Housing & Urban Development Corporation Ltd (NSE: HUDCO) Q3 2025 Earnings Call dated Jan. 23, 2025
Corporate Participants:
Sanjay Kulshrestha — Chairman and Managing Director
Daljeet Singh Khatri — Director of Finance and Chief Financial Officer
M. Nagaraj — Director of Corporate Planning
Analysts:
Shweta Daptardar — Analyst
Nilesh Jethani — Analyst
Rucheeta Kadge — Analyst
Rati J. Pandit — Analyst
Navin Shetty — Analyst
Arjun Bagga — Analyst
Arvind R — Analyst
Kayur Asher — Analyst
Dhaval Gada — Analyst
Ritika Dua — Analyst
Omkar Salgaonkar — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Housing and Urban Development Corporation Limited, HUDCO Q3 FY ’25 Earnings Conference Call hosted by Elara Securities. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]
I now hand the conference over to Ms. Shweta Daptardar from Elara Securities. Thank you, and over to you, ma’am.
Shweta Daptardar — Analyst
Thank you, Sejal. Good morning, everyone. On behalf of Elara Securities, we welcome you all to Q3 FY ’25 earnings conference call of HUDCO. From the team management, we have with us today, Shri Sanjay Kulshrestha, Chairman and Managing Director; M. Nagaraj, Director, Corporate Planning; Shri Daljeet Singh Khatri, Director, Finance and CFO; Shri LVS Sudhakar Babu, Executive Director of Finance; Shri Achal Gupta, General Manager of Finance. We express our gratitude towards the management of HUDCO to provide us the opportunity to host this conference call.
Without further ado, I now hand over the call to Mr. Sanjay Kulshrestha, CMD for his opening remarks, post which we can open the floor for Q&A. Thank you, and over to you, sir.
Sanjay Kulshrestha — Chairman and Managing Director
Good morning, I am Sanjay Kulshrestha, I am CMD of HUDCO. Thank you for — thank you so much for arranging this call and I welcome all the participants on this call. So let me go to the background of the company. HUDCO earlier which was a housing finance company has transited its positioning and now we are a NBFC IFC company and we are into the infrastructure financing. We are providing a holistic support to — for creation of the infrastructure which is required for the Viksit Bharat and which is in line with the policies of the government of India. This is not a sector based financing institution. We are into multi factor kind of financing industry. So starting from the housing to urban development.
So if I I talk about urban development, I think urban development takes care of the metro mobility, roads, transports, water, seaways and everything which is required for the urban development. So we are financing that part of the thing. Then we had also revised our object laws and include the rural infrastructure as well. So it is a company which provides a holistic support of financial. At the same time we are also extending our consultancy services starting from the conceptualization of the project to the handholding of the utilities. Because we understand that the best practices has to be shared between the stakeholders. And India is a very diverse kind of country wherein the requirement of each state and each state may vary from time to time.
We are also having a training institute and we welcome the participants from the stakeholders to which we are lending which also includes. There are some few foreign participants also we are inviting. So you can say we are providing a 360 degree kind of solutions for creation of infrastructure for our stakeholders. If you see our operations, we operate through our regional offices across the country and they are full fledged regional offices. Who takes care of the business development, the policies, the recoveries, the HR and everything is there at the road step of the borrowers. And that’s why if you see that we had been able to reduce our SMA2 assets also. So they take care of the monitoring, financial monitoring and the physical monitoring, the status, the progress of the project starting from the business conceptualization. So they are becoming our growth engines for the company.
Then regarding the figure, if you can see that our financial ratios are very strong so that equity is in the range of less than 6% which is best for any financial institution. Our CRAR is also around 47, 48%. We are leveraging our capitals very well. And you can see our sanctions has raised around 5 times on quarter to quarter on yearly basis from 18,000 crores we had raised up to 92,000 crores. The company has a very robust pipeline which is testimony that our disbursements are continuously growing. If you see our disbursement on quarter to quarter on a yearly basis we had raised up to 31,760 crores of the disbursement in past nine months.
In last year it was only INR17,000 crores. The year before pass it was around 8,000 crores. So company is on continual growth path. Our loan book has raised about 41% on yearly basis. If you see last year by 31st of December quarter three the loan book was around 84,000 which has raised to 118,000 crores of the loan book. And we will not be stopping at this place because we have a very robust pipeline. So committed liabilities of the loan. The loan book or you can say order book of the company is more than 1.2 lakh crores presently. And we are continually working to raise this order book. Our borrowing, if you see that we had continually worked to cut down our cost of funds.
Irrespective of our growth, we had been successfully able to cut down our cost of fund. And during last nine months we had raised around 39 40,000 of the crores. And the weighted average cost of the borrowing is 6.8. So on year to year basis you can say we had cut down around 30 basis point of our borrowing. And this is actually providing a potential to fund best asset quality and without compromising on our yields. NIMS and the spreads. On NPA side we are very very aggressive in resolving our assets. And you can see that our NPA levels are coming down very very heavily. And now our net NPA is only 0.18% and gross NPA is also reducing. So you can say that we are not only working towards the growing business, we are also resolving our assets. We had came to the market for recruitment and around 65 officers.
We had recruited a new blood, a fresh blood is also infused. At the same time we are taking off care of our corporate governance and all the compliance of the RBI is being done. And all the IT framework is also in line with the requirement of the company including ERPs and E office. It’s a more or less, you can say it’s a paperless kind of office. We are a triple a rented company of course and 75% owned by government of India. We are continually raising external commercial borrowings. Also last we had taken funds from the Japanese market, Yen denominated and total. We had taken two tranches in yen and they are giving good arbitrage in terms of the interest rate which is also one of the factor in reducing our cost of funds. The borrowing is very diverse. Around 17% is coming from the foreign currency and the bond is around 40%. So we are taking care of each and everything starting from the financial ratio maintenance up to the asset quality, then the growth of the business. Then the spreads and the resolution of the assets and enhancement of our process and the procedures including the recruitment of the new officers.
So this is my opening remarks. Thank you so much.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Nilesh Jethani from BOI Mutual Fund. Please go ahead.
Nilesh Jethani
Hi, good morning, sir, and…
Operator
Sorry to interrupt, sir. I would request you to please use your handset.
Nilesh Jethani
Hi, good morning, sir, and thanks for the opportunity and congratulations on the great set of numbers. So first question is on the overall loan growth guidance wanted to understand with robust performance in the nine month period do we revise or do we aspire to grow at a much faster pace versus 20% 25% guided earlier?
Sanjay Kulshrestha
Regarding the growth numbers. Yes, last year was very favorable and this is because of the tailwinds available in the infrastructure sector and the commitment of the government of India backed by the policies and the capital expenditure in the budget. At the same time the growth of company in last five years was not so high so you can say it was muted. So in one to two years of the time our growth rate may be around high as good as maybe 40% or 30% but finally we will be settling in the CAGR of 15%, 16% only. So because we will not be aggressive after two years. So we are, we are looking at the figures in the next fiscal of around INR1.5 lakh crores and by 2030 around INR3 lakh crores. So average CAGR will be around 15%.
Nilesh Jethani
Got it, sir. That was helpful. So second question was broadly on the color on the sanction book. So the sanction book today what we carry. Can you give us understanding what is the nature of this books and typically on a very broad based scenario, sanction to disbursement, what percentage gets converted A, B what are the timelines of this conversion typically?
Sanjay Kulshrestha
See, we are a multi sector financing institutions and our loan book is across the country. I think we have footprints in across nearly all the states. Only few states of northeast may not be there, but in all the states and states are now becoming most competitive in terms of creation of the infrastructure because it is the aspiration of the people to create the infrastructure. So one, we are across the state, second, we are across the sector. So I cannot say that this sector is moving high or this sector is not moving because in one state this sector will be moving very high, in other state another sector will be moving very high. But at the same time since we are housing and urban development, so we will be taking care of the housing as well.
Presently our housing portfolio is around 40% and with this PMAY 2.0 push from the Government of India, we are definitely sure that we will be maintaining this kind of loan book for another two to three years of the time. Because the horizon of this scheme is five years. And regarding the other assets, also regarding the conversion that you are asking, that pipeline is converted in a year, three to four years of the time. Because we all understand these are highly capital intensive project and a good gestation period is required for implementation of such huge capital expenditure projects. So three to four years is enough time and first year the disbursement may be around 30% to 35% and then next couple of years the project is getting completed.
So the conversion ratio presently is more than 80%. And we are definitely sure that whatever we are promising and committing to our borrowers, because of our terms and conditions, including the interest rate, we will be the most preferred lender. So conversion will be more than 80% always.
Nilesh Jethani
Got it sir. And so the disbursement run rate, what we are seeing the Q-o-Q growth but we also had the understanding that this time H1 was slightly better for us with some loan disbursement being preponed. But we still carry the fact that H2 typically is better for the BFSI industry as a whole. So this Q-o-Q trajectory of disbursement, is it right to assume will continue on a growth trajectory?
Sanjay Kulshrestha
Definitely. I think everything is going as per plan. Next to every quarter we are dispersing around INR10,000 crores. And I think in quarter four it will be slightly more than that. So it’s all planned and because the planning is being done on the progress of the project. So we look at the project to project and find out the disbursement schedules and on the basis of that only the quarter to quarter disbursement are planned.
Nilesh Jethani
Got it sir. That’s really helpful. I have few other questions. Probably I’ll join back in the queue and come again.
Operator
Thank you. [Operator Instructions] The next question is from the line of Rucheeta Kadge from iWealth Fund. Please go ahead.
Rucheeta Kadge
Hello sir, a very good morning. Sir, just wanted a little bit color on your cost to income ratio. So how do we see that panning out going ahead?
Sanjay Kulshrestha
Cost to income ratio definitely we are sustaining on from if you see the last five quarters. So the cost of funds we are continuously reducing and income we are continuously improving. So you can see our turnoveris around INR7700 crores and if you compare it with the last year it was around INR5600 crores. Am I right? Around INR5400 crores.
And regarding the spreads we are continually sustaining or you can say improving also this year also this quarter also we had improved to the extent and I am sure that we will be maintaining such kind of levels in terms of the spreads and the NIMS. NIMS will be around — NIMS will be around 3.2%. If you exclude the EBR portion of INR20,000 crores which has been taken by the government officials India our nims are around 3.85% and our spread is around 2.41%. So and return on asset also if you can see we had improved a lot. We are at 2.45% and the return on equity we had improved from around 11% to more than 14% now.
Rucheeta Kadge
Sir, my question is mainly on your operating expenses side that is you know, your employee cost and all of that. How do you see that panning out going ahead? You think that will be constant or you think it’ll improve like it will increase?
Sanjay Kulshrestha
No, no, definitely it will not be improved. Rather if you take out the escalation we will be reducing our cost of funds because now the new officers is being included and lot of retirements are there. So we will rather maintaining or we will be try to reduce our cost. If you see the cost of employee per unit profit it will be definitely improving.
Rucheeta Kadge
Got it. And sir, on the you know, recovery side, how much are we expecting to recover maybe next year?
Sanjay Kulshrestha
We had a definite plan madam and we are continually monitoring for resolution of the assets. And you can see our figures also we had been able to reduce and came out with 0.18 kind of NPA label for next financial. For next financial year, for next quarter, quarter four we are targeting around 187% of the resolution expected which includes the principal of around INR150 crores and the interest of around INR50 crores. So since our NP levels are very strong so you may feel that these figures are not so catchy. But our total figure is only INR2200 crores — and INR1200 crores out of INR2200 crores is under NCLT. So very soon I think we will be taking care of this result.
Rucheeta Kadge
Okay, sir. Understood. Understood. Thank you so much.
Sanjay Kulshrestha
Thank you.
Operator
Thank you. The next question is from the line of Rati J. Pandit from Nirmal Bang Institutional Equities. Please go ahead.
Rati J. Pandit
Hello?
Operator
Yes.
Rati J. Pandit
Yeah. So thanks for taking on my question. My first question is regarding the recovery. I mean what is the proportion of, I mean, PSU and private sector NPAs as of now and what is the status on resolution of the PSU NPAs which we are having and in the private sector as well?
Sanjay Kulshrestha
See, a lot of PSU NPS we had resolved. Like AP Housing Board we had resolved. Then Mizoram Urban Cooperative Development is resolved. Then the SBI is resolved. SBI Staff Housing Cooperative Society was resolved. Then Nair IPUR is resolved. So now it is only the JNK that we are working it out. And I am sure that in quarter four we will be resolving that. Because we are giving some special emphasis on JNK because of its structure. So we are in discussions with the administration and very soon it will be resolved. And last is the Ahmedabad Municipal Corporation. So it is in the stage of the auction. So very soon in the quarter four we will be resolving that. So the PSU NPA will come to zero by Q4. That is what we are expecting.
And regarding the private sector npa, there is no new npa. We had hold sanction of the private sector. And whatever we are doing is for the resolution of these private sector projects only. And as I have stated earlier also that out of INR2200 crores NPA, around INR1200 crores is under the NCLT and around INR429 crores under the DRT. So we are fighting the cases and I think we are in the advanced stage of the resolution. And at the same time we are working our OTS policies also and we are revising continually in line with the need of the projects. And we are going project to project to resolve those kind of assets and understanding the kind of problem they had faced and how to resolve these assets in the given scenario.
Rati J. Pandit
Okay. And my second question is regarding this PMA Urban Yoshina, do we expect any further disbursements on the same?
Sanjay Kulshrestha
Yeah, it is just started, madam. So it’s a very big program of Government of India. If you say PMI urban and rural around INR12 lakh crores is to be infused and it takes care of the BLC component and ISS component and the affordable housing on grant and partnership. So what we are expecting that INR1 lakh crores in next 4 to 5 years total disbursement will come to this sector from HUDCO only.
Rati J. Pandit
So it will be towards the state sector entities. I mean I hope we won’t have another round of GNUI.
Sanjay Kulshrestha
It will be towards the state sector entities. And other than that we are also opening our window for the PPP housing projects under PMAY in partnership. So we are opening that window also. And we are discussing with the government that how these modeling can be done.
Rati J. Pandit
Okay sir, that’s it. From my side. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Navin Shetty from Tara Capital Partners. Please go ahead.
Navin Shetty
Hi sir, just wanted to understand in terms of your growth guidance you told after two years it’s going to be 15%. Is there a change in the growth numbers that you were expecting earlier or is it been the same? Just wanted a clarity on the growth numbers.
Sanjay Kulshrestha
Presently it is the same that by 2026 fiscal we will be around INR1.5 lakh crores. And for this year the target was around INR1.2 lakh crores. So we had already achieved 1.18. So we may be settling at around 1.25. So if there is a revision because of the opportunities and the potential of the market we will be informing to the market. But as of now we are settling at 1.5 lakhs which is the same number for next fiscal and 3 lakh crores by 2030 at a CAGR average CAGR of around 15 to 16%.
Navin Shetty
Okay. Okay. So that was always the guidance that you had given. Sorry, we just wanted to understand reiterate that.
Sanjay Kulshrestha
Yeah. It will be between CAGREs. CAGR will be between around 20%.
Navin Shetty
Okay. Okay. So you mean 20% will be the average CAGR over the next three to four years?
Sanjay Kulshrestha
Yes.
Navin Shetty
Okay. Got it. Thank you.
Operator
Thank you. The next question is from the line of Arjun Bagga from Baroda BNP Paribas Mutual Fund. Please go ahead.
Arjun Bagga
Yeah. Hi sir. Good morning and thanks a lot for the opportunity. So you shared this AUM growth guidance of around 40%. 30 to 40% for the next two years. Just wanted to understand the color of this and since what segments would be growing and would be leading this growth. I think for this quarter, on a quarter, on quarter basis the growth has been almost equally distributed. Between the housing side and the urban infra side. If you could give some color over there, sir.
Sanjay Kulshrestha
If you see the different reports, I think huge numbers are coming in terms of the capital infusion by 2030. So we are taking a pie of that only. So our focus will remain on the urban infrastructure and the housing. So housing will be the big way because PMAY 2.0 has been launched by government of India and it is a very ambitious project. If you can see in earlier PMAY 1.0 also HUDCO has contributed loan of around 42,000 crores, 43,000 crores. So this time we are expecting around 1 lakh crores coming out of the housing only. And other than that then there are metro projects are there. Then the road projects are there. Then the port of projects are there. Then the water seawage is always there in our kitty. So all these project will be the guiding factor of our loan book. Then the energy will also be there.
Arjun Bagga
Yes. Sir, just coming again in terms of the numbers out there. So would it be safe to assume that assuming that we are growing at this 35 to 40% number for the next two years then that would be equally like similar number would be there for housing and similar for their for urban infra as well. Would that be safe to assume?
Sanjay Kulshrestha
It will be around 40, 60 only because housing is not so capital intensive. We are into the affordable housing category only. So you can take 40% towards the housing and 60% towards the urban infrastructure.
Arjun Bagga
Sure sir. Thank you so much.
Operator
Thank you. The next question is from the line of Arvind from Sundaram Alternates. Please go ahead.
Arvind R
Hello sir. Thank you so much for the opportunity. I would like to understand this like. So our yields are based on internal page benchmarks or is it based on external benchmarks? And if you can give the split of that, you know, internal index and external benchmarks, if there is any. And similarly like what would be the reset period? Like a typical reset period, Is it early, you know, or anything. And if it is an internal benchmark? And with respect to cost like a borrowing side, like is there any big chunk of borrowings in the, you know, external. External benchmark? I mean like not a fixed rate, like a floating rate of borrowings, you know, is it in a significant mix? Yeah.
Sanjay Kulshrestha
Our Director of Finance Mr. Khatri wants to speak on that.
Daljeet Singh Khatri
Hello, good morning. Yeah, our yields are based on internal benchmarks. We have our own internal. We worked out our own internal NCLR and we have our own rate card which is applicable for various category of borrowers and various sectors. So yield is based on that. And then coming to your second point that how do we look at further raising of our resources in the times to come. As you have seen, around 17% of my total borrowings is now from external commercial borrowings and FCNRB and we look forward to take this percentage of external commercial borrowings and FCRs to around 20% of our total borrowing mix so as to further reduce our cost of borrowings currently in this…
Operator
Ladies and gentlemen have lost the connection for the management. Please stay connected while we reconnect them. Thank you. Ladies and gentlemen, thank you for patiently holding. The management is back on call. Sir, please go ahead.
Daljeet Singh Khatri
Yeah, so I was mentioning about the diversification of our resources which we have taken — which have taken place in the last one and a half to two years as you’ve seen that our external commercial borrowing mix has increased from nearly 1% to around 17% of our total borrowings and we intend to further increase it to around 20% of total borrowing mix so as to reduce our overall cost of borrowings. As you have seen in the last nine months ended during the current financial year, our incremental cost of borrowing has reduced from 7.2 to around 6.8% and so we look forward to continuously diversifying our borrowing mix.
Operator
Thank you. The next question is from the line of Kayur Asher from PNB MetLife. Please go ahead.
Kayur Asher
Yeah, thank you. Thank you sir for the opportunity. I guess most of my questions have been answered but maybe just a few follow ups. So sir, we understand that there’s been a strong traction on this urban infra segment. So if you could provide some more color there on the, let’s say larger disbursements that you would have made recently in terms of projects you are funding, geography, where these funding is happening and more importantly, if you could talk about, I mean, how you are mitigating potential asset quality risk here. I mean, are all these loans typically guaranteed by the state government? Whether HUDCO is the sole lender in these projects? Yeah, sorry.
Sanjay Kulshrestha
Okay. I think our Director, Corporate Planning will speak on that. Then I will also supplement.
M. Nagaraj
Good afternoon. Actually, if you see our balance sheet, in terms of that, majority of our loans are secured by government guarantee by nature in urban infrastructure. We funded predominantly in infrastructure, especially like roads, urban mobility, water supply, seaways. Very good portfolio we have. So some of them are secured by government guarantee and some of them are bankable projects. In terms of housing, we have predominantly done that. Pradhan Mantria Vas Yojana again now, Pradhan Mantria Vas Yojana 2.0 is likely to start probably next year. It will pick up gradually. So it is in the planning and conceptual stage.
Kayur Asher
Yeah. So sir, whether HUDCO is typically the sole lender in these projects or how does it work?
Sanjay Kulshrestha
Yeah, actually now we had started working on an idea to become a sole lender. But at the same time we are open to consortium financing and some of the project we are financing with REC and PFC also because they had also of late started the infrastructure financing. Of course there is a cap of 30% with them which is not there with the HUDCO. So what if the project size is too large and as per the regulatory guidelines we are not able to fund 100% and we are going ahead with the consortium. But having said that, we always prefer to go solo, to have our own terms and conditions and the monitoring framework and everything on us to take care of the loan during the lifetime. But at the same time, regulatory framework has to be taken care.
And regarding the infrastructure. Urban infrastructure, that’s what you were asking. You may be knowing that India has a very high rate of urbanization and lot of requirement of the capital is coming into the urban sector and lot of traction is there and which is driven by the aspirations of the people who are coming to the urban side or the urbanization of the rural side. So lot of infrastructure is required starting from the housing to water and the basic needs of a person starting from the sewage to energy, then the roads, then the mobility. So all these things takes care of the urban infrastructure and for which HUDCO is mandated to support as a financier. So we have ample opportunities of the funding and we had been exercising this very judiciously. Of course, presently our more than 75% of the loans are backed by the government guarantees. But we had off late started doing the cash flow based projects also. So we have a very diverse kind of loan portfolio and we are continually working with the states to understand their needs and the requirement and to work out some customized loan product also in line with the requirement of the project.
Kayur Asher
Right sir, that’s helpful. And sir, one other follow up. So just more broadly like you mentioned at a high level, if you could help us understand given that large proportion of the lending that HUDCO does is let’s say backed by the state government guarantees or maybe budgetary provisions. So what is — what typically restricts the states to, I mean fund these projects directly from their budget or through let’s say the SDL borrowings that they do, the market borrowings that they do. Given that, I mean the borrowing rates on those bonds are likely to be much cheaper than what HUDCO would be lending at. So what’s driving that demand? If you could help us understand that.
Sanjay Kulshrestha
So you are right on your point. The first option, the estate excise is of the sdl. But the appetite of the market and the requirement of the state at that point of time it actually decides the amount of the SDL which the state raised. If you see the HUDCO loan, we are a project financing based organization. So we are disbursing the funds in line with the requirement of the projects. So there is no holding charges on the states for our loan. So in on one day if they require 1 crore, we will be disbursing in line with that requirement of 1 crore only. However, if you go for the SDL there will be a holding cost with the states and for hardcore loans they can use as a tap arrangement. So, they will be saving on their part.
And secondly, there are there are some concerns about the FRBM limits also. So they have to be within that FRBM limits also. And thirdly, the market appetite to control their cost of fund in terms of the sdl. It also plays a very vital role while deciding the amounts of sdl.
Kayur Asher
Understood. Sure, sir. And sir, lastly, we understand guiding for pretty strong growth in the coming years. And also HUDCO is known to, I mean have decent dividend payouts. So do you envisage any equity requirement going forward over the medium term?
M. Nagaraj
By 2030 going by this figure, whatever projections that we have taken given to the market I don’t think that we will be requiring any capital infusion. Our CRAR is very strong of around 47%. Our debt equity ratio is very good. So now the profits are being generated. So I don’t think anything will be there. In last year also the net worth has raised by around 11%. I think all the financial ratios are in control. So ROE is around 2.45% and debt equity is also in control. So I don’t think any requirement of the capital will be there for the company.
Kayur Asher
And sir, is this also, I mean given that, I mean bulk of our loans are backed by the state government which might be, I mean coming at a lower sort of risk weight that is also driving, I mean stronger capital ratios. Would that be a key contributor there? And so connected question there because you mentioned about let’s say 3 lakh crore book by 2030. So how should we look at, I mean the overall mix of that particular loan pool vis a vis, I mean what percent of the book would then be, let’s say backed by state government borrowing, state government guarantees or budgetary provisions. Any rough idea if you could provide.
Sanjay Kulshrestha
We definitely lower on side in the numbers because Ministry of Finance Government of India is continuously monitoring extending the government guarantees and the budgetary allocations. And there are issues in the frbm. That’s why we had switched towards the bankable projects and now we have set up internal department to look at the private sector funding also. So we are appraised of the situation that we may not be getting the government guarantee and we will be going for a good quality of the asset in other side or PPP side kind of things. So I don’t see any high. This is the highest debt government guarantee we have. So going forward the number may reduce but at the same time we will not compromise on the quality of the assets and the quality of the entities to which this lending will be done.
Kayur Asher
Understood sir. Thanks. This is very helpful. Thank you.
Operator
Thank you. The next question is from the line of Dhawal from DSP Investment Managers. Please go ahead.
Dhaval Gada
Hi sir. Congratulations on good numbers. Just had a couple of questions. First was relating to the Government of India bond book that we have about 20,000 crore. When does it sort of run off? If you could just remind that to would be useful. And second was relating to the profitability that we’ve achieved in the last nine months. Just, you know, sustainability around these ROA metrics. If you could just talk about, you know, what’s a sustainable ROA for our business that would be quite useful. Yeah.
Sanjay Kulshrestha
Regarding the bonds which has been raised as a year ’27, ’28, everything will be retiring — ’28, ’29. Sorry. So regard. So profitability numbers will be sustaining because we are on a growth path and we are maintaining our spreads and the name. So I have no doubt that the trajectory of the profitability will be reducing. At the same time, if you see our ROA is around 2.4, 2.45. So we will be somewhere around that number only. So because we are not compromising, at the same time we are resolving our asset, we are working towards cut down the cost of funds so everything is contributed in terms of the ROA or ROE. These figures we are settling down. I think by next quarter we will be settling and sustaining those figures.
Dhaval Gada
Right. Sir, just on the first one on this INR20,000 crore. So our INR3 lakh crore guidance is after this runoff that we will see in FY ’29. So that is budgeted. So is that correct?
Sanjay Kulshrestha
Yeah, it’s for 2030. So before that they will be retired. So it is…
Dhaval Gada
Understood. And the second one is where I was coming from an ROA perspective was the current profitability also includes the write backs which probably in a couple of years maybe we’ll sort of see a normalization of that provision line which is right now negative. So from that perspective I was just trying to understand you are confident of achieving this 2.5%, 2.4%, 2.5% ROA even at that size is where I was coming from.
Sanjay Kulshrestha
Yeah, yeah. If you see in the last year our profit has grown by 40%. So it may not be 40% because some of the figures are coming from the write backs. You are rightly said. But after resolving all these assets I think we will be. And at the same time we are enhancing our loan book also the contribution of the loan book will be higher towards the profit. So that is why the threshold label of the profit will come and the trajectory will be maintained.
Dhaval Gada
Perfect. Great. Thanks and all the best.
Sanjay Kulshrestha
Thank you.
Operator
Thank you. The next question is from the line of Ritika Dua from Bandhan AMC. Please go ahead.
Ritika Dua
Yeah, so thank you. So just one question on the release that you had made on this MOU that you had signed for the development of the port project. So could you just share some more details around that. You said that it’s a INR25,000-odd crore kind of project. So how does that progress? And maybe also some color on how on what yields do we look to do this business at?
Sanjay Kulshrestha
Yeah, Mr. Nagaraj will be speaking on that.
M. Nagaraj
Really thanks you for such a nice question you asked. So this is a very progressive one, ma’am. As you see that JNPT is already saturation levels have been come. So as a result now they are going for a new port. So we already committed almost 1/4 of the total 1. This will be implemented in a progressive manner. So it is expected that in a couple of years time it will get mature. Depending upon the requirements, they will be drawing our funds. This is the first step. What we have done is executing an MOU. So next step will be that sanctioning and all. We expect that there will be a yield around 8 to 9% will be the range in which there will be availing this facility, ma’am.
Ritika Dua
And sir, when you say one…
Sanjay Kulshrestha
Just to supplement, this is a very important infrastructure for the country. So. And we are very, very fortunate to get this opportunity with associating with JNPT. But at the same time we will not compromise on our yield. So yield will be around 9%, 8.9 to 9% kind of thing. But you know, these yields are continuously varying. It depends on the cost of funds and the rate cut expected from the rbi. But definitely the yields will be maintained minimum. At the same time the quality of the assets will not be compromised.
Ritika Dua
So sir, on an incremental basis the spread on this particular funding would be if at all 9% is the yield, the incremental spreads on this particular project would come at what?
Sanjay Kulshrestha
Not less than 2%.
Ritika Dua
Not less than 2%. And sir, like you said, that 1/4 has already been approved. I believe is what that number you said. And this number is likely to be disbursed over what time frame?
Sanjay Kulshrestha
No, it is not sanctioned, madam. The MoU is just signed yesterday — day before yesterday. So now we are in the advanced stage of discussions regarding the terms and condition. Then only the DPR will come to us. And then only because we work actually backward. Because we want to ensure that business rather than just signing an MoU. So now the discussions on the terms, conditions and the disbursement schedules and everything will be worked out and it will go to the board for sanctioning.
Ritika Dua
And sir, likely this would be on a consortium basis, considering the size.
Sanjay Kulshrestha
Yeah, it will be on the consortium basis. But we have to see it should be under our regulatory limits. And since our net worth is continually increasing. So presently we can take up to around INR5000 crores of the loan. So balance will be if they require, then balance it will go for other lenders also. But if they require in five years of the time, by the time our net worth will also increase. So we will see that how to engineer this disbursement and the loan outstanding in line with the regulatory requirements.
Ritika Dua
And so just one last question, like you know to one of the previous questions asked by another caller that you know, if at all this were to be funded by the state themselves, what other routes they could have maybe taken and what would have been the cost of fund in that case versus the 9% that you are maybe looking to lend them at?
Sanjay Kulshrestha
They had — since they had exhausted that route of SDL or VSEC based funding. That’s why they had came for the long term lending because we are providing more than 15 years kind of door to door tenure. So all these things means lending comes after the issuance of the SDL or government backed security.
Ritika Dua
Great. So thank you so much. Thank you.
Sanjay Kulshrestha
Thank you.
Operator
Thank you. The next follow up question is from the line of Rucheeta Kadge from iWealth Fund. Please go ahead. Ms. Rucheeta, I would request you to unmute your line and speak please.
Rucheeta Kadge
Hello?
Operator
Yes ma’am, you’re audible now.
Rucheeta Kadge
Yeah, so my question was on the average age of a book. So if you could just provide some color on that?
Sanjay Kulshrestha
Around seven years is the average age.
Rucheeta Kadge
Urban plus housing?
Sanjay Kulshrestha
Yeah, yeah, this is the average age.
Rucheeta Kadge
Okay. And this would be the norm going ahead as well?
Sanjay Kulshrestha
Longest loan will be around 20 years. The shortage is around one year. So average we will be maintaining between six to seven years of the time.
Rucheeta Kadge
Understood. Understood. Yeah. Thank you so much.
Operator
Thank you. The next follow up question is on the line of Omkar from Vasuki India. Please go ahead.
Omkar Salgaonkar
Hello. Yeah, good morning sir. So I just wanted to know the outlook on credit cost. So for now we are having write backs but what will be our normalized credit cost? If you could say that in next one to two years?
Sanjay Kulshrestha
Credit cost, we will be maintaining that because there are some external parameters which we see that some reductions will come. We are expecting some reduction and the credit cost will definitely go down.
Omkar Salgaonkar
Okay. So we will have write backs only for next two years?
Sanjay Kulshrestha
There will not be any new NPA, so it will be definitely go down.
Omkar Salgaonkar
Okay. Okay, that’s great. Congrats on the result. Thanks.
Operator
Thank you. Ladies and gentlemen, due to time constraint we will take that as the last question. I would now like to hand the conference over to the management for closing comments.
Sanjay Kulshrestha
Thank you so much. I think it was a very interactive session and We understand these kind of questions is being asked. So definitely it has enriched our experience and thank you for believing in us and I can assure you that the figures will be sustainable and whatever we are doing there is a definite framework to set these targets and on that basis only we are working and there is a huge potential in the infrastructure financing market. Looking at the Viksit Bharat plan of Government of India and now states had started competing in creation of the infrastructure which is a good work and this infrastructure growth is driven by the aspirations of our 1.4 billion people. So I think the sustenance of our business which is a since HUDCO is a multilateral — multi sectorial financial institution so it will provide a natural hedging in our business. So the growth rate will be sustainable. So that’s what I want to assure you.
Operator
[Operator Closing Remarks]