Sunlite

Risks

• The company production costs are vulnerable to fluctuations in raw material prices, especially Copper scrap. Currently, the company haven`t secured any long-term supply agreements for the raw materials its need.

• The company is primarily dependent upon few key suppliers within limited geographical location for procurement of raw materials. Any disruption in the supply of these raw materials due to fluctuations in the prices could have a material adverse effect on its business operations and financial conditions.

• The company generates its major portion of sales from its operations in certain geographical regions and any adverse developments affecting its operations in these regions could have an adverse impact on its revenue and results of operations.

• The company has very short span of operating history as company.

• Its top 10 and top 5 customers contribute majority of the company revenues from operations for the period ended December 31, 2023 and for the year ended March 31, 2023, 2022 and 2021. Any loss of business from one or more of them may adversely affect its revenues and profitability.

• Copper wires can be substituted by aluminium wires due to the lower cost and weight of metal which may pose a threat to the core business of the Company impacting the overall profitability.

• Majority of its revenue is dependent on single business segment i.e. copper rods. An inability to anticipate or adapt to evolving upgradation of products or inability to ensure product quality or reduction in the demand of such products may adversely impact its revenue from operations and growth prospects.

• The company is a high volume-low margin business. Any disruption in its turnover or failures to regularly grow the same may have a material adverse effect on its business, results of operations and financial condition.

• The company does not own the registered office & manufacturing unit and marketing office from which the company carry out its business activities. In case of nonrenewal of rent agreements or dispute in relation to use of the said premise, the company`s business and results of operations can be adversely affected.

• Its historical performance is not indicative of the company future growth or financial results and its may not be able to sustain the company historical growth rates.

• Its Business is dependent on the company manufacturing unit. Any disruption, breakdown or failures of machinery, disruption to power sources or any temporary shutdown of its manufacturing unit, may have a material adverse effect on its business, results of operations, financial condition and cash flows.

• Inventories and trade receivables form a major part of its current assets. Failures to manage the company inventory and trade receivables could have an adverse effect on its net sales, profitability, cash flow and liquidity.

• The company is subject to strict quality requirements and are consequently required to incur significant expenses to maintain its product quality. Any failures to comply with such quality standards may lead to cancellation of existing and future orders which may adversely affect its reputation, financial conditions, cash flows and results of operations.

• There are outstanding legal proceedings involving the Company. Any adverse decisions could impact its cash flows and profit or loss to the extent of demand amount, interest and penalty, divert management time and attention, consume financial resources in their defence or prosecution, affect its reputation, standing and future business and have an adverse effect on its business, prospects, results of operations and financial condition.

• The company operations involve melting of copper scrap in the furnaces which can be extremely dangerous and any accident, could cause serious injury to people or property which may adversely affect its production schedules, costs, sales and ability to meet customer demand.

• The Company has not placed orders of plant & machinery for our proposed object as specified in the Objects of the Issue. Any delay in placing orders, procurement of plant & machinery may delay our implementation schedule and may also lead to increase in price of these plant & machinery and equipments, further affecting our revenue and profitability.

• Under-utilization of our manufacturing capacities and an inability to effectively utilize our existing manufacturing capacities could have an adverse effect on our business, future prospects and future financial performance.

• Its Group Company i.e. Sunlite Aluminium Private Limited operate in the similer line of business as the company, which may lead to conflict of interest.

• Its insurance coverage may not be adequate to protect the company against certain operating hazards and this may have a material adverse effect on its business.

• Its Group Company have incurred losses in past and any operating losses in the future could adversely affect the results of operations and financial conditions of the company`s group company.

• The Company had negative operating 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 requires certain approvals, licenses, registrations and permits to operate its business, and failures to obtain or renew them in a timely manner or maintain the statutory and regulatory permits and approvals required to operate its business may adversely affect the company operations and financial conditions.

• Its growth is closely tied to the outlook of industries that utilize copper in the production of their end products.

• The company is subject to competition from both organized and unorganized players in the market, which may significantly affect the fixation and realisation of the price for its product, which may adversely affect the company`s business operation and financial condition.

• The Company is in use of trademark SUNLITE RECYCLING INDUSTRIES LTD., which is not registered under the Trademarks Act, 1999 as on date of Draft Red Herring Prospectus. Thus, its may be subject to claims alleging breach of third party intellectual property rights.

• Compliance with and changes in safety, health and environmental laws and regulations may adversely affect its business, prospects, financial condition and results of operations.

• The company is heavily dependent on its Promoter and Key Managerial Personnel for the continued success of its business through their continuing services and strategic guidance and support.

• The Company has unsecured loans which are repayable on demand. Any demand from lenders for repayment of such unsecured loans may adversely affect its cash flows.

• Excessive dependence on HDFC Bank Limited in respect of loan facilities obtained by the Company.

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

• Its Contingent Liability and Commitments could affect the company`s financial position.

• If the company is not able to successfully manage its growth, its business and results of operations may be adversely affected.

• Changes in technology may render its current technologies obsolete or requires the company to make substantial investments.

• Adverse publicity regarding its products could negatively impact the company.

• The average cost of acquisition of Equity Shares by its Promoters, is lower than the face value of Equity Share.

• The company has issued Equity Shares in the last 12 months at a price which could be lower than the Issue Price.

• Dependence upon transportation services for supply and transportation of its products are subject to various uncertainties and risks, and delays in delivery may result in rejection of products by customer.

• The Promoters (including Promoter Group) and Directors hold almost 100% of the Equity Shares of the Company and are therefore interested in the Company`s performance in addition to their remuneration and reimbursement of expenses.

• The company has incurred significant indebtedness which exposes it to various risks which may have an adverse-affect on the company`s business and results of operations.

• 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.

• Loans availed by the Company has been secured on personal guarantees of its Director. The company`s business, financial condition, results of operations, cash flows and prospects may be adversely affected in case of invocation of any personal guarantees provided by its Directors.

• Fraud, theft, employee negligence or similar incidents may adversely affect its results of operations and financial condition.

• The company could be harmed by employee misconduct or errors that are difficult to detect and any such incidences could adversely affect its financial condition, results of operations and reputation.

• The company has not identified any alternate source of funding and hence any failures or delay on the company part to mobilize the required resources or any shortfall in the Issue proceeds may delay the implementation schedule.

• Its may not be able to sustain effective implementation of the company`s business and growth strategy.

• The ompany is subject to the restrictive covenants of banks in respect of the Loans/ Credit Limits and other banking facilities availed from them.

• Any Penalty or demand raised by statutory authorities in future will affect its financial position of the Company.

• The Objects of the Issue for which funds are being raised, are based on its management estimates and have not been appraised by any bank or financial institution or any independent agency.

• Information relating to its production capacities and the historical capacity utilization of the company production facilities included in this Draft Red Herring Prospectus is based on certain assumptions and has been subjected to rounding off, and future production and capacity utilization may vary.

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

• 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.

• Its may be subject to surveillance measures, such as the Additional Surveillance Measures (ASM) and the Graded Surveillance Measures (GSM) by the Stock Exchanges which may adversely affect trading price of its Equity Shares.

• Certain key performance indicators for certain listed industry peers included in this Red Herring Prospectus have been sourced from public sources and there is no assurance that such financial and other industry information is complete.

• There is no monitoring agency appointed by the Company to monitor the utilization of the Issue proceeds.

• 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.

• Any future issuance of Equity Shares may dilute your shareholdings, and sale of the Equity Shares by its major shareholders may adversely affect the trading price of the company Equity Shares.

• The company cannot guarantee the accuracy or completeness of facts and other statistics with respect to India, the Indian economy and industry in which the company operates contained in the Red Herring Prospectus.

• Certain data mentioned in this Red Herring Prospectus has not been independently verified.

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

• QIBs and Non-Institutional Bidders are not permitted to withdraw or lower their Bids (in terms of quantity of Equity Shares or the Bid Amount) at any stage after submitting a Bid and Retail Individual Investors are not permitted to withdraw their Bids after Bid/Issue Closing Date.

• The company has significant working capital requirements and operate on high debt to equity ratio and if the company is unable to secure adequate working capital loans on commercially reasonable terms it could have a material adverse effect on its business, financial condition and results of operations.