Shanthala

Risks

• There are certain outstanding legal proceeding involving its Promoter and Promoter Entities which may adversely affect its business, financial condition and results of operations.

• The company is in the business of distribution of FMCG products including that of tobacco products which are subject to Stringent health and safety laws and regulations as well as governed by stricter consumption policies, which may affect the company`s business and financial position.

• Its distribute products manufactured by third party manufacturers or suppliers. Hence, the company has to relies on third parties for procuring the products sold by the Company. If these manufacturers or suppliers are unable or unwilling to manufacture the products distributed by it, or if these organizations fail to comply with FDA or other applicable regulations or otherwise fail to meet its requirements, its business will be adversely affected.

• The company has not entered into long-term contracts with its customers and typically operate on the basis of purchase orders, which could adversely impact its revenues and profitability.

• Its operations are subject to high working capital requirements. Its inability to maintain an optimal level of working capital required for its business may impact the company operations adversely.

• The company is engaged in distribution of FMCG products manufactured and / or marketed by FMCG Companies. Its Operating Cost comprises of Cost of goods sold, Employee cost and Other operating expenses, any fluctuations in Operating Cost may have impact on the Company`s business as well as financial performance.

• Its Promoter and Managing Director, B. Manjunath Mallya plays key role in its functioning and the company heavily relies on his knowledge and experience in operating its business and therefore, it is critical for its business that its Promoter remain associated with it. The company`s success also depends on its key managerial personnel and its ability to attract and retain them. Any loss of its key person could adversely affect its business, operations and financial condition.

• Substantial portion of its revenues has been dependent upon limited number of customers.

• The company is dependent upon few suppliers for the material requirements of its business. Further, the company does not have definitive agreements or fixed terms of trade with most of its suppliers. Failure to successfully leverage its relationships with existing suppliers or to identify new suppliers could adversely affect its business operations.

• Its business requires it 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 its business operations.

• Because its operate in a highly competitive industry, the company revenues, profits or market share could be harmed if its unable to compete effectively.

• The company could become liable to customers, suffer adverse publicity and incur substantial costs as a result of deficiency in the products its offer, which in turn could adversely affect the value of its goodwill, and its sales could be diminished if the company is associated with negative publicity.

• Its Promoter Group Entities have objects similar to the Company. There are no non-compete agreements between the Company and such Promoter Group Entities. The company cannot assure that its Promoter will not favor the interests of such entity over its interest or that the said entities will not expand which may increase the company competition and may adversely affect business operations and financial condition of the Company.

• The company is subject to risks arising from interest rate fluctuations, which could adversely affect its results of operations, planned expenditures and cash flows.

• The company has referred to the data derived from industry and government publications, publicly available information, and sources.

• Its business is geographically located in one area, Coorg district, Karnataka. Any loss or shutdown of operations at any of its facilities in this area may have an adverse effect on the company`s business and results of operations.

• The company depends on third parties for its transportation needs, any disruptions in their services, may adversely affect its operations.

• The company`s store its inventory in godowns from which its operate, though the company take utmost care in maintaining them but there may be chances of spoilage of products due to weather conditions or infections etc.

• There have been several instances of delay in filing of statutory returns by the Company in the past.

• There are certain comments made by its then Statutory Auditors in their Auditors Report for FY 2020-21 about maintenance of records of the fixed assets during FY 2021 by the Company.

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

• The company has not made any alternate arrangements for meeting its capital requirements for the Objects of the Offer. Further the company has 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, operations, and financial performance.

• The company does not own its Registered Office and godowns from which the company operate.

• Its results of operations are likely to vary due to cyclical demand for its products and will impact its performance quarter on quarter and may be unpredictable, which could cause the market price of the Equity Shares to be volatile.

• The company has in the past entered into related party transactions and may continue to do so in the future, which may potentially involve conflicts of interest with the equity shareholders.

• Its funding requirements and deployment of the Offer Proceeds are based on management estimates and have not been independently appraised by any bank or financial institution.

• The Company`s management will have flexibility in utilizing the Net Proceeds. There is no monitoring agency appointed by the Company and the deployment of funds is at the discretion of its Management and its Board of Directors, though it shall be monitored by its Audit Committee.

• The company has experienced negative cash flows in the past. Any such negative cash flows in the future could adversely affect its business, results of operations and prospects.

• Its Company has availed certain unsecured loans that are recallable by the lenders at any time.

• The Company has issued Equity Shares during last 12 months at price lower than the Issue Price.

• The company has not made any dividend payments in the past and its ability to pay dividends in the future will depend upon future earnings, financial condition, cash flows, working capital requirements, capital expenditures and restrictive covenants in its financing arrangements.

• Its Promoters and members of the Promoter Group will continue to jointly 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 Company has not registered the trademark. Its ability to use the trademark may be impaired if the same is not registered under its name.

• Its financing agreements contain covenants that limit the company flexibility in operating its business. Its inability to meet its obligations, including financial and other covenants under its debt financing arrangements could adversely affect the company`s business, results of operations and financial condition.

• Its insurance coverage may not adequately protect it against all material hazards and the policies do not cover all risks. In the event of the occurrence of such events, its insurance coverage may not adequately protect it against possible risk of loss.

• The requirements of being a listed company may strain its resources.