Atul Ltd 2016-17

203 Note 29.8 Financial Risk Management (continued) ii) Foreign exchange risk The Group 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 Group. The risk also includes highly probable foreign currency cash flows. The objective of the cash flows hedges is to minimise the volatility of the cash flows of highly probable forecast transactions. The Group has exposure arising out of export, import, loans and other transactions other than functional risk. The Group 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 Group. As an estimation of the approximate impact of the foreign exchange rate risk, with respect to Financial Statements, the Group has calculated the follows: 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 ` 2.05 cr gain in Other Comprehensive Income (2015-16: gain of ` 1.16 cr). A 2% decrease would have led to an increase in additional ` 0.65 cr loss in Other Comprehensive Income (2015-16: gain of ` 0.17 cr). Foreign currency risk exposure: The exposure to foreign currency risk of the Group 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 175.07 5.89 – 154.31 3.94 0.01 108.56 6.75 0.53 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) 125.47 5.89 – 27.06 3.94 0.01 (58.56) 6.75 0.53 Financial liabilities Borrowings 69.15 – – 95.21 – – 97.93 – – Trade payables 51.06 1.50 – 35.26 0.73 0.77 37.07 0.01 0.03 Capital creditors 0.16 – – – – – – – – 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) 51.22 1.50 – 35.25 0.73 0.77 57.93 0.01 0.03 iii) Management of credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty fails to meet its contractual obligations. Trade receivables Concentrations of credit risk with respect to trade receivables are limited, due to the customer base being large, diverse and across sectors and countries. All trade receivables are reviewed and assessed for default on a quarterly basis. historical experience of collecting receivables of the Group is supported by low level of past default and hence the credit risk is perceived to be low. Notes to the Consolidated Financial Statements