Grand Continent

Risks

• The company has issued Equity Shares during the preceding twelve months at a price which may be below the Offer Price.

• Majority of its properties are on long lease or license. If the company is unable to comply with the terms of the lease or license agreements, renew its agreements or enter into new agreements on favorable terms, the company business, results of operations and financial condition and cash flows may be adversely affected.

• Some of its agreements may be under stamped or inadequately stamped or unregistered and if any financial or judicial implication arises out of the same it may have an adverse effect on the Company`s business and reputation.

• A majority of its properties are operating under Sarovar Brands /Royal Orchid Brands pursuant to the franchise/ trademark license agreements with the Sarovar/Royal Orchid, and the company is subject to risks, including non-renewal, termination and disputes, associated with such contracts.

• Its franchise/ trademark license agreements with the Sarovar/Royal Orchid are non-exclusive.

• As on September 30, 2024, a significant portion of its hotel keys and revenue from operations is derived from hotels properties concentrated in the city of Bengaluru (Karnataka) and Tirupati (Andhra Pradesh) out of the portfolio of 16 operational hotel properties, and any adverse developments affecting these hotels or the regions in which they operate, could have an adverse effect on its business, results of operation, cash flows and financial condition.

• The company is subject to extensive government regulation with respect to safety, health, environment, real estate, food, excise, property tax and labor laws. Any non-compliance with or changes in regulations applicable to it or failures to obtain, maintain or renew the company statutory and regulatory licenses, permits and approvals required to operate its business may adversely affect the company business, results of operations, cash flows and financial condition.

• Negative customer experiences or negative publicity surrounding its hotel properties could have an impact on ability to source customers. Thus, the company may also incur higher expenses towards business promotion in the future, to source more customers which may have an adverse impact on its business and financial condition.

• Certain of its Joint Ventures, Group Company and Promoter Group entities incorporated in India or outside India have common pursuits as they are engaged in similar business or industry segments and may compete with the company.

• Changes in travellers` preferences due to cost of travel, spending habits, competition from alternative accommodation, and other factors may adversely affect the demand for hotel rooms, thereby adversely impacting its business, results of operations, financial condition, and cash flows.

• The company business prospects and continued growth depends on its ability to access financing at competitive rates and competitive terms, which amongst other factors is dependent on the company credit rating. Absence of its credit ratings may restrict the company access to capital and thereby adversely affect its business, cash flows and results of operations.

• The company business is capital intensive and may requires additional financing to meet those requirements, which could have an adverse effect on its results of operations, cash flows and financial condition.

• The company inability to protect or use its intellectual property rights may adversely affect the company business.

• There are certain discrepancies/errors noticed in some of its corporate records relating to forms filed with the Registrar of Companies and other provisions of Companies Act, 2013.

• The Company has incurred losses in the past.

• The Company have availed unsecured borrowings, certain of which may be recalled by the lender at any time, which may have an adverse impact on its cash flows, business and financial condition.

• India`s mid-scale hotel market is highly competitive and its inability to compete effectively may adversely affect its business, results of operations, cash flows and financial condition.

• The COVID-19 pandemic affected its business and operations and any future pandemic or widespread public health emergency in the future, could affect its business, financial condition, cash flows and results of operations.

• The company inability to manage its growth may disrupt its business and reduce the company profitability.

• Its Promoters, Ramesh Siva and Vidya Ramesh have been disqualified to act as directors in the past by the RoC.

• Some of its Directors were director of companies which has been struck off from the register of companies maintained by the RoC.

• Its may be unable to successfully grow the company business in new geographies in India, which may adversely affect its business prospects, results of operations, financial condition and cash flows.

• Any failures to maintain the quality and hygiene standards of the food and beverages that the company offer, will adversely affect its F&B Revenue, overall business and financial performance.

• The company has a large workforce deployed across its hotels and may be exposed to service-related claims and losses or employee disruptions and work stoppages that could have an adverse effect on its business and reputation. The Company has also witnessed delays in payment of statutory dues linked to its employees in the past.

• There are certain instances of delays in and non-payment of statutory dues by it. Any further delay in and nonpayment of statutory dues may attract financial penalties from the respective government authorities and in turn may have an adverse impact on its financial condition and cash flows.

• Its operations are dependent on the company ability to attract and retain qualified personnel which are in high demand in India, and any inability to retain qualified personnel could adversely affect its business, results of operations, cash flows and financial condition.

• Existing or planned amenities and transportation infrastructure at or near its other hotels could be closed, relocated, terminated, delayed or not completed at all. Disruptions of basic infrastructure such as electricity and water supply could adversely affect its operations.

• The company is exposed to a variety of risks associated with safety, security and crisis management including risks associated with natural or man-made threats and accidents, which could cause an adverse impact on its business and operations.

• The company depends on the skills and experience of its Promoters, Key Managerial Personnel, Senior Management and employees with technical expertise, and any inability to retain its Key Managerial Personnel and Senior Management could adversely affect the company business, results of operations, cash flows and financial condition.

• The success of its business is dependent on the company ability to anticipate and respond to customer requirements. Its business may be affected if the company is unable to identify and understand contemporary and evolving customer preferences or if the company is unable to deliver quality service as compared to its competitors.

• Several expenses incurred in its operations are relatively fixed in nature, and the company inability to effectively manage such expenses may have an adverse effect on its business, results of operations, cash flows and financial condition.

• The company is subject to a number of conditions and restrictions under its financing agreements. Any breach of the terms under the company financing arrangements or its inability to meet the company obligations, including financial and other covenants under its financing arrangements could adversely affect the company business and financial condition.

• A substantial portion of the Net Proceeds will be utilized for the repayment, prepayment and/or redemption of certain outstanding borrowings availed of by the Company Further, its funding requirements and the proposed deployment of Net Proceeds have not been appraised by any bank or financial institution or any other independent agency and are based on internal management estimates based on current market conditions.

• The music the company is play in its hotels` lobbies and restaurant may be protected under the Copyright Act. As a result of such infringement the Company`s reputation may be damaged and the damages its may be required to pay, could have an impact on the company cash flow.

• Its Registered Office is located on premises taken on a lease basis. There can be no assurance that this or leased agreement will be renewed upon termination, or that the company will be able to obtain other premises on leave and license or lease basis on same or similar commercial terms or at all.

• The company is required to comply with data privacy regulations and any non-compliance in the future may have an adverse impact on business, results of operations, cash flows and financial condition.

• Any failures of the information technology systems used in its operations could impair the company ability to effectively provide services, which could damage its reputation and adversely affect the company business and operations.

• Its inability to collect receivables in time or at all and default in payment from the company corporate customers could result in the reduction of its profits and affect the company cash flows.

• The company has not entered into any arrangements for alternate source of raising the funds required for its "Objects of the Offer". Any shortfall in raising/meeting the same could adversely affect its growth plans, operations and financial performance.

• An inability to maintain adequate insurance coverage in connection with its business may adversely affect the company operations and profitability.

• Certain sections of this Red Herring Prospectus disclose information from the KEN Research which has been prepared exclusively for the Offer and commissioned in connection with the Offer, and any reliance on such information for making an investment decision in the Offer is subject to inherent risks.

• The company has in past entered into related party transactions and its may continue to do so in the future that may involve conflicts of interest.

• An inability to establish and maintain effective internal controls could lead to an adverse effect on its business, results of operations, cash flows and financial condition.

• There is outstanding litigation pending against the Company, the promoter/ promoter group/ directors of the Company/ group companies by any regulatory authority in India or overseas which, if determined adversely, could affect its business, results of operations, cash flows and financial condition.

• There can be no assurance that the Objects of the Offer will be achieved within the time frame anticipated or at all, or that the deployment of the Net Proceeds in the manner intended by it will result in any increase in the value of your investment. Further, the plan for deployment of the Net Proceeds has not been appraised by any bank or financial institution.

• Its Promoter & Promoter Group have extended personal guarantees and personal properties as collateral security with respect to various loan facilities availed by the Company. Revocation of any or all of these personal guarantees may adversely affect its business operations and financial condition.

• The company Promoters and Promoter Group will continue to exert voting control over the Company after completion of the Offer, which may limit your ability to influence the outcome of matters submitted for approval of its shareholders.

• The average cost of acquisition of Equity Shares held by its Promoter could be significantly lower than the offer Price.

• The Company will not receive any proceeds from the Offer for Sale. The Selling Shareholder will receive the net proceeds from the Offer for Sale.

• Its Equity Shares have never been publicly traded, and after the Offer, the Equity Shares may experience price and volume fluctuations, and an active trading market for the Equity Shares may not develop. Further, the Offer Price may not be indicative of the market price of the Equity Shares after the Offer.

• There is no guarantee that the Equity Shares issued pursuant to the Offer will be listed on the SME Platform of NSE Limited in a timely manner or at all.

• Its future fund requirements, in the form of further issue of capital or securities and/or loans taken by it, may be prejudicial to the interest of the Shareholders depending upon the terms on which they are eventually raised.

• The Company has not paid dividends on Equity Shares in the past and its ability to pay dividends in the future will depends upon future earnings, financial condition, cash flows, working capital requirements, capital expenditures and restrictive covenants in its financing arrangements.

• None of the directors of the Company have any prior experience of directorship of any listed entity. Inexperience of director(s) to act as directors in any other listed entity within India may impact the business operations and performance of the company.

• The company has certain contingent liabilities and capital commitments disclosed in its financial statements and the company financial condition could be adversely affected if any of these contingent liabilities or capital commitments materialize.

• The company has undertaken, and may continue to undertake, strategic acquisitions, joint ventures and investments, which may not perform in line with its expectations or may be prone to other contingencies.

• The company could be adversely affected due to misconduct, errors or frauds of its employees that are difficult to detect and any such incidents could adversely affect the company financial condition, results of operations and reputation.

• The company relies on independent contractors for renovation of its hotel properties and any failure on their part to perform their obligations could adversely affect its business, results of operations, and cash flows.

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

• The company has not yet placed orders in relation to the funding capital expenditure requirements towards hotel properties which is proposed to be financed from the Net Proceeds of the Offer. In the event of any delay in placing the orders, or in the event the vendors are not able to execute the contract 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.