Page 259 - Tata Chemical Annual Report_2022-2023

Integrated Annual Report 2022-23 01-83 84-192 193-365
Integrated Report Statutory Reports Financial Statements
Standalone

Market risk Equity price sensitivity analysis
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market If prices of quoted equity securities had been 5% higher / (lower), the OCI for the year ended March 31, 2023 and 2022 would
prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk, such as equity price risk and increase / (decrease) by ` 218 crore respectively.
commodity risk. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency
exchange rates, equity price fluctuations, liquidity and other market changes. Financial instruments affected by market risk Credit risk management
include loans and borrowings, deposits, investments, forex receivable, forex payables and derivative financial instruments. 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
Foreign currency risk management from its financing activities, including loans given, deposits with banks and financial institutions, investment in mutual funds,
Foreign exchange risk arises on future commercial transactions and on all recognised monetary assets and liabilities, which are foreign exchange transactions and other financial instruments.
denominated in a currency other than the functional currency of the Company. The Company’s management has set a policy
wherein exposure is identified, a benchmark is set and monitored closely, and accordingly suitable hedges are undertaken. The The carrying amount of financial assets represents the maximum credit exposure, being the total of the carrying amount of
policy also includes mandatory initial hedging requirements for exposure above a threshold. balances with banks, short term deposits with banks, short term investment, trade and other receivables and other financial
assets excluding equity investments.
The Company's foreign currency exposure arises mainly from foreign exchange imports, exports and foreign currency borrowings,
primarily with respect to USD. The Company considers a financial asset to be in default when:

As at the end of the reporting period , the carrying amounts of the Company's foreign currency denominated monetary assets - the debtor is unlikely to pay its credit obligations to the Company in full, without recourse actions such as security
and liabilities in respect of the primary foreign currency i.e. USD and derivative to hedge the exposure, are as follows: realizations, etc.
` in crore - the financial asset is 120 days past due.
As at As at
Particulars The financial guarantee disclosed under note 41.1 (b) represents the maximum exposure to credit risk under such contracts.
March 31, 2023 March 31, 2022
USD exposure Trade and other receivables
Assets 7 5
Liabilities (538) (381) Trade and other receivables of the Company are typically unsecured and derived from sales made to a large number of
Net (531) (376) independent customers. Customer credit risk is managed by each business unit subject to established policies, procedures
Derivatives to hedge USD exposure 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
Forward contracts - (USD/ INR) 635 569 based on their financial position, past experience and other relevant factors. The credit period provided by the Company to
635 569 its customers generally ranges from 0-60 days. Outstanding customer receivables are reviewed periodically. Provision is made
Net exposure 104 193
based on expected credit loss method or specific identification method.
The Company’s exposure to foreign currency changes for all other currencies is not material.
The credit risk related to the trade receivables is mitigated by taking security deposits / bank guarantee / letter of credit - as
Foreign currency sensitivity analysis and where considered necessary, setting appropriate credit terms and by setting and monitoring internal limits on exposure to
individual customers.
The following table demonstrate the sensitivity to a reasonable possible change in USD exchange rate, with all other variables
held constant. The impact on the Company’s profit before tax due to changes in the fair value of monetary assets and liabilities There is no substantial concentration of credit risk as the revenue and trade receivables from any of the single customer do not
and derivatives is as follows: exceed 10% of Company revenue and trade receivables, except as disclosed in note 35.1.
` in crore
As at As at For certain other receivables, where recoveries are expected beyond twelve months of the balance sheet date, the time value
Particulars
March 31, 2023 March 31, 2022 of money is appropriately considered in determining the carrying amount of such receivables.
If INR had (strengthened) / weakened against USD by 5% (Decrease) / increase in 5 10
profit for the year Financial instruments and cash deposits
Credit risk from balances/investments with banks and financial institutions is managed in accordance with the Company’s
Based on the movements in the foreign exchange rates historically and the prevailing market conditions as at the reporting date, treasury risk management policy. Investments of surplus funds are made only with approved counterparties and within limits
the Company's Management has concluded that the above mentioned rates used for sensitivity are reasonable benchmarks. 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 minimize the concentration of risks and therefore mitigate financial loss through counterparty’s
Equity price risk management potential failure to make payments.
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 Financial guarantees
to the Company’s senior management on a regular basis. Financial guarantees disclosed in note 41.1(b) have been provided as corporate guarantees to financial institutions and banks
that have extended credit facilities to the Company's subsidiaries. In this regard, the Company does not foresee any significant
credit risk exposure.

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