172 Annual Report 2023-24 Atul Ltd Potential impact of risk Management policy Sensitivity to risk ii) Interest risk The Company is mainly exposed to interest rate risk due to its variable interest rate borrowings. The interest rate risk arises due to uncertainties about the future market interest rate of these borrowings As at March 31, 2024, the exposure to interest rate risk due to variable interest rate borrowings amounted to ` 10.52 cr (March 31, 2023: ` 5.41 cr) In order to manage its interest rate risk arising from variable interest rate borrowings, the Company uses interest rate swaps to hedge its exposure to future market interest rates whenever appropriate. The hedging activity is undertaken in accordance with the framework set by the Risk Management Committee and supported by the treasury department. As an estimation of the approximate impact of the interest rate risk, with respect to financial instruments, the Company has calculated the impact of a 25 bps change in variable interest rates. A 25 bps increase in variable interest rates would have led to approximately an additional ` 0.03 cr (2022-23: ` 0.01) expenses in the Standalone Statement of Profit and Loss. A 25 bps decrease in variable interest rates would have led to an equal but opposite effect. iii) 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 (`) 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 and other transactions other than functional risks. It hedges its foreign exchange risk using foreign exchange forward contracts and currency options after considering the natural hedge. The same is as per the guidelines laid down in its Risk Management Policy. As an estimation of the approximate impact of the foreign exchange rate risk, with respect to the Standalone Financial Statements, the Company has calculated the impact as follows: For derivative financial instruments, a2%increase in the spot price as on the reportingdatemay have led to insignificant effect in other comprehensive income (2022-23: loss of ` 0.23 cr). A2%decrease may have led to an additional ` 0.85 cr gain in other comprehensive income (2022-23: gain of ` 1.25 cr). For non-derivative financial instruments, a 2% increase in the spot price as on the reporting date may have led to an additional ` 7.10 cr gain in Standalone Statement of Profit and Loss (202223: gain of ` 8.20 cr). A 2% decrease may have led to an equal but opposite effect. Foreign currency risk exposure The exposure to foreign currency risk of the Company at the end of the reporting period expressed is as follows: Particulars As at March 31, 2024 US$ mn ` cr € mn ` cr £ mn ` cr Financial assets Trade receivables 49.14 409.81 3.27 29.38 0.30 3.13 Less: Hedged through derivatives1: Currency range options 5.30 44.20 - - - - Net exposure to foreign currency risk (assets) 43.84 365.61 3.27 29.38 0.30 3.13 Financial liabilities Trade payables 13.33 111.16 0.06 0.53 0.01 0.09 Net exposure to foreign currency risk (liabilities) 13.33 111.16 0.06 0.53 0.01 0.09 Note 29.8 Financial risk management (continued)
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