Hyundai Motor Group is aiming to list its Indian subsidiary, Hyundai Motor India, in the coming months, raising up to $3 billion in a landmark initial public offering, according to industry sources Monday.

HMI reportedly plans to file for the IPO in June, with Kotak and Morgan Stanley newly joining the syndicate as the deal advisers. If successful, it could surpass the $2.5 billion raised by the Life Insurance Corporation of India in 2022, potentially setting a new record in the Indian stock market.

India presents a key market for Hyundai, the world's third-largest carmaker, offering vast potential as a production base and a massive consumer market. The company, already a major player in India, plans to leverage both the surging demand for high-margin hybrids and the fast shift to EVs.

“If HMI goes public, it could become the largest IPO in Indian stock market history, using the potential $3 billion for local hybrid and EV investments,” said Kim Geun-a, an emerging markets researcher from Hana Securities.

Lessons from China

Hyundai's IPO strategy in India is also informed by its recent experiences in China, where it has been forced to sell off factories at a loss and exit the market.

In 2015, Hyundai built two plants in Changzhou and Chongqing. However, following the COVID-19 crisis, sales plummeted, leading to a costly restructuring. The Chongqing plant, operational since 2017, was sold for a quarter of its investment cost, and the Changzhou plant is also up for sale.

“If Hyundai’s Chinese subsidiary had been publicly traded, things might have turned out differently," Lee Jae-il, an analyst at Eugene Investment & Securities who specializes in EV and mobility sectors.

"Beijing Hyundai was a joint venture with BAIC Motor, which should have aligned their interests. However, BAIC also had partnerships with Mercedes-Benz and its own brand to focus on, so they weren’t motivated to save Beijing Hyundai. If there had been more private shareholders involved, the company wouldn't have collapsed so quickly."

Listing its Indian subsidiary would allow Hyundai to align interests with a broader range of stakeholders, according to his view. This approach also enables the company to raise capital through equity markets, reducing reliance on debt and enhancing its ability to respond to market changes.

Early, bold bet

The group's IPO preparations reportedly gained momentum following Executive Chair Chung Euisun's visit to India in April. As of April, Hyundai holds a 14.9 percent market share in India, second only to Maruti Suzuki. Combined with Kia's 5.9 percent share, the group's presence exceeds 20 percent.

This dominance is due to Hyundai's early and substantial investments. Hyundai established its Chennai plant in December 1996 and began producing the Santro in 1998.

“Unlike competitors who entered India through joint ventures, Hyundai's independent, large-scale investments allowed for swift decision-making and economies of scale. Planning for a 400,000-unit capacity from the start enabled Hyundai to outpace rivals,” Lee, the Eugene analyst said.

Following the planned filing, the IPO is set to undergo a thorough review by the Indian regulator. The approval could take almost three months, sources said.

A Hyundai official in Seoul declined to further elaborate on the planned IPO, saying "We are reviewing the plan but nothing has been confirmed."

Ambitious production expansion

With the surging popularity of SUVs and rising car prices in India, Hyundai is ramping up local production of hybrids and EVs.

“The Indian market is incredibly profitable because it produces high volumes of just a few vehicle models, leading to high component standardization and lower manufacturing costs. Plus, with the economy growing, the average price of new cars, especially SUVs, is rising rapidly each year,” said Kim of Hana.

By 2025, the company aims to reach an annual production capacity of 1.4 million units, including output from the Talegaon plant, up from 1.08 units last year.

Hyundai acquired the Talegaon plant, located 90 kilometers east of Mumbai, which GM had shut down in 2017. The company plans to invest 1.1 trillion won ($797 million) in the facility, allocating 810 billion won for upgrades and the remainder from parts affiliates.

The expanded Talegaon plant will support Hyundai's eco-friendly powertrain diversification. Analysts expect Hyundai to launch an electric vehicle based on the Creta, a popular compact SUV, in 2025, followed by a hybrid version in 2026. Kia is also expected to introduce a small multi-utility vehicle and two electric vehicles based on the Carens, a mid-size MPV, in 2025.

“Kia's focusing more on hybrids now, and we could see the launch of the hybrid version of the Kia Seltos, another very popular compact SUV, in India by 2025. This fits right in with their plan to ramp up hybrid electric vehicle production to 19 percent by 2030,” said Lee.