175 Statutory Reports 24 - 109 Financial Statements 110 - 263 Corporate Overview 01 - 23 Note 28.8 Financial risk management (continued) 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 purposes. These investmentsaresubject tochanges in the market price of securities. The fair value of quoted equity instruments classified as fair value through other comprehensive income as at March 31, 2022, is ` 641.11 cr (March 31, 2021: ` 577.36 cr). The fair value of mutual funds classified at fair value through profit and loss as at March 31, 2022, is ` 539.54 cr (March 31, 2021: ` 717.81 cr). 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, Chief Financial Officer and the Risk 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: For equity instruments, a 9.14% increase in Nifty 50 prices may have led to approximately an additional ` 17.72 cr gain in other comprehensive income (2020-21: ` 42.50 cr). A 9.14% 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 ` 5.4 cr gain in the Standalone Statement of Profit and Loss (2020-21: ` 7.18 cr). 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 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 and other transactions other than functional risks. It hedges its foreign exchange risk using foreign exchange forward contracts and currency options after considering the natural hedge. The same is as per the guidelines laid down in its Risk Management Policy. As an estimation of the approximate impact of the foreign exchange rate risk, with respect to the Standalone 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 additional ` 9.60 cr gain in other comprehensive income (2020-21: gain of ` 4.77 cr). A 2% decrease may have led to an additional ` 6.37 cr loss in other comprehensive income (2020-21: loss of ` 3.82 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, 2022 US$ mn ` cr € mn ` cr £ mn ` cr Financial assets Cash and cash equivalents (EEFC account ) 2.06 15.60 - - - - Trade receivables 75.32 570.77 3.40 28.59 0.23 2.30 Less: - - - - - - Hedged through derivatives1: - - - - - - Currency range options 29.25 221.66 - - - - Net exposure to foreign currency risk (assets) 48.13 364.72 3.40 28.59 0.23 2.30 1Includes hedges for highly probable transactions up to next 12 months
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