HUDCO is a wholly-owned Government company with more than 46 years of experience in providing loans for housing and urban infrastructure projects in India. HUDCO plays a key role in various Governments' schemes to develop housing and urban infrastructure sectors through appraisal and monitoring of projects. HUDCO's loan assets stood at INR 364bn comprising of ~31% in housing projects and rest in urban infra projects. Given its partnership with government and highest credit rating, HUDCO can raise funds at the cheapest possible cost. Increasing focus on affordable housing and governments push for infrastructure development bodes well for HUDCO's growth.
- Key role in Government's housing schemes
- Highest credit ratings and easy access to low-cost funding
- Pan-India presence and strong relationships with Govt.
- Strong financial position
Outlook & Valuation
HUDCO is engaged in financing of housing and urban infrastructure projects and is one of the leading financiers of state and central government. HUDCO's asset portfolio has grown at ~8-9% CAGR between FY14-16 which has resulted in Revenue/PAT CAGR of ~13%/ ~16% between FY13-16. Company's asset quality remains healthy, due to ~90% exposure towards government projects that are mostly secured. The company has reduced lending to private players since FY13 due to higher NPAs. Company has very high capital adequacy ratio of ~65%, all of which is Tier I capital. 67% of total Loan Portfolio, is guaranteed by State Governments. Current leverage position at 3x provides enough room for future lending growth. At the issue price the valuation is 1.4x P/BV on FY16 numbers which is fair given the low leverage ratios and adequate PCR, hence we recommend to SUBSCRIBE to the issue as a good long term investment.
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About SPA Securities
SPA Securities was promoted by a team of finance professionals in 1995 with an objective to provide value added financial services. Initially, the Group focused as a niche financial solutions provider in corporate finance and wealth management to Indian companies and high net worth individuals. In January 2000, the Group expanded its operations and the range of services. Today, SPA provides services for securities broking, merchant banking, wealth management, financial advisory, corporate finance , risk management and insurance broking.
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