- 9th May 2017
- Industry – Loans PSU
- IPO Open 8-11th May at Rs. 56-60
- Large Cap: Rs 11,611 crore Mkt cap
- P/E 16.52 times and P/B 1.30 times
- Retail investors and employees get a discount of Rs. 2/share
- Advice: The IPO is rated AVOID
Overview: HUDCO is a PSU engaged in providing loans for housing and urban infrastructure projects in India. HUDCO primarily lends to state governments and their agencies. 69% of HUDCO’s loan portfolio is in the urban infrastructure segment and the remaining 31% is in the housing finance loan segment. It’s revenues, EBITDA and PAT have grown at 4.8%, 4.2% and 6.8% CAGR over FY12-16. Revenues for FY16 were Rs. 3,350 cr. and profit Rs. 810 cr. It has 874 full time employees.
Key risks: 1) HUDCO has weak growth in a recent environment of shortages and massive demand 2) High GNPA’s and NNPA’s 3) It’s a weak institution and performance is unpredictable. Clearly the activities are not commercially driven, so how can investment results be attractive? 4) It is far better to own a wonderful business at a fair price than a fair business at a wonderful price”. We feel that HUDCO is an average business available at a good price.
Opinion: This IPO offering is rated AVOID, and investors may look elsewhere for long term gains.
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