Shriram City Union Finance Limited - Karvy

As part of our means of raising and/or managing our funds, we assign or securitize a substantial portion ofthe receivables from our loan portfolio to banks and other institutions. Such assignment or securitizationtransactions are conducted on the basis of our internal estimates of our funding requirements, which mayvary from time to time. In fiscal 2007, 2008, 2009, 2010 and 2011 we securitized/assigned assets of a bookvalue of ` 80,493.74 lakhs, ` 75,781.80 lakhs, ` 88,844.37 lakhs, ` 30,000 lakhs, and ` 117,915.72 lakhsrespectively. Any change in statutory and/regulatory requirements in relation to assignments orsecuritizations by financial institutions, including the requirements prescribed by RBI and the Governmentof India, could have an adverse impact on our assignment or securitization transactions. Any adversechanges in the policy and/or regulations in connection with securitization of assets by NBFCs and/or newcirculars and/or directions issued by the RBI in this regard, affecting NBFCs or the purchasers of assets,would affect the securitization market in general and our ability to securitise and/or assign our assets.We are also required to provide a credit enhancement for the securitization/assignment transactions by wayof either fixed deposits or corporate guarantees and the aggregate credit enhancement amount outstandingas on March 31, 2011 was ` 15,436.40 lakhs by way of cash collateral. In the event a relevant bank orinstitution does not realize the receivables due under such Loan Assets, such bank or institution would haverecourse to such credit enhancement, which could have a material adverse effect on our results ofoperations and financial condition.19. We face asset-liability mismatches which could affect our liquidity and consequently may adverselyaffect our operations and profitability.We face potential liquidity risks due to varying periods over which our assets and liabilities mature. As istypical for NBFCs, a portion of our funding requirements is met through short-term funding sources such asbank loans, working capital demand loans, cash credit, short term loans and commercial papers. However,each of our products differs in terms of the average tenor, average yield, average interest rates and averagesize of loan. The average tenor of our products may not match with the average tenor of our liabilities.Consequently, our inability to obtain additional credit facilities or renew our existing credit facilities, in atimely and cost-effective manner or at all, may lead to mismatches between our assets and liabilities, whichin turn may adversely affect our operations and financial performance. Further, mismatches between ourassets and liabilities are compounded in case of pre-payments of the financing facilities we grant to ourcustomers.20. Any change in control of our Promoters and/or any disassociation of our Company from the ShriramGroup could adversely affect our operations and profitability.As of June 31, 2011, SCL holds 50.99 % of the paid up share capital of our Promoter Shriram RetailHoldings Private Limited, (“SRHPL”), and the remaining shares in SRHPL were held by certain strategicinvestors. SEHPL and SRHPL hold 36.04% and 17.20% of the paid up share capital of our Company as onMarch 31, 2011, respectively. If SCL ceases to exercise control over SRHPL as a result of any transfer ofshares or otherwise, our ability to derive any benefit from the brand name “Shriram” and our goodwill as apart of the Shriram Group of companies may be adversely affected, which in turn could adversely affectour business and results of operations. Any such change of control could also significantly influence ourbusiness policies and operations.We benefit in several ways from other entities under the Shriram Group. We leverage on the ShriramGroup’s ecosystem to reach out to our prospective customers and our focus has been in maximizing ourassociation with the “Shriram” brand name and the synergies offered by the infrastructure, of other entitiesin the Shriram Group. Our customer base over the years has comprised of customers of other entities in theShriram Group. The large customer bases and wide-spread network of branches of entities such as ShriramTransport Finance Company Limited, (one of the largest organized asset financing NBFCs in India), andentities operating under the “Shriram Chits” brand name has continued to provide us with a large platformof target customers. Further, typically loans provided to chit depositors of Shriram Chits are partly orentirely secured by the deposits made with Shriram Chits. Accordingly, any disassociation of our Companyfrom the Shriram Group and/or our inability to have access to the infrastructure provided by other9