Atul Ltd 2018-19

Note 29.8 Financial risk management (continued) ¹ĺĚ îċūǄĚ ƑĿƙŒƙ Şîǋ îljljĚČƥ ĿŠČūŞĚ îŠē ĚǊƎĚŠƙĚƙȡ ūƑ ƥĺĚ ǄîŕƭĚ ūlj Ŀƥƙ ǛŠîŠČĿîŕ ĿŠƙƥƑƭŞĚŠƥƙ ūlj ƥĺĚ HƑūƭƎȦ ¹ĺĚ ūċŏĚČƥĿǄĚ ūlj ƥĺĚ Management of the Group for market risk is to maintain this risk within acceptable parameters, while optimising returns. ¹ĺĚ ĚǊƎūƙƭƑĚ ūlj ƥĺĚ HƑūƭƎ ƥū ƥĺĚƙĚ ƑĿƙŒƙ îŠē ƥĺĚ ŞîŠîijĚŞĚŠƥ ūlj ƥĺĚƙĚ ƑĿƙŒƙ îƑĚ ĚǊƎŕîĿŠĚē ċĚŕūǅȠ Potential impact of risk Management policy Sensitivity to risk i) Price risk ¹ĺĚ HƑūƭƎ Ŀƙ ŞîĿŠŕǋ ĚǊƎūƙĚē ƥū ƥĺĚ 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, these securities are not held for trading purposes. These ĿŠǄĚƙƥŞĚŠƥƙ îƑĚ ƙƭċŏĚČƥ ƥū ČĺîŠijĚƙ ĿŠ the market price of securities. The fair value of quoted equity instruments ČŕîƙƙĿǛĚē îƥ ljîĿƑ ǄîŕƭĚ ƥĺƑūƭijĺ ~ƥĺĚƑ Comprehensive Income as at March 31, 2019 is ` ǫǨǭȦǪǬ ČƑ ȳqîƑČĺ ǩǧȡ ǨǦǧǮȠ ` ǪǫǨȦǫǦ ČƑȴȦ The fair value of mutual fund ČŕîƙƙĿǛĚē îƥ ljîĿƑ ǄîŕƭĚ ƥĺƑūƭijĺ ƎƑūǛƥ and loss as at March 31, 2019 is ` 212.31 cr (March 31, 2018: ` 5.70 cr). In order to manage its price risk arising from investments in equity instruments, the Group maintains its portfolio in accordance with the framework set by the Risk Management policies. Any new investment or divestment must be approved by the Board of 'ĿƑĚČƥūƑƙȡ ĺĿĚlj GĿŠîŠČĿîŕ ~ljǛČĚƑ îŠē Risk Management Committee. ƙ îŠ ĚƙƥĿŞîƥĿūŠ ūlj ƥĺĚ îƎƎƑūǊĿŞîƥĚ impact of price risk, with respect to investments in equity instruments, the Group has calculated the impact as follows: GūƑ ĚƐƭĿƥǋ ĿŠƙƥƑƭŞĚŠƥƙȡ î ǯȦǧǪɼ increase in Nifty 50 prices would have ŕĚē ƥū îƎƎƑūǊĿŞîƥĚŕǋ îŠ îēēĿƥĿūŠîŕ ` 25.67 cr gain in other comprehensive income (2017-18: ` ǪǦȦǮǯ ČƑȴȦ ǯȦǧǪɼ ēĚČƑĚîƙĚ ĿŠ sĿljƥǋ 50 prices would have led to an equal but opposite effect. ii) Interest rate risk Financial liabilities: ¹ĺĚ HƑūƭƎ Ŀƙ ŞîĿŠŕǋ ĚǊƎūƙĚē ƥū ĿŠƥĚƑĚƙƥ rate risk due to its variable interest rate borrowings. The interest rate risk arises due to uncertainties about the future market interest rate of these borrowings. ƙ îƥ qîƑČĺ ǩǧȡ ǨǦǧǯȡ ƥĺĚ ĚǊƎūƙƭƑĚ ƥū interest rate risk due to variable interest rate borrowings amounted to ` ǮȦǪǯ ČƑ (March 31, 2018: ` Nil) In order to manage its interest rate risk arising from variable interest rate borrowings, the Group uses interest rate swaps to hedge its ĚǊƎūƙƭƑĚ ƥū ljƭƥƭƑĚ ŞîƑŒĚƥ ĿŠƥĚƑĚƙƥ rates whenever appropriate. The hedging activity is undertaken in accordance with the framework set by the Risk Management Committee and supported by the treasury department. ƙ îŠ ĚƙƥĿŞîƥĿūŠ ūlj ƥĺĚ îƎƎƑūǊĿŞîƥĚ impact of the interest rate risk, with ƑĚƙƎĚČƥ ƥū ǛŠîŠČĿîŕ ĿŠƙƥƑƭŞĚŠƥƙȡ ƥĺĚ Group has calculated the impact of a 25 bps change in interest rates. A 25 bps increase in interest rates would ĺîǄĚ ŕĚē ƥū îƎƎƑūǊĿŞîƥĚŕǋ îŠ îēēĿƥĿūŠîŕ ` 0.02 cr (2017-18: ` Nil) gain in other comprehensive income. A 25 bps decrease in interest rates would have led to an equal but opposite effect. Consolidated | Notes to the Financial Statements 233