H U D C O

HUDCO, a 55-year-old NBFC-IFC, plays a strategic role in India's infrastructure development under the Ministry of Housing and Urban Affairs. The company's loan book grew significantly from INR 24,000 crores in FY23 to INR 1.27 lakh crores in FY25, with disbursements exceeding INR 40,000 crores in FY25. Management aims for a loan book of INR 1.5 lakh crores by FY26 and INR 3 lakh crores by 2030, driven by government initiatives like the Urban Challenge Fund, which projects INR 4 lakh crores of investment.

HUDCO has maintained a strong focus on asset quality, achieving a net NPA of 0.25% in FY25. The company is committed to resolving INR 2,000 crores of NPAs within 18 months, with INR 800 crores of NCLT orders already received. Key NPA accounts include KVK Nilachal Power (INR 348 crores), Konaseema (INR 102 crores), and Nagarjun Oil Corporation (INR 350 crores). Management expects to recover INR 400-500 crores from NPAs in the current financial year.

The company successfully reduced its cost of funds by 35 basis points in FY25, from 7.1% to 6.75%, through strategic tapping of different sources and tenures. NIM improved from 3.18% to 3.22% in FY25, with a target to maintain it around 3.25-3.3%. Management anticipates a further 10-15 basis points reduction in cost of funds in FY26, leveraging new instruments like 54 EC capital gain exempt bonds and INR 5,000 crores zero coupon bonds.

HUDCO plans to venture into PPP and HAM models for private sector funding with a very selective approach. The focus will be on A-rated entities, projects with good cash flow, and robust concessionaire agreements. This cautious strategy aims to avoid past mistakes and ensure no compromise on asset quality, with third-party agencies supporting appraisal and monitoring. There is no specific target for private sector projects, emphasizing quality over quantity.

The company maintains strong financial ratios, with a CRAR of approximately 50% and a debt-equity ratio of less than 6%. HUDCO is well-placed to meet the RBI's guidance of 75% infrastructure lending (including affordable housing) this year, having already achieved 70%. Management believes the company's strong capital position will support growth without immediate need for external capital infusion.

HUDCO is transitioning to a paperless office and reducing turnaround times. The company has also invested in capacity building by recruiting 63 new employees, which contributed to a spike in operating expenses in FY25, alongside reclassification of certain costs. This investment is aimed at enhancing internal capabilities and capacity to support future growth.

The company reported notional MTM valuation losses of INR 400 crores for the full year FY25, primarily due to hedging activities and the movement of the US dollar against the INR (from 88 to 85). Management clarified these are notional calculations with no cash outgo, and are influenced by global uncertainties and currency fluctuations beyond the company's direct control.