Fonebox

Risks

• There are outstanding legal proceedings involving the Company. Any adverse decision in such proceedings may have a material adverse effect on its business, results of operations and financial condition.

• Its Registered Office and other premises from where the company operate are not owned by it.

• The Company has taken offices on lease basis and some of the lease agreements are not renewed/not executed/inadequately executed, because of which operations may be adversely affected.

• The company requires certain approvals and licenses in the ordinary course of business, some of the approvals are required to be transferred in the name of `Fonebox Retail Limited`, the company is yet to apply for the some of the said registrations and the failure to successfully obtain/renew such registrations would adversely affect its operations, results of operations and financial condition.

• The Company has entered into Franchisee Agreements, some of the agreements are not renewed/inadequately executed, stamped, because of which operations may be adversely affected.

• Its business is a high volume-low margin business.

• Its Restated Financial Statements are prepared and signed by the Peer Review Auditor who is not Statutory Auditors of the Company as required under the provisions of ICDR.

• Its Promoters, Directors and Group Company have provided personal / corporate guarantees for financing facilities availed by the Company and may in the future provide additional guarantees and any failure or default by the Company to repay such facilities in accordance with the terms and conditions of the financing agreements could trigger repayment obligations on them, which may impact their ability to effectively service their obligations as its Promoters and Directors and thereby, adversely impact its business and operations.

• The Company had negative cash flow from operating activity in recent fiscals, details of which are given below. Sustained negative cash flow could adversely impact its business, financial condition and results of operations.

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

• The Company`s business highly depends on the brands recognition and reputation of the products it offers to sell and their inability to maintain or enhance brands image that its sell could have a material adverse effect on the company`s business, financial condition and results of operations.

• The Company is dependent on few numbers of suppliers for purchase of products. Loss of any of this large Suppliers may affect its business operations.

• The company has incurred net loss in the past, and its may not be able to achieve or maintain profitability in the future.

• The company may be subject to risks associated with product warranty for the brand products.

• Its revenues are highly dependent on the company`s operations in geographical region of state of Gujarat. Any adverse development affecting its operations in this region could have an adverse impact on its business, financial condition and results of operations.

• Its business is subject to seasonal and cyclical volatility due to which there may be fluctuation in the sales of products which could lead to higher closing inventory position, which may adversely affect its business.

• The company has working capital requirements. If its experience insufficient cash flows to make required payments on its debt or fund working capital requirements, there may be an adverse effect on its results of operations.

• In addition to normal remuneration, other benefits and reimbursement of expenses to its Promoters and Directors; they are interested to the extent of their shareholding and dividend entitlement thereon in the Company and for the transactions entered into between the Company and themselves as well as between the Company and our Group Companies/Entities.

• The company face competition in its business from organized and unorganized players, which may adversely affect its business operation and financial condition.

• The company has availed credit facility from bank and it is subject to certain restrictive covenants. Any Delay in issuing No Objection Certificate for the proposed issue may delay its proposed Initial public offering.

• The company operates in a competitive industry and its market share may be adversely impacted in case the company does not keep ourselves appraised of the latest consumer trends and technology and if its fail to compete effectively in the markets in which the company operate.

• Competition from online retailers who can offer products at competitive prices and are also able to offer wide range of products may adversely affect its business and its financial condition, results of operations and cash flows.

• Its success depends heavily upon its Promoters, Directors and Key Managerial Personnel for their continuing services, strategic guidance and financial support. Its success depends heavily upon the continuing services of Promoters, Directors and Key Managerial Personnel who are the natural person in control of the Company.

• The Company in the past has entered into Related Party Transactions and may continue to do so in future also, which may affect our competitive edge and better bargaining power if entered with non-related parties resulting into relatively more favorable terms and conditions and better margins.

• The Company has availed Rs. 646.49 lakhs as unsecured loan as on March 31, 2023 from promoters, promoter group, group companies/ entities and relatives of Director/Promoter, financial institutions, which are repayable on demand. Any demand from the lenders for repayment of such unsecured loan may affect its cash flow and financial condition.

• Any conflict of interest which may occur between its business and any other similar business activities pursued by its Promoters and Promoter Group entity could have a material adverse effect on its business and results of operations.

• The average cost of acquisition of Equity Shares by its Promoters could be lower than the issue price.

• Its Promoter and the Promoter Group will jointly continue to retain majority shareholding in its Company after the offer, which will allow them to determine the outcome of the matters requiring the approval of shareholders.

• The company`s ability to pay any dividends will depends upon future earnings, financial condition, cash flows, working capital requirements and capital expenditures.

• Any future issuance of its Equity Shares may dilute prospective investors` shareholding, and sales of its Equity Shares by its major shareholders may adversely affect the trading price of its Equity Shares.

• There is no monitoring agency appointed by the Company to monitor the utilization of the Issue proceeds.

• Industry information included in this Draft Red Herring Prospectus has been derived from industry reports. There can be no assurance that such third-party statistical, financial and other industry information is either complete or accurate.

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

• The company has not identified any alternate source of raising the funds required for the object of the Issue and the deployment of funds is entirely at its discretion and as per the details mentioned in the section titled "Objects of the Issue".

• Any future issuance of Equity Shares may dilute your shareholdings, and sale of the Equity Shares by its major shareholders may adversely affect the trading price of the company`s Equity Shares.