Chemkart India

Risks

• Its business operations relies significantly on the continuous and timely supply of products from top 5 and top 10 suppliers, Also, the company does not have continuing and exclusive supply agreement with them. Any interruptions or discontinuation of same will adversely impact its overall performance and profitability.

• The company source its majority of the products from international market i.e. China. Any adverse developments affecting its procurement in this region could have an adverse impact on the company revenue and results of operations.

• We generate our majority of the sales from domestic market of which major portion of sales from our operations is generated from certain geographical regions especially, Maharashtra, Gujarat and New Delhi and minority portion of sales is from international market. Any adverse developments affecting our operations in these regions could have an adverse impact on our revenue and results of operations.

• Our Registered Office is not owned by us. In the event we lose such rights, our Business, Financial Condition and Results of Operations and Cash Flows could be adversely affected.

• The restated Consolidated financial statements have been provided by peer reviewed chartered accountants who is not statutory auditor of our Company.

• We depend on certain customers for a significant portion of our revenues, Also, our Company in the usual course of Business does not have any long term contracts with its Customers and we rely on purchase orders for delivery of our products and our Customers may cancel or modify their orders, change quantities, delay or change their sourcing strategy. Loss of one or more of our top Customers or a reduction in their demand for our products or reduction in revenue derived from them may adversely affect our Business, Results of Operations and Financial Condition.

• We have entered into and may enter into related party transactions in the future, however, there can be no assurance that such transactions, individually or taken together, will not have an adverse effect on our business, prospects, results of operations and financial condition.

• There are certain discrepancies/errors/delay filings noticed in some of our corporate records relating to forms filed with the Registrar of Companies and other provisions of Companies Act, 2013. Any penalty or action taken by any regulatory authorities in future, for non-compliance with provisions of corporate or any other law could impact the financial position of the Company to that extent.

• We have certain outstanding litigation against us, an adverse outcome of which may adversely affect our business, reputation and results of operations.

• Our Company had not obtained Registration under FSSAI for its warehouse where its operations are carried on and have applied for modification in the FSSAI. We are not sure if the same shall be approved by the concerned authority or at all.

• Our company has a limited operational track record in the trading of nutraceutical products and health supplements, also, our Wholly-Owned Subsidiary (WOS) Company i.e. Easy Raw Materials Private Limited (ERMPL) have no experience in manufacturing of said industry which may limit our ability to predict future performance and adapt to market dynamics.

• In the past and in the current scenario, our Company sources the raw materials from domestic market and majority of the domestic purchases are from Maharashtra. Any adverse developments affecting our procurement from this state or such geographical concentration in the domestic purchases, could have an adverse impact on our revenue and results of operations.

• Our Wholly-Owned Subsidiaries have incurred losses in the past years, we cannot assure you that the wholly owned Subsidiary Companies will not incur losses in the future or that such losses will not adversely affect our reputation or our business.

• Our Order Book may not be representative of our future results. Orders included in our Book may be delayed, cancelled or not fully paid for by our customers, which could materially harm our cash flow position, revenues and earnings.

• There are certain discrepancies and non-compliances noticed in some of our financial reporting and/or records relating to filing of returns and deposit of statutory dues with the taxation and other statutory authorities which may affect our revenue from operations.

• Our one of the wholly-owned subsidiary Company and our Group Companies which are also Promoter Group Companies are in the same line of business and consequently the interest of these Companies may be in conflict with the interest of our Company.

• The average cost of acquisition of Equity Shares by our Promoters could be lower than the Price Band to be decided by the Company in consultation with the Selling Shareholders and Book Running Lead Manager in accordance with the SEBI ICDR Regulations.

• Our one of the Promoter, Chairman and Managing Director, Mr. Ankit Shailesh Mehta was associated with one of the LLP which was struck off by MCA vide issuing a public notice, we cannot assure you that such regulatory actions will not be initiated against any of the Companies or LLP with which our Promoters or Directors are associated or may be associated in future.

• A significant proportion of our revenues are derived from products in Amino Acids and sports nutrition category and any reduction in the demand for the products in such category could have an adverse effect on our business, results of operations and financial condition.

• Our Promoters and members of the Promoter Group will continue jointly to retain majority control over our Company after the Offer, which will allow them to determine the outcome of matters submitted to shareholders for approval.

• Our Company have negative cash flows in the current and past years from operating and investing activities, details of which are given below. Sustained negative cash flow could impact our growth and business.

• We have incurred financial indebtedness, also certain of our financing arrangements involve variable interest rates and an increase in interest rates may adversely affect our results of operations and financial condition.

• Our Company`s Logo "Chemkart" is not registered with Registrar of Trademark, any infringement of our logo or failure to get it registered may adversely affect our Business. Further, any kind of negative publicity or misuse of our logo could hamper our Goodwill and our future Growth Strategies could be adversely affected.

• Volatility in the supply and pricing of our products may have an adverse effect on our business, financial condition and results of operations.

• Our Company or our WOS company have not yet placed orders in relation to Financing the capital expenditure towards setting up of the Manufacturing Facility for investment in Easy Raw Materials Private Limited (ERMPL). In the event of any delay in placing the orders, or in the event the vendors are not able to complete the civil construction in a timely manner, or at all, may result in time and cost over-runs and our business, prospects and results of operations may be adversely affected. Our WOS company`s proposed capacity set-up plans are subject to the risk of unanticipated delays in implementation due to factors including delays in construction, obtaining regulatory approvals in timely manner and cost overruns.

• We propose to repay or prepay all or a portion of certain outstanding borrowings availed by our Company, However, no assurance can be made that our Company will not require further funding and that such funding will be available at attractive rates or that by repaying the borrowings, will in fact improve our available funding alternatives.

• We are a Quality focused company and have obtained various quality assurance licenses, any failure by us to renew, maintain or obtain the required licenses may increase our compliance requirements and may result in the interruption of our operations and may have a material adverse effect on our business.

• Our Company had entered into a Share Purchase Agreement with Mr. Ankit Shailesh Mehta and Ms. Parul Shailesh Mehta to Purchase the shareholding of Vinstar Biotech Private Limited (VBPL) and Easy Raw Materials Private Limited (ERMPL) as a WOS of our company, the agreements entered into contained material terms which if not adhered to and also if the expansion through the WOS is not successful, could have material impact on the business operations of our Company.

• In case of our inability to obtain, renew or maintain the statutory and regulatory licenses, permits and approvals required to operate our business it may have a material adverse effect on our business.

• The technical collaboration agreement executed by our WOS, ERMPL can have potential implications of operating expenses which could result in hindrances to our goodwill and business operations.

• Our company lacks listed peer companies for comparison, this absence of comparable may lead to uncertainty in assessing investment viability for the Investors.

• Fluctuations in foreign currency exchange rates could materially affect our financial results.

• We operate in a competitive environment and face fair competition in our business from organized and unorganized players, which may adversely affect our business operations and financial condition.

• Any disruption in our information technology systems may adversely affect our business, results of operations and prospects.

• Our success largely depends upon the knowledge and experience of our Promoters, Directors, our Key Managerial Personnel and Senior Management as well as our ability to attract and retain personnel with technical expertise. Any loss of our Promoters, Directors, Key Managerial Personnel, Senior Management or our inability to attract and retain them and other personnel with technical expertise could adversely affect our business, financial condition and results of operations.

• Information relating to historical installed capacity of our processing included in this Draft Red Herring Prospectus is based on various assumptions and estimates and our future processing and capacity utilization may vary. Underutilization of our processing capacity and an inability to effectively utilize our blending and processing facility may have an adverse effect on our business, future prospects and future financial performance.

• We have certain contingent liabilities which have been disclosed in our Restated Consolidated Financial Information, which if they materialize, may adversely affect our results of operations, cash flows and financial condition.

• We are dependent on third-party transportation providers for the supply of products and delivery of our finished products, However, any such reductions or interruptions in the supply of the products could adversely affect our Business, Results of Operations and Financial Condition and may have an adverse effect on our ability to deliver our products in a timely or cost-effective manner.

• Our inability to accurately forecast demand or price for our products and manage our inventory may adversely affect our business, results of operations and financial condition.

• Our Company has availed unsecured loans that may be recalled by the lenders on demand, Failure to repay unsecured loans in a timely manner may have a material adverse effect on our business, results of operation, financial condition and cash flow.

• Within the parameters as mentioned in the chapter titled "Objects of the Offer" beginning on page 98 of this Draft Red Herring Prospectus, our Company`s management will have flexibility in applying the proceeds of the Offer. The fund requirement and deployment mentioned in the Objects of this Offer have not been appraised by any bank or financial institution.

• Portion of our Offer Proceeds are proposed to be utilized for general corporate purposes which constitute [*] % of the Offer Proceed.

• Our Promoters have provided personal guarantees for loan facilities obtained by our Company, and any failure or default by our Company to repay such loans in accordance with the terms and conditions of the financing documents could trigger repayment obligations on them, which may impact their ability to effectively service their obligations as our Promoters and thereby, impact our business and operations.

• We may not be fully insured for all losses we may incur which could have a material adverse effect on our business, reputation, results of operations, financial condition and cash flows.

• We may not be successful in implementing our business strategies, Failure to implement our business strategies would have a material adverse effect on our business and results of operations.

• If we are unable to source business opportunities effectively, we may not achieve our financial objectives.

• Our Company`s ability to pay dividends in the future will depend on our Company`s future results of operations, financial condition, cash flows and working capital and capital expenditure requirements.

• We have not commissioned an industry report for the disclosures made in the section titled ndustry Overview` and made disclosures on the basis of the data available on the internet and such data has not been independently verified by us.

• We are exposed to counterparty credit risk and any delay in receiving payments or non-receipt of payments may adversely impact our results of operations.

• If we fail to maintain an effective system of internal controls, we may not be able to successfully manage, or accurately report, our financial risks. Despite our internal control systems, we may be exposed to operational risks, including fraud, petty theft and embezzlement, which may adversely affect our reputation, business, financial condition, results of operations and cash flows.

• We might infringe upon the intellectual property rights of others and may be susceptible to claims from third parties, affecting our operations and financial condition.

• Failure to deal effectively with fraudulent activities on emails would increase our fraud losses and harm our business and could severely diminish seller and customer confidence in and use of our products.

• In addition to normal remuneration, other benefits and reimbursement of expenses, some of our directors (including our Promoters) are interested in our Company to the extent of their shareholding and dividend entitlement in our Company.

• Our WOS and our Company have not made any alternate arrangements for meeting our capital requirements for the Objects of the Offer. Further Our WOS and our Company have not identified any alternate source of financing the Objects of the Offer. Any shortfall in raising / meeting the same could adversely affect our growth plans, business operations and financial condition.

• As we continue to grow, we may not be able to effectively manage our growth and the increased complexity of our business, which could negatively impact our brand and financial performance.

• Our Company will not receive any proceeds from the Offer for Sale. Our Promoter Selling Shareholders will receive the proceeds from the Offer for Sale.

• Our inability to manage growth could disrupt our business and reduce our profitability.

• Significant differences exist between Indian GAAP and other accounting principles, such as US GAAP and IFRS, which may be material to investors assessments of Our Company`s financial condition. Our failure to successfully adopt IFRS may have an adverse effect on the price of our Equity Shares. The proposed adoption of IFRS could result in our financial condition and results of operations appearing materially different than under Indian GAAP.

• The company`s limited operational history in trading nutraceutical products and health supplements, combined with its wholly-owned subsidiary, Easy Raw Materials Private Limited (ERMPL), lacking manufacturing experience in this industry, may pose challenges in accurately forecasting future performance and effectively responding to evolving market conditions and also which might be considered as risks and challenges due to limited experience and regulatory complexity in the nutraceutical sector.

• The company generate its majority of the sales from domestic market of which major portion of sales from its operations is generated from certain geographical regions especially, Maharashtra, Gujarat and New Delhi and minority portion of sales is from international market. Any adverse developments affecting its operations in these regions could have an adverse impact on the company revenue and results of operations.

• The restated Consolidated financial statements have been provided by peer reviewed chartered accountants who is not statutory auditor of the Company.

• Its Registered Office is not owned by it. In the event we lose such rights, our Business, Financial Condition and Results of Operations and Cash Flows could be adversely affected.

• The company depends on certain customers for a significant portion of its revenues, Also, the Company in the usual course of Business does not have any long term contracts with its Customers and the company relies on purchase orders for delivery of its products and the company Customers may cancel or modify their orders, change quantities, delay or change their sourcing strategy. Loss of one or more of its top Customers or a reduction in their demand for the company products or reduction in revenue derived from them may adversely affect its Business, Results of Operations and Financial Condition.

• There are certain non-compliance/delay filings noticed in some of its corporate records relating to forms filed with the Registrar of Companies and other provisions of Companies Act, 2013. Any penalty or action taken by any regulatory authorities in future, for non-compliance with provisions of corporate or any other law could impact the financial position of the Company to that extent.

• The company has entered into and may enter into related party transactions in the future, however, there can be no assurance that such transactions, individually or taken together, will not have an adverse effect on its business, prospects, results of operations and financial condition.

• The Company have negative cash flows in the current and past years from operating and investing activities, details of which are given below. Sustained negative cash flow could impact its growth and business.

• The company has certain outstanding litigation against us, an adverse outcome of which may adversely affect its business, reputation and results of operations.

• The company has incurred financial indebtedness, also certain of our financing arrangements involve variable interest rates and an increase in interest rates may adversely affect its results of operations and financial condition.

• Its one of the Promoter, Chairman and Managing Director, Mr. Ankit Shailesh Mehta was associated with one of the LLP which was struck off by MCA vide issuing a public notice, the company cannot assure you that such regulatory actions will not be initiated against any of the Companies or LLP with which our Promoters or Directors are associated or may be associated in future.

• The Company has availed unsecured loans that may be recalled by the lenders on demand, Failures to repay unsecured loans in a timely manner may have a material adverse effect on its business, results of operation, financial condition and cash flow.

• There are certain discrepancies and non-compliances noticed in some of our financial reporting and/or records relating to filing of returns and deposit of statutory dues with the taxation and other statutory authorities which may affect its revenue from operations.

• In the past and in the current scenario, the Company sources the raw materials from domestic market and majority of the domestic purchases are from Maharashtra. Any adverse developments affecting its procurement from this state or such geographical concentration in the domestic purchases, could have an adverse impact on its revenue and results of operations.

• Its Wholly-Owned Subsidiaries have incurred losses in the past years, the company cannot assure you that the wholly owned Subsidiary Companies will not incur losses in the future or that such losses will not adversely affect its reputation or the company business.

• Its Order Book may not be representative of the company future results. Orders included in its Book may be delayed, cancelled or not fully paid for by its customers, which could materially harm the company cash flow position, revenues and earnings.

• The technical collaboration agreement executed by its WOS, ERMPL can have potential implications of operating expenses which could result in hindrances to the company goodwill and business operations.

• its one of the wholly-owned subsidiary Company and the company Group Companies which are also Promoter Group Companies are in the same line of business and consequently the interest of these Companies may be in conflict with the interest of the Company.

• The average cost of acquisition of Equity Shares by its Promoters could be lower than the Price Band to be decided by the Company in consultation with the Selling Shareholders and Book Running Lead Manager in accordance with the SEBI ICDR Regulations.

• A significant proportion of its revenues are derived from products in Amino Acids and sports nutrition category and any reduction in the demand for the products in such category could have an adverse effect on its business, results of operations and financial condition.

• Its Promoters and members of the Promoter Group will continue jointly to retain majority control over the Company after the Offer, which will allow them to determine the outcome of matters submitted to shareholders for approval.

• The Company`s Logo"Chemkart" is not registered with Registrar of Trademark, any infringement of its logo or failure to get it registered may adversely affect the company Business. Further, any kind of negative publicity or misuse of its logo could hamper the company Goodwill and its future Growth Strategies could be adversely affected.

• Volatility in the supply and pricing of its products may have an adverse effect on the company business, financial condition and results of operations.

• The Company or its WOS company have not yet placed orders in relation to Financing the capital expenditure towards setting up of the Manufacturing Facility for investment in Easy Raw Materials Private Limited (ERMPL). In the event of any delay in placing the orders, or in the event the vendors are not able to complete the civil construction in a timely manner, or at all, may result in time and cost over-runs and its business, prospects and results of operations may be adversely affected. The company WOS company`s proposed capacity set-up plans are subject to the risk of unanticipated delays in implementation due to factors including delays in construction, obtaining regulatory approvals in timely manner and cost overruns.

• The company propose to repay or prepay all or a portion of certain outstanding borrowings availed by the Company, However, no assurance can be made that our Company will not require further funding and that such funding will be available at attractive rates or that by repaying the borrowings, will in fact improve its available funding alternatives.

• The company is a Quality focused company and have obtained various quality assurance licenses, any failures by it to renew, maintain or obtain the required licenses may increase its compliance requirements and may result in the interruption of the company operations and may have a material adverse effect on its business:

• The Company had entered into a Share Purchase Agreement with Mr. Ankit Shailesh Mehta and Ms. Parul Shailesh Mehta to Purchase the shareholding of Vinstar Biotech Private Limited (VBPL) and Easy Raw Materials Private Limited (ERMPL) as a WOS of the company, the agreements entered into contained material terms which if not adhered to and also if the expansion through the WOS is not successful, could have material impact on the business operations of the Company.

• In case of its inability to obtain, renew or maintain the statutory and regulatory licenses, permits and approvals required to operate the company business it may have a material adverse effect on its business.

• The company lacks listed peer companies for comparison, this absence of comparable may lead to uncertainty in assessing investment viability for the Investors.

• Fluctuations in foreign currency exchange rates could materially affect its financial results.

• The company operates in a competitive environment and face fair competition in its business from organized and unorganized players, which may adversely affect the company business operations and financial condition.

• Any disruption in its information technology systems may adversely affect the company business, results of operations and prospects.

• Its success largely depends upon the knowledge and experience of our Promoters, Directors, the company Key Managerial Personnel and Senior Management as well as its ability to attract and retain personnel with technical expertise. Any loss of its Promoters, Directors, Key Managerial Personnel, Senior Management or the company inability to attract and retain them and other personnel with technical expertise could adversely affect its business, financial condition and results of operations.

• Information relating to historical installed capacity of its processing included in this Red Herring Prospectus is based on various assumptions and estimates and the company future processing and capacity utilization may vary. Under-utilization of its processing capacity and an inability to effectively utilize its blending and processing facility may have an adverse effect on the company business, future prospects and future financial performance.

• The company has certain contingent liabilities which have been disclosed in its Restated Consolidated Financial Information, which if they materialize, may adversely affect the company results of operations, cash flows and financial condition.

• The company is dependent on third-party transportation providers for the supply of products and delivery of its finished products, However, any such reductions or interruptions in the supply of the products could adversely affect its Business, Results of Operations and Financial Condition and may have an adverse effect on our ability to deliver the company products in a timely or cost-effective manner.

• Its inability to accurately forecast demand or price for the company products and manage its inventory may adversely affect the company business, results of operations and financial condition.

• Within the parameters as mentioned in the chapter titled "Objects of the Offer" beginning on page 99 of this Red Herring Prospectus, the Company`s management will have flexibility in applying the proceeds of the Offer. The fund requirement and deployment mentioned in the Objects of this Offer have not been appraised by any bank or financial institution.

• Portion of its Offer Proceeds are proposed to be utilized for general corporate purposes which constitute [?] % of the Offer Proceed.

• Its Promoters have provided personal guarantees for loan facilities obtained by the Company, and any failures or default by the Company to repay such loans in accordance with the terms and conditions of the financing documents could trigger repayment obligations on them, which may impact their ability to effectively service their obligations as its Promoters and thereby, impact the company business and operations.

• Its may not be fully insured for all losses the company may incur which could have a material adverse effect on its business, reputation, results of operations, financial condition and cash flows.

• Its may not be successful in implementing the company business strategies, Failures to implement its business strategies would have a material adverse effect on the company business and results of operations.

• If the company is unable to source business opportunities effectively, its may not achieve the company financial objectives.

• The Company`s ability to pay dividends in the future will depends on the Company`s future results of operations, financial condition, cash flows and working capital and capital expenditure requirements.

• The company has not commissioned an industry report for the disclosures made in the section titled `Industry Overview` and made disclosures on the basis of the data available on the internet and such data has not been independently verified by it.

• The company is exposed to counterparty credit risk and any delay in receiving payments or non-receipt of payments may adversely impact its results of operations.

• If the company fails to maintain an effective system of internal controls, its may not be able to successfully manage, or accurately report, its financial risks. Despite the company internal control systems, its may be exposed to operational risks, including fraud, petty theft and embezzlement, which may adversely affect its reputation, business, financial condition, results of operations and cash flows.

• The company might infringe upon the intellectual property rights of others and may be susceptible to claims from third parties, affecting its operations and financial condition.

• Failures to deal effectively with fraudulent activities on emails would increase its fraud losses and harm the company business and could severely diminish seller and customer confidence in and use of its products.

• In addition to normal remuneration, other benefits and reimbursement of expenses, some of its directors (including the company Promoters) are interested in the Company to the extent of their shareholding and dividend entitlement in the Company.

• Its WOS and the Company have not made any alternate arrangements for meeting its capital requirements for the Objects of the Offer. Further the company WOS and the Company have not identified any alternate source of financing the Objects of the Offer. Any shortfall in raising / meeting the same could adversely affect its growth plans, business operations and financial condition.

• As the company continue to grow, its may not be able to effectively manage its growth and the increased complexity of the company business, which could negatively impact its brand and financial performance.

• The Company will not receive any proceeds from the Offer for Sale. Its Promoter Selling Shareholders will receive the proceeds from the Offer for Sale.

• Its inability to manage growth could disrupt the company business and reduce its profitability.

• Significant differences exist between Indian GAAP and other accounting principles, such as US GAAP and IFRS, which may be material to investors assessments of the Company`s financial condition. Its failures to successfully adopt IFRS may have an adverse effect on the price of its Equity Shares. The proposed adoption of IFRS could result in the company financial condition and results of operations appearing materially different than under Indian GAAP.