The $3.3 billion initial public offering of Hyundai Motor Co.’s Indian unit has struggled to attract investors amid weakening sentiment in the broader market.
In two days, investors have subscribed for just 42% of the shares in Hyundai Motor India Ltd. being sold in the IPO, India’s largest ever. With the offering closing Thursday, the lackluster demand combined with weak gray market trading have lowered expectations for the stock’s debut.
The disappointing showing comes amid underperformance of Indian equities over the past few weeks as investor attention shifts to prospects of China stimulus. Hyundai’s deal had been hotly anticipated after exuberance over listings in India had made it the world’s busiest IPO market.
The Korean parent is selling up to a 17.5% stake in its Indian unit. At the top end of the IPO range, Hyundai Motor India is valued at about $19 billion. The shares are set to start trading on Oct. 22.
The listing of India’s second-largest carmaker by sales could still turn around, as the nation’s large IPOs tend to pick up subscriptions on the last day with retail investors catching up with institutional moves.
As of Wednesday, the institutional portion of Hyundai’s IPO received bids for 58% of shares on sale while the portion reserved for retail investors got 38%. Local rules mandate minimum subscription of 90% of the total share offering for IPOs to proceed with allotment and listing.
“I pretty confident that the issue will sail through,” said Astha Jain, an analyst at Hem Securities Ltd. Demand has been weak as the shares were priced shares at a “hefty valuation, leaving very little on the table for investors,” she said, adding that retail traders who look to cash out quickly are unlikely to participate.
Ahead of the start of the public offering, the company raised about 83.2 billion rupees ($990 million) via allocation of shares to anchor investors at 1,960 rupees apiece, the top of the marketed range. BlackRock Inc. and Baillie Gifford have been confirmed as buyers, after an earlier Bloomberg News report.
With Hyundai’s proceeds, Indian IPOs will have raised more than $12 billion so far this year, eclipsing volumes for the past two years but still below the record $17.8 billion raised in 2021, according to data compiled by Bloomberg. Other pending debuts include food-delivery company Swiggy Ltd. and the renewable-energy arm of state-run power producer NTPC Ltd.