Page 353 - Tata Chemical Annual Report_2022-2023

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

(c) The following tables shows a reconciliation from the opening balance to the closing balance for level 3 fair Market risk
values. Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market
FVTPL financial FVTOCI financial prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk, such as equity price risk and
Particulars
investments investments commodity price risk. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency
Balance as at April 1, 2021 - 516 exchange rates, equity price fluctuations, commodity price, liquidity and other market changes. Financial instruments affected
Addition / (deletion) during the year - 115 by market risk include borrowings, deposits, investments, forex receivables, forex payables and derivative financial instruments.
Add / (less): Fair value changes through Other Comprehensive Income - (11)
Balance as at March 31, 2022 - 620 Foreign currency risk management
Addition during the year 150 - Foreign exchange risk arises on future commercial transactions and all recognised monetary assets and liabilities which are
Add / (less): Fair value changes - (92) denominated in a currency other than the functional currency of the entities of the Group. The foreign exchange risk management
Balance as at March 31, 2023 150 528 policy requires operating entities to manage their foreign exchange risk against their functional currency and to meet this
objective they enter into derivatives such as foreign currency forwards, option and swap contracts, as considered appropriate
(d) Valuation technique to determine fair value and whenever necessary.
The following methods and assumptions were used to estimate the fair values of financial instruments:
The Group has international operations and hence, it is exposed to foreign exchange risk arising from various currencies, primarily
(i) The management assessed that fair value of cash and cash equivalents, trade receivables, trade payables, bank overdrafts with respect to USD. As at the end of the reporting period, the carrying amounts of the Group's foreign currency denominated
and other current financial assets and liabilities approximate their carrying amounts largely due to the short-term maturities monetary assets and liabilities, in respect to the primary foreign currency exposure i.e. USD, and derivative to hedge the foreign
of these instruments. currency exposure are as follows:
(ii) The fair values of the equity investment which are quoted, are derived from quoted market prices in active markets. ` in crore
The Investments measured at fair value (FVTOCI) and falling under fair value hierarchy Level 3 are valued on the basis of As at As at
valuation reports provided by external valuers with the exception of certain investments, where cost has been considered Particulars March 31, 2023 March 31, 2022
as an appropriate estimate of fair value because of a wide range of possible fair value measurements and cost represents USD exposure
the best estimate of fair values within that range.
Assets 97 256
The Company considers Comparable Companies Method (CCM) method and the illiquidity discount based on its assessment Liabilities (659) (466)
of the judgement that market participants would apply for measurement of fair value of unquoted investments. In the Net (562) (210)
CCM method, the Company would find comparable listed entities in the market and use the same PE multiple (ranging
from 9.80 to 20.60) for determining the fair value of the investment. Derivatives to hedge USD exposure
Forward contracts - (USD/INR) 815 564
(iii) The fair values of investments in mutual fund units is based on the net asset value (‘NAV’) as stated by the issuers of these
mutual fund units in the published statements as at Balance Sheet date. NAV represents the price at which the issuer will 815 564
issue further units of mutual fund and the price at which issuers will redeem such units from the investors. Net exposure 253 354

(iv) The Group enters into derivative financial instruments with various counterparties, principally financial institutions with The Group’s exposure to foreign currency changes for all other currencies is not material.
investment grade credit ratings. The fair value of derivative financial instruments is based on observable market inputs
including currency spot and forward rate, yield curves, currency volatility, credit quality of counterparties, interest rate Foreign currency sensitivity analysis
curves and forward rate curves of the underlying commodity etc. and use of appropriate valuation models. The following table demonstrates the sensitivity to a reasonable possible change in USD exchange rate, with all other variables
held constant. The impact on the Group’s profit before tax due to changes in the fair value of monetary assets and liabilities and
(v) The fair value of non-current borrowings carrying floating-rate of interest is not impacted due to interest rate changes, and derivatives is as follows:
will not be significantly different from their carrying amounts as there is no significant change in the underlying credit risk
of the Group (since the date of inception of the loans). ` in crore
As at As at
Particulars
(e) Financial risk management objectives March 31, 2023 March 31, 2022
The Group is exposed to market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk. If INR had (strengthened) / weakened against USD by 5%
The Group’s risk management strategies focus on the un-predictability of these elements and seek to minimise the potential (Decrease) / increase in profit for the year 13 18
adverse effects on its financial performance. The Board of Directors/Committee of Board of the respective operating entities
approve the risk management policies. The implementation of these policies is the responsibility of the operating entities. The Based on the movements in the foreign exchange rates historically and the prevailing market conditions as at the
Board of Directors/Committee of Board of the respective operating entities periodically review the exposures to financial risks, reporting date, the Group’s Management has concluded that the above mentioned rates used for sensitivity are
and the measures taken for risk mitigation and the results thereof. reasonable benchmarks.

All hedging activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience
and supervision. The Group’s policy is not to trade in derivatives for speculative purposes.

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