RED HERRING PROSPECTUS Dated August 24 ... - Globus Spirits

RISK FACTORS
An investment in the company’s Equity Shares involves a high degree of risk. One
should carefully consider all of the information in this Red Herring Prospectus,
including the risks and uncertainties described below, before making an investment
decision. Risks have been quantified, wherever possible. If any of the following risks
actually occur, the business, financial condition and results of operations could suffer,
the trading price of the Equity Shares may decline and you may lose all or part of your
investment.
Unless specified or quantified in the relevant risk factors below, the Company is not in
a position to quantify the financial or other implications of any of the risks described in
this section
Materiality
The Risk factors have been determined on the basis of their materiality. The following factors
have been considered for determining the materiality.
1. Some events may not be material individually but may be found material collectively.
2. Some events may have material impact qualitatively instead of quantitatively.
3. Some events may not be material at present but may be having material impacts in
future.
A. INTERNAL TO THE COMPANY
1. Constraint in the availability of raw material viz., Molasses and Grain may affect
the Company’s operations and in turn the profitability of the Company
Alcohol industry being a raw material intensive industry, the Company is exposed to possible
unpredictability in the supply of raw materials, be it molasses or grain. Disruption in the
supply of raw material may lead to hampering of the production process flow. Uncertainty
over the availability of raw materials such as molasses, grain and other sources such as
water, power, skilled manpower etc may also affect the Company’s operations and in turn
the future profitability of the Company, which cannot be quantified.
Management Perception
The main raw materials are Molasses and Grain. Both the raw materials are easily available
in the vicinity of the plant site. The Company’s production facilities can utilize both molasses
and/or grain as raw material, thus mitigating the dependence on any one specific raw
material.
2. Rise in input costs, particularly Raw Materials, may affect the profitability of the
Company
The Company is mainly engaged in manufacture of Rectified Spirit, Extra-Neutral Alcohol,
Country Liquor and IMFL products, and the main raw material for producing the above is
either molasses or grain or both. Molasses is a by-product of the Sugar industry and is
dependant on crop availability. In the event of a shortfall in sugarcane production or other
grain, on account of drought during any season, there could be a resultant increase in the
prices of molasses and grain, which could affect the future profitability of the Company.
Management Perception
Increase in prices of molasses and/or grain, if at all, is purely seasonal in nature and the
prices settle down with each new sugarcane/grain crop season. In the event, there is a fall in
supply of molasses, the Company, in order to tide over the situation, may import molasses
at competitive prices from neighbouring states or countries. Further the production facilities
of the Company are capable of handling alternative raw materials which will derisk any
production bottlenecks.
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