Page 308 - BCML AR 2019-20

FINANCIAL STATEMENTS

Notes forming part of the Consolidated Financial Statements

Note No. : 37 Other disclosures (Contd.)

20. Financial risk management objectives and policies
The Company’s principal financial liabilities includes borrowings, trade payables and other financial liabilities and principal financial
assets include trade receivables, cash and cash equivalents, bank balances other than cash and cash equivalents and other financial
assets.
The Company is exposed to credit risk, liquidity risk and market risk. The Company’s senior management under the supervision of Board
of Directors oversees the management of these risks. The policies framed with respect to risks summarised below provides assurance
that the Company’s financial risks are governed by appropriate policies and procedures and that financial risks are identified, measured
and managed in accordance with the Company’s policies and risk objectives.
(a) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market
prices. Market risk comprises three types of risk: interest rate risk, currency risk and other risks, such as regulatory risk and commodity
price risk.
(i) 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 Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s
borrowings obligations.

Sugar is produced over a period of 4 to 5 months and is required to be stored for sale over a period of 12 months, thereby
resulting in very high requirement of working capital. Cost of funding depends on the overall fiscal environment in the country
as well as the Company’s credit worthiness /credit ratings. Failure to maintain credit rating can adversely affect the cost of
funds.
To mitigate the interest rate risk, the Company maintains an impeccable track record and ensures long term relation with
the lenders to raise adequate funds at competitive rates. Company has access to low cost borrowings because of its healthy
Balance Sheet. Moreover, Company deals with five banks thereby reduces risk significantly. In addition, steady revenue from
co-generation and distillery business reduces the overall requirement of working capital.
(ii) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign
exchange rates. To mitigate foreign exchange risk, the Company covers its position through permitted hedging methods.

Foreign currency exposure : (US $ in Lacs)
Particulars Hedged Unhedged Total
Foreign currency receivables
Export related trade receivables - - -
(228.41) (2.66) (231.07)
Total - - -
(228.41) (2.66) (231.07)
Foreign curreny payables
Borrowings - Current - - -
(228.41) (-) (228.41)
Interest accrued but not due on borrowings - - -
(-) (0.19) (0.19)
Total - - -
(228.41) (0.19) (228.60)
Figures in brackets pertain to previous year.

306 | Balrampur Chini Mills Limited