Housing Urban Development Company (HUDCO), the Navratna CPSE under the Ministry of Housing and Urban Affairs (MoHUA), which recently got an NBFC licence, is planning to “become a zero-NPA (non-performing asset) company”, that is it will have no bad loans in its books, over the next 18-odd months, following resolution of ₹1,200-odd worth of projects at the National Company Law Tribunal (NCLT) and ₹400-odd crore at the Debt Recovery Tribunal. The company is seeking fundraise from Japan, equalling $500 million (over ₹43,000 crore), at a lower cost of over 100 basis points (at least one percentage point difference), as part of its growth strategy, Sanjay Kulshrestha, Chairman and Managing Director, HUDCO, told businessline.
If plans materialise, HUDCO will be amongst the first NBFCs to have achieved a zero-NPA track record.
“There are some projects which are nearing resolution at the NCLT and other appellate bodies. Nearly 10 projects account for 80 per cent of our NPAs. In the next 18 months or so, we hope to be a zero-NPA company. We are in talks with the borrowers for resolving these cases,” he said.
HUDCO has a gross NPA of 1.88 per cent for 9MFY25, down from the 3.36 per cent in the same period a year ago; whereas net NPA is just 0.27 per cent, down from the 0.49 per cent in the comparative period last year.
The NBFC has a loan book of ₹1,18,931 crore for the nine-month period and a market-cap of nearly ₹47,000 crore. The return on equity and return on assets stand at 14.71 per cent and 2.45 per cent, respectively.
Fund rRaise
In terms of fundraise, Kulshrestha said the company would look at the fundraise from Japan “towards the end of this month”, with interest rates at 6.1-6.4 per cent, substantially lower than funds it raises in the Indian market which come at an interest of nearly 7.4 per cent.
“So we have a clear arbitrage there of one percentage point or so. Japan is offering amongst the most competitive rates including relaxed withholding tax norms,” he said, pointing out that the plan is to bring down cost of funds for the finserv company that is into financing of urban infra (70 per cent) and housing projects (30 per cent).
HUDCO’s incremental cost of funds for the first nine months of the fiscal has been in the 6.8 per cent range, down from 7.18 per cent, the company top brass had previously said in a post-result investor call. The overall cost of borrowings have come down to 7.34 per cent (7.70 per cent).
In comparison, the company lends – primarily to government-backed projects – at 8.6-10 per cent, depending on the risk factor.
HUDCO’s resource mobilisation has been through External Commercial Borrowings (ECBs), Word Bank, ADB, JICA and KfW Development Bank, apart from domestic sources.
“Our long-term plan is to further bring down cost of funds,” Kulshrestha said.
Other sources
According to him, HUDCO would also be tapping the US markets and borrowings in Swiss Francs. “We will see how the US Fed rates move and depending on that we will take a call on tapping that market. In case of Europe, it is Swiss Francs that we can explore depending on the rates offered,” he said.
Officials said there are some high cost borrowings – at 8.95-odd per cent – which would fall due for payment over the next few years. As these repayments happen, the cost of borrowings will be go down by some basis points.
“We intend to be around the 6.8 per cent (cost of funds) range,” Kulshrestha said.