HUDCO Is Now An Infrastructure Financing Co But Has Been Careful In Financing Infra Projects

Summary

In this interview, Mr. Sanjay Khera, Chairman and MD of HDFC, discusses the company’s growth trajectory and expansion into infrastructure financing, especially urban infra projects. He highlights strong growth in FY24 with a loan book nearing ₹1.2 lakh crore and plans to increase this further in FY25. Despite global concerns over large infrastructure projects, HDFC remains confident, ensuring careful vetting of projects. The company aims for a 60-40 split in loan books between housing and urban infra by FY25, with further shifts toward infrastructure financing in the coming years. The optimism around government infrastructure spending bolsters HDFC’s strategy.

Takeaways

• 😀 HUDCO's loan book grew by 41% YoY in Q3, reaching ₹1.1 lakh crore.
• 😀 The company expects to close FY24 with a strong performance, exceeding its ₹1.2 lakh crore loan book target.
• 😀 Government measures, including liquidity support and rate cuts by RBI, are boosting HUDCO's margins.
• 😀 HUDCO is increasingly focusing on urban infrastructure alongside its traditional housing finance sector.
• 😀 By FY27, HUDCO aims for a loan book ratio of 30% housing and 70% urban infrastructure.
• 😀 HUDCO's loan book mix in FY25 is expected to be approximately 60% housing and 40% urban infrastructure.
• 😀 HUDCO maintains a strong focus on project bankability and risk management to ensure low NPAs, with a net NPA of just 2.7%.
• 😀 The government’s Urban Challenge Fund, with 25% subsidies, is expected to support urban infrastructure projects funded by HUDCO.
• 😀 HUDCO is cautious in financing infrastructure projects, ensuring no compromise on risk assessment and governance.
• 😀 For FY25, HUDCO expects to cross its loan book target of ₹1.2 lakh crore, with FY26 projections at ₹1.5 lakh crore.
• 😀 The government’s FY25 budget includes substantial allocations for urban infrastructure, such as metro projects, housing, and industrial housing.

Q & A

What has been the growth trajectory for Hoodco in recent times?

Hoodco has experienced phenomenal growth, with its loan book reaching ₹1.1 lakh crores, marking a 41% year-on-year increase. The company is optimistic about closing the current financial year on a strong note, and the fourth quarter, traditionally the best for financial institutions, is expected to drive significant growth.

What measures has the government taken to support infrastructure development?

The government of India has introduced various measures to accelerate infrastructure development, including an Urban Challenge Fund, which provides a 25% subsidy for urban infrastructure projects. Additionally, large allocations have been made for sectors like housing, metro systems, and industrial housing, aimed at boosting economic growth.

How has Hoodco’s strategy shifted regarding its loan book?

Hoodco has shifted its focus from being primarily a housing finance company to a broader infrastructure finance company. The company is now increasingly focusing on large infrastructure projects, including urban infrastructure, and plans to have 70% of its loan book in urban infrastructure by FY27.

What is the company’s growth target for the next financial year?

Hoodco has set a target to grow its loan book to ₹1.5 lakh crores by FY26, driven by a robust pipeline of infrastructure projects and strong government support for urban infrastructure.

What is the expected split between housing and urban infrastructure in Hoodco’s loan book by FY25?

By FY25, Hoodco expects a 60:40 split between housing and urban infrastructure in its loan book. Over time, as urban infrastructure projects ramp up, this ratio will shift, with urban infrastructure making up 70% of the loan book by FY27.

What steps is Hoodco taking to ensure the sustainability and risk management of its infrastructure projects?

Hoodco is very cautious in its approach to lending, particularly for urban infrastructure projects. The company carefully evaluates project bankability and has implemented strong internal systems and procedures for loan sanctions and disbursements to mitigate risks. The company’s NPA levels are among the lowest in the market.

How is the government’s allocation for urban infrastructure expected to impact Hoodco’s growth?

The government’s substantial budget allocation for urban infrastructure, including ₹97,000 crores for metro systems, housing, and industrial housing, is expected to create a favorable environment for Hoodco. The Urban Challenge Fund and other initiatives will help Hoodco finance large-scale infrastructure projects, contributing to the company’s growth.

What are Hoodco’s targets for NPAs and how does the company plan to achieve them?

Hoodco aims to become a zero NPA company within 18 months. Currently, the company’s net NPA stands at just 27%, with a return on assets (ROA) of 2.42%. Through vigilant project assessment and stringent loan processes, Hoodco is focused on maintaining low NPA levels while expanding its loan book.

How does Hoodco plan to benefit from government policies like PMAY 2.0?

Hoodco anticipates that PMAY 2.0 will contribute significantly to its housing loan book, with disbursements expected to ramp up in the first and second quarters of the coming year. The company’s focus on financing affordable housing projects under the government’s initiatives will support its growth.

What are Hoodco’s financial targets for FY25 and FY26?

For FY25, Hoodco is targeting a loan book of ₹1.2 lakh crores, which it is on track to surpass. For FY26, the company is revising its target to ₹1.5 lakh crores, supported by strong growth in both housing and urban infrastructure sectors.