(Reuters) – India’s Manappuram Finance reported an unexpected growth in second-quarter profit on Tuesday, as strong performance in its mainstay gold loan segment offset higher provisions.
The gold loan financier’s consolidated net profit rose 2% from last year to 5.71 billion rupees (about $68 million) for the three months ended Sept. 30.
Analysts were expecting a profit of 5.31 billion rupees as per data compiled by LSEG, a decline of 4.8%.
Domestic gold prices surged to record highs during the quarter, driving loan growth for lenders including Manappuram Finance.
Rising prices of bullion benefit gold financiers as they increase the value of collateral gold, and as more customers seek loans against higher-valued assets.
Revenue from the company’s gold loan portfolio rose about 21% to 18.56 billion rupees, contributing about 70% of overall revenue.
Meanwhile, microfinance loans, or collateral-free loans to borrowers with annual incomes up to 300,000 rupees, jumped 22.6% to 7.81 billion rupees. The segment contributes 29.6% of revenue.
The company’s consolidated assets under management rose 17.4% to 457 billion rupees, and its net interest income also jumped about 17.4%.
This offset a 117.5% growth in provisions for bad loans to 2.60 billion rupees. Impairments in its Asirvad Micro Finance unit jumped by 121.8%, the company said in an earnings statement.
Indian lenders like IndusInd Bank and Kotak Mahindra Bank have flagged concerns in the microfinance space which has led to higher provisions, hurting their quarterly earnings.
In October, the Reserve Bank of India barred Asirvad Micro Finance from sanctioning and disbursing loans due to “usurious” pricing and for charging a significant mark-up over funding costs.
Shares of Manappuram Finance closed 4% higher ahead of the results.
($1 = 84.0740 Indian rupees)
(Reporting by Dimpal Gulwani; Editing by Varun H K)
