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Atul Ltd | Annual Report 2017-18
Note 29.8 Financial Risk Management
(continued)
iii) 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 are denominated in a
currency that is not the functional
currency (
`
) 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
the Risk Management Policy of the
Group.
As an estimation of the approximate
impact of the foreign exchange rate
risk, with respect to the Financial
Statements, the Group 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
`
2.78 cr gain in Other
Comprehensive Income (2016-17:
gain of
`
2.05 cr). A 2% decrease
may have led to an increase in
additional
`
2.30 cr loss in Other
Comprehensive Income (2016-17:
Gain of
`
0.65 cr).
Foreign currency risk exposure:
The exposure to foreign currency risk of the Group at the end of the reporting period expressed are as follows:
Particulars
As at March 31, 2018
US$ mn
`
cr
€ mn
`
cr
Financial assets
Trade receivables
37.07 241.10
1.21
9.78
Less:
Hedged through derivatives
1
Foreign exchange forward contracts
0.92
6.01
–
–
Net exposure to foreign currency risk (assets)
36.15 235.09
1.21
9.78
Financial liabilities
Trade payables
16.39 106.55
0.06
0.48
Less:
Hedged through derivatives
1
Currency range options
3.72 24.22
–
–
Net exposure to foreign currency risk (liabilities)
12.67 82.33
0.06
0.48
1
Includes hedges for highly probable transactions up to next 12 months
Particulars
As at March 31, 2017
US$ mn
`
cr
€ mn
`
cr
Financial assets
Trade receivables
27.00 175.07
0.85
5.89
Less:
Hedged through derivatives
1
Currency range options
7.65
49.60
–
–
Net exposure to foreign currency risk (assets)
19.35 125.47
0.85
5.89
Financial liabilities
Borrowings
10.67 69.15
–
–
Trade payables
7.87 51.06
0.22
1.50
Capital creditors
0.03
0.16
–
–
Less:
Hedged through derivatives
1
Foreign exchange forward contracts
9.00 58.35
–
–
Currency swaps
1.67 10.80
–
–
Net exposure to foreign currency risk (liabilities)
7.90 51.22
0.22
1.50
1
Includes hedges for highly probable transactions up to the next 12 months
Notes
to the Consolidated Financial Statements