Hyundai's Rs 31,526-Crore Related-Party Transactions Gets Advisory Firm Thumbs Down
Hyundai India sourced 37% of its parts and revenue in the first quarter of fiscal 2025 from related parties.
Hyundai Motor India Ltd. is in focus after Stakeholders Empowerment Services — a corporate governance research and advisory firm — advised investors against voting in favour of the resolutions for related party transactions worth Rs 31,528 crore.
Barring related party transactions with Hyundai Motor Co., SES has advised investors to vote against the proposal for related party transactions with the other six entities.
On the other hand, Investor Advisory Services, another advisory firm has voted in favour for approval of related party transactions for all seven entities.
Every time a company gets listed on the bourses, it is required to get approval from its new shareholders for the said related party transactions. But what is the link between supply chain of Hyundai India and its other related entities globally within the group? What’s the share of some of these entities in revenue for Hyundai’s India entity? Here's a look.
Total Related Party Transaction Value
In an exchange filing dated Feb. 11, 2025, Hyundai Motor India mentioned each entity along with the aggregate value of the transaction with them.
Transactions could include availing/rendering of services, purchase/sale of goods, purchase of fixed assets, etc. Hyundai Motor filed a postal ballot for entering into the following material related party transactions on Feb. 11. E-voting commenced the next day and will end on March 13, 2025, at 5:00 p.m. IST.
These are the entities mentioned by Hyundai Motor India.
Mobis: Aggregate value not exceeding Rs 12,525 crore.
Hyundai Motor Co: Rs 4,607 crore.
Hyundai Transys Lear Automotive India: Rs 2,556 crore.
Kia India: Rs 5,824 crore.
HEC India LLP: Rs 3,000 crore.
Hyundai Motor De Mexico S DE RL DE CV: Rs 1,852 crore.
PT Hyundai Motor Manufacturing Indonesia: Rs 1,164 crore.
India Entity Sourced 37% of Parts and Revenue From Related Parties
Hyundai India sourced 37% of its parts and revenue in the first quarter of fiscal 2025 (38% in FY24) from related parties, according to several brokerage reports.
Mobis India Ltd. supplies after-sale parts and accessories to its dealers and is one of the key entities for Hyundai in India. Any failure with Mobis to fulfil these supply requirements could have a material and adverse impact on the after-sale services provided to customers, Hyundai Motor India had mentioned in RHP.
According to brokerage firm JP Morgan, the core R&D is conducted across the group, with costs shared mainly across HMC, Kia and Mobis. Post-development, HMC/Kia separately develop their vehicles and parts makers (Mobis, Wia) invest in component capacities to supply both car makers. Such integration, the brokerage believes, enables efficiency and speed of response to changes in market dynamics.
Going forward, it will be key to see if the company gets the said shareholder approval for these related party transactions.
Commenting on the same, Hyundai Motor India Ltd. spokesperson said, “We are aware of the SES recommendations, and we are of the view that this is an isolated opinion. Another reputed proxy advisory firm, IiAS, has shared a contrary opinion to the recommendations of SES, favouring all seven resolutions and giving a clear go-ahead. Our commitment to the highest standards of corporate governance remains uncompromising, and we shall continue to uphold the interests of all stakeholders.”
