Heritage Foods Limited | 30th Annual Report 2021-22

Financial Statements Company Overview Statutory Reports 225 The Group is exposed primarily to Credit risk, Liquidity risk and Market risk (fluctuations in interest rates, foreign currency rates, and prices of equity instruments), which may adversely impact the fair value of its financial instruments. The Group assesses the unpredictability of the financial environment and seeks to mitigate potential adverse effects on the financial performance of the Group. A. Credit risk Credit risk is the risk that the counterparty shall not meet its obligations under a financial instrument or customer contract, leading to a financial loss. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of the creditworthiness as well as concentration of risks. Credit risk arises primarily from financial assets such as trade receivables, investment in equity shares, balances with banks, loans and other receivables. Credit risk is controlled by analyzing credit limits and creditworthiness of the customers on a continuous basis to whom credits have been granted after obtaining necessary approvals. Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, cash and cash equivalents, bank deposits and other financial assets. None of the financial instruments of the Group result in material concentration of credit risk. Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ` 645.45 and ` 486.40 as of 31 March 2022 and 31 March 2021 respectively, representing carrying amount of all financial assets with the Group. Financial assets that are neither past due nor impaired None of the Group’s cash equivalents, including fixed deposits, were either past due or impaired as at 31 March 2022 and 31 March 2021. Financial assets that are past due but not impaired The Group’s credit period for customers generally ranges from 0 - 30 days. The aging of trade receivables, net of those provided for in the books of account, is given below: As at 31 March 2022 As at 31 March 2021 0-30 days 168.24 149.38 31-60 days 16.56 2.82 61-90 days - - Greater than 90 days - - 184.80 152.20 Ind AS requires expected credit losses to be measured through a loss allowance. The Group assesses at each date of Balance Sheet whether a financial asset or a group of financial assets are impaired. Expected credit losses are measured at an amount equal to 12 months expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial assets have increased significantly since the initial recognition. The Group has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and is adjusted for forward-looking information. B. Liquidity risk Liquidity risk refers to the risk that the Group cannot meet its financial obligations as and when they become due. The objective of liquidity risk management is to maintain sufficient liquidity and to ensure that funds are available for meeting due obligations of the Group. The Group manages liquidity risk by maintaining adequate reserves, banking facilities, continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of the financial assets and financial liabilities. The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments: Particulars As at 31 March 2022 As at 31 March 2021 On demand Up to 1 year More than 1 year Total On demand Up to 1 year More than 1 year Total Financial guarantees # 120.26 - - 120.26 149.54 - - 149.54 Borrowings - 21.25 58.44 79.69 19.36 263.58 302.92 585.86 Deferred payment liabilities - 16.37 21.10 37.47 - 15.99 37.48 53.47 Lease liabilities - 33.65 53.17 86.82 - 26.33 27.03 53.36 Trade payables - 518.68 - 518.68 - 354.59 - 354.59 Other financial liabilities - 1,032.92 - 1,032.92 - 1,192.18 - 1,192.18 120.26 1,622.87 132.71 1,875.84 168.90 1,852.67 367.43 2,389.00 # Represents loan amount outstanding to the bankers by the joint venture, against which financial guarantees were extended by the Holding Company as at 31 March 2022 and 31 March 2021. Summary of the significant accounting policies and other explanatory information (All amounts in ` millions, except share data and where otherwise stated) Consolidated