4. Claims, Provisions and Contingent Liabilities:
The Company has ongoing litigations with various
regulatory authorities and third parties. Where an
outflow of funds is believed to be probable and a
reliable estimate of the outcome of the dispute can
be made based on management's assessment of
specific circumstances of each dispute and relevant
external advice, management provides for its best
estimate of the liability. Such accruals are by nature
complex and can take number of years to resolve
and can involve estimation uncertainty. Information
about such litigations is provided in the notes to the
financial statements.
Aggregate market value of quoted investments ' 20090.64 Crores (2025 - ' 25924.28 Crores).
Aggregate amount of impairment in value of investments ' 64.23 Crores (2025 - ' 88.05 Crores).
# Additional Tier 1 bonds, which are perpetual in nature, are issued by commercial banks under Reserve Bank of India guidelines.
These have been classified as debt instruments by the Company based on the substantive characteristics of the contract.
* Investments in Fixed Maturity Plans (FMPs) that are intended to be held by the Company till maturity are classified as amortised
cost. The underlying instruments in the portfolio of these FMPs have minimal churn and are held to receive contractual cashflows.
** Exchange Traded / Target Maturity Index Funds follow a passive buy and hold investment strategy to receive contractual cashflows
except for meeting redemption and rebalancing requirements. Investment in such funds are classified as FVTOCI as cash flows
from these investments are realised on maturity or upon sale.
Aggregate market value of quoted investments ' 4676.72 Crores (2025 - ' 3648.50 Crores).
# Additional Tier 1 bonds, which are perpetual in nature, are issued by commercial banks under Reserve Bank of India guidelines.
These have been classified as debt instruments by the Company based on the substantive characteristics of the contract.
* Investments in Fixed Maturity Plans (FMPs) that are intended to be held by the Company till maturity are classified as amortised
cost. The underlying instruments in the portfolio of these FMPs have minimal churn and are held to receive contractual cashflows.
** Exchange Traded / Target Maturity Index Funds follow a passive buy and hold investment strategy to receive contractual cashflows
except for meeting redemption and rebalancing requirements. Investment in such funds are classified as FVTOCI as cash flows
from these investments are realised on maturity or upon sale.
C) Shareholding of Promoters: Nil
D) Ordinary Shares allotted as fully paid pursuant to contract(s) without payment being received in cash or as fully paid up
Bonus Shares during the period of five years immediately preceding 31st March: Nil
E) Rights, preferences and restrictions attached to the Ordinary Shares
The Ordinary Shares of the Company, having par value of ' 1.00 per share, rank pari passu in all respects including voting rights and
entitlement to dividend.
F) Shares reserved for issue under Stock Options / Employee Stock Appreciation Rights (ESARs)
Refer Note 29(xiv) for details on number of Stock Options / ESARs (including terms and conditions) against which Ordinary Shares
may be issued by the Company upon vesting and exercise of such Stock Options / ESARs, in accordance with the relevant Schemes.
* Excluding taxes.
1. (a) Auditors' remuneration excludes remuneration for services amounting to Nil (2025 - ' 1.90 Crores) rendered by network
firm / entity which is a part of the network of which auditor is a member firm.
(b) In addition to the above, Nil (2025 - ' 0.15 Crore) has been paid to the Statutory Auditors in respect of certification fees relating
to demerger of hotels business which has been included in discontinued operations.
(i) Exceptional Items of Continuing Operations for the year ended 31st March, 2026 of ' 183.87 Crores represents:
a) estimated one-time impact on recognition of past service cost of ' 271.95 Crores with respect to increase in liability of
gratuity and compensated absences, primarily arising due to change in definition of wages pursuant to notifications issued
by the Ministry of Labour & Employment dated 21st November, 2025 bringing into force the provisions of the Code on
Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health
and Working Conditions Code, 2020 (collectively referred to as the “New Labour Codes”). The Company continues to
monitor the finalisation of rules by the Central and State Governments and clarifications from the Government on other
aspects of the New Labour Codes and will account for such developments as needed.
b) receipt of' 88.08 Crores on final settlement of the insurance claim towards leaf tobacco stocks, which were destroyed due
to fire at a third party owned warehouse in an earlier year.
Exceptional Items of Continuing Operations for the year ended 31st March, 2025 represents fair value gain of ' 527.96 Crores
upon acquisition of 1,52,32,129 Equity Shares of ' 2 / - each of EIH Limited and 34,60,829 Equity Shares of ' 2 / - each of
HLV Limited, from Russell Credit Limited, a wholly owned subsidiary of the Company, at their respective book value.
(iii) Amount required to be spent by the Company during the year as per Section 135 read with Section 198 of the Companies Act,
2013 - ' 499.92 Crores (2025 - ' 460.70 Crores) being 2% of the average Net Profits of the Company.
Expenditure incurred during the year is ' 500.00 Crores (2025 - ' 461.50 Crores) comprising employee benefits expense of
' 18.60 Crores (2025 - ' 17.82 Crores) and other expenses of ' 481.40 Crores (2025 - ' 443.68 Crores), of which ' 59.85 Crores
(2025 - ' 49.42 Crores) is accrued for payment as on 31st March, 2026. Such CSR expenditure does not include any spends on
construction / acquisition of assets. Amount available for set off in succeeding financial years is ' 1.46 Crores (2025 - ' 1.97 Crores).
Such CSR expenditure of ' 500.00 Crores (2025 - ' 461.50 Crores) excludes ' 8.44 Crores (2025 - ' 6.98 Crores) being the
excess of expenditure of salaries of CSR personnel and administrative expenses over the limit of 5% of total CSR expenditure
laid down under Rule 7(1) of the Companies (Corporate Social Responsibility Policy) Rules, 2014 for such expenses.
CSR activities undertaken during the year pertain to: poverty alleviation; promoting education and skill development; promoting
healthcare including preventive healthcare; providing sanitation and drinking water; ensuring environmental sustainability;
promoting gender equality and women empowerment; enabling climate resilience; rural development projects; creating
livelihoods for people (especially those from disadvantaged sections of society); protection of national heritage, art and culture;
preserving and promoting music; promoting sports; conducting research in science, technology, engineering and medicine aimed
at promoting Sustainable Development Goals (SDGs) and providing relief and assistance to victims of disasters and calamities.
(iv) Research and Development expenses for the year amount to ' 194.50 Crores (2025 - ' 187.68 Crores).
(v) Contingent liabilities and commitments:
(a) Contingent liabilities
Claims against the Company not acknowledged as debts ' 1008.67 Crores (2025 - ' 917.25 Crores), including interest on
claims, where applicable, estimated to be ' 316.00 Crores (2025 - ' 299.13 Crores). These comprise:
• Excise duty, VAT / sales taxes, GST and other indirect taxes claims disputed by the Company relating to issues of
applicability and classification aggregating ' 647.83 Crores (2025 - ' 627.25 Crores), including interest on claims, where
applicable, estimated to be ' 279.81 Crores (2025 - ' 267.29 Crores).
• Local Authority taxes / cess / royalty on property, utilities etc. claims disputed by the Company relating to issues of
applicability and determination aggregating ' 306.89 Crores (2025 - ' 237.21 Crores), including interest on claims,
where applicable, estimated to be ' 24.15 Crores (2025 - ' 20.22 Crores).
• Third party claims arising from disputes relating to contracts aggregating ' 40.50 Crores (2025 - ' 39.40 Crores),
including interest on claims, where applicable, estimated to be ' 0.58 Crore (2025 - ' 0.46 Crore).
• Other matters ' 13.45 Crores (2025 - ' 13.39 Crores), including interest on other matters, where applicable, estimated
to be ' 11.46 Crores (2025 - ' 11.16 Crores).
It is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash flows,
if any, in respect of the above.
(b) Commitments
• Estimated amount of contracts remaining to be executed on capital accounts and not provided for ' 1480.38 Crores
(2025 - ' 912.50 Crores).
• Uncalled liability on partly paid-up shares and other investments is ' 51.57 Crores (2025 - ' 50.50 Crores).
• The Company on 19th April, 2023, executed transaction documents for acquisition of 100% of the share capital (on
a fully diluted basis) of Sproutlife Foods Private Limited (‘Sproutlife') over a time period of about three to four years.
The Company held 47.50% of the share capital (on a fully diluted basis) of Sproutlife as on 31st March, 2026
(Refer Note 4). The consideration for acquisition of the balance stake of 52.50% will be determined based on pre-agreed
valuation criteria and fulfilment of applicable terms and conditions. Further, the Company on 1st April, 2026 acquired the
right to nominate majority of the Directors on the Board of Sproutlife. Consequently, Sproutlife has become a subsidiary
of the Company with effect from the said date.
• The Company on 6th February, 2025, executed transaction documents for acquisition of 100% of the share capital of
Ample Foods Private Limited (‘Ample Foods') over a time period of about three years. Consequently, the Company
acquired 43.75% stake in Ample Foods on 4th April, 2025 for a consideration of ' 131.25 Crores (Refer Note 4). The
Company's stake in Ample Foods will increase to 62.50% by April, 2027 through secondary purchase of ' 56.00 Crores.
The consideration for acquisition of balance stake of 37.50% will be determined based on pre-agreed valuation criteria
and fulfilment of applicable terms and conditions.
• The Company on 31st March, 2025, entered into a Business Transfer Agreement (BTA) with Aditya Birla Real Estate
Limited for acquisition of the Undertaking pertaining to manufacture, distribution and sale of pulp and paper products
operated under the name of ‘Century Pulp and Paper', as a going concern on a slump sale basis for a lumpsum
consideration of up to ' 3500.00 Crores on a cash-free debt-free basis, subject to adjustments in accordance with
the terms and conditions set out in the BTA. The transaction will be consummated upon fulfilment of the conditions
precedent as laid down in the BTA.
• The Company on 17th April, 2025, executed Transaction Documents i.e., Share Subscription and Share Purchase
Agreement and Shareholders' Agreement, to acquire the balance 73.50% of the share capital (on a fully diluted basis)
of Mother Sparsh Baby Care Private Limited (‘Mother Sparsh'), an associate company, in one or more tranches over a
time period of about two to three years, based on pre-agreed valuation criteria and fulfilment of applicable terms and
conditions. Prior to this, the Company held 26.50% of the share capital (on a fully diluted basis) of Mother Sparsh.
The Company on 21st May, 2025, acquired 594 Equity Shares and 2,201 Compulsorily Convertible Preference Shares
in Mother Sparsh for a consideration of ' 50.58 Crores. Consequently, the Company held 39.47% of the share capital
(on a fully diluted basis) of Mother Sparsh as at 31st March, 2026 (Refer Note 4).
(vi) Employee Benefit PlansDescription of Plans
The Company makes contributions to both Defined Benefit and Defined Contribution Plans for qualifying employees. These
Plans are administered through approved Trusts, which operate in accordance with the Trust Deeds, Rules and applicable
Statutes. The concerned Trusts are managed by Trustees who provide strategic guidance with regard to the management
of their investments and liabilities and also periodically review their performance. In respect of other employees, contribution
towards provident fund are deposited with the Government administered funds.
Provident Fund, Pension and Gratuity Benefits are funded and Leave Encashment Benefits are unfunded in nature. The Defined
Benefit Pension Plans are based on employees' pensionable remuneration and length of service. Under the Provident Fund,
Gratuity and Leave Encashment Schemes, employees are entitled to receive lump sum benefits.
(a) Defined Benefit Plans:
The liabilities arising in the Defined Benefit Schemes are determined in accordance with the advice of independent,
professionally qualified actuaries, using the projected unit credit method. The Company makes regular contributions to
these Defined Benefit Plans. Additional contributions are made to these Plans as and when required based on actuarial
valuation. Some Group companies also participate in these Plans. These participating Group companies make contributions
to the Plans for their respective employees on a uniform basis and each entity ascertains their obligation through actuarial
valuation. The net Defined benefit cost is recognised by these companies in their respective Financial Statements.
Risk Management
The Defined Benefit Plans expose the Company to risk of actuarial deficit arising out of investment risk, interest rate risk and
salary cost inflation risk.
Investment Risk: This may arise from volatility in asset values due to market fluctuations and impairment of assets due to
credit losses. These Plans primarily invest in debt instruments such as Government securities and highly rated corporate
bonds, the valuation of which is inversely proportional to the interest rate movements, and also in insurer managed funds,
the investments in which are also subject to equity market risk.
Interest Rate Risk: The present value of Defined Benefit Plan liability is determined using the discount rate based on the
market yields prevailing at the end of reporting period on Government securities. A decrease in yields will increase the fund
liabilities and vice-versa.
Salary Cost Inflation Risk: The present value of the Defined Benefit Plan liability is calculated with reference to the future
salaries of participants under the Plan. Increase in salary might lead to higher liabilities.
These Plans have a relatively balanced mix of investments in order to manage the above risks. The investment strategy is
designed based on the interest rate scenario, liquidity needs of the Plans and pattern of investment as prescribed under
various Statutes.
(b) Amounts towards Defined Contribution Plans have been recognised under “Contribution to Provident and other funds” in
Note 25: ' 113.87 Crores [2025 - ' 136.41 Crores (including amounts recognised in discontinued operations)].
(vii) Leases:
As a Lessee
The Company's significant leasing arrangements are in respect of land, buildings (comprising licensed properties, residential
premises, office premises, stores, warehouses etc.) and plant & equipment. These arrangements generally range between
2 years and 10 years, except for certain land and building leases where the lease term ranges up to 99 years. The lease
arrangements have extension / termination options exercisable by either parties which may make the assessment of lease
term uncertain. While determining the lease term, all facts and circumstances that create an economic incentive to exercise an
extension option, or not exercise a termination option are considered.
The amount of ROU Assets and Lease Liabilities recognised in the Balance Sheet are disclosed in Note 3G and Note 14 respectively.
The total cash outflow for leases for the year is ' 411.46 Crores (2025 - ' 429.30 Crores) [including payments of ' 357.66 Crores
(2025 - ' 355.34 Crores) in respect of short-term / low-value leases and variable lease payments of Nil (2025 - ' 4.72 Crores)].
The sensitivity of variable lease payments and effect of extension / termination options not included in measurement of lease
liabilities is not material.
(viii) Under the terms of the Joint Venture Agreement (JVA), Logix Developers Private Limited (‘LDPL') (CIN: U70101DL2010PTC207640)
was to develop a luxury hotel-cum-service apartment complex. However, Logix Estates Private Limited, Noida, the JV partner
communicated its intention to explore alternative development plans to which the Company reiterated that it was committed only
to the project as envisaged in the JVA. The JV partner refused to progress the project and instead expressed its intent to exit
the JV by selling its stake to the Company and subsequently proposed that both parties should find a third party to sell the entire
shareholding in LDPL. The resultant deadlock has stalled the project. The Company’s petition that the affairs of the JV are being
conducted in a manner that is prejudicial to the interest of the Company and the JV entity, as also a petition for winding up of
LDPL filed by Logix Estates, are currently before the Hon'ble National Company Law Tribunal, Delhi Bench.
New Okhla Industrial Development Authority (NOIDA), vide letter dated 6th July, 2022, cancelled the sub-lease for the land on
which the project was to be constructed on account of non-payment of lease installments and non-fulfilment of the conditions of
the sub-lease, including forfeiture of the amount deposited. Upon cancellation of the sub-lease, LDPL is evaluating all options
to pursue its rights.
The financial statements of LDPL for the year ended 31st March, 2026 are yet to be approved by its Board of Directors.
(ix) The Company on 13th June, 2025, acquired, in an all-cash deal, 100% of the equity share capital of Sresta Natural Bioproducts
Private Limited (‘Sresta'), an Indian company primarily engaged in the business of manufacturing and selling of organic food
products (staples, spices, processed foods etc.) under the brand name ‘24 Mantra Organic'. This acquisition is expected to
fortify ITC's presence and market standing in the high growth organic products segment in both Indian and overseas markets.
Subsequently, the Board of Directors of the Company at the meeting held on 1st August, 2025 approved the Scheme of
Amalgamation of Sresta and Wimco Limited (‘Wimco'), wholly owned subsidiaries, with the Company under Sections 230
and 232 of the Companies Act, 2013 (‘the Scheme'). The Hon'ble National Company Law Tribunal (‘NCLT'), Kolkata Bench
vide Order dated 20th March, 2026 and NCLT, Hyderabad Bench, vide Order dated 16th April, 2026 have approved the said
amalgamation and certified copies of the Orders have been filed with the Registrar of Companies, West Bengal and Telangana,
respectively, on 7th May, 2026. Since all the requisite formalities have been completed, the aforesaid amalgamation has been
given effect to in these Financial Statements from the respective Appointed Dates i.e. 1st April, 2025 for Wimco and 13th June,
2025 for Sresta. Accordingly, the two subsidiaries of Sresta viz., Sresta Global FZE, UAE and Fyve Elements LLC, USA, have
become direct wholly owned subsidiaries of the Company.
a) The amalgamation of Sresta has been accounted for using the acquisition method prescribed under Ind AS 103 - Business
Combinations, and accordingly, the identifiable assets (both tangible and intangible) acquired and liabilities assumed have
been recorded at their provisional acquisition date fair values as determined by an independent valuer. Excess of purchase
consideration over the fair value of identified assets acquired and liabilities assumed has been recognized as Goodwill.
The fair value of total purchase consideration (including contingent consideration of ' 9.33 Crores) is ' 328.13 Crores. The
fair values of identifiable assets acquired and liabilities assumed on acquisition are as follows:
# Goodwill is attributed to the potential of growing the business internationally, assembled workforce, expected operating synergies
etc. Goodwill has not been considered as a depreciable asset for income tax purpose.
As part of the acquisition, contingent consideration of an amount not exceeding ' 11.50 Crores (undiscounted value) is
payable to the erstwhile promoters of Sresta after 2 years on the business achieving mutually agreed financial milestones.
The fair value of contingent consideration as on 31st March, 2026 is ' 10.20 Crores.
b) The amalgamation of Wimco has been accounted for using the Pooling of Interests Method, being a business combination
under common control as defined in Appendix C to Ind AS 103 - Business Combinations. The assets and liabilities of
Wimco have been recognised at carrying values as appearing in the Consolidated Financial Statements of the Company.
Consequently, the investment held by the Company in Wimco amounting to ' 8.50 Crores stands cancelled. Further,
comparative information in these Financial Statements have been restated as if the combination had occurred from the
beginning of the previous period.
(x) Discontinued Operations represents operations of the Hotels Business of the Company (excluding ITC Grand Central, Mumbai)
which was demerged pursuant to the Scheme of Arrangement amongst the Company and ITC Hotels Limited and their respective
shareholders and creditors under Sections 230 to 232 read with the other applicable provisions of the Companies Act, 2013
w.e.f 1st January, 2025, being the Appointed Date and the Effective Date.
The exceptional items of discontinued operations for the year ended 31st March, 2025 represent the excess of fair value of
the net assets distributed to the shareholders of the Company over its carrying value amounting to ' 15163.06 Crores (net of
demerger related expenses).
(xi) During the year, the Company divested its entire shareholding of 7,759 Compulsorily Convertible Cumulative Preference Shares of
' 10 / - each and 2,386 Equity Shares of ' 10 / - each held in Delectable Technologies Private Limited (‘DTPL'), consequent to
which DTPL ceased to be an associate company.
(xii) Prag Agro Farm Limited has ceased to be a wholly owned subsidiary of the Company with effect from 10th December, 2025,
consequent to its voluntary liquidation by the Hon'ble National Company Law Tribunal, Mumbai Bench. Further, Pavan Poplar
Limited has filed for voluntary liquidation and the same is pending with the said Tribunal.
(xiii) During the year, the Ministry of Corporate Affairs (MCA) notified the Companies (Indian Accounting Standards) Amendment
Rules, 2025 and the Companies (Indian Accounting Standards) Second Amendment Rules, 2025, effective from 1 April 2025,
amending Ind AS 21, Ind AS 1, Ind AS 7, Ind AS 107 and Ind AS 12. These amendments primarily relate to guidance on
exchangeability of currencies, classification of liabilities as current or non-current, disclosure of supplier finance arrangements
and a temporary exception for deferred taxes arising from the OECD BEPS Pillar Two model rules. These amendments do not
have a material impact on the standalone financial statements.
(xiv) Employee Stock Option Schemes and Employee Stock Appreciation Rights Scheme
B. Information in respect of Options granted by ITC Hotels Limited (ITCHL):
In terms of the Scheme of Demerger of Hotels business, one stock option of ITCHL (including fractional entitlements) has
been granted to the eligible employees of the Company by ITCHL under the ITC Hotels Special Purpose Employee Stock
Option Scheme (‘ITCHL SP ESOP Scheme') for every ten stock options outstanding under the ITC Employee Stock Option
Schemes (‘ITC ESOS') as on the Record Date i.e. 6th January, 2025, on the terms and conditions similar to the ITC ESOS.
Each option entitles the holder thereof to apply for and be allotted ten Equity Shares of ITCHL of ' 1 / - each upon payment of
exercise price. These options vest over a period of three years from the date of original grant under the ITC ESOS and are
exercisable within a period of five years from the date of vesting. The exercise prices have been determined basis fair and
reasonable adjustments approved by the respective Nomination & Compensation Committees of the Company and ITCHL
for outstanding stock options under the ITC ESOS Schemes as on the Record Date.
Debt-Equity Ratio and Debt Service Coverage Ratio are not relevant as the Company is virtually debt-free.
(xvii) Consequent to expiry of the GST Compensation Cess, the Government of India increased GST and Central Excise duty on
cigarettes with effect from 1st February, 2026. In accordance with Ind AS 115, ‘Revenue from Contracts with Customers' and
Schedule III to the Companies Act, 2013, GST and GST Compensation Cess are excluded from Gross Revenue from sale of
products, whereas Excise duty is not excluded. Consequently, the Gross Revenue from sale of products and services & Excise
duty for the year ended 31st March, 2026 and value of inventory as at 31st March, 2026 reflect the impact of sharp increase in
Excise duty and are not strictly comparable with those of the previous year.
(xviii) Figures presented as “...” are below the rounding off norm adopted by the Company.
(xix) Figures for the previous year are re-arranged, wherever necessary, to conform to the figures of the current period. The same
does not have any material impact on the standalone financial statements.
(xx) The standalone financial statements were approved for issue by the Board of Directors on May 21, 2026. Such financial
statements are required to be placed before the shareholders for adoption in terms of Companies Act, 2013.
The Company's financial strategy aims to support its strategic priorities and provide adequate capital to its businesses for growth
and creation of sustainable stakeholder value. The Company funds its operations primarily through internal accruals and aims at
maintaining a strong capital base to support the future growth of its businesses.
During the year, the Company issued 1,53,48,450 Ordinary Shares (2025 - 2,93,98,310 Ordinary Shares) of ' 1.00 each amounting
to ' 1.54 Crores (2025 - ' 2.94 Crores) towards its employee stock options. The securities premium stood at ' 16344.50 Crores
as at 31st March, 2026 (2025 - ' 15834.70 Crores).
The Company has a system-based approach to risk management, anchored to policies and procedures and internal financial
controls aimed at ensuring early identification, evaluation and management of key financial risks (such as market risk, credit risk
and liquidity risk) that may arise as a consequence of its business operations as well as its investing and financing activities.
Accordingly, the Company's risk management framework has the objective of ensuring that such risks are managed within
acceptable and approved risk parameters in a disciplined and consistent manner and in compliance with the applicable regulations.
It also seeks to drive accountability in this regard.
Liquidity Risk
The Company's Current assets aggregate ' 46143.39 Crores (2025 - ' 39758.12 Crores) including Current Investments, Cash
and cash equivalents and Bank Balances other than cash and cash equivalents of ' 21837.06 Crores (2025 - ' 18474.80 Crores)
against an aggregate Current liability of ' 15191.92 Crores (2025 - ' 13124.07 Crores). As part of its surplus liquidity management
operations, the Company may sell instruments that are held at amortised cost. Such sales may be infrequent (even if significant
in value) or insignificant in value both individually and in aggregate (even if frequent).
Non-current liabilities (other than derivatives and lease liabilities) due between one year to three years amounted to
' 143.13 Crores (2025 - ' 87.89 Crores) and Non-current liabilities (other than derivatives and lease liabilities) due after three
years amounted to ' 209.81 Crores (2025 - Nil) on the reporting date. Derivative liabilities are current in nature. The maturity
analysis of undiscounted lease liabilities is disclosed under Note 29(vii).
Further, while the Company's total equity stands at ' 69928.61 Crores (2025 - ' 67893.71 Crores), there are no non-current
borrowings. In such circumstances, liquidity risk or the risk that the Company may not be able to settle or meet its obligations as
they become due does not exist.
Market Risk
A. Foreign Currency Risk
The Company undertakes transactions denominated in foreign currency (mainly US Dollar, Pound Sterling, Euro and Japanese
Yen) which are subject to the risk of exchange rate fluctuations. Financial assets and liabilities denominated in foreign currency,
including the Company's net investments in foreign operations (with a functional currency other than Indian Rupee), are also
subject to reinstatement risks.
32. Financial Instruments and Related Disclosures (Contd.)
The Company uses derivatives to hedge its exposure to foreign exchange rate fluctuations. Where such derivatives are not
designated under hedge accounting, changes in the fair value of such hedges are recognised in the Statement of Profit and Loss.
The Company may also designate certain hedges as cash flow hedges to mitigate the risk of foreign exchange exposure on highly
probable forecasted cash transactions. The currency, amount and tenure of such hedges are generally matched to the underlying
transaction(s). Changes in the fair value of the effective portion of cash flow hedges are recognised as cash flow hedging reserve
in Other Comprehensive Income. While the probability of such hedges becoming ineffective is very low, the ineffective portion, if
any, is immediately recognised in the Statement of Profit and Loss.
The movement in the cash flow hedging reserve in respect of designated cash flow hedges is summarised below:
Foreign Currency Sensitivity
For every percentage point increase / decrease in the underlying exchange rate of the outstanding foreign currency denominated
assets and liabilities, including derivative contracts, holding all other variables constant, the profit before tax for the year ended
31st March, 2026 would decrease / increase by ' 5.95 Crores (2025 - ' 5.08 Crores) and other equity as at 31st March, 2026 would
decrease / increase by ' 10.61 Crores (2025 - ' 16.06 Crores) on a pre-tax basis.
B. Interest Rate Risk
As the Company is virtually debt-free and its deferred payment liabilities do not carry interest, the exposure to interest rate risk
from the perspective of financial liabilities is negligible. Further, treasury activities, focused on managing investments in debt
instruments, are centralised and administered under a set of approved policies and procedures guided by the tenets of safety,
liquidity and returns. This ensures that investments are made within acceptable risk parameters after due evaluation.
The Company's investments are predominantly held in Government securities, bonds / debentures, fixed deposits, certificates
of deposit, commercial papers and debt mutual funds. Mark to market movements in respect of the Company's investments in
bonds / debentures that are held at amortised cost are temporary and get recouped through coupon accruals. Other investments
in Government securities, bonds / debentures, certificates of deposit, commercial papers are fair valued through the Statement
of Profit and Loss / Other Comprehensive Income to recognise market volatility, which is not considered to be significant. Fixed
deposits are held with highly rated banks and companies and have a short tenure and are not subject to interest rate volatility.
The Company also invests in debt mutual fund schemes of leading fund houses. Such investments are susceptible to market price
risks that arise mainly from changes in interest rate which may impact the return and value of such investments. However, given
the relatively short tenure of underlying portfolio of the debt mutual fund schemes in which the Company has invested, such price
risk is not significant.
C. Other Price Risk
The Company is not an active investor in equity markets; it holds certain investments in equity for long term value accretion
which are accordingly measured at fair value through Other Comprehensive Income. The value of investments in such equity
instruments as at 31st March, 2026 is ' 2790.34 Crores (2025 - ' 3629.98 Crores). Accordingly, fair value fluctuations arising from
market volatility is recognised in Other Comprehensive Income.
For select agricultural commodities primarily held for trading, futures contracts are used to hedge price risks till positions in
the physical market are matched. Such activities are managed by the business team within an approved policy framework.
The carrying value of inventories is adjusted to the extent of fair value movement of the risk being hedged. Such hedges are
generally for short time horizons and recognised in profit or loss within the crop cycle. Accordingly, the Company's net exposure
to commodity price risk arising from such transactions is considered to be insignificant.
Credit Risk
Company's deployment in debt instruments are primarily in Government securities, fixed deposits with highly rated banks and
companies, bonds issued by Government institutions, public sector undertakings, mutual fund schemes of leading fund houses
and certificates of deposit / commercial papers issued by highly rated banks and financial institutions. Of this, investments that
are held at amortised cost stood at ' 8117.72 Crores (2025 - ' 12450.86 Crores). With respect to the Company's investing
activities, debt mutual fund schemes and counter parties are shortlisted and exposure limits determined on the basis of their credit
rating (by independent agencies), financial statements and other relevant information. As these counter parties are Central / State
Government, Government institutions / public sector undertakings with investment grade / sovereign credit ratings and taking into
account the experience of the Company over time, the counter party risk attached to such assets is considered to be insignificant.
The Company's customer base is large and diverse limiting the risk arising out of credit concentration. Company's payment
terms generally range from advance (generally settled within the operating cycle) to a credit period of up to 180 days, depending
upon specific circumstances and industry practices. Credit is extended in business interest in accordance with guidelines issued
centrally and business-specific credit policies that are consistent with such guidelines. Exceptions are managed and approved
by appropriate authorities, after due consideration of the counterparty's credentials and financial capacity, trade practices and
prevailing business and economic conditions. There is no significant financing component and / or remaining performance
obligation in respect of its transaction with the customers for sale of goods and services. The Company's exposure to trade
receivables on the reporting date, net of expected loss provisions, stood at ' 2925.60 Crores (2025 - ' 3910.79 Crores).
The Company's historical experience of collecting receivables and the level of default indicate that credit risk is low and generally
uniform across markets; consequently, trade receivables are considered to be a single class of financial assets. All overdue
customer balances are evaluated taking into account the age of the dues, specific credit circumstances, the track record of the
counterparty etc. Loss allowances and impairment is recognised, where considered appropriate by responsible management.
The movement of the expected loss provision (allowance for bad and doubtful loans, advances and receivables etc.) made by the
Company are as under:
Fair value hierarchy
Fair value of the financial instruments is classified in various fair value hierarchies based on the following three levels:
Level 1: Quoted prices (unadjusted) in active market or Net Asset Value (NAV) for identical assets or liabilities.
Level 2: Inputs other than quoted price included within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
The fair value of financial instruments that are not traded in an active market is determined using market approach and valuation
techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If significant
inputs required to fair value an instrument are observable, the instrument is included in Level 2.
Derivatives are valued using valuation techniques with market observable inputs such as foreign exchange spot rates and forward
rates at the end of the reporting period, yield curves, risk free rate of returns, volatility etc., as applicable. The fair value of
investment in Bonds / Debentures, Government or Trust Securities, Certificates of Deposit / Commercial Papers, Venture Capital
Funds etc. and financial liabilities, where applicable, is determined using market observable inputs such as quotes from market
participants, value published by the issuer etc.
Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
If one or more of the significant inputs is not based on observable market data, the fair value is determined using generally
accepted methodologies such as discounted cash flow analysis, with the most significant inputs being the discount rate that
reflects the credit risk of counterparty.
The fair value of trade receivables, trade payables and other current financial assets and liabilities is considered to be equal to the
carrying amounts of these items due to their short - term nature. Where such items are non-current in nature, the same has been
classified as Level 3 and fair value determined using discounted cash flow basis. Similarly, unquoted equity instruments where
most recent information to measure fair value is insufficient, or if there is a wide range of possible fair value measurements, cost
has been considered as best estimate of fair value.
There has been no change in the valuation methodology for Level 3 inputs during the year. The Company has not classified any
material financial instruments under Level 3 of the fair value hierarchy. The sensitivity of change in the unobservable inputs used
in fair valuation of Level 3 financial assets and liabilities does not have a significant impact on their value. There were no transfers
between Level 1, Level 2 and Level 3 during the year.
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