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* First listing of a state-run company in five years
* Shares rise as high as 77.85 rupees vs IPO issue price of 60
* HUDCO's strong debut augurs well for other state-run co IPOs (Updates with background, details, quotes)
By Swati Bhat and Samantha Kareen Nair
MUMBAI/BENGALURU, May 19 (Reuters) - Shares in India's Housing and Urban Development Corp Ltd (HUDCO) surged nearly 30 percent at their market debut on Friday as investors sought to buy into the property sector of a country where housing demand is among the highest in the world.
HUDCO is the first state-run company to list on the stock exchange in five years. The government sold just over a tenth of its stake in a heavily oversubscribed initial public offering that raised 12.2 billion rupees ($188 million).
Shares in the company, which finances housing and urban infrastructure projects, were trading 22.33 percent higher at 73.40 rupees by 0723 GMT, after rising as high as 77.85 rupees, above the IPO issue price of 60 rupees.
The strong debut bodes well for plans by other state-run companies looking to list this year, as India aims to raise 725 billion rupees in the year to March 2018 from asset sales to shrink its deficit.
"With the government's focus on affordable housing and public infrastructure, HUDCO has a bright future indeed for long-term investors," said Naveen Jain, proprietor at Chandan Shares.
"It is an awesome listing and the first this fiscal from the government in the backdrop of 10 more government IPOs lined up," Jain said.
Some investors, however, are concerned that the stock market is over-valued, especially as the benchmark BSE index has risen to record highs four out of the last five sessions. The index is now trading at a 12-month forward price-to-earnings ratio of around 20.51 compared with a 5-year average of 17.91.
Last year, companies raised $4 billion from initial public offerings, the highest amount in six years.
Investors are now watching the IPO of India Grid Trust that closes later on Friday. It is the second infrastructure investment trust to go public after IRB InvIT Fund, which had a lackluster debut. ($1 = 64.8200 Indian rupees) (Editing by Miral Fahmy)