Revenue
Margin
Demand
Guidance
Tone
Event Participants
Executives
4
Achal Gupta, Daljeet Singh Khatri, M. Nagaraj, Sanjay Kulshrestha
Analysts
8
Divyam Ketan Doshi (9To3 Capital), Kishore Agarwal (Bajaj AMC), Parth (DAM Capital), Sandeep Agarwal (Naredi Investment), Sumit Rohra (Smartsun Capital), Vaibhav (Nirmal Bang Securities), Vijay Singh (Mirae Asset), Vishal Gajwani (Aditya Birla AMC)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Q1 FY27 sanctions | ₹60,000+ crores | ~48% of FY26 full-year sanctions (₹1.24 lakh crores) in a single quarter; led by ring roads, expressways, irrigation, water grids, power, and urban infrastructure projects |
| Total sanctions outstanding | ₹2.5 lakh crores | Durable pipeline; excludes new Gujarat/Bihar MoUs yet to convert into sanctioned projects |
| FY27 disbursement guidance | ~₹65,000 crores | +25% YoY vs ₹52,000 crores in FY26; supported by board-approved ₹70,000 crore borrowing plan |
| FY27 repayments | ~₹20,000 crores | Q1 FY27 receipts ₹4,000+ crores; ₹15,000-16,000 crores expected across remaining quarters |
| Gross NPA | ₹1,600+ crores | ~₹1,100 crores in NCLT (pre-2013 exposures, advanced resolution); ~₹34 crores outside NCLT (3 accounts); ~₹29 crores non-consortium NCLT accounts |
| Net NPA | ~₹82 crores | Near-zero ("nearing zero, not zero"); management expects most assets resolved during FY27 |
| Yield on loans | 8.78% (Q1 FY27) | Under modest pressure from accelerated growth; housing lending at ~8.6% (MCLR-linked) |
| Spread | ~1.8% (Q1 FY27) | Below the 2% target due to growth front-loading; management expects normalization by Q3 FY27 |
| NIM guidance | ~3.0% | Maintained; described as "well acknowledged by borrowers" |
| Effective tax rate | ~20.6% (Q1 FY27) | Reduced from earlier levels; board discontinued DTL creation on special reserve, aligning with peer NBFCs |
| ECB cost (RBI Forex window) | 5.5%-6.5% all-in | Includes only 1.5% hedging share paid by HUDCO; RBI covers balance hedging cost; $700 million drawn, $2 billion tie-up |
| Borrowing mix | >70% domestic; ~10% ECB | ECB share could rise toward ~20% of borrowings via RBI window; domestic bond + bank loans form the core |
| FY27 borrowing plan | ~₹70,000 crores | Board-approved; calibrated to fund the ₹65,000 crore disbursement target |
Geographic & Segment Commentary
- Urban Infrastructure (India-wide): Q1 sanctions spanned ring roads, expressways, irrigation, water grids, drinking water, industrial corridors, power generation/distribution, and urban infrastructure in Telangana; sustainable finance sanctions remain concentrated in water and sanitation as "seed" investments tied to AMRUT, expected to catalyze larger capital projects. The Urban Challenge Fund (₹1 lakh crore central VGF + 25% state + 50% private) is shifting the ecosystem from grant-based to bankable project financing; the apex committee has already sanctioned ₹30,000+ crores.
- Gujarat: June 2026 MoU (₹1 lakh crores+) anchored on Olympics 2036 infrastructure, Commonwealth Games 2030 (Ahmedabad), International Police Games 2029, metro/RRTS linking Gandhinagar-Ahmedabad-Sabarmati, and state highway projects; first sanctions expected in Q2 FY27.
- Bihar: June 2026 MoU (₹1 lakh crores+) covers 12 satellite towns, road projects, tourism, metro, and housing; a ₹21,000 crore road financing opportunity is already live, with competition from NABARD, NaBFID, and commercial banks pushing bid pricing down; state is leveraging Urban Challenge Fund bankability requirements.
- Other States / New Cities: HUDCO is working intensively in ~12-13 states; new city development (Jewar Airport catchment near Delhi, Mumbai airport conurbation, Naya Nagpur, New Shillong in Meghalaya, New Bhubaneswar) is expected to drive urban capital demand; urbanization projected to double from ~40 crore to ~80 crore over the next 20 years.
- Affordable Housing (PMAY): Portfolio is reducing as state counterpart funding under PMAY becomes less frequent; lending continues at ~8.6% (MCLR), with commitment to housing maintained but sanctions increasingly tilted toward infrastructure.
Company-Specific & Strategic Commentary
- PPP Project Finance Division: Board-approved division launched across five sectors; two private-sector projects (~₹7,000 crores) sanctioned in Q1 FY27; no volume target—case-to-case approach requiring strong entities, projects, concessionaires, and collateral; disbursements expected from H2 FY27; Urban Challenge Fund (50% VGF) expected to generate PPP pipeline in water, desalination, stormwater, drainage, and sewerage.
- RBI Forex Window & Liability Management: $700 million drawn under the RBI five-year ECB window (hedging capped at 1.5% for borrower; RBI covers balance); $2 billion tie-up is the floor, with enhancement under negotiation; cost of 5.5%-6.5% is attractive vs domestic rates; >99% of FX exposure is now long-term; ongoing initiatives include retiring high-cost loans and asset monetization.
- State MoU Expansion: ~6 MoUs totaling ~₹6.5 lakh crores, including Gujarat and Bihar signed in June 2026; MoUs valid for 5 years, with sanctions commencing this year and disbursements spread over ~5 years; management cautions conversion depends on land acquisition, project structuring, and financial closure.
- NPA Resolution Overhaul: Strategy shifted from DRT-only approach to proactive promoter engagement to understand resolution capacity; NCLT accounts at advanced stage with all lenders aligned; most assets expected resolved in FY27.
- DTL Policy Change: Board stopped creating deferred tax liability on special reserve, aligning HUDCO with government and private NBFC peers; structurally lowers effective tax rate to ~20.6%.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Disbursements (FY27) | ~₹65,000 crores | vs ₹52,000 crores in FY26 (+25% YoY); supported by ₹70,000 crore board-approved borrowing plan |
| Borrowings (FY27) | ~₹70,000 crores | Mix: >70% domestic (bonds + bank loans); ECB via RBI window ~10%, potentially rising toward 20% based on cost |
| Repayments (FY27) | ~₹20,000 crores | ₹4,000+ crores received in Q1; ₹15,000-16,000 crores across remaining quarters |
| Spread / NIM (ongoing) | ~2% spread; ~3% NIM | Q1 spread of ~1.8% is growth-related compression; expected to normalize by Q3 FY27 as recent disbursements capitalize |
| Loan book (FY30) | ₹3 lakh crores | Mid-FY28 review for mid-course correction based on FY27 achievement |
| ECB under RBI window | $2 billion minimum | Tie-up finalized; targeting enhancement; RBI covers hedging beyond 1.5% borrower share |
| NPA resolution (FY27) | Most assets resolved | ₹1,100 crore NCLT book at advanced resolution; non-NCLT accounts ( |
| Effective tax rate (ongoing) | ~20.6% | Structural reduction from DTL policy change; subject to regulatory stance |
Risks & Constraints
| Risk | Context |
|---|---|
| MoU conversion delays | The ~₹6.5 lakh crore MoU pipeline (5-year validity) faces land acquisition, social, and political hurdles; CMD explicitly caveated that "the arithmetic fails that it will be done by 2029" — sanctions begin this year but disbursements stretch over ~5 years |
| Competitive intensity in state financing | NABARD, NaBFID, and commercial banks are bidding aggressively; a ₹21,000 crore Bihar road project saw bid rates fall sharply, pressuring yields and potentially HUDCO's spread |
| Foreign currency risk | >99% of FX borrowings are now long-term, but ECB share may rise to ~20% of borrowings; $200 million FCNR maturing in 2028 is fully hedged; management is balancing availability vs cost of dollar funds |
| Near-term spread compression | Q1 spread of ~1.8% vs 2% target is driven by accelerated growth; if disbursement momentum slows, the capitalization benefit may defer beyond Q3 FY27 |
| NCLT resolution uncertainty | ₹1,100 crores tied in NCLT proceedings; although advanced, timelines depend on judicial processes and recoveries come in tranches; liquidation recoveries are inherently uncertain |
| Tax/regulatory stance | Lower effective tax (~20.6%) rests on the board policy of not creating DTL on special reserve; any regulatory change could reverse the benefit |
Q&A Highlights
Foreign Exposure, Hedging & Spread Commitment
- Question: Clarification on short-term foreign exposure and whether higher hedging costs/payment challenges persist; how does portfolio yield relate to lending rates? (Vijay Singh, Mirae Asset)
- Answer: Short-term FX exposure is minuscule—more than 99% is 5-year long-term borrowing; $700 million drawn under the RBI window with a $2 billion tie-up; RBI covers hedging costs beyond the 1.5% borrower share, making dollar loans attractive. Spreads will remain around 2% and NIMs around 3%—"well acknowledged by borrowers." (CMD Sanjay Kulshrestha)
- Answer: No FCNR maturities in the current or next financial year; the $200 million FCNR maturing 2028 is adequately secured with higher protections; no forex losses foreseen. (DF Daljeet Singh Khatri)
FCNR Legacy & Gujarat/Bihar MoUs
- Question: Are last year's FCNR accounting losses now behind us? How will the two new MoUs, each in excess of ₹1 lakh crore (Gujarat and Bihar), shape sanctions and disbursements? (Sumit Rohra, Smartsun Capital)
- Answer: FCNR losses are behind; remaining $200 million is fully protected; no forex losses expected this year. (DF Daljeet Singh Khatri)
- Answer: Gujarat MoU is backed by identified projects—Olympics 2036 infrastructure, Commonwealth Games 2030 (Ahmedabad), International Police Games 2029, metro, RRTS (Gandhinagar-Ahmedabad-Sabarmati), and highway projects; sanctions will start from Q2 FY27. Bihar MoU covers 12 satellite towns, road projects, tourism, metro, and housing, leveraging Urban Challenge Fund facilities. (CMD Sanjay Kulshrestha)
- Answer: Bihar has already floated a ~₹21,000 crore road project where HUDCO is competing; competition from NABARD, NaBFID, and commercial banks is intense, and bid rates have fallen sharply—yet opportunity remains large across satellite towns, tourism, and industrial parks. (Director of Corporate Planning M. Nagaraj)
PPP Project Finance Division
- Question: What is the internal target book size for the PPP Project Finance Division for FY28/FY29? (Divyam Ketan Doshi, 9To3 Capital)
- Answer: There is no target—sanctions/disbursements will be case-to-case across five sectors; two projects (~₹7,000 crores) were sanctioned in Q1 FY27 with disbursements starting in H2 FY27. The approach is deliberately safe: good entities, good projects, strong concessionaire agreements, and collateral. Urban Challenge Fund (50% VGF) is expected to bring PPP opportunities in water, desalination, stormwater, drainage, and sewerage. (CMD Sanjay Kulshrestha)
Growth Guidance: Disbursements & AUM
- Question: What is the near-term growth trajectory for FY27/FY28 disbursements and AUM? What drives the sanctions composition weighted toward water/sanitation? (Parth, DAM Capital)
- Answer: FY27 disbursement is guided at
₹65,000 crores vs ₹52,000 crores last year, backed by a ₹70,000 crore board-approved borrowing plan; the ₹3 lakh crore loan book target for 2030 remains, with a mid-FY28 review for course correction. Sanctions outstanding are ~₹2.5 lakh crores, with Q1 sanctions exceeding ₹60,000 crores vs ₹1.24 lakh crores in all of FY26. Water and sanitation are priority "seed" investments aligned with AMRUT that catalyze larger capital projects. Spread compression (1.8%) is purely growth-related; normalization to 2% is expected by Q3 FY27 as Q4 FY26/Q1 FY27 disbursements capitalize. (CMD Sanjay Kulshrestha; Finance team Balbir)
MoU Timelines, Borrowing Mix & Tax Rate
- Question: What is the timeline for the
6 MoUs (₹6.5 lakh crores)? What is the borrowing mix plan? Why is the tax rate low at ~20.6%? (Sandeep Agarwal, Naredi Investment) - Answer: MoUs are valid for five years; sanctions begin this year and disbursements will flow over the five-year horizon given the capital-intensive nature and time required for structuring and financial closure. Borrowing mix remains >70% domestic (bonds + bank loans) with ~10% ECB, which could rise toward 20% through the RBI window. (CMD Sanjay Kulshrestha)
- Answer: The tax rate fell because the board decided to stop creating deferred tax liability on the special reserve, aligning HUDCO with other government-sector and private NBFCs. (DF Daljeet Singh Khatri)
Repayment Pipeline
- Question: What is the full-year repayment pipeline, and does the ₹4,000-5,000 crore per quarter run-rate still hold? (Kishore Agarwal, Bajaj AMC)
- Answer: Total repayments for FY27 will be ~₹20,000 crores; ₹4,000+ crores received in Q1; ₹15,000-16,000 crores expected across the remaining three quarters, which is factored into the loan book trajectory. (Finance team Balbir)
Yield & Spread Management
- Question: Yield on loans is 8.78%—what are expectations for coming quarters and the strategy to protect yield? (Vaibhav, Nirmal Bang Securities)
- Answer: Yield is a function of cost of funds; as borrowing costs decline, the company passes through benefits selectively but maintains
2% spread and ~3% NIM. Housing lending is at MCLR (8.6%); rates vary by sector and project requirements. (CMD Sanjay Kulshrestha)
Asset Quality & NPA Resolution Approach
- Question: NPA is nearly zero—can you elaborate on the NPA position and the due diligence/underwriting process that keeps risk low? (Sumit Rohra, Smartsun Capital)
- Answer: GNPA is slightly above ₹1,600 crores and net NPA ~₹82 crores; ~₹1,100 crores of gross NPA is at various NCLT stages (funded pre-2013), now at an advanced resolution phase with all lenders aligned; ~₹34 crores outside NCLT (3 accounts) and ~₹29 crores in non-consortium NCLT accounts are also at advanced stages. The strategy has shifted to constructive promoter engagement—understanding developer capacity and resolution capability—rather than a DRT-only approach. Management expects most of these assets to be resolved during FY27. Underwriting remains diligent on both projects and borrowing entities to prevent new NPAs. (CMD Sanjay Kulshrestha)
Key Takeaway
HUDCO delivered a strong Q1 FY27, with sanctions exceeding ₹60,000 crores—nearly half of FY26's full-year ₹1.24 lakh crores—against a sanctions pipeline of ₹2.5 lakh crores. Management guided FY27 disbursements of ₹65,000 crores (+25% YoY), backed by a ₹70,000 crore board-approved borrowing plan, and reiterated the ₹3 lakh crore loan book target by FY30. Strategy centers on state MoU expansion (₹6.5 lakh crores across six MoUs, including new Gujarat and Bihar agreements), a board-approved PPP Project Finance Division (two projects, ~₹7,000 crores sanctioned), and liability diversification through the RBI Forex window ($700 million drawn; $2 billion tie-up costing 5.5%-6.5%). Asset quality stayed benign—GNPA ₹1,600+ crores, NNPA ~₹82 crores—with most NCLT assets expected resolved in FY27. Key watch points include spread normalization to 2% by Q3 FY27, MoU-to-sanction conversion over a five-year horizon, and pricing competition from NABARD, NaBFID, and commercial banks.