India Ratings affirms HUDCO’s long-term issuer rating at ‘AAA’; outlook stable

NEW DELHI: India Ratings and Research (Ind-Ra) has affirmed Housing and Urban Development Corporation (HUDCO) long-term issuer rating at ‘AAA’, and kept the outlook for the company as ‘stable’.

The agency has kept the short-term issuer rating at ‘A1+’ for the company.

“The affirmation reflects the strategic importance of HUDCO as a public policy institution towards the development of affordable housing and sustainable urban infrastructure,” Ind-Ra said in a release.

The government has divested about 38.7 lakh shares, constituting 10.2% of its stake in HUDCO through the IPO, which was open for subscription from May 8 to May 11. The shares were offered at a price band of Rs 56-60 per share. The Rs 1,200-crore IPO was oversubscribe nearly 80 times on its close on Thursday, with close to 20 lakh applicants bidding in the offer.

Ind-Ra expects the government to continue to provide timely support to HUDCO, indicated by the government notifications time and again, which authorise HUDCO to issue tax-free bonds, a source of low-cost funding.

HUDCO has skewed its loan portfolio and disbursals towards funding state government agencies’ housing and urban infrastructure projects. Their share in the loan book increased to 89.83% in 9MFY17 from 69% in FY10. Moreover, in 9MFY17, 98.7% of the disbursals were towards state governments and their entities.

“The emphasis on loan disbursal to state government agencies engaged in core sector development will continue in the near-to-medium term, as it is a part of HUDCO’s prudent risk management policy,” Ind-Ra said.

The majority of loan book is guaranteed by state governments, where debt servicing is often a charged expenditure on state budgets, which has has helped HUDCO in keeping a control over its non-performing assets in its government sector portfolio, according to the rating agency.

HUDCO funds the housing needs of economically weaker section and low-income group category, along with uplifting non-commercial urban infrastructure. It has funded 16.49 million homes, about 84% of which belong to the economically weaker section, since its inception in 1970 till financial year 2016-17.

 (source by:-The Economic Times)

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