Atul Ltd 2016-17

195 Risk exposure Through its defined benefit plans, the Group is exposed to a number of risks, the most significant of which are detailed below: i) Asset volatility The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Most of the plan asset investments is in fixed income securities with high grades and in Government securities. These are subject to interest rate risk. The Group has a Risk Management strategy where the aggregate amount of risk exposure on a portfolio level is maintained at a fixed range. Any deviations from the range are corrected by rebalancing the portfolio. The Group intends to maintain the above investment mix in the continuing years. ii) Changes in bond yields A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of bond holdings. The Group actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the employee benefit obligations. The Group has not changed the processes used to manage its risks from previous periods. Investments are well diversified, such that the failure of any single investment will not have a material impact on the overall level of assets. A large portion of assets in 2017 consists of insurance funds, although the Group also invests in corporate bonds and special deposit scheme. The plan asset mix is in compliance with the requirements of the respective local regulations. Expected contributions to post-employment benefit plans for the year ending March 31, 2018 are ` 2.71 cr. The weighted average duration of the defined benefit obligation is 5 years (2015-16: 5 years). The expected maturity analysis of gratuity is as follows: Particulars Less than a year Between 1 - 2 year Between 2 - 5 year Over 5 year Total Defined benefit obligation (gratuity) As at March 31, 2017 7.45 5.75 20.50 17.20 50.90 As at March 31, 2016 8.15 5.55 25.42 26.46 65.58 b) Defined contribution plans: Amount of ` 10.28 cr (March 31, 2016: ` 9.62 cr) is recognised as expense and included in the Note 26 ‘Contribution to Provident and other funds’. c) Provident Fund: In case of certain employees, the Provident fund contribution is made to a trust administered by the Group. The actuary has provided a valuation of Provident fund liability based on the assumptions listed below and determined that there is no shortfall as at March 31, 2017. The assumptions used in determining the present value of obligation of the interest rate guarantee under deterministic approach are: Particulars 2016-17 2015-16 i) Mortality rate Indian Assured Lives Mortality (2006-08) ultimate Indian Assured Lives Mortality (2006-08) ultimate ii) Withdrawal rates 6.0% pa for all age groups 5% pa for all age groups iii) Rate of discount 7.22% 7.80% iv) Expected rate of interest 8.65% 8.80% v) Retirement age 60 years 60 years vi) Guaranteed rate of interest 8.65% 8.80% Notes to the Consolidated Financial Statements