HUDCO shares tank 9% after govt announces 7% stake sale via OFS

Housing & Urban Development Corporation Ltd (HUDCO) shares tanked 9.5% today as the government proposed to sell a 7% stake or over 14 crore shares in the state-run company via an offer for sale (OFS) on October 18-19, 2023. Depending upon the response, the government could also explore a green shoe option of 3.5%.

The floor price of the offer will be ₹79 per equity share, and the OFS is likely to fetch the government around ₹1,100 crore.

"Offer for Sale in HUDCO opens tomorrow for non-retail investors. Retail investors can bid on Thursday. Government will divest 7% equity including a Green Shoe option of 3.5%," secretary, Department of Investment and Public Asset Management, says on micro-blogging platform X.

The HUDCO stock, meanwhile, opened a gap down at ₹83.10 on the BSE today and fell to an intra-day low of ₹81.37. The stock at the current share price of ₹81.62 is trading 15% down as compared to its 52-week high of ₹95.89 achieved on October 4, 2023. The PSU's m-cap stands at ₹16,333.50 crore.

The offer for sale proposal, shared with exchanges, shows the government aiming to sell up to 7,00,66,500 company shares at the face value of ₹10 each, with an option to sell up to 7,00,66,500 equity shares. The employees will also be eligible to apply for equity shares up to ₹5,00,000. The allotment to an employee will be up to ₹2 lakh and if the quota is left undersubscribed, the allotment will increase to ₹5 lakh.

The government says the OFS will achieve the minimum public shareholding target of the company. For non-retail investors, the offer will open on a separate window of the stock exchange on October 18, 2023, and the retail investors and non-retail investors, who choose to carry forward their bids, can place bids on October 19.

Around 10% of the offer will be reserved for allocation to retail investors and no single bidder other than mutual funds and insurance companies will be allocated over 25% of the offer shares.

HUDCO emphasises on building housing and infrastructure for economically weaker sections and low-income groups. With an authorised capital of ₹2,500 crore, as of date, HUDCO has a paid-up equity of ₹2,001.90 crore. The government owns an 81.81% stake in the company, while the rest 18.19% stake is owned by the public.

For the quarter ending June 30, 2023, the company recorded a net profit of ₹445.7 crore, down from ₹639.1 crore net profit in the previous quarter. Its revenue also dipped to ₹1,842 crore Q1 FY24 from ₹1,862.4 in the previous quarter.

Notably, the government recently sold a 4.92% stake in power producer SJVN via OFS, receiving bids for 20.91 crore against 8.70 crore on offer. The floor price of the offer was ₹69 per equity share.