The proposed initial public offer (IPO) by Hyundai, with its Korean parent offering to sell a 17.5% stake in the Indian subsidiary, has reportedly got the nod of the Securities and Exchange Board of India. The $3 billion IPO is set to cement India’s growing appeal as a capital-raising destination for multinational companies, experts said Hyundai’s IPO plan in India has already driven its share price higher in Korea, highlighting India as a favorable destination for raising capital. Looking ahead, the Indian government is likely to welcome more multinational corporations as they seek to raise funds in this emerging financial hub.Beyond investor opportunities, the Hyundai IPO will stimulate business across India’s financial ecosystem, benefiting merchant banks, brokerages, law firms, and other capital market players. The successful launch of this IPO could encourage other multinational corporations to list their Indian arms, capitalizing on India’s high market valuations and further boosting the nation’s capital account convertibility agenda.
Impact on India
Although the proceeds will exit India, the transaction is seen as having a negligible effect on the country’s foreign exchange reserves or exchange rate. More importantly, it presents significant opportunities for domestic investors who have limited investment options in the Indian market. The IPO offers the chance to own a stake in India’s second-largest car manufacturer, a substantial addition to the investment universe dominated by select listed companies.
In a broader context, the development presents India with an opportunity to outperform China, whose financial markets lag behind its product markets. While China’s financial system is grappling with challenges, India’s capital markets, particularly equities, have evolved and become a preferred investment avenue for domestic investors, weaned off traditional bank deposits and insurance policies.
India’s financial infrastructure, including its international financial services hub at GIFT City, offers a streamlined and globally competitive platform for capital movement.
