Page 257 - Tata_Chemicals_yearly-reports-2017-18

Foreign currency sensitivity analysis
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 derivatives is
as follows:
` in crore
Particulars As at As at
31 March, 2018 31 March, 2017
If INR had (strengthened) / weakened against USD by 5%
(Decrease) / increase in profit for the year 57.85 43.76
Based on the movements in the foreign exchange rates historically and the prevailing market conditions as at the reporting date, the
Group’s Management has concluded that the above mentioned rates used for sensitivity are reasonable benchmarks.
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 Integrated Report
rates. The Group’s exposure to the risk of changes in market rates relates primarily to the Group’s non-current debt obligations with
floating interest rates.
The Group’s policy is generally to undertake non-current borrowings using facilities that carry floating-interest rate. The Group 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 Group do not have a significant fair value or cash flow interest rate risk due to their short
tenure.
As the Group 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 Group had the following long term variable interest rate borrowings and derivative to hedge the
interest rate risk as follows:
` in crore Statutory Reports
Particulars As at As at
31 March, 2018 31 March, 2017
Non-current variable interest rate borrowings 5,756.09 6,094.31
Derivatives to hedge interest rate risk
Cross currency swaps (not designated in a hedge relationship) 825.96 1,232.15
Interest rate swaps (designated in Cash flow hedges) 2,763.42 3,060.92
Total 3,589.38 4,293.07
Net exposure 2,166.71 1,801.24

Interest rate sensitivity
The following table demonstrates the impact to the Group’s profit before tax and other comprehensive income to a reasonably possible
change in interest rates on long term floating rate borrowings, with all other variables held constant:
` in crore Financial Statements
Particulars Increase/ Effect on profit Effect on other
decrease in basis before tax comprehensive
points income
31 March, 2018 +50/-50 (28.70)/ 28.70 0.40/ (0.40)
31 March, 2017 +50/-50 (28.90)/ 28.89 12.31/ (8.57)
The effect on other comprehensive income is calculated on change in fair of cash flow hedges entered to hedge the interest rate risks.
Based on the movements in the interest rates historically and the prevailing market conditions as at the reporting date, the Group’s
Management has concluded that the above mentioned rates used for sensitivity are reasonable benchmarks.

Consolidated Financial Statements 255