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b) Financial assets:
The Company holds variable
interest rate financial assets
and fixed interest rate
financial assets. However,
it does not designate fixed
interest rate financial assets
at fair value through profit
and loss. Therefore, changes
in interest rates of fixed
rate instruments may not
affect profit or loss | equity.
As at March 31, 2018, the
exposure to interest rate risk
due to variable interest rate
loans amounted to
`
Nil (March
31, 2017:
`
4.30 cr).
In order to manage its interest rate
risk on variable interest rate financial
assets, any new loan is as per the
Policy of the Company.
The Company has calculated the
impact of a 25 bps change in interest
rates.
A 25 bps increase in interest rates
may have led to approximately
an additional
`
Nil (2016-17:
`
0.01 cr) gain inOther Comprehensive
Income. A 25 bps decrease in interest
rates may 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, loans and
other transactions other than
functional risk. 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 Financial
Statements, the Company has
calculated the impact as follows:
For derivative and non-derivative
financial instruments, a 2% increase
in the spot price as on the reporting
date may have led to an increase in
additional
`
5.48 cr gain in Other
Comprehensive Income (2016-17:
gain of
`
3.76 cr). A 2% decrease
may have led to an increase in
additional
`
5.01 cr loss in Other
Comprehensive Income (2016-17:
loss of
`
2.36 cr).
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, 2018
US$ mn
` cr
€ mn
` cr
£ mn
` cr
Financial assets
Trade receivables
54.80 356.43
2.75
22.17
0.03
0.27
Dividends receivable
0.16
1.04
–
–
0.57
5.21
Less:
Hedged through derivatives
1
Foreign exchange forward contracts
0.92
6.01
–
–
–
–
Net exposure to foreign currency risk (assets)
54.04 351.46
2.75 22.17
0.60
5.48
Financial liabilities
Borrowings
–
–
–
–
–
–
Trade payables
16.09 104.64
0.14
1.09
0.03
0.24
Less:
Hedged through derivatives
1
Currency range option
3.72
24.22
–
–
–
–
Net exposure to foreign currency risk (liabilities)
12.37 80.42
0.14
1.09
0.03
0.24
1
Includes hedges for highly probable transactions up to next 12 months
Notes
to the Financial Statements
Note 27.8 Financial Risk Management
(continued)