The initial public offering (IPO) of Housing and Urban Development Corporation Ltd (HUDCO) forayed the market with a bang. In the opening day, the IPO recorded 100 percent subscription. The “Maniratna” company provide loans for housing and urban infrastructure projects will stay open until May 11. The company has a fixed price band of Rs 56-60 per equity per share.
Backed by government
HUDCO is backed by the government and it is well placed to soak 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 a safe future for the company, HUDCO. The higher management of the company is eyeing at a double-digit growth in the coming few years.
HUDCO’s AAA credit rating and strong relationship with various state governments put 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% expect market pundits.
Swelling loan assets
The company will also swell its loan assets faster than its historical place as central government backed different high budget infrastructure projects will crowd the country in the forthcoming years. Due to a higher share of floating rate assets, there could be intermittent volatility, thought the loan spread is expected to stay steady, believes the experts.
Offloading the NPA
HUDCO’s high NPA 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 NPA with the government sector companies stands 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, assures the fence sitters.
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