As Hyundai prepares for its upcoming IPO on October 15, the company is poised to capitalize on the domestic passenger vehicle sales upcycle, particularly through its strong focus on high-growth utility vehicles (UVs), which account for 63% of its portfolio.

Capacity Expansion and Model Portfolio Growth

Hyundai is expanding its production capacity from 8.2 lakh units to 10.7 lakh units to meet growing demand in both domestic and international markets. The company also plans to broaden its model portfolio with four new electric vehicles (EVs) in the pipeline over the next few years. According to Nuvama Institutional Equities, which met with Hyundai’s top leadership, there is potential to introduce global models into the Indian market as well.

Localization for Improved Profitability

Hyundai is increasing its focus on localization to boost profitability, particularly in the areas of powertrain parts, transmissions, ADAS components, and EV batteries. This effort is expected to enhance margins as the company deepens its local sourcing.

Hyundai IPO Valuation and Financial Performance

The ₹27,870 crore IPO is expected to attract significant interest. Hyundai Motor India reported a profit of ₹4,400 crore in the first nine months of FY24. Based on this, the IPO valuation stands at 27 times EPS at the upper end of its ₹1,59,300 crore valuation. The parent company plans to offload a 17.5% stake in the IPO.

Annualized FY24 profits, combined with an expected 5% compound annual growth rate (CAGR) in profit after tax (PAT) over FY24–27, could see PAT rise to ₹6,800 crore by FY27. At the top end of the Hyundai IPO valuation, the price-to-earnings ratio for FY27 is estimated at 24 times.

Key Takeaways from Analyst Meeting with Nuvama

Premiumization of the Portfolio

UVs contributed 63% of Hyundai’s overall sales in FY24, with hatchbacks and sedans making up 23% and 14%, respectively. The company is focused on driving sales in the UV segment by launching more products across different price points and powertrain options.

Sales and Service Network Expansion

As of December 2023, Hyundai had 1,366 sales outlets and 1,550 service outlets across India, with an even split between urban and rural markets. The company plans to further expand its network to support its growth.

EV Pipeline

Hyundai is targeting both the mass and premium EV segments, with four EV launches planned over the medium term. The Creta EV is scheduled for launch in Q4FY25.

Export Opportunities

Hyundai Motor India serves as an export hub for models like the Verna and Venue. The company is on track to become Hyundai Motor Corporation’s largest export hub.

Localization Initiatives

Hyundai’s current localization rate stands at 80%, with plans to increase this by localizing key components such as automatic transmissions, powertrain parts, ADAS systems, and EV batteries. The royalty rate is expected to remain stable at 3.5% in the long term.

Capex and Future Investments

Hyundai has announced plans to invest ₹32,000 crore over the next ten years. Of this, ₹6,500 crore has been allocated to the Talegaon plant. The company’s Chennai plant spread over 537 acres, currently operates at 96% capacity and produces 0.82 million units across 13 models.

Talegaon Plant Expansion

Hyundai recently acquired General Motors’ Talegaon plant, which will add 0.17 million units to its production capacity by the second half of FY26, with an additional 0.08 million units by FY28. This will increase Hyundai’s total capacity to 1.07 million units, representing a 30% growth over current levels.