Housing and Urban Development Corporation Ltd IPO Message Board (Page 111)

Septa Apr 3, 2017 9:20:45 PM IST

With reference to your mssg regarding DCF techniques and fair value, I guess there is something terribly wrong.

As you have taken 1st year Value as 700 crore which coming around 693.75 crore as model with 11% Growth and so on..

Which is impacting further calculation and final figure as follows

1) PV of the year 1-10 Cash Flow: 60,770,127.183.71
2) Terminal Value: 77,825,203,527.21
3) Total PV of the Cash Flow: 138,595,330,710.92

So the other factors like Intrinsic Value and Margin of Safety.

Not able to calculate Intrinsic Value and Margin of Safety as Debt Level is not mentioned and I have failed to figure out (Kindly mentioned)

Based on your calculation, i reached on certain fig of Debt Level and based on that, i calculate Intrinsic Value and Margin Safety coming as follows

Intrinsic Value: 69.23

Margin Safety: 86.53

% of IV: 56.15

Debt Level taken as 8,426,367== Correct me if I am wrong. Will be glad to know where m getting wrong.

Thanks in advance

Pardon me,

Margin of Safety: 51.92

Dear tnk...

If u think fundamentals are irrelevant and grey price is the most appropriate way to invest in IPO, then all the best to you....

I won''t invest in this IPO at Rs.50....Let it list at 100....I will be happy if u double your money.....

I invested in dmart and shankara but not due to GMP but fundamentals....I do not see any potential in this IPO. But GMP is showing 60 percent premium....So I request don''t miss this opportunity of making 60 per cent......

I always trade and invest by applying logic, history, valuation, balance sheet, technicals and psychology of the market.....

For you it must me part time for me trading is my bread and butter....I will be very happy for you if you make 60 percent...

But i won''t compromise on my learnings and principles which I apply while making commitment....I think it cannot give more than 10 percent premium on listing....

Brother take a calculator, a paper and pen and do simple maths...

Roy - happy that you are giving 10% premium to issue price. in that case I would be happy to apply.

even dmart doesnt deserve 640 Rs.. still it is holding on to that price.. so you have enough time to exit.. if that is the case with hudco then why leave the 10% 20%...

"The Market Can Remain Irrational Longer Than You Can Remain Solvent"

~John Maynard Keynes

However, it is recommended that an investor contemplating an investment in such a stock do a significant amount of analysis and look behind the numbers to ascertain whether it is a genuine bargain or a "value trap." The initial impression of a stock that is trading at less than net cash per share may be that it is a bargain.

cash value of NMDC was 122 and all were giving depressing targets of 70-80 when it was 90.. see ultimately it went above 122.. are you saying HUDCO cash value is greater than 50?

Dear Anandk (m=40019),

I refer my yesterday’s request to you...


Eagleye Apr 3, 2017 9:47:17 AM IST
Housing and Urban Development Corporation Ltd IPO
As per your analysis ... based upon Discounted Dividend Model (DDM / FCFE) ... what is the fair value of:

1) Bharat Financial Inclusion Limited
2) Equitas Holdings Limited
3) Ujjivan Financial Services Limited


I know it a time taking task ... but I hope today being a holiday ... it will give you enough time to work on this

There is nothing so disastrous as a rational investment policy in an irrational world.

I have a business to look after and these analysis (mainly IPO related) I do it in my free time. Today may be a holiday for you but we do not observe it. Since you have requested it, I''ll do it but I cannot give you any time-frame.

It is a voluntary service and I have got lot of others things in my priority list. I''ll choose the best valuation technique that look apt to me w.r.t. these companies.

I think there is construction error in my sentence. It means company''s payout ratio would be 30% minimum going forward because of CPSE Capital Restructuring Guidelines subject to some exceptions mentioned in that Guideline.

30% is 3 rs on 10rs FV ..
so dividend yeild of 3/50 = 6% ??
if you get shares at 50RS...If this is true then there is no reason not to apply!!

Dear Anandk (m=40019),

I refer your earlier post ...

Anandk Apr 3, 2017 9:28:25 AM IST
Housing and Urban Development Corporation Ltd IPO
@Eagleeye.. What you are trying to convey? I already made it is clear that now onwards HUDCO will pay minimum 30% dividend.




Unfortunately, I beg to differ ...

In accordance with CPSE Capital Restructuring Guidelines, HUDCO is required to pay a minimal annual dividend of 30% of its PAT or 5% of its net worth, whichever is higher.

I am unable to interpret it as ... your interpretation ... “minimum 30% dividend.”



You may like to refer this once again ... page 2 ... point no 5.2
http://dipam.gov.in/sites/default/files/Capital%20Restructuring%20Guidelines-PDF2016-en.pdf

Dear @anandk and @jonam..

I really appreciate your analysis and showing true fundamental picture of this IPO......Kudos to you......

Let market hype surrounded to this momentum sector (NBFC) decide the price of this issue, who knows market is in good mood and generous enough to list this issue @ Rs.80 as indicated by GMP but u both have shown true picture.....

Dear Roz Mary Marlo,
Your msg
Let market hype surrounded to this momentum sector (NBFC) decide the price of this issue,
Days of selling ipo in market hype... are gone long ago....
Ha... and do you think these two gentlemen.... are smarter than grey market operators... really nice...

If u think those hype days are gone...Then what was CL Edu....Ur memory is so short....

Dear @anandk @jonam....,

I really appreciate your analysis and showing true fundamental picture of this IPO......Kudos to you......

Let market hype surrounded to this momentum sector (NBFC) decide the price of this issue, who knows market is in good mood and generous enough to list this issue @ Rs.80 as indicated by GMP but u both have shown true picture.....

HUDCO ME ANEY DISCOUNT FOR RETAILOR????

Let them decide the issue price first...if Rs.50 then they will give discount to retail investors....

Warna Koi retail trader is IPO mein kuch nahi kamaiga....

Chittorgthar Wall HUDCO KA fresh information update Q abhi tak Na hi kiya hay dare or registrar etc information in complete?????

Bhai....Ye Hudco ke lead manager sahi waqt Ka intezaar kar rahe hai....

Unko pata hai Rs.50 price mein samajdar investor is issue se door rahenge......Sahi waqt pe ye apne aap aaram se sail ho jayega market hype mein....

Don''t blame this website for that....This is stock market, psychology plays very important role...

it can be easily found frm bv and return on networth ratio

You are right....Upar, niche, aage aur piche, har jagah se is IPO Ka price 46 to 54 se upar nazar nahi aata......

I got fair value around Rs 61 with 25% MIS so intrinsic value is Rs 81.50 Approx using DCF method u can see from my data i have assumed growth rate at 11% to 8% with PM Modi is planning big on infra and housing for poor HUDCO will pay vital role in BJP''s dream of building road and house in big numbers

IMO BEST OPTION IS TO SELL AT GMP GIVEN THIS ISSUE WILL SUBSCRIBED BIG TIME

Initial Cash Flow:       Rs 7,00,00,00,000.00                   
                        
Years:      1-5      6-10            
Growth Rate:      12%      5%            
                        
Terminal Growth Rate:      5%            Discount Rate:      11%
                        
Shares Outstanding:      2,00,19,00,000            Margin of Safety:      25%
Debt Level:                        
                        
Year      Flows      Growth      Value      
1      7,77,00,00,000       11%       Rs 7,00,00,00,000.00       
2      8,54,70,00,000       10%       Rs 6,93,69,36,936.94       
3      9,31,62,30,000       9%       Rs 6,81,19,47,082.22       
4      10,06,15,28,400       8%       Rs 6,62,78,40,404.32       
5      10,86,64,50,672       8%       Rs 6,44,87,09,582.58       
6      11,73,57,66,726       8%       Rs 6,27,44,20,134.40       
7      12,67,46,28,064       8%       Rs 6,10,48,41,211.85       
8      13,81,53,44,590       9%       Rs 5,99,48,44,072.90       
9      14,92,05,72,157       8%       Rs 5,83,28,21,260.12       
10      16,11,42,17,929       8%       Rs 5,67,51,77,442.28       
                        
                        
Terminal Year       Rs 16,91,99,28,825.73                   
                        
PV of Year 1-10 Cash Flows:                   Rs 63,70,75,38,127.61       
                        
Terminal Value:                   Rs 99,31,56,05,239.86       
                        
Total PV of Cash Flows:                   Rs 1,63,02,31,43,367.46       
                        
Number of Shares:                  2,00,19,00,000       
                        
Intrinsic Value (IV):                   Rs 81.43       
                        
Margin of Safety IV:                   Rs 61.08       
                        
What Percentage of IV comes from                   61%      
the Terminal Value:                        

"Ulta chor kotwal ko daante" however you have skills in applying data and analysis it which i have already appreciate which i have already done and again i will sound like an old record DDM method is not an effective method in calculating fair value. AS eagleye said apply DDM to any pervious IPO for fair value calculation you will get the fair price below the IPO price that is reason i again say DDM is not an effective method.

For once and all, I said that it (HUDCO IPO) looks expensive to me with respect to its tentative offer price and GMP trailing. And I also put stress on market factor being the biggest factor to IPO Listing Price Mechanism. I said that I have done DDM analysis for this company which got me a fair value in the range of 33-38 and provided my reasoning.

Now question is how did you guys infer that DDM will always give me fair value below the offer price. And Eagleye herself told me that she has no financial background and wants me to cover a list of companies which could be of great help to her and I just acknowledged that.

If anyone of you felt bad about my approach in this forum and going against some of the main contributors, I am sorry.

Bottom-line: Your money and your decision.

A lot of data analysis on Hudco has been done....Let individual decide what they have to do with Hudco IPO by referring previous posts.....

Bechari Hudco...Today it''s balance sheet really got screwed up...

Lets analyse Hudco with Dmart and CL edu...Sounds interesting....

Dmart: Warrior (Sensible retail investors) went to war with sword (knowledge) and won the war....i.e made big profit...

CL edu: Warrior (Novice retail investors) went to war WITHOUT sword (knowledge) and got butchered....i.e made big loss...

Hudco: Warrior (Sensible retail investors) went to war with sword (knowledge)....And guess what, the war was called off...i.e no profit no loss....

Hudco war is due in future....You decide the end result...I have given mine....

No numbers involved here..As it becomes too complicated for most of the them.

And for shankara

HUDCO IPO
GMP 28.75 – 29.25

EAGLEYE PLEASE READ 196 POST NO AND DONT MISGUIDE OTHERS BY OVERSTATING HUDCO GMP

Dear CA Saheb,

you are Simply Amazing !!!

... in 4 trading days your fair value assessment increased by 175% ... from 20 to 35 .. WOW !!!






I refer your 2 recent posts herebelow ..

gupa Apr 3, 2017 4:07:51 PM IST
Housing and Urban Development Corporation Ltd IPO

BASED ON COMPARE WITH REC OR NBCC OR PNBHF HUDCO FAIR VALUE RS 35


gupa Mar 29, 2017 10:22:33 AM IST
Housing and Urban Development Corporation Ltd IPO

IF WE COMPARE REC WITH HUDCO THEN FAIR VALUE OF HUDCO ONLY RS 20

From the link Ee has given i.e. article by Aswath Damodaran, Aswath says the following:

"The best measure of corporate quality, for me, is a high excess return, i.e., a return on capital that is vastly higher than its cost of capital"

If one measures HUDCO on this parameter it comes out a big cropper as it return on equity is just 8.07% and Return on Net Worth is 9.18% whereas the Average cost of interest bearing liabilities is 7.99% (Page 51 of DRHP) and the cost of capital would be way higher.

https://seekingalpha.com/article/4054061-explaining-paradox-good-bad-companies-can-bad-good-investments

Yes, I know he is Guru.

Septa ji and eagle eye,
Kindly enlighten us on s chand and co ipo.i just glanced on their drhp.i find they has a huge loss in first qtr of 16 -17, interest cost is high and receivables, investory are also v high.whats yr opinion or analysis at this offer price?

Paradox of why good companies can be bad investments and why bad companies can be good investments explained here ... http://rakesh-jhunjhunwala.in/prof-aswath-damodaran-explains-why-buying-bad-companies-makes-a-good-investment/

I feel a correction will be there as people will book some profits. Correction a good time to buy?

Dear Septa sir,

Market at all time high. Where is it heading? An upside or correction or a crash?

Please let us know your opinion on the market.

HUDCO IPO

Highlights:
1)      Highest Capital Adequacy Ratio in the industry
2)      Highest Tier 1 CRAR in the Industry
3)      Highest Credit Rating from all Credit Rating Agencies
4)      Lowest Debt:Equity Ratio in the Industry




HUDCO’S Capital to Risk Assets Ratio (CRAR) as at September 30, 2016 was 68.07%, all of which was Tier 1 capital, compared to the minimum required CRAR of 12.00% and a minimum Tier 1 CRAR of 6.00%.

A significant reason for their high CRAR is that the HFC Guidelines on capital adequacy accord a “zero” risk-weight to loans guaranteed by State Governments and as at September 30, 2016, 66.71% of their total Loan Portfolio, was guaranteed by State Governments.

Domestically, HUDCO holds a credit rating of AAA, the highest credit rating, for long-term borrowings from each of CARE, ICRA and IRRPL, which lowers their cost of borrowing.

As at September 30, 2016 HUDCO’s Long-term debt to equity ratio was 2.8 (lowest in the industry)

Their sustained performance and profitability enabled them to earn the Mini-Ratna (Category-I Public Sector Enterprise) status, which was conferred to them in Fiscal 2005.