EMS

Risks

• The Company, its Promoters/Director and its Group Companies are parties to certain legal proceedings. Any adverse decision in such proceedings may have a material adverse effect on its business, results of operations and financial condition.

• The company has been black-listed in past.

• Most agreements that the company has entered into in connection with its business contain a penalty or liquidated damage clause for delay in the completion of a project that takes effect should the completion of a project be delayed.

• The company bid for WWTPs and WSSPs mostly funded by the World Bank through Central and State Governments and derive its revenues from the contracts awarded to it. Any reduction in budgetary allocation to this sector may affect the number of projects that the government authorities/bodies may plan to develop in a particular period. Its business is directly and significantly dependent on projects awarded by them.

• The company deploy traditional technologies in the designing and installation of WWTPs or WSSPs. Any incapability to adopt a new technology or change in the requirement of a particular technology by the government authorities may affect its position to bid for WWTPs or WSSPs.

• The company projects are awarded through the competitive bidding process by government authorities/bodies. Its may not be able to qualify for, compete and win future projects, which could adversely affect its business and results of operations.

• The industry in which its operate is capital intensive in nature, and involve relatively long gestation periods. The company require substantial financing for its business operations and the failure to obtain additional financing on terms commercially acceptable to it may adversely affect its ability to grow and the company future profitability.

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

• A significant portion of its revenue is generated from business transactions with government entities or agencies. Any change in the governments in the markets in which its operate, change in policies and/or the company inability to recover payments therefrom in a timely manner or at all, would adversely affect its operations and revenues which in turn would adversely affect its profitability.

• Failure to increase the size of its projects and pre-qualification may affect the company growth prospects.

• Failure to achieve financial closures and funding arrangements within a stipulated period for HAM projects may attract penalty and may also lead to termination of the contract.

• The company business is working capital intensive. If its experience insufficient cash flows to meet required payments on its working capital requirements, there may be an adverse effect on the results of its operations.

• Failure to capitalize on government policy initiatives in the water and wastewater treatment market.

• The company business is substantially dependent on its design and engineering teams to accurately carryout the pre-bidding engineering studies for potential projects. Any deviation during the execution of the project as compared to its pre-bid estimates could have a material adverse effect on its cashflows, results of operations and financial condition.

• The company business is subject to seasonal fluctuations.

• The company require certain approvals and licenses in the ordinary course of business and are required to comply with certain rules and regulations to operate its business, and the failure to obtain, retain and renew such approvals and licences in timely manner or comply with such rules and regulations or at all may adversely affect its operations.

• Bidding for a tender involves various management activities such as detailed project study, cost estimations. Inability to accurately measure the cost may lead to bid amount having margin lower than hurdle rate margin i.e. the expected rate of return.

• The company actual cost in executing WWTPs & WSSPs may vary substantially from the assumptions underlying its bid or estimates. Its may be unable to recover all or some of the additional costs and expenses, which may have a material adverse effect on its results of operations, cash flows and financial condition.

• The company on-going projects are exposed to various implementation risks & uncertainties and may be delayed, modified or cancelled for reasons beyond its control which may materially and adversely affect the company business, prospects, reputation, profitability, financial condition and results of operation.

• Projects undertaken through a joint venture may be delayed on account of the performance of the joint venture partner, resulting in delayed payments.

• The company profitability and results of operations may be adversely affected in the event of any disruption in the supply of materials or increase in the price of materials, fuel costs, labour or other inputs.

• Trade Receivables and Inventories form a substantial part of its current assets and net worth. Failure to manage the same could have an adverse effect on its net sales, profitability, cash flow and liquidity.

• The company has certain contingent liabilities, which, if materialized, may affect its financial condition and results of operations.

• The company has issued the following shares in the last one year prior to the date of this Draft Red Herring Prospectus, which could have been issued at a price lower than the Issue Price.

• The company operations may be adversely affected in case of industrial accidents at its construction sites.

• The company cannot assure you that the construction of its projects will be free from any and all defects.

• The company own traditional equipment, resulting in increased fixed costs to the Company. In the event its not able to generate adequate cash flows it may have a material adverse impact on its operations.

• The company relies on effective and efficient project management. Any adverse change in its project management procedures could affect the company ability to complete projects on a timely basis or at all, which may cause it to incur liquidated damages for time overruns pursuant to its contracts.

• If the company fail to undertake O&M works or if there is any deficiency of service regarding these works in the projects installed by it pursuant to and as per the relevant contractual requirements, the company may be subject to penalties or even termination of its contracts, which may have a material adverse effect on its reputation, business, financial condition, results of operations and cash flows.

• Some of its Promoters Group and Group Companies have objects which would allow them to engage in the line of business similar to its Company. There are no non - compete agreements between the Company and such Promoters Group and Group Companies. Its cannot assure that the company Promoters will not favor the interests of such Companies over its interest or that the said entities will not expand which may increase its competition, which may adversely affect business operations and financial condition of the Company.

• Water treatment or reuse and zero liquid discharge technology is subject to rapid change. These changes may affect the demand for its services. If the company is unable to keep abreast of the technological changes and new introductions its business, results of operations and financial condition may be adversely affected.

• The company enter into various contract agreements with its customers for the company construction projects. Such agreements contain conditions and requirements, the non-fulfilment of which could result in delays or inability to implement and complete its projects as contemplated.

• The company government contracts usually contain terms that favour government clients. Its ability to negotiate the standard form of Government contracts may be limited and its may be required to accept unusual or onerous provisions in such contracts, which may affect the efficient execution and profitability of its projects.

• This Draft Red Herring Prospectus contains information from an industry report which was prepared by CARE Advisory Research and Training Limited (CareEdge Research) pursuant to an engagement with the Company.

• The company relies on joint venture partners for selective government projects bids and execution of awarded projects. The failure of a joint venture partner to perform its obligations could impose additional financial and performance obligations resulting in reduced profits or, in some cases, significant losses from the joint venture and may have an adverse effect on its business, results of operations and financial condition.

• The company business is largely concentrated in Ghaziabad and may be affected by various factors associated with Ghaziabad.

• The Company has availed Rs. 89.06 lakhs as unsecured loan which are repayable on demand. Any demand from the lenders for repayment of such unsecured loan may affect its cash flow and financial condition.

• The company Promoters and members of Promoters Group have mortgaged their personal properties and provided personal guarantees for its borrowings to secure its loans. The company business, financial condition, results of operations, cash flows and prospects may be adversely affected by the revocation of all or any of the personal guarantees provided by its Promoters and members of Promoters Group in connection with the Company`s borrowings.

• In addition to normal remuneration, other benefits and reimbursement of expenses of some of its Directors (including the company Promoters) and Key Management Personnel are interested in the Company to the extent of their shareholding and dividend entitlement in the Company.

• Some of its borrowings carry restrictive covenants or conditions and could affect the company ability to manage its business operations.

• Any variation in the utilisation of the Net Proceeds of the Fresh Issue as disclosed in this Draft Red Herring Prospectus shall be subject to certain compliance requirements, including prior Shareholders` approval.

• Obsolescence, destruction, theft, breakdowns of its equipment or failures to repair or maintain the same may adversely affect its business, cash flows, financial condition and results of operations.

• The completion of its projects can be delayed on account of the company dependency on its contracted labour force. Also, the company results of operations could be adversely affected by strikes, work stoppages or increased wage demands by its employees or other disputes with its employees or the company contractors` employees.

• Some of its agreements may have certain irregularities.

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

• The Company has reported certain negative cash flows from its financing activity and investing activity, details of which are given below. Sustained negative cash flow could impact its growth and business.

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

• Any adverse revision to its credit rating by rating agencies may adversely affect the company ability to raise additional financing and the interest rates and other commercial terms at which such funding is available.

• The company is exposed to the risks of malfunctions or disruptions of information technology systems.

• The company success depends largely on its senior management and skilled professionals and the company ability to attract and retain them.

• It is difficult to predict its future performance, or compare the company historical performance between periods, as its revenue fluctuates significantly from period to period.

• 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. There can be no assurance that such transactions, individually or in the aggregate, will not have an adverse effect on its financial condition and results of operations.

• If the company is unable to establish and maintain an effective internal controls and compliance system, its business and reputation could be adversely affected.

• Employee misconduct, errors or fraud could expose it to business risks or losses that could adversely affect its business prospects, results of operations and financial condition.

• The company funding requirements and deployment of the Fresh Issue proceeds are based on management estimates and have not been independently appraised by any bank or financial institution.

• The company procure Projects / Contracts on the basis of pre-qualification criteria and competitive selection processes. Its face intense competition from the company competitors including on account of competitive proposal quoted by them.

• Any failure to protect or enforce its rights to own or use its trademark could have an adverse effect on the company business and competitive position.

• The company Promoters and Promoters Group will continue to exercise control post completion of the Issue and will have considerable influence over the outcome of matters.

• The company benefit from its relationship with its Promoters and its business and growth prospects may decline if the company cannot benefit from this relationship in the future.

• The company insurance coverage may not be sufficient or may not adequately protect it against any or all hazards, which may adversely affect its business, results of operations and financial condition.

• In the event there is any delay in the completion of the Issue, there would be a corresponding delay in the completion of the objects / schedule of implementation of this Issue which would in turn affect its revenues and results of operations.

• The company has not made any provision in its financial statements for potential decline in value of its investments.

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

• Any future issuance of Equity Shares, or convertible securities or other equity linked securities by it and any sale of Equity Shares by its significant shareholders may dilute your shareholding and adversely affect the trading price of the Equity Shares.

• If there is any change in tax laws or regulations, or their interpretation, such changes may significantly affect its financial statements for the current and future years, which may have a material adverse effect on its financial position, business and results of operations.

• Delays in the completion of construction of current and future projects could lead to termination of engineering, procurement and construction ("EPC") agreements or cost overruns, which could have an adverse effect on its cash flows, business, results of operations and financial condition.

• The company ability to pay dividends in the future will depend upon future earnings, financial condition, cash flows, working capital requirements and capital expenditures and there can be no assurance that its will be able to pay dividends in the future.