Page 149 - InterloopAnnualReport2021

NOTES TO THE

FINANCIAL STATEMENTS

For the year ended June 30, 2021

52. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company finances its operations through equity, borrowings and management of working capital with a view
to maintain an appropriate mix between various sources of finance to minimize risk. The Company follows an
effective cash management and planning policy and maintains flexibility in funding by 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.
The Company has exposures to the following risks from its use of financial instruments:

- Market risk
- Credit risk
- Liquidity risk

52.1 Market risk
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 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, 2021 and 2020.

52.1.1 Interest rate risk:
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 rates. Majority of the interest rate exposure arises
from investments in term deposit receipts, long term and short term loans, lease liabilities, short term
borrowings and long term financing.

At the reporting date, the interest rate profile of the Company’s interest bearing financial instruments is
as follows:

2021 2020
Fixed rate instruments
Short term investments (Rupees in ‘000) 500,000 125,044
Loan to Metis International (Pvt) Limited - Secured (Rupees in ‘000) 6,398 6,777
Receivables from IL Bangla Limited (Rupees in ‘000) – 88,562
Long term financing - Secured (Rupees in ‘000) 7,088,848 3,662,969
Lease liabilities (Rupees in ‘000) 220,044 119,694
Short term borrowings - Secured (Rupees in ‘000) – 484,861

Variable rate instruments
Loan to director - Secured (Rupees in ‘000) 15,001 19,617
Effective interest rate in percentage 2.25 2.40
Long term financing from financial institutions -
Secured (Rupees in ‘000) 3,563,732 3,559,544
Effective interest rate in percentage 6.98 10.29
Short term borrowings from financial institutions -
Secured (Rupees in ‘000) 19,636,066 13,870,000
Effective interest rate in percentage 2.30 2.45

Fair value sensitivity analysis for fixed rate instruments
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 at the balance sheet date would not affect statement
of profit or loss of the Company.

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