Page 189 - CJ 2019 INTEGRATED REPORT

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2 NOTES TO THE FINANCIAL
STATEMENTS 31 DECEMBER 2019 (CONTINUED)
FINANCIAL
RISK MANAGEMENT (CONTINUED)
• Price risk The The Group Group is is is exposed exposed to to equity securities price risk in fin in fin respect of o the the financial financial assets assets at at fair fair value value through through other comprehensive income and financial financial financial assets assets assets at at at at fair fair fair value value value through through through profit or or or loss The The The Group Group Group is is is is is not exposed exposed to to to commodity price risk The The Group’s strategy for for its financial financial assets assets at at at at at fair fair value value through through OCI is is is is to to to to hold them for for long term term capital appreciation and and is is is is is not influenced by short term term market market fluctuations However the the the the the the Directors Directors monitor the the the the the the equity markets on on on on on a a a a a a a a a a a a a a a daily basis basis and and the the the the the Board of of Directors Directors meet on on on on on a a a a a a a a a a a a a a a regular basis basis to to to to review the the the the the performance of of these investments The financial asset at at at fair value through other comprehensive income consists primarily of investment fin in in in in in in a a a a a a a a a a a a a a a a a a a company incorporated fin in in in in in in in in India and and listed on on on the the the the the Bombay Stock Stock Exchange Exchange and and the the the the the National Stock Stock Exchange Exchange During the the the the the year ended 31 31 December December 2019 2019 the the the the the the the the market market price price price of of of of this investment investment has gained 46% (2018 – loss of of of of 41%) of of of of its value compared to the the the the the market market price price price in in in in in 2018 2018 2018 2018 At 31 31 December December 2019 2019 if the the the the the price price price of of of of the the the the the investment investment had increased / / decreased by a a a a a a a a a a a a a a a further 10% 10% (2018 (2018 – – 10%) with all variables held constant equity would have been Rs Rs 25 million million (2018 (2018 – – Rs Rs 34 million) higher/ lower The The value value value value of o of of quoted quoted shares shares held held at at fair fair value value value value through profit or loss would have increased/decreased by Rs Rs 29 million million (2018 (2018 – Rs Rs Rs Rs 30 million) million) if if a a a a a a a a a a a a a a a a a a a a a change change of o of of o of 10% 10% occurred in in in the share share share price The The value value value value of o of of o of unquoted shares shares held held at at fair fair value value value value through profit or loss would have increased/decreased by Rs Rs Rs 11 million million million (2018 (2018 – Rs Rs Rs 15 million) million) if if a a a a a a a a a a a a a a change change of of o of 10% 10% occurred in the share price The Group is is not exposed to any other significant price risk at 31 December 2019 • Interest rate risk The Group Group analyses its interest rate exposure on on on on on a a a a a a a a a a a a a a a a a a a a dynamic basis Various scenarios scenarios are simulated taking into consideration refinancing renewal of o of existing positions and alternative financing financing Based on on on on on on on these scenarios scenarios the the the the Group Group calculates the the the the the impact on on on on on on on on profit or or or or or loss of o of a a a a a a a a a a a a a a a a a a a a a a a a a defined interest interest interest rate rate shift shift For each simulation the the the the the same interest interest interest rate rate shift shift is used for for all currencies The scenarios are run only for for liabilities that represent the the the major interest-bearing positions The Group takes on on on exposure to to the the effects of of fluctuations in in in in in the the prevailing levels of of market interest interest rates on on on with respect to to its interest bearing assets and liabilities The The significant interest-bearing assets include loans loans hire purchase debtors and and cash at at at at bank The The loans loans arising on on on on the life assurance business are are on on on on on on a a a a a a a a a a a a a a a a a a a a a a a a a a a a fixed fixed interest interest interest interest interest rate rate rate rate basis and and and are are not not subject subject to to to to interest interest interest interest interest rate rate rate rate fluctuations fluctuations Interest on on on on on on hire purchase debtors is is is fixed fixed by law and and and is is is also not not subject subject to to to interest interest interest interest rate rate rate rate fluctuations fluctuations The effective interest interest interest interest rate rate rate rate on on on on on cash cash and and cash cash equivalents was 0 0 0 0 0 0 0 0 0 0 0 0 0 0 01% 01% (2018 (2018 – 0 0 0 0 0 0 0 0 0 0 0 0 0 0 01%) the the impact of o of a a a a a a a a a a a a a a a a a a 0 0 0 0 0 0 0 0 0 0 0 0 0 0 75% shift shift would cause a a a a a a a a a a a a a a a a a a maximum shift shift in in in the the post tax profit o of Rs Rs 3 678 000 000 (2018 (2018 – Rs Rs 4 660 000) With respect to interest-bearing liabilities significant interest interest interest rate rate risk arises on on the the Group bank bank loans loans which are at at at variable rates The effective interest interest interest charge on on bank bank loans loans was 4 4 4 2% (2018 (2018 – 5 5 5 1%) the the impact of o of a a a a a a a a a a a a a a a a a a a a a a 0 0 0 0 0 0 0 0 0 75% shift shift would cause a a a a a a a a a a a maximum shift in in post tax profit o of Rs Rs 35 476 000 000 (2018 (2018 – Rs Rs 27 646 000) The Company’s effective interest charge on bank loans was 9 9 9 9% (2018 (2018 – 5 5 8%) the impact of o of a a a a a a a a a a a 0 0 0 0 0 0 0 0 0 75 % % % shift shift would cause a a a a a a a a a maximum shift in in post tax profit o of Rs Rs 11 291 000 000 (2018 (2018 – Rs Rs 18 18 18 831 000) Credit risk Credit risk arises from cash cash and and and cash cash equivalents loans and and and receivables and and and financial assets at fair value through OCI For cash cash cash cash and and and cash cash cash cash equivalents equivalents the the the Group and and and Company transacts with with only highly reputable financial institutions The Directors have assessed that the the the the the credit risk associated with with cash cash cash cash and and and cash cash cash cash equivalents equivalents is is is insignificant based on on on on on the the the the the historical information of of the the the financial financial strengths of of the the the financial financial institutions Due to to the the the the the diversity of of of the the the the the Group’s activities the the the the the credit credit risks associated with each type of of of receivables receivables are are managed according to to their nature and are are described below The credit credit quality of of of these receivables receivables is is provided in in Note 18 The credit quality of of financial assets at fair value through OCI is is is is disclosed fin in Note 16 Credit risk is is is is managed by the Board of of each subsidiary INTEGRATED REPORT 2019 (b)