HUDCO zooms 20% on heavy volumes; stock up 51% from OFS price in 2 months

The average trading volumes at the counter jumped four-fold with a combined 181 million equity shares of HUDCO changing hands on the NSE and BSE till 02:48 PM.

Shares of Housing Urban Development Corporation (HUDCO) zoomed 20 per cent to Rs 119 on the BSE in Thursday’s intra-day trade on the back of four-fold jump in average trading volumes. A combined 181 million equity shares of HUDCO changed hands on the NSE and BSE till 02:48 PM.

Thus far in the month of December, the stock of state-owned financial institution has surged 39 per cent. While, it rallied 51 per cent against its offer for sale (OFS) price of Rs 79 per share.

In October, the government had raised Rs 1,050 crore by selling partial stake in HUDCO through OFS. The government had sold 132.88 million equity shares or 6.64 per cent of total equity of the company via OFS, the exchange data shows. Post stake sale, the government owns 75.17 per cent of HUDCO's shareholding.

Meanwhile, on November 1, Moody's Investors Service affirmed the Baa3 local- and foreign-currency issuer ratings of HUDCO. At the same time, Moody's affirmed HUDCO's (P) Baa3 local- and foreign-currency senior unsecured medium term note (MTN) ratings, and ba1 Baseline Credit Assessment (BCA).

Moody's has maintained the stable outlook on the ratings, reflecting the agency's expectation that the company's credit fundamentals will be stable, and that it will continue to receive strong support from the Government of India (Baa3 stable) when needed.

HUDCO plays an important role of providing financing to housing and urban development programs in India and signs a Memorandum of Understanding with the Ministry of Housing and Urban Affairs that outlines the company’s annual performance targets.

The ba1 BCA reflects HUDCO's low credit risk given around 97 per cent of its outstanding loans are to state governments and their related entities with 90 per cent of such loans benefiting from explicit state government guarantees. Moody's expects the company's asset quality to remain stable over the next 12 to 18 months.

Like other non-deposit-taking finance companies, HUDCO has high reliance on wholesale funding. This is mitigated by its strong access to funding from banks and bond markets because of its government linkage. The company holds modest on-balance-sheet liquidity. But good asset liability maturities matching and access to undrawn credit lines from commercial banks support the company's liquidity, Moody’s said.

Meanwhile, CARE Ratings expects that HUDCO will continue to be strategically important to the government and will continue to play an important role in the development of the housing and infrastructure sector.

The ratings take comfort from majority of the lending by the company being backed by guarantee from various state governments with the company receiving budgetary provision, wherever required, from the governments for their respective debt servicing. The ratings also draws comfort from the company’s diversified resource profile, healthy-capitalisation metrics and adequate liquidity profile, the rating agency said in its rationale.