Hyundai Motor India IPO: 10 key risks investors should know before subscribing to the ₹27,856 crore tomorrow

The Hyundai Motor India IPO launch scheduled for tomorrow marks a significant milestone for the country. The company is a wholly-owned subsidiary of Hyundai Motor Company, Korea and since its establishment in 1996, Hyundai has emerged as a prominent automobile manufacturer in India, renowned for its popular models like the i20, Creta, and Venue.

Hyundai Motor India IPO provides an appealing opportunity for those interested in the automotive industry due to Hyundai's expanding market share in the country.The Hyundai Motor India IPO bidding will begin from October 15, 2024, to October 17, 2024. The Hyundai Motor India IPO price band has been fixed in the range of ₹1,865 to ₹1,960, with a minimum investment of ₹13,055 for a lot of 7 shares. The estimated issue size amounts to ₹27,870.16 crore, positioning it as one of the largest IPOs of the year. The allocation to anchor investors for the Hyundai Motor India IPO is scheduled to take place today (Monday, October 14).

The Hyundai Motor India IPO has allocated 50% of the shares in the public issue for qualified institutional buyers (QIB), 15% for non-institutional Institutional Investors (NII), and 35% of the offer is set aside for retail investors. The employee reservation segment comprises a maximum of 778,400 equity shares. Eligible employees participating in the employee reservation portion are being offered a discount of ₹186 per equity share.

Here are some of the key risks listed by the company in its Red-Herring Prospectus (RHP) that investors make a note of before subscribing to the issue:

Hyundai Motor India IPO - Key Risks

- Hyundai Motor India's business and results of operations could be negatively impacted by rises in the prices of parts and materials necessary for their operations.

- The business activities of Kia Corporation and Kia India Private Limited, two of the company's Group Companies, are comparable to those of Hyundai Motor India, potentially leading to conflicts of interest that could negatively affect the business.

- The company has been involved in and may continue to be involved in deals with Hyundai Motor Company and other companies in the Hyundai Motor Group, which could lead to conflicts of interest and potentially harm the business.

- The company, its subsidiaries, and promoter are currently involved in ongoing legal disputes, and any adverse ruling in these cases could have a detrimental impact on their business, reputation, financial standing, and operational performance.

- The company's sales heavily depend on selling non-electric passenger vehicles, and there is no guarantee that they will effectively and affordably implement their EV strategy, or even implement it at all.

-The company's production facilities are now operating at high levels of capacity utilisation, and unless they can boost their capacity by operationalising Talegaon production Plant on schedule or at all, they might not be able to fulfill future demand for their products. Their manufacturing schedules and associated expenses may also suffer if they overestimate or underestimate the demand for their goods, since this might result in either under- or over-utilisation of the capacity of their factories.

-Hyundai Motor India's passenger vehicles and parts are currently produced exclusively at the Chennai Manufacturing Plant. Any interruptions or halts at their manufacturing facilities, including the Talegaon Manufacturing Plant once it becomes operational, could have negative effects on their operations, financial situation, and overall results.

-The company is conducting research to create an affordable green hydrogen energy system in India. Nonetheless, there is no guarantee that the technology for green hydrogen will be economically feasible.

-The business could face significant negative consequences if government incentives are no longer available, reduced, or eliminated, affecting its prospects, financial condition, operations, and cash flows.

-In the rapidly changing and fiercely competitive automotive market, the company may struggle to compete effectively, potentially impacting its operations negatively.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.