|326| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts As at 31.03.2019 As at 31.03.2018 Cash Flow Hedges Products/ Currency Pair Release Release As at March 31, 2019 In less than 12 Months After 12 Months As at March 31, 2018 In less than 12 Months After 12 Months Hedge Instrument Type Currency Swaps USD_INR 771.61 615.19 156.42 994.99 360.97 634.02 Deferred Tax on above (269.63) (214.97) (54.66) (347.69) (126.14) (221.55) 501.98 400.22 101.76 647.30 234.83 412.47 (g) The following tables presents the amount of gain/(loss) recognized in Effective portion of Cash Flow Hedge and recycled during the year 2018-19: Cash Flow Hedges Opening Balance Net Amount recognised Recycled CTA As at To P&L 31.03.2019 Amount added to NonFinancial Assets Total Amount recycled Commodity 111.74 909.34 609.91 2.39 612.30 23.88 432.66 Forex 210.39 (1,297.82) (872.33) (31.11) (903.44) 0.41 (183.58) Interest (0.03) - (0.03) - (0.03) - - Total 322.10 (388.48) (262.45) (28.72) (291.17) 24.29 249.08 Deferred Tax on above (59.75) 106.74 90.38 5.17 95.55 (0.56) (49.12) Cost of Hedging Reserve Opening Balance Net Amount recognised Recycled CTA As at To P&L 31.03.2019 Amount added to NonFinancial Assets Total Amount recycled Commodity - (41.15) (41.15) - (41.15) - - Forex 994.99 200.42 423.80 - 423.80 - 771.61 Total 994.99 159.27 382.65 - 382.65 - 771.61 Deferred Tax on above (347.69) (55.66) (133.72) - (133.72) - (269.63) The following tables presents the amount of gain/(loss) recognized in Effective portion of Cash Flow Hedge and recycled during the year 2017-18: Cash Flow Hedges Opening Balance Net Amount recognised Recycled CTA As at To P&L 31.03.2019 Amount added to NonFinancial Assets Total Amount recycled Commodity (1,671.43) (210.57) (1,987.31) (0.11) (1,987.42) 6.32 111.74 Forex 886.92 264.44 932.74 7.14 939.88 (1.09) 210.39 Interest (1.75) (0.43) (2.15) - (2.15) - (0.03) Total (786.26) 53.44 (1,056.72) 7.03 (1,049.69) 5.23 322.10 Deferred Tax on above 308.92 (68.07) 300.60 - 300.60 - (59.75)
|327| Chap. 15 – Ind AS 32-107-109-113 Cost of Hedging Reserve Opening Balance Net Amount recognised Recycled CTA As at To P&L 31.03.2018 Amount added to NonFinancial Assets Total Amount recycled Forex 633.97 361.02 - - - - 994.99 Deferred Tax on above (219.40) (128.29) - - - - (347.69) (h) The following table presents the amount of gain/ (loss) recycled from Effective portion of Cash Flow Hedge and Cost of Hedging Reserve and reference of the line item in the Statement of Profi t and Loss where those amounts are included: ` in Crore Year ended 31.03.2019 Year ended 31.03.2018 Revenue from Operations 242.18 (1,113.72) Cost of Materials Consumed (102.76) 58.24 Depreciation and Amortization (7.25) (6.90) Finance Costs (0.12) (2.08) Other Expenses (11.85) 7.74 120.20 (1,056.72) (i) The adjustment as part of the carrying value of inventories arising on account of fair value hedges is as follows: ` in Crore Year ended 31.03.2019 Year ended 31.03.2018 Copper 251.16 (148.61) Gold (2.41) 0.89 Silver (0.97) (0.49) Total 247.78 (148.21) The Group’s hedging policy only allows for effective hedge relationships to be established. The effective portion of hedge is recognised in OCI, while ineffective portion of hedge is recognised immediately in the Statement of Profi t and Loss. The Group uses hypothetical derivative method to assess effectiveness. Ineffectiveness may arise on account of differences in critical terms and credit risk of the hedging instrument and the hedged item. 56. Offsetting Financial instruments subject to offsetting , enforceable master netting arrangement and similar arrangement. i. As at March 31, 2019: Effects on Balance sheet Related amounts not offset Gross amount Gross amount set off in the balance sheet Net amount in the balance sheet Amounts subject to master netting Financial Instrument collateral Net Amount Financial Assets Derivatives 1,454.27 (39.54) 1,414.73 (249.29) - 1,165.44 Cash and cash equivalents 9,118.74 - 9,118.74 - - 9,118.74 Trade Receivables 11,459.76 - 11,459.76 - - 11,459.76
|328| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts Effects on Balance sheet Related amounts not offset Gross amount Gross amount set off in the balance sheet Net amount in the balance sheet Amounts subject to master netting Financial Instrument collateral Net Amount Other financial assets 940.84 - 940.84 - - 940.84 Total Financial Assets 22,973.61 (39.54) 22,934.07 (249.29) - 22,684.78 Financial Liabilities Derivatives 1,230.81 (39.54) 1,191.27 (249.29) (75.98) 866.00 Trade Payables 20,724.40 - 20,724.40 - - 20,724.40 Other financial Liabilities 3,080.33 - 3,080.33 - - 3,080.33 Total Financial Liabilities 25,035.54 (39.54) 24,996.00 (249.29) (75.98) 24,670.73 ii. As at March 31, 2018: Effects on Balance sheet Related amounts not offset Gross amount Gross amount set off in the balance sheet Net amount in the balance sheet Amounts subject to master netting Financial Instrument collateral Net Amount Financial Assets Derivatives 2,063.81 (22.42) 2,041.39 (371.33) - 1,670.06 Cash and cash equivalents 8,044.94 - 8,044.94 - - 8,044.94 Trade Receivables 9,959.81 - 9,959.81 - - 9,959.81 Other financial assets 1,224.29 - 1,224.29 - - 1,224.29 Total Financial Assets 21,292.84 (22.42) 21,270.42 (371.33) - 20,899.10 Financial Liabilities Derivatives 1,451.37 (22.42) 1,428.95 (371.33) (3.57) 1,054.05 Trade Payables 20,428.84 - 20,428.84 - - 20,428.84 Other financial Liabilities 3,325.07 - 3,325.07 - - 3,325.07 Total Financial Liabilities 25,205.28 (22.42) 25,182.86 (371.33) (3.57) 24,807.96 4. LARSEN & TOUBRO LIMITED a) Significant Accounting Policies (r) Financial instruments Financial assets and/or financial liabilities are recognised when the Group becomes party to a contract embodying the related financial instruments. all financial assets, financial liabilities and financial guarantee contracts are initially measured at transaction values and where such values are different from the fair value, at fair value. transaction costs that are attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from, as the case may be, the fair value of such financial assets or liabilities on initial recognition. transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. A financial asset and a financial liability is offset and presented on net basis in the balance sheet when there is a current legally enforceable right to set-off the recognised amounts and it is intended to either settle on net basis or to realise the asset and settle the liability simultaneously. (i) Financial assets A. all recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets as follows:
|329| Chap. 15 – Ind AS 32-107-109-113 1. investments in debt instruments that are designated as fair value through profit or loss (FVtPl) - at fair value 2. other investments in debt instruments – at amortised cost, subject to following conditions: • The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and • The contractual terms of instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. 3. debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income [FVtoCi] (unless the same are designated as fair value through profit or loss) • The asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and • The contractual terms of instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. 4. debt instruments at FVtPl is a residual category for debt instruments, if any, and all changes are recognised in profit or loss. 5. investments in equity instruments are classified as FVtPl, unless the related instruments are not held for trading and the Group irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income. 6. The group has elected to measure the investments in associates and joint ventures held through unit trusts at FVtPl. B. For financial assets that are measured at FVtoCi, income by way of interest and dividend, provision for impairment and exchange difference, if any, (on debt instrument) are recognised in profit or loss and changes in fair value (other than on account of above income or expense) are recognised in other comprehensive income and accumulated in other equity. on disposal of debt instruments at FVtoCi, the cumulative gain or loss previously accumulated in other equity is reclassified to profit or loss. in case of equity instruments at FVtoCi, such cumulative gain or loss is not reclassified to profit or loss on disposal of investments. C. a financial asset is primarily derecognised when: 1. the right to receive cash flows from the asset has expired, or 2. the group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and a) the group has transferred substantially all the risks and rewards of the asset, or b) the group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. on derecognition of a financial asset in its entirety, the difference between the carrying amount measured at the date of derecognition and the consideration received is recognised in profit or loss. D. impairment of financial assets: the Group recognises impairment loss on trade receivables using expected credit loss model which involves use of a provision matrix constructed on the basis of historical credit loss experience as permitted under ind as 109. in respect of financial services business, the Group applies a separate model of the expected credit loss for recognising impairment loss on financial assets measured at amortised cost, debt instruments at FVtoCi, lease receivables, trade receivables and other contractual rights to receive cash or other financial asset, and financial guarantees not designated as at FVtPl as follows: • Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. Credit loss is the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate (or
|330| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts credit- adjusted effective interest rate for purchased or originated credit-impaired financial assets). the Group estimates cash flows by considering all contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) through the expected life of that financial instrument. • The Group measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. if the credit risk on a financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. 12-month expected credit losses are portion of the lifetime expected credit losses and represent the lifetime cash shortfalls that will result if default occurs within the 12 months weighted by the probability of default after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months. • When making the assessment of whether there has been a significant increase in credit risk since initial recognition, the Group uses the change in the risk of a default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit losses. to make that assessment, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition. (ii) Financial liabilities a. Financial liabilities, including derivatives and embedded derivatives, which are designated for measurement at FVtPl are subsequently measured at fair value. Financial guarantee contracts are subsequently measured at the amount of impairment loss allowance or the amount recognised at inception net of cumulative amortisation, whichever is higher. all other financial liabilities including loans and borrowings are measured at amortised cost using effective interest Rate (eiR) method. B. a financial liability is derecognised when the related obligation expires or is discharged or cancelled. (iii) the Group designates certain hedging instruments such as derivatives, embedded derivatives and in respect of foreign currency risk, certain non-derivatives as either fair value hedges, cash flow hedges, or hedges of net investments in foreign operations. Hedges of foreign exchange risk on firm commitments are accounted as cash flow hedges. a. Fair value hedges: Changes in fair value of the designated portion of derivatives that qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. the fair value adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to profit or loss from that date. B. Cash flow hedges: in case of transaction related hedges, the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated in equity as ‘hedging reserve’. the gain or loss relating to the ineffective portion is recognised immediately in profit or loss. amounts previously recognised in other comprehensive income and accumulated in equity relating to the effective portion are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same head as the hedged item. the effective portion of the hedge is determined at the lower of the cumulative gain or loss on the hedging instrument from inception of the hedge and the cumulative change in the fair value of the hedged item from the inception of the hedge and the remaining gain or loss on the hedging instrument is treated as ineffective portion. in case of time period related hedges, the premium element and the spot element of a forward contract is separated and only the change in the value of the spot element of the forward contract is designated as the hedging instrument. similarly, wherever applicable, the foreign currency basis spread is separated from the financial instrument and is excluded from the designation of that financial
|331| Chap. 15 – Ind AS 32-107-109-113 instrument as the hedging instrument in case of time period related hedges. the changes in the fair value of the premium element of the forward contract or the foreign currency basis spread of the financial instrument is accumulated in a separate component of equity as ‘cost of hedging’. the changes in the fair value of such premium element or foreign currency basis spread are reclassified to profit or loss as a reclassification adjustment on a straight line basis over the period of the forward contract or the financial instrument. the cash flow hedges are allocated to the forecast transactions on gross exposure basis. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. any gain or loss recognised in other comprehensive income and accumulated in equity at that time remains in equity and is recognised in profit or loss when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in profit or loss. (iv) Compound financial instruments issued by the Group which can be converted into fixed number of equity shares at the option of the holders irrespective of changes in the fair value of the instrument are accounted by separately recognising the liability and the equity components. the liability component is initially recognised at the fair value of a comparable liability that does not have an equity conversion option. the equity component is initially recognised at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. the directly attributable transaction costs are allocated to the liability and the equity components in proportion to their initial carrying amounts. subsequent to initial recognition, the liability component of the compound financial instrument is measured at amortised cost using the effective interest method. the equity component of a compound financial instrument is not remeasured subsequently. b) Notes to accounts NOTE [56] Disclosure pursuant to Ind AS 107 “Financial Instruments: Disclosures”: Market risk management (a) Foreign exchange rate and interest rate risk: The Group regularly reviews its foreign exchange forward and option positions and interest rate swaps, both on a standalone basis and in conjunction with its underlying foreign currency and interest rate related exposures. The Group follows cash flow hedge accounting for Highly Probable Forecasted Exposures (HPFE) hence the movement in mark to market (MTM) of the hedge contracts undertaken for such exposures is likely to be offset by contra movements in the underlying exposures values. However, till the point of time the HPFE becomes an on-balance sheet exposure, the changes in MTM of the hedge contracts will impact the Balance Sheet of the Group. Further, given the effective horizons of the Group’s risk management activities which coincide with the durations of the projects under execution and could extend across 3-4 years and the business uncertainties associated with the timing and estimation of the project exposures, the recognition of the gains and losses related to these instruments may not always coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may affect the Group’s financial condition and operating results. Hence, the Group monitors the potential risk arising out of the market factors like exchange rates, interest rates, price of traded investment products etc. on a regular basis. For on-balance sheet exposures, the Group monitors the risks on net unhedged exposures. (i) Foreign exchange rate risk: In general, the Group is a net receiver of foreign currency. Accordingly, changes in exchange rates, and in particular a strengthening of the Indian Rupee, will negatively affect the Group’s net sales and gross margins as expressed in Indian Rupee. There is a risk that the Group may have to adjust local currency product pricing due to competitive pressures when there have been significant volatility in foreign currency exchange rates.
|332| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts The Group may enter into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks associated with certain existing assets and liabilities, certain firmly committed transactions, forecasted future cash flows and net investments in foreign subsidiaries. In addition, the Group has entered, and may enter in the future, into non-designated foreign currency contracts to partially offset the foreign currency exchange gains and losses on its foreign denominated debt issuances. The Group’s practice is to hedge a portion of its material net foreign exchange exposures with tenors in line with the project/business life cycle. However, the Group may choose not to hedge certain foreign exchange exposures for a variety of reasons. The net exposure to foreign currency risk (based on notional amount) in respect of recognised financial assets and recognised financial liabilities and derivatives is as follows: ` in Lacs Particulars As at 31-3-2019 As at 31-3-2018 US Dollar including pegged currencies EURO Malaysian Ringgit Canadian Dollar Japanese Yen Kuwaiti Dinar US Dollar including pegged currencies EURO Malaysian Ringgit Canadian Dollar Japanese Yen Kuwaiti Dinar Net exposure to foreign currency risk in respect of recognised financial assets/(recognised financial liabilities) (5474.23) 286.37 67.37 91.74 (10.43) 162.25 (2966.34) (23.64) 66.84 50.96 (179.21) 78.01 Derivatives including embedded derivatives for hedging receivable/ (payable) exposure with respect to non financial assets/(non financial liabilities 552.57 222.95 – – – – 594.48 222.04 – – – – Derivatives including embedded derivatives for hedging receivable/ (payable) exposures with respect to firm commitments and highly probable forecast transactions 16327.53 (813.82) 102.09 (38.66) 538.14 974.77 11598.88 (1673.88) 49.17 51.14 659.25 1273.26 Receivable/(payable) exposures with respect to forward contracts and embedded derivatives not designated as cash flow hedge (1237.61) 586.94 – – 31.73 – (1705.20) (239.02) – – – – Options (written) not designated as cash flow hedge (527.50) (533.77) – – – – – – – – – – To provide a meaningful assessment of the foreign currency risk associated with the Group’s foreign currency derivative positions against off-balance sheet exposures and unhedged portion of on-balance sheet financial assets and liabilities, the Group uses a multi-currency correlated value-at-risk (“VAR”) model. The VAR model uses a Monte Carlo simulation to generate thousands of random market price paths for foreign currencies against Indian Rupee taking into account the correlations between them. The VAR is the expected loss in value of the exposures due to overnight movement in spot exchange rates, at 95% confidence interval. The VAR model is not intended to represent actual losses but is used as a risk estimation tool. The model assumes normal market conditions and is a historical best fit model. Because the Group uses
|333| Chap. 15 – Ind AS 32-107-109-113 foreign currency instruments for hedging purposes, the loss in fair value incurred on those instruments are generally offset by increase in the fair value of the underlying exposures for on-balance sheet exposures. The overnight VAR for the Group at 95% confidence level is ` 106.11 crore as at March 31, 2019 and ` 59.93 crore as at March 31, 2018. Actual future gains and losses associated with the Group’s investment portfolio and derivative positions may differ materially from the sensitivity analysis performed as at March 31, 2019 due to the inherent limitations associated with predicting the timing and amount of changes in foreign currency exchange rates and the Group’s actual exposures and position. (ii) Interest rate risk: The Group’s exposure to changes in interest rates relates primarily to the Group’s outstanding floating rate debt and lending. The Group’s outstanding debt in local currency is a combination of fixed rate and floating rate. For the portion of local currency debt on fixed rate basis, there is no interest rate risk. For the portion of local currency debt on floating rate basis, there is a natural hedge with receivables in respect of financial services business. There is a portion of debt that is linked to international interest rate benchmarks like LIBOR. The Group also hedges a portion of these risks by way of derivatives instruments like interest rate swaps and currency swaps. The exposure of the Group’s borrowing to interest rate changes at the end of the reporting period are as follows: Particulars As at 31-3-2019 As at 31-3-2018 Floating rate borrowings 49107.01 45476.71 A hypothetical 50 basis point shift in respective currency LIBOR and other benchmarks on the unhedged loans would result in a corresponding increase/decrease in finance cost for the Group on a yearly basis as follows: Particulars Impact on profit and loss after tax Impact on equity 2018-19 2017-18 As at 31-3-2019 As at 31-3-2018 Indian Rupee Interest rates -increase by 0.50% in INR interest rate* 1.63 (25.77) 1.63 (25.77) Interest rates -decrease by 0.50% in INR interest rate* (1.63) 25.77 (1.63) 25.77 US Dollar Interest rates -increase by 0.50% in USD interest rate* (20.44) (20.91) (20.44) (20.91) Interest rates -decrease by 0.50% in USD interest rate* 20.44 20.91 20.44 20.91 * Holding all other variables constant (b) Liquidity risk management: The Group manages liquidity risk by maintaining sufficient cash and marketable securities and by having access to funding through an adequate amount of committed credit lines. Given the need to fund diverse businesses, the Group maintains flexibility in funding by maintaining availability under committed credit lines to meet obligations when due. Management regularly monitors the position of cash and cash equivalents vis-à-vis projections. Assessment of maturity profiles of financial assets and financial liabilities including debt financing plans and maintenance of Balance Sheet liquidity ratios are considered while reviewing the liquidity position.
|334| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts The Group’s investment policy and strategy are focused on preservation of capital and supporting the Group’s liquidity requirements. The Group uses a combination of internal and external management to execute its investment strategy and achieve its investment objectives. The Group typically invests in money market funds, large debt funds, Government of India securities, equity and equity marketable \ securities and other highly rated securities under a limits framework which governs the credit exposure to any one issuer as defined in its investment policy. The policy requires investments generally to be investment grade, with the primary objective of minimising the potential risk of principal loss. To provide a meaningful assessment of the price risk associated with the Group’s investment portfolio, the Group performed a sensitivity analysis to determine the impact of change in prices of the securities that would have on the value of the investment portfolio assuming a 0.50% movement in debt funds and debt securities and a 5% movement in the NAV of the equity and equity marketable securities. Based on the investment position a hypothetical 0.50% change in the fair market value of debt securities would result in a value change of +/- ` 38.01 crore as at March 31, 2019 and +/-` 24.17 crore as at March 31, 2018. A 5% change in the equity funds, NAV would result in a value change of +/- ` 39.16 crore as at March 31, 2019 and +/- ` 17.19 crore as at March 31, 2018 respectively. The investments in money market funds are for the purpose of liquidity management only and are held only overnight and hence not subject to any material price risk. (c) Credit risk management: (i) Financial service business: Financial services business has a risk management framework that monitors and ensures that the business lines operate within the defined risk appetite and risk tolerance levels as defined by the senior management. Risk Management function is closely involved in management and control of credit risk, portfolio monitoring, market risks including liquidity risk and operational risks. The credit risk function independently evaluates proposals based on well-established sector specific internal frameworks, in order to identify, mitigate and allocate risks as well as to enable risk-based pricing of assets. Regulatory and process risks are identified, mitigated and managed by a separate Group. Risk management policies are made under the guidance of Risk Management Committee and are approved by Board of Directors. (ii) Other than financial service business: The Group’s customer profile include public sector enterprises, state owned companies and large private corporates. Accordingly, the Group’s customer credit risk is low. The Group’s average project execution cycle is around 24 to 36 months. General payment terms include mobilisation advance, monthly progress payments with a credit period ranging from 45 to 90 days and certain retention money to be released at the end of the project. In some cases retentions are substituted with bank/ corporate guarantees. The Group has a detailed review mechanism of overdue customer receivables at various levels within organisation to ensure proper attention and focus for realization. (iii) Reconciliation of loss allowance provision for financial services business -Loans: Particulars Loss allowance measured at 12-month ECL Loss allowance measured at life time ECL Financial assets for which credit risk has increased significantly and credit not impaired Financial assets for which credit risk has increased significantly and credit impaired Loss allowance as on 1-4-2017 307.45 143.92 3865.51 Provision on new financial assets 188.74 16.89 67.93 Transferred to and from 12-month ECL to life time ECL (64.69) (51.09) 115.78 Higher/(lower) provision on existing financial assets (151.69) 82.89 871.18 Loss allowance as on 31-3-2018 279.81 192.61 4920.40 Provision on new financial assets 313.71 33.49 123.00 Transferred to and from 12-month ECL to life time ECL 28.36 (25.78) (2.59)
|335| Chap. 15 – Ind AS 32-107-109-113 Particulars Loss allowance measured at 12-month ECL Loss allowance measured at life time ECL Financial assets for which credit risk has increased significantly and credit not impaired Financial assets for which credit risk has increased significantly and credit impaired Higher/(lower) provision on existing financial assets (141.88) 27.79 (1127.93) Loss allowance as on 31-3-2019 480.00 228.11 3912.88 (iv) Reconciliation of allowance for expected credit loss on trade receivables (other than financial services business): Particulars Trade Receivables 2018-19 2017-18 Opening balance 2900.10 2465.16 Changes in allowance for expected credit loss: Loss allowance based on ECL 84.34 41.80 Additional provision 265.62 766.83 Write off as bad debts (249.23) (373.69) Closing balance [Refer Note 13] 3000.83 2900.10 (v) Amounts written off: Particulars 2018-19 2017-18 Amount of financial assets written off during the period but still enforceable 1531.86 557.52 Other disclosure pursuant to Ind AS 107 “Financial Instruments: Disclosures”: (a) Category-wise classification for applicable financial assets: ` crore Sr. No. Particulars Note As at 31-3-2019 As at 31-3-2018 I. Measured at fair value through Profit or Loss (FVTPL): (i) Investment in equity instruments 6,12 582.49 843.99 (ii) Investment in preference shares 6,12 312.98 287.39 (iii) Investment in mutual funds and units of fund 6,12 8990.10 4514.29 (ii) Investment in government securities, debentures and bonds 6,12 1523.26 1253.23 (v) Derivative instruments not designated as cash flow hedges 9,18 139.12 17.12 (vi) Embedded derivatives not designated as cash flow hedges 9,18 28.40 47.60 (vii) Investment in security receipts 6 791.07 1016.88 (viii) Loans 7,8,16,17 24395.92 16836.61 Sub-total (I) 36763.34 24817.11 II. Measured at amortised cost: (i) Loans 7,8,16,17 78412.79 71981.52 (ii) Investment in government securities, debentures and bonds 6,12 1832.55 84.94 (iii) Trade receivables 13 37038.17 33116.98
|336| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts Sr. No. Particulars Note As at 31-3-2019 As at 31-3-2018 (iv) Advances recoverable in cash 18 974.20 3428.27 (v) Cash and bank balances 9,14,15 12217.35 8353.04 (vi) Other receivables 287.14 121.53 Sub-total (II) 130762.20 117086.28 III. Measured at fair value through Other Comprehensive Income (FVTOCI): (i) Investment in government securities, debentures and bonds 6,12 4445.53 4829.00 (iii) Derivative instruments designated as cash flow hedges 9,18 1212.86 865.18 (iv) Embedded derivative designated as cash flow hedges 9,18 17.50 8.72 Sub-total (III) 5675.89 5702.90 Total (I+II+III) 173201.43 147606.29 (b) Category-wise classification for applicable financial liabilities: ` crore Sr. No. Particulars Note As at 31-3-2019 As at 31-3-2018 I. Measured at Fair value through Profit or Loss (FVTPL): (i) Derivative instruments not designated as cash flow hedges 23,29 24.93 21.44 (ii) Embedded derivatives not designated as cash flow hedges 23,29 99.41 47.11 Sub-total (I) 124.34 68.55 II. Measured at amortised cost: (i) Borrowings 22,26,27 125555.17 107524.08 (ii) Trade payables 28 42994.81 37797.38 (iii) Others 4489.42 4981.81 Sub-total (II) 173039.40 150303.27 III. Derivative instruments (including embedded derivatives) through Other Comprehensive Income: (i) Derivative instruments designated as cash flow hedges 23,29 368.52 170.18 (ii) Embedded derivatives designated as cash flow hedges 23,29 185.85 164.12 Sub-total (III) 554.37 334.30 IV. Financial guarantee contracts 23,29 1.78 1.47 Total (I+II+III+IV) 173719.89 150707.59
|337| Chap. 15 – Ind AS 32-107-109-113 (c) Items of income, expenses, gains or losses related to financial instruments: ` crore Sr. No. Particulars 2018-19 2017-18 I. Net gains/(losses) on financial assets and financial liabilities measured at fair value through Profit or Loss and amortised cost: A. (i) Financial asset or financial liabilities mandatorily measured at fair value through profit and loss: 1. Gains/(losses) on fair valuation or sale of Investments 137.91 (2160.12) 2. Gains/(losses) on fair valuation or sale of Loan (Financial Services) (77.62) (30.73) 3. Gains/(losses) on fair valuation/settlement of derivative: (a) Gains/(losses) on fair valuation or settlement of forward contracts not designated as cash flow hedges 7.73 59.40 (b) Gains/(losses) on fair valuation or settlement of embedded derivative contracts not designated as cash flow hedges (1.65) 28.22 (c) Gains/(losses) on fair valuation or settlement of futures not designated as cash flow hedges (21.81) (125.74) Sub-total (A) 44.56 (2228.97) B. Financial assets measured at amortised cost: (i) Exchange difference gains/(losses) on revaluation or settlement of items denominated in foreign currency (trade receivables, loans given etc.) 471.76 220.53 (ii) (Allowance)/reversal for expected credit loss during the year (699.45) (1265.19) (iii) Provision for impairment loss (other than ECL)[net] (803.87) (778.78) (iv) Gains/(losses) on derecognition: (a) Bad debts written off [net] 438.15 (220.29) (b) Gains/(losses) on transfer of financial assets (non recourse) (364.34) (477.26) Sub-total (B) (957.75) (2520.99) C. Financial liabilities measured at amortised cost: (i) Exchange difference gains/(losses) on revaluation or settlement of items denominated in foreign currency (trade payables, borrowing availed etc.) (452.17) (172.42) (ii) Unclaimed credit balances written back 90.86 128.76 Sub-total (C) (361.31) (43.66) Total [I] = (A+B+C) (1274.50) (4793.62) II. Net gains/(losses) on financial assets and financial liabilities measured at fair value through Other Comprehensive Income: A. Gains recognised in Other Comprehensive Income: (i) Financial assets measured at fair value through Other Comprehensive Income: (a) Gains/(losses) on fair valuation or sale of government securities, bonds, debentures etc. (125.90) (51.18) (ii) Derivative measured at fair value through Other Comprehensive Income:
|338| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts Sr. No. Particulars 2018-19 2017-18 (b) Gains/(losses) on fair valuation or settlement of forward contracts designated as cash flow hedges (225.41) 640.56 (c) Gains/(losses) on fair valuation or settlement of embedded derivative contracts designated as cash flow hedges 18.49 (82.38) Sub-total (A) (332.82) 507.00 Less: B. Gains reclassified to Profit and Loss from Other Comprehensive Income (i) Financial assets measured at fair value through Other Comprehensive Income: 1. On government securities, bonds, debentures etc. upon sale (62.89) (5.70) (ii) Derivative measured at fair value through Other Comprehensive Income: 2. On forward contracts upon hedged future cash flows affecting the Profit and Loss or related assets or liabilities 355.28 434.30 3. On embedded derivative contracts upon hedged future cash flows affecting the Profit and Loss or related assets or liabilities 15.42 (150.25) Sub-total (B) 307.81 278.35 Net gains recognised in Other Comprehensive Income [II]=[(A)-(B)] (640.63) 228.65 Total [II] = (A-B) (640.63) 228.65 III. Interest and Other income/expense: A. Dividend Income: Dividend income from investments measured at FVTPL 236.91 2748.08 Sub-total (A) 236.91 2748.08 B. Interest Income: (i) Financial assets measured at amortised cost 10901.16 8789.81 (ii) Financial assets measured at fair value through Other Comprehensive Income 356.91 391.27 (iii) Financial assets measured at fair value through Profit or Loss 2197.22 1443.07 Sub-total (B) 13455.29 10624.15 C. Interest expense: (i) Financial liabilities measured at amortised cost (8528.80) (6969.13) (ii) Derivative instruments (including embeded derivatives) that are measured at fair value through Other Comprehensive Income (reclassified to Profit and Loss during the year) (259.02) (266.60) (iii) Financial liabilities measured at fair value through Profit or Loss (0.06) (15.48) Sub-total (C) (8787.88) (7251.21) Total [III] =(A+B+C) 4904.32 6121.02
|339| Chap. 15 – Ind AS 32-107-109-113 (d) Fair value of financial assets and financial liabilities measured at amortised cost: ` crore Particulars Note As at 31-3-2019 As at 31-3-2018 Carrying amount Fair value Carrying amount Fair value Financial assets: Loans 7,8,16,17 62234.11 57890.20 61500.75 56265.75 Government securities, debentures and bonds 6,12 1832.55 1899.07 84.94 84.94 Total 64066.66 59789.27 61585.69 56350.69 Financial liabilities: Borrowings 22,26,27 51252.31 51656.55 44982.93 45417.30 Total 51252.31 51656.55 44982.93 45417.30 Notes: 1. Carrying amount of Loans is gross of provsion for expected credit losses 2. The carrying amounts of trade and other receivables, cash and cash equivalents, trade and other payables are considered to be the same as their fair values due to their short term nature. The carrying amounts of loans given and borrowings taken for short term or at floating rate of interest are considered to be close to the fair value. Accordingly these items have not been included in the above table. (e) Disclosure pursuant to Ind AS 113 “Fair Value Measurement” - Fair value hierarchy of financial assets and financial liabilities measured at amortised cost: As at 31-3-2019 Level 1 Level 2 Level 3 Total Valuation technique for level 3 items Financial assets: Loans – 8783.50 49106.70 57890.20 Discounted cash flow Government securities, debentures and bonds – 1899.07 – 1899.07 Discounted cash flow Total – 10682.57 49106.70 59789.27 Financial Liabilities: Borrowings 737.02 9360.96 41558.57 51656.55 Discounted cash flow Total 737.02 9360.96 41558.57 51656.55 As at 31-3-2018 Level 1 Level 2 Level 3 Total Valuation technique for level 3 items Financial assets: Loans – 8989.57 47276.18 56265.75 Discounted cash flow Debentures and Bonds – 84.94 – 84.94 Discounted cash flow Total – 9074.51 47276.18 56350.69 Financial Liabilities: Borrowings 811.49 9202.25 35403.56 45417.30 Discounted cash Total 811.49 9202.25 35403.56 45417.30 flow Valuation technique Level 2: Future cash flows discounted using G-sec/LIBOR rates plus corporate spread.
|340| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts (f) Fair value hierarchy of financial assets and financial liabilities at fair value: ` crore Particulars Note As at 31-3-2019 As at 31-3-2018 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Financial assets: Financial assets at FVTPL: (i) Equity shares 6, 12 39.93 – 542.56 582.49 102.16 – 741.83 843.99 (ii) Preference shares 6, 12 – 213.17 99.81 312.98 – 217.73 69.67 287.40 (iii) Mutual fund 6, 12 8801.31 – – 8801.31 4385.66 – – 4385.66 (iv) Debt instruments viz. government securities, bonds and debentures 6, 7, 12 656.38 0.53 866.35 1523.26 424.46 – 828.77 1253.23 (v) Derivative instruments not designated as cash flow hedges 9,18 – 139.12 – 139.12 – 17.12 – 17.12 (vi) Embedded derivative instruments not designated as cash flow hedges 9,18 – 28.40 – 28.40 – 47.60 – 47.60 (vii) Other investments – – 979.86 979.86 – – 1145.50 1145.50 (viii) Loans (financial services business) 8,17 – – 24395.92 24395.92 – – 16836.61 16836.61 Financial assets at FVTOCI (i) Debt instruments viz. government securities, bonds and debentures 6, 7, 12 2133.84 2303.29 8.40 4445.53 2849.72 1889.70 89.58 4829.00 (ii) Derivative financial instruments designated as cash flow hedges 9,18 – 1212.86 – 1212.86 – 865.18 – 865.18 (iii) Embedded derivative financial instruments designated as cash flow hedges 9,18 – 17.50 – 17.50 – 8.72 – 8.72 Total 11631.46 3914.87 26892.90 42439.23 7762.00 3046.05 19711.96 30520.01 Financial Liabilities: Financial liabilities at FVTPL: (i) Designated at FVTPL: (a) Derivative instruments not designated as cash flow hedges 23,29 – 24.93 – 24.93 – 21.44 – 21.44 (b) Embedded derivative instruments not designated as cash flow hedges 23,29 – 99.41 – 99.41 – 47.11 – 47.11 (ii) Designated at FVTOCI: (a) Derivative financial instruments designated as cash flow hedges 23,29 – 368.52 – 368.52 – 170.18 – 170.18 (b) Embedded derivative financial instruments designated as cash flow hedges 23,29 – 185.85 – 185.85 – 164.12 - 164.12 Total – 678.71 – 678.71 – 402.85 – 402.85
|341| Chap. 15 – Ind AS 32-107-109-113 Valuation technique and key inputs used to determine fair value: A. Level 1: Mutual funds, bonds, debentures and government securities - quoted price in the active market B. Level 2: (a) Derivative Instruments – Present vaue technique using forward exchange rates at the end of reporting period. (b) Preference share and government securities, bonds and debentures – Future cash flows are discounted using G-sec rates as at reporting date. (g) Movement of items measured using unobservable inputs (Level 3): ` crore Particulars Equity shares Preference shares Debt instruments Loans Other Investments Total Balance as at 31-3-2017 752.53 75.45 1113.95 7900.36 733.61 10575.90 Addition during the year 141.45 – 244.58 13342.84 443.97 14172.84 Disposal during the year (166.52) – (407.93) (4406.59) (14.05) (4995.09) Gains/(losses) recognised in Profit or Loss 14.37 (5.78) (32.25) – (18.03) (41.69) Balance as at 31-3-2018 741.83 69.67 918.35 16836.61 1145.50 19711.96 Addition during the year 565.76 – 11.19 14248.11 192.46 15017.52 Disposal during the year (571.03) – (33.33) (6688.80) (123.44) (7416.60) Gains/(losses) recognised in Profit or Loss (194.00) 30.14 (21.46) – (234.66) (419.98) Balance as at 31-3-2019 542.56 99.81 874.75 24395.92 979.86 26892.90 (h) Sensitivity disclosure for level 3 fair value measurements: Particulars Fair value as at Significant unobservable inputs Sensitivity As at 31-3-2019 As at 31-3-2018 ` crore Equity shares 476.98 656.51 Book value 2019: Increase/decrease of 5% in the book value would result in impact on profit or loss by R 18.02 crore 2018: Increase/ decrease of 5% in the book value would result in impact on profit or loss by R 24.51 crore 65.58 64.27 31-3-2019: 1. Net realization per month R 30.90 per sq/ft. 2. Capitalisation rate 12.25% 31-3-2018: 1. Net realization per month R 30 per sq/ft. 2. Capitalisation rate 12% 2019 : 1% change in net realization would result in +/- R 0.32 crore (post tax- R 0.21 crore) 25 bps change in capitalization rate would result in +/- R 0.63 crore (post tax- R 0.41 crore) 2018 : 1% change in net realization would result in +/- R 0.31 crore (post tax- R 0.20 crore) 25 bps change in capitalization rate would result in +/- R 0.64 crore (post tax- R 0.42 crore) – 21.05 Cost 2018: Sensitivity is insignificant
|342| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts Particulars Fair value as at Significant unobservable inputs Sensitivity As at 31-3-2019 As at 31-3-2018 Preference shares 99.81 69.67 Expected yield 2019: Increase/decrease in the fair value by 5% would result in impact on profit or loss by R 4.74 crore 2018: Increase/decrease in the fair value by 5% would result in impact on profit or loss by R 3.21 crore Debt instruments 874.75 918.35 Expected yield 2019: Increase/(decrease) in fair value by 0.25% would result in impact on profit or loss by R 1.65 crore 2018: Increase/(decrease) in fair a by 0.25% would result in impact on profit or loss by R 1.73 crore Loans 24395.92 16836.61 Expected yield 2019: Increase/(decrease) in fair value by 0.25% would result in impact on profit or loss by R 39.68 crore 2018: Increase/(decrease) in fair value by 0.25% would result in impact on profit or loss by R 27.52 crore Other Investments 979.86 1145.50 Net Assets Value (NAV) 2019: Increase/decrease in the NAV by 5% would result in impact on profit or loss by R 31.87 crore 2018: Increase/decrease in the NAV by 5% would result in impact on profit or loss by R 37.45 crore ` crore Particulars Note As at 31-3-2019 As at 31-3-2018 Within twelve month After twelve month Total Within twelve month After twelve month Total A. Non-derivative liabilities: Borrowings 22,26,27 53909.10 84473.80 138382.90 35625.77 84552.99 120178.76 Trade payables 28 41836.59 1158.22 42994.81 37031.46 765.92 37797.38 Other financial liabilities 23,29 4261.66 227.76 4489.42 3245.58 1736.23 4981.81 Total 100007.35 85859.78 185867.13 75902.81 87055.14 162957.95 B. Derivative liabilities: Forward contracts 23,29 384.74 14.14 398.88 176.76 21.99 198.75 Embedded derivatives 23,29 147.05 142.08 289.13 136.50 89.29 225.79 Total 531.79 156.22 688.01 313.26 111.28 424.54 (j) Details of outstanding hedge instruments for which hedge accounting is followed: (i) Outstanding currency exchange rate hedge instruments:
|343| Chap. 15 – Ind AS 32-107-109-113 (A) Forward covers taken to hedge exchange rate risk and accounted as cash flow hedge: As at 31-3-2019 As at 31-3-2018 Nominal amount (v crore) Average rate (v) Within twelve months (v crore) rate (v) After twelve months (v crore) Nominal amount (v crore) Average Within twelve months (v crore) After twelve months (v crore) (a) Receivable hedges US Dollar 24682.61 75.12 15833.62 8848.99 15955.20 69.64 10243.19 5712.01 EURO 2373.28 84.81 1643.94 729.34 1823.48 85.20 1210.15 613.33 Malaysian Ringgit 113.99 17.54 53.37 60.62 138.38 17.07 138.38 – Omani Riyal 230.00 187.51 150.51 79.49 301.94 179.55 301.94 – Arab Emirates Dirham 1228.16 19.34 1228.16 – 1414.98 18.11 1411.17 3.81 Canadian Dollar – – – – 56.96 56.96 56.96 – British Pound 87.48 96.74 87.48 – 68.97 97.34 68.97 – Japanese Yen 1449.58 0.68 1284.36 165.22 923.19 0.65 889.42 33.77 Kuwaiti Dinar 1524.52 237.38 1232.40 292.12 2039.77 222.73 1698.31 341.46 Qatari Riyal 1551.27 19.72 1227.83 323.44 1476.18 18.55 1253.61 222.57 Bangladesh Toka 873.53 0.88 854.91 18.62 – – – – Saudi Riyal 96.64 21.04 96.64 – – – – – Australian Dollar – – – – 25.90 56.32 25.90 – South African Rand – – – – 102.69 5.40 102.69 – Danish Krone – – – – 9.87 12.34 9.87 – Norwegian Krone – – – – 16.91 9.39 16.91 – Thai Baht – – – – 1.43 2.12 1.43 – Swedish Krona – – – – 27.03 9.32 27.03 – (b) Payable hedges US Dollar 13738.88 70.57 12789.54 949.34 13167.42 67.43 7475.81 5691.61 EURO 4472.40 81.43 4338.30 134.10 4957.31 80.88 4887.56 69.75 Arab Emirates Dirham – – – – 0.75 17.86 0.75 – British Pound 71.10 94.52 71.10 – 75.61 91.99 51.53 24.08 Japanese Yen 1060.96 0.66 877.42 183.54 337.91 0.62 337.91 – Kuwaiti Dinar 531.77 232.14 531.77 – 760.92 219.15 760.92 – Swiss Franc 302.59 72.69 302.59 – 417.42 74.49 417.42 – Chinese Yuan – – – – 26.03 10.32 26.03 – Swedish Krona – – – – 16.56 8.83 16.56 – Norwegian Krone 5.20 9.16 5.20 – 8.02 8.74 7.00 1.02 Omani Riyal 28.71 180.36 28.71 – – – – – Canadian Dollar 40.53 54.04 40.53 – – – – – (B) Options taken to hedge exchange rate risk and accounted as cash flow hedge As at 31-3-2019 As at 31-3-2018 Nominal amount (v crore) Average rate (v) Within twelve months (v crore) rate (v) After twelve months (v crore) Nominal amount (v crore) Average Within twelve months (v crore) After twelve months (v crore) Receivable: US Dollars/Indian Rupees 1422.50 R 71.13 to R 74.94 1422.50 - - - - - EURO/US Dollars 632.65 $ 1.17 to $ 1.25 363.68 268.97 - - - - Payable: US Dollars/Indian Rupees 750.00 R 67.69 to R 75 750.00 - - - - -
|344| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts (C) Forward covers taken to hedge exchange rate risk and accounted as net investment hedge: As at 31-3-2019 As at 31-3-2018 Nominal amount (` crore) Average rate (`) Within twelve months (` crore) rate (`) After twelve months (` crore) Nominal amount (` crore) Average Within twelve months (` crore) After twelve months (` crore) Receivable: US Dollar 28.73 71.83 28.73 – 28.73 71.83 – 28.73 Arab Emirates Dirham 81.20 20.46 – 81.20 – – – – Qatati Riyals 116.68 20.91 116.68 – – – – – Saudi Riyal 51.07 19.34 51.07 – 187.39 17.43 187.39 – (ii) Outstanding interest rate hedge instruments: Interest rate swaps taken to hedge interest rate risk and accounted as cash flow hedge: As at 31-3-2019 As at 31-3-2018 Nominal amount (` crore) Average rate (`) Within twelve months (` crore) rate (`) After twelve months (` crore) Nominal amount (` crore) Average Within twelve months (` crore) After twelve months (` crore) Floating interest rate borrowings 373.90 7.17 369.58 4.32 773.58 7.48 524.94 248.64 Copper (Tn)* (271.25) 514615.22 (271.25) – (193.29) 486405.65 (193.29) – Aluminium (Tn) 202.04 148790.59 202.04 – 266.11 138402.62 266.11 – Iron Ore (Tn) 38.32 5469.41 29.47 8.85 60.65 4055.89 60.65 – Coking Coal (Tn) 39.27 29.26 10.01 33.91 11958.33 33.91 – 13631.02 Zinc (Tn) 42.44 189480.24 42.44 – 19.76 222813.00 19.76 – Lead (Tn) 33.63 142435.43 33.63 – 10.99 160606.00 10.99 – *Negative nominal amount represents sell position. (k) Carrying amounts of hedge instruments for which hedge accounting is followed: (A) Cash flow hedge: Particulars As at 31-3-2019 As at 31-3-2018 Currency exposure Interest rate exposure Commodity price exposure Currency exposure Interest rate exposure Commodity price exposure (i) Forward contracts Current: Asset - Other financial assets 714.75 (0.40) 56.94 538.62 (0.25) 25.18 Liability - Other financial liabilities 396.77 – 46.57 197.60 – 23.19 Non-current: Asset - Other financial assets 366.37 (0.40) – 219.76 (0.48) – Liability - Other financial liabilities 109.95 – – 98.81 – – (ii) Swap contracts Current: Asset - Other financial assets 49.11 0.88 – 66.58 (8.43) – Liability - Other financial liabilities – – – 12.57 – – Non-current:
|345| Chap. 15 – Ind AS 32-107-109-113 Particulars As at 31-3-2019 As at 31-3-2018 Currency exposure Interest rate exposure Commodity price exposure Currency exposure Interest rate exposure Commodity price exposure Asset - Other financial assets – – – 21.02 (3.65) – Liability - Other financial liabilities – – – – – – (iii) Option contracts Current: Asset - Other financial assets 22.43 – – – – – Liability - Other financial liabilities 0.96 – – – – – Non-current: Asset - Other financial assets 6.51 – – – – – Liability - Other financial liabilities – – – – – – (B) Net Investment hedge: Particulars As at 31-3-2019 As at 31-3-2018 Currency exposure Interest rate exposure Commodity price exposure Currency exposure Interest rate exposure Commodity price exposure (i) Forward contracts Current: Asset - Other financial assets 11.48 – – 14.63 – – Liability - Other financial liabilities 0.11 – – 2.15 – – Non-current: Asset - Other financial assets 2.68 – – 0.91 – – (l) Breakup of cash flow hedging reserve and cost of hedging reserve: ` crore Particulars As at 31-3-2019 As at 31-3-2018 Cash flow hedging reserve Cost of hedging reserve Cash flow hedging reserve Cost of hedging reserve Balance towards continuing hedges 360.54 6.77 241.13 (11.45) Balance for which hedge accounting discontinued (121.43) (0.88) 208.09 – Total 239.11 5.89 449.22 (11.45) (m) Reclassification of hedging reserve and cost of hedging reserve to Profit or Loss: ` crore Particulars 2018-19 2017-18 Future cash flows are no longer expected to occur: Revenue from operations 109.03 – Sales, administration and other expenses (45.53) (83.81) Other Income 0.34 – Hedged expected future cash flows affecting profit or loss: Progress Billing (28.32) 441.59 Revenue from operations 69.08 331.25 Manufacturing, construction and operating expenses (24.26) (166.29) Finance costs (259.35) (267.43) Other Income – 0.03 Sales, administration and other expenses 262.37 203.70
|346| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts (n) Movement of hedging reserve and cost of hedging reserve: ` crore Hedging reserve 2018-19 2017-18 Opening balance 449.22 359.62 Changes in the spot element of the forward contracts which is designated as hedging instruments for time period related hedges 261.47 (4.49) Changes in fair value of forward contracts designated as hedging instruments (301.78) 719.83 Changes in fair value of swaps 59.82 (151.83) Amount reclassified to Profit or Loss (364.94) (211.57) Amount included in non-financial asset/liability 0.31 1.24 Amount included in Progress Billing in balance sheet 28.32 (255.20) Taxes related to above 106.69 (8.38) Closing balance 239.11 449.22 Cost of hedging reserve 2018-19 2017-18 Opening balance (11.45) (12.09) Changes in the forward element of the forward contracts where changes in spot element of forward contract is designated as hedging instruments for time period related hedges (226.43) (5.33) Less: Included in carrying amount of hedge item 0.13 – Amount reclassified to Profit or Loss 252.95 6.49 Taxes related to above (9.31) (0.52) Closing balance 5.89 (11.45) NOTE [58] Value of financial assets and inventories pledged as collateral for liabilities and/or commitments and/or contingent liabilities: Particulars As at 31-3-2019 As at 31-3-2018 Current: Investments 22.90 – Inventories and trade receivables 11865.78 11434.34 Cash and cash equivalents 682.92 1257.08 Loans 24703.11 10519.31 Other assets 694.42 525.62 Total inventories and current financial assets pledged as collateral 37969.13 23736.35 Non-current: Investments 87.48 – Loans 42797.67 52722.97 Other assets – 26.10 Total non-current financial assets pledged as collateral 42885.15 52749.07
|347| Chap. 15 – Ind AS 32-107-109-113 5. MINDTREE LIMITED a) Significant Accounting Policies (viii) Impairment a) Financial assets In accordance with Ind AS 109, the Group applies expected credit loss (ECL) model for measurement and recognition of impairment loss. The Group follows ‘simplified approach’ for recognition of impairment loss allowance on trade receivables. The application of simplified approach does not require the Group to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. For recognition of impairment loss on other financial assets and risk exposure, the Group determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If in subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on 12-month ECL. Lifetime ECLs are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12-months after the reporting date. ECL is the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the entity expects to receive (i.e. all shortfalls), discounted at the original EIR. When estimating the cash flows, an entity is required to consider: (i) All contractual terms of the financial instrument (including prepayment, extension etc.) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument; (ii) Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. As a practical expedient, the Group uses a provision matrix to determine impairment loss on portfolio of its trade receivable. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward-looking estimates. At regular intervals, the historically observed default rates are updated and changes in forward-looking estimates are analysed. ECL impairment loss allowance (or reversal) is recognised as an income/expense in the statement of profit and loss during the period. This amount is reflected under the head other expenses in the statement of profit and loss. The balance sheet presentation for various financial instruments is described below: Financial assets measured at amortised cost, contractual revenue receivable: ECL is presented as an allowance, i.e. as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write off criteria, the Group does not reduce impairment allowance from the gross carrying amount. 8. Financial instruments Financial assets and liabilities (carrying value/ fair value) As at March 31, 2019 March 31, 2018 Assets: Cash and cash equivalents 158,529 44,925 Investments Financial instruments at FVTPL 13,960 46,438
|348| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts As at March 31, 2019 March 31, 2018 Financial instruments at FVTOCI 191,964 181,919 Financial instruments at Amortised cost 21,708 28,405 Other financial assets Trade receivables 104,862 105,436 Unbilled receivables* 22,880 42,486 Other assets 19,757 11,615 Derivative assets 5,104 1,273 538,764 462,497 Liabilities: Trade payables and other payables Trade payables 62,660 51,203 Other financial liabilities 26,288 17,983 Borrowings** 99,467 138,259 Derivative liabilities 1,310 2,217 189,725 209,662 * On account of adoption of Ind AS 115, unbilled revenues pertaining to fixed price development contracts of 15,038 as at March 31, 2019, has been considered as non-financial Contract assets, which are billable on completion of milestones specified in the contracts. ** Includes current obligation under borrowings classified under "Other current financial liabilities" Offsetting financial assets and liabilities The following table contains information on other financial assets and trade payables and other payables, subject to offsetting: As at March 31, 2019 March 31, 2018 Financial Assets: Gross amount of recognised other financial assets 154,129 165,985 Gross amount of recognised trade payables and other payables set off in the consolidated balance sheet (6,630) (6,448) Net amount of other financial assets presented inthe consolidated balance sheet 147,499 159,537 Financial liabilities Trade payables Gross amount recognised as Trade payables and other payables 95,578 75,634 Gross amount of recognised trade payables and other payables set off in the consolidated balance sheet (6,630) (6,448) Net amounts of Trade payables and other payables presented in the consolidated balance sheet 88,948 69,186 For the financial assets and liabilities subject to offsetting or similar arrangements, each agreement between the Company and the counterparty allows for net settlement of the relevant financial assets and liabilities when both elect to settle on a net basis. In the absence of such an election, financial assets and liabilities will be settled on a gross basis and hence are not offset. Fair value Financial assets and liabilities include cash and cash equivalents, trade receivables, unbilled revenues, finance lease receivables, employee and other advances and eligible current and non-current assets, longand
|349| Chap. 15 – Ind AS 32-107-109-113 short-term loans and borrowings, finance lease payables, bank overdra ft s, trade payable, eligible current liabilities and non current liabilities. The fair value of cash and cash equivalents, trade receivables, unbilled revenues, borrowings, trade payables, other current financial assets and liabilities approximate their carrying amount largely due to the short-term nature of these instruments. The Company"s long-term debt has been contracted at market rates of interest . Accordingly, the carrying value of such long-t erm debt approximates fair value. Further, finance lease receivables that are overdue are periodically evaluated based on individual credit worthiness of customers. Based on this evaluation, the Company records allowance for estimated losses on these receivables. As at March 31,2019 and 2018, the carrying value of such receivables, net of allowances approximates the fair value. Investments in liquid and short-term mutual funds, which are classified as FVTPLare measured using net asset values at the reporting date multiplied by the quantity held. Fair value of investments in commercial papers, certificate of deposits and bonds classified as FVTOCI is determined based on the indicative quotes of price and yields prevailing in the market at the reporting date. Fair value of investments in equity instruments classified as FVTOCI is determined using market and income approaches. The fair value of derivative financ ial instruments is determined based on observable market inputs including currency spot and forward rates, yield curves, currency volatility etc. Fair value hierarchy The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilit ies. Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). The following table presents fair value of hierarchy of assets and liabilities measured at fair value on a recurring basis: Particulars As at March 31, 2019 As at March 31, 2018 Fair value measurements at reporting date Fair value measurements at report ing date Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Assets Derivative instruments: Cash flow hedges 3,149 — 3,149 — 1,139 — 1,139 — Others 1,955 — 1,955 — 134 — 134 — Investments: Investment in liquid and short - term mutual funds 13,960 13,960 — — 46,438 46,438 — — Investment in equity instruments 6,916 — 248 6,668 5,685 — — 5,685 Commercial paper, Certificate of deposits and bonds 185,048 6,865 178,183 — 176,234 1,951 174,283 — Liabilities Derivative instruments Cash flow hedges Others (130) — (130) — (1,276) — (1,276) — (1,180) — (1,180) — (941) — (941) —
|350| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts The following methods and assumptions were used to estimate the fair value of the level 2 financial instruments included in the above table. Derivative instruments (assets and liabilities): The Company enters into derivative financial instruments with various counter-parties, primarily banks with investment grade credit ratings. Derivatives valued using valuation techniques with market observable inputs are mainly interest rate swaps, foreign exchange forward contracts and foreign exchange option contracts. The most frequently applied valuation techniques include forward pricing, swap models and Black Scholes models (for option valuation), using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, interest rate curves and forward rate curves of the underlying. As at March 31, 2019, the changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognised at fair value. Investment in commercial papers, certificate of deposits and bonds: Fair value of these instruments is derived based on the indicative quotes of price and yields prevailing in the market as at reporting date. Details of assets and liabilities considered under Level 3 classification Particulars Investment in equity instruments Derivative Assets - others Liabilities - Contingent consideration Balance as at April 1, 2018 5,685 — — Additions 2,869 — — Transfers out of level 3 (647) — — Disposal (1,341) — — Gain/loss recognised in foreign currency translation reserve 203 — — Gain/loss recognised in other comprehensive income (101) — — Balance as at March 31, 2019 6,668 — — Balance as at April 1, 2017 5,303 426 (339) Additions 1,851 — — Payouts — — 164 Transferred to Investments accounted for using the equity method (357) — — Gain/loss recognised in consolidated statement of profit and loss - (426) 167 Gain/loss recognised in foreign currency translation reserve 53 — (32) Gain/loss recognised in other comprehensive income (1,165) — — Finance expense recognised in consolidated statement of profit and loss — — 40 Balance as at March 31, 2018 5,685 — —
|351| Chap. 15 – Ind AS 32-107-109-113 Description of significant unobservable inputs to valuation: As at March 31, 2019 Items Valuation technique Significant unobservable input Movement by Increase Decrease Unquoted equity investments Discounted cash flow model Long term growth rate Discount rate 0.5% 0.5% 201 (243) (187) 256 As at March 31, 2018 Items Valuation technique Significant unobservable input Movement by Increase Decrease Unquoted equity investments* Third party quote Revenue achievement 1.0% 18 (18) * Carrying value of 1,545 as at March 31, 2018. Derivative assets and liabilities The Company is exposed to foreign currency fluctuations on foreign currency assets/ liabilities, forecasted cash flows denominated in foreign currency and net investment in foreign operations. The Company follows established risk management policies, including the use of derivatives to hedge foreign currency assets/ liabilities, foreign currency forecasted cash flows and net investment in foreign operations. The counter parties in these derivative instruments are primarily banks and the Company considers the risks of nonperformance by the counterparty as non-material. The following table presents the aggregate contracted principal amounts of the Company's derivative contracts outstanding: (in million) As at March, 31 2019 March 31, 2018 Notional Fair value Notional Fair value Designated derivatives instruments Sell: Forward contracts USO 333 1,410 USD 904 ` 951 ∈ — ∈ 134 ` (531) £ — £ 147 ` (667) AUD 97 AUD 77 ` 29 Range forward options contracts USO 1,067 1,149 USO 182 5 £ 191 68 £ 13 5 ∈ 153 349 ∈ 10 2 AUD 56 39 AUD — — Interest rate swaps USO 75 (11) USD 75 (7) Non-designated derivatives instruments Sell: Forward contracts USO 1,182 1,359 USD 939 (360) ∈ 32 55 ∈ 58 6 £ 1 (1) £ 95 (56) AUD 82 28 AUD 77 68 SGD 11 n SGD 6 (1) ZAR 56 n4 ZAR 132 (16) CAD 56 t40 CAD 14 32
|352| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts As at March, 31 2019 March 31, 2018 Notional Fair value Notional Fair value SAR 123 (1) SAR 62 AED 9 A AED 8 PLN 38 n5 PLN 36 n2 CHF 10 A CHF 6 3 QAR 3 (1) OAR 11 (3) TRY 28 n2 TRY 10 8 MXN - - MXN 61 (6) NOK 29 t4 NOK 34 3 OMR 1 (1) OMR 3 (1) SEK 35 t5 Range forward options contracts USO 150 61 USD 50 (6) ∈ 31 2 ∈ - - £ 71 57 £ 20 (2) Buy: Forward contracts USO 730 (971) USD 575 (417) JPY 154 JPY 399 6 MXN 9 (13) MXN - - DKK 75 DKK 9 (1) The following table summarises activity in the cash flow hedging reserve within equity related to all derivative instruments classified as cash flow hedges: As at March 31, 2019 March 31, 2018 Balance as at the beginning of the year (143) t 7,325 Deferred cancellation gain/ (loss), net 6 (6) Changes in fair value of effective portion of derivatives 1,069 (12) Net (gain)/loss reclassified to statement of profit and loss on occurrence of hedged transactions 2,087 (7,450) Gain/(loss) on cash flow hedging derivatives, net 3,162 (7,468) Balance as at the end of the year 3,019 (143) Deferred tax thereon (604) 29 Balance as at the end of the year, net of deferred tax 2,415 t (114) The related hedge transactions for balance in cash flow hedging reserves as at March 31, 2019 are expected to occur and be reclassified to the statement of profit and loss over a period of two years. As at March 31, 2019 and 2018, there were no significant gains or losses on derivative transactions or portions thereof that have become ineffective as hedges, or associated with an underlying exposure that did not occur. Sale of financial assets From time to time, in the normal course of business, the Company transfers accounts receivables, unbilled receivables, net investment in finance lease receivables (financials assets) to banks. Under the terms of the arrangements, the Company surrenders control over the financial assets and transfer is without recourse. Accordingly, such transfers are recorded as sale of financial assets. Gains and losses on sale of financial assets without recourse are recorded at the time of sale based on the carrying value of the financial assets and fair value of servicing liability. The incremental impact of such transactions on our cash flow and liquidity for the year ended March 31, 2019 and March 31, 2018 is not material.
|353| Chap. 15 – Ind AS 32-107-109-113 In certain cases, transfer of financial assets may be with recourse. Under arrangements with recourse, the Company is obligated to repurchase the uncollected financial assets, subject to limits specified in the agreement with the banks. These are reflected as part of loans and borrowings in the statement of consolidated balance sheet. Financial risk management Market Risk Market risk is the risk of loss of future earnings, to fair values orto future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments, foreign currency receivables, payables and borrowings. The Company's exposure to market risk is a function of investment and borrowing activities and revenue generating activities in foreign currency. The objective of market risk management is to avoid excessive exposure of the Company's earnings and equity to losses. Risk Management Procedures The Company manages market risk through a corporate treasury department, which evaluates and exercises independent control over the entire process of market risk management. The corporate treasury department recommends risk management objectives and policies, which are approved by senior management and Audit Committee. The activities of this department include management of cash resources, implementing hedging strategies for foreign currency exposures, borrowing strategies, and ensuring compliance with market risk limits and policies. Foreign currency risk The Company operates internationally and a major portion of its business is transacted in several currencies. Consequently, the Company is exposed to foreign exchange risk through receiving payment for sales and services in the United States and elsewhere, and making purchases from overseas suppliers in various foreign currencies. The exchange rate risk primarily arises from foreign exchange revenue, receivables, cash balances, forecasted cash flows, payables and foreign currency loans and borrowings. A significant portion of the Company's revenue is in the U.S. Dollar, the United Kingdom Pound Ster ling, the Euro, the Canadian Dollar and the Australian Dollar, while a large portion of costs are in Indian rupees. The exchange rate between the rupee and these currencies has fluctuated significant ly in recent years and may continue to fluctuate in the fut ure. Appreciation of the rupee against these currencies can adversely affect the Company's results of operations. The Company evaluates exchange rate exposure arising from these transactions and enters into foreign currency derivative instruments to mitigate such exposure. The Company follows established risk management policies, including the use of derivatives like foreign exchange forward/option contracts to hedge forecasted cash flows denominated in foreign currency. The Company has designated certain derivative instruments as cash flow hedges to mitigate the foreign exchange exposure offorecasted highly probable cash flows. The Company has also designated foreign currency borrowings as hedge against respective net investments in foreign operations. As at March 31, 2019 and 2018 respectively, a ( 1 increase/decrease in the spot exchange rate of the Indian rupee with the U.S. dollar would result in approximately ( 2,002 (consolidated statement of profit and loss ( 602 and other comprehensive income( 1,400) and ( 1,500 (consolidated statement of profit and loss ( 414 and other comprehensive income ( 1,086) decrease/increase in the fair value of foreign currency dollar denominated derivative instruments. The below table presents foreign currency risk from non-derivative financial instruments as at March 31, 2019 and 2018:
|354| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts Particulars As at March 31, 2019 US$ Euro Pound Sterling Australian Dollar Canadian Dollar Other currencies# Total Trade receivables (39,896 (8,030 (5,212 ( 3,542 (1,528 (3,880 ( 62,088 Unb illed receivables 8,038 1,609 3,146 1,225 204 743 14,965 Contract assets 4,706 1,445 2,270 836 150 598 10,005 Cash and cash equivalents 21,997 2,884 1,573 1,003 1,928 2,204 31,589 Other assets 8,553 1,173 4,056 1,038 1,033 4,544 20,397 Borrowings* (50,516) (20) (21) (33) — (21) (50,611) Trade payables and other financial liabilities (27,202) (5,779) (4,646) (1,526) (806) (2,787) (42,746) Net assets/ (liabilities) (5,472) (9,342) (11,590) (6,085) (4,037) (9,161) (45,687) Particulars As at March 31, 2018 US$ Euro Pound Sterling Australian Dollar Canadian Dollar Other currencies# Total Trade receivables ( 32,948 (7,273 (6,585 (3,459 ( 990 (3,651 (54,906 Unb illed revenues 13,893 2,571 5,189 2,094 338 1,609 25,694 Cash and cash equivalents 9,144 3,791 1,685 786 34 2,241 17,681 Other assets 13,796 1,993 4,061 1,164 940 4,459 26,413 Borrowings* (49,257) (41) (37) (165) — (137) (49,637) Trade payables and other financial liabilities (23,561) (3,962) (5,958) (1,516) (652) (2,942) (38,591) Net assets / (liabilities) (3,037) (11,625) (11,525) (5,822) (1,650) (8,881) (36,466) # Other currencies reflect currencies such as Saudi Riyal, Singapore Dollars, Danish Krone, etc. * Includes current obligation under borrowings classified under "Ot her current financial liabilities" As at March 31, 2019 and 2018, respectively, every 1% increase/decrease of the respective foreign currencies compared to functional currency of the Company would impact results by approximately 457 and 365, respectively. Interest rate risk Interest rate risk primarily arises from floating rate borrowing, including various revolving and other lines of credit. The Company's investments are primar ily in short-term investment s, which do not expose it to significant interest rate risk. The Company manages its net exposure to interest rate risk relating to borrowings by entering into interest rate swap agreements, which allows it to exchange periodic payments based on a notional amount and agreed upon fixed and floating interest rates. Certain borrowings are also transacted at fixed interest rates. If interest rates were to increase by 100 bps from March 31, 2019, additional net annual interest expense on floating rate borrowing would amount to approximately 866. Credit risk Credit risk arises from the possibility that customers may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, analysis of historical bad debts and ageing of accounts receivable. Individual risk limits are set accordingly. No single customer accounted for more than 10% of the accounts receivable as of March 31, 2019 and 2018, respectively and revenues forthe year ended March 31, 2019 and 2018, respectively. There is no significant concentration of credit risk. Counterparty risk Counterparty risk encompasses issuer risk on marketable securities, settlement risk on derivative and money market contracts and credit risk on cash and time deposits. Issuer risk is minimised by only buying securities which are at least AA rated in India based on Indian rating agencies. Settlement and credit risk is reduced by the policy of entering into transactions with counterparties that are usually banks or financial
|355| Chap. 15 – Ind AS 32-107-109-113 institutions with acceptable credit ratings. Exposure to these risks are closely monitored and maintained within predetermined parameters. There are limits on credit exposure to any financial institution. The limits are regularly assessed and determined based upon credit analysis including financial statements and capital adequacy ratio reviews. Liquidity risk Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable price. The Company's corporate treasury department is responsible for liquidity and funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Company's net liquidity position through rolling forecasts on the basis of expected cash flows. As of March 31, 2019, cash and cash equivalents are held with major banks and financial institutions. The table below provides details regarding the remaining contractual maturities of significant financial liabilities at the reporting date. The amounts include estimated interest payments and exclude the impact of netting agreements, if any. As at March 31, 2019 Contractual cash flows Carrying value Less than 1 year 1-2 years 2-4years 4-7years Total Borrowings* 99,467 73,559 24,887 4,309 — 102,755 Trade payables and Other financial liabilities* 88,948 88,948 — — — 88,948 Derivative li abilit ies 1,310 1,310 — — — 1,310 As at March 31, 2018 Contractual cash flows Carrying value Less than 1 year 1-2 years 2-4years 4-7years Total Borrowings* 138,259 95,466 18,997 28,190 6 142,659 Trade payables and Other financial liabilities* 69,186 69,179 7 — — 69,186 Derivative li abilit ies 2,217 2,210 7 — — 2,217 The balanced view of liquidit y and financial indebtedness is stated in the table below. This calculation of the net cash position is used by the management for external communication with investors, analysts and rating agencies: As at March 31,2019 March 31, 2018 Cash and cash equivalent 158,529 44,925 Investment 220,716 249,094 Borrowings* (99,467) (138,259) 279,778 155,760 * Includes current obligation under borrowings and financial leases classified under 'Other current financial liabilities'. 6. NATIONAL PAYMENT CORPORATION OF INDIA Accounting Policy 1.12. Financial Instruments Financial Assets and Financial Liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments. Financial Assets and Financial Liabilities are initially measured at fair value.
|356| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts Financial Assets All recognised Financial Assets are subsequently measured in their entirety at amortised cost. A Financial Asset shall be measured at amortised cost if both of the following conditions are met: i. The Financial Asset is held within a business model whose objective is to hold Financial Assets in order to collect contractual cash flows and ii. The contractual terms of the Financial Asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Interest income on Financial Asset measured at amortised cost, is measured at effective interest rate on the gross carrying amount. Cash and cash equivalents (including bank balances and bank overdrafts) are reflected as such in the statement of Cash Flow. Those cash and cash equivalents which are not available for general use as on the date of Balance Sheet are also included under this category with a specific disclosure. Impairment of Financial Assets: i. The Company is not recognising estimated credit loss on trade receivables since the company is dealing with regulated entities and has not experienced any loss due to credit risk since inception. ii. The Company has invested in Central Government Securities, T-Bills, and Government of India Bonds, sovereign in nature. Hence, impairment is not required. A Financial Asset is de-recognised when and only when: i. The contractual rights to the cash flows from the Financial Asset expire; ii. It transfers the Financial Assets and the transfer qualifies for de-recognition. Financial Liabilities Financial Liabilities are subsequently carried at amortised cost using the effective interest method for trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments. Disclosure Financial Instruments Financial instrument by category The carrying value and fair value of financial instruments by categories as of 31st March 2019 were as follows: Financial Assets (Amount ` in Lakh) Particulars As at 31st March 2019 As at 31st March 2018 Measured at amortised cost Trade receivable 8,570.10 7,345.10 Cash & cash equivalents 1,05,433.72 52,548.53 Investments 22,968.47 19,340.62 Other financial Assets 5,784.97 13,673.46 Total Financial Assets 1,42,757.26 92,907.71
|357| Chap. 15 – Ind AS 32-107-109-113 (Amount ` in Lakh) Particulars As at 31st March 2019 As at 31st March 2018 Measured at amortised cost Trade payables 1,732.33 3,012.61 Other financial liabilities 40,682.78 17,271.65 Total Financial Liabilities 42,415.11 20,284.26 Fair value hierarchy Level 1 - Quoted prices in active market for identical Assets and Liabilities Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly Level 3 - Inputs for the Assets or liabilities that are not based on observable market data. (Amount ` in Lakh) Investments (Level 1) As at 31st March 2019 As at 31st March 2018 Government securities 11,924.17 8,071.76 Total 11,924.17 8,071.76 Note: The fair value pertaining to Assets or liabilities which are measured at cost or amortised cost on a non-recurring basis has not been disclosed for level 3 hierarchy. Financial Risk Management Financial risk factors The Company’s activities expose it to a variety of financial risks, settlement risk, market risk, credit risk and liquidity risk. The Company’s focus is to foresee the unpredictability of liquidity risks emanating from defaulting of the member(s) during settlement and seek to minimize potential adverse effects on its financial performance. The Company uses members’ contribution and line of credit to mitigate risk associated with default by member(s) during settlement. Credit risk Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. Since the Company has exposure to regulated entities, the credit risk is limited. It is mitigated by timely monitoring of receivables. The Company has robust accounts receivable collection mechanism which has ensured near zero level of credit risk since inception. The investment of the Company is in high grade investment categories reducing the credit risk exposure to near minimal. The following table gives details in respect of % of revenue generated from top customer and top 5 customers: Particulars Year ended 31st March 2019 Year ended 31st March 2018 Revenue from top customer 18% 18% Revenue from top 5 customers 42% 41% The Company provides certain mandated services like Cheque Truncation System (CTS) and National Automated Clearing House (NACH), Bharat Bill Payment System, and accordingly are sole provider of such kind of services. The client mentioned above are likely to depend on these services till they are solely handled by the company.
|358| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts Credit risk exposure There is no requirement for providing for expected credit loss as the Company has robust collection mechanism and has not written off any amount due to client credit risk exposure. Market risk Under the current changing dynamics of the market, there is always a business or market risk for the Company. As company venture towards a more cashless society, services like UPI, NeTC, AePS, BBPS etc., will be the major revenue generator. More innovation and R&D’s for new products, will be made so as to maintain its competitiveness. Value addition on the existing products will be carried out so as to maintain its leadership in the market. As per our existing risk management framework, NPCI evaluates its Strategic, Compliance, Financial, Operational risks so as to maintain its effectiveness in delivery. Foreign currency risk exposures (Amount ` in Lakh) Particulars As at 31st March 2019 As at 31st March 2018 USD USD Financial Assets Trade Receivables 1,271.46 1,343.16 Financial Liabilities Trade Payables 63.61 — 7. SHOPPERS STOP LIMITED Accounting Policies 2.1.2 Fair Value Measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, (regardless of whether that price is directly observable or estimated using another valuation technique). In estimating the fair value of an asset or a liability, the group takes into account the characteristics of the asset or liability, if market participants would take those characteristics into account when pricing the asset or liability, at the measurement date. In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; • Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and • Level 3 inputs are unobservable inputs for the asset or liability. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of Ind AS 102, leasing transactions that are within the scope of Ind AS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 or value in use in Ind AS 36. 2.4.7 Dividend and Interest income Dividend income from Investments is recognised when the right to receive the payment has been established. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
|359| Chap. 15 – Ind AS 32-107-109-113 2.8 Financial Instruments Classification: The Group classifies its financial assets in the following measurement categories:– those to be measured subsequently at fair value (either through other comprehensive income, or through the Statement of Profit and Loss), and – those measured at amortised cost. The classification depends on the Company’s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in the Statement of Profit and Loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income. The Group reclassifies debt investments when and only when its business model for managing those assets changes. Measurement: At initial recognition, the Group measures a financial asset at its fair value plus, in the case of financial asset not at fair value through the Statement of Profit and Loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through the Statement of Profit and Loss are expensed in the Statement of Profit and Loss. Financial assets with embedded derivatives are considered in their entirely when determining whether their cash flows are solely payment of principal and interest. Debt instruments: Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments: Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in the Statement of Profit and Loss when the asset is derecognised or impaired. Interest income from these financial assets is included in other income using the effective interest rate method. Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in the Statement of Profit and Loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to the Statement of Profit and Loss and recognised in other income/expense. Interest income from these financial assets is included in other income using the effective interest rate method. Fair value through profit and loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through Statement of Profit and Loss. A gain or loss on a debt investment that is subsequently measured at fair value through Statement of Profit and Loss and is not part of a hedging relationship is recognised in the Statement of Profit and Loss and presented net in the Statement of Profit and Loss In the period in which it arises. Interest income from these financial assets is included in other income. Equity instruments: The Group subsequently measures all equity investments at fair value. Where the Company’s management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to the Statement of Profit and Loss. Dividends from such investments are recognised in the Statement of Profit and Loss as other income when the Group’s right to receive payments is established. Changes in the fair value of financial assets at fair value
|360| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts through the Statement of Profit and Loss are recognised in other income / other expenses in the Statement of Profit and Loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value. Impairment of financial assets: The Group assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Derecognition of financial assets: A financial asset is derecognised only when – the Group has transferred the rights to receive cash flows from the financial asset or retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients. Where the Group has transferred an asset, the Group evaluates whether it has transferred substantially all risks and rewards of the financial asset. In such cases, the financial asset is derecognised. Where the Group has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised. Where the Group has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognized if the Group has not retained control of the financial asset. Where the Group retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset. 2.8.1 Offsetting financial instruments: Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default insolvency or bankruptcy of the Group or the counterparty. Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the issue of financial liabilities are deducted from the fair value of the financial liabilities on initial recognition. After initial recognition, all financial liabilities (other than financial guarantee contracts and derivative instruments – see below) are subsequently measured at amortised cost using the effective interest method. The Company has not designated any financial liability as FVTPL. 2.8.2 Financial guarantee contracts: The Group on a case to case basis elects to account for financial guarantee contracts as a financial instrument or as an insurance contract, as specified in Ind AS 109 on Financial Instruments and Ind AS 104 on Insurance Contracts. The Group has regarded all its financial guarantee contracts as insurance contracts. At the end of each reporting period the Group performs a liability adequacy test, (i.e. it assesses the likelihood of a pay-out based on current undiscounted estimates of future cash flows), and any deficiency is recognised in profit or loss. 2.8.3 Derivative instruments: The Group enters into foreign exchange forward contracts to manage its exposure to foreign exchange rate risks. These contracts are initially recognised at fair value and subsequently, at the end of each reporting period, re-measured at their fair values on reporting date. The resulting gain or loss is recognised in profit or loss in the same line as the movement in the hedged exchange rate. Disclosures 37 Derivatives / Forward foreign exchange contracts a) The Group uses foreign currency forward contracts to hedge its risks associated with foreign currency exposures relating to the underlying transactions and firm commitments. The Group does not enter into any derivative instruments for trading and speculative purposes. It is the policy of the Group to enter into forward foreign exchange contracts to cover specific foreign currency payments and receipts. The Group also enters into forward foreign exchange contracts to manage the risk associated with anticipated sales and purchase transactions out of 6 months within 40% to 50% of the exposure generated.
|361| Chap. 15 – Ind AS 32-107-109-113 Adjustments are made to the initial carrying amounts of non-financial hedged items when the anticipated sale or purchase transaction takes place. The following are the outstanding Forward Exchange Contracts entered into by the Group as at 31 March 2019. Particulars 31 March 2019 31 March 2018 Number of Contracts - - - 1 1 1 Type - - - Buy Buy Buy Foreign currency (in lacs) - - - 0.27 EURO 0.06 GBP 1.86 USD INR Equivalent (in lacs) - - - 22.20 5.77 121.43 b) Unhedged Foreign Currency exposure The following are the foreign currency exposures that have not been hedged by a derivative instrument or otherwise at the end of the year. Particulars 31 March 2019 31 March 2018 ` In Lacs In Foreign currency ` In Lacs In Foreign currency Trade Payable 90.88 USD 1,31,429 - Creditors for capital expenditure 0.69 EURO 889 - 38. Financial Instruments A. Capital risk management The Group’s objectives when managing capital are to safeguard continuity as a going concern, provide appropriate return to shareholders and maintain a cost efficient capital structure. The Group determines the amount of capital required for respective companies on the basis of an annual budget and a five year plan, including, for working capital, capital investment in stores, technology. The Group’s funding requirements are met through internal accruals and a combination of both long-term and short-term borrowings. Majorly Group raise long-term loan for its CAPEX requirement and based on the working capital requirement utilise the working capital loans. The Group monitors capital on the basis of consolidated total debt to consolidated total equity on a periodic basis. The following table summarise the capital of the Group: Particulars As at 31st March 2019 As at 31st March 2018 Long term borrowings (including current maturities) 4,423.33 8,700.11 Short-term borrowings 3,022.26 3,834.77 Total debt 7,445.59 12,534.88 Equity share capital 4,399.50 4,398.03 Other equity (including Non-Controlling Interests, less goodwill on consolidation) 87,070.50 86,045.96 Total Equity 91,470.00 90,443.99 Debt to Total Equity Ratio 0.08 0.14 The Group’s objective is to keep the debt to total equity ratio of the holding company on consolidated basis below 1 which it has achieved in current year. B. Financial risk management A wide range of risks may affect the Group’s business and operational / financial performance. The risks that could have significant influence on the Group are market risk, credit risk and liquidity risk. The Board of Directors of respective Companies reviews and sets out policies for managing these risks and monitors suitable actions taken by management to minimize potential adverse effects of such risks on the Group’s operational and financial performance.
|362| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts a) Market risk: Market Risk is the risk that changes in market place could affect the future cash flows to the Group. The market risk for the Group arises primarily from product price risk, interest rate risk and, to some extent, foreign currency risk. Product price risk: In a potentially inflationary economy, the Group expects periodical price increases across its retail product lines. Product price increases which are not in line with the levels of customers’ discretionary spends, may affect the business/retail sales volumes. In such a scenario, the risk is managed by offering judicious product discounts to retail customers to sustain volumes. The Group negotiates with its vendors for purchase price rebates such that the rebates substantially absorb the product discounts offered to the retail customers. This helps the Group protect itself from significant product margin losses. This mechanism also works in case of a downturn in the retail sector, although overall volumes would get affected. Interest risk: The Group is exposed to interest rate risk primarily due to borrowings having floating interest rates. The Group uses available working capital limits for availing short-term working capital demand loans with interest rates negotiated from time to time so that the Group has an effective mix of fixed and variable rate borrowings. Interest rate sensitivity analysis shows that an increase / decrease of fifty basis points in floating interest rates would result in decrease / increase in the Group ’s profit before tax by approximately ₹15 lacs (2018: ₹ 188 lacs). Currency risk: The Group’s significant transactions are in Indian Rupees and therefore there is minimal foreign currency risk. Generally, the Group fully covers the foreign currency risk for transactions in foreign currency which are primarily for import of merchandise, by entering into forward foreign exchange contracts. Also Refer Note 37 for the forward foreign currency contracts outstanding at the end of the reporting period. b) Credit risk: Credit risk is a risk that the counter party will default on its contractual obligation resulting in financial loss to the Group. The credit risk for the Group primarily arises from credit exposures to trade receivables (mainly institutional customers), deposits with landlords for store properties taken on leases and other receivables including balances with banks. Trade and other receivables: The Group’s retail business is predominantly on ‘cash and carry’ basis which is largely through credit card collections. The credit risk on such collections is minimal, since they are primarily owned by customers’ card issuing banks. The Group has adopted a policy of dealing with only credit worthy counterparties in case of institutional customers and the credit risk exposure for institutional customers is managed by the Group by credit worthiness checks. The Group also carries credit risk on lease deposits with landlords for store properties taken on leases, for which agreements are signed and property possessions timely taken for store operations. The risk relating to refunds after store shut down is managed through successful negotiations or appropriate legal actions, where necessary. The Group’s experience of delinquencies and customer disputes have been minimal. Further, Trade and other receivables consist of a large number of customers, across geographies, hence, the Group is not exposed to concentration risks. Property options receivable: The Group considers a variety of relevant factors like age, past due details and credit enhancements (guarantees) in assessing credit risk from property options receivable. The property option receivables are guaranteed under contract by a company of the promoter shareholder group with further assurance from a promoter director. c) Liquidity Risk: Liquidity risk is a risk that the Group may not be able to meet its financial obligations on a timely basis through its cash and cash equivalents, and funds available by way of committed credit facilities from banks. Management manages the liquidity risk by monitoring rolling cash flow forecasts and maturity profiles of financial assets and liabilities. This monitoring includes financial ratios and takes into account the accessibility of cash and cash equivalents and additional undrawn financing facilities. The table below summarizes the maturity profile (remaining period of contractual maturity at the balance sheet date) of the Group’s financial liabilities based on contractual undiscounted cash flows.
|363| Chap. 15 – Ind AS 32-107-109-113 `. in Lacs Less than 1 year Between 1 and 5 years Carrying amounts At 31 March 2018 Borrowings (long-term and short-term) 8,134.80 4,400.08 12,534.88 Interest payable 6.37 - 6.37 Trade payables and other accruals 51,906.81 - 51,906.81 At 31 March 2019 Borrowings (long-term and short-term) 7,243.67 201.92 7,445.59 Interest payable 9.40 - 9.40 Trade payables and other accruals 1,27,709.82 - 1,27,709.82 In respect of financial guarantee contracts, no amounts are recognised based on the results of the liability adequacy test for likely deficiency / defaults by the entities on whose behalf the Group has given guarantees, grounded on the Group’s actual experience. The Group has access to following financing facilities which were undrawn as at the end of reporting periods mentioned. ` in Lacs As at 31-Mar-19 As at 31-Mar-18 Secured Working Capital Facilities Amount Used 778.00 1,328.14 Amount Unused 32,622.00 32,071.86 Total 33,400.00 33,400.00 Unsecured Working Capital Facilities Amount Used - - Amount Unused 2,500.00 2,500.00 Total 2,500.00 2,500.00 8. ULTRATECH CEMENT LIMITED Accounting Policies (v) Financial Instruments: Financial assets and financial liabilities are recognised when a Company becomes a party to the contractual provisions of the instruments. Initial Recognition: Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss and ancillary costs related to borrowings) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are charged to the Statement of Profit and Loss over the tenure of the financial assets or financial liabilities. Classification and Subsequent Measurement: Financial Assets The Company classifies financial assets as subsequently measured at amortised cost, Fair Value through Other Comprehensive Income (“FVOCI”) or Fair Value through Profit or Loss (“FVTPL”) on the basis of following: • the entity’s business model for managing the financial assets and • the contractual cash flow characteristics of the financial asset.
|364| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts Amortised Cost: A financial asset shall be classified and measured at amortised cost if both of the following conditions are met: • the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and • the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. In case of financial assets classified and measured at amortised cost, any interest income, foreign exchange gains or losses and impairment are recognised in the Statement of Profit and Loss. Fair Value through OCI: A financial asset shall be classified and measured at fair value through OCI if both of the following conditions are met: • the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and • the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Fair Value through Profit or Loss: A financial asset shall be classified and measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through OCI. All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets. For financial assets at FVTPL, net gains or losses, including any interest or dividend income, are recognised in the Statement of Profit and Loss. Classification and Subsequent Measurement: Financial liabilities Financial liabilities are classified as either financial liabilities at FVTPL or ‘other financial liabilities’. Financial Liabilities at FVTPL: Financial liabilities are classified as at FVTPL when the financial liability is held for trading or is a derivative (except for effective hedge) or are designated upon initial recognition as FVTPL. Gains or Losses, including any interest expense on liabilities held for trading are recognised in the Statement of Profit and Loss. Other Financial Liabilities: Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised cost using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortised cost on initial recognition. Interest expense (based on the effective interest method), foreign exchange gains and losses, and any gain or loss on derecognition is recognised in the Statement of Profit and Loss. Impairment of financial assets: Expected credit losses are recognized for all financial assets subsequent to initial recognition other than financial assets in FVTPL category. For financial assets other than trade receivables, as per Ind AS 109, the Company recognises 12 month expected credit losses for all originated or acquired financial assets if at the reporting date the credit risk of the financial asset has not increased significantly since its initial recognition. The expected credit losses are measured as lifetime expected credit losses if the credit risk on financial asset increases significantly since its initial recognition.
|365| Chap. 15 – Ind AS 32-107-109-113 The Company’s trade receivables do not contain significant financing component and as per simplified approach, loss allowances on trade receivables are measured using provision matrix at an amount equal to life time expected losses i.e. expected cash shortfall. The impairment losses and reversals are recognised in Statement of Profit and Loss. Derecognition of financial assets and financial liabilities: The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises an associated liability for amounts it has to pay. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in OCI and accumulated in equity is recognised in the Statement of Profit and Loss. The Company de-recognises financial liabilities when and only when, the Company’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability de-recognised and the consideration paid and payable is recognised in the Statement of Profit and Loss. Financial Guarantee Contract Liabilities: Financial Guarantee Contract Liabilities are disclosed in financial statements in accordance with Ind AS 37 - Provisions, Contingent Liabilities and Contingent Assets. (x) Financial liabilities and equity instruments: • Classification as debt or equity Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. • Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a Company are recognised at the proceeds received. (y) Derivative financial instruments: The Company enters into derivative financial instruments viz. foreign exchange forward contracts, interest rate swaps and cross currency swaps to manage its exposure to interest rate, foreign exchange rate risks and commodity prices. The Company does not hold derivative financial instruments for speculative purposes. Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately excluding derivatives designated as cashflow hedge. (z) Hedge accounting: The Company designates certain hedging instruments in respect of foreign currency risk, interest rate risk and commodity price risk as cash flow hedges. At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changesin fair values or cash flows of the hedged item attributable to the hedged risk. The effective portion of changes in the fair value of the designated portion of derivatives that qualify as cash flow hedges is recognised in OCI and accumulated under equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.
|366| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts Amounts previously recognised in OCI and accumulated in equity relating to effective portion as described above are reclassified to Statement of Profit or Loss in the periods when the hedged item affects the Statement of Profit or Loss, in the same line as the recognised hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, such gains and losses are transferred from equity and included in the initial measurement of the cost of the nonfinancial asset or non-financial liability. Hedge accounting is discontinued prospectively when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in OCI and accumulated in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the Statement of Profit and Loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in the Statement of Profit and Loss. Disclosures NOTE 52 (A): CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES (Ind AS – 107) Particulars As at March 31, 2019 As at March 31, 2018 Carrying Value Fair Value Carrying Value Fair Value Financial Assets at amortised cost Trade Receivables 2,531.43 2,531.43 2,220.63 2,220.63 Loans 1,307.03 1,307.03 238.02 238.02 Cash and Bank Balances 707.17 707.17 219.07 219.07 Other Financial Assets 852.57 852.57 479.31 479.31 Financial Assets at fair value through profit or loss Investments 2,902.65 2,902.65 5,436.09 5,436.09 Fair Value Hedging Instruments Derivative Assets 99.05 99.05 121.52 121.52 Total 8,399.90 8,399.90 8,714.64 8,714.64 Financial liabilities at amortised cost Non-Convertible Debentures 2,535.00 2,462.79 2,575.00 2,509.35 Term Loan from Banks 14,188.63 14,188.63 10,489.00 10,489.00 Cash Credits/Working Capital Borrowing 81.76 81.76 770.47 770.47 Commercial Papers 1,642.46 1,642.46 992.87 992.87 Sales Tax Deferment Loan 438.77 438.77 289.68 289.68 Trade Payables 2,845.55 2,845.55 2,384.87 2,384.87 Preference Shares 1,000.10 1,000.10 1,000.10 1,000.10 Other Financial Liabilities 1,981.66 1,981.66 1,824.74 1,824.74 Foreign Currency Borrowings 2,931.63 2,931.63 3,363.10 3,363.10 Fair Value Hedging Instrument Derivative Liability 0.15 0.15 28.27 28.27 Total 27,645.71 27,573.50 23,718.10 23,652.45 NOTE 52 (B): FAIR VALUE MEASUREMENTS (Ind AS 113) The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in an orderly transaction in the principal (or most advantageous) market at measurement date under the current market condition regardless of whether that price is directly observable or estimated using other valuation techniques. The Group has established the following fair value hierarchy that categorises the values into 3 levels. The inputs to valuation techniques used to measure fair value of financial instruments are:
|367| Chap. 15 – Ind AS 32-107-109-113 Level 1: This hierarchy uses quoted (unadjusted) prices in active markets for identical assets or liabilities. The fair value of all bonds which are traded in the stock exchanges is valued using the closing price or dealer quotations as at the reporting date. Level 2: The fair value of financial instruments that are not traded in an active market (For example traded bonds, over the counter derivatives) is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on company specific estimates. The mutual fund units are valued using the closing Net Asset Value. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. Particulars Fair Value As at March 31, 2019 As at March 31, 2018 Financial Assets at fair value through profit or loss Investments – Level 2 2,877.74 5,412.50 Investments – Level 3 24.91 23.59 Fair value Hedge Instruments Derivative assets – Level 2 99.05 121.52 Total 3,001.70 5,557.61 Fair value Hedge Instruments Derivative liability – Level 2 0.15 28.27 Total 0.15 28.27 The management assessed that cash and bank balances, trade receivables, loans, trade payables, cash credits, commercial papers and other financial assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. The following methods and assumptions were used to estimate the fair values: (a) The fair values of the quoted investments/units of mutual fund schemes are based on market price/ net asset value at the reporting date. (b) The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves and an appropriate discount factor. (c) The fair value of forward foreign exchange contracts is calculated as the present value determined using forward exchange rates and interest rate curve of the respective currencies. (d) The fair value of currency swap is calculated as the present value determined using forward exchange rates, currency basis spreads between the respective currencies, interest rate curves and an appropriate discount factor. (e) The fair value of foreign currency option contracts is determined using the Black Scholes valuation model. (f) The fair value of the remaining financial instruments is determined using discounted cash flow analysis. The discount rates used is based on management estimates. The significant unobservable inputs used in the fair value measurement of the fair value hierarchy together with a quantitative sensitivity analysis as at March 31, 2019 and March 31, 2018 are as shown below:
|368| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts Particulars Valuation Technique Significant unobservable inputs Discounting Rate Sensitivity of the input to fair value. Investments in Unquoted instruments accounted for as fair value through Profit and Loss DCF method Average Cost of Borrowings to arrive at discount rate. March 31, 2019: 8.50% March 31, 2018: 8.50% 0.5% (March 31 2018: 0.5%) increase/ (decrease) would result in increase/(decrease) in fair value by ` (1.14) Crores (March 31, 2018: ` (0.35) Crores) Reconciliation of Level 3 Fair Value Measurements: Balance as at March 31, 2017 15.31 Add: Change in Value of Investment in Preference Shares measured at FVTPL 1.20 Add: Investment at Fair value on Loss of Control in Subsidiary 7.11 Add: Purchase of Investment during the year 0.02 Less: Sale of Investment during the year (0.05) Balance as at March 31, 2018 23.59 Add: Change in Value of Investment in Preference Shares measured at FVTPL 1.10 Add: Purchase of Investment during the year 20.24 Less: Sale of Investment during the year (20.02) Balance as at March 31, 2019 24.91 NOTE 53: FINANCIAL RISK MANAGEMENT OBJECTIVES (Ind AS 107) The Group’s principal financial liabilities, other than derivatives, comprises of borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Group’s operations. The group’s principal financial assets, other than derivatives include trade and other receivables, investments and cash and cash equivalents that derive directly from its operations. The Group’s activities expose it to market risk, liquidity risk and credit risk. Group’s overall risk management focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the group. The group uses derivative financial instruments, such as foreign exchange forward contracts, foreign currency option contracts, principal only swaps, cross currency swaps that are entered to hedge foreign currency risk exposure, interest rate swaps, coupon only swaps to hedge variable interest rate exposure and commodity fixed price swaps to hedge commodity price risks. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments. The several sources of risks which the group is exposed to and their management are given below: Risk Exposure Arising From Measurement Management (I) Market Risk A. Foreign Currency Risk Committed commercial transaction Financial asset and Liabilities not denominated in INR Cash Flow Forecasting Sensitivity Analysis (a) Forward foreign exchange contracts (b) Foreign currency options (c) Principal only/ Currency swaps B. Interest Rate Risk Long Term Borrowings at variable rates Investments in Debt Schemes of Mutual Funds and Other Debt Securities Sensitivity Analysis, Interest rate movements (a) Interest Rate swaps, Coupon Only swaps (b) Portfolio Diversification
|369| Chap. 15 – Ind AS 32-107-109-113 Risk Exposure Arising From Measurement Management C. Commodity Price Risk Movement in prices of commodities mainly Imported Thermal Coal and Pet Coke Sensitivity Analysis, Commodity price tracking (a) Commodity Fixed Prices (b) Swaps/Options (II) Credit Risk Trade receivables, Investments, Derivative financial instruments, Loans and Bank balances Ageing analysis, Credit Rating (a) Diversification of mutual fund investments, (b) Credit limit & credit worthiness monitoring, (c) Criteria based approval process (III) Liquidity Risks Borrowings and Other Liabilities and Liquid Investments Rolling cash flow forecasts Broker Quotes (a) Adequate unused credit lines and borrowing facilities (b) Portfolio Diversification The Group has standard operating procedures and investment policy for deployment of surplus liquidity, which allows investment in debt securities and mutual fund schemes of debt categories only and restricts the exposure in equity markets. Compliances of these policies & principles are reviewed by internal auditors on periodical basis. The Corporate treasury team updates the Audit Committee on a quarterly basis about the implementation of the above policies. It also updates to the Internal Risk Management Committee of the Group on periodical basis about the various risks to the business and status of various activities planned to mitigate the risks. (I) Market Risk: Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables, payables and borrowings. A. Foreign Currency Risk: Foreign currency risk is the risk of impact related to fair value or future cash flows of an exposure in foreign currency, which fluctuate due to changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the foreign currency borrowings, import of fuels, raw materials & spare parts, capital expenditure, exports of cement and the Company’s net investments in foreign subsidiaries. When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. The Company evaluates exchange rate exposure arising from foreign currency transactions. The Company follows established risk management policies and standard operating procedures. It uses derivative instruments like foreign currency swaps and forwards to hedge exposure to foreign currency risk. Outstanding foreign currency exposure (Gross) as at March 31, 2019 March 31, 2018 Trade and advances receivables USD 19.60 0.83 Euro 0.08 0.10 Others - 0.01
|370| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts Outstanding foreign currency exposure (Gross) as at March 31, 2019 March 31, 2018 Trade Payables USD 3.26 1.30 Euro 0.26 0.75 Others 0.03 0.02 Borrowings USD 15.25 21.14 Investments USD 6.92 6.92 Foreign currency sensitivity on unhedged exposure: 100 bps increase or decrease in foreign exchange rates will have the following impact on profit before tax. Particulars As at March 31, 2019 As at March 31, 2018 USD (4.79) (4.51) Others - (0.01) B. 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 Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s short term borrowing (excluding commercial paper) with floating interest rates. For all long-term borrowings with floating rates, the risk of variation in the interest rates is mitigated through interest rate swaps. The Group constantly monitors the credit markets and rebalances its financing strategies to achieve an optimal maturity profile and financing cost. Interest rate exposure Particulars Total borrowings Floating rate borrowings Fixed rate borrowings Non-Interest bearing borrowings INR 19,805.14 14,188.81 5,177.56 438.77 USD 2,974.10 42.47 2,931.63 - AED 12.29 12.29 - - BDT 26.29 26.29 - - BHD 0.53 0.53 - - Total as at March 31, 2019 22,818.35 14,270.39 8,109.19 438.77 INR 16,041.51 10,563.86 5,187.97 289.68 USD 3,392.46 29.36 3,363.10 - AED 16.98 16.98 - - BDT 27.21 27.21 - - BHD 2.06 2.06 - - Total as at March 31, 2018 19,480.22 10,639.47 8,551.07 289.68 Note: Interest rate risk hedged for FCY borrowings has been shown under Fixed Rate borrowings. Interest rate sensitivities for unhedged exposure (impact on profit before tax due to increase in 100 bps): Particulars Total borrowings Floating rate borrowings INR (141.89) (105.64) USD (0.42) (0.29) AED (0.12) (0.17) BDT (0.26) (0.27) BHD (0.01) (0.02)
|371| Chap. 15 – Ind AS 32-107-109-113 Note: If the rate is decreased by 100 bps profit will increase by an equal amount. Interest rate sensitivity has been calculated assuming the borrowings outstanding at reporting date have been outstanding for the entire reporting period. Further, the calculations for the unhedged floating rate borrowing have been done on the notional value of the foreign currency (excluding the revaluation). Foreign Currency and Interest Rate Risk Management: Forward Exchange and Interest Rates Swaps Contracts: A. Derivatives for hedging currency and interest rates, outstanding are as under: Particulars Hedged Item Currency As at March 31, 2019 As at March 31, 2018 Cross Currency (a) Forward Contracts Loan Receivable USD 18.50 - Rupees Imports USD 11.06 6.47 Rupees Imports Euro 0.12 0.15 Rupees Imports Euro 1.24 1.11 USD Exports USD 0.71 - Rupees (b) Other Derivatives: (i) Currency & Interest Rate Swap (CIRS) ECB* USD 7.32 9.82 Rupees (ii) Principal only Swap ECB* USD 7.32 11.32 Rupees Imports Euro - 0.05 USD (iii) Interest Rate Swap ECB* USD 7.32 11.32 USD ECB* USD 27.75 30.50 AED *External Commercial Borrowings B. Cash Flow Hedges: The Company has raised foreign currency external commercial borrowings and to mitigate the risk of foreign currency and floating interest rates the Company has taken forward contracts, currency swaps, interest rates swaps and principal only swaps. The Company is following hedge accounting for all the foreign currency borrowings raised on or after April 01, 2015 based on qualitative approach. The Company assesses hedge effectiveness based on following criteria: (i) an economic relationship between the hedged item and the hedging instrument; (ii) the effect of credit risk; and (iii) assessment of the hedge ratio The Company designates the derivatives to hedge its currency risk and generally applies a hedge ratio of 1:1. The Company’s policy is to match the critical terms of the forward exchange contracts to match with the hedged item. Foreign currency cash flows: Particulars As at Average Exchange Rate (USD/INR) Nominal Foreign Currency USD Crores Fair Value Assets (Liabilities) ` in Crores Buy Currency for External Commercial Borrowings (USD) March 31, 2019 65.19 7.32 17.25 Buy Currency for External Commercial Borrowings (USD) March 31, 2018 65.19 7.32 (10.90) Buy Currency for Imports (Euro) March 31, 2019 - - - Buy Currency for Imports (Euro) March 31, 2018 1.25 0.05 3.66
|372| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts Interest rates outstanding on Receive Floating and Pay Fix contracts: Particulars As at Average Exchange Rate (USD/INR) Nominal Foreign Currency USD Crores Fair Value Assets (Liabilities) ` in Crores 1 to 2 years March 31, 2019 0.90% 18.75 30.32 2 to 5 years March 31, 2019 3.92% 16.32 19.39 2 to 5 years March 31, 2018 2.21% 37.82 74.48 Cross Currency and Interest rate Swaps: Particulars As at Average Exchange Rate (USD/INR) Nominal Foreign Currency USD Crores Fair Value Assets (Liabilities) ` in Crores 2 to 5 years March 31, 2019 7.79% 67.49 7.32 2.76 2 to 5 years March 31, 2018 7.79% 67.49 7.32 (23.57) * Includes weighted average rate for Cross Currency Interest Rate Swaps, Principal Only Swap and Coupon Swaps. The above Hedging Instruments are included in the Balance Sheet under the head “Other Financial Assets”/“Other Financial Liabilities”. Refer Statement of changes in equity for movement on OCI. Recognition of gains/(losses) under forward exchange and interest rates swaps contracts designated under cash flows hedges: Particulars As at March 31, 2019 As at March 31, 2018 Effective Hedge (OCI) Ineffective Hedge (Profit and Loss) Effective Hedge (OCI) Ineffective Hedge (Profit and Loss) Gain/(Loss) (50.38) - 10.05 - C. Commodity price risk management: Commodity price risk for the Company is mainly related to fluctuations in coal and pet coke prices linked to various external factors, which can affect the production cost of the Company. Since the Energy costs is one of the primary costs drivers, any fluctuation in fuel prices can lead to drop in operating margin. To manage this risk, the Company enters into forward covers for imported coal, enter into long-term supply agreement for pet coke, identifying new sources of supply etc. While forward covers are prevailing in the markets for coal but in case of pet coke no such derivative is available; it has to be procured at spot prices. Additionally, processes and policies related to such risks are reviewed and controlled by senior management and fuel requirement are monitored by the central procurement team. (II) Credit Risk Management: Credit risk arises when a customer or counterparty does 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 financing/investing activities, including deposits with banks, mutual fund investments, and investments in debt securities, foreign exchange transactions and financial guarantees. The Group has no significant concentration of credit risk with any counterparty. Trade receivables Trade receivables are consisting of a large number of customers. The Group has credit evaluation policy for each customer and based on the evaluation credit limit of each customer is defined. Wherever the Group assesses the credit risk as high the exposure is backed by either bank guarantee / letter of credit or security deposits. Total Trade receivables as on March 31, 2019 is ` 2,531.43 Crores (March 31, 2018 ` 2,220.63 Crores) The Group does not have higher concentration of credit risks to a single customer. Single largest customer has total exposure in sales 2.3% (March 31, 2018 1.8%) and in receivables 8.2% (March 31, 2018 6.7%).
|373| Chap. 15 – Ind AS 32-107-109-113 As per simplified approach, the Company makes provision of expected credit losses on trade receivables using a provision matrix to mitigate the risk of default payments and makes appropriate provision at each reporting date wherever outstanding is for longer period and involves higher risk. As per policy receivables are classified into different buckets based on the overdue period ranging from 6 months - one year to more than two years. There are different provisioning norms for each bucket which are ranging from 25% to 100%. Movement of provision for doubtful debts: Particulars March 31, 2019 March 31, 2018 Opening provision 48.99 42.25 Add: Provided during the year 10.33 7.04 Less: Utilised during the year (0.07) (0.03) Add/(Less): Effect of Foreign Currency Conversion 0.45 (0.27) Closing Provision 59.69 48.99 Investments, Derivative Instruments, Cash and Cash Equivalent and Bank Deposit Credit Risk on cash and cash equivalent, deposits with the banks/financial institutions is generally low as the said deposits have been made with the banks/financial institutions who have been assigned high credit rating by international and domestic rating agencies. Credit Risk on Derivative Instruments is generally low as Group enters into the Derivative Contracts with the reputed Banks and Financial Institutions. Investments of surplus funds are made only with approved Financial Institutions/Counterparty. Investments primarily include investment in units of mutual funds, Quoted Bonds, Non-Convertible Debentures issued by Government/Semi Government Agencies/PSU Bonds/High Investment grade corporates etc. These Mutual Funds and Counterparties have low credit risk. Total Non-current and current investments as on March 31, 2019 is ` 2,877.74 Crores (March 31, 2018 ` 5,412.50 Crores) Financial Guarantees: The company has given corporate guarantees of ` 4 crores. (Refer Note 37(c)). (III) Liquidity risk management: Liquidity risk is defined as the risk that the Group will not be able to settle or meet its obligations on time or at reasonable price. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of credit facilities to meet obligations when due. The Group’s treasury team is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Group’s liquidity position through rolling forecasts on the basis of expected cash flows. The table below provides details regarding the remaining contractual maturities of financial liabilities and investments held for managing the risk at the reporting date based on contractual undiscounted payments. ` in Crores As at March 31, 2019 Less than 1 year 1 to 5 years More than 5 Years Total Borrowings (including current maturities of long-term debts) 3,267.19 6,432.72 13,118.44 22,818.35 Trade Payables 2,845.55 - - 2,845.55 Interest accrued but not due on borrowings 212.31 - - 212.31
|374| Mandatory Accounting Standards (Ind AS) — Extracts from Published Accounts As at March 31, 2019 Less than 1 year 1 to 5 years More than 5 Years Total Other Financial Liabilities (excluding Derivative Liability) 1,769.35 - - 1,769.35 Derivative Liability 0.15 - - 0.15 Investments 1,516.49 1,004.59 356.66 2,877.74 As at March 31, 2019 Less than 1 year 1 to 5 years More than 5 Years Total Borrowings (including current maturities of long-term debts) 3,620.77 4,298.76 11,564.71 19,480.22 Trade Payables 2,384.87 - - 2,384.87 Interest accrued but not due on borrowings 166.93 - - 166.93 Other Financial Liabilities (excluding Derivative Liability) 1,657.81 - - 1,657.81 Derivative Liability - 28.27 - 28.27 Investments 3,949.12 1,106.72 356.66 5,412.50 ll
|375| Chap. 16 – Ind AS 33 — Earning Per Share Chapter 16 Ind AS 33 – Earnings Per Share 1. ASHOKA BUILDCON LIMITED The Group’s Earnings per Share (‘EPS’) is determined based on the net profit attributable to the shareholders’ of the Group. Basic earnings per share is calculated by dividing the profit from continuing operations and total profit, both attributable to equity shareholders of the Group by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common and dilutive shares outstanding during the year including share based payments, except where the result would be anti-dilutive 2. AVENUE SUPERMARTS LIMITED Accounting Policy Earnings per Share Basic earnings per share Basic earnings per share is calculated by dividing: The profit attributable to equity shareholder of The group By the weighted average number of equity shares outstanding during the financial year Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: — The after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and — The weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares. Disclosures Statement of Consolidated Profit and Loss Earnings per equity share of ` 10 each: (in `) Basic 42 14.46 12.92 Diluted 14.26 12.76 Notes to Accounts 42 Earnings per share (EPS) Basic EPS amounts are calculated by dividing the profit for the year attributable to equity holders by the weighted average number of equity shares outstanding during the year. Diluted EPS amounts are calculated by dividing the profit attributable to equity holders by the weighted average number of Equity shares outstanding during the year plus the weighted average number of equity shares that would be issued on conversion of all the dilutive potential equity shares into equity shares.