Annual report FY2016
125
33. Financial risk management objectives and policies (cont’d)
(a)
Credit risk (cont’d)
Other financial assets
For other financial assets including cash and bank balances, short term deposits and investment in mutual funds, the
Group minimises credit risk by dealing with good credit rating counterparties.
The maximum exposure to credit risk is represented by the carrying value of each financial asset on the balance sheet.
(b)
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate
because of changes in market interest rates. The Group’s exposure to interest rate risk arises primarily from loans and
borrowings. The Group’s interest bearing loans and borrowings (Note 24) at floating rate are re-priced at intervals of less
than 3 to 12 months from the end of the reporting period.
Management has assessed that the impact of market changes to interest rate to be insignificant and no sensitivity
analysis has been performed.
(c)
Foreign currency 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 rates. The Group’s exposure to the risk of changes in foreign exchange rates relates
primarily to the Group’s net investments in foreign subsidiaries. The Group’s net investments in foreign subsidiaries are
not hedged as currency positions in INR are considered long-term in nature.
Sensitivity analysis for foreign currency risk
The following table demonstrates the sensitivity of the Group’s profit before tax to a reasonably possible change
in the INR exchange rates against the respective functional currency of the Group entities, with all other variables
held constant.
2016
2015
Profit before tax
$’000
Equity
$’000
Profit before tax
$’000
Equity
$’000
INR/SGD
– strengthened 5% (2015: 5%)
2,100
33,175
1,800
34,500
– weakened 5% (2015: 5%)
(2,100)
(33,175)
(1,800)
(34,500)
Please refer to Note 27 for more details.
(d)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations due to shortage of funds.
The Group and the Trust’s exposure to liquidity risk arises primarily from mismatch of the maturities of financial assets
and liabilities. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the
use of stand-by credit facilities.
Notes to the
Financial Statements
For the financial year ended 31 March 2016
