In today's Finshots, we see why Hyundai India wants to go public this year.

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The Story

Indians love cars.

According to the Society of Indian Automobile Manufacturers (SIAM), Indians bought more than 4 million cars in 2023 alone. We are the world’s third-biggest car market, after China and the US. And with an increasing number of people choosing electric vehicles (EVs), many people believe the market is ripe for disruption. By 2025, India is expected to become the third-largest EV market, with 2.5 million EVs on the roads.

It’s no wonder then that automakers want to ride on this trend. Look at Hyundai India. They want to raise around $3 billion (₹25,000 crores) from the public market in what could end up being a record-breaking IPO.

We say record-breaking because the money it wants to raise, surpasses the last two biggest IPOs in the Indian stock market’s history (LIC — around ₹21,000 crores and PayTM — around ₹18,000 crores).

Anyway, given this ambitious IPO plan, you might wonder: Isn’t Hyundai a foreign brand? So why pursue an IPO in the Indian market?

Let’s take it from the top.

See, Hyundai Motors India is a wholly-owned subsidiary of South Korean auto giant Hyundai Motor Company (HMC).

In the early 1990s, when India liberalised its economy, opening doors for foreign companies to sell and set up shop in India, Hyundai Motors was one of the frontrunners, (in 1996) capitalising on the fledgling Indian economy.

But it wasn’t an easy ride for Hyundai.

At first, they faced tough competition from the well-known domestic car manufacturer Maruti and foreign brands like Ford. In fact, they were even competing with rival brand South Korean Daewoo, whose compact MPV (Multi-Purpose Vehicle), Matiz, took on Hyundai’s Santro in 1998. But as you all know, Santro would go on to become a best seller and cement Hyundai’s place in the market.

Today, they’re a household brand and they’ve undoubtedly won Indian consumers’ hearts like no other. This success is evident in its position as the second-largest car manufacturer in India after Maruti Suzuki.

But how did it manage to do so, you ask?

First, instead of competing solely on price points, which can be extremely challenging considering Maruti’s dominance in the affordable segment, Hyundai focused on offering extra comfort and more features.

For instance, their debut model, the Hyundai Santro, won hearts with its tall-boy design and spacious cabin. See, tall-boy cars have a boxy shape, with a higher roofline than usual, providing ample headroom for occupants, especially taller people.

At the time, its entry-level cars featured some really cool technologies such as a multi-port fuel injection engine, power steering, and rear seat belts, distinguishing itself from competitors.

Second, Hyundai put a lot of weight on local manufacturing. At its Chennai plant, Hyundai brought South Korean makers and vendors to localise the manufacturing processes. This approach ensured that Hyundai maintained international standards while controlling the costs of critical components like body parts, headlights, and engine parts.

Third, Hyundai continued this trend with models like the i20, Grand i10, and Creta, demonstrating a keen understanding of consumer preferences and positioning itself as a premium alternative to Maruti Suzuki.

Impressive, no?

Fourth, we cannot underestimate the phenomenal success of Kia Motors, which is striking gold in the Indian markets. As Hyundai’s subsidiary, Kia Motors has followed in its parent company’s footsteps, becoming the fifth-largest car manufacturer in India within just a few years.

So yes, Hyundai’s success story will be told for years to come.

But they don't want to sit on their laurels. They want to double down on this remarkable success.

Together with Kia, the company plans to increase its annual production capacity in India to 1.5 million units annually.

A key component of this expansion strategy is the new Pune plant, which they acquired from General Motors last year. This plant will play a crucial role in helping Hyundai strengthen its presence and meet the growing demand in the Indian market.

To add to this, Hyundai India is also a major car exporter. Since 1999, it has consistently maintained its position as India’s largest passenger car exporter. It exports cars to over 80 countries, including the Middle East, Africa, Asia and Latin America.

To add to its growth trajectory, it plans to introduce more electric vehicles (EVs) in India and expand its EV lineup by 2030. On the other hand, Kia India plans to begin local EV production by 2025.

And all of this will need money. To put things in perspective, to date, Hyundai has invested $5 billion in its Indian manufacturing plant, with commitments to pump in another $4 billion over the next decade.

And apparently, Hyundai India doesn’t want to borrow any money from its parent company in Korea. Therefore, it is preparing for an initial public offering (IPO) in the Indian stock market. The parent company in South Korea will sell its 17.5% shareholding in Hyundai Motors India to investors who believe in the growth potential of auto stocks.

Moreover, the cherry on the cake is that India’s stock market is soaring higher than ever. Between 2019 and 2023, the benchmark Indian indices have doubled. Earlier this year, India’s stock market confidently overtook Hong Kong’s to claim its place as the world’s fourth-largest.

Given these favourable conditions, you can see why the company believes it’s the perfect time for them to go public.

Will it be another feather in the cap for Hyundai India?

Well, we will have to wait and see.

Until then…

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