IREDA, HUDCO: 2 NBFC PSU Stocks Rally 5-8%, Nears 1-Year Highs And The Reason Is Upcoming Budget 2024

NBFC stocks with PSU status such as IREDA and HUDCO witnessed heavy buying sentiment on June 26 after a report stated that the upcoming Union Budget 2024 will likely bring in measures that may enable the two government-backed companies to achieve cheaper funds. IREDA and HUDCO surged by 5-8% in a single-day.

HUDCO share price ended at Rs 285.15 apiece, up by 3.7% on BSE with a market cap of Rs 57,084.18 crore. During the trading session of June 26, the stock zoomed by at least 5.3% to hit an intraday high of Rs 289.55 apiece which is near its 52-week high of Rs 299.90 apiece.

Meanwhile, IREDA's share price stood at Rs 194.75 apiece, up by 5.3% with a market cap of Rs 52,344.22 crore. The stock rallied by 7.75% in the trading hours to hit an intraday high of Rs 199.35 apiece which was near its 52-week high of Rs 215 apiece.

As per the MoneyControl report, the government is mulling including the two PSUs - Indian Renewable Energy Development Agency (IREDA) and Housing and Urban Development Corp. Ltd. (HUDCO) - under Section 54EC of the Income Tax Act. Once these PSUs are included under the Section, the investors buying their bonds will be exempted from capital gains tax.

As per the ClearTax report, section 54EC of Income Tax means that when a taxpayer sells long-term immovable property (land or building or both), they can avail of capital gain exemption under Section 54EC by investing in certain bonds.

ClearTax explained that Section 54EC bonds, also known as Capital gain bonds are fixed-income instruments which provide capital gains tax exemption under Section 54EC to the investors.

Currently, exemptions on bonds under section 54EC for PSU companies are allowed for National Highways Authority of India (NHAI), Rural Electrification Corporation (REC), Power Finance Corporation Limited (PFC) bonds, or Indian Railway Finance Corporation (IRFC) Limited bonds.

The tax rate for LTCG is 20% currently, and the exemption in section 54EC PSU bonds lessens the tax burden. LTCG is levied on profits or gains from the sale or transfer of properties, whether movable or immovable including stocks. LTCG kicks in when assets are sold after 12 months of holding them.

After reigning for the third time in a row, the Prime Minister Narendra Modi-led government will announce the full-fledged Union Budget 2024-25. The latest Budget is expected to be presented between July 20-25. This comes after the interim budget which was announced on February 1, 2024.

Indian Renewable Energy Development Agency Limited (IREDA) is a 'Navratna' Government of India Enterprise under the administrative control of the Ministry of New and Renewable Energy (MNRE). IREDA is a Public Limited Government Company established as a Non-Banking Financial Institution in 1987 engaged in promoting, developing and extending financial assistance for setting up projects relating to new and renewable sources of energy and energy efficiency/conservation with the motto: "ENERGY FOR EVER". The company supports specific projects and schemes for generating electricity and/or energy through new and renewable sources and conserving energy through energy efficiency.

Meanwhile, HUDCO is a unique institution with its motto of "Profitability with Social Justice". A Public Sector Company, under the Ministry of Housing and Urban Affairs (MoHUA), HUDCO has been a key partner with the Government in building assets for the Nation. In its operations, HUDCO lays a considerable emphasis on the housing need of the "deprived" that is Economically Weaker Sections (EWS) and Low-Income Groups (LIG). HUDCO is the premier techno-financing public sector enterprise, in the field of housing and infrastructure development in our country.