Page 227 - Interloop Annual Report 2018-2019

NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED

FINANCIAL STATEMENTS FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2019 FOR THE YEAR ENDED JUNE 30, 2019

Cash flow sensitivity analysis for variable rate instruments
51. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
If interest rates on loan, receivables, long term financing, liabilities against assets subject to finance lease and short term borrowings from banks, at the
The Company finances its operations through equity, borrowings and management of working capital with a view to maintain an appropriate mix between year end date, fluctuate by 100 bps higher / lower with all other variables, in particularly foreign exchange rates held constant, profit before taxation for
various sources of finance to minimize risk. The Company follows an effective cash management and planning policy and maintains flexibility in funding by the year 2019 and 2018 would have been affected as follows:
keeping committed credit lines available. Market risks are managed by the Company through the adoption of appropriate policies to cover currency risks and
interest rate risks. 2019 2018
The Company has exposures to the following risks from its use of financial instruments: Rupees in ‘000
– Market risk Effect on profit and loss of an increase in interest rate for loan to director 144 -
– Credit risk Effect on profit and loss of an increase in interest rate for receivables from IL Bangla Limited 786 -
– Liquidity risk
Effect on profit and loss of an increase in interest rate for long term financing 14,696 15,188
51.1 Market risk:
Effect on profit and loss of an increase in interest rate for liabilities against assets subject to finance
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 lease - 10
comprises interest rate risk, currency risk and other price risk such as equity risk. The sensitivity analysis in the following sections relate to the position
as at June 30, 2019 and 2018. Effect on profit and loss of an increase in interest rate for short term borrowings 63,191 61,542
78,817 76,740
51.1.1 Interest rate risk:
Decrease in interest rates at June 30 would have had the equal but opposite effect of these amounts. Sensitivity analysis has been prepared on
Interest rate risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest symmetric basis.
rates. Majority of the interest rate exposure arises from investments in term deposit receipts, long term and short term loans, short term borrowings,
long term financing and liabilities against assets subject to finance lease.
51.1.2 Currency risk / Foreign Exchange risk:
At the balance sheet date, the interest rate profile of the Company’s interest bearing financial instruments is as follow
Currency risk is the risk that the fair value or future cash flows of a financial instrument, will fluctuate because of changes in foreign exchange rates.
Foreign currency risk arises mainly where receivables and payables exist due to foreign currency transactions.
2019 2018
Exposure to Currency Risk

Fixed rate instruments The Company’s exposure to currency risk is restricted to the amounts receivable from/payable to the foreign entities and bank balances which are
Short term investments (Rupees in '000) 1,076,355 - denominated in currency other than the functional currency of the Company. The Company’s exposure to currency risk is as follows:
Loan to Metis International (Pvt) Limited - Secured (Rupees in '000) 9,560 33,414
2019 2018
Long term financing - Secured (Rupees in '000) 2,639,611 814,286 Particulars Currency F.Currency ‘000 Rupees in '000 F.Currency ‘000 Rupees in ‘000
Variable rate instruments
Foreign currency bank accounts US $ 390.39 64,024 261.55 31,752
EUR 38.84 7,239 4.71 666
Loan to director - Secured (Rupees in '000) 33,250 -
Effective interest rate in percentage 6.07 - 71,263 32,418
Receivables from IL Bangla Limited (Rupees in '000) 82,766 - Trade debts US $ 47,810.39 7,840,904 57,364.98 6,964,108
Effective interest rate in percentage 7.53 -
Loans and advances US $ 58.48 9,560 275.00 33,414
Long term financing from financial institutions - Secured (Rupees in '000) 2,236,325 2,402,190
Effective interest rate in percentage 13.35 7.33 Less: Payables - Creditors US $ 345.28 54,661 467.42 56,744
EUR 152.36 28,490 89.78 12,688
Liabilities against assets subject to finance lease - Secured (Rupees in '000) - 847 CNY 0.93 23 - -
Effective interest rate in percentage - 7.94 CHF 0.45 75 0.35 43
83,249 69,475
Short term borrowings from financial institutions - Secured (Rupees in '000) 11,855,742 15,034,364 On Balance sheet Exposure 7,838,479 6,960,465
Effective interest rate in percentage 3.03 4.17
Under letter of credit US $ 4,160.32 684,373 1,971.64 239,357
Fair value sensitivity analysis for fixed rate instruments EUR 4,271.95 798,812 5,297.17 748,650
JPY ¥ 21,776.31 33,285 3,100.00 3,402
The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rate GBP £ 27.00 5,628 - -
at the balance sheet date would not affect statement of profit or loss of the Company. CHF - - 21.75 2,656
Off Balance Sheet Exposure 1,522,098 994,065 2018 - 19
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