Ceigall India

Risks

• The company`s business is primarily dependent on contracts awarded by governmental authorities. As on June 30, 2024, the NHAI projects awarded to it constituted 80.31% of its Order Book, while the remaining 19.69% of its Order Book was from contracts with other central, state governmental and local departments. Any adverse changes in the central, state or local government policies may lead to its contracts being foreclosed, terminated, restructured or renegotiated, which may have a material affect on its business, profitability and results of operations.

• The company has sustained negative cash flows from operating activities in the past and may experience earnings declines or operating losses or negative cash flows from operating activities in the future.

• Delays in the completion of construction of ongoing projects could lead to termination of its contracts or cost overruns or claims for damages, which could have an adverse effect on its cash flows, business, results of operations and financial condition.

• All projects the company operates have been awarded primarily through competitive bidding process. Its bids may not always be accepted. The company may not be able to qualify for, compete and win projects or identify and acquire new projects, which could adversely affect its business and results of operations.

• One of its Directors, Arun Goyal, was debarred from accessing the securities market in the past.

• The company is required to pay royalty charges for mining pursuant to terms of its contracts and specific central and state regulations. Any adverse change in the terms of contract and policies adopted by the government regarding payment of royalty on mining could adversely affect its project cost and profitability.

• There have been instances in the past where the company have not made certain regulatory filings with the RoC and been in non-compliance with certain requirements under Companies Act, 2013, and paid a penalty of Rs. 1.28 million. Any such instances of non-compliance may have an adverse effect on its reputation and impact the company`s profitability.

• Its operations are subject to accidents and other risks and could expose it to material liabilities, loss in revenues and increased expenses, which could have an adverse effect on its business, results of operations and financial condition.

• The company Promoters and members of Promoter Group hold Equity Shares and have interests in its performance in addition to their normal remuneration or benefits and reimbursement of expenses incurred.

• Projects sub-contracted or undertaken through a joint venture may be delayed on account of nonperformance of the joint venture partner, principal or sub-contractor, resulting in delayed payments or non enforcement of performance guarantee issued by it, could lead to material adverse effect on its business, prospects, financial condition and results of operations.

• Its revenue from execution of projects in the roads and highways sector including specialized structures constituted approximately 92.71%, 96.57% and 97.46% of its total revenue for the Financial Years ended March 31, 2024, 2023 and 2022, respectively. Its business and the company financial condition would be materially and adversely affected if the company fails to obtain new contracts or its current contracts are terminated.

• The company has high working capital requirements. If its experience insufficient cash flows to enable it to make required payments on its debt or fund working capital requirements, there may be an adverse effect on its results of operations and profitability of the Company.

• Its may be exposed to liabilities arising from defects or faults during construction, for instance the company paid Rs.1.77 million and Rs.1.75 million in Fiscal 2024 and 2023 respectively, for death claims and temporary disablement claims. Such liabilities may adversely affect its business, financial condition, results of operations and prospects.

• Its funding requirements and proposed deployment of the Net Proceeds are not appraised by any bank/financial institution and are based on management estimates and may be subject to change based on various factors, some of which are beyond its control.

• Its Order Book may not be representative of the company future results and its actual income may be significantly less than the estimates reflected in its Order Book, which could adversely affect its business, financial condition, results of operations and prospects.

• Delays in the acquisition of private land or rights of way, eviction of encroachments, environmental clearances for the projects or resolution of associated land issues, which are though attributable to its customers, may adversely affect the company`s timely performance of its contracts and lead to disputes and losses thereby having an adverse effect on its business, results of operations and financial condition.

• The company entered into the hybrid annuity model ("HAM") segment in 2021 for implementing highway projects which are different from the engineering procurement contract ("EPC") projects. Its cannot assure you if the company will be successful in executing these HAM projects.

• The Company, Directors, Promoters and Subsidiaries are involved in certain legal and other proceedings. Any adverse outcome in such proceedings may have an adverse effect on its business, results of operations and financial condition.

• Its inability to obtain, renew or maintain the statutory and regulatory permits and approvals required to operate its business could have a material adverse effect on the company`s business.

• Its diversification beyond projects in the roads and highways sector may not be successful, which could adversely affect its business, financial condition, results of operations and prospects.

• The company operates in a very competitive industry and its failures to successfully compete could result in the loss of one or more of its significant customers and may adversely affect the company`s business.

• The company own and rent equipment and mobilize such equipment at the beginning of each project resulting in increased fixed costs to the Company. In the event the company is not able to generate adequate cash flows it may have a material adverse impact on its operations.

• Its projects are exposed to various implementation and other risks, including risks of time and cost overruns, and uncertainties, which may adversely affect its business, financial condition, results of operations, and financial condition.

• Its may not be able to always complete the company`s projects ahead of schedule and be eligible for early completion bonus, which could have an adverse effect on its profitability.

• Its operations and profitability could be affected if the company fails to procure and mobilize its construction equipment and keep pace with technical and technological developments in the construction industry.

• If the company is not successful in managing its growth, the company`s business may be disrupted and its profitability may be reduced.

• Its business is manpower intensive and any unavailability of the company 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 its cash flows and results of operations.

• Any termination or failures by it to renew the lease and license agreements for the company Corporate Office in an acceptable and timely manner, or at all, could adversely affect its business and results of operations. Further the lease agreements entered into by the Company for its Corporate Office is not registered.

• Its inability to meet the company obligations, including financial and other covenants under its debt financing arrangements could adversely affect the company`s business and results of operations.

• contracts with government authorities/bodies usually contain terms that favour them, who may terminate its contracts prematurely under various circumstances beyond the company control and as such, the company has limited ability to negotiate terms of these contracts and may have to accept restrictive or onerous provisions. its inability to negotiate terms that are favourable to the company may have a material adverse impact on its financial condition and results of operations.

• If the company fails to maintain its projects pursuant to the relevant contractual requirements, its may be subject to penalties or even termination of the company contracts, which could have an adverse effect on its business, results of operations and financial condition.

• Its business is relatively concentrated in north, west and central region of India and any adverse development in these regions may adversely affect its business, results of operations and financial condition.

• The Securities and Exchange Board of India received a complaint alleging coercion, financial instability and fraudulent practices.

• The success of its business is dependent on the company`s ability to anticipate and respond to customer requirements, both in terms of the type and location of its projects. If unsuccessful, could have an adverse effect on the company cash flows, business, results of operations and financial condition.

• Market conditions may affect its ability to complete the company HAM and EPC projects at expected profit margin, which could adversely affect its results of operations and financial condition.

• Its business is subject to seasonal and other variations and the company may not able to accurately forecast its project schedule which could have an adverse effect on the company cash flows, business, results of operations and financial condition.

• Failures in internal control systems could cause operational errors which may have an adverse impact on its profitability.

• Its projects may be adversely affected by public and opposition from the local communities, conflicting local interests, elections and protests.

• The company depends on forming successful joint ventures to qualify for the bidding process for and to implement large projects and its inability to enter into or successfully manage such joint ventures could impose additional financial and performance obligations resulting in reduced profits or in some cases, significant losses from the joint venture, which could have a material adverse effect on its business, financial condition and results of operation.

• The company is required to furnish financial and performance bank guarantees as part of its business. The company inability to arrange such guarantees or the invocation of such guarantees may adversely affect its cash flows and financial condition.

• The company has certain contingent liabilities which, if materialized, may adversely affect its financial condition.

• 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.

• Any downgrade in its credit ratings could increase its borrowing costs, affect the company ability to obtain financing, and adversely affect its business, results of operations and financial condition.

• Its ability to pay dividends in the future will depends on the company`s earnings, financial condition, working capital requirements, capital expenditures and restrictive covenants of its financing arrangements.

• Increases in interest rates may materially impact its results of operations.

• The company has entered into certain credit facilities that are repayable on demand. Any unexpected demand for repayment of such facilities by the lenders may adversely affect its business, financial condition, cash flows and results of operations.

• Its insurance policies may not be adequate to cover all losses incurred in its business. An inability to maintain adequate insurance cover to protect it from material adverse incidents in connection with its business may adversely affect its operations and profitability.

• Current margin levels may not be indicative of the future growth.

• Any variation in the utilization of the Net Proceeds would be subject to certain compliance requirements, including prior shareholders` approval.

• Its operations are subject to environmental, health and safety laws and regulations.

• The Company depends on the skills and experience of its individual Promoter and Key Managerial Personnel and Senior Management for its growth. The loss of their services may have a material adverse effect on its business, financial condition and results of operations.

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

• This Red Herring Prospectus contains information from an industry report, prepared by an independent third-party research agency, CARE Research, which the company has commissioned and paid for purposes of confirming its understanding of the industry exclusively in connection with the Offer and reliance on such information for making an investment decision in the Offer is subject to certain inherent risks.

• The 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, market capitalization to revenue from operations multiple, price to revenue from operations ratio and price to earnings ratio based on the Offer Price of the Company, may not be indicative of the market price of the Equity Shares on listing.