To becomes first state-run company to tap the market in past five years

A quiet buzz appears to be building around the initial public offering (IPO) from the Housing and Urban Development Corporation Ltd (Hudco). The government fully owns Hudco and this will be the first offering from a public sector undertaking to hit the capital markets after a gap of five years; the last being National Buildings Construction Corporation (NBCC) in 2012.

The government plans to sell 10.2 percent of its stake in Hudco, to raise Rs 1,224 crore through the offering, which opens on May 8. This will be an offer for sale, which means that the company will not receive any proceeds from the offering and there will be no sales of new shares. The IPO’s price band is Rs 56 to Rs 60 per share of face value of Rs 10 each.

The Hudco offering is of 204 million shares and this disinvestment from the government forms part of its broader disinvestment plan which was announced in the FY17-18 Union Budget on January 31.

Hudco is one of the government’s ‘mini-ratnas’ and was established in 1970 to provide loans for housing and urban infrastructure projects. 

Hudco operates in the housing finance space which is crowded by several large private players, which include several companies such as HDFC, Indiabulls Housing Finance, LIC Housing Finance, Dewan Housing Finance Corporation and a string of smaller firms.

But what stands out for Hudco is that it is focussed on financing long-gestation government projects. 

This is a segment in which several banks – themselves struggling with stressed assets – have preferred to stay away from in recent years. NBFCs are also largely absent and thus gives Hudco a firm advantage.

Hudco’s total outstanding loan portfolio is Rs 36,385 crore (as on December 2016) and the majority, 89.93 percent is towards state governments and their agencies. About 30.86 percent of Hudco’s loan portfolio is towards housing finance loans and the balance 69.12 percent is towards urban infrastructure finance loans and project linked bonds, the company has said in an investor presentation.