HUDCO Q2 FY27 Profit Rises 28% as Loan Growth Offsets Funding Cost Surge
The state-owned financier posted strong revenue growth, but a sharp rise in interest expense kept profitability in check despite a robust project pipeline.
HUDCO’s Q2 FY27 profit grew 28% year-on-year to ₹911 crore, driven by a 25.5% rise in revenue. However, a 33% surge in interest costs squeezed the net profit margin sequentially, highlighting the challenge of maintaining spreads amid rapid loan book expansion.
For HUDCO, the story of India’s urban infrastructure build-out is written in loan sanctions. The second quarter showed that demand remains robust, but the cost of funding that growth is rising faster than the income it generates.
Revenue rose 25.5% year-on-year to ₹4,040 crore, while profit grew 28.3% to ₹911 crore. Sequentially, both top and bottom lines grew around 8-7%, maintaining momentum from a strong first quarter. The net profit margin, however, dipped 40 basis points from the June quarter to 22.5%.
Revenue & profit
Revenue (₹ Cr)
Profit (₹ Cr)
Net Profit Margin (%)
| Metric | CurrentQ2 FY27 | PreviousQ1 FY27 | Same quarter LYQ2 FY26 |
|---|---|---|---|
| Revenue (₹ Cr) | 4,040.42YoY +26% | 3,717.17 | 3,219.03 |
| Profit (₹ Cr) | 911.04YoY +28% | 851.11 | 709.83 |
| Net Profit Margin (%) | 22.5YoY +1.8% | 22.9 | 22.1 |
The Cost of Funding a Boom
The margin squeeze points directly to a 33.1% yearly jump in interest expense, which outpaced the 25.5% growth in revenue. According to NDTV Profit, finance costs rose to ₹2,857 crore as the company borrowed to fuel its expansion. This is the core tension: loan book growth is accelerating, but it is being funded at higher rates.
Management, however, has a plan to ease this pressure. In a July interview with CNBC-TV18, CMD Sanjay Kulshrestha said the company is aggressively using the RBI’s forex window to secure cheaper, long-term foreign currency loans. He expects spreads to stabilize around the guided 2% by year-end.
Asset Quality Strengthens the Foundation
Amid the growth, asset quality provided a solid backdrop. The company resolved 10 non-performing project loans in the first half with no fresh additions, Indian Masterminds reported. Gross credit-impaired assets improved to 0.71% from 0.96% last quarter, per TradingView.
This clean-up supports the aggressive growth strategy. With a high debt-to-equity ratio of 6.45, strong asset quality is non-negotiable for maintaining lender confidence and low funding costs over the long term.
A Pipeline Built to Last
The outlook is anchored by an enormous project pipeline. HUDCO reported provisional loan sanctions of ₹1.04 lakh crore for the first half, with disbursements up 37% year-on-year to ₹35,371 crore, according to a TradingView report. This visible pipeline, backed by large state MOUs, suggests the growth story has legs.
The market approved, sending the stock up nearly 6% on results day. The valuation, at a P/E of 7.9 against an industry average of 16.5, still prices in the risks of a leveraged financier in a rising rate environment.
Key Points
- Profit and revenue grew healthily by 28% and 26% year-on-year, continuing the strong sequential momentum from Q1.
- Net profit margin dipped 40 bps quarter-on-quarter as a 33% surge in interest costs outpaced revenue growth.
- Asset quality improved markedly, with resolved NPAs and a lower gross impaired assets ratio, providing a stable base for expansion.
- A robust sanctions pipeline of over ₹1 lakh crore for H1 FY27 and guidance for a ₹2 lakh crore loan book by year-end underpin future growth.
Hexa Perspective
HUDCO’s quarter confirms it is firmly in a high-growth phase, fueled by national infrastructure spending. The margin compression, however, is a real-time test of its funding strategy.
The next few quarters will show if cheaper ECB borrowings can outrun rising domestic rates to protect the guided 2% spread. If spreads hold, the combination of high growth, improving asset quality, and a deep pipeline makes the current valuation discount noteworthy. If funding costs stay elevated, growth itself will continue to pressure profitability.
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