Page 187 - Tata_Chemicals_yearly-reports-2017-18

Interest rate risk management
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
rates. The Company’s exposure to the risk of changes in market rates relates primarily to the Company’s non-current debt obligations with
floating interest rates.
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: Integrated Report
` in crore
Particulars As at As at
31 March, 2018 31 March, 2017
Non-current variable interest rate borrowings 825.96 1,232.15
Derivatives to hedge interest rate risk
Cross currency swaps 825.96 1,232.15
Total 825.96 1,232.15
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. Statutory Reports

Equity price risk management
Equity price risk is related to the change in market price of the investments in quoted equity securities. 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, 2018 and 2017 would increase /
(decrease) by ` 85.94 crore and ` 82.70 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 receivables and from its financing
activities, including deposits with banks and financial institutions, investment in mutual funds, foreign exchange transactions and other Financial Statements
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 receivables and other financial assets excluding equity investments.
Trade receivables
Trade 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 any 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.

Standalone Financial Statements 185