HUDCO to slash funding costs with ₹4,000-5,000 crore bond refinancing, targets Japan and US markets: CMD Kulshrestha

HUDCO Chairman and Managing Director Sanjay Kulshrestha

Housing and Urban Development Corporation (HUDCO) will look to refinance nearly ₹4,000–5,000 crore worth of high cost bank loans through lower interest bearing bonds thereby bringing down cost of funds by 10 – 20 basis points (6.6-odd per cent) this fiscal, Chairman and Managing Director, Sanjay Kulshrestha, told businessline.

Most of the bank loans to be refinanced carry an interest of 7.3 – 7.5 per cent. As against this, the last fund raise by HUDCO, to the tune of ₹2,500 crore, through bonds carried an interest rate of 6.9 per cent.

Refinancing is the process of replacing an existing loan with a new one, often to get better terms like a lower interest rate or a shorter loan term. 

“We are looking to bring down the cost of funds and have been exploring various options. So we will refinance some of the previous high cost funds through lower cost financing options. Even a 10-20 basis point difference gives us good leverage. So refinancing will be done for some of the older borrowings,” Kulshrestha said.

The NBFC has approvals for a ₹60,000 crore fund raise.

It recently received government approvals for issue of deep-discount zero coupon bonds – a rarely used but selectively premium offering – of up to ₹5,000 crore (on maturity), apart from getting the green light to issue capital gains bonds.

Bond issue

HUDCO intends to raise some ₹2,500–odd crore through these one time, zero coupon bonds, mostly targeted at corporates. Typically, a zero-coupon bond is a debt instrument that is sold at a discount to its face value and does not pay periodic interest during its life. Instead, the investor receives the full face value at maturity. So far only two government-backed entities – REC (Rural Electrification Corporation Ltd) and PFC (Power Finance Corporation) – have been allowed to issue these bonds.

The capital gains bonds – called Section 54EC bonds – will allow the company to tap into the retail segment, with expected fund raise being in the ₹500–1,000 crore range. “We are a new player here. So there is some competition. We will carry out pan-India roadshows to tap into this segment,” he said.

Tapping Japan and the USA

According to Kulshrestha, at least two fund raising tranches are being explored from Japan – with each tranche being to the tune of $500 million (around ₹4000 crore). The cost of funds are expected to be around 6 per cent – substantially lower.

The company could also tap into the US market, post Q3FY25, depending on the Fed rate movements. Right now the cost of funds from the US works out in the 7 – 7.5 per cent range, sources said.

“So if there is some change in the cost of funds from the US, we will tap into that market too. Probably post the third quarter of this year,” he said.

HUDCO aims to bring down its cost of funds to 6.6 – 6.7 per cent in FY26; as against the 6.9 per cent exit rates of FY25. The company’s NPAs remain less than 1 per cent.

Disbursals

The company, one of the oldest housing finance entities in the country, recently obtained approvals as a non-banking financial entity. It is targeting a disbursal of ₹50,000 crore in FY26 – nearly 25 per cent higher over FY25’s ₹40,000-odd crore.

Disbursals mainly cover 30 – 35 per cent in the roads segment, 5 – 10 per cent in multi modal corridors, 20 – 25 per cent in power and engineering segment and around 10 per cent in housing. These mostly cover government, including State government ones.

Published on April 22, 2025