Hyundai IPO opens today; GMP falls under 3%: Should you buy or not?

Hyundai Motor IPO : The much-anticipated initial public offering ( IPO ) of Hyundai Motor India (HMIL) is set to open for bidding on Tuesday, October 15. Valued at Rs 27,856 crore, it marks the largest IPO in Indian stock market history. 

The issue price is set between Rs 1,865 and Rs 1,960 per share, with a minimum lot size of seven shares. The bidding window will remain open until Thursday, October 19.

The IPO is the first from an Indian car manufacturer since Maruti Suzuki 's in 2003. Hyundai's South Korean parent, Hyundai Motor Company, has waited more than two decades to bring this offer to the Indian market. It is an entirely "offer for sale" (OFS) issue, with up to 14.21 crore equity shares on offer, leading to a market capitalisation of approximately Rs 1.6 lakh crore.

Despite the initial enthusiasm, Hyundai's grey market premium (GMP) has been on a steady decline. Recently, the GMP was Rs 65 per share, signalling a modest 3 per cent potential listing gain for investors at the higher end of the price band. The GMP had been much higher, with quotes of Rs 150-175 per share before the weekend, but it plummeted to two-digit figures over the last few days. Earlier in October, the GMP had even touched Rs 500, and around Rs 350-375 when the issue was officially announced.

While some market experts feel the IPO is fairly priced, they believe it could yield solid long-term returns, thanks to Hyundai's established track record. However, the all-OFS nature of the offering has raised concerns, as all proceeds from the sale will flow to the parent company in South Korea, leaving the Indian subsidiary without financial benefits. 

The high valuations and OFS structure have left investors cautious, particularly amid broader market volatility. There is also concern about liquidity being drained from the Indian market due to the large size of the issue.

Considering the falling GMP and the structure of the IPO , potential investors are advised to carefully weigh short-term risks against the possibility of long-term gains before making a decision.