Housing and Urban Development Corporation Ltd (HUDCO IPO)

GREAT CHOICE BEING AN INVESTOR 

Housing and Urban Development Corporation Ltd which is wholly-owned government company till now is all set to cherish us. Company is now planning to raise around Rs.1,224 crore(approx.) through its IPO. One of the much awaited IPO of the year that has kept me waiting since the starting of this year only 3 days from now is all set to open on 8th May 2017.

Its not just the name which has kept me waiting so far but MODI government’s plan of “Housing for All by 2022”-#Mission, is exciting which is gonna benefit the company not in just this time frame of government but also in future governments also which gives us the view for not only seeing the opportunity in medium term but also as a long term investor.

ISSUE DETAILS 

• Issue Open    :   08th May, 2017
• Issue Closes  :   11th May, 2017
• Issue Type     :   Book Built Issue IPO
• Issue Size       :   20,40,58,747 Equity Shares 
• Face Value     :   Rs 10/ Equity Shares
• Issue Price     :   Rs.56 – Rs.60/ Equity Share
• Valuation       :   1,224.35 Cr.(Approx.)
• Market Lot    :    200 Shares 
• Minimum Order Quantity: 200 Shares and in multiples
• Listing At       :    BSE, NSE

COMPANY OVERVIEW

Incorporated in 1970, Housing and Urban Development Corporation Ltd (HUDCO) is a wholly-owned Government company with more than 46 years experience in providing loans for housing and urban infrastructure projects in India. They provides long term finance for construction of houses and to undertake housing and urban infrastructure development programs. Apart from the financing operations, Hudco offers consultancy services, promotes research and studies and help propagate use of local building materials, cost-effective and innovative construction technologies.

HUDCO offers loans for housing projects, such as urban and rural housing, co-operative housing, community toilets, slum up-gradation, staff housing, repairs and renewals, private sector projects, land acquisition, and housing programs. They also offers take out finance for housing and infrastructure projects to state government, public agencies, and private corporate sector agencies.

Company provide loans for implementing agencies comprising state government bodies, co-operative societies, corporate employers, and community sectors; and building technology and rent to own schemes. It also provides finance for infrastructure projects in the sectors of water supply, sewerage, drainage, solid waste management, roads and transport, and electricity in the urban areas; and social infrastructure component, such as play/primary schools, working women hostels, health centres, play grounds, police stations, courts, jails, crematorium, etc. In addition, the company offers consultancy services, including URP services, environmental engineering, and government programs consultancy services; and disaster mitigation services. Further it provides home loans for individual.

 

ISSUE OBJECTS

Well unlike others this company has its basic objectives only:

• Carry out the disinvestment of 20,01,90,000 Equity Shares by the Selling Shareholder constituting 10% of the Company’s Pre-Offer paid up Equity Share capital Company; and

• To achieve the benefits of listing the Equity Shares on the Stock Exchanges.

COMPANY PROMOTERS

Company’s Promoter is the President of India, acting through the Ministries.

 

HOUSING FINANCE MARKET IN INDIA

Traditionally, the Indian housing finance market has been largely catered to by Banks and HFCs. Together, they play a significant role in the housing finance system that promotes competition, market efficiency and consumer choice with improved terms and conditions in obtaining housing finance. (Source: NHB Report on Trend and Progress of Housing in India, 2015).

The most prominent HFCs in India are widely recognized as LIC Housing Finance Limited, Indiabulls Housing Finance Ltd, Dewan Housing Finance Corporation Limited, PNB Housing Finance Limited, Housing Development Finance Corporation Limited and Gruh Finance Limited.

ICRA estimates that the total housing credit outstanding in India as at June 30, 2016 was around ` 12.8 trillion compared with ` 12.4 trillion as at March 31, 2016, indicating a year on year growth of 19% (19% in Fiscal 2016). The share of HFCs and NBFCs in the overall mortgage finance market remained steady at 36% as at June 30, 2016, with commercial banks accounting for the remaining 64%. ICRA believes that HFCs and NBFCs are likely to benefit due to their focused approach, thrust on the relatively high growth segments like Affordable Housing and self-employed customers, and their comparatively superior service levels. Banks will nevertheless maintain a sizeable share of the market, given their competitive interest rates, their extensive branch network and customer base, access to stable low-cost funds, and the requirement to meet priority sector lending targets.

(Source: ICRA – Indian Mortgage Finance Market-Update for Q1FY17)

Table Depicting Growth in Housing Credit

 

VALUATIONS

As far as Valuations are concerned the IPO is so cheap  with a P/E of 15.50x  at the upper price band and 14.47x on lower price band on consolidated basis, and valuations remain the same on standalone basis as company has no subsidiaries. (Both Diluted as well as on Basic EPS basis).

#Alternatively if we see P/E on taking average EPS both on Consolidated as well as Standalone then we find it @15.66x & 14.62x respectively (Both @ Upper & Lower Price Band)

                                                 EARNINGS PER SHARE

                                                             RoNW

                        CONSOLIDATED/STANDALONE RESTATED                                        SUMMARY STATEMENT OF ASSETS & LIABILITIES

                     CONSOLIDATED/ STANDALONE RESTATED                                            SUMMARY STATEMENT OF PROFIT  AND LOSS

ANALYSIS & SUBSCRIPTION SUGGESTIONS BY AUTHOR

Well this is the kind of company every type of investor should be looking for, which not only has capacity to fulfil small/medium term investor but along with that it can give fabulous returns over a period of time in long run.

As their are so many lists which can be mentioned here to go for the IPO but shorting with that we are mentioning best of them all:

1. The company has been conferred the status of Miniratna (Category-I Public Sector Enterprise) by the GoI,

2. “Housing for All by 2022”-#Mission, is exciting which is gonna benefit the company in long run(Already mentioned in first para of the Article),

3. Infrastructural development shall be massive in coming years in our country,

4. Valuations: These kind of Valuations are hard to find right from the primary market for a investor which make us hungry even more,

5. And last but not the least financials, which gives us consistent growth over the years which includes; consistent EPS growth, consistent RoNW growth, etc.

After considering all the above points we have a must subscribe rating on the IPO