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Note 28.8 Financial risk management (continued)
b) Management of market risk
¹ĺĚ ƙĿǕĚ îŠē ūƎĚƑîƥĿūŠƙ ūlj ƥĺĚ ūŞƎîŠNj ĚNJƎūƙĚƙ Ŀƥ ƥū ƥĺĚ ljūŕŕūDžĿŠij ŞîƑŒĚƥ ƑĿƙŒƙ ƥĺîƥ îƑĿƙĚ ljƑūŞ Ŀƥƙ ƭƙĚ ūlj ǛŠîŠČĿîŕ
instruments:
i) price risk
ii) foreign exchange risk
¹ĺĚ îċūDŽĚ ƑĿƙŒƙ ŞîNj îljljĚČƥ ĿŠČūŞĚ îŠē ĚNJƎĚŠƙĚƙȡ ūƑ ƥĺĚ DŽîŕƭĚ ūlj Ŀƥƙ ǛŠîŠČĿîŕ ĿŠƙƥƑƭŞĚŠƥƙ ūlj ƥĺĚ ūŞƎîŠNjȦ ¹ĺĚ ūċŏĚČƥĿDŽĚ
of the Management of the Company for market risk is to maintain this risk within acceptable parameters, while optimising
returns. The Company exposure to, and the Management of these risks is explained below:
Potential impact of risk
Management policy
Sensitivity to risk
i) Price risk
The Company is mainly exposed to
the price risk due to its investments in
equity instruments and mutual funds.
The price risk arises due to uncertainties
about the future market values of these
investments.
Equity price risk is related to the
change in market reference price of the
investments in equity securities.
In general, equity securities are not
held for trading purposes. These
investments are subject to changes in
the market price of securities. The fair
value of quoted equity instruments
ČŕîƙƙĿǛĚē îƙ ljîĿƑ DŽîŕƭĚ ƥĺƑūƭijĺ ūƥĺĚƑ
comprehensive income as at March 31,
2019 is
`
525.32 cr (March 31, 2018:
`
ǪǫǧȦǫǩ ČƑȴȦ
The fair value of mutual funds
ČŕîƙƙĿǛĚē îƥ ljîĿƑ DŽîŕƭĚ ƥĺƑūƭijĺ ƎƑūǛƥ
and loss as at March 31, 2019 is
`
197.65 cr (March 31, 2018: Nil).
In order to manage its price risk
arising from investments in equity
instruments, the Company maintains
its portfolio in accordance with
the framework set by the Risk
Management Policy.
Any new investment or divestment
must be approved by the Board,
ĺĿĚlj GĿŠîŠČĿîŕ ~ljǛČĚƑ îŠē ¤ĿƙŒ
Management Committee.
As an estimation of the approximate
impact of price risk, with respect to
investments in equity instruments, the
Company has calculated the impact as
follows.
GūƑ ĚƐƭĿƥNj ĿŠƙƥƑƭŞĚŠƥƙȡ
î ǯȦǧǪɼ
increase in Nifty 50 prices may have
led to approximately an additional
`
25.53 cr gain in other comprehensive
income (2017-18:
`
ǪǦȦǮǩ ČƑȴȦ
ǯȦǧǪɼ
decrease in Nifty 50 prices may have
led to an equal but opposite effect.
For mutual funds, a 1% increase in
prices may have led to approximately
an additional
`
1.98 cr gain in the
¬ƥîƥĚŞĚŠƥ ūlj ¡ƑūǛƥ îŠē gūƙƙ ȳǨǦǧǭȹ
18:
`
Nil). A 1% decrease in prices may
have led to an equal but opposite effect.
ii) 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
ƥƑîŠƙîČƥĿūŠƙ îŠē ƑĚČūijŠĿƙĚē ǛŠîŠČĿîŕ
assets and liabilities denominated in
a currency that is not the functional
currency (
`
) of the Company. The risk
also includes highly probable foreign
ČƭƑƑĚŠČNj Čîƙĺ ǜūDžƙȦ ¹ĺĚ ūċŏĚČƥĿDŽĚ ūlj
ƥĺĚ Čîƙĺ ǜūDž ĺĚēijĚƙ Ŀƙ ƥū ŞĿŠĿŞĿƙĚ ƥĺĚ
volatility of the
`
Čîƙĺ ǜūDžƙ ūlj ĺĿijĺŕNj
probable forecast transactions.
The Company has exposure arising
out of export, import, and other
transactions other than functional
risks. The Company 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 Company.
As an estimation of the approximate
impact of the foreign exchange rate
risk, with respect to the Financial
Statements,
the
Company
has
calculated the impact as follows:
For derivative and non-derivative
ǛŠîŠČĿîŕ ĿŠƙƥƑƭŞĚŠƥƙȡ î Ǩɼ ĿŠČƑĚîƙĚ
in the spot price as on the reporting
date may have led to an increase
in additional
`
5.93 cr gain in other
comprehensive
income
(2017-18:
gain of
`
ǫȦǪǮ ČƑȴȦ
Ǩɼ ēĚČƑĚîƙĚ ŞîNj
have led to an increase in additional
`
5.17 cr loss in other comprehensive
income (2017-18: loss of
`
5.01 cr).
Corporate Overview 01-22
Statutory Reports 23-105
Financial Statements 107-250
166
Atul Ltd | Annual Report 2018-19