Hyundai India to dilute 7.5% additional stake in 3-5 years

Hyundai Motor India, which is selling up to 17.5% stake through an IPO, will dilute an additional 7.5% stake in the next three to five years, according to the company’s investment banker. This is in line with the minimum public shareholding guidelines set by the Indian market regulator Securities and Exchange Board of India.

As per the guidelines, the public shareholding in a listed company must be compulsorily increased to at least 25% within five years of listing. Here, “public” is defined as non-promoter shareholders.

“The SEBI guidelines give a window for the minimum public shareholding to be achieved. We will comply with the guidelines. Between 3-5 years, the minimum public shareholding will be met,” said Rahul Saraf, Managing Director and head of investment banking at Citi Group Global Market India, when asked about the timeline for Hyundai India meeting its mandated 25% public shareholding. 

Citi Group is among the lead book-running managers for Hyundai Motor India’s public offering. Kotak Mahindra, HSBC Securities, JP Morgan, and Morgan Stanley are the other bankers involved in the issue.

There are several methods for listed companies to meet the minimum public shareholding requirement. This includes public issues, rights issues, bonus share issues, allotments under Qualified Institutions Placement, and options and allotment of shares under an employee stock option scheme as well as transfer of shares to an Exchange Traded Fund.

Hyundai Motor Company plans to raise up to Rs 27,870 crore in its upcoming IPO of Hyundai India by selling a 17.5% stake to the public. Today, it set the price band of the IPO in the range of Rs 1,865 – 1,960, and the issue will be open for subscription from October 15 to October 17.

The IPO will be the largest in the country to date, surpassing Life Insurance Corp’s Rs 21,000-crore IPO two years ago. This will also be the first IPO by a carmaker in India in the two decades since Maruti Suzuki's listing in 2003.

In the IPO, Hyundai India is not offering any new shares, it has only an offer-for-sale component. The parent company will sell up to 142.19 million equity shares of Rs 10 face value.

It is unclear whether Hyundai India will offer new shares or Hyundai Motor Company will sell further stakes when the company plans to offer further shares to the public to meet the guidelines. The additional stake dilution could also happen in multiple tranches. 

Hyundai is the second largest passenger carmaker in India, the third largest passenger vehicle market globally. It is also the third largest market for the South Korean brand and accounts for around 14% of its global sales.

Hyundai entered India in 1996 and introduced its first car, Santro, in 1998. It has invested around Rs 29,741 crore in India as of December end in tangible fixed assets and capital work in progress. The company has cumulatively sold around 12 million passenger vehicles, including exports.

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