gayatri projects limited - Edelweiss

GAYATRI PROJECTS LIMITEDEXTERNAL RISK FACTORSA slowdown in economic growth in India could cause our business to sufferThe Indian economy has shown sustained growth over the last few years with real GDP growing at 6.9% in theFiscal 2005, 8.5% in the Fiscal 2004 and 4.0% in Fiscal 2003. During the first quarter of Fiscal 2006, real GDP grewat 8.1% compared to 7.5% during the first quarter of Fiscal 2005. With the importance of the agricultural sector toour business, any slowdown in the growth of the agricultural sector could also adversely impact our performance.Growth in agricultural production in India has been variable. Agricultural GDP grew by 2.0% in the first quarter ofFiscal 2006 compared to 3.8% in the first quarter of Fiscal 2005. Agricultural GDP grew at 1.1% in Fiscal 2005 and9.6% in Fiscal 2004 while it declined by 7.2% in Fiscal 2003 due in part to a poor monsoon in 2002 which had animpact in Fiscal 2003 (Source: Central Statistical Organisation Ministry of Statistics and Programme Implementation).Any slowdown in the Indian Economy or future volatility in global commodity prices, in particular steel, cement andprices of other construction material, could adversely affect our business.Political instability or changes in the government could delay further liberalization of the Indian economyand adversely affect economic conditions in India generally, which could impact our financial results andprospects.Since 1991, successive Indian governments have pursued policies of economic liberalization. The role of the Indiancentral and state governments in the Indian economy as producers, consumers and regulators has remained significant.The leadership of India has changed a number of times since 1996. The current central government, which came topower in May 2004, is led by the Indian National Congress in coalition with several political parties. Although thecurrent government has announced policies and taken initiatives that support the economic liberalization policiesthat have been pursued by previous governments, the rate of economic liberalization has been affected by the coalitionnature of the government. If there was to be any slowdown in the economic liberalization, or a reversal of stepsalready taken, it could have an adverse affect on our business.Terrorist attacks, civil unrest and other acts of violence or war involving India and other countries couldadversely affect the financial markets and our business.Terrorist attacks and other acts of violence or war may negatively affect the Indian markets on which our EquityShares will trade and may also adversely affect the worldwide financial markets. These acts may also result in aloss of business confidence. In addition, any deterioration in relations between India and Pakistan might result ininvestor concern about stability in the region, which could adversely affect the market price of our Equity Shares.India has also witnessed civil disturbances in recent years and it is possible that future civil unrest as well as otheradverse social, economic and political events in India could have a negative impact on us. Such incidents couldalso create a greater perception that investment in Indian companies involves a higher degree of risk and couldhave an adverse impact on our business and the market price of our Equity Shares.Natural calamities could have a negative impact on the Indian economy, particularly the agriculture sector,and cause our business to suffer.India has experienced natural calamities such as earthquakes, a tsunami, floods and drought in the past few years.The extent and severity of these natural disasters determines their impact on the Indian economy. Any negativeimpact of natural disasters on the Indian Economy could adversely affect our business and the market price of ourEquity Shares.Any downgrading of India’s debt rating by an international rating agency could have a negative impact onour businessAny adverse revisions to India’s credit ratings for domestic and international debt by international rating agenciesmay adversely impact our ability to raise additional financing, the interest rates and other commercial terms at whichsuch additional financing is available. This could have a material adverse affect on our business and financialperformance, our ability to raise financing for onward lending and the price of our Equity Shares.xvi