Housing and Urban Development Corp. plans to raise $2 billion through overseas borrowing in the current financial year, Chairman and Managing Director Sanjay Kulshrestha said on Wednesday.
This will be through a mix of bonds and loans, he said during HUDCO's post earnings press conference, adding that the state-owned company will tap the Japanese market because of cheaper rates.
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While the company plans to raise $500 million through external commercial borrowings in the second quarter of the current financial year, it is also planning a bond series, the CMD said. Both borrowings will be in yen-denominated terms.
From the total overseas borrowing, the company may also look to issue social bonds in the Japanese market in this financial year, a company official said. It could look to issue these papers at a rate of 6.25%.
On the domestic borrowing front, Kulshrestha expects about 80% of its total borrowing from the domestic bonds and loans.
Of the Rs 65,000 crore that the company plans to raise, it will raise about Rs 1,000 crore through 54EC capital gains bonds and Rs 5,000 crore through five-year zero coupon bonds, a company official told NDTV Profit on the sidelines.
In the financial year ended March 2025, the company's total borrowing was around Rs 55,000-60,000 crore.
54EC bonds are also known as capital gains bonds which allows investors to save on long-term capital gains taxes incurred from the sale of property or assets. It offers a tax exemption on the capital gains if invested within a certain timeframe.
Meanwhile, zero coupon bonds, or deep discounted bonds, are those sold at a discount of over 20% than its face value. The entire income received from investors will be considered under long-term capital gains tax instead of interest income, making these bonds tax efficient.
The company plans to tap the debt market with its zero coupon bond issue by the next month, Kulshrestha said.
In the domestic market, HUDCO's plain vanilla bonds are issued at a coupon of around 6.80% levels. the company official expects its zero coupon bonds to be issued at about 40 basis points lower.
In April, HUDCO receive the government's approval to issue zero coupon bonds clearance and the company will be able to raise a maximum of Rs 2,351.49 crore through this issue.
“The authorisation to issue 54EC Capital Gains Bonds and Zero Coupon Bonds will enable access to long-tenor, low-cost funds, strengthening support for bankable projects,” the CMD said.
He expects the company's cost of funds to decrease to 6.5-6.6% by the end of the current financial year. As of March 31, its cost of funds was at 6.75%.
Overall, he expects to grow the company's loan book at over 25% on a compounded annual growth rate and expects it to touch Rs 3 lakh crore by 2030.
HUDCO's loan book grew by 34.72% on-year to Rs 1.24 lakh crore for the quarter ended March. Apart from infrastructure, the company also expects to fund public airport and seaport projects.
On profitability, Kulshrestha expects the company's net interest margin to remain in the range of 3-3.4% in FY26 from current levels of 3.36%.
Moreover, it expects to turn into a net zero company in the next 18 months as it has not added any fresh slippages in the last two years.
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