volumes. We negotiate with vendors for purchase price rebates such that the rebates substantially absorb the
product discounts offered to the retail customers. This helps protect us from significant product margin losses.

Interest Rate Risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes
in market interest rates.

We are exposed to interest rate risk primarily due to borrowings having floating interest rates. We use available
working capital limits for availing short term working capital demand loans with interest rates negotiated from
time to time so that we have an effective mix of fixed and variable rate borrowings. We do not enter into financial
instrument transactions for trading or speculative purposes or to manage interest rate exposure.

Credit Risk

Credit risk is the risk of the financial loss that the counterparty will default on its contractual obligation. The credit
risk for us primarily arises from the credit exposures to trade receivables (mainly institutional customers), deposits
with landlords for store properties taken on leases, cash and cash equivalents, deposits with banks and other
receivables.

Trade and other receivables

Our retail business is predominantly on cash and carry basis. We sell goods on credit basis to institutional parties.
The credit risk on such collections is minimal considering that such sales are only 3% of the total sales. The
average credit period for institutional parties is 30 days. No interest is charged on trade receivables on payment
received even after the credit period. We have adopted a policy of dealing with only credit worthy counterparties
in case of institutional customers and the credit risk exposure for institutional customers is managed by us by
credit worthiness checks. We also carry credit risk on lease deposits with landlords for store properties taken on
lease, for which agreements are signed and property possessions timely taken for store operations. The risk relating
to refunds after store shut down is managed through successful negotiations or appropriate legal actions, where
necessary.

Liquidity Risk

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an
appropriate liquidity risk management framework for the management of our short, medium and long-term
funding and liquidity management requirements. We manage liquidity risk by maintaining adequate reserves,
banking facilities by continuously monitoring forecast and actual cash flows and by matching the maturity profiles
of financial assets and liabilities.

Inflation

In recent years, India has experienced relatively high rates of inflation. While we believe inflation has not had any
material impact on our business and results of operations, inflation generally impacts the overall economy and
business environment and hence could affect us.

UNUSUAL OR INFREQUENT EVENTS OR TRANSACTIONS

Except as described in this Prospectus, to our knowledge, there have been no unusual or infrequent events or
transactions that have in the past or may in the future affect our business operations or future financial
performance.

SIGNIFICANT ECONOMIC CHANGES THAT MATERIALLY AFFECT OR ARE LIKELY TO
AFFECT INCOME FROM CONTINUING OPERATIONS

Our business has been subject, and we expect it to continue to be subject, to significant economic changes that
materially affect or are likely to affect income from continuing operations identified above in “Management's
Discussion and Analysis of Financial Condition and Results of Operations — Significant Factors Affecting our
Results of Operations and Financial Conditions” and the uncertainties described in “Risk Factors” on pages 307
and 22, respectively.

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