Hyundai’s India IPO will have imitators
Corrects to fix sourcing in the second paragraph. The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Refiles to add hyperlink.
By Shritama Bose
MUMBAI, June 17 (Reuters Breakingviews) - If Hyundai Motor's 005380.KS up to $3 billion initial public offering of its Indian business crystallises a premium valuation as easily as expected, other multinationals could rush to list their local operations in the South Asian nation.
The South Korean carmaker on Saturday filed for a listing of the unit in Mumbai. The target valuation of up to $30 billion, per Reuters citing unnamed sources, is 53 times its earnings in the 12 months ended March 2023, compared to 32 times for its larger rival Maruti Suzuki MRTI.NS and five times for its $48 billion Seoul-listed parent.
An IPO offers lots of benefits. It will crush the "Korean discount", where companies trading in Seoul are plagued by lower valuations than Asian peers because opaque conglomerates dominate the market. Hyundai also can use the new richly valued shares to strike deals in India, where it wants to sell more expensive cars and increase its share of electric vehicles.A listing outside Seoul offers some protection from any future funding squeeze at home. The default of a Legoland theme park developer, for example, caught large Korean companies off-guard in 2022 and pushed up borrowing costs.
The carmaker is the latest global company tapping aspects of what Marc Bitzer, CEO of U.S. appliance maker Whirlpool WHR.N describes as "asset arbitrage"; the company sold a 24% stake in its India unit in February. Similarly British American Tobacco BATS.L in March sold a 3.5% stake in its Indian peer ITC ITC.NS and used the $2 billion proceeds to support a $895 million share buyback.
Companies usually shy away from floating their subsidiaries because it is not efficient to manage multiple listings. The local listings of Unilever ULVR.L, Nestle NESN.S, Pfizer PFE.N, Siemens SIEGn.DE and Suzuki Motor 7269.T enjoy big premiums but many are legacy structures.The difficulty of taking a company private in India is another reason to hold back. Yet India's increasing importance as a growth market and its buoyant stocks may be changing the balance of the equation.
The case is strong for Japanese companies that are under pressure to boost shareholder value. Take Honda Motor Co 7267.T, which counts the South Asian country as its top market for motorcycles. Sumitomo Mitsui Financial Group 8316.T could consider listing its Indian shadow bank which is growing 24% year-on-year. Other foreign firms with large India businesses include Korea's Samsung Electronics 005930.KS.
Hyundai's deal is barely out of the door but bankers are salivating over the prospect of more just like it.
Follow @ShritamaBose on X
CONTEXT NEWS
Hyundai Motor's Indian unit on June 15 filed for a Mumbai initial public offering, Reuters reported the same day citing the draft prospectus. The company plans to sell up to a 17.5% stake held by its South Korean parent. No new shares will be issued.
The deal will generate proceeds of between $2.5 billion and $3 billion for the seller at a valuation of up to $30 billion, sources told Reuters. Citi, JPMorgan, HSBC, Morgan Stanley and India's Kotak Mahindra Capital are advising the company on the deal. Hyundai shares rose nearly 5% before midday in Seoul on June 17.
Graphic: Indian units of foreign companies are richly valued https://reut.rs/3Vp7cY9
Editing by Una Galani and Aditya Sriwatsav
Activos relacionados
Últimas noticias
Descargo de responsabilidades: Cada una de las entidades de XM Group proporciona un servicio de solo ejecución y acceso a nuestra plataforma de trading online, permitiendo a una persona ver o usar el contenido disponible en o a través del sitio web, sin intención de cambiarlo ni ampliarlo. Dicho acceso y uso están sujetos en todo momento a: (i) Términos y Condiciones; (ii) Advertencias de riesgo; y (iii) Descargo completo de responsabilidades. Por lo tanto, dicho contenido se proporciona exclusivamente como información general. En particular, por favor tenga en cuenta que, los contenidos de nuestra plataforma de trading online no son ni solicitud ni una oferta para entrar a realizar transacciones en los mercados financieros. Operar en cualquier mercado financiero implica un nivel de riesgo significativo para su capital.
Todo el material publicado en nuestra plataforma de trading online tiene únicamente fines educativos/informativos y no contiene –y no debe considerarse que contenga– asesoramiento ni recomendaciones financieras, tributarias o de inversión, ni un registro de nuestros precios de trading, ni una oferta ni solicitud de transacción con instrumentos financieros ni promociones financieras no solicitadas.
Cualquier contenido de terceros, así como el contenido preparado por XM, como por ejemplo opiniones, noticias, investigaciones, análisis, precios, otras informaciones o enlaces a sitios de terceros que figuran en este sitio web se proporcionan “tal cual”, como comentarios generales del mercado y no constituyen un asesoramiento en materia de inversión. En la medida en que cualquier contenido se interprete como investigación de inversión, usted debe tener en cuenta y aceptar que dicho contenido no fue concebido ni elaborado de acuerdo con los requisitos legales diseñados para promover la independencia en materia de investigación de inversiones y, por tanto, se considera como una comunicación comercial en virtud de las leyes y regulaciones pertinentes. Por favor, asegúrese de haber leído y comprendido nuestro Aviso sobre investigación de inversión no independiente y advertencia de riesgo en relación con la información anterior, al que se puede acceder aquí.
