Usha Financial

Risks

• The company requires substantial capital for its business and any disruption in the cost and availability of capital, including the company sources of financing, could have an adverse effect on its business, results of operations, financial condition and cash flows.

• Any deterioration in the credit quality of its loans could adversely affect the company`s business, results of operations, financial condition and cash flows.

• While the company has applied for consent to undertake the Offer from certain of its lenders, the company has not received consents from some of these lenders as on the date of this Draft Red Herring Prospectus. Any failures to obtain these consents could lead to changes in its plans or strategies, including the company capital raising plan through the Offer.

• The company depends on the accuracy and completeness of information provided by its borrowers. Any misleading information provided to it by the company borrowers may affect its judgement of their credit worthiness, which could have an adverse effect on its business, cash flows, results of operations, financial condition.

• A major portion of its expenses is incurred in Portfolio Management charges included in other expenses. Its Inability to effectively reduce and control these expenses may adversely impact its profitability in the future.

• The company depends on a limited number of customers for a significant portion of its revenues. The loss of a major customer or significant reduction in demand from any of the company major customers may adversely affect its business, financial condition, results of operations and prospects.

• Its top two states contribute the company major revenue for the year ended 31st March 2024, 2023, 2022. Any loss of business from one or more of these states may adversely affect its revenues and profitability.

• Its contingent liabilities as stated in the company Restated Financial Statements could adversely affect its financial conditions.

• Its underwriting, risk management and collection processes may not be able to effectively identify, monitor or mitigate the risks in its lending operations.

• The company is required to comply with guidelines issued by regulatory authorities in India, which are evolving and may increase its compliance costs and subject it to penalties.

• Any downgrade in its credit ratings in the future may increase interest rates for refinancing its borrowings, which would increase the company cost of borrowings, and adversely affect its ability to borrow on a competitive basis.

• Its business could be adversely affected if the company is unable to maintain its capital to risk weighted assets ratio.

• The company is subjected to supervision and regulation by the RBI as a non-systemically important NBFC, and changes in RBI`s regulations governing us could adversely affect its business.

• Its inability to meet the company obligations under its financing agreements and instruments could adversely affect the company`s business, results of operations, financial condition and cash flows.

• Its inability to detect money-laundering and other illegal activities fully and on a timely basis may expose it to additional liability and adversely affect its business and reputation.

• Its may be unable to protect the company brand name and other intellectual property rights which are critical to its business.

• Fluctuation of Interest rate may adversely affect the Company`s business.

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

• The company requires certain statutory and regulatory approvals for conducting its business and the company inability to obtain, retain or renew them in a timely manner, or at all, may adversely affect its business and results of operations.

• Some of its Directors and Key Managerial Personnel may be interested in the Company to the extent of their shareholding in the Company.

• The Company does not own the premises through which its conduct the company`s business operations.

• Its business heavily relies on the expertise and guidance of the company Directors and Key Managerial Personnel to ensure sustained success. The loss of any of them could have a significant impact on the company.

• There is outstanding litigation pending against its Promoters which, if determined adversely, could affect its business, results of operations and financial condition.

• The Company has negative cash flows from its operating, investing and its financing activities in the current and past years, details of which are given below. Sustained negative cash flow could impact on its growth and business.

• Its employees are key to the company`s business. If the company is unable to attract new employees and retain its existing employees the company`s business operations would be negatively impacted.

• Its Promoters and promoter group have significant controlling interest over the Company and have the ability to direct its business and affairs; their interests may conflict with your interests as a shareholder. Further they have interests in the Company other than reimbursement of expenses incurred or normal remuneration or benefits.

• If the company fails to maintain an effective system of internal controls, its may not be able to successfully manage or accurately report its financial risk.

• The average cost of acquisition of Equity Shares by its Promoters is lower than the issue price.

• The Company may not have complied with certain statutory provisions of the Companies Act, 2013. Such non-compliances / lapses may attract penalties and prosecution against the Company and its directors which could impact the financial position of the Company to that extent.

• Its Merchant bankers have given certain observations regarding the secretarial and RBI due diligence.

• Business operation and stability depends on many factors, its may not be able to effectively implement the company`s business and growth strategy.

• The Company has issued Equity Shares during the last twelve months at a price which may be lower than the Offer Price.

• Its marketing and advertising activities may not be successful in increasing the popularity of the Company among customers. If its marketing or advertising initiatives are not effective, this may affect the popularity of the Company.

• Its funding requirements and proposed deployment of the Net Proceeds have not been appraised by a bank or a financial institution and if there are any delays or cost overruns, its may have to incur additional cost to fund the objects of the Issue because of which its business, financial condition and results of operations may be adversely affected.

• If the company is unable to continue to innovate or if its fail to adapt to changes in the company industry, its business, financial condition, cash flows and results of operations would be adversely affected.

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

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

• The Company may incur penalties or liabilities for non-compliance with certain provisions of the GST Act, Income Tax and other applicable laws in previous years.

• Its insurance policy may not be adequate to cover all the losses which a business could incur. Any inability to maintain adequate cover from material adverse incidents may adversely affect its operation and profitability.

• Significant differences exist between Ind AS and other accounting principles, such as Indian GAAP, IFRS and U.S. GAAP, which may be material to investors` assessments of our financial condition, result of operations and cash flows.

• The Company is subject to foreign exchange control regulations which can pose a risk of currency fluctuations.

• Its ability to pay dividends in the future may be affected by any material adverse effect on its future earnings, financial condition or cash flows.

• This Draft Red Herring Prospectus contains information from third parties, including an industry report prepared by an independent third-party research agency, Infomerics Analytics and Research Private Limited, which the company has commissioned and paid for purposes of confirming its understanding of the industry exclusively in connection with the Offer.

• The Company`s future funding requirements, in the form of further issue of capital or other securities and/or loans that might be availed by it, may turn out to be prejudicial to the interest of the shareholders depending upon the terms and conditions on which they are raised.

• Equity Shares of the Company have never been publicly traded, and after the Issue, the Equity Shares may be subject to price and volume fluctuations, and an active trading market for the Equity Shares may or may not develop. Further, the Issue Price may not be indicative of the market price of the Equity Shares after the Issue.

• You may be subject to Indian taxes arising out of capital gains on the sale of its Equity Shares.

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

• Investors will not be able to sell immediately on an Indian stock exchange any of the Equity Shares they purchase in the Issue.

• Holders of Equity Shares may be restricted in their ability to exercise pre-emptive rights under Indian law and thereby may suffer future dilution of their ownership position.

• A third-party could be prevented from acquiring control of it post this Issue, because of anti-takeover provisions under Indian law.