Fractal Industries Ltd

Risks

• The company relies on a limited number of customers for its sales, and the loss of any major customer could adversely impact its revenue and profitability.

• The company relies on a limited number of suppliers for product procurement, and the loss of any key supplier could impact its business operations.

• The Company, Promoter, Directors, KMP, SMP and Group Company are involved in certain legal proceedings. Any adverse decision in such proceedings may render it/them liable to liabilities/penalties and may adversely affect its business and results of operations.

• The Company has reported certain negative cash flows from its operating activity, investing activity and financing activity, details of which are given below. Sustained negative cash flows could impact its growth and business.

• Dependence on online marketplaces and effective warehouse management for order fulfilment may adversely affect it business operations and financial performance.

• Cybersecurity and data protection risks in its technology driven warehouse operations may adversely affect the company business and reputation.

• Changing fashion trends on online marketplaces may adversely affect its business and financial performance.

• Any mismanagement, loss, or damage of inventory may adversely affect the company operations, profitability, and financial condition.

• Inefficiency in managing product returns through online marketplaces could materially affect its operations, profitability, financial condition, and growth prospects.

• Its depends on a limited number of States for a significant portion of the company revenue from operations. The loss of any of its major customer in these States due to any adverse development or significant reduction in business from the company major customer may adversely affect its business, financial condition, results of operations and future prospects.

• If the Company is unable to protect its intellectual property, or if the Company infringes on the intellectual property rights of others, its business may be adversely affected.

• Its Registered Office, Manufacturing Unit and few Warehouses from where the company operate is not owned by it but taken on Lease basis. Its inability to renew the lease agreement or any adverse impact on the title or ownership rights of the company owner/landlord in relation to these premises may impede its operations.

• Disruptions or inefficiencies in its supply chain and logistics network may adversely affect the company operations and financial performance.

• Its Manufacturing facility relies on specialized machinery and any significant breakdown or delay in maintenance could disrupt the company production.

• Its business operations are subject to fluctuations in raw material prices.

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

• There are certain delays in filing forms with the RoC under the provisions of Companies Act, 2013. Any penalty or action taken by any regulatory authorities in future for non-compliance with provisions of relevant act could impact the financial position of the Company to that extent.

• There have been instances of delayed filings in the past with certain regulatory authorities with respect to filings related to GST returns and TDS Returns. If the regulatory authorities impose any monitory penalties on it or take any punitive actions against the Company in relation to the same, its business, financial condition and results of operations could be adversely affected.

• There are certain delayed filing of Provident Fund Dues which may attract penalties.

• The Company has not received "No Objection Certificate" from one of its Lender to undertake this Issue. Nonreceipt of such "No-Objection" certificate could lead to delay or inability to proceed with Initial Public Offer (IPO).

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

• The Company has unsecured loans which are repayable on demand.

• Strikes, work stoppages or increased wage demands by its employees or any other kind of disputes with the company employees/workmen in future could adversely affect its business and results of operations.

• If the company is unable to effectively address the increased competition its anticipate, its may lose market share and experience a decline in profits, which could negatively impact the company business, operational results, and financial condition.

• Our business requires us to obtain and renew certain registrations, licenses and permits from government and regulatory authorities and the failure to obtain and renew them in a timely manner may adversely affect our business operations. We require a number of approvals, NOCs, licenses, registrations and permits in the ordinary course of our business. Some of the approvals are required to be obtained by our Issuer Company and any failure or delay in obtaining the same in a timely manner may adversely affect our operations.

• Our Promoter Group Entity is engaged in the similar line of business activities as those undertaken by our Company, which may result in conflict of interest.

• Failure to effectively execute our business strategy could negatively impact our operations and hinder our growth.

• Our insurance coverage may not be adequate to protect us against all potential losses to which we may be subject to, and this may have a material adverse effect on our business.

• If the company is unable to establish and maintain an effective system of internal controls and compliances, our business and reputation could be adversely affected.

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

• Employee misconduct or errors, which can be difficult to detect, could negatively impact its financial condition, operational results, and reputation.

• The Company has entered into certain related party transactions and may continue to do so in the future.

• The average cost of acquisition of Equity shares by its Promoters is lower than the Issue price.

• The capacity of its Manufacturing unit is not fully utilized. Consequently, if there is also any under-utilization of the company capacities in future, it could affect its ability to fully absorb fixed costs and thus may adversely impact the company financial performance.

• Failures to maintain product quality standards or keep up with technological advancements could negatively affect its business, financial performance, and operational results.

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

• In addition to receiving regular remuneration, other benefits, and expense reimbursements, its Promoters and Directors have interests in the Company through their shareholding and entitlement to dividends. They are also interested in transactions conducted between the Company and themselves.

• A shortage or non-availability of electricity may adversely affect its manufacturing and warehousing operations and have an adverse effect on the company business, results of operations and financial condition.

• Dependence on debt and outflow of finance cost leads to outflow of cash flows and reduces overall profitability.

• Majority of its Directors do not have any prior experience of being a director in any other listed company in India.

• Compliance with and changes in safety, health and environmental laws and various labour, workplace and related laws and regulations impose additional costs and may increase its compliance costs and a such adversely affect the company results of operations and its financial condition.

• If the company is unable to service its debt obligations in a timely manner or to comply with various financial and other covenants and other terms and conditions of the company financing agreements, it may adversely affect its business, prospects, results of operations and financial condition.

• Its lenders have charge over the company movable and immovable properties in respect of finance availed by it and the company promoters, Directors and member of promoters group have provided their personal guarantee for such debt facility availed by it.

• Changes in technology may render its current technologies obsolete or require it to make substantial investments.

• Its ability to pay any dividends will depend upon future earnings, financial condition, cash flows, working capital requirements and capital expenditures.

• Any variation in the utilization of the Net Proceeds as disclosed in this Draft Red Herring Prospectus shall be subject to certain compliance requirements, including prior approval of the shareholders of the Company.

• The Issue price of its Equity Shares may not be indicative of the market price of the company Equity Shares after the Issue and the market price of its Equity Shares may decline below the Issue Price and you may not be able to sell your Equity Shares at or above the Issue Price.

• The Objects of the Issue for which funds are being raised, are based on its management estimates and the same have not been appraised by any bank or financial institution or any independent agency. The deployment of funds in the project is entirely at the company discretion, based on the parameters as mentioned in the chapter titled as "Objects of the Issue".

• In the event there is any delay in the completion of the Issue, or delay in schedule of implementation, there would be a corresponding delay in the completion of the objects of this Issue which would in turn affect its revenues and results of operations.

• Its 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 the company discretion and as per the details mentioned in the chapter titled "Objects of the Issue".

• The requirements of being a public listed company may strain its resources and impose additional requirements.

• There is no guarantee that its Equity Shares will be listed on the relevant stock exchange in a timely manner or at all.

• Estimates and forward-looking statements may prove to be inaccurate.