INDIA INFOLINE FINANCE LIMITED - Securities and Exchange ...

India Infoline Finance Limited
41. High levels of customer defaults could adversely affect our business, financial condition and results of
operations.
We are subject to customer default risks including default or delay in repayment of principal or interest on
our loans. Customers may default on their obligations to us as a result of various factors including
bankruptcy, lack of liquidity, lack of business and operational failure. If borrowers fail to repay loans in a
timely manner or at all, our financial condition and results of operations will be adversely impacted.
42. Significant fraud, system failure or calamities could adversely impact our business.
We seek to protect our computer systems and network infrastructure from physical break-ins as well as
fraud and system failures. Computer break-ins and power and communication disruptions could affect the
security of information stored in and transmitted through our computer systems and network infrastructure.
We employ security systems, including firewalls and password encryption, designed to minimize the risk of
security breaches. Although we intend to continue to implement security technology and establish
operational procedures to prevent fraud, break-ins, damage and failures, there can be no assurance that these
security measures will be adequate. A significant failure of security measures or operational procedures
could have a material adverse affect on our business and our future financial performance. Although we
take adequate measures to safeguard against system-related and other frauds, there can be no assurance that
it would be able to prevent frauds.
We are exposed to many types of operational risks, including the risk of fraud or other misconduct by
employees and unauthorized transactions by employees. Although we have been careful in recruiting all our
employees, we have in the past been held liable for the fraudulent acts committed by our employees
adversely impacting our business. Our reputation could be adversely affected by significant frauds
committed by employees, customers or outsiders.
43. We depend on the accuracy and completeness of information about customers and counterparties which
may adversely affect our reputation and business.
In deciding whether to extend credit or enter into other transactions with customers and counterparties, we
may rely on information furnished to us by or on behalf of customers and counterparties, including financial
statements and other financial information. We may also rely on certain representations as to the accuracy
and completeness of that information and, with respect to financial statements, on reports of independent
auditors. For example, in deciding whether to extend credit, we may assume that a customer’s audited
financial statements conform to generally accepted accounting principles and present fairly, in all material
respects, the financial condition, results of operations and cash flows of the customer. Our financial
condition and results of operations could be negatively affected by relying on financial statements that do
not comply with generally accepted accounting principles or other information that is materially misleading.
Moreover, we have implemented KYC norms and other measures, to prevent money laundering. In the
event of ineffectiveness of these norms and systems, our reputation, business and results of operations may
be adversely affected.
44. Inaccurate appraisal of credit may adversely impact our business
We may be affected by failure of employees to comply with internal procedures and inaccurate appraisal of
credit or financial worth of our clients. Inaccurate appraisal of credit may allow a loan sanction which may
eventually result in a bad debt on our books of accounts. In the event we are unable to check the risks
arising out of such lapses, our business and results of operations may be adversely affected.
45. We have entered into a number of related party transactions and may continue to enter into related party
transactions, which may involve conflict of interest.
We have entered into a number of related party transactions, within the meaning of AS 18 as notified by the
Companies (Accounting Standards) Rules, 2006. Such transactions may give rise to current or potential
conflicts of interest with respect to dealings between us and such related parties. Additionally, there can be
no assurance that any dispute that may arise between us and related parties will be resolved in our favour.
For further details, please refer to statement of related party transactions in “Financial Statements -
Significant Accounting Policies and Notes to Accounts on the Reformatted Unconsolidated Financial
Statements (Annexure 13)” beginning on page 106.
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