What is your assessment of the Hyundai IPO? Are you recommending it as a subscribe or an avoid and what is the reason?
Narendra Solanki: We have recommended it as a subscription for long-term purposes. And the basis is that the pricing of the issue is kind of fully priced in terms of valuations. As far as business is concerned, there is nothing wrong with the business. The output is very good. The company is the second largest operator in India with 14-15% market share and second largest exporter. Also, in terms of new launches, the company is very keen to launch EV models starting this year.
So, there is a long runway for the business. The company is also positioned very well in the mid-SUV segment, having a market share of around 38%. So, long-term prospects are very good for the company. It is just that the issue is somewhat fully priced. So, we have subscribed to a long-term rating for this IPO.
What is the kind of growth rate that you are expecting from Hyundai, both on top line and on the bottom line front over the next three years? Do you expect Hyundai's performance to outperform its peers like M&M or Maruti?
Narendra Solanki: We see 16-18% growth from this business. In terms of EV, we would like to see how the traction holds for the EV business. If that holds good, then the growth can be upwards of 18%. But 16% to 18% growth is fair enough for the next two to three years.
What do you make of the valuation at which this IPO is coming through versus, let us say, the incumbents, the likes of Tata Motors, Maruti. How would you compare it and what is the assessment of a realistic multiple?
Narendra Solanki: If the pricing was somewhere around Rs 1,500 or so, then the issue could have generated more interest in the short-term as well. Currently, from our side, it is fully priced. That is why you might see a near-term or short-term interest might not be there. But for investment purposes and long-term return generation, those kinds of investors should only apply.
Let us just assume that when the listing does happen, it does not happen with a big pop. Maybe it is just sideways or maybe a bit down as well, given the size of the IPO itself. If it opens a bit lower, would you recommend people to buy on that dip?
Narendra Solanki: Yes, definitely, since the issue, we have already recommended subscribe for long-term investors. Any discount on the listing day should encourage long-term investors to increase their positions as per their own assessment of their portfolios, weights and all.
Any one trigger that could lead to a great upside or a great return for any IPO investor when it comes to Hyundai that you are expecting?
Narendra Solanki: I do not see any near-term trigger, other than the Creta EV launch, which is scheduled for later this financial year. So, how good traction that EV vehicle gathers would be an interesting point in terms of business.
Did you happen to look at the increase in the royalty amount or royalty payment that the company had done? Does it seem to be a concern for you?
Narendra Solanki: As far as guidance by the management is concerned, there is no immediate near- to medium-term risk. They have conveyed it pretty firmly that the current 3.5% would be there for a very long period in time until and unless some regulatory changes happen, which we do not think is happening in the near to medium term. So, no risk from their point of view.
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