India (Commonwealth) _ Maruti Suzuki’s enduring supremacy as the top domestic automaker chosen by investors on Dalal Street is threatened by competitor Hyundai Motor’s readiness to list on Indian exchanges. According to investment managers and experts, the South Korean automaker’s listing in the nation may have an impact on the higher prices that Maruti’s shares have commanded compared to those of other automakers.
Hyundai is in talks with bankers for an initial public offering (IPO) here, but the date and scale of the share sale have still to be determined, according to an ET story from earlier this month. While market players are still awaiting Hyundai’s initial public offering (IPO) prospectus to have a deeper understanding of the company’s financials, the initial opinion is that investors may have more alternatives in the sector due to the company’s strong push into a few high-growth areas.
According to Ashwin Patil, senior auto analyst at LKP Securities, the regrowth in the small car market and the dearth of electric vehicle goods hurt Maruti’s share price and growth prospects. The possibility of a negative effect on Maruti’s share price following Hyundai’s IPO is present.
In FY24, Hyundai is expected to sell 785,488 cars, while Maruti is expected to sell 20, 85,637 units overall. Despite Maruti’s higher car sales, stockbroker Emkay Global claimed that because of Hyundai’s comparatively premium positioning, its profitability growth has been significantly greater.
Fund managers stated that while Hyundai stands to earn from the more lucrative development regions, Maruti’s shares might prolong advances in the near future. Although Hyundai is better positioned in the mid-to-premium category and may profit from electric vehicle leveraging, Maruti shares are projected to rise by 7-8% from their present levels, according to Niket Shah, fund manager at Motilal Oswal AMC. Shah stated that while Maruti is probably going to be rerated at the time of Hyundai’s IPO, Hyundai should eventually trade at premium prices. Maruti shares have increased by 10.5% since the first week of February, when word of Hyundai’s intention to IPO first appeared. They have increased by 33% in the last year and by 12% thus far in 2024.
According to Patil, Maruti is now selling at high multiples and is expensive. Hyundai is a better investment for investors and might have a negative effect on Maruti’s prices because its valuation is probably in the middle of those of Maruti and Mahindra & Mahindra. Emkay claims that Maruti’s price-to-earnings ratio is about 25 times the expected earnings for FY26. Analysts believe that Hyundai’s IPO may have a greater effect on Tata Motors and Mahindra’s share values than on Maruti.
Although Maruti isn’t actively looking at the EV category, the main goal of the IPO is for Hyundai to expand its line of electric vehicles, according to Dharan Shah, founder of Tradonomy Research. This suggests that Mahindra & Mahindra and Tata Motors are probably Hyundai’s real rivals.” He continued by saying that because Hyundai has a lower market capitalization than Tata Motors and Maruti, it is more likely to take market share away from M&M.
Maruti had no meaningful competition in India throughout the 1980s, and it was spared from even having to advertise its goods. In order to save money, they produced more than half of their automobiles in white, and there were lengthy waiting lines. But once Hyundai joined the market, things began to shift. Hyundai began emphasizing service, quality, and customer care.
The Indian auto industry has traditionally been dominated by Maruti Suzuki and Hyundai. These two massive automakers provide a wide range of options, including affordable hatchbacks, small sedans, SUVs, and many more. Selecting one of them is among the most difficult tasks a buyer of a new automobile must perform. Just to aid you in the event that you want to get a new vehicle, let us briefly compare the two.
India’s own brand is often referred to as Maruti Suzuki. However, Suzuki Motor Corporation of Japan is the parent firm and owns a 56% stake in the subsidiary. They announced their merger in 1982, one year after Maruti Suzuki was established. It is the first plant in Manesar and employs close to forty thousand people.
