Hudco plans to refinance up to ₹7,000 crore of costly debt in FY26

Institution aims to lower cost of funds by leveraging softening rates; raised ₹2,190 crore via NCDs in May and targets ₹65,000 crore in total borrowings this year

State-owned Housing & Urban Development Corporation (Hudco) plans to refinance old high-cost debt of up to ₹7,000 crore in financial year 2025-26 (FY26) to lower its cost of funds, taking advantage of softening interest rates in the system.

 

Sanjay Kulshrestha, Chairman and Managing Director, Hudco, told Business Standard the refinancing exercise has already begun. In early May, the institution raised ₹2,190 crore via non-convertible debentures with a five-year maturity carrying a coupon rate of 6.90 per cent. The institution expects to reduce its funding cost by 10–15 basis points in this financial year.

 

According to an analyst presentation by Hudco, the cost of funds rose to 7.44 per cent in FY25 from 7.25 per cent in FY24. However, the yield on loans improved to 9.5 per cent from 9.04 per cent a year ago. Its net interest margin (NIM) rose to 3.22 per cent at March- end in 2025 from 3.18 per cent.

 

There is an expectation of further repo rate cuts in the current financial year, and the dollar is also expected to weaken. This may allow for additional reductions in the cost of funds, Kulshrestha said.

 

The Reserve Bank of India has reduced the policy repo rate by 50 basis points (bps) – with a 25 bps cut in February and another in April 2026. The current policy repo rate is 6.0 per cent.

 

Kulshrestha said Hudco expects to raise funds worth ₹65,000 crore via bonds and external commercial borrowings. It raised ₹51,133.41 crore in FY25 compared to ₹21,975.13 crore in FY24.

 

On business growth in FY26, he said disbursements could be around ₹50,000 crore.  Sanctions stood at ₹1.27 trillion in March 2025. The sanctioned amounts are disbursed over a period of two years, depending on project progress.

 

There is a committed pipeline of more than ₹2 trillion. The outstanding loan book could touch ₹1.5 trillion by the end of March 2026, he said.

 

Loan disbursements grew by 122.59 per cent year-on-year to ₹40,038 crore in FY26. Outstanding loans rose by 34.72 per cent year-on-year to ₹1.24 trillion at the end of March 2025, according to the analyst presentation.