Rationale

The rating reaffirmation factors in the good capitalisation level and comfortable liquidity profile of Nahar Capital and Financial Services Ltd (NCFSL) with a gearing of 0.01 times, a capital adequacy ratio of 97.2%, and liquid investments of ~Rs. 160 crore as of March 31, 2021. Also, the rating continues to draw comfort from NCFSL being a part of the Nahar Group, which is one of the largest and oldest textile groups in the country with an established track record of over six decades and a good credit profile. ICRA also notes that NCFSL's earnings profile is exposed to the inherent volatility associated with capital markets, given the nature of its business. However, with the company's investments being well-diversified among various capital market instruments like mutual funds (both debt and equity), debentures and equity shares, the risk is somewhat mitigated. ICRA also notes that 34% of NCFSL's total assets, as on March 31, 2021, are invested in various Nahar Group companies (Rs. 247 crore). Thus, the performance of those underlying companies would have a bearing on the company's credit profile. Overall, NCFSL's ability to identify profitable investment opportunities in the capital market segment, diversify its revenue stream and scale up its operations in a prudent manner, while maintaining adequate risk management systems and profitability, will remain a key monitorable.