Hudco stock up 40% in 3 days

Significant interest at a reasonable premium is said to have lifted the share

Government-owned Housing and Urban Development Corporation’s (Hudco’s) stock has gained a little over 40 per cent in the past three days. Even after Tuesday’s 12 per cent rally, the stock continued to be in demand, with a gain of 8.5 per cent on Wednesday.

Turnover in the counter has also been unusually high in these three days, with Thursday’s crossing Rs 150 crore, from data on the BSE.

Sources indicate one of India’s well-known high net worth individuals (HNIs) is mopping stake in Hudco, explaining the unusual trading volumes and price surge. “With affordable housing being the new theme, particularly for HNIs, investors are willing to acquire Hudco’s shares at even a substantial premium,” says a broker with knowledge of the deal.

He adds that with the government holding about 89 per cent, free float of the stock is limited and adding to its premium. Even after the rise in these three days, its market capitalisation is only Rs 1,995 crore, the free float being a mere Rs 220 crore.

Valuations, though, are not a worry, with the price to book value of about 2.1, based on the latest data with Capitaline. With a listing gain of 22 per cent, the stock was on the priority list for most investors. While the company’s performance hasn't been anything to write home about, with net profit up 7.6 per cent year-on-year in FY17, investors see it as a steady play, with good growth potential in its business. Net interest margin at a little over four per cent is among the best in the sector, though non-performing asset (NPA) levels were a bit elevated — gross NPAs of six per cent and net NPAs at 1.15 per cent of the total for FY17. The question is whether it would deliver on investor expectations.