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Muthoot Finance, India's largest gold-loan provider, reported a bigger-than-expected increase in third-quarter profit on Wednesday, as strong loan growth more than offset the higher finance costs.

The Kerala-based gold-loan financier's profit rose nearly 14% to 10.27 billion rupees ($123.7 million) in the quarter ended Dec. 31, beating analysts' average estimate of 10.12 billion rupees, according to LSEG data.

The board also approved raising up to 160 billion rupees through an issue of non-convertible debentures.

Gold prices hit a record high during the quarter and benefitted gold financiers by increasing the value of pledged gold collateral, driving loan growth as more customers sought loans against their higher-valued assets.

Interest income rose roughly 19% to 31.18 billion rupees. Standalone loan assets under management(AUM) increased 23%, while gold-loan AUM grew 22% for the nine months ended Dec. 31.

Finance cost rose surged 33% in the quarter amid elevated borrowing costs.

Muthoot had missed estimates in the previous three quarters due to higher finance costs.

Indian lenders have been facing higher finance costs as the central bank kept key lending rates unchanged for the past six policy meetings following, a 250 basis points increase since May 2022.

Smaller rival Manappuram Finance, last week, reported a profit that beat estimates, driven by growth in non-gold loan segments.

Shares of Muthoot ended 0.9% higher ahead of the results.

($1 = 83.0227 Indian rupees)