Thirumalai 49th Annual Report 2021-2022

Chemicals Ltd.

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 rates. The Group’s main exposure to interest risk arises from long term borrowing with floating rate. The Group
does not have any derivatives to hedge its interest rate risk exposure as at 31 March 2022.
Interest rate sensitivity analysis
The table below summarises the impact of increase /decrease of the interest rates at the reporting date, on the Group's
equity and profit for the period. The analysis is based on the assumption of +/- 1% change.

Profit before tax Equity before tax

Strengthening Weakening Strengthening Weakening
As at 31 March 2022
Term loan from bank 9 (9) 9 (9)
As at 31 March 2021
Term loan from bank 11 (11) 11 (11)
Foreign exchange risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rate. The Group is exposed to transactional foreign currency risk to the extent that there is
a mismatch between the currencies in which revenues and purchases are denominated, and the respective functional
currency of the Group Companies. The functional currency of the Group Companies are primarily the Indian Rupee (`) and
US Dollars (USD). The currency in which these transactions are primarily denominated are in Indian Rupee (`), US dollars
(USD) and Euro (EUR).
Derivative financial instruments
The Group holds foreign currency options contracts to mitigate the risk of changes in exchange rates on foreign currency
exposures. The counterparty for these contracts is generally a bank. These derivative financial instruments are valued
based on Black Scholes model. Options contracts are mainly entered into for net foreign currency exposures that are not
expected to be offset by other same currency transactions.
The Company's exposure to foreign currency risk in USD at the end of the reporting period expressed in Indian Rupees as
follows:

31 March 2022 31 March 2021

` in Lakhs ` in Lakhs
Financial assets
Trade receivables 2,060 247
Cash and bank balances 2,840 717
Other financial assets 53 -
Financial liabilities
Trade and other payables 464 229
Net assets/ (liabilities) 4,489 735
The details in respect of outstanding foreign currency options contracts are as follows:

As at 31 March 2022 As at 31 March 2021

USD in Millions ` in Lakhs USD in Millions ` in Lakhs
Forward contract in USD - Buy option 4.50 3,411 - -
Forward contract in USD - Sell option 3.50 2,653 - -
The foreign exchange foward contracts mature within 12 months. ` figures above have been calculated based on spot rates
as at the reporting periods. The table below analyzes the derivative financial instruments into relevant maturity groupings
based on the remaining period as at the Balance Sheet date (amount in millions of USD):

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