Housing & Urban Development Corporation Ltd Management Discussions

<dhhead>MANAGEMENT DISCUSSIONS & ANALYSIS REPORT</dhhead>

1. INDUSTRY STRUCTURE AND DEVELOPMENTS

As per the Second Advance Estimates (SAE) released by the National Statistical Office (NSO), the Indian economy is estimated to achieve a GDP growth of 6.5 per cent in Financial Year 2025, marginally higher than the 6.4% growth estimated earlier. This growth was achieved despite several external headwinds amidst geopolitical and policy uncertainties. Overall, the retail inflation rate remained moderate to steady during the year broadly in tandem with the global trend. The Reserve Bank of India (RBI) remained vigilant on the inflation front and gradually moderated its monetary policy stance based on the evolving inflation situation from ‘withdrawal of accommodation’ to ‘neutral’ thereafter to ‘accommodative’andfinallyto ‘neutral’ again in the June 2025 monetary policy statement. The RBI started its softer interest rate regime by gradually reducing the policy repo rate from 6.50% prevalent since February, 2023 to 6.25% in February, 2025, further to 6% inApril,2025andfinallyto 5.50% in June, 2025. The series of rate cuts have had a total policy rate reduction of 100 basis points since February, 2025.

The Government of India has launched several transformative initiatives to catalyze urban development, most notably the Rs. 1 Lakh Crore Urban Challenge Fund (UCF). An allocation of Rs. 10,000 Crore towards this has been proposed for Financial Year 2025-26. This initiative seeks to foster ‘Cities as Growth Hubs’ through innovative urban redevelopment, improved water and sanitation services, and greater private sector participation. The UCF will finance up to 25% of eligible, bankable urban projects, thereby encouraging Urban Local Bodies (ULBs) to raise the balance through municipal bonds, bank loans, and Public-Private Partnerships (PPPs). In alignment with these national priorities, HUDCO is poised to play a pivotal role across the urban infrastructurevaluechain,offeringcomprehensive support to ULBs from project conceptualization to implementation. This includes the preparation of Detailed Project Reports (DPRs.), conducting financial viability assessments, and structuring blended finance packages integrating loans with additional financing instruments. Recognizing the unique challenges faced by smaller municipalities, is placing special emphasis on Tier-2 and Tier-3 cities through dedicated handholding and technical assistance. To this end, a Technical Assistance (TA) Fund has been created to support project design, institutional development, and policy advisory services.

To further streamline project financing, HUDCO is in the process of operationalizing an ‘Urban Invest Window’ a landscape, particularly in accessing long-term co-funding single-pointinterfacetohelpULBsnavigatethe financing under flagship government schemes such as PMAY-U, Atal Mission for Rejuvenation and Urban

(AMRUT 2.0), Swachh Bharat Mission 2.0 (SBM 2.0), HUDCO is also promoting the adoption of geospatial tools to support asset mapping, infrastructure planning, and evidence-based governance. These efforts are in line with the Government’s National Geospatial Mission, which aims to modernize / digitize land records and improve spatial data accuracy for better urban planning Building on the previous Budget proposals, urban sector reforms related to governance, municipal services, urban land, and planning will be incentivized. The Union Budget’s continued thrust on infrastructure investment with focus on each Infrastructure-related Ministry to come up with a 3-year pipeline of PPP infra projects would accelerate the pace of infrastructure development in the country. The addition of new infrastructure sectors such as Shipping, Marine, Hotels in Tourism sector, etc. to the Harmonized Master List of Infrastructure (HML) would expand the investment opportunities in those sectors. Jal Jeevan Mission has been extended until 2028 with an enhanced total outlay to achieve 100% coverage. Top 50 tourist destination sites in the country will be developed in partnership with states through a challenge mode. Further, the Union Budget 2025-26 announcement of SWAMIH FUND-2 (Special Window for Affordable and Mid-Income Housing), as a blended finance facility with contribution from the Government, banks and private investors of Rs. 15,000 Crore for completion of 1 Lakh housing units would help growth of housing sector.

2. STRENGTHS AND WEAKNESSES

A series of developments since 2024 has established HUDCO on a solid footing. HUDCO was conferred ‘Navratna’ status in April, 2024. Thereafter, HUDCO was granted NBFC-IFC (Infrastructure Finance Company) status by RBI in August, 2024 in the new RBI regulatory framework.

Leveraging Capital Market Instruments for Cost-Effective Financing-In April, 2025, HUDCO has been permitted by the Government of India to mobilize resources through 54EC Capital Gain Bonds and Zero-Coupon Bonds, which intends to leverage strategically to mobilize low-cost funding. These instruments are expected to strengthen HUDCO’s competitiveness by reducing theaveragecostoffunds,thusenhancingitsabilitytofinanceinfrastructure projects more effectively. For resource mobilization, HUDCO has employed a judicious mix of domestic and international resources to keep its cost of borrowingincontrol.Allthesedevelopmentshavesignificantly enhanced HUDCO’s business potential throughout the housing and infrastructure domain as an important player. HUDCO has also established its presence in international markets through JPY-denominatedSamuraibondissuances,markingsignificantstep towards diversifying its funding portfolio and accessing offshorecapital markets. This initiative has not only broadened the investor base but also provided a hedge against domestic liquidity constraints. Expanding Lending HorizonsandRiskDiversification- In line with its strategy to diversify lending operations and mitigate concentration risk, HUDCO has opened a dedicated window for private sector projects, especially those in PPP mode or backed by dedicated and regulated cash flow mechanisms, such as Hybrid Annuity Model (HAM) projects. This approach enhances project bankability while ensuring sustainable revenue streams.

Furthermore, HUDCO remains committed to extending its outreach through last-mile financial connectivity to underserved and remote regions, ensuring equitable access to development finance across the country. The Company has established a well-developed network of client base consisting of various state government agencies and its parastatals such as Development Authorities, Housing Boards, Urban Local Bodies, Water Supply, Sewerage Boards, Roads & Bridges Development Corporations, etc. with its PAN-India presence through its 21 regionaloffices and 11 development offices. Further, HUDCO has been entering into MoUs with various agencies to base and business. HUDCO has a human resource base of multidisciplinary professionals from various fieldscovering Finance, Law, Architecture, Civil Engineering, Urban and Regional Planning, Information Technology, Economics, Human Resources and Public Relations, Social Science, etc. The Human resource base has also been strengthened recently through recruitment of professionals at various levels. HUDCO has its own Training & Research Institute, the Human Settlement Management Institute (HSMI), for research activities as well as training & capacity building of in-house and outside professionals of the habitat sector.

Some of the key weaknesses being faced by the Company include: inadequate access to low-cost sources of funds; restrictions in exposure/credit concentration norms; and difficulties in getting State Government guarantee/budgetary support, which pose challenges for expansion of business. To mitigate the same, HUDCO has opened a dedicated window for private sector projects which will help to expand lending horizons and diversification of risks.

3. OPPORTUNITIES, THREATS, RISKS AND CONCERNS

In the recent past, HUDCO’s image has got a significant boost owing to the factors like grant of IFC status and permission to float 54EC bonds. ‘Navratna’ status has already granted autonomy to HUDCO in various ways. The Company’s status as a NBFC- IFC will allow HUDCO greater diversification, whereby it would be able to projects. The permission to float 54EC Bonds and Zero- extendlong-termfinancial Coupon Bonds would enable HUDCO to reduce its cost of borrowing and thus improve margin and profitability. The overall sectoral and macro environment also presents HUDCO with huge business opportunities given huge shortage of physical infrastructure and consequent fund requirements housing and infrastructure sectors. Thus, HUDCO has a great role to play in the Government’s vision of ‘Viksit Bharat.’ However, there are many players in the market like banks and Financial Institutions (FIs) who offer competition to HUDCO. Banks have an edge over HUDCO in terms of cheap resource availability from CASA deposits which helps them offer very competitive interest rates to the borrowers and to maintain better margins.

4. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

During the year under review, HUDCO operates only in one segment and has no other reportable segment, hence, segment wise performance, has not been given.

5. OUTLOOK

The global economic outlook is swaying with uncertainties. The recent trade tariff related measures emanating from USA have unleashed fresh headwinds triggering strong fluctuationsin the stock market indices, posing fresh challenges to global growth and inflation. The government is vigilant and seized of the situation. The RBI has already given a monetary policy boost to the system by reducing the policy repo rate by a total 100 basis points 25 basis points each time in February and April, 2025 and 50 basis points more in June, 2025 monetary policy statement. With the June, 2025 monetary policy statement, the Central Bank has switched to ‘neutral’ stance again and stated that future course of monetary policy would be determined on the basis of incoming data and evolving outlook. The combined effect of the series of policy rate reductions is likely to improve the investment climate and loan off-take.

Capacity Building: Enabling a Future-Ready Ecosystem - In recognition of the rapidly evolving landscape of infrastructure and housing, HUDCO has placed strong emphasis on capacity building - both internally and across the broader sector. HUDCO continues to invest in upskilling and reskilling its workforce to stay abreast of emerging trends, technologies, and regulatory frameworks. This ongoing learning framework is designed to equip HUDCO professionals to deliver high-impact, forward-looking solutions in a dynamic operating environment.

At the sectoral level, HUDCO contributes significantly through its training and research wing, the Human Settlement Management Institute (HSMI). HSMI conducts capacity building programs, knowledge dissemination workshops, and technical training for ULB officials, housing agencies, and sector professionals. These programs aim to enhance institutional capabilities in urban planning, housing finance, municipal governance, and infrastructure project management, thereby contributing to the professionalization of the sector and improved project outcomes.

This dual-pronged approach to capacity development reinforces HUDCO’s role not just as a financier, but as a knowledge partner and thought leader in India’s housing and infrastructure sectors.

With rapid urbanization and thrust on infrastructure-led economic growth in India entailing huge capital expenditure requirement, HUDCO is gearedtofinancethe full spectrum of required infrastructure projects in the country including the affordablehousing projects. Further, option to issue capital gain bonds would enhance HUDCO’s lending capability. HUDCO’s new status of NBFC-IFC (Infrastructure Finance Company) in the new RBI regulatory framework, would go a long way for a quantum jump in its business operations. HUDCO is fully geared up to extend financial assistance in terms of counter-part funding to states and urban local bodies as well as extending consultancy and capacity building support for housing and infrastructure projects. The top priorities include: y enhance HUDCO’s participation in flagship missions of the Government of India such as houses are to be constructed in the next five years for urban poor and middle-class families with an estimated investment of Rs. 10 Lakh Crore), Atal Mission for Rejuvenation and Urban Transformation 2.0 (AMRUT 2.0), Swachh Bharat Mission 2.0 (SBM 2.0), Jal Jeevan Mission, Urban Challenge Fund (of Rs. 1 Lakh Crore for Water supply, sewage treatment and solid waste management projects and services for 100 large cities), etc. through its core verticals of Financing, Consultancy, and Training; y funding Health/ Social Infrastructure Projects such as Health Centres, Government Hospitals, and Medical Colleges, as State Governments require significant funds to expand their healthcare infrastructure; y prioritize funding Urban Metro Rail projects in major cities, as the Government is keen to expand the metro network and is seeking external participation for such projects; y aligning with the country’s net zero goals, HUDCO is poised to contribute to ‘green economy’ sectors such as green buildings, sustainable transport, water, waste management, land management, and renewable energy; y enhanced funding for ‘Blue Economy’ sectors such as ports, shipyards, Sagarmala projects, and related infrastructure.

6. INTERNAL CONTROL SYSTEM AND ITS ADEQUACY

HUDCO’s internal control system with reference to the Financial Statements is adequate and commensurate with the nature, size, and complexity of its operations. The detail with respect to internal control systems has been given in the Directors’ Report.

7. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The details of Financial Performance with respect to Operational Performance have been fully explained in the Directors’ Report. In preparation of Financial Statements, the Company has followed Indian Accounting Standards notified under the Companies (Indian Accounting Standard) Rules, 2015 (as amended) with effect from 1st April, 2018 issued by the Ministry of Corporate Affairs.

Information pursuance to Schedule-V of SEBI (LODR)Regulations,2015-(i)Thereisnosignificantchanges

(change of 25% or more as compared to the immediately Previous Financial Year) in key financial ratios viz. Debtors Turnover Ratio (Not applicable to HUDCO, being an IFC), Inventory Turnover Ratio (Not applicable to HUDCO, being an IFC), Interest Coverage Ratio (Not applicable to HUDCO, being an IFC), Current Ratio (Not applicable to HUDCO, being an IFC and due to maintenance of Accounts as per Ind AS), Operating Profit Margin and Net Profit Margin during the Financial Year 2024-25 as compared to the Previous Year 2023-24. However, the Debt-Equity Ratio stood at 5.72 times as on 31.03.2025 as compared to 4.05 times as on 31.03.2024 i.e. increase by 41.23% which is well within the acceptable range. This increase in Debt-Equity Ratio is primarily on account of growth in Business.

8. MATERIAL DEVELOPMENT IN HUMAN RESOURCES, INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

Learning and Development (L&D) remain a cornerstone of our strategy to build a future-ready workforce, especially due business verticals. Continuous education and structured workforce tocompany’sgrowing presenceacrossdiversified training are vital to ensure adherence to standard operating procedures and minimize human errors.

In alignment with this objective, a total of 15 in-person training programmes and workshops were conducted during the year 2024-2025, focusing on operational excellence, compliance, and skill enhancement. To broaden our reach and ensure inclusion across all geographies, nine webinars were also organized, enabling wider participation and cost-effective knowledge dissemination.

Recognizing the upcoming wave of superannuation and the current gap in availability of experienced professionals at the middle and senior levels, the Company proactively launched a Recruitment Drive during the year. This initiative led to the successful on boarding of new talent at both Trainee Officer and Lateral levels leading to infusion of fresh blood to our talent pipeline and which will lead to long-term organizational growth.

As on 31st March, 2025, HUDCO has a workforce of 619 employees. The category wise details of employees are as under: -

Group	General	SC	ST	OBC	EWS	Ex-Serv.	Total	Physically Handicapped*
A	319	88	33	85	4	0	529	8
B	5	1	0	3	0	0	9	0
C	8	4	5	4	0	0	21	0
D	24	19	9	7	0	1	60	1
Total	356	112	47	99	4	1	619	9

* Physically Handicapped categorization is included in their respective categories

9. ENVIRONMENTAL PROTECTION AND CONSERVATION, TECHNOLOGICAL CONSERVATION, RENEWABLE ENERGY DEVELOPMENT, FOREIGN EXCHANGE CONSERVATION

Your Company is not engaged in any manufacturing activity, hence, there are no significant particulars, relating to environmental protection and conservation, technological conservation, renewable energy developments, etc. HUDCO encourages projects which are environmentally safe and secure and have taken various initiatives in the direction on a continuous basis. The particulars with regard to foreign exchange earnings and outgo are given in the Directors’ Report. Focus on ESG and Social Impact - Recognizing the growing importance of sustainability in infrastructure financing, HUDCO has formulated a dedicated Environmental, Social, and Governance (ESG) Policy. The organization continues to prioritize funding for projects that align with ESG norms and generate positive social and environmental impact. for electric vehicle (EV) charging infrastructure, implementation of solarisation Recentexamplesincludefinancing projects, and other green urban initiatives.

HUDCO’s continuous focus financialinnovation, and inclusive urban development positions it responsiblelending, as a key enabler in India’s journey toward sustainable and resilient cities.

10. CORPORATE SOCIAL RESPONSIBILITY

The status report on Corporate Social Responsibility for the year 2024-25 has been given in the Directors’ Report and Annual Report on CSR activities, annexed with the Directors’ Report.

11. CAUTIONARY STATEMENT

All the statements in the management discussion and analysis report with regard to projections, estimates and expectations are forward looking statement, based on certain future assumptions and expectations, which could vary from the actuals envisaged. The Company assumes no responsibility in any way to modify or revise such statements based on subsequent events or developments.

For and on behalf of the Board of Directors

Sd/-

Sanjay Kulshrestha

Chairman & Managing Director

(DIN: 06428038)

Place : New Delhi

Date : 22nd August, 2025