HUDCO stock hits record high; zooms 15% on heavy volumes

Shares of Housing & Urban Development Corporation (HUDCO) hit a record high of Rs 234.30, zooming 15 per cent on the National Stock Exchange (NSE) in Friday's intra-day trade amid heavy volumes on expectations of good growth going forward. Last week, the Department of Public Enterprises (OPE) granted the Navratna Status to HUDCO.

The stock of the state-owned financial institution surpassed its previous high of Rs 226.95 touched on February 2, 2024. It has bounced back 43 per cent from the low of Rs 163.80 hit on March 13.

At 12:15 pm; HUDCO was trading 14 per cent higher at Rs 231.75, as compared to 0.20 per cent decline in Nifty 50. The average trading volumes at the counter jumped over five-fold. A combined 78.58 million equity shares of HUDCO have changed hands on the NSE and BSE thus far.

HUDCO's borrowing programmes derive significant strength from its sovereign ownership (75 per cent of the equity held by the Government of India (Gol) as of March 31, 2024) and its important role as a nodal agency for the implementation of Government policies in the high priority sectors of social housing and urban infrastructure.

HUDCO as the premier techno-financial institution assists the Ministry of Housing and Urban Affairs (MoHUA) in scrutiny and inspection of sample projects / DPRs under Pradhan Mantri Awas Yojana (Urban) - Housing for All (PMAY-U) Mission prior to their consideration by the Ministry for sanction of central assistance.

The key to HUDCO's growth prospect is crucially linked to the urbanisation trend of the country.
India's urban population is estimated to increase from 470 million in 2021 to 600 million by 2036 which would constitute about 40 per cent urbanization level (World Bank Report 2022).

The report also estimated that India's cities require a capital investment of $840 billion in urban infrastructure and municipal services till 2036 in 2020 prices. Further, as per National Infrastructure Pipeline (NIP) report, total capital expenditure requirement in infrastructure sectors in India during fiscal 2020 to 2025 is projected at about Rs 111 trillion, including Rs 19.19 trillion for urban infrastructure projects including affordable housing projects.

Thus, with continuous rise in the urbanisation levels and commensurate increase in capital investment requirement, HUDCO's potential for quantum jump in business operations augurs well, the company had said in its FY23 annual report.

Nonetheless, HUDCO's gross and net stage 3 percentages remain under control and stood comfortable at 3.1 per cent and 0.4 per cent, respectively, as on December 31, 2023 (3.4 per cent and 0.5 per cent, respectively, as on March 31, 2023). HUDCO witnessed modest portfolio growth in 9M FY2024.

With the pick-up in sanctions and disbursements in the latter half of FY2024, ICRA expects the company to report good growth going forward. ICRA has also taken cognisance of HUDCO’s inability to meet the conditions for continuation as a housing finance company (HFC) under the revised regulatory definition. In this regard, the company is in the process of seeking fresh registration under the Reserve Bank of India (RBI).

HUDCO has a diversified funding profile with sources including tax-free bonds, GoI FSBs, taxable bonds, refinance from National Housing Bank (NHB), bank loans, commercial paper, and foreign currency borrowings. Around 50 per cent of its borrowings, as on December 31, 2023, was in the form of tax-free bonds and GoI FSBs with a tenure of at least 10-15 years, auguring well for the asset-liability maturity (ALM) profile, the rating agency said in rationale.

The Stable outlook reflects ICRA's expectation that HUDCO will likely remain strategically important to the GoI for the implementation of its policy in the high priority housing and urban development sectors.
Moreover, HUDCO is likely to maintain adequate profitability, borrowing, and capitalisation profiles, ICRA said.