SRS Limited (RHP) - Karvy

SRS Limited19. The lease agreements pertaining to certain immovable properties are not adequately stamped andregistered in accordance with the applicable Stamp Act and Registration Act, 1908.The lease documents pertaining to various properties have not been registered under the provisions ofthe Registration Act, 1908 and have not been adequately stamped in accordance with the applicableStamp Act. In case of non registration of document and inadequacy of stamp duty, the Company maybeliable to pay the applicable registration fee and stamp duty alongwith imposed penalty to theappropriate authorities, which may go upto a maximum of ten times of applicable Registration Fee andStamp Duty.In case of any legal proceedings, the lease agreements which are not adequately stamped and registeredin accordance with the applicable law may not be admissible as evidence in the court of law.20. The Company has had negative cash flows in the past three years, as stated in the table below:ParticularsYear EndedMarch 31,2011Year EndedMarch 31,2010(in Rs. millions)Year EndedMarch 31,2009Net cash from operating activities (471.80) (955.85) (240.71)Net cash used in investing activities (271.85) 919.79 (507.49)Net cash used in financing activities 863.53 194.27 672.42The Company’s cash flows from operating activities have been negative in the financial years endedMarch 31, 2009, 2010 and 2011 mainly because of increase in the Company’s operations which haveresulted in substantial increase in working capital required by it.21. The Company is subject to restrictive covenants under financing arrangements provided toCompany by the lending Banks.The Company has entered into a financing arrangement with State Bank of India and other consortiumBanks. Pursuant to the financing arrangement, the consortium banks have imposed on the Companycertain restrictive covenants such as, to obtain prior permission, for change in capital structure,formulate any scheme of amalgamation or reconstructions, implement any scheme of expansion /diversification / modernization other than incurring routine capital expenditure; to make any corporateinvestments or investment by way of share capital or debenture or lend or advance funds to or placedeposits with any other concern; enter into borrowing arrangement either secured or unsecured withany other bank, financial institutions and firm or otherwise; undertake guarantee obligations on behalfof any other firm; declare dividend for any year out of the profits relating to that year or of the previousyears, withdraw loans / deposits secured from Directors and Promoters of the firm; give guarantee onbehalf of any third party and dispose-off whole or substantially the whole of the undertaking. Theabove conditions imposed by State Bank of India and other Consortium Banks for financingarrangement could adversely affect the Company’s ability to conduct its business and operations. TheCompany has obtained consent from the banks for the proposed IPO.For further details see “Financial Indebtedness” on page 269. Failure to meet any of the conditionsmay have an adverse effect on the business and operations of the Company.22. There has been a delay in schedule of implementation in the Objects of the Issue and any furtherdelay in the same may have an adverse impact on the expansion plans of the Company.There has been a delay in schedule of implementation in the Objects of the Issue and any further delayin the same may have an adverse impact on the expansion plans of the Company. The implementationof the Objects of the Issue is based on timely raising of funds from the Initial Public Offering and anydelay in the same may result in further delay in implementation and cost overrun. For details on thesame please refer section titled “Objects of the Issue” on Page 39 of this Red Herring Prospectus.xxii