2 weeks Ago
Hyundai Motor India IPO is set to open on October 15 with the largest public issue in India to-date. At the upper end of the price band, the IPO size will be ₹27,870 crore, which will surpass LIC's size of over ₹21,000 crore. NSE The IPO will be a complete Offer For Sale (OFS), where the company's parent will be selling 14.
2 crore shares or 17.5% of the total equity. The carmaker, which has a domestic market share of 14.
6%, has fixed the price band for its public issue between ₹1,865 and ₹1,960 per equity share. As Hyundai Motor India, the second largest OEM and the second largest exporter of passenger vehicles, goes public this month, subscribing to its IPO doesn’t come without risks being involved. Here is a look at some of the key risk factors as mentioned in Hyundai Motor India IPO red herring prospectus (RHP) -Electric vehicles strategy: The company has said its long-term competitiveness depends on the evolution of the EV market including any impact from a global shift in consumer preferences and government policies in different jurisdictions.
“Our failure to recognise these market trends and meet customer demands for EVs could adversely impact our operations...
A significant portion of our sales volumes are derived from the sale of non-EV passenger vehicles, and there is no assurance that we will be able to adopt our EV strategy successfully and cost-efficiently,” Hyundai India said. -Royalty fee: Any increase in the royalty fee payable by Hyundai Motor India to Hyundai Motor Company, the promoter, under the Royalty Agreement, including up to and exceeding the limits of 5% of the annual consolidated turnover of the company could adversely impact profitability metrics, including earnings per share. -Dependency on the global parent: “We depend on HMC, our Promoter, for our operations, including for parts and materials (such as engines and transmission assembly) and research and development.
” As per the RHP, any adverse change in the firm’s relationship with HMC and the companies in the Hyundai Motor Group could have an adverse impact on its business, reputation, financial condition, and results of operations. -Material cost and supply: Hyundai Motors India said that it depends on a limited number of suppliers for parts and materials. Any interruption in the availability of parts and materials could adversely impact operations.
Also, increases in the prices of parts and materials required for operations could have an adverse impact. -Export business: Any failure or delay by Hyundai Motor Company or Hyundai Motor India in accessing the export markets could have a material adverse effect on the results of operations and prospects. -Capacity limitations: The firm said that its manufacturing plants currently operate at high capacity utilisation levels and it may not be able to meet additional demand for products until it is able to increase capacity by operationalising Talegaon Manufacturing Plant on time or at all.
“Further, if we underestimate or overestimate the demand for our products, the capacity utilisation of our manufacturing plants may be under-utilised or over-utilised, respectively, which could adversely affect our manufacturing schedules and related costs,” it said. -SUV sales: The company substantially depends on the sales of SUV models in India. The sale may be affected by changes in government regulations, taxation and emission norms and any decrease in the demand for or disruption in the manufacture of SUVs, or any other passenger vehicle models the firm relies on in the future, could adversely impact operations.
-Legal proceedings: “Our Company, one of our subsidiaries and our promoter are involved in outstanding legal proceedings and any adverse outcome in any of these proceedings may adversely impact our business, reputation, financial condition and results of operations,” as the RHP..
