H U D C O — Q3 FY26 earnings call

Call held 4 Feb 2026

Management summary

HUDCO reported strong loan book growth of approximately 25% and significantly improved asset quality with Net NPAs at 0.06%. Profit After Tax for 9M FY26 stood at INR2,400 crores, up from INR1,900 crores in the prior year, despite a one-time fair value loss of INR470 crores from FCNR borrowings. The company is actively resolving remaining NPAs and targeting a INR3 lakh crore loan book by 2030, supported by government initiatives in urban infrastructure, while also addressing its debt-to-equity ratio.

Highlights

  • Loan book growing around 25%, indicating strong business momentum.

  • Net NPA reduced significantly to approximately 0.06%, reflecting robust asset quality management.

  • Profit After Tax for 9M FY26 increased to INR2,400 crores from INR1,900 crores in the prior year, demonstrating healthy profitability.

  • Successfully resolved INR385 crores of NPAs in the current FY, with a clear plan to resolve remaining INR700-800 crores by next financial year-end.

  • Sanctioned around INR1.4 lakh crores in the current year, building a strong committed sanction pipeline of INR2.5 lakh crores.

Concerns

  • Net loss on fair value changes of INR470 crores in 9 months FY26 due to FCNR borrowing, though expected to be a one-time impact.

  • Net Interest Margins (NIMs) falling to around 2.88% in 9 months FY26, attributed to backloaded disbursements.

  • Debt-to-equity ratio at 7.28x as of December 31, 2025, which management plans to reduce to below 6x.

Key financials

3 periods

Headline

  • Loan Book Growth
    25%
  • Net NPA
    0.06%
  • Debt-to-Equity Ratio
    7.28×

9M FY26

  • PAT
    ₹2,400 Cr
    YoY +26.3%
  • Fair Value Changes Loss
    ₹470 Cr
  • NIM
    2.9%

9M Preceding Year

  • PAT
    ₹1,900 Cr

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 Debt disclosed Maturity: ECBs have original maturity of 5-5.5 years, due for redemption after 3-3.5 years.
    • Repayment FCNR outstanding reduced from INR15,000 crores to INR5,000 crores. ₹10,000 Cr
    • Forex hedge ECBs aggregating to around INR10,000 crores are 100% hedged through option structures with extended protection. ₹10,000 Cr
    Yes., these ECBs aggregating to around INR10,000 crores, they are having a maturity of roughly 5 -- original maturity of 5, 5.5 years and they will be due for redemption after 3, 3.5 years.

Guidance & targets

Credit Growth

  • Loan Book Growth Credit Growth · Ongoing · High confidence around 25%
    We are continuing to grow around 25% in our loan book.

    — Sanjay Kulshrestha

Loan Book

  • Total Loan Book Loan Book · by 2030 · High confidence INR3 lakh crores
    And second is, we are trying to achieve this INR3 lakh crores loan book, which we are trying by 2030 and a lot of efforts we are taking.

    — Sanjay Kulshrestha

Profitability

  • NIM Profitability · Ongoing · High confidence 3-3.1%
    So, on a year-to-year basis, you will see that it will be around 3%, 3.1% kind of NIM that we will maintain, and there is no internal issue on that.

    — Sanjay Kulshrestha

Forex Impact

  • FCNR Impact on P&L Forex Impact · from next quarter · High confidence No impact
    Yes, yes, it will be -- this will be the last quarter. And from next quarter, there will not be any impact. Yes.

    — Sanjay Kulshrestha

Disbursement

  • Disbursement Target Disbursement · FY26 · High confidence INR50,000 crores
    For this financial year, our target is around INR50,000 crores of disbursement.

    — Sanjay Kulshrestha

Asset Quality

  • NPA Resolution (remaining) Asset Quality · by the end of next financial year · High confidence most resolved
    we are hopeful that we'll be able to resolve most of them by the end of next financial year.

    — Daljeet Singh Khatri

Capital Adequacy

  • Debt-to-Equity Ratio Capital Adequacy · next 2, 3 months · High confidence less than 6

    Previously 7.28x → less than 6

    But we are already on the job, and we will -- shortly, we will be coming out with the instruments to improve our debt-to-equity ratio... And we plan to bring it back to less than 6 in the next 2, 3 months.

    — Daljeet Singh Khatri

Housing Sector

  • PMAY 2.0 Uptake Housing Sector · next financial year · Medium confidence pick up in a big way
    Maybe I think next financial year, it will pick up in a big way.

    — Daljeet Singh Khatri

What to watch in Q4 FY26

Debt-to-equity ratio

next 2-3 months
Current 7.28x (as of Dec 31, 2025)
Target Below 6x

Why it matters

Management has committed to reducing this key capital adequacy metric, which is important for financial stability and growth capacity.

Presently, my debt-to-equity ratio as at the end of December 31, 2025 is 7.28x... we plan to bring it back to less than 6 in the next 2, 3 months.

Risks & concerns

  • Increasing Debt-to-Equity ratio

    medium

    Debt-to-equity ratio at 7.28x as of Dec 31, 2025, which management plans to reduce to less than 6x in 2-3 months using perpetual debt instruments.

    Analyst acknowledged

  • Forex impact from FCNR borrowings

    low

    INR470 crores fair value loss in 9M FY26 due to FCNR, but management states this is the last quarter for such impact as 1-year FCNR will not be taken.

    Analyst acknowledged

  • Competition in infrastructure financing from commercial banks and NBFCs

    low

    Management highlights HUDCO's unique space, niche projects, and collaboration with other institutions, rather than direct competition, especially in government-backed schemes.

    Analyst downplayed

Q&A highlights

7 direct
FCNR borrowing fair value loss and future impact Direct
this may be the last quarter. Current quarter will be the last quarter. And now we have decided to not take the 1-year FCNR... from next quarter, there will not be any impact.

Clarifies the one-time nature of the INR470 crore loss and future forex risk mitigation by stopping 1-year FCNR.

Asked by Arul from KSEMA Wealth Private Limited

Impact of increased government allocation to states (INR2 trillion, 33% increase) Direct
Yes. You are very right. These are the SASCI loans extended by the Government of India, and this initiative has been taken just 3 years back, and now it stands at INR2 lakh crores... if you see government wants to push the reform.

Confirms the positive impact of increased government spending, particularly SASCI loans, on HUDCO's business prospects.

Asked by Sumeet Rohra from Smartsun Capital Pte Limited

Timeline between sanctioning and disbursement Direct
Generally, if I sanction project, so it takes 6 months to 1 year of the time to start the disbursement. Generally, 20% disbursement comes in the first year. And these projects have long gestation infrastructure projects, so it takes 3 to 4 years of the time.

Provides crucial insight into the project execution cycle, helping analysts model future disbursement velocity and revenue recognition.

Asked by Sumeet Rohra from Smartsun Capital Pte Limited

NIM trajectory and reasons for fall to 2.88% Direct
regarding the NIMs, as you have asked, you are right that there are some disbursements which were backloaded. So, on a year-to-year basis, you will see that it will be around 3%, 3.1% kind of NIM that we will maintain, and there is no internal issue on that.

Explains the temporary dip in NIM due to backloaded disbursements and provides reassurance on future NIM stability at 3-3.1%.

Asked by Rati Pandit from Nirmal Bang

NPA resolution trajectory for remaining INR700-800 crores Direct
we are hopeful that we'll be able to resolve most of them by the end of next financial year.

Sets a clear and ambitious timeline for resolving the remaining significant NPA book, indicating continued focus on asset quality.

Asked by Rati Pandit from Nirmal Bang

Loans under moratorium or restructured not classified as Stage 3 NPAs Direct
No, these is no asset. I mean in the last 8 to 12 quarters, we have no addition of Stage 3 assets in our book.

A strong positive signal about asset quality and transparency, indicating no hidden stress or deferred recognition of bad loans.

Asked by Devyam Joshi from 9T03 Capital

Comfort level with debt-to-equity ratio and plans to manage it Direct
Presently, my debt-to-equity ratio as at the end of December 31, 2025 is 7.28x... we plan to bring it back to less than 6 in the next 2, 3 months.

Acknowledges a rising debt-to-equity ratio and provides a concrete plan and timeline for its reduction, addressing capital adequacy concerns.

Asked by Nemin Doshi from Fortress Group

2 min read 7 chapters

Detailed narrative

Q3 FY26 Performance Overview

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.

Asset Quality Improvement

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.

Cost of Funds and Hedging Strategy

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.

Government Initiatives and Urban Development Focus

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.

Infrastructure Financing Opportunities

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.

Capital Adequacy and Debt Management

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.

PMAY 2.0 and Housing Sector Outlook

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.

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