundai aims to raise between USD 2.5 billion and USD 3 billion from this stake sale. While the company is seeking approval to sell up to 17.5 per cent of its stake, the final percentage offered in the IPO could potentially be lower.

Previous estimates have valued Hyundai’s Indian unit at up to  USD 30 billion, highlighting the substantial growth and potential of the Indian automotive market. Hyundai has been operating in India for over 25 years, and its affordable cars like the Santro and the sports utility vehicle Creta have gained popularity among Indian consumers.

The decision to launch an IPO in India is part of Hyundai’s strategy to accelerate its expansion in the country. By listing its Indian unit, Hyundai aims to reduce its dependence on the Korean parent company for funds. This move will provide Hyundai Motor India with greater financial autonomy, allowing it to compete more effectively with local rivals such as Tata Motors and to develop its own growth plans in a market that accounts for 14 per cent of Hyundai’s total global sales.

Hyundai has ambitious plans for the Indian market, including the introduction of locally made electric vehicles, the establishment of a charging network, and the development of a battery facility. The company also intends to expand its manufacturing capacity in India.

As part of the IPO process, Hyundai is required to disclose potential “risk factors” to investors in its filing with the Securities and Exchange Board of India (SEBI). Among these factors, the sources mention Hyundai’s dependence on its Korean parent and related party transactions within the Hyundai Group. Additionally, the company has noted that the unavailability or reduction of current government incentives for electric vehicle manufacturers could pose a potential risk.

While Hyundai Motor India has declined to comment on these developments, the proposed IPO represents a significant step in the company’s commitment to the Indian market and its long-term growth strategy in one of the world’s largest automotive markets.