Atul Ltd 2020-21

206 Atul Ltd | Annual Report 2020-21 Note 29.6 Employee benefit obligations (continued) Sensitivity analysis The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is: Particulars Change in assumptions Impact on defined benefit obligation Increase in assumptions Decrease in assumptions As at March 31, 2021 As at March 31, 2020 As at March 31, 2021 As at March 31, 2020 As at March 31, 2021 As at March 31, 2020 Discount rate 1.00% 1.00% (4.18%) (3.24%) 4.63% 3.51% Attrition rate 1.00% 1.00% (0.45%) (0.42%) 0.48% 0.45% Rate of return on plan assets 1.00% 1.00% (4.18%) (3.24%) 4.63% 3.51% Salary escalation rate 1.00% 1.00% 4.52% 3.41% (4.16%) (3.21%) The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied while calculating the defined benefit liability recognised in the Consolidated Balance Sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change as compared to the previous year. Major category of plan assets are as follows: ( ` cr) Particulars As at March 31, 2021 As at March 31, 2020 Unquoted in % Unquoted in % Government of India assets 1.18 2.15% 1.18 2.33% Debt instruments Corporate bonds 1.17 2.14% 1.11 2.19% Investment funds Insurance funds 52.27 95.38% 43.14 85.31% Others 0.02 0.04% 4.98 9.85% Special deposit scheme 0.16 0.29% 0.16 0.32% 54.80 100.00% 50.57 100.00% 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 are 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. All deviations from the range are corrected by rebalancing the portfolio. The Group intends to maintain the above investment mix in the coming 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 other 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.