Hyundai Motor India's shares give in to gravity on day 1, despite analyst backing

Despite leading broking houses issuing ‘buy’ ratings on the freshly minted shares of Hyundai Motor India, the stock fell by around 6% on its first day of trading.

The shares, which were priced at Rs 1,960 during the IPO, ended their first day on Indian bourses at Rs 1,819.60. They had opened at Rs 1,934, down 1.3% from the IPO price.

Saral Seth, VP of Institutional Equities at Indsec Securities, connected the lacklustre debut to the massive size of the issue, even though much of the money was raised from institutional investors.

“A smaller issue would have been better. But markets have absorbed such a large issue with flat opening, which is a positive,” he said. Seth’s firm too has a ‘Buy’ on the stock, and he believes the stock will rerate to Rs 2,200-2,400 in next 3-6 months.

He continues to be bullish on the stock, and says Hyundai’s product profile is superior to that of the Maruti Suzuki, and thus valuations deserve premium compared to Maruti Suzuki.

"For fresh new investors wishing to buy post listing, we advise to wait and watch for the price to settle and revisit the space with a better-discounted opportunity, the best range of a Hyundai can be a 10-15% discount to its issue price. For the long term, Hyundai’s growth story remains intact in line with India's growth story,” Indsec Securities said.

Kranthi  Bathini, Director - Equity Strategy at WealthMills Securities Pvt Ltd, attributed the sharp fall in Hyundai's IPO to the overall negative sentiment around the bourses.

Speaking to Autocar Professional, he said: "Today the Nifty corrected brutally more than 300 points. Such action curtails any performance of the IPO. It was one of the largest IPOs and this kind of negative sentiment has impacted the stock's performance on its listing day.”

But, from a medium to longer-term perspective, Kranthi added that Hyundai Motors has the backing of a strong business model.

Similar views on the Hyundai stock have been shared by Mrunmayee Jogalekar, Auto Research Analyst - Asit C Mehta Investment Intermediates Ltd, who says that the short term market performance could be influenced by market vagaries, but in the medium to long term, the fundamentals of the company look strong.

She believes that the fundamentals will come to the fore and the stock will see an uptick in the future.

Meanwhile, global brokerage firm Nomura initiated coverage with a ‘Buy’ recommendation on Hyundai Motor India with a target price of Rs 2,472.

Nomura has said that the trend of premiumization in the Indian car industry will drive high-quality growth at HMIL. Domestic brokerage houses have also expressed similar confidence despite the stock facing pressure on the listing.

On the other hand, Indian brokerage Emkay Research came out with a price target of only Rs 1,750. It expects the company’s per-share profit to grow only by around 5% over the next three years.