Heritage Foods Limited | 30th Annual Report 2021-22

30 th Annual Report 2021-22 Heritage Foods Limited 174 payables and all short-term and long-term borrowings. Market risk comprises three types of risk: interest rate risk, currency risk and other price risks such as equity price risk. i. Interest risk: Interest rate risk is the risk that the fair value or future cash flows of a financial instrument shall fluctuate because of changes in the market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Com- pany’s long-term obligations with floating interest rates. The impact on account of change in interest rate on the Company’s long-term obligations is not considered as significant. ii. Foreign currency risk: Foreign currency risk is the risk that the fair value or future cash flows of an exposure shall fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Com- pany’s operating and investing activities (when revenue or expense including capital expenditure is denominated in a foreign currency). The exposure of foreign currency risk to the entity is low as it enters very limited transactions in foreign currencies and accordingly any impact on account of change in the exchange rate is not considered as significant. The carrying amounts of the Company’s unhedged foreign currency denominated monetary items in ` terms as at 31 March 2022 and 31 March 2021 are as follows: Financial assets - Trade receivables 31 March 2022 31 March 2021 - USD - - Financial liabilities- capital creditors 31 March 2022 31 March 2021 - EURO 2.65 2.70 iii. Equity price risk: The Company’s listed and non-listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Company manages the equity price risk through diversification and by placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Company’s senior management on a regular basis. The Company’s Board of Directors reviews and approves all equity investment decisions. At the reporting date, the exposure to unlisted equity securities at fair value was ` 2.60 (31 March 2021: ` 2.60). Sensitivity analyses of these investments have been provided in Note 38. 41. Capital risk management For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other reserves attributable to the equity holders. The primary objective of the Company’s capital management is to maximise the shareholder value. The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payments to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total equity plus net debt. The Company’s policy is to keep the gearing ratio up to 35%. The Company includes within net debt, borrowings from banks less cash and cash equivalents. Borrowings from banks comprise of term loans and loans repayable on demand. 31 March 2022 31 March 2021 Borrowings from banks - 470.25 Less: Cash and cash equivalents (324.76) (195.52) Net debt (A) - 274.73 Total equity (B) 6,604.86 5,937.64 Net debt and total equity (A) + (B) 6,604.86 6,212.37 Gearing ratio (%) 0.00% 4.42% Summary of the significant accounting policies and other explanatory information (All amounts in ` millions, except share data and where otherwise stated)