HUDCO - Housing &Urban Development Corporation Ltd. Share Price

Outlook by Management:
HUDCO's management emphasized a robust growth trajectory driven by infrastructure financing, targeting a loan book of Rs.300,000 crores by 2030 (15-20% CAGR). Key focus areas include urban development (metros, roads, water/sewage) and affordable housing (40% of portfolio), supported by PMAY 2.0. The company aims to sustain strong financial metrics: CRAR (47-48%), debt-equity ratio (<6%), and NIMs (3.85% excluding EBR funds). Asset quality remains a priority, with net NPAs at 0.18% and aggressive recovery efforts.

Major Points:

1. Growth & Pipeline: Loan book grew 41% YoY to Rs.118,000 crores (Q3 FY25). Sanctions surged 5x YoY to Rs.92,000 crores, with a robust order book of Rs.1.2 lakh crores.
2. Funding & Cost Efficiency: Reduced cost of funds to 6.8% (down 30 bps YoY) via diversified borrowing (17% ECB, 40% bonds). Plans to increase ECB mix to 20% for further cost optimization.
3. Asset Quality: Targeting Rs.150"“200 crore recoveries in Q4 FY25. Gross NPAs are declining, with Rs.1,200 crore under NCLT resolution.
4. Sectoral Focus: Housing (Rs.100,000 crore disbursement target under PMAY 2.0) and urban infrastructure (60% of future growth).
5. New Initiatives: MoU with JNPT for Rs.25,000 crore port project (8.9"“9% yield) and expansion into PPP projects.
6. Profitability: ROA improved to 2.45%, ROE to 14%. No equity dilution expected; dividends to continue.
7. Operational Strengths: Digitization, new hires, and regional offices enhance monitoring and disbursement efficiency.

Management remains confident in leveraging India's infrastructure demand while maintaining strict risk controls.

Question 1:
"Hi, Good Morning Sir, and thanks for the opportunity and congratulations on the great set of numbers. So first question is on the overall loan growth guidance. I wanted to understand with robust performance in the 9-month period, do we revise or do we aspire to grow at a much faster pace versus 20%, 25% guided earlier?"
Answer:
Management clarified that while short-term growth (30-40%) is achievable due to favorable infrastructure policies and pent-up demand, the long-term CAGR will stabilize around 15-16%. Targets include reaching a loan book of Rs.1.5 lakh crores by FY26 and Rs.3 lakh crores by 2030. Growth is driven by housing (PMAY 2.0) and urban infrastructure projects.

Question 2:
"Sir, on the disbursement run rate, what we are seeing, the Q-o-Q growth, but we also had the understanding that this time H1 was slightly better for us with some loan disbursement being preponed, but we still carry the fact that H2 typically is better for the BFSI industry as a whole. So this Q-o-Q trajectory of disbursement, is it right to assume we'll continue on a growth trajectory?"
Answer:
Disbursements are aligned with project progress, with quarterly disbursements averaging Rs.10,000 crores. Q4 is expected to exceed this, reflecting consistent growth. The pipeline remains robust, with disbursements planned based on project milestones.

Question 3:
"Hello Sir, a very Good Morning, just wanted a little bit color on your cost-to-income ratio. So how do we see that panning out going ahead?"
Answer:
Cost-to-income ratio is expected to remain stable or improve due to reduced employee costs (retirements offset new hires) and operational efficiency. NIMs are at 3.2% (3.85% excluding low-yield EBR borrowings), with spreads at 2.41%. ROA (2.45%) and ROE (14%) reflect sustained profitability.

Question 4:
"My first question is regarding the recoveries. I mean what is the proportion of PSU and private sector NPAs as of now? And what is the status on resolution on the PSU NPAs, which we are having, and in the private sector as well?"
Answer:
Gross NPA stands at 1.88% (Rs.2,200 crores), with Rs.1,200 crores under NCLT and Rs.429 crores under DRT. PSU NPAs (e.g., J&K, APMC) are nearing resolution, targeting full PSU NPA resolution by Q4. Private NPAs are addressed via OTS policies and legal processes.

Question 5:
"Sir, just wanted to understand in terms of your growth guidance, you told after 2 years, it's going to be 15%. Is there a change in the growth numbers that you were expecting earlier?"
Answer:
Guidance remains unchanged: 30-40% growth for the next two years, stabilizing at a 15-16% CAGR. FY25 loan book target is Rs.1.25 lakh crores, rising to Rs.1.5 lakh crores by FY26. Growth is driven by housing (40%) and urban infra (60%), supported by PMAY 2.0 and metro/road projects.

Question 6:
"So our yields are based on internal benchmarks or is it based on external benchmarks? And if you can give the split of that internal and external benchmarks?"
Answer:
Yields are based on internal MCLR and sector-specific rate cards. Borrowings include 17% external commercial borrowings (ECB/FCNR), targeted to reach 20% to reduce costs. Incremental borrowing costs fell from 7.2% to 6.8%, aiding margin stability.

Question 7:
"Sir, like you mentioned at a high level, if you could help us understand given that large proportion of the lending that HUDCO does is, let's say, backed by the state government guarantees... what's driving that demand?"
Answer:
States prefer HUDCO over SDLs due to flexible disbursements (no holding costs) and FRBM limits. Projects are financed as needed, with 75% loans government-guaranteed. Future focus includes cash-flow-based projects and PPP models to diversify beyond guarantees.

Question 8:
"First was relating to the Government of India bond book that we have about INR 20,000 crores. When does it sort of run off? And second was relating to the sustainability of ROA metrics."
Answer:
The Rs.20,000 crore EBR bond retires by FY29. ROA (2.4-2.45%) is sustainable via loan book growth, cost optimization, and low credit costs (minimal new NPAs). Profit growth (40% YoY) includes write-backs but will stabilize as asset resolution concludes.

Question 9:
"On the release that you had made on this MoU for the port project... what yields do we look to do this business at?"
Answer:
The JNPT port project (Rs.25,000 crores) will yield ~8.9-9% with spreads ≥2%. Funding may involve consortium lending, with phased disbursements aligned to regulatory limits. The project addresses SDL saturation and offers long-term (15+ years) infrastructure financing.

Question 10:
"My question was on the average age of our book, so if you could just provide some color on that?"
Answer:
The average loan tenure is ~7 years, ranging from 1 to 20 years. This mix balances short-term liquidity and long-term infrastructure needs, with no significant changes expected.