MAHINDRA & MAHINDRA LTD. | Integrated Annual Report 2022-23

281 COMPANY OVERVIEW BOARD’S REPORT MANAGEMENT DISCUSSION AND ANALYSIS CORPORATE GOVERNANCE BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT STANDALONE ACCOUNTS CONSOLIDATED ACCOUNTS 1. Market Risk Management (contd.) (ii) Interest Rate sensitivity The sensitivity analyses below have been determined based on exposure to interest rate for both derivative and non-derivative instruments at the end of reporting period. For floating rate liabilities, analysis is prepared assuming the amount of liability outstanding at the end of the reporting period, was outstanding for the whole year. The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Company’s profit before tax is affected through the impact on floating rate borrowings, as follows: Rupees crores Particulars Currency Increase/ decrease in basis points Effect on profit before tax Effect on pre-tax equity Year ended 31 st March, 2023 ........................................................................ EUR +25 — — INR +25 2.00 — Year ended 31 st March, 2022............................................................................ EUR +25 — — INR +25 5.24 — 2. Credit Risk Management Credit Risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company’s exposure are continuously monitored. (a) Financial Guarantees In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks. The Company’s maximum exposure in this respect is the maximum amount, the Company would have to pay, if the guarantee is called on. Financial guarantees are accounted as explained in note 2 (k). The amount recognised in Balance Sheet as liabilities and maximum exposure details are as given below: Rupees crores Particulars 2023 2022 Maximum exposure................................................................................................................................................................................................... 697.33 889.42 Amount recognised as liability ........................................................................................................................................................................ 15.86 20.50 (b) Trade Receivables The Company applies the simplified approach to provide for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected loss provision for all trade receivables. The Company has computed expected credit losses based on a provision matrix which uses historical credit loss experience of the Company. Forward-looking information (including macroeconomic information) has been incorporated into the determination of expected credit losses. The Company has taken dealer deposits, bank guarantees etc. which are considered as collateral and these are considered in determination of expected credit losses, where applicable. Amounts pertaining to these collaterals are as given below:- Rupees crores Particulars 2023 2022 Dealer Deposits............................................................................................................................................................................................................. 15.43 11.03 Bank Guarantees.......................................................................................................................................................................................................... 765.44 752.11 Others (including Letter of Credit).................................................................................................................................................................. 74.23 87.51 Reconciliation of loss allowance for Trade Receivables: Rupees crores Particulars 2023 2022 Balance as at beginning of the year ........................................................................................................................................................ (239.15) (228.36) Acquisitions through business combinations [Refer note 44 (B)].............................................................................................. — (10.93) Additions during the year....................................................................................................................................................................................... (52.62) (34.35) Amounts written off during the year............................................................................................................................................................. 46.49 1.88 Amount of loss reversed/written back.......................................................................................................................................................... 18.68 32.61 Balance as at end of the year ....................................................................................................................................................................... (226.60) (239.15) The Company’s maximum exposure to credit risk in respect of Financial Guarantee contracts are disclosed in Note 38 - 3(a). In respect of other financial assets, the maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets. 38. Financial instruments (contd.)