Shriram City Union Finance Limited - Karvy

companies in the Shriram Group could adversely affect our ability to attract customers and to expand ourbusiness, which in turn could adversely affect our goodwill, operations and profitability.21. The trade mark/service mark and logo in connection with the “Shriram” brand which we use is licensedto us and consequently, any termination or non-renewal of such license may adversely affect ourgoodwill, operations and profitability.Pursuant to a license agreement dated April 1, 2010 between our Company and Shriram Ownership Trust,(“SOT”) we are entitled to use the brand name “Shriram” and the associated mark. In this regard, ourCompany has to pay to SOT, 0.25% on the gross turnover of our Company for the first year of the licenseagreement. Royalty rates for the subsequent years will be decided mutually on or before April 1 st of therespective financial years. Along with the royalty, our Company also is required to pay to SOT amounts byway of reimbursement of actual expenses incurred by SOT in respect of protection and defence of theCopyright. The agreement is valid for a period of three years from the date of execution thereof, subject toany pre-mature termination thereof by SOT in accordance with the terms and conditions of the agreement.In the event such license agreement is terminated or is not renewed or extended in the future, we may notbe entitled to use the brand name “Shriram” and the associated mark in connection with our businessoperations. Consequently, we will not be able to derive the goodwill that we have been enjoying under the“Shriram” brand. Further, if the commercial terms and conditions including the consideration payablepursuant to the said agreement are revised unfavorably, our Company may be required to allocate largerportions of its profits and/or revenues towards such consideration, which would adversely affect ourprofitability.We operate in a competitive environment and we believe that our brand recognition is a significantcompetitive advantage to us. If the license and user agreement is not renewed or terminated, we may needto change our name, trade mark/service mark or the logo. Any such change could require us to incuradditional costs and may adversely impact our goodwill, business prospects and results of operations.22. We have certain contingent liabilities which may adversely affect our financial condition.As of March 31, 2011, we had certain contingent liabilities not provided for, including the following:• Guarantees issued by the company –`6.81 lakhs• Guarantees issued by others –` 1,942.77 lakhsFor further information on such contingent liabilities, see Annexure VI to our Reformatted ConsolidatedSummary Financial Statements. In the event that any of these contingent liabilities materialize, ourfinancial condition may be adversely affected.23. We are involved in various legal and other proceedings that if determined against us could have amaterial adverse effect on our financial condition and results of operations.We are currently involved in a number of legal proceedings arising in the ordinary course of our business.These proceedings are pending at different levels of adjudication before various courts and tribunals,primarily relating to civil suits and tax disputes. For further information relating to certain significant legalproceedings that we are involved in, please refer to the section titled “Pending Proceedings and StatutoryDefaults” beginning on page 164 of this Draft Prospectus.An adverse decision in these proceedings could materially and adversely affect our business, financialcondition and results of operations.10