HUDCO IPO: A quick read as the IPO closes on Thursday

The initial public offer (IPO) of Housing and Urban Development Corporation Ltd (HUDCO) opened with a bang. On the opening day itself, the IPO recorded 100 percent subscription. The IPO of the Mini Ratna company will remain open til May 11. The company has a fixed price band of Rs 56-60 per equity share.

Backed by government

HUDCO, the company that provides loans for housing and urban infrastructure projects, is backed by the government and is well placed to grab the emerging opportunities in the market, believes the experts. The Government of India is aggressively trying to build infrastructure within the country through different projects like Smart City and Housing for All, which can ensure future growth for HUDCO. The management of the company is expecting a double-digit growth in the next few years. HUDCO’s AAA credit rating and strong relationship with various state governments puts it on the right track by propelling its growth up to a level of 15% CAGR over FY17-19E and deliver a return on equity (RoE) of 12%, according to market experts. 

Swelling loan assets 

The company will also grow its loan assets faster than in the past, as the Central government backed different high budget infrastructure projects will flood the country in the coming years. Due to a higher share of floating rate assets, there could be intermittent volatility, though the loan spread is expected to stay steady, the experts believe. 

Offloading the NPA

HUDCO’s high NPAs from the private sector is due to the huge defaults from some of the private sector corporates. The company has stopped lending loans to private players after 2013 and HUDCO’s NPAs from the PSUs stand at 0.75 per cent, which keeps the company burden free and will further expedite the growth of the company in the years to come.