The success of the initial public offering (IPO) of Hyundai Motor Company’s Indian arm could lead to a wave of multinational companies (MNCs) looking to list their subsidiaries in the country. With investment bankers confirming that several multinationals are exploring similar opportunities, Hyundai’s decision to go public in India could set a precedent for foreign companies looking to unlock value and raise capital through domestic listings.
Reports suggest that other multinational companies such as LG Electronics and Hindustan Coca-Cola Beverages (HCCB) are considering listing their Indian operations. Investment bankers are initially in talks with half a dozen multinationals evaluating the potential of IPOs to capitalize on India’s strong stock market, known for higher valuations compared to global peers. For example, Indian subsidiaries of foreign companies such as Maruti Suzuki and Hindustan Unilever trade at significantly higher price-to-earnings (P/E) ratios than their parent companies.
Attractive market
India’s $5 trillion stock market is seen as an attractive destination for multinationals, especially those with significant domestic operations. Rising valuation premiums in sectors such as consumer goods, energy and automobiles have made India a market of choice for multinationals looking to capitalize on investor interest. Hyundai’s IPO is expected to be a turning point, potentially leading to a broader influx of multinational listings.
Several foreign companies have already started generating revenue from their Indian operations this year. For example, US-based Whirlpool has sold a 24% stake in its Indian subsidiary, while BAT Plc has divested a 3.5% stake in ITC Ltd. As Indian markets continue to offer favorable conditions, more multinationals may choose to follow Hyundai’s path and enter their domestic markets. weapons to capitalize on India’s growing culture of equality.
Hyundai’s IPO is seen as an important moment, comparable to the crucial IPOs of global companies such as Colgate and Unilever that helped shape India’s capital markets decades ago. With India poised to become the third-largest economy, the success of multinational IPOs could further strengthen the country’s stock market and provide investors with more diversified options.
