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Housing & Urban Development Corporation Ltd (HUDCO), a multi-bagger PSU stock, rallied 15% to hit a fresh record high on Friday, April 26th, 2024. This surge takes its one-year gains to an impressive 369%.
This marks the sixth consecutive day of gains for HUDCO shares, fueled by optimism surrounding its business prospects. Recent developments include the government awarding HUDCO with Navratna status and rating agency ICRA reaffirming its credit rating for the company.
ICRA’s stable outlook for HUDCO stems from the PSU’s perceived continued strategic importance to the government, particularly in realizing its policy goals within the high-priority housing and urban development sectors. The rating agency anticipates HUDCO to maintain healthy profitability, borrowing, and capitalization levels.
HUDCO Shares Soar 15%
On Friday, HUDCO’s stock price on the BSE (Bombay Stock Exchange) rose a significant 15.28%, reaching a new high of Rs 234.20.
HUDCO’s borrowing strength is bolstered by its substantial government ownership (75.17%) and its designated role as a key agency for implementing government policies in crucial social housing and urban infrastructure sectors.
ICRA highlights the relatively low credit risk associated with HUDCO’s loan portfolio. This is attributed to the company’s focus on government-backed urban infrastructure projects and others that benefit from guarantees and budgetary allocations from central and state governments to ensure debt servicing by relevant entities.
The rating agency also acknowledges HUDCO’s comfortable capitalization level, diversified borrowing strategy, and strong financial flexibility, all advantages stemming from its government ownership. These factors contribute to a positive liquidity profile, even though the focus on lower-risk projects might lead to moderate earnings.
While ICRA acknowledges that government guarantees mitigate credit risk within HUDCO’s portfolio, the weak financial health of many state governments remains a potential concern.
As of December 31, 2023, HUDCO’s gross and net non-performing asset (NPA) ratios remained well-controlled at 3.1% and 0.4%, respectively.
The company experienced modest portfolio growth in the first nine months of FY2024. However, with an uptick in sanctions and disbursements during the latter half of FY2024, ICRA anticipates strong future growth for HUDCO.
Finally, the report acknowledges HUDCO’s inability to meet the revised regulatory definition for continuing as a housing finance company (HFC) under the Reserve Bank of India’s (RBI) guidelines. To address this, HUDCO is currently in the process of seeking fresh registration with the RBI.