Fundamental Analysis of HUDCO – Financial & More

HUDCO’s Fundamental Analysis: Urban development in India depends on housing and infrastructure, which are critical for economic and social development. Providing affordable housing and strong infrastructure can help address the basic needs of a growing population and accelerate the country’s development.

One of the companies that plays an important role in the development of the country’s infrastructure is HUDCO Limited. In this article, we will conduct a fundamental analysis of HUDCO to determine the company’s future potential.

Fundamental Analysis of HUDCO

Let’s start our fundamental analysis of HUDCO by learning about the company’s operations and products. Next, let’s look at equity finances. The article concludes with highlights and a summary of future plans.

Industry Overview

India’s growth is strongly supported by continued investment in real estate, generating income and jobs that benefit a variety of industries.

The government’s emphasis on ‘infrastructure-led economic growth’ was evident in the Union Budget 2023-24, where capital investment in infrastructure increased by 33 per cent to reach ₹10 lakh crore, equivalent to 3.3 per cent of GDP.

Additionally, the Urban Infrastructure Development Fund (UIDF), managed by the National Housing Bank, was established to leverage the priority sector lending shortfall. The fund aims to improve urban infrastructure in tier 2 and 3 cities.

Lastly, the Pradhan Mantri Awas Yojana (PMAY) strengthened the government’s commitment to housing development with its allocation increasing by 66% to reach ₹79,000 crore.

Company Overview

Established in 1970, Housing and Urban Development Corporation (HUDCO) is a public sector financial institution for housing and infrastructure development. The company

The company provides long-term financing for the construction or financing of residential homes or undertakes housing and urban infrastructure development programs. Housing finance is divided into social housing, residential real estate, and retail finance and is operated under the brand HUDCO Niwas.

Through urban infrastructure finance, the company facilitates lending for water supply, roads and transport, power, emerging sectors, industrial infrastructure, commercial infrastructure, social infrastructure, sewerage, drainage, solid waste management, etc.

As of FY23, the company has a network of 21 regional offices and 11 development offices across India with a presence in major cities of each state and other cities and union territories.

The following image shows a geographic breakdown of the company’s total outstanding loan portfolio.

Operational Highlights

Cumulatively since its inception, the company has approved a total of 17,335 housing and urban infrastructure projects with total loans of ₹236,555 crore and disbursements of ₹196,612 crore.

The company has also approved financial assistance to over 196.48 lakh houses in both rural and urban areas of the country, of which 1.87 crore (95.31%) fall under EWS/LIG category.

Additionally, under its retail lending arm HUDCO Niwas, the company has cumulatively approved financial assistance worth ₹6,871 crore to 3.86 million individuals and disbursed an amount of ₹5,178 crore.

Fundamental Analysis of HUDCO – Finance

Now, let us do a fundamental analysis of HUDCO Limited using the annual reports released by the company.

Increase in net interest income and net profit

The company’s financials reported total revenue of ₹7086.18 crores in FY23. This represents a marginal increase in revenue compared to total revenue of ₹6997.66 crores in FY22. With reported revenue of ₹5,591.22 crores in FY19, the company’s total revenue has grown at a compound annual growth rate (CAGR) of 6.10% till the most recent financial year.

On the other hand, the company’s net profit declined slightly from ₹1,716.60 crores in FY22 to ₹1,701.62 crores in FY23. Overall, the company’s net profit has grown at a CAGR of 9.58% since FY19, which is better than its revenue growth.

Margin Analysis

The company’s net interest margin showed a downward trend till FY22. Net interest margin improved slightly in FY23, reported at 3.19%. NIM represents a company’s net income relative to its average interest-earning assets. The company reported the highest net profit margin at 24.68% during FY22. During FY23, these margins declined slightly to 24.14%.

The table below shows the net interest margin and net profit margin of HUDCO Limited for five financial years.

Non-performing assets (NPAs)

During FY23, total NPAs were reported at ₹2,759.17 crores, constituting 3.42% of the company’s overall loan portfolio. After accounting for the provisions set out for GNPAs, the company reported net NPAs of ₹407.25 crores constituting 0.52% of the net loan outstanding.

During FY23, NPAs increased slightly to 0.52% (3.42% in FY22), while GNPAs decreased to 3.42% (3.58% in FY22). This is a result of a reduction in provision coverage from 86.20% in FY22 to 85.24% in FY23.

rate of return

Regarding returns, the company reported ROA of 2.13% in FY23, which was a slight decrease compared to the previous fiscal year. ROA represents the return a company earns on its total assets.

During FY23, the company reported an ROE of 11.02%, which is lower than the average return shareholders expect for their invested capital. The table below shows the RoA and RoE of HUDCO Limited over 5 financial years.

HUDCO’s Fundamental Analysis – What’s Next?

• The company is emphasizing its expanding focus on urban infrastructure and social housing.
• The company focuses on sanctioning lending to state governments and their institutions. This will help private sector companies avoid credit risk.
• The company is expanding its geographical presence in smaller cities to meet its growing financing requirements and requirements.
• The company will continue to participate in the implementation of government housing and urban infrastructure programs such as DAY-NULM, Smart Cities Mission, AMRUT, Jal Jeevan Mission and PMAY-HFA (Urban).
• The company aims to raise funds from a variety of sources to reduce the cost of incremental borrowings.

key indicators

conclusion:

This concludes the article on ‘Basic Analysis of HUDCO’. Finally, we can say that growth looks good due to the government’s emphasis on housing and infrastructure development and the company’s strong financials and future plans. What does the future hold for HUDCO? What are your views on the company? Let us know in the comments section below.

Written by Aaron Barth

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