Hudco eyes end-to-end role for ULBs to drive ₹1 trn Urban Challenge Fund

State-run company plans to finance $500 million in greenfield metro projects this financial year

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Housing and Urban Development Corporation (Hudco), a state-owned lender, is eyeing a larger, end-to-end role in financing grassroots corporations or urban local bodies (ULBs) to drive investment for the ₹1 trillion Urban Challenge Fund, announced by the government.

 

The company is working on the Urban Invest Window, its support platform, to help ULBs develop bankable infrastructure projects, and its discussion with multiple states including Maharashtra, Telangana, Andhra Pradesh, and Karnataka has gained pace, Sanjay Kulshrestha, chairman and managing director, told Business Standard in an interaction.

 

“States have a lot of projects lined up. We will be hand-holding them through capacity building and project formulation. Transaction advisors will be there to work with them so that they can present their projects to the investment community,” he said.

 

Demand for urban financing is brewing in view of the fund, announced by Union Finance Minister Nirmala Sitharaman in her Budget speech in February. The initiative provides 25 per cent support for bankable projects, which position cities as growth hubs.

 

The move presents a multi-trillion project opportunity which lenders can tap into. According to Kulshreshtha, Hudco aims to see these initiatives through to the financing stage, where it aims to be a beneficiary by extending credit.

 

Currently, there is a vacuum in bankability for urban projects and Hudco will look to build from the basics like preparing asset registers, capacity, assessing bankability, preparing better detailed project reports, and seeking PPP (public-private partnership) investment.

 

“Public–Private Partnership (PPP) participants will be drawn to the initiatives, for which obtaining an appropriate investment grade ratings will be essential. In some cases, Urban Local Bodies (ULBs) may opt to issue Municipal Bonds, which will necessitate a comprehensive review of their accounts and budgets. Their financials will need to be streamlined and strengthened to meet the requirements for credit rating evaluations. While this is a shared responsibility across stakeholders, we will play an active role and are in the process of identifying ULBs that are prepared to collaborate,” said Kulshreshtha.

 

The lender funded largely government-backed projects so far and is starting a foray into PPP projects and sectors other than housing this financial year onwards.

 

“In private sector funding, we do not have a target. Our approach will be strictly driven by the credibility of the entities, with a strong emphasis on project due diligence and the strength of the promoters,” he said.

 

The company is eyeing opportunities worth ₹1.1 trillion in the maritime space. It is talking to PPP players for financing projects as well, Kulshreshtha said. It has also started a $1 billion urban mobility fund and is in talks with metro corporations across India for financing opportunities.

 

“This financial year you can expect around $500 million of financing for greenfield projects,” he said.

 

The company is looking at increasing its loan books to around ₹3 trillion by 2030 from ₹1.44 trillion at present, and becoming a zero net-nonperforming asset entity in the next 12 months.

 

Kulshreshtha said will continue to avoid raising funds in the US dollar market due to currency-related volatility and will exercise caution in external commercial borrowings.