HUDCO - Housing &Urban Development Corporation Ltd. Share Price

HUDCO's management provided a positive outlook during the Q4 FY '25 earnings conference call, highlighting their growth trajectory and strategic initiatives. Key insights shared include:

1. Loan Book Growth: The company has set a long-term target of achieving a loan book of INR 3 lakh crores by 2030, with a target of INR 1.5 lakh crores by FY '26. This represents substantial growth from their current position, underscored by their increase in sanctions from over INR 82,000 crores to INR 1.27 lakh crores last financial year.

2. Disbursement and Sanctions: HUDCO reported disbursements of slightly over INR 40,000 crores for FY '25, doubling from INR 17,000 crores in prior years. They emphasized a prudent approach to disbursements, aligning them with project milestones.

3. NPA Management: The company's net Non-Performing Assets (NPAs) are at 0.25%. Management targets the resolution of approximately INR 2,000 crores in NPAs within 18 months, having already seen significant recoveries from accounts under the National Company Law Tribunal (NCLT).

4. Cost of Funds: HUDCO successfully reduced its cost of funds by 35 basis points to 6.75% over the past year, aiming for further reductions through various strategies, including the exploration of 54 EC bonds and zero-coupon bonds, with the expectation of lowering the cost of funds by another 10-15 basis points in the financial year.

5. Focus on Infrastructure: Their strategic transition to an Infrastructure Finance Company leverages government initiatives, including an Urban Challenge Fund which projects about INR 4 lakh crores in investment, contributing to HUDCO's expansion in projects across housing, metro, and urban infrastructure.

6. Capacity Building: The addition of 63 new employees is part of their strategy to enhance operational efficiency and respond to growth opportunities.

The management expressed confidence in navigating the competitive landscape while maintaining asset quality, underscoring their commitment to supporting India's infrastructure development aligned with government policies.

Questions and Answers from the Earnings Transcript of HUDCO Q4 FY'25

1. Question from Shweta (Elara Capital): "You mentioned around INR1.5 lakh crores of loan book by FY'26. Do you think you might even surpass this target given your current growth trajectory?"

   Answer by Sanjay Kulshrestha: "While INR1.5 lakh crores seems achievable, we are cautious about our growth to maintain asset quality. We aim to surpass our target, but we want to evaluate after the second quarter. Factors like Urban Challenge Fund could influence our trajectory, but we haven't factored them into our current targets."

2. Follow-up Question from Shweta: "Can you give clarity on PMAY 2 disbursals? Will they happen in FY'26?"

   Answer by Sanjay Kulshrestha: "PMAY 2.0 will start with state governments. While we anticipate some disbursement soon, we're cautious not to factor them into our guidance until clearer visibility exists."

3. Question from Ramesh Damani (RSD Finance): "Can you explain the net loss on fair value changes in the P&L?"

   Answer by Daljeet Singh Khatri: "The net loss is primarily due to MTM valuation changes from hedging and the movement of the dollar against the INR, leading to a fair value adjustment of around INR400 crores for the year."

4. Follow-up Question from Ramesh Damani: "Any color on accounting for 8-B?"

   Answer by Daljeet Singh Khatri: "This relates to MTM gains or losses on foreign exchange transactions based on the movements of the dollar. Calculations are done by banks and vetted by our consultants. We show both realized and notional gains/losses."

5. Question from Shweta: "What are the current NPAs and your recovery outlook?"

   Answer by Sanjay Kulshrestha: "We have INR2,000 crores in NPAs, with INR1,100 crores under NCLT. Orders for about INR800 crores have come through, which we're optimistic about resolving within 18 months."

6. Follow-up Question from Aakash Goel: "What percentage of your loan book do you expect to be private sector now or by 2030?"

   Answer by M Nagaraj: "We initially have no specific targets for private sector loans but will focus on quality. We'll selectively choose projects based on past experiences and risk assessments, aiming for cautiously adding to our portfolio."

7. Question from Rati Pandit: "What is the status of your current order book and sanctions?"

   Answer by M Nagaraj: "We have sanctioned INR1.27 lakh crores and a committed pipeline of over INR2 lakh crores. The disbursement trend follows a typical 2-year project completion period."

8. Follow-up Question from Rati Pandit: "What is your current capital adequacy, and will you need to raise capital soon?"

   Answer by Sanjay Kulshrestha: "Currently, our capital adequacy ratio is around 46.6%. We project that we won't need to raise capital soon, as our existing ratios provide a comfortable margin."

These concise responses encapsulate the major inquiries and insights shared during HUDCO's Q4 FY'25 earnings call, providing an overview of the company's performance and outlook.