Good Health Can’t Wait.

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Good Health Can’t Wait. Dr. Reddy’s Laboratories Limited NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (All amounts in Indian Rupees millions, except share data and where otherwise stated) 2.36: HEDGES OF FOREIGN CURRENCY RISKS, INTEREST RATE RISKS AND DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED) Hedges of recognized assets and liabilities Changes in the fair value of derivative contracts that economically hedge monetary assets and liabilities in foreign currencies and for which no hedge accounting is applied are recognized in the statement of profit and loss. The changes in fair value of such derivative contracts as well as the foreign exchange gains and losses relating to the monetary items are recognized as part of foreign exchange gains and losses. Outstanding derivative contracts The following table gives details in respect of the notional amount of outstanding foreign exchange derivative contracts: As at 31 March 2015 CATEGORY CURRENCY CROSS CURRENCY AMOUNTS IN MILLIONS BUY / SELL PURPOSE Forward contract USD INR USD 176.9 Sell Hedging Option contract USD INR USD 340 Sell Hedging Forward contract USD RON USD 10 Buy Hedging Forward contract USD RUB USD 20 Buy Hedging Forward contract USD RUB USD 20 Sell Hedging Forward contract EUR USD EUR 6 Buy Hedging Forward contract EUR USD EUR 35 Sell Hedging Forward contract RUB INR RUB 300 Sell Hedging As at 31 March 2014 CATEGORY CURRENCY CROSS CURRENCY AMOUNTS IN MILLIONS BUY / SELL PURPOSE Forward contract USD INR USD 10 Buy Hedging Forward contract USD INR USD 467.5 Sell Hedging Forward contract USD RON USD 13 Buy Hedging Forward contract EUR USD EUR 170 Sell Hedging Option contract USD INR USD 235 Sell Hedging Hedges of changes in the interest rates: Consistent with its risk management policy, the Company uses interest rate swaps (including cross currency interest rate swaps) to mitigate the risk of changes in the interest rates. The Company does not use them for trading or speculative purposes. The changes in fair value of such interest rate swaps (including cross currency interest rate swaps) are recognized as part of finance cost. Accordingly, the Company has recorded, as part of finance cost, a net loss of ` 10 and a net gain of ` 259 for the years ended 31 March 2015 and 2014, respectively. As at 31 March 2015, the Company has outstanding interest rate swap arrangements that hedge a portion of interest rate risk arising from floating rate, dollar denominated foreign currency borrowing of USD 165 million. Derivative financial instruments valuation: The Company enters into derivative financial instruments with various counterparties, principally financial institutions and banks. Derivatives valued using valuation techniques with market observable inputs are mainly interest rate swaps, foreign exchange forward contracts and foreign exchange option contracts. The most frequently applied valuation techniques include forward pricing, swap models and Black Scholes models (for option valuation), using present value calculations. The Company had derivative financial assets and derivative financial liabilities of ` 979 and ` 639, respectively, as of 31 March 2015 as compared to derivative financial asset and derivative financial liabilities of ` 580 and ` 339, respectively, as of 31 March 2014 towards these derivative financial instruments. 214
Consolidated Financial Statements Annual Report 2014 - 15 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (All amounts in Indian Rupees millions, except share data and where otherwise stated) 2.37: FINANCIAL RISK MANAGEMENT The Company’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company’s primary risk management focus is to minimize potential adverse effects of market risk on its financial performance. The Company’s risk management assessment and policies and processes are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Board of Directors and the Audit Committee is responsible for overseeing Company’s risk assessment and management policies and processes. a. Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of customers to which the Company grants credit terms in the normal course of business. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables. Trade receivables The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country, in which the customer operates, also has an influence on credit risk assessment. As at 31 March 2015 and 31 March 2014, the maximum exposure to credit risk in relation to trade receivables is `41,012 and ` 33,253 respectively (net of allowances). Trade receivables that are neither past due nor impaired Trade receivables amounting to ` 33,473 and ` 24,422 were neither past due nor impaired as at 31 March 2015 and 31 March 2014, respectively. Trade receivables that are past due but not impaired The Company’s credit period for customers generally ranges from 20 – 180 days. The age analysis of the trade receivables has been considered from the due date of the invoice. The ageing of trade receivables that are past due, but not impaired, is given below: PERIOD (IN DAYS) AS AT 31 MARCH 2015 AS AT 31 MARCH 2014 0 – 90 6,232 7,716 91 – 180 773 876 More than 180 535 239 Total 7,539 8,831 Trade receivables that are impaired The age analysis of the trade receivables that are impaired is given below: PERIOD (IN DAYS) AS AT 31 MARCH 2015 AS AT 31 MARCH 2014 0 –90 - - 91 – 180 - - More than 180 667 690 Total 667 690 Reconciliation of the allowance account for credit losses The details of changes in provision for bad debts during the year ended 31 March 2015 and 31 March 2014 are as follows: PARTICULARS 2014-15 2013-14 Balance as at 1 April 690 582 Provision made during the year 168 168 Trade receivables written off and exchange differences (191) (60) Balance as at 31 March 667 690 215
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ANNUAL REPORT 2014-15 Good Health C
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Our Brand We are in the business of
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Corporate Overview Annual Report 20
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Page 235 and 236: The future belongs, not to those wh
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