The government is selling up to 8% stake or 16.02 crore shares in the company through an Offer For Sale (OFS). The offer, which invited bids from non-retail investors on Tuesday, was subscribed 1.6 times at an indicative price of Rs 45.03 per share. The issue will be open for retail investors on Wednesday. Retail investors will get the shares at a discount of 5% below the offer price.
“About 40% of the loans were given to state governments for their urban Infra projects, and there could be a delay in the recovery amid the pandemic impact on revenues of state governments,” said Ashutosh Mishra, head of institutional research, Ashika Stock Broking. “This could put pressure on HUDCO’s balance sheet leading to cash flow mismatches and inability to grow loan book sustainably in the near term.”
The floor price for the offer has been fixed as Rs 45 per share. HUDCO’s IPO four years ago was priced at Rs 60 apiece. The Rs 1,200-crore IPO has subscribed 79 times and received bids worth Rs 97,000 crore. Since its listing, the stock has been an underperformer. Analysts said the company’s return on equity at 12.81% in the past three years has been disappointing for investors.
Shares of HUDCO, which declined 16.87% in the last month against the 1% decline in the Nifty Index, ended at Rs 45.35 on Tuesday, down 4.1% over the previous day.
The company’s net interest income declined 14.3% to Rs 580 crore in the quarter ended March 31 from the same period a year ago.
“The sanctions and disbursements pipeline and asset quality will be key monitorable in the near term,” said Rati Pandit, analyst, Quantum Securities. “For the long term, we continue to remain positive on the business model of HUDCO, as 96.6% of loans are towards government entities and a majority of them have a government guarantee.”
The government, which currently owns 89.81% of the company, will own 81.81% after the stake sale.
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