Live Markets »News & Advice»IPO News»IPO News Details
IPO News Details
Back

HUDCO IPO: Should you invest?

Puneet Wadhwa/New Delhi 09 May 17 | 08:40 AM

The initial public offer (IPO) of Housing and Urban Development Corporation Ltd. (HUDCO) saw a good response on the opening day, with the issue getting subscribed 63%, or 0.63 times.

According to reports, the QIB portion was subscribed 18%, while the NII portion saw subscription of 16%, retail 152% and the employee portion was subscribed 1%.

Related Stories

    No Related Stories Found
Widgets Magazine


IPO will of the 'Miniratna' that provides loans for housing and urban infrastructure projects, will close on May 11. HUDCO has fixed the price band of Rs 56-60 per equity share.

So should you subscribe to the offer? Here's a quick compilation of what leading brokerages across the country suggest.


NIRMAL BANG


Government has been emphasising on both housing and infrastructure development. In such scenario, HUDCO is well placed to cater the upcoming opportunities. Over FY14-FY16 its assets under management (AUM) have grown at a CAGR of 9.4%. Going forward, we believe that it can grow in double digit given the strong momentum in the sector. 


Currently, HUDCO has leverage of 2.7x, as the growth kicks in, it will leverage the book leading to improvement in return on equity. On the valuation front, at the given upper band price of issue of Rs. 60, the stock is offered at P/E of 18.14x of  its 9MFY17 annualised EPS and 1.34x  9MFY17 P/BV which we believe is reasonably priced as compared to its peers. We recommend subscribing to the issue.


ANTIQUE STOCK BROKING


Owing to its AAA credit rating, HUDCO is able to garner low cost liabilities and lend at a competitive rates. At the same time, its strong relationships with various state governments enable it to grow at a healthy rate. Recent initiatives by the central government in affordable housing space and smart cities could ensure that HUDCO can grow at 15% CAGR over FY17-19e and deliver return on equity (RoE) of 12%.


Given the limited appraisal skills, HUDCO witnessed huge NPAs in its private sector portfolio. While it has stopped lending to this segment since 2013, re-starting it could be a risk. ALM (asset liability management) mismatch and governmental disposition on allowing HUDCO to raise tax free bonds could result in margin volatility in the future. 


At the upper price band of Rs60 per share, the stock trades at 1.0x FY19e book. While comparison with housing finance companies (HFCs) is absolutely unwarranted due to the fact that HUDCO doesn't lend directly to the home buyer, IPO valuations leave some upside for investors.


IIFL


With the likelihood of accelerated spending on housing and urban infra projects by state governments and implementation of targeted schemes by the central government, the growth opportunity for HUDCO is set to enhance significantly, thereby enabling the company to swell its loan assets faster than its historical pace. The loan spread is expected to remain steady at 2-2.2% over the longer term, although there could be intermittent volatility due to higher share of floating rate assets. 


Being substantially capitalised and commanding the highest credit rating, HUDCO can raise long-term money at the best possible rates from the bond market. Asset quality issues are confined to the private sector exposure, but thankfully they are largely addressed in terms of provisioning. Consequently, credit cost may come-off in the coming years augmenting the franchise profitability. Given the reasonable visibility for steady asset growth and better return ratios, the IPO valuation at 1.4-1.5x 9M FY17 P/ABV seems attractive. We recommend Subscribe.


HDFC SECURITIES


In ICRA’s opinion, the housing finance sector will register a growth of around 18% to 20% in Fiscal 2017, compared with the 5-year CAGR of 18% in Fiscal 2011 to Fiscal 2016. The growth is likely to be supported by some pick-up in primary sales, new launches and a healthy growth in the Affordable Housing segment. ICRA expects banks to grow their home loan books at around 16% to 19% and HFCs at a slightly higher pace of around 17% to 21% leading to an overall growth of 18% to 20% in Fiscal 2017. The long-term growth outlook for the sector remains positive given the Government’s focus on “Housing for All" by 2022, and the favourable regulatory environment.


ANGEL BROKING


The reported GNPAs & NNPAs of HUDCO were 6.80% and 1.51% respectively at the end of 9MFY2017. HUDCO’s high NPA was due to large defaults from some of the private sector corporates in which it had exposure to earlier. 


However, it’s NPA from government sector is only 0.75%. It has already done substantial provisions on the private sector NPAs and stopped lending to them from FY2013 onwards, and hence, we don’t expect material change in NPAs in the near term. Further, a provisioning coverage ratio of 72% lends enough comfort on the loan book.


At the issue price band of Rs 56-60, the stock is offered at 1.25x-1.35x its 9MFY2017 BV, which we believe is reasonably priced, and hence, recommend SUBSCRIBE to the issue.

 

Comments

    15 Aug 17 at 11:43 AM
By: Roger Jack

I do love science fiction, Do my Dissertation yet it's not by any methods a kind unto itself; it for the most part seems to merge with another class. With the couple of movies I've done, I've ended up playing with kind by one means or another or another, so any sort that is made to mix with others takes after sweet to me. It empowers you to use huge, mythic conditions to examine standard things. Notwithstanding, to lead a nearness that is both gainful and satisfying, our measures of accomplishment must be sensible, and we should be able to recognize, and be appreciative for, our accomplishments.

    27 Jun 17 at 02:22 PM
By: DanielHeller

This is highly informatics. crisp and clear. I think that everything has been described in systematic manner so that reader could get maximum information and learn many things. write my essay

    09 Jun 17 at 07:59 PM
By: Oliver

And if you dont wont to do you r homework, I can find someone to do my homework for me

    01 Jun 17 at 02:20 PM
By: sachinkrc

printable map of united states

    01 Jun 17 at 02:19 PM
By: sachinkrc

printable map of united states

    22 May 17 at 07:50 PM
By: Chris Dean

The Borderlands series is one of the best in the lot of action gaming. Now the third installment of the series is about to release with the addition of two new varieties of items including the laser gun and I am waiting for this game to release to check it out myself. Hope it lives up to our expectations.You can check out Borderlands 3 features

    11 May 17 at 08:28 PM
By: Ariena Grande

government is already being focused on housing authorities and its development. They are taking big spaces to build projects and housing scheme if you look at reports of UK Dissertation on housing projects you might see that it’s been going on for over years now the growth in housing authorities and properties has dramatically increase to much and which has catches everyone eye so it’s a thing everyone should be looking to invest on.



Widgets Magazine

Sensex

Company Price Gain (%)
Hind. Unilever1,200.902.23
Power Grid Corpn223.501.85
TCS2,512.851.32
Bharti Airtel421.601.21
ITC281.800.84

Poll

Will the economy gain by adopting a January-December fiscal year instead of the existing one that ends on March 31?



Online Portfolio

You can create Online Portfolio here using the below button.

Widgets Magazine