Page 231 - Tata_Chemicals_yearly-reports-2019-20

Integrated report Statutory reportS Financial StatementS
Standalone

The Company’s policy is generally to undertake non-current borrowings using facilities that carry floating-interest rate. The Company
manages its interest rate risk by entering into interest rate swaps, in which it agrees to exchange, at specified intervals, the difference
between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount.
Moreover, the short-term borrowings of the Company do not have a significant fair value or cash flow interest rate risk due to their
short tenure.
As the Company does not have exposure to any floating-interest bearing assets, or any significant long-term fixed-interest bearing
assets, its interest income and related cash inflows are not affected by changes in market interest rates.
As at the end of reporting period, the Company had the following long term variable interest rate borrowings and derivatives to
hedge the interest rate risk as follows:
` in crore
As at As at
March 31, 2020 March 31, 2019
Non-current variable interest rate borrowings - 438.85
Derivatives to hedge interest rate risk
Cross currency interest rate swaps - 438.85
Net exposure - -

Interest rate sensitivity
No sensitivity analysis is prepared as the Company does not expect any material effect on the Company’s results arising from the
effects of reasonably possible changes to interest rates on interest bearing financial instruments at the end of the reporting period.
Equity price risk management
The Company's exposure to equity price risk arises from investment held by the Company and classified as FVTOCI. In general, these
investments are strategic investments and are not held for trading purposes. Reports on the equity portfolio are submitted to the
Company’s senior management on a regular basis.
Equity price sensitivity analysis
If prices of quoted equity securities had been 5% higher / (lower), the OCI for the year ended March 31, 2020 and 2019 would increase
/ (decrease) by ` 74.86 crore and ` 98.94 crore respectively.
Credit risk management
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading
to a financial loss. The Company is exposed to credit risk from its operating activities, primarily trade and other receivables and
from its financing activities, including deposits with banks and financial institutions, investment in mutual funds, foreign exchange
transactions and other financial instruments.

The carrying amount of financial assets represents the maximum credit exposure, being the total of the carrying amount of balances
with banks, short term deposits with banks, short term investment, trade and other receivables and other financial assets excluding
equity investments.

Trade and other receivables
Trade and other receivables of the Company are typically unsecured and derived from sales made to a large number of independent
customers. Customer credit risk is managed by each business unit subject to established policies, procedures and control relating
to customer credit risk management. Before accepting new customer, the Company has appropriate level of control procedures to
assess the potential customer's credit quality. The credit-worthiness of its customers are reviewed based on their financial position,
past experience and other relevant factors. The credit period provided by the Company to its customers generally ranges from
0-60 days. Outstanding customer receivables are reviewed periodically. Provision is made based on expected credit loss method or
specific identification method.
The credit risk related to the trade receivables is mitigated by taking security deposits / bank guarantee / letter of credit - as and where
considered necessary, setting appropriate credit terms and by setting and monitoring internal limits on exposure to individual customers.

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