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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