Joseph Garcia
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Thank you for posting your solution to your issue. Our collective knowledge base has been increased.Update/Solved: Starter solenoid was causing the weak retraction of the gear, so it were touching the flywheel teeth. Solenoid replaced with a new one from Hyundai They seem to be the same construction - fits just right. Only difference was the plug connector on new one instead the bolt-style connector on the old.
Hope this may help in case one does not have access to right parts. Problem solved! No more grinding sounds!
Will order the whole starter assembly though, as the starter had plastic parts inside that broke into pieces while assembly.
Thank you all for assistance!