225 Anchor Investors, 21 Domestic Mutual Funds Have Participated In Hyundai IPO: COO Tarun Garg
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00:00The biggest IPO of our times, it's Hyundai that opens for subscription today.
00:04Had a significant response to its anchor book yesterday with some very important marquee
00:10names subscribing to Hyundai's IPO that opened today. Tarun Garg, CEO of Hyundai Motor India
00:18now joins in to talk to us about the outlook for the company and the excitement around it.
00:23Hi Tarun, congratulations. It's a big day and I guess there's a bigger day around the corner
00:27when you actually list on the exchanges. But before we start, please tell me how do you
00:31pronounce Hyundai? It's actually Hyundai. So we go with Hyundai? Yes. Okay, great. This makes
00:39life a whole lot easier. We've been debating this over the last few days and yeah. So you've been a
00:44household name even though I've never called it Hyundai for 28 years is when you launched in
00:50India. You are Indianizing this as you list on the exchanges and let retail investors participate in
00:57this phenomenal story that you've got going for you. You want to tell us what this IPO will mean
01:02for the company, for the Indian arm and the outlook for you and the company? Thank you. Thank you so
01:08much for having me here and as you know that over the past 26 plus years we have really done very
01:14well. We are the second largest player in the passenger vehicle space in India and we believe
01:20now the time is just about right to take the second phase of our growth story because this
01:25IPO will give opportunity to the local investors as well as global investors to be a part of this
01:31growth story. All will also help us to really pursue global standards in terms of operations,
01:36excellence, governance. So I believe this is just about the right time and I'm very happy to see
01:42yesterday's anchor response especially from the local mutual funds. If you see you know 21 mutual
01:47funds across 83 schemes contributing to 34.4% of the total anchor allocation. We have a response
01:55from the pension funds in India. We have response from the insurance companies as well. So I think
02:00all in all it is very very satisfactory day yesterday and we believe that yes like I said
02:06this is very very good for us in terms of further Indianizing our operations.
02:10In fact I think the numbers that we saw yesterday and the subscribers to the anchor book was rather
02:16phenomenal and it wasn't just big marquee global names but also of some very important domestic
02:21fund houses that have subscribed to your anchor book. Now let's talk business and I want to
02:26understand from you Tarun how does business on ground change for you once you become a listed
02:31entity. While I know retail investors can now participate in the story does it impact business
02:37because I know you're sitting on a healthy cash balance on your books. I do understand this is an
02:42OFS but let's talk about what it does for the India business. Look India is a very very important
02:48market. Of course if you see we are already the fifth biggest economy in terms of 100
02:54meter company. It is the third biggest market for us behind US and Korea. So the Indian operations
03:00are very important. Today we are sitting on a capacity of 824,000 but 250,000 capacity kicks in
03:07with the addition of the Pune plant. So this is one very big thing because 30% capacity addition
03:12would mean a lot of headroom for us to increase both our domestic as well as export volumes.
03:17The other big thing which is happening is the electrification. So you know currently we have
03:21of course the IONIQ 5 which is a benchmark in EVs. At the same time we like to really compete in the
03:26high volume space. CRETA is a very strong brand for us and which better model than CRETA to really
03:32make an entry into the high volume EV space. So CRETA EV is going to come in the next quarter
03:37followed by three more EVs in the midterm and not only that actually these EVs are being backed by
03:43very strong localization. So as we speak today Samina the battery packs are being localized.
03:48We have already announced the localization of the LFP cell manufacturing with the Indian partner.
03:53We are looking at dry drain and power electronics as well. So the entire EV supply chain
03:58we are targeting to localize. Then we are also investing in the charging infrastructure.
04:02So believe this is a new space opening up for us which will help us to really increase volumes as
04:07well as market share. So I think this is very good of course in terms of especially for IPO
04:13the communication now will be much more. I think we will talk to you much more. We'll talk to the
04:18investors much more and the quarterly calls so which would mean that we will really even further
04:23pursue global standards in terms of operations, excellence, governance which is very good. I think
04:29this is a great opportunity for our organization HMI for all our employees to really even take the
04:35ante up and raise the raise the bar even up you know. Of course we have done very well if I may
04:40say over the past 26 years but I think we can only go improve from here even more. Tarun,
04:46morning this is Agam here. You know we want to talk about the SUV segment right because
04:51that's essentially largely the segment which has actually driven volumes for the entire sector as
04:57a whole and Hyundai has of course been a key contributor to leading those volumes coming in.
05:04You spoke about the Creta well briefly right now. My question then is that firstly
05:10how have you differentiated yourself with respect to other competitors in this market
05:16and secondly do you feel that the new entry-level segment will further propel sales for not just
05:23for you but the industry as a whole? So look if you see when we launched the Creta in 2015
05:30SUVs used to contribute only 13% to the overall sales and Creta changed it all. Today
05:35TIV SUVs are contributing 52% for Hyundai SUVs are contributing 67%. You said how do we
05:42differentiate? We differentiate by giving respect to India. We differentiate by really raising the
05:48bar up. You saw the facelift of the Creta which was launched in January and it has received some
05:52great response. Creta is now in the top three brands across categories for India and of course
05:57the segment leader in the mid-SUV segment. So Alcazar facelift was launched last month to some
06:03great response. Last year we launched the Xter again some great response. We continuously do
06:08innovations as well like last two months back we introduced dual cylinder CNG in Xter which is
06:14again giving some great response. So I think the whole idea is to really raise the bar up. I'll
06:19give you one very good example ADAS. So we saw all these highways coming up in India where the high
06:24speeds were going up. We started with one model and today eight out of 13 models in our portfolio
06:30have a feature of ADAS and which is really lapped up by the customers because the penetration in
06:35these eight models has reached 29%. So you can see it is all about introducing new features,
06:42introducing new technologies and going up with this new Bharat which is so aspirational and
06:47basically does not want to compromise on the products in terms of technology, features, design
06:54everything. So I think Hyundai is really well placed for that because we have a very strong
06:58parent which is the third biggest OEM now in the world. The parent has all kinds of technologies
07:04not only battery electric vehicles but plug-in hybrids, strong hybrids, CNG, petrol, diesel,
07:10even hydrogen. So I think HMI is very well placed to take care of the future and of course our new
07:15plant which kicks in next year will add about 30% to our capacity in both phases put together. So I
07:21think this will really give us opportunity to not only increase the domestic volumes but also
07:26the export volumes. Right Tarun, you know I also want your view on the kind of markets that IONIQ
07:32as well as KONA address at the moment, your plans as well as going forward and the opportunities
07:37that you see here. Look if you see when we launched the KONA in 2019 as a full-fledged SUV
07:44electric with a range of 450 kilometers, SUVs were only being talked about at that time. So KONA
07:50helped us to really understand the customer, what is this EV customer, how does he behave.
07:55Of course IONIQ 5 was a benchmark creator and we have got some great positioning in the
08:00mind of the customer. Then the learnings were that although 85 percent of the customers are
08:05charging at home or office, however they were reluctant to really take their cars on the highways.
08:10So we made it a plan to really look at providing some fast charging stations at the prominent
08:16highways in India and some prominent locations. So we already have 15 in place, we have a very
08:21strong plan for that. Along with a local Indian player we are going to have fast chargers at our
08:26dealerships. With Tamil Nadu government also we are going to have 100 fast charging stations.
08:30So I think the entire ecosystem for EV is being built, like I said a localization, the charging
08:35infrastructure, four products and which will help us to position the EVs and now that we know the
08:40customer to really market them well and increase our volumes also.
08:45Tarun Lal, just to keep the focus on business and you've maintained very healthy margins and I think
08:50that's a standout for Hyundai, for now at least. But going ahead how do you plan to
08:56manage rising input costs particularly with supply chain challenges, fluctuating forex
09:02exchange rates etc. because I do know your key spare parts do come in from the parent company.
09:10If you see you know the one very important thing about Hyundai's philosophy has been the
09:14quality of growth. So if you see we have really taken it together whether it's volume, market
09:20share as well as profitability. So we have a very strong cost structure in place where we optimize
09:25cost through value engineering through various other initiatives. On foreign exchange one very
09:29good thing is right from the time we set foot in India we have focused big time on exports. Dollar
09:34is strong which is actually positive because we are dollar positive in terms of our exports being
09:38more than the imports so that is a positive news. The new capacity is coming in of course which will
09:43kick in 250,000 capacity in due course 170,000 of which will come in h2 of next year itself.
09:50As you know EBITDA margins we finished last year with 13.1% EBITDA margin even quarter one of
09:56financial year 25 the good performance continued as we have mentioned in our RHP the EBITDA margin
10:02rose to 13.5% so I think premiumization, featurization, SUVization which is now at 67%
10:09cost optimization, the plant capacity which is coming in you know all these factors have helped
10:14us to really really stay ahead of the curve and grow along with profits along with our dealer
10:20network a very solid network both in the rural and the urban areas and of course a great product
10:25lineup that we have which is not only dependent on SUVs of course SUVs are big in terms of 67%
10:30contribution but we have hatches we have sedans in fact last year we launched the full model
10:35change of the Verna which received a great response in the Nios i20 so I think those marquee
10:41brands really help us to give all kind of solutions to the customers because one very critical about
10:46part about India is that India is such a big country and every state also behaves differently
10:51today we offer different type of powertrains also to various customers like for example you know in
10:56UP or in Maharashtra CNG is very popular whereas in Telangana or Andhra Pradesh or Punjab diesel is
11:02very popular in Delhi petrol is popular very popular so I think we have all kinds of powertrains
11:08and that really helps us to target all the states very well. Tarun, while I know we'll be very
11:13excited to talk to you when you start reporting on earnings publicly from next quarter this might
11:19be a question that's far out and you can choose to answer it for me the way you like it but
11:24once you become a listed company there will be a dividend policy post the IPO right
11:31and this becomes your job more important than anybody else's how do you balance shareholder
11:36returns with reinvestment for growth? Absolutely and in fact if you see we have a very good track
11:42record of cash conversion the internal accruals and we believe the capex which we have announced
11:4732,000 crores over the next eight to ten years we are we will generate enough capital to take
11:53care of it through our internal accruals regarding the dividend policy yes once the
11:57financial year 25 is over we'll announce our new dividend policy which will take into account the
12:03returns the cash position the capex requirements but most importantly we like to benchmark with
12:08the industry best practices and really look at the shareholders return very very importantly.
12:16All right well Tarun on that note we'll leave it at that thank you so much for joining us
12:20and taking us through well the plans that Hyundai India has for the nation of course
12:25the entire sector and we also look forward to the listing of the IPO or whatever soon happens next.