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India's largest gold loan provider, Muthoot Finance, reported a smaller-than-expected first-quarter profit on Tuesday, as higher impairment charges and finance costs outpaced strong loan demand on the back of elevated gold prices.

The company's profit rose about 11% to 10.79 billion rupees (nearly $129 million) for the quarter ended June 30.

Analysts had expected 11.71 billion rupees, according to LSEG data.

Muthoot recorded a more than two-fold jump in impairment charges stemming from excess provisions on loan assets made in previous accounting periods.

Finance costs also rose 27%, as Indian lenders faced pressure from borrowing costs that have stayed at elevated levels, with the central bank keeping the interest rates unchanged for nine straight policy meetings.

The two pushed total expenses 30% higher to 22.18 billion rupees.

Muthoot's standalone loan assets under management grew 25% year-on-year to 843.24 billion rupees on strong loan growth as India's gold prices soared to a record high and drove more customers to seek loans against their higher-valued assets.

Analysts also pointed to lower competitive intensity in the market after the central bank banned IIFL Finance from disbursing gold loans in March, benefitting other gold loan players.

Muthoot's interest income rose 23.6% to 36.56 billion rupees.

Smaller rival Manappuram Finance reported a rise in first-quarter profit on strong gold-loan growth.

Muthoot's shares ended 2% lower ahead of the results.

($1 = 83.9380 Indian rupees)