Nahar Capital & Financial Services Ltd Management Discussions

Industry Structure and Developments

Your company is registered with the Reserve Bank of India as a "Non-Banking Financial Company-Investment and Credit Company (NBFC-ICC)". As per Reserve Bank of India (Non-Banking Financial Company Scale Based Regulation) Directions, 2023, the Company continues to be classified as NBFC - Base Layer (NBFC-BL) for the financial year 2024-25. Your Company is mainly doing investment activities with long term perspective as well as doing trading and lending activities. Further, the Company is also doing real estate activities for higher yields.

The Indian financial services sector plays a vital role to the countrys economy, comprising a diverse range of players such as commercial banks, insurance companies, non-banking financial companies, pension funds, mutual funds and other financial entities like Micro Finance Companies, Gold Loan and Consumer Loan Companies etc. Amongst these sectors, the NBFC sector has played an important role in promoting inclusive growth in India. NBFCs occupy a unique position, distinct from both banks and micro finance institutions, characterized by their adaptability and agility. They often serve as the only formal credit sources for large segments of under served borrowers. NBFCs fulfill the "last-mile" role that traditional banks deem too expensive or risky to undertake. NBFCs has been playing a critical role in participating in the development of an economy by providing a fillip to transportation, employment generation, wealth creation, bank credit in rural segments, emergency financing, bridge financing, M&A financing etc. and thus support financially weaker sections of the society. NBFCs mainly focuses on business related to loans and advances, acquisition of shares, stock, bonds, debentures, securities issued by government or local authority or other securities of similar nature, leasing, hire-purchase, insurance business, chit business etc.

The outlook for Non-Banking Financial Companies (NBFCs) in India for FY 26 appears promising, influenced by various macroeconomic factors and sector-specific trends. There is likely to be continued demand for credit, especially from the retail and Micro, Small, and Medium Enterprises (MSMEs) sectors. This could lead to a more resilient and dynamic financial ecosystem that benefits all stakeholders involved.

Economic Overview

India, the worlds fourth-largest economy, is experiencing robust growth, with real GDP growth estimated at 6.4% in fiscal year 2025 demonstrating strong resilience and growth potential, with key sectors like services and exports driving the momentum and is expected to maintain this positive momentum in fiscal year 2026 as affirmed by International Monetary Fund (IMF) in its World Economic Outlook Update released on July 29, 2025. This makes India one of the fastest-growing major economy globally, a significant achievement amidst global economic uncertainties. The economy is characterized by robust domestic demand, particularly in private consumption and investment, a dynamic demographic profile, sustained economic reforms and a thriving services sector.

India is asserting its rising influence in global trade, investment, and innovation fuelled by a decade of structural reforms, investor-friendly policies, and enhanced global competitiveness. The PLI Schemes enhanced the countrys manufacturing prowess, fostered technological advancements, and elevated Indias position in global markets. Further, Make in India, Start-up India, PM Gati Shakti, National Industrial Corridor Programme, promoting Ease of Doing Business and reducing compliance burden, National Single Window System, India Industrial Land Bank, Project Monitoring Group (PMG), liberalization of FDI policy etc. are some of the major initiatives of the Government of India to boost investments and attract more industrial activities in the country.

The Indian economy faces a multitude of challenges, including, heightened trade tensions, policy uncertainty, inflation and potential disruptions in global supply chains due to geopolitical risks that can negatively impact economic growth. Furthermore, technological innovations pertaining to AI/Gen AI result in growth-promoting but employment-reducing impacts. The challenges need to be carefully managed to ensure sustained and inclusive growth.

Despite these challenges, the Indian economy is projected to be a powerhouse of growth, driven by strong domestic demand, prudent policies, and strategic initiatives and expected to maintain its position as the fastest-growing major economy and a key player in the global economic landscape.

Opportunities and Threats

Your Company identifies profitable investment opportunities in the entire financial market segments and also in real estate segment, diversifies its revenue stream and scale up its operations in a prudent manner, while maintaining adequate risk management systems and profitability. Your Company is exploring other investment options including investing directly in debt securities, Commodity Funds, Quant based MLDs linked to gold and equity markets, NCDs of reputed industrial and real estate companies as well as in Alternative Investment Funds (AIFs) like Credit Opportunity Funds, Private Equity Funds, Real Estate Funds, Venture Funds etc. for better profitability. Your Company foresees and is cautious of all the economic and financial threats globally as well as domestically, while making new investments and also aware of the fact that change in Government policies and rate of interest revisions will affect the valuation of investments made by Company. Your company is more cautious in investing i.e. by increasing fund allocations to safer and high rated securities, REITS, INVITS, Multi Asset Funds Balance Advantage Funds and Digital Disruptive Technology Funds etc.

In current volatile global scenario and fast changing consumer behaviors, your Company is investing in longer duration debt securities/funds and latest investment opportunities compatible with new technologies like Electric Vehicles (EVs), Artificial Intelligence (AI), 5-6G/Satellite Networking, Cloud Computing etc. Your Company has built a strong diversified investment base and continues to mitigate any adverse impact of any uncertainty in the short term but is well-positioned to benefit from the financial markets momentum, economic rebound expected over the next few years.

Future Outlook

By 2047, India aspires to become a fully developed, high-income country. A "Viksit Bharat" characterized not only by towering buildings and expansive highways but also by fair prosperity and financial empowerment at the grassroots level. Further, Indias financial market is projected to grow significantly due to strong domestic demand, driven by strong GDP growth and manageable debt level and Foreign Exchange Reserves while external events and geopolitical scenarios keep foreign flows into India volatile. However, the domestic as well global events such as global trade disruptions, economic sanctions, diplomatic tensions, terrorist attacks, regional conflicts, war situations in Israel/Gaza & Russia/Ukraine etc., political instability, rising inflation, government policies and regulatory changes etc. may further lead to heightened volatility in the Indian financial market and Foreign Direct Investment inflows.

Notwithstanding the challenges, your management expects the Indian financial market to remains resilient and robust in the long run. The Company will strive to do the financial business, focused on delivering consistent and superior returns to the companys shareholders and at the same time maintaining the high levels of safety. On real estate front, the Company is looking for opportunities and will further explore and invest in new projects to upsurge its lease/rental income in the coming periods. Your Company has recognized its role as a corporate citizen and continuously endeavors to adopt the best practices and the highest standards of corporate governance. We look forward to the future with renewed optimism as your Company will continuously focus on its resources, strengths and strategies to achieve its vision keeping the above strategic intent in mind.

Risks and Concerns

The Company recognizes that risk is an integral and unavoidable component of business and it is committed to manage and mitigate the risk in a proactive and effective manner. Being an investment company, the business of the Company is exposed to several risks viz; market risk, global risk, regulatory risk, credit risk, liquidity risk, operational risk, competition risk, interest rate risk, cyber security risk etc. which can affect the returns on Companys investments and financial business in unexpected way. Presently, different and next generation investment opportunities are prevalent, which are highly remunerative but a little risky, unless we utilize expertise and experience of professionals and specialized fund managers.

Considering the Companys nature of its business, it is essentially exposed to the volatility associated with financial markets. However, with the investments being well-diversified among various financial market instruments like mutual funds (both debt and equity), bonds/debentures, MLDs, REITS, AIFs, InvITs, VC/PE funds, Multi Asset/Balanced Funds, AIFs and equity shares (both listed and unlisted), the risk is well managed. The Companys balanced approach to portfolio management and its continuous review has enabled it to get early warning signals because of corrective measures taken by company from time to time. The Company uses information technology extensively in its operations and invests through professionals for ensuring effective information. Sustained efforts to strengthen the risk framework and portfolio quality have yielded consistently better outcomes for the Company.

As part of the Risk Management framework, the Company has also constituted the Risk Management

Committee comprising of three Non-Executive Directors to monitor risk tolerance limits, review and analyze risk exposure related to specific issues and provides oversight of risk across the organization. The Risk Management Committee met four times during the financial year under review. The Company is having Risk Management Policy and Fair Practice Code to strengthens the investment decisions and also for better risk management.

Internal Control Systems and Their Adequacy

The Company is maintaining an efficient and effective system of Internal Financial Control for the facilitation of speedy and accurate compilation of financial statements. The Companys internal control system is designed to ensure operational efficiency, protection and conservation of resources, accuracy and promptness in financial reporting and compliance with laws and regulations and procedures. Further, the statutory auditors of the Company have verified the systems and processes and confirmed that the internal financial controls system over financial reporting is operating effectively.

Pursuant to the provisions of Section 138 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, the Company has also appointed M/s. Piyush Singla & Associates, Chartered Accountant as Internal Auditor of the Company. The Internal Auditor test the adequacy and effectiveness of Internal Control Systems laid down by the management and to suggest improvement in the systems. They also identify and address technology and IT-related security issues commensurate with the nature and complexities of its operations. The Internal Audit Reports are discussed with the Management and are reviewed by the Audit Committee of the Board which also reviews the adequacy and effectiveness of the internal controls in the Company. During the year, Companys Internal Controls were tested and no reportable weakness in the system was observed.

The companys Internal Financial Control System commensurate with the nature of its business and the size of its operations. In order to further strengthen the Internal control system and to automate the various processes of the business, company is making use of SAP S4 HANA application, which is based on SAP HANA database. It keeps all the data in memory which results in data processing that is magnitude faster than that of disk based system, allowing for advanced, real time analytics. The Asset Liability Management (ALM) Policy concerned with the effective risk management in various Portfolios is also framed by the Company.

Apart from this, an Audit Committee consisting of three non executive directors has been constituted. All the significant audit observation and follow up action thereon are taken care of by the Audit Committee. The Committee oversee the adequacy of Internal Control. The Audit Committee met four times during the financial year under review. The Company has also established a Vigil Mechanism as per Section 177(9) of Companies Act, 2013 read with Rule 7 of the Companies (Meeting of Board and its Powers) Rules, 2014.

Segment wise Financial/Operational Performance

We would like to inform you that as per Ind-AS 108 Operating Segments, Companys activities can be classified under two segments namely; Investment/Financial Activities and Real Estate Segment. During the year, the Company achieved a total income of Rs. 4936.09 Lakhs with a profit before tax of Rs. 3821.33 Lakhs. The segment wise detailed performance has already been discussed in the Directors Report under the column Financial Review.

Your Company continued to reward shareholders with regular dividends. The Board of Directors, considering the growth and profitability of the Company, has proposed a dividend of Rs. 1.50/- per equity share (i.e. 30%) for the year ending March 31, 2025.

Human Resources/Industrial Relations

The Company recognizes people as its most valuable asset and it has built an open, transparent and meritocratic culture to nurture this asset. The Company is of firm belief that the Human Resources are the driving force that propels a Company towards progress and success. The Company has a team of able and experienced professionals to look after the affairs of the Company. The total employees strength of the Company was 20 as on 31 March 2025.

Key Financial Ratios

The Company has identified the following ratios as applicable key financial ratios:-

Cautionary Statement

Though the statement and views expressed in the above said report are on the basis of best judgment but the actual future results might differ from whatever is stated in the report.