What's In Store For HUDCO In FY25?

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00:00We have with us Mr. Sanjay Kulsheshtha, who is the Chairman and Managing Director at HUDCO

00:05to talk to us about numbers, very strong growth coming in from HUDCO,

00:10why 30% on the loan book, 19% on total income.

00:15Mr. Kulsheshtha, can you tell us whether a 25% plus loan growth in FY25

00:23can be expected now with the kind of Q1 performance you've delivered?

00:28Very well, I think the 25% of the CAGR growth will be within our limits.

00:34And since the company is extending loans towards the infrastructure,

00:40entire limit of the infrastructure, which includes the affordable housings also,

00:44other than the road, water or power or energy or whatever they are in the

00:49infrastructure list of the Government of India.

00:51So, we have seen the leverage from the housing for all in the PMI 1.0

00:58and the similar leverage will be there.

01:00And there are tailwinds that the estates will be coming out with the counterpart

01:05requirement under the PMI 1.0 Grameen as well as PMI 1.0 Urban.

01:09So, it will give a very large potential for companies like HUDCO.

01:15And since we are under the ambit of our ministry, that is MOA,

01:19so all these schemes will give that kind of impetus.

01:22And I think in another two to three years,

01:25our growth rate will remain higher between 20 to 25%.

01:29And this year, we are expecting that it will be slightly higher than the 25%.

01:35Got it. That's bullish, sir.

01:38I want to try and also understand, where do margins go from here?

01:42You've seen some bit of margin pressure start to come in all the way to Q1.

01:47Is this now a sort of bottom you've made where margins are concerned?

01:52Does it only get better from here is what I want to understand.

01:56You are right, actually.

01:58We are at the bottom and it is because of the market pressures

02:01and the internationally domestic interest rates,

02:04which are governing our cost of funds.

02:07But we have tried and experimented a lot of things and a lot of measures

02:10and you can see that we have...

02:14But at the same time, the commitment of the company,

02:17which is in 75% owned by the government of India will remain,

02:20that we are here for the infrastructure,

02:23which is viable, which is more sustainable.

02:26And we are very well aware that the interest cost

02:29in any infrastructure puts value to that infrastructure.

02:33So that's why at the same time,

02:35we also know that a desired spread and the names are also required for the company.

02:40So we are working between 3.3 to 3.5% of the name that is in net interest margin.

02:47And if you can see our presentation also,

02:50wherein we have very clearly shown that out of total borrowing,

02:53around 20,000 crores is against the EBR,

02:56which is giving us the service charges.

02:58If we reduce that EBR, our name is around 3.7%

03:02and the spread is around 1.7 to 1.8%.

03:05And I am very clear that we will be maintaining these kind of names

03:09between 3.5% around and the spread of around 1.7 to 1.8%.

03:15Understood. And what's the recovery pipeline like?

03:19You've got plenty of recoveries in the pipeline,

03:22clearly 1,400 crore within the NCLT fold itself.

03:27How much of that materializes, say, in FY25

03:30and how much are you pencilling for FY26 and beyond, if at all?

03:35I think by FY26, all the assets should be resolved.

03:39But at the same time, we know the process of the NCLT.

03:43So we are completely dependable on the process.

03:47And we are pushing and pursuing very hard with our consortium partners

03:52so that the resolution should come.

03:54And we have seen during last year,

03:56a lot of updates are there in the NCLT

03:59and a lot of assets are going to resolve.

04:01And during this quarter, during this financial year,

04:04we are trying that out of 1,400 crores,

04:07at least 500 crores of the loans will be resolved by March 2025.

04:11At the same time, we have revised our OTS guidelines

04:14and the way we were working.

04:16And we are looking at the assets that we want to resolve it,

04:20whether it is NCLT, DRT, or DRAT,

04:23or through the lender bank resolution plans as well.

04:27So we had opened up our policy in terms of the OTS.

04:31At the same time, we are opening up that we can also bid

04:35in case there are no bidders which are coming.

04:37And the total objective of the company

04:40is to come down to this stress assets

04:45towards the zero by FY26.

04:48Okay, and so therefore, what does that do to credit costs?

04:52First, and I'll break this up.

04:53First, I want to try and understand what this does

04:56to your overall credit costs for FY25 and 26.

04:59Will you continue to be in negative territory

05:01where that is concerned, especially on your P&L?

05:04And I want to try and push that further.

05:07On your fresh lending that you've done,

05:09you know, 30% odd growth.

05:11What's the kind of credit costs that one should pencil in

05:14if one were an investor?

05:18Regarding credit costs, yes, our yields are improving.

05:21And at the same time,

05:23at the same time, the lending is becoming very,

05:27very competitive.

05:28Because we generally works with a very,

05:31very robust kind of infrastructure

05:33and very robust kind of entities.

05:35Most of our loans or credits are extended

05:38to the state government and the state government entities.

05:41And they are backed by the state government guarantee

05:43and the budgetary allocations also

05:44since these assets are towards the social sector.

05:47So this puts a pressure on the credit cost.

05:51And, but it's okay.

05:54Finally, we have to maintain our yield

05:59slightly more than nine.

06:01And at the same time,

06:03the cost of funds should be as good as around seven.

06:08In last quarter, in FY24,

06:12we had been very well able to take out our cost of fund

06:18from 7.46 to 7.1%.

06:21This quarter, last quarter, it was slightly higher,

06:24but I'm sure with the infusion of the ECBs

06:27that we are taking 400 million during this quarter,

06:31we will very well be within 7.1 or 7.15,

06:34not more than that.

06:35So it will give some space to our spreads

06:38and at the same time, our yields will be higher.

06:41Right, so what I'm trying to understand

06:43is whether you can maintain that 2.2% plus kind of ROA,

06:46even in a normalized credit cost environment.

06:50Just want to try and get that.

06:52Will you, are you comfortable,

06:53confident that the 2.2% is something like a normalized ROA

06:58and therefore, your PAT will grow largely

07:02at the rate at which your AUM is growing?

07:05Yeah, I think it will not be a challenge for the company.

07:09Our 2.2, in this high cost regime we had maintained,

07:13so I think there is a good positioning

07:18regarding this 2.2 number.

07:20Maybe slightly, maybe it will go up towards 2.25

07:25when the rates start melting down.

07:27So when the AUM will start growing,

07:30at the same time, we are seeing

07:31that we will introduce a lot of products.

07:33So starting from the state government guarantee

07:35to the project-based funding,

07:37wherein during the commissioning stage,

07:40the interest rates will be slightly higher

07:42and when the projects are established,

07:44we will give the discounting to them.

07:45So in a way, we are keeping our product mix

07:49so that it will raise towards the spreads

07:52and at the same time, it will give good value

07:55to our bottom lines.

07:57So I just wanted to try and round this up.

07:59What gives you the confidence

08:01that in this benign credit cost cycle environment,

08:08of course, probably that's a one-off

08:11and what gives you the confidence

08:14that that will continue, or at least for HUDCO?

08:18I think the confidence is coming

08:20from our promoter, that is government.

08:22The way the policies are being framed,

08:24very, very transparent,

08:25and the way government is not only intervening

08:28towards the policy, but also the capital infusions

08:32towards the infrastructure projects.

08:33So everything is planned towards the Bixit Bharat.

08:36A lot of infrastructure are planned

08:37and all the states are on board.

08:39You can see the states are competing within the states

08:43so that it is giving a competition between the states.

08:46Every state is aspiring to become

08:48a developed kind of states,

08:50like we have signed an MOU in Rajasthan

08:52and they are talking about Bixit Rajasthan,

08:54and then on the same lines,

08:56Maharashtra is talking about how the development

08:59can be done and how the multi-modal corridors

09:02and the road connectivities, hospitals,

09:04and all these things are giving

09:06that kind of confidence to us,

09:07that all these states, we have sanctions now,

09:09start sanctions in the Gujarat also, if you have seen.

09:12So now HUDCO has footprints in entire country.

09:16So all these things are giving confidence,

09:19one, coming from the government of India.

09:21Second, the plans of the state government.

09:25And third, the financial ratios.

09:27We are very strong at the financial ratios.

09:29Our loan book is just one lakh crores,

09:32so there is a lot of appetite in the HUDCO to grow.

09:34And there is good support from our ministry also,

09:38which is taking care of most of the infrastructure,

09:40starting from the metro to Swachh Bharat,

09:43to Amrit City, to Smart City,

09:45and now it is Housing for All 2.0,

09:48which will give a lot of potentials to the company.

09:51Sure, sure.

09:52Thank you so much, sir.

09:53It's been a pleasure speaking with you,

09:54breaking down the numbers of HUDCO.

09:56Of course, very strong numbers overall,

09:58but in line with how markets are doing today.

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