Atul Ltd 2016-17

139 Note 27.8 Financial Risk Management (continued) b) Financial assets: The Company holds variable interest rate financial assets and fixed interest rate financial assets. However, it does not designate fixed interest rate financial assets at fair value through profit and loss. Therefore, changes in interest rates of fixed rate instruments would not affect profit or loss | equity. As at March 31, 2017, the exposure to interest rate risk due to variable interest rate loans amounted to ` 4.30 cr (March 31, 2016 and April 01, 2015: ` 4.30 cr) In order to manage its interest rate risk on variable interest rate financial assets, any new loan is as per the Policy of the Company. The Company has calculated the impact of a 25 bps change in interest rates. A 25 bps increase in interest rates would have led to approximately an additional ` 0.01 cr (2015-16: ` 0.01 cr) gain in Other Comprehensive Income. A 25 bps decrease in interest rates would have led to an equal but opposite effect. ii) Foreign exchange risk The Company has international operations and is exposed to foreign exchange risk arising from foreign currency transactions. Foreign exchange risk arises from future commercial transactions and recognised Financial assets and liabilities denominated in a currency that is not the functional currency (INR) of the Company. The risk also includes highly probable foreign currency cash flows. The objective of the cash flow hedges is to minimise the volatility of the ` cash flows of highly probable forecast transactions. The Company has exposure arising out of export, import, loans and other transactions other than functional risks. The Company hedges its foreign exchange risk using foreign exchange forward contracts and currency options after considering the natural hedge. The same is within the guidelines laid down by Risk Management Policy of the Company. As an estimation of the approximate impact of the foreign exchange rate risk, with respect to Financial Statements, the Company has calculated the following: For derivative and non-derivative financial instruments, a 2% increase in the spot price as on the reporting date would have led to an increase in additional ` 3.76 cr gain in Other Comprehensive Income (2015-16: gain of ` 2.25 cr). A 2% decrease would have led to an increase in additional ` 2.36 cr loss in Other Comprehensive Income (2015-16: loss of ` 0.91 cr). Foreign currency risk exposure: The exposure to foreign currency risk of the Company at the end of the reporting period expressed in ` cr, are as follows: Particulars As at March 31, 2017 As at March 31, 2016 As at April 01, 2015 USD EUR GBP USD EUR GBP USD EUR GBP Financial assets Trade receivables 244.26 16.80 0.77 202.95 8.58 1.52 186.33 15.93 1.03 Dividend receivable – – 5.25 – – – – – – Less: Hedged through derivatives (Includes hedges for highly probable transactions up to next 12 months) Foreign exchange forward contracts – – – – – – 4.38 – – Currency range options 49.60 – – 83.25 – – 162.74 – – Currency vanilla options – – – 44.00 – – – – – Net exposure to foreign currency risk (assets) 194.66 16.80 6.02 75.70 8.58 1.52 19.21 15.93 1.03 Financial liabilities Borrowings 69.15 – – 95.21 – – 97.93 – – Trade payables 52.33 1.52 0.04 35.51 0.78 0.82 38.15 0.40 0.13 Less: Hedged through derivatives (Includes hedges for highly probable transactions up to next 12 months) Foreign exchange forward contracts 58.35 – – 59.98 – – 12.52 – – Interest rate swaps – – – 2.07 – – 12.39 – – Currency swaps 10.80 – – 33.17 – – 52.16 – – Net exposure to foreign currency risk (liabilities) 52.33 1.52 0.04 35.50 0.78 0.82 59.01 0.40 0.13 Notes to the Financial Statements