In a significant development for the financial markets, Housing & Urban Development Corporation Ltd (HUDCO) witnessed a sharp decline of 9.51% in its share price during Wednesday’s trading session. This drop occurred as the Indian government commenced the sale of up to 7% of its stake in this state-run housing finance company through an Offer for Sale (OFS). The floor price and other essential details surrounding this stake sale are now in the spotlight.
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The government currently holds a substantial 81.81% stake in HUDCO, and the sale of this 7% stake is expected to generate approximately Rs 1,100 crore. This strategic move aligns with the government’s objective to achieve the minimum public shareholding norm established by the capital market regulator SEBI, which requires listed companies to maintain a public float of at least 25%.
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The offer for sale consists of 7,00,66,500 shares, with an additional option to sell up to 7,00,66,500 shares through an oversubscription option, resulting in a total of 14,01,33,000 shares (base size + green shoe).
The party responsible is required to inform the stock exchanges of its intent to activate the oversubscription option after the conclusion of the trading day, specifically no later than 5 pm on October 18, 2023. Analyzing HUDCO’s stock performance from a technical standpoint, it is evident that it traded below the 5-day, 10-day, 20-day, and 30-day Simple Moving Averages (SMAs) while staying above the 50-day, 100-day, 150-day, and 200-day SMAs. Additionally, the 14-day Relative Strength Index (RSI) for the stock was recorded at 44.99
An RSI level below 30 is generally considered oversold, while a value above 70 is deemed overbought. Additionally, HUDCO’s stock holds a Price-to-Equity (P/E) ratio of 10.37 and a Price-to-Book (P/B) value of 1.17. Notably, the stock displays a one-year beta of 1.33, indicating relatively low volatility.
Over the past six months, HUDCO’s stock price has experienced an impressive gain of approximately 79%. Despite the company currently witnessing a dip in its share price due to the ongoing Offer for Sale (OFS), its year-to-date (YTD) performance remains impressive, with a surge of 52%.
In the broader market context, Indian equity benchmarks have been trading lower, with significant pressure coming from the banking, financial, consumer, and technology sectors. This suggests that HUDCO’s share price decline is part of a larger market trend rather than an isolated occurrence. It is crucial for investors to remain vigilant and adapt their investment strategies in response to these ongoing developments.
In summary, the substantial 9.51% drop in HUDCO’s share price is a clear consequence of the government’s decision to commence a 7% stake sale in the housing finance company via an Offer for Sale (OFS). This strategic move aims to enhance public shareholding in compliance with SEBI norms and has generated significant interest in the market. As the stock markets continue to evolve, keeping a close eye on the performance of HUDCO and related sectors will be crucial for investors and market participants.
