Draft Prospectus - India Infoline Finance Limited

India Infoline Investment Services Limited
timely manner or at all. The recovery of monies from defaulting customers may be further compounded by the fact
that we do not generally insist on, or receive post dated cheques as security towards the timely repayment of dues
from customers to whom we have provided loans.
12. All of the gold loans we offer are due within one year of disbursement, and a failure to disburse new loans may
result in a reduction of our loan portfolio and a corresponding decrease in our interest income.
All of the gold loans we offer are due within one year of disbursement with an average tenure of three months. The
relatively short-term nature of our loans means that our long-term interest income stream is less certain than if a
portion of our loans were for a longer term. In addition, our existing customers may not obtain new loans from us
upon maturity of their existing loans, particularly if competition increases. The potential instability of our interest
income could materially and adversely affect our results of operations and financial position.
13. Our results of operations could be adversely affected by any disputes with our employees.
As of June 30, 2011, we employed 2,263 full-time employees. Currently, none of our employees are members of
any labor union. While we believe that we maintain good relationships with our employees, there can be no
assurance that we will not experience future disruptions to our operations due to disputes or other problems with
our work force, which may adversely affect our business and results of operations.
14. We handle cash on a regular basis and are hence exposed to the risk of fraud and misappropriation of funds.
We mainly service rural and semi-urban customers who primarily conduct their business in cash. Accordingly, we
usually collect cash installments from our customers and this exposes us to the risk of fraud and misappropriation
of funds.
Our insurance policies, security systems and measures undertaken to detect and prevent these risks may not be
sufficient to prevent or deter such activities in all cases, which may adversely affect our operations and
profitability. While we have not faced any major problem in the past and while we have taken insurance policies
including fidelity cover and cover for cash in safes and in transit, we cannot assure you that no incident of fraud or
misappropriation of funds will occur in the future. If such events occur, there could be an adverse affect on the
profitability of our business and it could increase our insurance costs.
15. Our contingent liabilities could adversely affect our financial condition.
As per the reformatted audited financial statements of our Company for year ended March 31, 2011, we had certain
contingent liabilities not provided for, amounting to ` 19.79 million. The contingent liability amounts disclosed in
our audited restated financial statements represent estimates and assumptions of our management based on advice
received. For further details, please refer to section titled “Statement of Contingent liability – Annexure 19” in the
chapter “Financial Statements” beginning on page 88.
16. We are subject to certain restrictive covenants in our loan documents, which may restrict our operations and
ability to grow and may adversely affect our business.
There are restrictive covenants in the agreements we have entered into with our lenders. These restrictive
covenants require us to maintain certain financial ratios and seek the prior permission of these banks/financial
institutions for various activities, including, amongst others, selling, leasing, transferring or otherwise disposing of
any part of our business or revenues, effecting any scheme of amalgamation or reconstitution, implementing a new
scheme of expansion or taking up an allied line of business. Such restrictive covenants in our loan documents may
restrict our operations or ability to expand and may adversely affect our business. Though we have received
necessary approvals from our lenders for this Issue, these restrictive covenants may also affect some of the rights
of our shareholders, including the payment of the dividends. For details of these restrictive covenants, see the
section titled “Financial Indebtedness” beginning on page 181.
17. Our success depends in large part upon our management team and key personnel and our ability to attract,
train and retain such persons.
Our ability to sustain our rate of growth depends significantly upon our ability to manage key issues such as
selecting and retaining key managerial personnel, developing managerial experience to address emerging
challenges and ensuring a high standard of client service. In order to be successful, we must attract, train, motivate
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