Arunaya Organics

Risks

• The company is dependent on a third party i.e. Chinmay Chemicals Private Limited (Chinmay), its group company for supplying the company products. Any disruptions at such production or manufacturing facility and their supply chains arrangements, or failures of to adhere to the relevant quality standards may have a negative effect on its reputation, business, and financial condition.

• The company is dependent on a few customers for a major part of its revenues. Further the company does not enter longterm arrangements with its customers and any failures to continue its existing arrangements could adversely affect the company business and results of operations.

• The company does not have any long-term agreements with its raw material suppliers. If the company faces difficulties in obtaining the necessary quality and quantity of raw materials in timely manner and at fair prices, or if the company fails to secure them altogether, it could detrimentally affect its business, financial performance, and cash flow.

• Its existing and proposed manufacturing units are located in Gujarat. Any localized social unrest, natural disaster, service disruption, or other unforeseen events in or around Gujarat could lead to production interruptions or shutdowns at its facilities. Such disruptions could have a material adverse effect on its business and financial condition.

• Its primary source of revenue largely depends on a sale of Direct Dyes and Intermediaries. Consequently, any downturn in sales within these segments would significantly hamper its operations and profitability.

• The company business is dependent on the performance of certain industries. Economic cyclicality coupled with reduced demand in these other industries, in India or globally, could adversely affect its business, results of operations and financial condition.

• The company has significant working capital requirements for its smooth day to day operations of business and discontinuance or the company inability to acquire adequate working capital timely and on favorable terms may have an adverse effect on its operations, profitability and growth prospects.

• If there are delays in setting up the Proposed Facility or if the costs of setting up and the possible time or cost overruns related to the Proposed Facility or the purchase of plant and machinery for the Proposed Facility is higher than expected, it could have a material adverse effect on its financial condition, cash flow, results of operations and growth prospects.

• A significant portion of its domestic revenues are derived from the West Zone and any adverse developments in this market could adversely affect its business.

• Delay in payment of loans to its secured lender.

• The company may faces several risks associated with setting up its proposed manufacturing unit, which could hamper the company growth, prospects, cash flow and business and financial condition.

• The company operate its Registered Office and manufacturing facility, Corporate Office, and Godown that are held by it on leasehold basis. In the event the company lose or are unable to renew such leasehold rights, its business, results of operations, financial condition, cash flows and prospects may be adversely affected.

• There have been instances in the past where the company has not made certain regulatory filings with the RoC and there were certain instances of discrepancies in relation to certain statutory filings and corporate records of the Company.

• Its success depends on stable and reliable logistics and transportation infrastructure. Disruption of logistics and transportation services could impair the ability of its suppliers to deliver raw materials or the company ability to deliver products to its customers and/ or increase its transportation costs, which may adversely affect the company operations.

• Optimal capacity utilisation of its production capacities could adversely affect the company business, future prospects, and financial performance, as the company may not be able to meet any potential increase in demand in the future.

• Fluctuations in raw material prices may affect its profitability.

• The company intend to utilize a portion of the Net Proceeds for funding its capital expenditure requirements. The company is yet to place orders for such capital expenditure.

• There have been some instances of delays in filing of statutory and regulatory dues in the past with the various government authorities.

• The company is involved in certain legal proceedings, which, if determined adversely, may affect its business and financial condition.

• The shortage or non-availability of power may adversely affect its business, result of operations, financial conditions, and cash flows.

• Information relating to the installed production capacity and capacity utilization of its manufacturing unit included in this Red Herring Prospectus are based on various assumptions and estimates and future production and capacity may vary.

• In its operations, the company operates within a highly regulated industry, requiring strict adherence to environmental, health, and safety regulations. Non-compliance risks legal liabilities increased operational expenses, and adverse effects on its financial performance, potentially prompting further compliance obligations.

• The company lacks documentary evidence for Ashokbhai Agrawal`s past educational qualifications, while the experience details of Umesh Menon and Bikash Tarafdar are based on the information provided by the directors.

• The Company has experienced negative cash flow in the past and may continue to do so in the future, which could have a material adverse effect on its business, prospects, financial condition, cash flows and results of operations.

• Its inability to collect receivables and default in payment from the company customers could result in the reduction of its profits and affect the company cash flows.

• Its Promoters and Directors have interests in entities, which are in businesses similar to its and this may result in potential conflict of interest with the company.

• Its Promoters have provided personal guarantee for loans availed by the company.

• Its Promoters and Promoter Group will be able to exercise significant influence and control over its operations after the offer and may have interests that are different from those of its other shareholders.

• Its Promoters, Directors and Key Managerial Personnel may have interest in the Company, other than reimbursement of expenses incurred, remuneration or other benefits received.

• Its success depends heavily upon the company individual Promoters, Directors, and SMPs for their continuing services, strategic guidance, and financial support.

• The company has entered and may continue to enter into related party transactions and there can be no assurance that such transactions have been on favourable terms.

• Its contingent liabilities as stated in its Restated Financial Statements could affect the company financial condition.

• The Company has unsecured loans with a total outstanding amount of Rs 334.94 lakhs as of January 31, 2025, that may be recalled by the lenders at any time.

• The company faces competition in its industry both from organized and unorganized players, posing potential risks to its business operation and financial condition.

• The company has issued Equity Shares during the last one year at a price that may be below the Offer Price.

• Its operations are labour intensive, and the company manufacturing operations may be subject to unionization, work stoppages or increased labour costs, which could adversely affect its business and results of operations.

• None of its Directors does not have any prior experience of being a director in any other listed company in India.

• Its business is exposed to foreign exchange rate related fluctuations.

• The company has not identified any alternate source of financing the `objects of the Offer`. If the company fails to mobilize resources as per its plans, its growth plans may be affected.

• The Company`s management will have flexibility in utilizing the net proceeds from the fresh issue and the deployment of the net proceeds from the offer is not subject to any monitoring by any independent agency.

• The objects of the fresh issue for which the funds are being raised have not been appraised by any bank or financial institutions. Any variation in the utilization of its Net Proceeds as disclosed in this Red Herring Prospectus would be subject to certain compliance requirements, including prior Shareholders` approval.

• The Company will not receive any proceeds from the Offer for Sale portion, and the Promoter Selling Shareholder shall be entitled to the Offer Proceeds to the extent of the Equity Shares offered by him in the Offer for Sale. Its Promoter is therefore interested in the Offer in connection with the Equity Shares offered by them in the Offer for Sale.

• The company requires several approvals, licenses, registrations and permits for its business and are required to comply with certain rules, regulations and conditions to operate its business and failure to obtain, retain or renew such approvals and licences in a timely manner or to comply with the requisite rules, regulations and conditions may adversely affect its operations.

• The Company has presently applied for new/fresh trademark registration which is pending for registration/consideration and if third parties infringe the trademark, logo and intellectual property that the company use, its business and reputation would be adversely affected.

• Any downtime for maintenance and repair of its machinery/equipment could lead to business interruptions that could be expensive and harmful to its reputation and to the company business.

• Its may not be able to identify or effectively respond to evolving preferences, expectations or trends in a timely manner and a failures to derive the desired benefits from its product development efforts may impact the company competitiveness and profitability.

• The requirements of being a listed company may strain its resources.

• Its insurance coverage may not adequately protect the company against potential risk, and this may have a material adverse effect on its business.

• Its employees may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.

• The company ability to pay dividends in the future will depends upon future earnings, financial condition, cash flows, working capital requirements, and capital expenditures.

• Its may not be successful in implementing the company business strategies.

• The Equity Shares have never been publicly traded, and, after the offer, the equity shares may experience price and volume fluctuations, and an active trading market for the equity shares may not develop. Further, the price of the equity shares may be volatile, and you may be unable to resell the equity shares at or above the offer price, or at all.

• There are restrictions on daily weekly monthly movement in the price of the equity shares, which may adversely affect the shareholder`s ability to sell for the price at which it can sell, equity shares at a particular point in time.

• The company has not independently verified certain data in this Red Herring Prospectus.

• QIB and Non-Institutional Investors are not permitted to withdraw or lower their Bids (in terms of quantity of Equity Shares or the Bid Amount) at any stage after submitting a Bid.

• Investors will not be able to sell immediately on an Indian stock exchange any of the Equity Shares they purchase in the Offer.

• Any future issuance of Equity Shares may dilute the shareholding of the Investor, or any sale of Equity Shares by its Promoter or other significant shareholder(s) may adversely affect the trading price of the Equity Shares.