Page 258 - Tata_Chemicals_yearly-reports-2017-18

Equity price risks management
Equity price risk is related to the change in market reference price of the investments in quoted equity securities. The Group’s exposure to
equity price risk arises from investments held by the Group and classified in the Consolidated Balance Sheet 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 Group’s
senior management on a regular basis.

Equity price sensitivity analysis
If prices of equity instrument had been 5% higher/(lower), the OCI for the year ended 31 March, 2018 and 2017 would increase/(decrease)
by ` 87.22 crore and ` 83.96 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
If the price of the future contracts were higher / (lower) by 10% As at As at
31 March, 2018 31 March, 2017
Increase / (decrease) in OCI for the year Natural gas 36.91 28.11
Increase / (decrease) in OCI for the year HFO 0.68 2.80
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 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.
Trade receivables
The Trade 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.
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.
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.

256 Annual Report 2017-18