Shriram City Union Finance Limited - Karvy

24. We may have to comply with strict regulations and guidelines issued by regulatory authorities in India.We are regulated principally by and have reporting obligations to the RBI. We are also subject to thecorporate, taxation and other laws in effect in India. The regulatory and legal framework governing us maycontinue to change as India’s economy and commercial and financial markets evolve. In recent years,existing rules and regulations have been modified, new rules and regulations have been enacted andreforms have been implemented which are intended to provide tighter control and more transparency inIndia’s asset finance sector. Further, RBI may increase the minimum capital adequacy requirement fordeposit taking NBFCs such as us.Compliance with many of the regulations applicable to our operations may involve significant costs andotherwise may impose restrictions on our operations. If the interpretation of the regulators and authoritiesvaries from our interpretation, we may be subject to penalties and the business of our Company could beadversely affected. There can be no assurance that changes in these regulations and the enforcement ofexisting and future rules by governmental and regulatory authorities will not adversely affect our businessand future financial performance.25. Our ability to assess, monitor and manage risks inherent in our business differs from the standards ofsome of our counterparts in India and in some developed countries.We are exposed to a variety of risks, including liquidity risk, interest rate risk, credit risk, operational riskand legal risk. The effectiveness of our risk management is limited by the quality and timeliness ofavailable data.Our hedging strategies and other risk management techniques may not be fully effective in mitigating ourrisks in all market environments or against all types of risk, including risks that are unidentified orunanticipated. Some methods of managing risks are based upon observed historical market behavior. As aresult, these methods may not predict future risk exposures, which could be greater than the historicalmeasures indicated. Other risk management methods depend upon an evaluation of information regardingmarkets, customers or other matters. This information may not in all cases be accurate, complete, current,or properly evaluated. Management of operational, legal or regulatory risk requires, among other things,policies and procedures to properly record and verify a number of transactions and events. Although wehave established these policies and procedures, they may not be fully effective. Our future success willdepend, in part, on our ability to respond to new technological advances and evolving NBFC and retailfinance sector standards and practices on a cost-effective and timely basis. The development andimplementation of such technology entails significant technical and business risks. There can be noassurance that we will successfully implement new technologies or adapt our transaction-processingsystems to customer requirements or evolving market standards.26. Our Promoters have significant control in our Company, which will enable them to influence theoutcome of matters submitted to shareholders for approval, and their interests may differ from those ofother holders of Equity Shares.As of June 30, 2011, our Promoters SEHPL and SRHPL beneficially owned 36.04% and 17.20%,respectively, of our paid-up equity share capital. See “Capital Structure”. Our Promoters have the ability tocontrol our business including matters relating to any sale of all or substantially all of our assets, the timingand distribution of dividends and the election or termination of appointment of our officers and directors.This control could delay, defer or prevent a change in control of our Company, impede a merger,consolidation, takeover or other business combination involving our Company or discourage a potentialacquirer from making a tender offer or otherwise attempting to obtain control of our Company even if it isin our Company’s best interest. In addition, for so long as our Promoters continue to exercise significantcontrol over our Company, it may influence the material policies of our Company in a manner that couldconflict with the interests of our other shareholders. The Promoters may have interests that are adverse tothe interests of our other shareholders and may take positions with which we or our other shareholders donot agree.11