This state-owned housing finance stock has zoomed 305% in past 1 year

Shares of HUDCO rallied 10 per cent to hit a new high of Rs 189.65 in Thursday's intra-day trades on the back of near two-fold jump in average trading volumes.

Shares of Housing & Urban Development Corporation (HUDCO) hit a new high of Rs 189.65, as they rallied 10 per cent on the BSE in Thursday’s intra-day trades amid heavy volumes. 

At 12:37 PM; the stock of state-owned financial institution company was quoting 5 per cent higher at Rs 180.60 after the Finance Minister Nirmala Sitharaman said Pradhan Mantri Awas Yojana (Grameen) close to achieving target of 30 million houses, additional 20 million targeted for next 5 years. The government will launch a housing scheme for the deserving middle class to buy or build their own houses. 

"Our government will launch a scheme to help deserving sections of the middle class living in rented houses or slums or chawls and unauthorised colonies to buy or build their own houses," says FM Sitharaman.

The average trading volumes at the counter nearly doubled today, with a combined 101 million equity shares changing hands on the NSE and BSE. In comparison, the S&P BSE Sensex was up marginally by 0.04 per cent at 71,780. In the past one year, the stock price of HUDCO has zoomed 305 percent, as compared to a 20 per cent rise in the S&P BSE Sensex. 

HUDCO is a Housing Finance Company (HFC) registered with theNational Housing Bank (NHB). The company is primarily engaged in the business of financing Housing and Urban development activities in the country.

The government owns 75.17 per cent of HUDCO's shareholding and appoints the company's board of directors. HUDCO plays an important role in 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.

On December 27, 2023, HUDCO signed a financing pact with Gujarat government to invest Rs 14,500 crore for financing housing and urban infrastructure projects in the state.

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 future outlook in terms of the government’s sectoral focus and related developments have positive implications for HUDCO’s medium-term and long-term strategies.The enhanced allocation for Pradhan Mantri Awaas Yojana (Urban & Rural) by 66 per cent to over Rs 79,000 crore announced in 2023-24 Union Budget will have a positive effect on the housing activities in the country.

It is expected that viability gap funding requirements from the state governments would gather momentum by the middle of financial year 2023-24. HUDCO being a major partner in many such housing schemes by the various state governments would stand to benefit, HUDCO said in its FY23 annual report.

HUDCO's profitability and capital are strong. HUDCO is a preferred lender to state-government-owned entities given such lending is considered off-balance-sheet borrowings for respective state governments. Moody's Investors Service expects HUDCO's return on assets to be stable ataround 2.1 per cent, underpinned by stable net interest margins and credit costs.