Why HUDCO Share Price is Rising

What's sweeter than sugar? How about earning 452% returns in just one year.

Yes, you read that right 452%.

This isn't some exotic dessert, but the incredible performance of HUDCO, the government's powerhouse for housing and infrastructure finance.

Fuelled by a surge in government support for affordable housing and a booming demand for home loans, the PSU's share price has been on a phenomenal ride.

The company has already delivered a remarkable 147% return in 2024 alone, and the momentum shows no signs of slowing.

Now, the company is back in the investor spotlight with a recent 39% surge in the past month, followed by an additional 13% jump in just the last five days.

What's driving this latest surge, and can investors expect more?

Let's delve deeper and explore the factors propelling HUDCO's impressive run.

#1 Upcoming Union Budget

The upcoming budget has sparked significant market interest as it coincides with heightened anticipation.

Investors are particularly optimistic about HUDCO due to the government's robust focus on affordable housing as the upcoming budget is expected to introduce measures beneficial to HUDCO and similar state-run firms.

Amid this backdrop, a recent report has emerged indicating potential benefits for HUDCO and IREDA. According to a government source, there are discussions about including these entities under section 54EC aimed at enhancing investment opportunities.

Under Section 54EC of the Income Tax Act, long-term capital gains (LTCG) from the sale of immovable assets like land and houses can be exempted if reinvested in specified PSU bonds.

Currently, bonds issued by entities like REC and PFC enjoy this exemption, helping investors mitigate tax liabilities that would otherwise apply to LTCG from property sales, taxed at 20%.

The inclusion of HUDCO under Section 54EC would extend similar tax benefits to investors purchasing its bonds, despite lower interest rates compared to other bonds in the market.

This potential inclusion aligns with the government's strategic goals of promoting affordable housing.

#2 Announcement Under the PMAY Scheme

On 11 June 2024 the NDA government announced that it will expand the Pradhan Mantri Awas Yojana by constructing an additional 30 million (m) rural and urban homes.

This decision is aimed at addressing India's critical housing needs. The initiative seeks to meet the growing demand from eligible households across the country.

For HUDCO, a key player in the housing finance sector, this announcement brings substantial opportunities.

As a result, investor confidence in the company has risen. Investors anticipate promising business prospects and more profits in the housing finance market. This has led to an increase in HUDCO's share price.

What Next?

HUDCO aims to increase its assets under management (AUM) to over Rs 1.5 trillion (tn) by financial year 2026, up from the current Rs 840 billion (bn).

Sanjay Kulshrestha, Chairman and Managing Director of HUDCO, stated that the long-term goal is to achieve an AUM of Rs 5 tn by 2030. He expects the net interest margin (NIM) to remain between 3% and 3.5%, with spreads ranging from 1.7% to 2%.

The company is focused on reducing funding costs, resolving stressed assets, and expanding and diversifying its loan portfolio.

In February, the company increased its borrowing limit from Rs 180 bn to Rs 350 bn and plans to explore external commercial borrowing (ECB) from Japan.

The top management expects substantial growth due to increased infrastructure spending, supporting India's goal Viksit Bharat 2047.

With lower government borrowings expected in FY25, the company foresees a potential interest rate decrease. Also, it is exploring issuing social bonds to secure funds at competitive rates, boosting financial sustainability.

It is also expanding internationally, recently securing borrowings in Japanese Yen from East Asian countries at lower rates, enhancing its lending competitiveness.

While HUDCO pursues ambitious growth targets, investors should be mindful of potential risks such as market volatility and funding challenges that could affect its financial performance and share price.

How IREDA Share Price has Performed Recently

In the past five days, HUDCO share price rallied 12.9%. In the last month it is up 39%

In 2024, so far its share price it surged 147.3% and in the past year it has rallied 452.3%.

The stock touched its 52-week high of Rs 325.8 on 4 July 2024 and a 52-week low of Rs 57.6 on 5 July 2023.

About HUDCO

The Housing and Urban Development Corporation, abbreviated as HUDCO, is an Indian public sector undertaking engaged in housing finance and infrastructure project finance.

The government granted Navratna Status to PSU on 18 April 2024.

To know more, check out HUDCO's financial factsheet.

Happy Investing!

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