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Shaping the future of software driven business
Consolidated Financials •
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Notes forming part of consolidated financial statements (Contd.)
Level 3 — Inputs are not based on observable market data (unobservable inputs). Fair values are determined in whole or in
part using a valuation model based on assumptions that are neither supported by prices from observable current market
transactions in the same instrument nor are they based on available market data.
Financial risk management
Financial risk factors and risk management objectives
The Group’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group’s focus is to
foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance.
The primary market risk to the Group is foreign exchange risk. The Group uses derivative financial instruments to mitigate
foreign exchange related risk exposures. The use of financial derivatives is governed by the Group’s policies approved by the
Board of Directors which provide written principles on foreign exchange hedging. The Group’s exposure to credit risk is mainly
for receivables that are overdue for more than 90 days. The Credit Task Force is responsible for credit risk management.
Investment of excess liquidity is governed by the Investment policy of the Group. The Group’s Risk Management Committee
monitors risks and policies implemented to mitigate risk exposures.
Market risk
The Group operates globally with its operations spread across various geographies and consequently the Group is exposed to
foreign exchange risk. Around 80% to 90% of the Group’s foreign currency exposure is in USD. The Group holds plain vanilla
forward contracts against expected future sales in USD to mitigate the risk of changes in exchange rates.
The following table analyses unhedged foreign currency risk from financial instruments as of March 31, 2019:
(In
`
Million)
USD
EUR
GBP
Other
currencies
Total
Trade receivables
126.29
101.62
41.84
47.58
317.33
Cash and cash equivalents and bank balances
226.68
5.43
13.72
30.07
275.90
Other financial assets
-
0.14
3.33
1.82
5.29
Trade and other payables
40.28
0.34
11.74
-
52.36
The following table analyses unhedged foreign currency risk from financial instruments as of March 31, 2018:
(In
`
Million)
USD
EUR
GBP
Other
currencies
Total
Trade receivables
936.55
116.79
0.20
97.89
1,151.43
Cash and cash equivalents and bank balances
288.75
5.30
8.35
27.79
330.19
Trade and other payables
16.66
-
1.73
-
18.39
Foreign currency sensitivity analysis
For the year ended March 31, 2019 and March 31, 2018, every percentage point depreciation / appreciation in the exchange rate
between the Indian rupee and foreign currencies, would affect the Group’s profit before tax margin (PBT) by approximately
0.26% and 0.25% respectively.
Derivative financial instruments
The Group holds derivative foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign
currency exposures. These derivative financial instruments are valued based on quoted prices for similar assets in active
markets or inputs that are directly or indirectly observable in the marketplace. The Group has designated foreign exchange
forward contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast sales
transactions.