H U D C O — Q1 FY26 earnings call

Call held 12 Aug 2025

Management summary

HUDCO reported a strong Q1 FY26 with significant increases in sanctions and disbursements, driving loan outstanding to INR 1.34 Lakh Crore. Asset quality improved further with Net NPA below 0.1%. While NIM and RoA saw a temporary dip due to quarter-end disbursements, management is confident of recovery in Q2 and expects to overachieve FY26 targets, leveraging a robust sanction pipeline and expanding urban infrastructure opportunities.

Highlights

  • Sanctions for Q1 FY26 jumped 143% QoQ to INR 34,000 Crore from INR 14,000 Crore in Q4 FY25, indicating strong business momentum.

  • Disbursements for Q1 FY26 were INR 12,800 Crore, marking an all-time high for the first quarter, and management expects to overachieve INR 50,000 Crore for FY26.

  • Loan outstanding (loan assets) increased to INR 1.34 Lakh Crore in Q1 FY26, up from INR 1.24 Lakh Crore in FY25, demonstrating consistent portfolio growth.

  • Net NPA has been reduced to slightly less than 0.1%, with no new NPAs in the last 10 quarters, reflecting robust asset quality management.

  • Revenue grew more than 34% YoY, and net profit increased by 13% YoY, supported by a healthy debt-equity ratio of 5.93x and competitive borrowing costs (INR 20,000 Crore at 6.32% in Q1).

Concerns

  • NIM compressed from 3.2% to 2.94% in Q1 FY26, attributed to last fortnight disbursements, though management expects recovery in Q2.

  • Return on Assets (RoA) also experienced a temporary dip in Q1 FY26 due to the same reason, with correction anticipated in Q2.

  • PMAY 2.0 disbursements are currently not factored into HUDCO's targets due to their dependence on state-level actions and beneficiary contributions, introducing some uncertainty in future growth drivers.

Key financials

2 periods

Headline

  • Net Interest Margin (NIM)
    2.9%
  • Net NPA
    0.1%
  • Return on Equity (RoE)
    14.3%

Q1 FY26

  • Sanctions
    ₹34,000 Cr
    QoQ +143%
  • Disbursements
    ₹12,800 Cr
  • Loan Outstanding
    ₹1.34L Cr
    QoQ +8%

What they filed

Q1 FY27: revenue up 26.6%, net profit up 35.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,518 2,760 2,845 2,937 3,219 +28%3,431 +24%3,563 +25%3,717 +27%
Net profit689 735 728 630 710 +3%713 −3%1,981 +172%851 +35%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Debt Gross ₹1,16,000 Cr Maturity: Average 5-5.5 years for fixed rate borrowings.
    • New borrowing Borrowed at 6.32% in the last quarter, considered a remarkable achievement. ₹20,000 Cr
    Around 1/3 of our borrowing is floating and around 2/3 of our borrowings is fixed rate borrowings of the total borrowings of INR1,16,000 Crore. ... Bifurcation is around 40% is from bonds and then another 20% is external commercial borrowings and the remaining is short-term, medium-term and long-term borrowings from the banks.
  • Liquidity Liquidity disclosed Liquidity buffers are very strong.
    Liquidity buffers are very strong.

Guidance & targets

Sanctions

  • Total Sanctions Sanctions · FY26 · High confidence INR 1.55-1.60 Lakh Crore

    Previously INR 1.27 Lakh Crore → INR 1.55-1.60 Lakh Crore

    Yes. As per arithmetic, we will be crossing INR1.50 Lakh Crore, may be lending at around INR1.55 Lakh Crore, INR1.60 Lakh Crore something of that kind. So revision, we are not done. But I think as per the arithmetic is concerned, you are right, we will be crossing this figure.

    — Sanjay Kulshrestha

Disbursements

  • Total Disbursements Disbursements · FY26 · High confidence INR 50,000 Crore

    Previously INR 40,000 Crore (FY25) → INR 50,000 Crore

    And with these figures also, if you can directly multiply by 4, we will be overachieving INR50,000 Crore of the disbursement.

    — Sanjay Kulshrestha

Asset Quality

  • Net NPA Asset Quality · Within 16 months · Medium confidence Net Zero

    From <0.1% today

    And I'm very happy to inform that we are going towards we are reaching towards a zero NPA company and now our net NPA has reduced to slightly less than 0.1%, which I think is the best in the market.

    — Sanjay Kulshrestha

Profitability

  • NIM Profitability · FY26 · High confidence >3%

    From 2.94% today

    But I think we will be successfully be able to maintain our NIM more than 3% during the financial year.

    — Sanjay Kulshrestha

  • RoA Profitability · Q2 FY26 · Medium confidence Corrected

    From Dipped in Q1 today

    It's a temporary phenomenon, which will be corrected in quarter 2.

    — Sanjay Kulshrestha

Loan Book

  • Loan Book Outstanding Loan Book · Q3 FY26 or sometime before that · High confidence INR 1.50 Lakh Crore

    From INR 1.34 Lakh Crore today

    But yes, you are right, we will be crossing INR1.50 Lakh Crores may be in the quarter 3 or sometime before that.

    — Sanjay Kulshrestha

Yield

  • Yield on Loan Book Yield · Near-term · Medium confidence 9.1-9.2%
    So here, the yield may be corrected because of the reduction in the repo rate, may be around 9.1%, 9.2% will be the yield. That's what I can foresee as of now.

    — Sanjay Kulshrestha

What to watch in Q2 FY26

NIM Recovery

Q2 FY26
Current 2.94%
Target >3%

Why it matters

NIM compression was a key concern in Q1; its recovery is crucial for profitability and meeting full-year guidance.

But I think we will be successfully be able to maintain our NIM more than 3% during the financial year.

Risks & concerns

  • Forex Volatility and Losses

    medium

    A one-time forex loss occurred due to an unusual 1-day movement of CHF, which crossed its 10-year cycle, despite conservative hedging policies. Management is monitoring global developments daily.

    Management acknowledged

  • PMAY 2.0 Disbursement Uncertainty

    medium

    Disbursements under PMAY 2.0 are dependent on various state-level factors and beneficiary contributions, making their timing and volume uncertain. HUDCO has not yet factored these into its current financial figures.

    Management acknowledged

  • Temporary NIM and RoA Compression

    low

    NIM compressed from 3.2% to 2.94% and RoA dipped in Q1 FY26 due to last-fortnight disbursements. Management expects this to be a temporary phenomenon, with recovery anticipated in Q2.

    Management downplayed

Q&A highlights

7 direct
Disbursement Momentum and Q1 Performance Direct
So generally, in financial institution, the quarter 1 is a bit slow and the acceleration starts from quarter 2, then quarter 3 and then quarter 4. So we had successfully reversed this exercise. And because of that, the turnover is continuously increasing and they are actually improving our bottom line.

Management clarified that Q1 FY26 disbursements of INR 12,800 Crore, while appearing flattish YoY, represent an all-time high for a first quarter, indicating a successful reversal of the typical Q1 slowdown and strong underlying momentum.

Asked by Shweta Daptardar

Lag between Sanctions and Disbursements Direct
I think generally, we are working with the capital-intensive capital infrastructure project where the construction time starts from as low as 3 years to 4 years of the time. So sanctions to disbursement -- in a broader sense, you can say it is around 35%.

Management explained that the lag is inherent to capital-intensive infrastructure projects with long gestation periods (3-4 years), making direct project-to-project mapping difficult, but overall disbursement is about 35% of sanctions.

Asked by Shweta Daptardar

Impact of Project Delays on Loan Growth Direct
No, I think this is a very pertinent question, and that's why you can see our sanction pipeline. So whatever we want to achieve, now we are taking that into the sanctions also. If you see, last year, sanction was INR1.27 Lakh Crore. And before that, it was INR83,000 Crore. This year, around INR34,000 Crore. All put together, we have a sanction pipeline available at hand more than INR1.5 Lakh Crore.

Management stated that project implementation delays do not impair loan growth because they maintain a robust sanction pipeline (over INR 1.5 Lakh Crore) which accounts for such factors, ensuring continuous disbursement.

Asked by Shweta Daptardar

Forex Losses and Hedging Policy Direct
And whatever loss we had done, you are right, it is only because of the 1-day movement of the CHF. This is only -- there is only one reason and which was not in our hand, and it has crossed the 10-year cycle of the CHF. Our hedging was done well within the ranges, rather, our forwards are very well.

Management attributed forex losses to an unusual, one-time CHF movement, emphasizing their conservative hedging policy (1-year forward levels) and high protection levels for other currencies like USD.

Asked by Shweta Daptardar

NIM Compression and RoA Dip in Q1 Direct
So you are right, it is mark-to-market loss because of the currency fluctuation. It's a onetime phenomenon that had happened. And regarding NIM, you see most of the disbursement in this quarter had happened in last 15 days. So they had not converted into the NIM. They have not converted into the income. But I think we will be successfully be able to maintain our NIM more than 3% during the financial year.

Management explained that the NIM compression from 3.2% to 2.94% and the RoA dip were temporary, caused by last-fortnight disbursements in Q1, and they expect both to recover in Q2, maintaining NIM above 3% for the year.

Asked by Sumeet Rohra

Loan Book Guidance Revision Direct
Yes. As per arithmetic, we will be crossing INR1.50 Lakh Crore, may be lending at around INR1.55 Lakh Crore, INR1.60 Lakh Crore something of that kind. So revision, we are not done. But I think as per the arithmetic is concerned, you are right, we will be crossing this figure.

Management confirmed that based on current trajectory, the loan book will likely cross INR 1.50 Lakh Crore, potentially reaching INR 1.55-1.60 Lakh Crore, indicating a higher growth expectation than previously implied.

Asked by Sumeet Rohra

PMAY 2.0 Disbursement Outlook Partial
We are excluding the PMAY disbursement because PMAY disbursement is dependent on many factors. So we have not taken into account. So whenever they are get matured and whenever the states are coming, then only I think we will be factoring in. But as of now, we have not factored into our figures.

Management indicated that PMAY 2.0 disbursements are not yet a firm part of their financial projections due to state-level dependencies, suggesting this significant potential growth driver is still uncertain for the near term.

Asked by Nemin Doshi

Urban Infrastructure Opportunity and Urban Challenge Fund Direct
So till now also, whatever we are doing, it's in the urban segment only. But now this opportunity of Urban Challenge Fund is coming up. Honorable Finance Minister has announced during her budget speech, which is a subsidy of INR1 Lakh Crore will be extended by the Government of India to the states.

Management highlighted the significant opportunity in urban infrastructure, particularly with the new Urban Challenge Fund and its INR 1 Lakh Crore subsidy, which will drive demand for financing and involve private sector participation, expanding HUDCO's addressable market.

Asked by Parth

2 min read 6 chapters

Detailed narrative

Robust Growth in Sanctions and Disbursements

HUDCO demonstrated strong operational performance in Q1 FY26, with sanctions reaching INR 34,000 Crore, a significant 143% increase quarter-on-quarter from INR 14,000 Crore. Disbursements also hit an all-time high for a first quarter at INR 12,800 Crore. Management expressed confidence in overachieving the FY26 disbursement target of INR 50,000 Crore, indicating sustained momentum in project funding.

Expanding Loan Book and Healthy Financial Ratios

The company's loan outstanding grew to INR 1.34 Lakh Crore in Q1 FY26, up from INR 1.24 Lakh Crore in FY25, reflecting a continuous growth trajectory of approximately 30% over the last two financial years. HUDCO maintains a healthy debt-equity ratio of 5.93x, providing ample room for further borrowings to support growth. Revenue increased by over 34% YoY, and net profit grew by 13% YoY, underscoring strong financial health.

Improving Asset Quality and Net Zero NPA Target

Asset quality continued to improve, with Gross NPA reducing from 1.67% to 1.34% and Net NPA falling to less than 0.1%. Management highlighted no new NPAs in the last 10 quarters and expressed an ambitious goal to become a 'net zero NPA company' within the next 16 months. Significant progress is expected in resolving old NPAs (over INR 1,157 Crore) currently in various stages of NCLT proceedings, with resolutions anticipated within six months.

NIM and RoA Outlook Amidst Q1 Dip

Net Interest Margin (NIM) experienced a temporary compression from 3.2% to 2.94% in Q1 FY26, and Return on Assets (RoA) also dipped. Management attributed this to a large volume of disbursements occurring in the last fortnight of the quarter, which had not yet converted into income. They are confident that both NIM will recover to above 3% and RoA will correct in Q2 FY26, maintaining spreads of 2-2.3%.

Strategic Funding and Cost Management

HUDCO's total borrowings stand at INR 1,16,000 Crore, with approximately one-third being floating rate and two-thirds fixed. The company successfully borrowed INR 20,000 Crore at a competitive rate of 6.32% in Q1 FY26. The asset side largely comprises semi-fixed rate loans, with most having a 1-year reset option, allowing for effective asset-liability management and competitive pricing.

Expanding Urban Infrastructure Focus and PMAY 2.0 Potential

Aligning with the 'Viksit Bharat' theme, HUDCO is expanding its focus beyond housing to a broader range of urban infrastructure, including rapid rail, e-mobility, water projects, and roads. The company is actively working with the Ministry on the Urban Challenge Fund, which includes a INR 1 Lakh Crore subsidy for states. While PMAY 2.0 disbursements are not yet factored into current targets due to state-level dependencies, 7 lakh household loans have been sanctioned by MoHUA, indicating future potential.

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