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Notes on the consolidated financial statements
for the year ended 31 March 2017
42. Financial risk management objectives and policies
A. Interest rate risk
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 interest rates. The Company’s exposure to the risk of changes in market interest rates relates
primarily to the Company’s debt obligations with floating interest rates.
Increase/
decrease in
basis points
Effect on profit
before tax
`
Crores
31-Mar-17
INR
+50
(1.00)
INR
-50
1.00
31-Mar-16
INR
+50
(1.29)
INR
-50
1.29
B. Foreign currency sensitivity
Foreign currency risk is the risk that the fair value of future cash flows of an exposure will fluctuate because of changes
in exchange rates. Foreign currency risk senstivity is the impact on the Company’s profit before tax is due to changes
in the fair value of monetary assets and liabilities. The following tables demonstrate the sensitivity to a reasonably
possible change in USD and EURO exchange rates, with all other variables held constant.
Change in USD
rate
Effect on profit
before tax
`
in crores
31-Mar-17
+5%
0.14
-5%
(0.14)
31-Mar-16
+5%
(1.04)
-5%
1.04
Change in
EURO rate
Effect on profit
before tax
`
in crores
31-Mar-17
+5%
(1.34)
-5%
1.34
31-Mar-16
+5%
(3.02)
-5%
3.02
The movement in the pre-tax effect on profit and loss is a result of a change in the fair value of derivative financial
instruments not designated in a hedge relationship and monetary assets and liabilities denominated in INR, where the
functional currency of the entity is a currency other than INR.