HUDCO makes strong debut; ends 21% premium to issue price
The stock settled at Rs 72.50, a 21% premium to its issue price, and 1.3% lower against its opening price. In intraday trade, the stock rallied as much as 30% to Rs 77.80 against its IPO price.
The discount of Rs 2 per share to the issue price of Rs 60 was offered to retail and eligible employees.
The IPO of HUDCO saw huge demand from investors and was subscribed nearly 80 times. The portion reserved for qualified institutional buyers (QIBs) was subscribed 55.45 times, non-institutional investors saw a subscription of 330.36 times and retail investor’s category was subscribed about 11 times.
The state-run HUDCO, which provides loans for housing and urban infrastructure projects in India, recently raised over Rs 1,120 crore as a part of its IPO, assisting the government’s efforts to meet its disinvestment target.
The company enjoys strong relationship with the state governments and their agencies and finances various central and state government schemes in housing and urban infrastructure development. In most cases these loans are subject to repayment through allocations in state government budgets or recourse to alternate sources of revenue, which reduces the recovery risk of loans to state governments and their agencies.
“As at December 31, 2016, gross non-performing assets (NPA) ratio for loans to state governments and their agencies was 0.75% as compared with total gross NPA of 6.80%. In addition to this, lending to state governments also helps in the higher capital to risk (weighted) assets ratio (CRAR) of 63.7% as at December 2016 as the risk-weight to such loans is “zero”,” YES Securities said in an IPO note.
Analysts remain optimistic on the road ahead for the company and suggest investors stay put in the stock for now.
“We had suggested subscribing to the issue and the stock got listed at a premium to its offer price of Rs 60. At the current market price, HUDCO trades at 1.8x its adjusted book value. We recommend clients to HOLD the stock with a target price of Rs.80/ which is around 2x its current adjusted book value,” says G Chokkalingam, founder and managing director of Equinomics Research & Advisory.