Shriram City Union Finance Limited - Karvy

Our rapid growth exposes us to a wide range of increased risks, including business risks, such as thepossibility that a number of our impaired loans may grow faster than anticipated, as well as operationalrisks, fraud risks and regulatory and legal risks. Moreover, our ability to sustain our rate of growth dependssignificantly upon our ability to manage key issues such as selecting and retaining key managerialpersonnel, maintaining effective risk management policies, continuing to offer products which are relevantto our target base of clients, developing managerial experience to address emerging challenges andensuring a high standard of client service. We will need to recruit new employees, who will have to betrained and integrated into our operations. We will also have to train existing employees to adhere properlyto internal controls and risk management procedures. Failure to train our employees properly may result inan increase in employee attrition rates, require additional hiring, erode the quality of customer service,divert management resources, increase our exposure to high-risk credit and impose significant costs on us.10. We have no prior operating experience in the housing finance business and accordingly, we may not beable to successfully implement our growth strategy to foray into the housing finance business.Our Company incorporated a wholly owned subsidiary namely Shriram Housing Finance Limited inNovember 2010, with a view of entering the housing finance sector. We have applied to National HousingBank (wholly owned by the Reserve Bank of India), for a certificate of registration under the NationalHousing Bank Act, 1987, to carry on business of a housing finance institution. The aforesaid Subsidiary willcommence operations once it is registered with the National Housing Bank. Shriram Housing Finance Limitedwill typically target middle-income customers in semi-urban locations.We cannot assure that our foray into the housing finance business would yield favorable or expected resultsas our overall profitability and success will be subject to various factors including, among others, ourability to obtain necessary statutory and/or regulatory approvals and licenses in connection with the saidbusiness, our ability to effectively recruit, retain and motivate appropriate managerial talent, ourinexperience in the housing finance sector and ability to compete with banks, housing finance companiesand other financial institutions that are already well established in this market segment as well as our abilityto effectively absorb additional infrastructure costs.Our housing finance business will require significant capital investments and commitments of time fromour senior management, there also can be no assurance that our management will be able to develop theskills necessary to successfully manage these new business areas. Our inability to effectively manage anyof these issues could materially and adversely affect our business and impact our future financialperformance.11. We may experience difficulties in expanding our business into new regions and markets in India andintroducing our complete range of products in each of our branches.As part of our growth strategy, we continue to evaluate attractive growth opportunities to expand ourbusiness into new regions and markets in India. Factors such as competition, culture, regulatory regimes,business practices and customs and customer requirements in these new markets may differ from those inour current markets and our experience in our current markets may not be applicable to these new markets.In addition, as we enter new markets and geographical regions, we are likely to compete not only withother banks and financial institutions but also the local unorganized or semi-organized private financiers,who are more familiar with local regulations, business practices and customs and have strongerrelationships with customers.As a part of our growth strategy, we propose to target establishing our operations through new branches incities and towns where we historically had relatively limited operations, such as in eastern and northernparts of India, and to further consolidate our position and operations in western and southern parts of India.We target to gradually introduce our entire range of product offerings, namely (i) product finance loans, (ii)pre-owned and new vehicles loans, (iii) personal loans, (iv) loans against gold, and (v) loans to smallenterprises at each of our existing branches across India.Our business may be exposed to various additional challenges including obtaining necessary governmentalapprovals, identifying and collaborating with local business and partners with whom we may have no6