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221
annual
report
20
16-17
kajaria
ceramics
corporate
overview
management
reports
Financial
statements
42. Financial risk management objectives and policies
II. Credit risk
Credit risk is the risk that 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.
Credit risk from investments with banks and other financial institutions is managed by the Treasury functions in accordance
with the management policies. Investments of surplus funds are only made with approved counterparties who meet the
appropriate rating and/or other criteria, and are only made within approved limits. The management continually re-assess
the Company’s policy and update as required. The limits are set to minimise the concentration of risks and therefore
mitigate financial loss through counterparty failure.
The maximum credit risk exposure relating to financial assets is represented by the carrying value as at the Balance Sheet
date
A. Trade receivables
“Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and
control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive
credit review and individual credit limits are defined in accordance with this assessment. Outstanding customer
receivables are regularly monitored.
At the year end the Company does not have any significant concentrations of bad debt risk other than that disclosed
in note 9.
An impairment analysis is performed at each reporting date on an individual basis for major clients. The calculation is
based on historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class
of financial assets disclosed in Note 40. The Company does not hold collateral as security. The Company evaluates the
concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and
operate in largely independent markets..
B. Financial instruments and cash deposits
Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in
accordance with the Company’s policy. Investments of surplus funds are made only with approved counterparties.
III. Liquidity risk
The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank
overdrafts.
The table below summarises the maturity profile of the Company’s financial liabilities based on contractual undiscounted
payments.
(
`
in crores)
On demand Less than 3
months
3 to 12
months
1 to 5 years > 5 years
Total
Year ended 31 March 2017
Borrowings*
55.08
12.56
30.02
112.80
5.19
215.65
Trade payables
20.36
269.06
2.68
-
-
292.10
Other financial liabilities
48.62
7.46
20.78
-
-
76.86
124.06
289.08
53.48
112.80
5.19
584.61
Notes on the consolidated financial statements
for the year ended 31 March 2017