At a Glance
HUDCO’s stock is up 3x in two years. Why? Because everyone suddenly loves boring infrastructure finance. With rising urban spending and a ₹48,000 Cr market cap, this PSU looks tempting — but is it worth paying 2.67x Book Value for a 9% ROCE business?
1️⃣ What Even Is HUDCO? 🤔
- HUDCO = Housing and Urban Development Corporation
- PSU under Ministry of Housing & Urban Affairs
- Core biz = lend to:
- State governments
- Municipal bodies
- Infrastructure agencies
🚫 No home loans to you and me.
✅ Yes to Smart Cities, piped water, sewers, metros, and public housing.
It’s a government infra lender — kind of like REC, but with a real estate and urban touch.
2️⃣ The Numbers They Don’t Want You To Notice 👀
| Metric | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Revenue (₹ Cr) | 7,267 | 6,986 | 7,082 | 7,829 | 10,311 |
| Net Profit (₹ Cr) | 1,578 | 1,716 | 1,701 | 2,117 | 2,709 |
| Net Interest Margin | 31% | 34% | 32% | 35% | 35% |
| ROE | 12% | 12% | 11% | 13% | 16% |
| Dividend Payout % | 28% | 41% | 45% | 39% | 31% |
| Borrowings (₹ Cr) | ₹60,978 | ₹61,503 | ₹62,905 | ₹73,996 | ₹1,07,297 |
✅ Profit growth: 16% CAGR (3Y)
✅ Revenue growth: 14% CAGR (3Y)
❌ But ROCE still stuck at ~9.6%
❌ And that valuation multiple is looking spicy…
3️⃣ Let’s Talk Valuation: ₹240 Too Hot?
- EPS (FY25): ₹13.5
- CMP: ₹240
- P/E: 17.7
- Book Value: ₹89.8 → P/B: 2.67x
- Dividend Yield: 1.73%
Compare with other infra PSU lenders:
| Company | P/E | P/B | ROE | Yield |
|---|---|---|---|---|
| HUDCO | 17.7 | 2.67 | 16% | 1.7% |
| PFC | 5.9 | 1.17 | 22% | 3.8% |
| REC | 6.6 | 1.47 | 21% | 4.0% |
| IRFC | 28.1 | 2.48 | 15% | 1.1% |
📛 HUDCO is the most expensive infra PSU right now.
So either:
- Market expects a re-rating based on smart city/infrastructure boom
- Or it’s pricing in hope + momentum + retail FOMO
4️⃣ What’s Driving the Rally? 🪜
- 📈 Infra spending = next 10-year India story
- 🧾 ₹750 Cr NCD issuance in June (cheap debt = good sign)
- 🏢 Urban infra projects pipeline: 19.5% growth in disbursals FY25
- 🏠 PM Awas Yojana boost = more HUDCO lending
- 📊 Retail Shareholders: from 3.3 Lakh → 9.3 Lakh in 2 years (yup, PSU FOMO is real)
5️⃣ Risks Lurking Beneath 🫣
- ❌ ROCE still below cost of capital (~9.6%)
- ❌ Interest coverage is low for a lender
- ❌ Book value isn’t growing fast — but P/B is
- ❌ Possible interest capitalization trickery flagged by some analysts
- 🧱 PSU culture = slower lending cycle, political influence in loans
6️⃣ Fair Value Estimate 🔍
Let’s run a simple multiple logic on FY26:
- FY25 PAT = ₹2,709 Cr
- Assume 10% growth → FY26 PAT = ₹2,980 Cr
- EPS ~₹14.9
- Assign:
| Case | P/E | FV |
|---|---|---|
| Bear (return to mean) | 10x | ₹150 |
| Base (reasonable premium) | 13x | ₹195 |
| Bull (infra rerating) | 16x | ₹240 |
| Overhype | 20x | ₹298 |
🎯 Fair Value Range: ₹195–₹240
📌 CMP = ₹240 → Already near upper end.
7️⃣ EduInvesting Verdict 🔍
HUDCO is like a clean white shirt — safe, PSU-branded, and worn during infra booms.
But:
- You’re now paying PFC valuation × 3
- ROCE < 10% isn’t screaming efficiency
- Retail mania + govt infra buzz is baked in
That said — if you want steady 10% profit growth, some dividends, and exposure to India’s urban dreams… it’s not the worst PSU on your shelf.
✍️ Written by Prashant | 📅 June 26, 2025
Tags: HUDCO, PSU stocks, infra lending, urban development, PM Awas Yojana, dividend stocks, EduInvesting, REC, PFC, government NBFC, smart city financing
