Sonalis Consumer

Risks

• The company require several approvals, NOCs, licenses, registrations and permits in the ordinary course of the company business. Some of the approvals are required to be transferred in the name of "Sonalis Consumer Products Limited" from "Appetite Food" pursuant to change of name under which the products were transferred to the Company and any failure or delay in obtaining the same in a timely manner may adversely affect its operations.

• The company is required to obtain licenses and approvals under several legislations including the FSS Act and the relevant rules and regulations, the Fire Safety and Services Act and the S&E Acts. Its inability to obtain or renew such permits, approvals and licenses in the ordinary course of the company business may adversely affect its business, financial condition and results of operations.

• The Company is dependent on few numbers of customers and suppliers for sales and purchase from top customers and Top suppliers. Loss of any of these large customer and supplier will significantly affect the company revenues and profitability.

• The land and premises for the company processing units are taken on lease by third Party. If its unable to renew existing leases or relocate operations on commercially reasonable terms, there may be an adverse effect on its business, financial condition, result of operations and cash flows.

• The company business involves usage of manpower and any unavailability of its employees or shortage of contract labour or any strikes, work stoppages, increased wage demands by workmen or changes in regulations governing contractual labour may have an adverse impact on the company cash flows and results of operations.

• The company is in the process of applying for the registration of its Product logo in the company name. If its fail to obtain registration its brand building efforts may be hampered which might lead to adverse effect on the company business.

• Any contamination or deterioration of its products and Services could result in legal liability, damage the company reputation and adversely affect its business prospects and consequently its financial performance.

• The Company has not taken any insurance which may expose the company from potential losses to which its may be subject to risk and this may have a material effect on its business and financial condition.

• Any failure to maintain effective quality control systems for the company supply chain could have a material adverse effect on its business, reputation, results of operations and financial condition.

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

• There have been instances in the past where the company has not made certain regulatory filings with the RoC and there were certain instances of discrepancies in relation to certain statutory filings and corporate records of the Company.

• The Company may incur penalties or liabilities for non-compliances with certain provisions of the Companies Act and other applicable laws.

• The company is dependent on the adequate and timely delivery of quality ingredients, packaging materials and other necessary supplies and if the company suppliers fail to provide it with sufficient quality and quantities of ingredients, packaging materials and other necessary supplies, the company business, results of operations and financial condition could be adversely affected.

• Business Transfer Agreement ["BTA"] executed between M/s Appetite Foods and the Company dated May 15, 2022 contains some restrictive covenants with certain terms and conditions. Inability to effectively service / comply the terms and conditions, comply with or obtain waivers of some covenants, as the case may be, may adversely affect its business, results of operations and financial conditions.

• The company plan to expand into new geographies and may be exposed to significant liability and could lose some or all of its investment in such regions, as a result of which the company business, financial condition and results of operations could be adversely affected.

• The compan is dependent on its Promoters, management team, a number of Key Managerial Personnel and persons with technical expertise and the loss of or its inability to attract or retain such persons could adversely affect the company business, results of operations and financial condition.

• General economic and market conditions in India and globally could have a material adverse effect on its business, financial condition, cash flows, results of operations and prospects.

• An inability to comply with food safety laws, environmental laws and other applicable regulations in relation to its manufacturing facilities may adversely affect the company business, financial condition and results of operations.

• The company has had negative cash flows in the past and it is possible that we may experience negative cash flows in the future.

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

• There are certain outstanding legal proceedings pending against its Directors. Any adverse outcome in any of these proceedings may adversely affect the company profitability and reputation and may have an adverse effect on its results of operations and financial condition.

• Major fraud, lapses of internal control or system failures could adversely impact the company`s business.

• The company face intense competition in its businesses, which may limit the company growth and prospects. The Company faces significant competition from other companies.

• The LM has relied on declarations, undertakings and affidavits for some of the Directors, Promoter and KMPs to include their details in this Draft Prospectus.

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

• The company inability to manage growth could disrupt its business and reduce the company profitability. Its propose to expand the company business activities in coming financial years.

• If the company is unable to source business opportunities effectively, its may not achieve the company financial objectives.

• Brand recognition is important to the success of The company business, and its inability to build and maintain its brand names will harm the company business, financial condition and results of operation.

• The company has a limited number of raw material suppliers. Any kind of refusal from them can hinder its production resulting into loss of the company clients.

• Delays or defaults in payments from its clients could result into a constraint on the company cash flows. The efficiency and growth of its business depends on timely payments received from the company clients.

• Any reduction in the demand for its products could lead to underutilization of the company production capacity. Its may also face surplus production of a particular product due to various reasons including inaccurate forecasting of customer requirements, which could adversely affect its business, results of operations, financial condition and cash flows.

• Information relating to estimated installed capacities of the company processing is based on various assumptions and estimates and actual production may differ significantly from such estimated capacities.

• The continuing impact of the COVID-19 pandemic on its business and operations is uncertain and it may be significant and continue to have an adverse effect on its business, operations and the company future financial performance.

• The company is subject to restrictive covenants under its financing agreements that could limit the flexibility the company has to manage its business.

• The company business is primarily dependent upon a continuing relationship with dealers/ distributors for sales of its products. Any reduction or interruption in the business of these dealers/ distributors, or a substantial decrease in orders placed by these dealers/distributors may have an adverse impact on the revenues and operations of the Company. Further, its do not have any long-term or exclusive arrangements with dealers or distributors for selling the company products.

• The company is subject to transportation risks.

• The company is inability to collect receivables and default in payment from its customers could result in the reduction of the company profits and affect its cash flows.

• A shortage or non-availability of essential utilities such as electricity and water could affect its manufacturing operations and have an adverse effect on the company business, results of operations and financial condition.

• The company inability to identify and understand evolving industry trends and consumer preferences, and to develop new products to meet the company customers` demands may adversely affect its business.

• After the completion of the Issue, the company Promoters along with the Promoter Group will continue to collectively hold substantial shareholding in the Company.

• Certain Promoters and Directors are interested in the Company`s performance in addition to their remuneration and reimbursement of expenses.

• Any future acquisitions, joint ventures, partnerships, strategic alliances, tie-ups or investments could fail to achieve expected synergies and may disrupt its business and harm the results of operations and the company financial condition.