Nirmal Bang initiates coverage on HUDCO, sees upside potential of 12%

The upside in the stock is seen primarily due to factors like the company’s strategic position in government plans, a huge growth opportunity in infra lending space, government exposure at 97.5% of loan book, improvement in NIM and strong capital position.

HUDCO has built a strong relationship with state governments and their agencies, which gives it a better chance of providing loans to those entities.

The company has not lent to the private sector since 2013 and has provided 100% on legacy private sector NPAs, leading to best-in-class PCR of 86.9%, which indicates that credit cost will remain lower in future as 97.5% is state/central government exposure, which is a stable asset class and hence RoA is likely to expand.

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“We expect NIM to increase from 3.2% at present to 3.5% in FY26E because of increased lending to better yielding urban infrastructure segment, favourable repricing trends and raising of relatively lower cost borrowings,” said the domestic brokerage firm.

Shares of HUDCO have multiplied 6 times in the last one year alone, giving 162% returns in the last 6 months alone.

were trading 3% higher at Rs 335 around 11 am on BSE today.

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