Moody’s Ratings has affirmed Housing and Urban Development Corporation Limited (HUDCO)’s Baa3 local and foreign currency issuer ratings. The outlook remains stable, reflecting India’s sovereign rating. The affirmation is supported by HUDCO’s strong government linkages and its role in implementing government housing policies. Moody’s assesses HUDCO’s standalone credit profile at ba1, one notch below the issuer rating.
Key Rating Drivers
Moody’s has affirmed HUDCO’s Baa3 issuer ratings, which are one notch above its ba1 standalone assessment, reflecting a very high level of expected government support. This view is based on HUDCO’s strong ties to the government, including 75% government ownership and its key role in implementing government policies related to housing and urban infrastructure. The government also appoints two directors to HUDCO’s Board.
Standalone Assessment
HUDCO’s ba1 standalone assessment reflects expectations that asset risks and profitability will remain stable over the next 12-18 months, supported by state government guarantees on most loans. This stability will help offset risks associated with the declining capital ratio amid high loan growth. HUDCO’s robust access to funding from banks and bond markets, driven by its government links, mitigates risks from reliance on wholesale funding.
Factors That Could Change the Rating
An upgrade of HUDCO’s ratings is contingent on an upgrade of India’s sovereign rating. Moody’s could also upgrade HUDCO’s standalone assessment if its liquidity significantly improves and provides a buffer against adverse market conditions, while maintaining stable asset quality and capitalization.
Potential Downgrade Triggers
HUDCO’s issuer ratings could be downgraded if India’s sovereign rating is downgraded or if government support weakens. The standalone assessment could be lowered if HUDCO’s capitalization weakens, with its TCE/TMA ratio falling below 12.0%. A material weakening of asset quality, reflected in an increase in the problem loans ratio above 5%, or a significant increase in exposure to higher-risk assets could also trigger a downgrade.
Source: BSE
