The Indian arm of the South Korean auto major Hyundai Motor India (HMIL) has filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) in which the company will sell around 142.2 million shares (of the total 812 million shares) at a face value of ₹10 each.

However, the preliminary papers filed gave no details of the pricing of the initial public offering (IPO) or the company’s valuation. According to sources, Hyundai is expected to raise at least $3 billion (around ₹25,000 crore) through the IPO. Once it goes through, it will be the largest in India, surpassing LIC’s share sale of ₹21,000 crore.

On June 14, businessline reported that HMIL moved a step closer to an IPO in the Indian market, with the company set to file its DRHP with the SEBI.

India is the third largest revenue generator for Hyundai Motor Corporation (HMC) which sold 7,77,876 units (including exports) in the last financial year, an eight per cent growth as compared with 7,20,565 units in FY22-23.

Advisors for the share sale include Citigroup, Kotak Mahindra Bank, JP Morgan, HSBC and Morgan Stanley.

“The Offer would constitute 17.50 per cent of the post-offer paid-up equity share capital of our company...As on the date of this Draft Red Herring Prospectus, HMC, our promoter (including through its nominees) holds 100 per cent of our issued, subscribed and paid-up equity share capital. Upon completion of this offer, our promoter, HMC, will approximately hold 82.50 per cent of our post-Offer issued, subscribed and paid-up equity shares capital,” HMIL said in the preliminary papers filed to Sebi for its IPO.

It further said that “As a result, our promoter will be able to exercise a significant level of control over all matters requiring shareholder approval, including the election of directors, amendment of our constitutional documents and approval of significant corporate transactions and any other approvals which require a majority vote of shareholders eligible to vote.”

The DHRP reviewed by businessline also said that HMIL will pay 3.5 per cent of revenue as royalty to HMC for each vehicle model sold.

“Under the existing Royalty Agreement dated June 10, 2024 with HMC, HMC has, among others, granted our company a non-exclusive, non-transferable right and license to manufacture and sell passenger vehicles and/ or parts as specified in the Royalty Agreement in India and to use HMC’s trademarks in connection with such manufacturing and selling activities for which we are required to pay an amount to HMC equal to 3.5 per cent of our sales revenue (which is to be determined as set forth in the Royalty Agreement), arising from sale of the passenger vehicles or parts,” it said.

Before the current Royalty Agreement was entered into, HMIL paid a separate royalty fee for each passenger vehicle model sold, it added.

According to analysts, Hyundai is opting for an IPO to capitalise on the growing market potential in India which will also showcase the confidence of global automobile manufacturers in the Indian automotive market.

“It shows the confidence of global carmakers in the Indian automotive market and in the Indian capital market. This development opens up fresh opportunities for legacy carmakers worldwide to secure funds from India and expand their investments within the country,” Gaurav Vangaal, Associate Director, Light Vehicle Production Forecast for the Indian Subcontinent at S&P Global Mobility, said.

Hyundai’s Executive Chair Euisun Chung and CEO Chang Jae-Hoon also visited India recently (in April) and held a series of meetings regarding the IPO. The company has been operating in India since 1996, with manufacturing facilities in Tamil Nadu and an upcoming plant in Talegaon (Maharashtra).