Atul Ltd 2018-19

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 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