Recommendations From Housing Finance Sectors

This section gives a recommendation of a stock having stock margin padding price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon

Housing and Urban Development Corporation 

BUILD OUR PORTFOLIO ON SOLID FOUNDATION OF HUDCO 

HERE IS WHY
Revenue boosted by government projects
Reducing NPAs
Positive future outlook 

Housing and Urban Development Corporation Ltd (HUDCO) is a technofinancing public sector enterprise in the field of housing and infrastructure development in India. It classifies its housing finance loans into social housing, residential real estate and retail finance, which is branded as HUDCO Niwas. HUDCO also finances urban infrastructure projects like water supply, road and transport, power, Smart Cities, etc. The borrowers under urban infrastructure finance are primarily state governments and their agencies. It has a pan-India presence with a network of 21 regional offices and 11 development offices in addition to its corporate and registered office located in New Delhi. 

On a consolidated basis, the total income of the company from operations rose by 12.42 per cent to Rs1806.49 crore in Q1FY20 from Rs1606.86 crore in Q1FY19. The net profit almost remained flat with a minor increase of 0.68 bps to Rs335.68 crore in Q1FY20 from Rs333.38 crore in Q1FY19. The pressure on net profit was observed because of increased finance cost. The net interest margin stood at 3.25 per cent in the June quarter of FY20, representing a decline of 90 bps in comparison with the same quarter in the previous year. The net interest income declined by 21.20 per cent to Rs580 crore in Q1FY20 from Rs736 crore in Q1FY19. The gross non-performing assets (GNPAs) stood at 4.32 per cent in June quarter of FY20, while it was 6.87 per cent in Q1FY19 and the net NPAs stood at 0.47 per cent in Q1FY20, showing a decline of 0.62 per cent in comparison to the same quarter previous year, due to disbursements of Rs31,009 crore, which is a growth of 87% over disbursements of previous year. During the year, HUDCO sanctioned loans amounting to Rs34,452 crore. 

The Government of India has taken several initiatives to promote affordable housing and to revitalize the urban sector. HUDCO has the potential to perform in the government programmes in terms of lending as well as to offer consultancy. The government is expected to invest huge amount in the infrastructure sector, in highways, renewable energy and urban transport. The government has given a push to connectivity through industrial corridors, dedicated-freight corridors, Bhartamala and Sagarmala projects, Jal Marg Vikas and UDAN Schemes. The urban housing demand in India is being addressed through Pradhan Mantri Awas Yojana (PMAY)- rural as well as urban. Pradhan Mantri Awas Yojana aims to achieve the objective of "Housing for All" by 2022, which will bring USD 1.3 trillion investments in the housing sector, by 2022. 

Considering the above investments, there is substantial opportunity for funding housing and urban infrastructure in the country. HUDCO also signed a memorandum of understanding with the Ministry of Housing and Urban Affairs and Department of Public Enterprises. It is providing consultancy services while financial assistance for implementation of affordable housing projects could play an important role in supporting various government housing programmes which will enable HUDCO to grow financially. By virtue of these factors, we recommend our reader-investor to BUY this stock.