Muthoot Finance (MUTT.NS), India's leading gold-loan provider, announced a larger-than-anticipated surge in third-quarter profit, fueled by robust loan expansion that offset heightened finance expenses. The Kerala-based company recorded a nearly 14% increase in profit, reaching 10.27 billion rupees ($123.7 million) for the quarter ending on December 31, surpassing analysts' average projection of 10.12 billion rupees, according to LSEG data. Additionally, the board sanctioned plans to raise up to 160 billion rupees through non-convertible debentures.

The quarter witnessed a record-high in gold prices, bolstering the value of pledged gold assets and driving loan growth as more customers sought loans against their appreciating collateral. This resulted in a notable 19% surge in interest income to 31.18 billion rupees. Standalone loan assets under management (AUM) soared by 23%, with gold-loan AUM expanding by 22% for the nine months ending on December 31.

Despite the impressive performance, finance costs surged by 33% in the quarter due to elevated borrowing expenses. Muthoot Finance had previously fallen short of expectations in the past three quarters, primarily due to increased finance costs. The broader trend of higher finance costs among Indian lenders has been attributed to the central bank's decision to maintain key lending rates unchanged over the last six policy meetings, following a cumulative 250 basis points hike since May 2022. Meanwhile, smaller competitor Manappuram Finance (MNFL.NS) reported a profit exceeding estimates last week, driven by growth in non-gold loan segments.