RISK MANAGEMENT PLAN

SRS LIMITED (Adopted on 30.09.2014)

R I S K MANAGEMENT P O L I C Y / P L A N

Risks are a natural part of the business world. While risk is normally affiliated with negative connotations, a mature understanding of risk defines it as an essential element that helps corporates to seize new opportunities and conquer new frontiers, that is, i f risk is handled properly. Herein lies the basis for the adage 'No risk, no gain*. Intrinsically, risk is a necessary partner in progress, and hence needs to be aptly handled for business growth.

Hence, any risk management policy needs to ideally focus on the management of risk, rather than the elimination of risk as many would prefer as an obvious answer. Elimination of risk is futile and counter-productive as it may stem fresh initiatives, experimentation and growth. Management of risk, on the other hand, highlights the pitfalls well in advance, preparing management to take appropriate steps to go around it, while pursuing growth and profitability.

As a large corporate with diversified interests, SRS Limited is exposed to several sets of risks since it operates across industries rather than a single category. Each business vertical has its own nuances and risks, and they need to be handled in a focused manner.

As per the amended Clause 49 of the Listing Agreement with Stock Exchanges, the Company is required to lay down the procedure for business risk assessment and minimization, which is to be periodically reviewed by the Board. Thus, the Board in its meeting held on 30 th September, 2014 has devised this Risk Management Plan for all the verticals of the Company

Company Overview on Risk Management Policy

With the above philosophy, SRS Limited has a very dynamic view on risk management as it has the task to manage diverse operations across multiple formats and in various geographies. Its operational spread necessitates that a strong centralized system is in place for this purpose for a regular and broad overview. This is layered by a second process at the level of the functional heads which deep dives into specific details across all operational aspects.

The Company periodically assesses its operations to ensure that no flank is exposed to risk and to identify and weed out shortcomings from the system as and when they occur, or ideally, before they occur. This spirit of preventive risk management underscores the ethos of the Company's philosophy on this front.

Apart from this, the Company also lays importance of sharing and carrying forward the learnings from the mistakes and experiences of others in the organization.

Purpose of the Risk Management Policy

This plan documents the risks identified in respect of all the verticals of the Company and strategies to mitigate the same.

Presently, the operations of the Company comprises of Gold & Jewellery, Cinema Exhibition, Retail and Food & Beverages and Hospitality. The risks identified in each of the vertical are as follows: -

G O L D & J E W E L L E R Y

Inventory- Price Risk: As the raw material for jewellery i.e., gold is imported and there are restrictions imposed by RBI on its imports, therefore, the Company has to maintain a high level of

inventory requiring high working capital. However, maintaining this inventory becomes difficult for the Company during the slack season, as it carries inventory price risk. Also, with the volatility in gold prices and currency movement, hedging assumes a very important role to safeguard the working of the company with respect to the gold inventory.

Competition Risk: With the increase in disposable income and the change in standard of living, the demand for luxury goods such as consumer electronics, mobile phones, leather goods, automobiles, gadgets etc. are also increasing. The jewellery sector may experience competition from these luxury goods, which may eat the market share of the sector and in turn, of the Company, further, new channels of distribution and purchase such as online may give sudden scale to relatively new entrants and may move a chunk of the overall target segment away from the traditional outlets.

Exchange Rate/Currency Risk: The revenues/profitability of this division may be affected by the rupee/dollar exchange rate because of the import/exports of gold & jewellery. Thus, any volatility in the exchange rates affects the rates and thereby profitability/margins of the vertical.

The Company's risk management and control procedures involve prioritization and continued assessment of these risks and devise appropriate controls, evaluating and reviewing the control mechanism. Through this approach, the Company strives to identify opportunities that enhance organizational values while managing or mitigating risks that can affect its future performance.

CINEMA E X H I B I T I O N

Seasonal in nature: Revenues of Cinemas increases during holidays/festival season and decreases during examination or IPL matches or other such games.

Concentration of Movie-Watching days: Movie going is fast becoming a weekend affair, leading to very high capacity utilization, and even housefuls on weekends. However, the flip side is low auditorium occupancy during weekdays.

Reduced window of opportunity: Digital prints have meant that a huge number of prints are available during a movie's release. This leads to an equally large number of shows (supply glut at times) for any movie and hence contracts the timeframe available to any cinema to milk the market adequately.

Cinema with value offering basket: Earlier, cinema used to run as an independent identity but now it needs support from other outlets like food courts, gaming zone, shopping zones etc. The surroundings have started becoming compulsory without which is becoming an uphill task to get required footfall. This is in sharp contrast to the earlier times when just having a good cinema property assured good crowd-pulling power.

Depends primarily on the acceptance of a movie by public: Revenues of Cinemas primarily depends on the release of new movies and their acceptance by the public at large. Moreover, the commercial success of a movie also depends upon the quality and acceptance of other competing films released into the marketplace at or near the same time etc.

Competition Risk: We face competition from other companies in the Indian film exhibition sector. Some of our competitors have greater financial resources than us and therefore they may be in a better position than us to invest in Multiplex Cinema projects or to sustain losses from such developments in the start-up stage. In the future, we may also face competition from global

entertainment companies, i f and when such companies make their foray into the Indian exhibition sector.

Per capita disposable income: As a leisure activity, movie attendance relies on household disposable income levels, which, in turn, is affected by employment rates, taxes and the general state of the economy. When disposable income levels rise, people are more capable of spending on discretionary services, driving up ticket sales. Conversely, consumers may defer or reduce trips to the movies when they have lower disposable income. This factor's contribution to risk is expected to decrease in the coming year.

External competition: Cable, satellite TV, online streaming platforms, pirated software and other entertainment products are increasingly appearing in households that are lowering demand for the Movie/Theater industry. On per program basis, these services allow viewers to access entertainment at a fraction of the cost as compared that of a movie ticket. This factor's contribution to risk is expected to remain the same in the coming year.

Number of broadband connections: The number of broadband connections indicates the extent to which consumers use high-speed internet for a variety of purposes, including access to competing streaming platforms. With the rapid rise in broadband connection numbers, more consumers are using the internet to download or stream movies, which directly reduces demand for the Movie Theaters industry. The number of broadband connections is expected to rise in 2014.

Frequent Technological change: As movie theaters continue to switch to digital and 3D projection systems, ticket prices typically rise, allowing for industry revenue gains but hampering the numbers of moviegoers on account of more spending. The regular change in the technology is also contributing in asset accumulation as when new technology surfaces the older once inventory starts increasing with lesser utility of the same. For e.g. Dolby dizital 7.1 is still being underutilized but another technology called Atmos is round the corner, so companies who have already invested in the latest sound system are no longer the latest - so frequent up gradation is required causing inputs on additional funds for running the same business.

R E T A I L

Competitive risk: we face competition from other Companies in retail sector, other shopping channels, like e-commerce & m-commerce, multi-brand retailers with FDI etc. that impact operations/revenues of this vertical

Economic risks: The risk that consumer confidence will decline, leading to reduced consumer spending that in a turn leads to a fall out of tenants.

Political Risk: The largest opposition party in India has opposed FDI in retail and some of its leaders have indicated that they wil l scrap the policy i f their party comes to power. A political change in state and central governments puts a lot of political risk on investment in retail.

Finance Risk: The rapid expansion in retail space in recent years was largely debt funded. This has resulted in substantial leverage, which has added to retailers financing risks in the recent scenario. The declining interest coverage clearly indicated that a large number of retailers are highly leveraged and are battling high interest payments.

Taxation Risk: Various states levy different taxation structures and this makes it very difficult for a brand to expand its operations across a wider geographical region that spans several states. Movement of goods, their billing and sales becomes a very complicated affair after a point.

Manpower Risk: Since organized retail is an evolving category, there is a shortage of trained manpower, which acts as a limiting factor in expansions and operations. Further, it has a negative implication on the cost structure as well since quality resources come at a higher cost. In addition to this, the turnover rate at the junior operational level is higher, which makes smooth store operations a challenge.

FOOD & B E V E R A G E S

Competition: The Hospitality and F&B industry has seen a huge amount of growth in recent years. The consumer thus has a plethora of options to choose from in terms of the restaurants and banquets he can visit, or the kind of cuisines that he wishes to enjoy and even the ambience he prefers at any given time. This multiplicity of options has mushroomed fast, going beyond the organic growth in population or disposable income at times. Hence, several players in this domain may be fighting for a thinner share of the market.

Quality: The quality of food has a direct bearing not only on the enjoyment factor, but also on the overall health of the diners. This makes it very tricky as the food served needs to be always fresh and hygienic, with a zero tolerance for sub-optimal food. An un-agreeable experience here can threaten the very existence of the restaurants.

Worker's problems

Consistency: Maintaining consistency is crucial in this industry to give a uniform experience to the customers. However, at times, this becomes difficult on account of the regional differences and preferences, localized sourcing of ingredients and culinary skills of chefs from different regions.

Quality & Quantity

Regulatory Risks

MANAGING T H E R I S K

Managing such diverse sets of risks call for a fine blend of centralized and functional controls. This includes several steps such as:

Strong Corporate Governance policy implementation, as this makes the entire planning and operational transparent and the involvement of people from multi-functional teams. This leads to proper implementation as well of timely red-flagging of potential risk elements. Strong risk management processes are set up for each business and the risk management ethos is internalized by all employees of the Company. This ensures that a 'look-out' approach for risk management is set in place, helping the company to identify, assess and manage risk elements well in advance

Responsibility with functional heads: each functional head has the responsibility of sound risk management as a part of his or her core KRA. This ensures that not only are the risk management processes set in place, but are also followed diligently Regular audits of the operations at each touch-point are carried out to ensure compliance with processes and physically verify the state of things, followed by a formal reporting Learnings from one team as well as experiences from diverse projects are openly shared with all the stakeholders in other divisions so that these learnings make people more

attentive to possible pitfalls and ensure that similar mistakes are never repeated in the organization. For new projects, risk management processes kick in right from inception stage and go on until the launch state and thereafter. This ensures that even before a project gets off the ground, it has been adequately risk mapped - not only from the launch point of view, but also from the long-term operational view.

For SRS Limited

Dr. Anil Jindal J^^^L

Sh. Sunil Jindal

Sh. Vinod Kumar \/l\^\0^ ^ U ^ A ^

Sh. Raju Bansal ~ ^ ^ ^ o | Q ^ w i ^ A

Sh. Jitender Kumar Garg

Sh. Ankit Garg

Sh. Shiv Mohan Gupta

Sh.Lalit Kumar [jxiA jO

Sh. Praveen Gupta ^t^S

Sh. Jogindar Lai Chhabra « -—g^J^ -^— -—

Sh. Nishant GoeI ^ v f y ^ V ^ ^ L -

Ms. Anjali Trehan [ \ \o\fr