Housing & Urban Development Corporation Ltd Q3 FY26 Earnings Analysis

- HUDCO is targeting sustained strong growth in sanctions and disbursements, with H1 FY26 sanctions at ~INR93,000 crores (22% growth YoY) and disbursements at INR26,000 crores (19% growth YoY). - Loan book grew 30% YoY from INR111,000 crores to INR144,000 crores; expected to cross INR1.5 lakh crores by March 2026 and potentially reach INR3 lakh crores by FY2030. - Medium-term AUM growth expected around 25%-27% annually. - Urban Invest Window and Urban Challenge Fund initiatives offer substantial opportunities, with RBI targeting INR1 lakh crores from state governments and INR2 lakh crores from PPP players over 1 to 3 years. - HUDCO aims to maintain spreads of around 2% and NIMs of 3%-3.3%, while cautiously expanding into private sector infrastructure loans. - The company's growth strategy aligns with India's developmental goals, targeting accelerated urban infrastructure financing linked with programs like AMRUT and metro projects.

- HUDCO targets strong and sustained growth, with loan book expected to grow from INR1.44 lakh crores to INR1.5 lakh crores by March 2026, and further to INR3 lakh crores by FY 2030, implying a ~25-27% annual growth. - Disbursement guidance for FY 2026 is INR50,000 crores, with H1 already achieving 50%, indicating full-year target achievable with growth. - Net Interest Margin (NIM) expected to improve, with management targeting above 3.1% in H2 FY 2026, aided by anticipated 25 bps repo rate cut. - Resolution of NPAs and interest recoveries from identified projects (10 projects worth INR730 crores principal) expected to add up to INR900 crores in recoveries, bolstering profitability. - ROE improved to around 15%; management confident in maintaining/growing profitability aligned with growth. - Strategic government backing and diversified infrastructure financing pipeline provide strong medium-to-long term revenue visibility. - Management assures consistent growth narrative continuing into next quarters.

- HUDCO is actively working on funding metro projects, collaborating with multinational institutions to support urban infrastructure development. - The company plans to start issuance of bonds and engage with multilateral banks to create value through strategic financing. - HUDCO aims to expand through the Urban Invest Window, focusing on capacity building, asset mapping, and financial closure to create bankable urban infrastructure projects. - The company targets participation in the Urban Challenge Fund, aiming to mobilize INR 1 lakh crore in state government loans and leveraging PPP players for loan arrangements, reflecting a large opportunity in urban infrastructure finance. - HUDCO is entering the private sector in five key areas: ports, airports, roads, energy, and real estate, with stringent risk evaluation and underwriting criteria. - There is planned issuance of perpetual debt in Q3 or Q4 depending on market conditions to support growth, with a maintained debt-equity ratio around 8%.

- HUDCO plans to maintain a debt-to-equity ratio around 8%, with current levels sub-7%. - They are planning to raise perpetual debt in the third or fourth quarter of the fiscal year, depending on market conditions, though it is not an emergent need. - No immediate plans for equity issuance are mentioned. - Focus remains on strategic borrowing including external commercial borrowings (5-year maturity) with adequate foreign exchange protection. - They have actively managed borrowings to reduce cost of funds to about 6.32%. - No new FCNR borrowings are planned; remaining FCNR loans will mature by February-March next year. - HUDCO is also looking at bond issuance and working with multilateral banks for bond issuance as part of future funding strategy. - The company aims to fund growth, including metro projects and urban infrastructure, leveraging multilateral institutions and private sector investments.

- Outstanding MOUs signed: INR 7 lakh to 8 lakh crores. - Documented schemes: Around INR 2 lakh crores, ready to convert into disbursements. - Non-documented schemes: Approximately INR 1 lakh crores, in various documentation stages. - Total clear pipeline of sanctioned projects: Around INR 3 lakh crores. - Of this, INR 2 lakh crores already documented with agreements. - INR 1 lakh crores at different documentation and discussion stages. - Sanction pipeline described as very strong, supporting sustained growth in upcoming years.