Qualitek Labs

Risks

• A substantial portion of its revenues has been dependent upon a few customers, with which the company does not have any firm commitments. The loss of any one or more of its major customers would have a material adverse effect on its business, cash flows, results of operations, and financial condition.

• The Company, some of its Promoters and its Group Company is 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 in the past entered into transactions with related parties and may continue to do so in the future. These or any future related party transactions may potentially involve conflicts of interest and there can be no assurance that its could not have achieved better terms, had such arrangements been entered into with unrelated parties.

• There has been certain non-compliance with the provisions of Companies Act, 2013 with respect to corporate actions taken by the Company. Consequently, its may be subject to regulatory actions and penalties for such non-compliance and its business and financial condition may be adversely affected.

• Its future funds requirements, in the form of 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 unsecured loans which are repayable on demand.

• The company is required to maintain certain licenses, approvals, registrations, consents and permits in the ordinary course of business. Failure to obtain the requisite approvals result in noncompliance and therefore, affect its business operations, financial condition, result of operations and prospects.

• There has been certain non-compliance with labour laws by the Company. Consequently, its may be subject to regulatory actions and penalties for such non-compliance and its business and financial condition may be adversely affected.

• The company may not be successful in implementing its business strategies.

• The company Promoters and Directors are also interested as a shareholder or director or partner in Group Companies, that are engaged in the business similar to the Company. In addition, its Group Company, Interstellar Testing Centre Private Limited is engaged in the business similar to the Company. This may lead to conflict of interest of its Group Company with the Company.

• If there are delays in installation of plant and machinery for existing laboratories and for expansion of laboratories, or if the costs of setting up and the possible time or cost overruns related to the proposed expansion or the installation of plant and machinery for existing laboratories are higher than expected, it could have a material adverse effect on its financial condition, results of operations and growth prospects.

• The Company requires significant amounts of working capital for a continued growth. Its inability to meet the company working capital requirements may have an adverse effect on its results of operations.

• The company have incurred borrowings from commercial banks and an inability to comply with repayment and other covenants in its financing agreements could adversely affect the company business and financial condition.

• Technological changes, evolving customer requirements and emerging industry trends may affect its business, may render its current technologies obsolete, and may require it to make substantial capital investments.

• Properties, on which the company has its Registered Office, Corporate Office and laboratories, are not owned by it. Any termination or dispute in relation to this lease/ rental/ license agreement may have a material adverse effect on its business, financial condition, results of operations and cash flows.

• Exchange rate fluctuations may adversely affect its results of operations.

• The company`s success will depends on its ability to attract and retain its key managerial personnel and key scientific personnel.

• Outbreaks of contagious diseases, such as the outbreak of COVID-19, may have a material adverse effect on its business, financial condition, results of operations, cash flows and prospects.

• Certain discrepancies / errors were notices in corporate records related to filling with the Registrar of Companies as per the provisions of Companies Act, 2013.

• Within the parameters as mentioned in the chapter titled `objects of the Issue` beginning on page 99 of this Draft Prospectus, the Company`s management will have flexibility in applying the proceeds of this Issue.

• The company`s business is subject to strikes, work stoppages and/or increased wage demands, as well as other disputes with its employees.

• The company`s ability to pay dividends in the future may depend upon its future revenues, profits, financial condition, cash flows, working capital requirements, capital expenditures and restrictive covenants in its financing arrangements.

• The company Promoters will continue jointly to retain majority control over the Company after the Issue, which will allow them to determine the outcome of matters submitted to Shareholders for approval.

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

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

• Its Promoter, also being the Managing Director, and some other Directors and Key Managerial Personnel of the Company, hold Equity Shares in the Company and are therefore interested in the Company`s performance in addition to their remuneration and reimbursement of expenses.

• The Company may not completely utilise the Net Proceeds of the Issue for the objects in FY 2023-24.

• Its Group Companies have incurred losses in the past, which could not be perceived positively by external parties.

• There is no monitoring agency appointed by the Company and the deployment of funds are at the discretion of its Management and its Board of Directors, though it shall be monitored by the Audit Committee.

• Any inability on its part to maintain quality standards could adversely impact the company business, results of operations and financial condition.

• If the company fail to protect the intellectual property rights of its clients, the company may be subject to liability for breach of contract and may suffer damage to its reputation.

• If the company underprice its contracts, overrun its cost estimates or fail to receive approval for or experience delays in documentation of change orders, its business, financial condition, results of operations or cash flows may be materially adversely affected.

• The industry segments in which the company operates being fragmented, its face competition from other players, which may affect its business operations and financial conditions.

• Its operations are considerably located in Pune, Maharashtra region and failure to expand its operations may restrict the company growth and adversely affect its business.

• The company major operations are concentrated in Pune, Maharashtra and any adverse factors affecting the state could have an adverse impact on its business, results of operations and financial condition.

• Major revenues of the Company are generated from Automotive testing and any adverse factors affecting the automotive sector as a whole could have an adverse on its business, results of operations and financial condition.

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

• The company Promoter has provided personal guarantee for loans availed by it. In the event of default of the debt obligations, the personal guarantees may be invoked thereby adversely affecting its Promoter`s ability to manage the affairs of the Company and the Company`s profitability and consequently this may impact its business, prospects, financial condition and results of operations.

• Its trademark is registered in the name of Kamal Grover, one of the Promoter and Director, and the Company has obtained license to use the trademark through a license agreement. Failure to protect intellectual property may adversely affect its reputation, goodwill and business operations.

• The company have not entered into a license agreement with its Group Company (Quality & Testing Infosolution Private Limited) for the use of LIMS (Laboratory Information Management System) in its routine business operations and sample management.

• The company has not obtained letter of consent/No objection certificate from ICICI Bank for inclusion of its name as Banker to the Company in the Draft Prospectus.

• The Promoter Group of the Company does not include several immediate relatives of Promoter Antaryami Nayak, Kamal Grover and/ or their entity(ies) in which they may have an interest.

• Several members of the Promoter Group of the Company do not have income tax returns as well as KYC documents required for the purpose of identification of entities in which the Promoter Group may have an interest.

• The company generally do business with its customers on purchase order basis and do not enter into long-term contracts with most of them.

• The company has not made any alternate arrangements for meeting its capital requirements for the Objects of the Issue. Further the company have not identified any alternate source of financing the `objects of the Issue`. Any shortfall in raising / meeting the same could adversely affect its growth plans, operations and financial performance.

• There are restrictions on daily / weekly / monthly movements in the price of the Equity Shares, which may adversely affect a shareholder`s ability to sell, or the price at which it can sell, Equity Shares at a particular point in time.

• The Equity Shares have never been publicly traded, and, after the Issue, the Equity Shares may experience price and volume fluctuations, and an active trading market for the Equity Shares may not develop. Further, the price of the Equity Shares may be volatile, and you may be unable to resell the Equity Shares at or above the Issue Price, or at all.

• After this Issue, the price of the Equity Shares may be highly volatile, or an active trading market for the Equity Shares may not develop.

• 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.

• You will not be able to sell immediately on Stock Exchange any of the Equity Shares you purchase in the issue until the Issue receives appropriate trading permissions.

• QIB and Non-Institutional investors are not permitted to withdraw their Application (in terms of quantity of Equity Shares or the Application Amount) at any stage after submitting the Application.

• Sale of Equity Shares by its Promoter or other significant shareholder(s) may adversely affect the trading price of the Equity Shares.