Government-owned Housing and Urban Development Corporation (HUDCO)’s IPO, bidding for which opened on BSE and NSE today, has been subscribed 63 percent on the first day of bidding. Of their respective quota of reserved shares, Institutional investors had bid 17%; Non-Institutional investors 16%; retail investors 152%; and employees 1%. The total bids for subscription on BSE and NSE were 63%.
The price band has been set in the range of Rs 56-60 per share with a discount of Rs 2 per share for retail investors. The IPO is a part of government’s efforts to meet its disinvestment targets. The government plans to divest 10% of the shares through the IPO which will be active until 11 May 2017.
HUDCO, which provides loans for housing and urban infrastructure projects in India, is promoted by the President of India who also owns all shares of the company (2,001,899,300 directly and 700 through his nominees). All the 200,190,000 shares being offered will be sold through the Offer For Sale (OFS) route.
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As of 30 September 2016, the total assets under management (AUMs) for the wholly-owned government company were about Rs 36,110 crore, which included housing finance assets of Rs 11,290 crore and urban infrastructure finances of Rs 24,820 crore.
HUDCO has more than 46 years’ experience in providing loans for housing and urban infrastructure projects in India. The company boasts of a strong financial performance including consistently increasing revenues and strong profitability. The company’s top-line has increased in each of the last four years and looks on track of doing an encore this year as well. Similarly, its proven business model means profits have remained strong and have followed a growth trajectory in the time frame.
HUDCO’s sustained performance and profitability earned it the Miniratna status in fiscal 2005.While its earnings have improved, profitability has slipped a bit in the last six months. Nevertheless, net profit margin at 19.9% is still quite strong given its huge size.
Being a profitable PSU, HUDCO pays a regular dividend and this is something retail investors will find attractive. The company is required to pay a minimal annual dividend of 30% of its profit after tax (PAT) or 5% of its net worth, whichever is higher. Although this was not maintained in the latest financial year, the dividend rate of 5% was still quite attractive.