HUDCO shares: HUDCO, a standout performer in the stock market, soared by 15% to hit an unprecedented high on Friday, signaling a remarkable one-year surge of 369%. This surge marks the sixth consecutive day of gains for HUDCO shares, propelled by optimistic sentiments regarding its business prospects after the government bestowed Navratna status upon the PSU. Furthermore, the reaffirmation of its credit rating by rating agency ICRA has added to investor confidence, contributing to the upward momentum.
On April 24, ICRA expressed a positive outlook for HUDCO, anticipating stability in its operations. The agency believes that the PSU will continue to hold strategic significance for the government, particularly in executing its policies within the crucial housing and urban development sectors. ICRA expects HUDCO to sustain satisfactory levels of profitability, borrowing capacity, and capitalization, highlighting its confidence in the company’s future performance.
The HUDCO stock surged by 15.28 percent on Friday, reaching a peak of Rs 234.20 on the BSE.
HUDCO’s borrowing initiatives benefit substantially from its sovereign ownership, with the government holding a 75.17 percent stake. Additionally, its pivotal role as a nodal agency for executing government policies in critical sectors such as social housing and urban infrastructure adds to its strength.
ICRA stated that the ratings are further supported by the relatively low credit risk profile of HUDCO’s portfolio. This is attributed to the emphasis on government-sponsored urban infrastructure projects and other initiatives supported by guarantees and budgetary allocations from central and state governments to ensure debt servicing by the respective entities.
ICRA noted that the ratings also take into account HUDCO’s favorable level of capitalization, diversified borrowing profile, and strong financial flexibility. This is supported by its sovereign ownership, which enhances its liquidity position. Despite the relatively lower risk exposure leading to modest earnings, these factors contribute to HUDCO’s overall financial strength.
ICRA highlighted that although the credit risk associated with HUDCO’s loan portfolio is reduced by government guarantees, the financial fragility of several state governments poses a potential risk.
As of December 31, 2023, HUDCO’s gross and net stage 3 percentages remained well-managed and stood at 3.1 percent and 0.4 percent, respectively.
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HUDCO experienced moderate portfolio expansion in the first nine months of FY2024. With an increase in sanctions and disbursements anticipated in the latter part of FY2024, ICRA anticipates significant growth for the company in the future. ICRA also noted HUDCO’s inability to fulfill the requirements for maintaining its status as a housing finance company (HFC) under the revised regulatory definition. Consequently, the company is currently pursuing fresh registration under the Reserve Bank of India (RBI).
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