Page 334 - Tata_Chemicals_yearly-reports-2021-22

Integrated Annual Report 2021-22

Equity price sensitivity analysis
If prices of equity instrument had been 5% higher/(lower), the OCI for the year ended March 31, 2022 and 2021 would increase/
(decrease) by ` 217.74 crore and ` 131.72 crore respectively.
Commodity price risk
Certain entities within the Group are affected by the volatility in the price of commodities. Its operating activities require the ongoing
production of steam and electricity and therefore require a continuous supply of fuels. Due to potential volatility in the price of fuels,
the Group has put in place a risk management strategy whereby the cost of fuels are hedged.
Commodity price sensitivity
The following table shows the effect of price changes in commodities to OCI due to changes in fair value of cash flow hedges
entered to hedge commodity price risk.
` in crore
As at As at
If the price of the future contracts were higher / (lower) by 10% Commodity
March 31, 2022 March 31, 2021
Increase / (decrease) in OCI for the year Natural gas 120.73 48.12
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 Group is exposed to credit risk from its operating activities, primarily trade and other receivables and from
its investing activities, including deposits with banks and financial institutions, investment in mutual funds 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 investment, trade receivables and other financial assets excluding equity investments.
The Group considers a financial asset to be in default when:
- the debtor is unlikely to pay its credit obligations to the Company in full, without recourse actions such as security realizations, etc.
- the financial asset is 120 days past due.
Trade and other receivables
The Trade and other receivables of Group are majorly unsecured and derived from sales made to a large number of independent
customers. Customer credit risk is managed by each business unit subject to the established policy, procedures and control relating
to customer credit risk management. Before accepting any new customer, the Group 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 factors. The credit period provided by the Group to its customers generally ranges from 0-60 days.
Outstanding customer receivables are regularly monitored. 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 payment terms and credit period, and by setting and monitoring internal limits on
exposure to individual customers.
As the revenue and trade receivables from any of the single customer do not exceed 10% of Group revenue, there is no substantial
concentration of credit risk.
For certain other receivables, where recoveries are expected beyond twelve months of the balance sheet date, the time value of
money is appropriately considered in determining the carrying amount of such receivables.
Financial instruments and cash deposits
Credit risk from balances/investments with banks and financial institutions is managed in accordance with the Risk management policy.
Investments of surplus funds are made only with approved counterparties and within limits assigned to each counterparty. The limits are
assigned based on corpus of investable surplus and corpus of the investment avenue. The limits are set to minimise the concentration
of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The objective of liquidity
risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements.

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