Hyundai Motor’s ₹31,526 Cr Transactions: Why Investors Are Concerned

Stocks in News | Shares of Hyundai Motor India Ltd (HMI), have been on a downward trend over the past month and saw another dip on Monday, March 10.

The reason? The company is seeking shareholder approval for seven major related party transactions (RPTs) worth Rs 31,526 crore. E-voting for these approvals is scheduled for March 12-13.

Why Are Investors Concerned?

The Curious Case of Hyundai's Construction Deals

This isn’t the first time Hyundai has engaged in such transactions. In 2017, HMI awarded a large construction project to HEC India LLP, a Chennai-based firm wholly owned by Hyundai’s South Korean parent. However, the firm had only 10 employees and subsequently subcontracted the work, leading to a complex chain of handovers:

• HEC India LLP assigned the project to Kotec Automotive Services Pvt Ltd (KAS), a Chennai-based firm with strong Hyundai ties.
• KAS further subcontracted it to You Seung Sang Sa India Construction Pvt Ltd (YSSS), another South Korean-owned entity.
• Finally, YSSS outsourced the work to RT Construction, a local Uttar Pradesh-based firm that completed the project.
• Despite completing the work, RT Construction reportedly did not receive payments from YSSS, resulting in financial losses and legal disputes.

Déjà Vu? Hyundai Wants Another Rs 3,000 Crore for Construction

HMI is now seeking approval for another Rs 3,000 crore construction contract to be awarded to HEC India LLP, which still operates with only 10 employees. Given the past precedent, there are concerns that the project could follow the same subcontracting pattern, with multiple layers of companies taking intermediary fees.

Additionally, the company is seeking approvals for Rs 28,000 crore worth of transactions with its South Korean parent’s companies. This has raised questions among investors about whether the Indian subsidiary is being used primarily to benefit its parent entity.

Hyundai’s Market Position Under Pressure

Amid governance concerns, Hyundai has also seen a decline in its market standing. Once firmly holding the No. 2 position in India’s passenger vehicle market, the company has now slipped to fourth place.

According to data from the Federation of Automobile Dealers Associations (FADA):

• Hyundai sold 38,156 cars in February, a 20% drop from 47,540 units in the same month last year.
• Its market share declined to 12.58%, down from 14.05% a year ago.

This decline places Hyundai behind Maruti Suzuki, Mahindra & Mahindra, and Tata Motors in terms of retail sales.

Hyundai’s EV Ambitions: A Game-Changer?

While Hyundai is navigating financial and governance-related challenges, the company is also making major strides in the electric vehicle (EV) space. At a recent town hall in Gurugram, Hyundai Motor Company’s President and CEO, Jose Munoz, made it clear—the company is all in on EVs. He talked about ramping up investments in EV tech and infrastructure, with India playing a key role in Hyundai’s bigger goal of selling 2 million EVs globally by 2030.

Despite some bumps in the road, Hyundai’s EV game plan looks promising. The company is betting big on making EVs more accessible in India—something Tata Motors has done successfully. Over the next few years, Hyundai plans to roll out five new EVs, starting with the much-anticipated Hyundai Creta Electric, which builds on the massive success of the Creta SUV. The premium Ioniq 5 has already made a strong impression, and Hyundai is looking to keep the momentum going.

Backed by its global parent and with a clear roadmap for India’s fast-growing EV market, Hyundai is setting itself up for long-term success. The competition is heating up, but if Hyundai plays its cards right, it could be a major force in India’s EV revolution.

The Big Question: Should You Buy Hyundai Motor Shares Now?

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