BENGALURU (Reuters) – Indian gold loan financier Manappuram Finance reported a third-quarter profit that missed analysts’ estimates on Thursday, hurt by the stress in its microfinance business, including a quarter-long ban from issuing loans.
The company’s consolidated net profit halved to 2.82 billion rupees ($32.5 million) in the quarter, missing analysts’ average estimate of 4.59 billion rupees, as per data compiled by LSEG.
Indian lenders have seen rising default rates in microfinance loans, or collateral-free small loans to borrowers, following a period of aggressive lending in the segment.
Bad loans and provisions in Manappuram’s microfinance unit surged four-fold to 4.73 billion rupees, accounting for a large chunk of total company-wide provisions of 5.55 billion rupees in the October to December quarter.
At the start of the period, the Reserve Bank of India (RBI) had barred the unit from sanctioning and disbursing loans due to “usurious” pricing and for charging a significant mark-up over funding costs. The RBI lifted the ban last month.
As a result, revenue in its microfinance business dropped around 5% to 6.65 billion rupees in the quarter.
However, revenue from Manappuram’s gold loan portfolio, which contributes 75% of total revenue, rose 17%, aided by gold prices jumping to record highs.
Rising gold prices increase how much a customer can borrow against bullion, benefiting gold financiers in terms of loans issued.
The company’s net interest income rose 5%.
While Manappuram missed analysts estimates, its larger rival Muthoot Finance rode the increase in gold prices to report a bigger-than-expected quarterly profit on Wednesday. ($1 = 86.8680 Indian rupees)
(Reporting by Nishit Navin; Editing by Savio D’Souza)
