H U D C O

HUDCO reported a robust Q3 FY26, with its loan book continuing to grow at approximately 25%. Profit After Tax for the nine months of FY26 reached INR2,400 crores, a significant increase from INR1,900 crores in the corresponding period of the previous year. This growth was achieved despite a one-time^📎 net loss of INR470 crores on fair value changes related to FCNR borrowings, which management expects to cease from the next quarter.

The company has made substantial progress in improving its asset quality, with Net NPAs now standing at a low of approximately 0.06%. In the current financial year, HUDCO successfully resolved NPAs aggregating to INR385 crores. Management expects to resolve most of the remaining INR700-800 crores of NPAs by the end of the next financial year, further solidifying its asset book and demonstrating aggressive resolution efforts.

HUDCO is actively working to reduce its cost of funds and diversify its funding sources. The company incurred a net loss of INR470 crores in 9M FY26 due to fair value changes on FCNR borrowings, but management confirmed this would be the last quarter for such an impact, as they have decided against 1-year FCNR. Existing ECBs of around INR10,000 crores are 100% hedged for 5-15 years, ensuring protection against currency volatility and contributing to a stable cost of funds.

HUDCO is aligning its strategy with the Government of India's 'Viksit Bharat' vision, focusing on sustainable and bankable urban infrastructure. Recent budget allocations, including INR2 trillion for states (a 33% increase) and SASCI loans, are expected to significantly boost urban development projects. HUDCO aims to be a key beneficiary and catalytic agent in these initiatives, leveraging its expertise in debt financing for urban local bodies and working closely with them.

The company is expanding and diversifying its asset base into various infrastructure segments, including metro projects, airports, water supply, and transport. HUDCO has sanctioned around INR1.4 lakh crores in the current year and has a committed sanction pipeline of INR2.5 lakh crores. Management believes its niche in government-backed projects and collaboration with other financial institutions will drive growth, targeting a INR3 lakh crore loan book by 2030.

As of December 31, 2025, HUDCO's debt-to-equity ratio stood at 7.28x. While acknowledging the pressure, management plans to reduce this ratio to less than 6x within the next 2-3 months by utilizing instruments like perpetual debt. This proactive approach aims to maintain capital adequacy while supporting continued growth and adhering to internal policies.

The PMAY 2.0 program, though initially slow, is gradually gaining momentum, with many states initiating assessments and developing schemes. Management anticipates a significant pick-up in the program in the next financial year, which will provide a substantial boost to HUDCO's housing finance segment. This aligns with the broader focus on urban development and bankable housing projects.