What's In Store For HUDCO In FY25?
Transcript
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.