HUDCO rallies 14% on heavy volumes; zooms over 100% since November

Shares of Housing & Urban Development Corporation (HUDCO) surged 14 per cent on BSE to a fresh high of Rs 157.40 in Friday’s intra-day trade amid heavy volumes.

Since November, the stock of the state-owned financial institution has more than doubled or zoomed 109 per cent.

At 09:56 am Friday, HUDCO was the top gainer on the BSE 500 index. It was up 13 per cent at Rs 155.35 as compared to a 0.83 per cent rise in the BSE Sensex.

The average trading volumes on the counter jumped 1.5 times. A combined 65.66 million equity shares changed hands on the NSE and BSE.

HUDCO is primarily engaged in activities relating to housing finance and non-housing loans pertaining to urban infrastructure.

Last month, 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 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.

Meanwhile in November, Moody's Investors Service affirmed the Baa3 local- and foreign-currency issuer ratings of the company.

Moody's maintained a stable outlook reflecting its expectation that the company's credit fundamentals will be stable and that it will continue to receive strong support from the govt (Baa3 stable) when needed.

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

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 assetiability maturities matching and access to undrawn credit lines from commercial banks support its liquidity, Moody’s said in its ratings rationale.