Hyundai Engineering Co., the plant engineering affiliate of South Korea’s second-largest conglomerate in market capitalization, Hyundai Motor Group, is set for its market debut, industry officials said Wednesday.

The IPO comes in line with the auto group’s continued efforts to reform its corporate structure and to realign affiliates under Chairman Chung Euisun, after officially assuming the top post in October last year.

Last Friday, the company sent requests for proposals to major securities here and abroad for its initial public offering on the domestic bourse Kospi, seeking to confirm the brokerage in charge by early May. Up until recently, the company has repeatedly denied market speculations regarding its IPO possibility.

Given that the process takes up to six months from sending requests for proposals, the company’s IPO could take place within the year.

In order to solve the group’s long-standing cross-shareholding structure and to solidify leadership, it is crucial that Chairman Chung expand his shares in Hyundai Mobis and take over the shares owned by his father, Honorary Chairman Chung Mong-koo.

By listing the plant engineering company, Chung is expected to see his total equity value rise by up to 1 trillion won ($891.6 million) and use the cash to acquire stakes in other affiliates.

Hyundai Engineering & Construction, the construction arm of the group, is currently the largest shareholder of Hyundai Engineering, holding 38.62 percent in stake. While Chairman Chung holds 11.72 percent, his father Chung Mong-koo also holds a 4.68 percent stake.

Other stakeholders include the group’s logistics arm Hyundai Glovis, carmaker Kia Corp., and auto parts maker Hyundai Mobis.

Founded in 1974, Hyundai Engineering built up its business mostly in plant construction and infrastructure. Over recent years, it has expanded scope onto residential construction.

Last year, Hyundai Engineering’s sales climbed 5.3 percent on-year to 7.19 trillion won ($6.43 billion) but its operating profit slipped 36.6 percent during the same period to 258.7 billion won.

Despite sluggish business performance, however, market observers estimate the company’s value at around 10 trillion won -- in which case Chairman Chung will see his equity total climb by around 1 trillion won.

“Chung has assumed chairmanship but still faces a number of hurdles to overcome in order to gain control over the group,” said an industry official.

“It is likely that he may now add fuel to the pending scenarios related to corporate succession.”

The auto group’s attempt for governance restructuring was thwarted in 2018 due to the backlash from US-based activist hedge fund Elliott Management.

By Bae Hyun-jung (tellme@heraldcorp.com)