India's Muthoot Finance posts bigger-than-expected profit on strong loan growth

BENGALURU (Reuters) - Muthoot Finance, India's largest gold loan provider, reported a higher-than-estimated quarterly profit on Thursday, boosted by strong loan demand amid rising bullion prices.

The company's standalone profit rose 17% to 10.56 billion rupees ($127 million) in the fourth quarter, beating analysts' expectations of 10.23 billion rupees, according to LSEG data.

Its interest income rose around 20% to 33.58 billion rupees.

Benchmark spot gold prices rose 22% in the January-March period from a year earlier, bolstering loan growth for lenders such as Muthoot.

Rising prices of bullion benefit gold financiers by increasing the value of pledged gold collateral, driving growth as more customers seek loans against their higher-valued assets.

Last week, smaller rival Manappuran Finance also reported a bigger-than-expected profit.

However, non-bank lenders have to also contend with elevated financing costs, which rose nearly 30% for Muthoot in the quarter.

Analysts expect Muthoot also benefited from a regulatory ban, in March, on IIFL Finance from disbursing gold loans due to "material supervisory concerns" in its portfolio.

Muthoot's standalone loan assets under management increased 20% to 758.27 billion rupees for the year ended March 31.

Earlier this month, Reuters reported that the central bank had warned some non-bank lenders against disbursing cash loans in excess of the permissible limit of 20,000 rupees.

Muthoot's infrastructure was already in place to move its remaining cash-transacting customers to digital channels, Managing Director George Alexander Muthoot said in a statement.

The company's shares ended 3.7% lower ahead of the results. ($1 = 83.2750 Indian rupees)

(Reporting by Nishit Navin; Editing by Savio D'Souza)