HUDCO IPO: Here's what brokerages say

Housing and Urban Development Corporation Limited's (HUDCO) initial public offer (IPO) opens for subscription on Monday May 8, 2017 and will close on March 11, 2017. 

HUDCO, via offer for sale (OFS), will offer a total of 20.4 crore equity shares at  a face value of Rs 10 each. 

Price band for the IPO has been fixed at lower band of Rs 56 per share and upper band of Rs 60 per share. Issue size of the IPO is between Rs 1,128 crore – Rs 1,224 crore. 

Of the total equity shares offered, 50% will be sold to qualified institutional buyer (QIB), 35% for retail individual investors (RII) and remaining for non-institutional investors (NII). 

There is also a discount of Rs 2 per share offered to the retail category and for employees. 

Analysts believe HUDCO has a unique business model.

Siddhart Purohit, analyst, Angel Broking said, "Focus on Govt. sponsored projects and ability to raise funds at a competitive price provides earnings visibility for many years. 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."

Akash Jain, MBA (Financial Markets), Vice – President Research of Ajcon Global said, "At the upper end of the price band of Rs 60, the IPO is valued at 1.3x at FY17E post issue Book Value which is cheap. There are no direct listed peers when the Company is considered as a whole as it is catering mainly to state governments for housing and infrastructure projects."

Motilal Oswal said, "Hudco’s AUM has compounded at 9% CAGR from Rs 30,011.8 crore in FY14 to Rs 35,664.9  crore in FY16.  As the company is majorly into wholesale financing it doesn’t have any comparable." 

V.K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, "Presently, there is a consensus that housing sector, particularly affordable housing, is set to boom in a big way. The interest subsidies announced by the government and the prevailing low interest rates are huge stimulus to the housing sector."

He further said that the company will play a key role in Government's  scheme for Indian housing Infrastructure such as Pradhan Mantri Awas Yojana (PMAY),  Deendayal Antyodaya Yojana-National Urban Livelihoods Mission (DAY-NULM) and Jawaharlal Nehru National Urban Renewal Mission (JNNURM). 

As of December 31, 2016, the company has sanctioned a total loan of Rs 24,073.63 crore to government and its agencies. 

73.57% was subject to various state government guarantees and the remainder was some other form of security, such as a mortgage or negative lien. 

Also gross non-performing assets (GNPA) for loans to state government and their agencies was just at 0.75% of loan portfolio compared to total gross NPAs of 6.80% of loan portfolio as of December 31, 2016.