Muthoot Finance misses Q2 profit view as costs weigh

India's Muthoot Finance reported a smaller-than-expected rise in second-quarter profit on Thursday, hurt by high finance costs.

The gold financing company said its profit rose 14.3 per cent to Rs 991 crore for the quarter ended September 30, missing analysts' expectation of Rs 1,041 crore, according to LSEG data.

Muthoot's profit miss comes amid a high cost of funds as the Indian central bank kept lending rate steady at 6.50 per cent in its fourth straight policy meeting in October. It has raised rates by 250 basis points since May 2022 in a bid to cool surging prices.

Analysts had estimated bank borrowing costs for NBFCs to reprice upwards in first half of FY24.

Kerala-based company's finance costs rose by more than 28 per cent, taking total expenses nearly 30 per cent higher to Rs 1,743 crore.

The company missed estimates in the June quarter as well, despite posting its first quarterly profit growth in six.

Standalone loan assets under management, however, grew 21 per cent to Rs 69,002 crore for the half-year ended September 30 on steady demand for loans.

Gold prices hit record high earlier this year and though there was some correction, prices were up more than 20 per cent year-on-year in the quarter. Higher gold prices is a positive for gold financiers, as more customers pledge gold as collateral aiding loan growth.

Muthoot's interest income rose nearly 22 per cent to Rs 3,015 crore.

"Our gold loan assets under management demonstrated strong growth, led by strong demand trends in both urban and semi-urban markets," Managing Director George Alexander Muthoot said in a statement.

Muthoot's main rival Manappuram Finance is set to report second-quarter results on November 13.

Shares of Muthoot Finance ended 0.7 per cent lower ahead of the results.