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Directors Report of Dr. Reddy's Laboratories Ltd.

Mar 31, 2017

Dear members,

The directors are pleased to present the 33rd annual report for the year ended 31 March 2017.

FINANCIAL HIGHLIGHTS

Table 1 gives the financial highlights of the company for FY2017 as compared to the previous financial year, on Ind AS consolidated and standalone basis.

COMPANY AFFAIRS

The company''s standalone net revenue for the year was '' 103.11 billion, a decline of 2.88% over the previous year. In US$ terms, this amounted to $ 1.59 billion. Profit before tax (PBT) was '' 15.45 billion, a decline of 7.88% over the previous year. In US$ terms, this translates into $ 238 million.

Consolidated net revenue for the year was '' 143.68 billion, a decline of 9.43% over the previous year. In US$ terms, this amounted to $ 2.21 billion. PBT was '' 15.54 billion, a decline of 45.65% over the previous year. In US$ terms, this translates into $ 240 million.

TABLE ij FINANCIAL HIGHLIGHTS ('' Million)

CONSOLIDATED

STANDALONE

FY2017

FY2016

FY2017

FY2016

Total revenue

143,676

158,633

103,110

106,168

Profit before depreciation, amortization and tax

25,803

37,977

22,796

23,261

Depreciation and amortization

10,266

9,389

7,351

6,495

Profit before tax

15,537

28,588

15,445

16,766

Tax expense

2,965

7,511

1,604

3,023

Profit after tax

12,572

21,077

13,841

13,743

Share of profit of equity accounted investees, net of tax

349

229

-

-

Net profit for the year

12,921

21,306

13,841

13,743

Add: surplus at the beginning of the year

82,595

67,074

79,930

72,058

Total available for appropriation

95,516

88,380

93,771

85,801

Appropriations:

Dividend paid during the year

3,312

3,411

3,312

3,411

Tax on dividend paid

674

694

674

694

Credit of dividend distribution tax

(596)

-

(633)

(32)

Transfer to general reserve

1,355

1,679

1,355

1,679

Others

-

-

-

119

Balance carried forward

90,771

82,595

89,063

79,930

Revenue from Global Generics declined by 10% and stood at '' 115.41 billion, driven largely by North America and Emerging Markets.

Revenue from North America declined by 16% and stood at '' 63.6 billion. This is primarily on account of increased competition in our key products namely Valganciclovir, Decitabine, Azacitidine etc. coupled with discontinuation of the McNeil business. During the year, the company launched 10 products, the major ones being Omeprazole Sodium Bicarbonate and Nitroglycerin Sublingual tablets. FY2017 also saw 26 ANDA filings in the USA. As of 31 March 2017, cumulatively 101 generic filings are pending for approval with the USFDA (99 ANDAs and two NDAs under 505(b)(2) route). Of these 99 ANDAs, 62 are Para IVs out of which we believe 21 have ''First to File'' status.

Revenue from Emerging Markets was '' 21.1 billion, a decline of 11% on a year-on-year basis. Revenue from India stood at '' 23.1 billion, registering a year-on-year growth of 9%.

Revenues from PSAI stood at '' 21.3 billion, a decline of 5% on a year-on-year basis. During the year, 82 DMFs were filed globally of which nine were in the US. The cumulative number of DMF filings as of 31 March 2017 was 754.

DIVIDEND

Your directors are pleased to recommend a dividend of '' 20/- on every equity share of '' 5/- (400%) for FY2017. The dividend, if approved at the 33rd annual general meeting (AGM), will be paid to those shareholders whose names appear on the register of members of the company as of the end of day on 18 July 2017.

In terms of regulations 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), the company has revised its dividend distribution policy. This policy was originally adopted on 18 May 2009. The policy is attached as Annexure I to the board''s report.

TRANSFER TO RESERVES

The company proposes to transfer '' 1,355 million to the general reserve.

SHARE CAPITAL

The paid-up share capital of your company decreased by '' 24.33 million to '' 828.71 million in FY2017 due to the following:

(a) Buyback and extinguishment of 5,077,504 equity shares,

(b) Allotment of 211,564 equity shares, on exercise of stock options by eligible employees of Dr. Reddy''s, through the ''Employees Stock Option Scheme, 2002'' and ''Dr. Reddy''s Employees ADR Stock Option Scheme, 2007''.

FIXED DEPOSITS

The company has not accepted any deposits covered under chapter V of the Companies Act, 2013. Accordingly, no disclosure or reporting is required in respect of details relating to deposits.

CHANGE IN THE NATURE OF BUSINESS, IF ANY

During the year, there was no change in the nature of business of the company or any of its subsidiaries.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

None.

SUBSIDIARIES AND ASSOCIATES

The company had 47 subsidiaries and three joint venture companies as on

31 March 2017. During FY2017,

Imperial Credit Private Limited and Dr. Reddy''s Laboratories Kazakhstan LLP, have become subsidiary companies and Reddy Cheminor SA in France, was closed and ceased to be a wholly-owned subsidiary. Further, OctoShare BV, OctoPlus Development BV, OctoPlus Technologies BV, OctoPlus Science BV, OctoPlus PolyActive Science BV and Chienna BV ceased to be subsidiaries of the company, upon their merger with Dr. Reddy''s Research and Development BV (formerly known as OctoPlus BV).

As per section 129(3) of the Companies Act, 2013, where the company has one or more subsidiaries, it shall, in addition to its financial statements, prepare a consolidated financial statement of the company and of all subsidiaries in the same form and manner as that of its own and also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiaries.

In accordance with the above, the consolidated financial statements of the company and all its subsidiaries and joint ventures, prepared in accordance with Indian Accounting Standards (Ind AS) 110 and 111 as specified in the Companies (Indian Accounting Standards) Rules, 2015, form part of the annual report. Further, a statement containing the salient features of the financial statement of our subsidiaries and joint ventures in the prescribed form AOC-1, is attached as Annexure II to the board''s report. This statement also provides details of the performance and financial position of each subsidiary.

In accordance with section 136 of the Companies Act, 2013, the audited financial statements and related information of the subsidiaries, where applicable, will be available for inspection during regular business hours at our registered office in Hyderabad, India. These are also available on the company''s website: www.drreddys.com.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The company makes investments or extends loans/guarantees to its wholly owned subsidiaries for their business purposes. Details of loans, guarantees and investments covered under section 186 of the Companies Act, 2013, along with the purpose for which such loan or guarantee was proposed to be utilized by the recipient, form part of the notes to the financial statements provided in this annual report.

CORPORATE GOVERNANCE AND ADDITIONAL SHAREHOLDERS'' INFORMATION

A detailed report on the corporate governance systems and practices of the company is given in a separate chapter of this annual report. Similarly, other information for shareholders is provided in the chapter additional shareholders'' information. A certificate from the statutory auditors of the company confirming compliance with the conditions of corporate governance is attached to the corporate governance report.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the management discussion and analysis in terms of the provisions of regulation 34 of the Listing Regulations, is provided as a separate chapter in the annual report.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

The term of Mr. Ravi Bhoothalingam as an independent director of the company ended on 27 July 2016. The board places on record its appreciation for the services rendered by Mr. Bhoothalingam during his tenure as a member of the board and its committees.

The board of directors at its meeting held on 12 May 2017, had re-appointed Mr. K Satish Reddy as whole-time director designated as chairman of the company (or such other designation as the board may deem fit), for a further period of five years with effect from 1 October 2017 (including terms and conditions of the appointment), subject to approval of the shareholders at the forthcoming 33rd AGM scheduled on 28 July 2017.

In accordance with section 149(7) of the Companies Act, 2013, each independent director has confirmed to the company that he or she meets the criteria of independence laid down in section 149(6) of the Companies Act, 2013 and regulation 16(1)(b) of the Listing Regulations.

Mr. G V Prasad, retires by rotation at the forthcoming 33rd AGM and being eligible, seeks re-appointment.

Brief profiles of Mr. K Satish Reddy and Mr. G V Prasad are given in the corporate governance section of the annual report and notice convening the 33rd AGM for reference of the shareholders.

BOARD EVALUATION

As per provisions of the Companies Act, 2013 and regulation 17(10) of the Listing Regulations, an evaluation of the performance of the board and members was undertaken. For details, please see the chapter on corporate governance in this annual report.

APPOINTMENT OF DIRECTORS AND REMUNERATION POLICY

The assessment and appointment of members to the board is based on a combination of criteria that includes ethics, personal and professional stature, domain expertise, gender diversity and specific qualification required for the position. A potential board member is also assessed on the basis of the independence criteria defined in section 149(6) of the Companies Act, 2013 and regulation 16(1)(b) of the Listing Regulations.

In accordance with section 178(3) of the Companies Act, 2013, regulation 9(4) of the Listing Regulations and on recommendations of the nomination, governance and compensation committee, the board adopted a remuneration policy for directors, key managerial personnel (KMPs) and senior management. The policy is attached to the corporate governance report.

NUMBER OF BOARD MEETINGS

The board of directors met four times during the year. In addition, an annual board retreat was held to discuss strategic matters. Details of board meetings are given in the corporate governance report.

AUDIT COMMITTEE

The audit committee of the board of directors consists entirely of independent directors. Presently, the committee comprises Mr. Sridar Iyengar (chairman), Ms. Kalpana Morparia, Dr. Omkar Goswami and Mr. Bharat N Doshi. Further details can be seen in the corporate governance report. The board has accepted all recommendations made by the audit committee during the year.

BUSINESS RISK MANAGEMENT

The company has a risk management committee of the board, consisting entirely of independent directors.

Details of the committee and its terms of reference are set out in the corporate governance report.

The audit and risk management committees review key risk elements of the company''s business, finance, operations and compliance and respective mitigation strategies. The risk management committee reviews key strategic, business, compliance and operational risks, while issues around ethics and fraud, internal control over financial reporting (ICOFR), as well as process risks and their mitigation are reviewed by the audit committee.

The company''s finance, investment and risk management council (FIRM council) is a management level committee which operates under a charter and focuses on risks associated with the company''s business and investments. The FIRM council periodically reviews matters pertaining to ethics and fraud, compliance and internal audit. Additionally, the enterprise-wide risk management (ERM) function helps the management and the board to periodically prioritize, review and measure business risks against a pre-determined risk appetite and their suitable response, depending on whether such risks are internal, strategic or external.

During FY2017, focus areas of risk management included progress on strategy execution, quality and regulatory, geo-political, compliance and patent infringement risk exposures, safety and health.

ADEQUACY OF INTERNAL FINANCIAL CONTROL SYSTEMS

The company has in place adequate internal financial controls with reference to financial statements. These controls ensure the accuracy and completeness of the accounting records and preparation of reliable financial statements.

DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of section 134(5) of the Companies Act, 2013, (''the Act''), your directors state that:

1. applicable accounting standards have been followed in the preparation of the annual accounts;

2. accounting policies have been selected and applied consistently. Judgments and estimates made are reasonable and prudent, so as to give a true and fair view of the state of affairs of the company at the end of the FY2017 and of the profit of the company for that period;

3. proper and sufficient care has been taken to maintain adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

4. annual accounts have been prepared on a going concern basis;

5. adequate internal financial controls for the company to follow have been laid down and these are operating effectively; and

6. proper and adequate systems have been devised to ensure compliance with the provisions of all applicable laws and these systems are operating effectively.

RELATED PARTY TRANSACTIONS

In accordance with section 134(3)(h) of the Companies Act, 2013 and rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contract or arrangement entered into by the company with related parties referred to in section 188(1) in form AOC-2 is attached as Annexure III. All such contracts or arrangements are in the interest of the company. Details of related party disclosures form part of the notes to the financial statements provided in this annual report.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The company has an ombudsperson policy (whistle blower/vigil mechanism) to report concerns. The vigil mechanism consists of a hotline - a dedicated email-ID and a phone number. The ombudsperson policy safeguards from victimization of those who use this mechanism. An audit committee member is the chief ombudsperson. The policy also provides access to the chairperson of the audit committee under certain circumstances. Details of the policy are also available on the company''s website: www.drreddys.com/investors/ governance/ombudsperson-policy

STATUTORY AUDITORS

M/s. S R Batliboi & Associates LLP, chartered accountants (firm registration no. 101049W/E300004) were appointed as statutory auditors of the company at the 32 nd AGM held on 27 July 2016, for a period of 5 years commencing from the conclusion of 32nd AGM till the conclusion of the 37th AGM, subject to ratification by shareholders every year, as may be applicable. The firm has consented and confirmed that the appointment is within the limits specified under section 141(3)(g) of the Companies Act, 2013. The statutory auditors have also confirmed that they are not disqualified to be appointed as such in terms of the proviso to section 139(1), section 141(2) and section 141(3) of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014.

The audit committee and the board of directors recommend to the shareholders the ratification of appointment of M/s. S R Batliboi & Associates LLP, chartered accountants, as statutory auditors of the company from the conclusion of the 33rd AGM till the conclusion of 34th AGM.

SECRETARIAL AUDITOR

Pursuant to section 204 of the Companies Act, 2013 and the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014,

Dr. K R Chandratre, practicing company secretary (membership no. FCS 1370 and certificate of practice no. 5144) was appointed to conduct the secretarial audit of the company for FY2017. The secretarial audit report for FY2017 is attached as Annexure IV.

Based on the consent received from Dr. K R Chandratre, and on the recommendations of the audit committee, the board has appointed him as the secretarial auditor of the company for FY2018.

COST AUDITORS

Pursuant to section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014 and the Companies (Cost Records and Audit) Amendment Rules, 2014, the company maintains the cost audit records in respect of its pharmaceutical business. On recommendation of the audit committee, your board has appointed M/s. Sagar & Associates, cost accountants (firm registration no. 000118) as cost auditors of the company for the FY2018 at a remuneration of '' 7 lakhs plus reimbursement out of pocket expenses at actuals and applicable taxes. The provisions also require that the remuneration of the cost auditors be ratified by the shareholders. As a matter of record, relevant cost audit reports for FY2016 were filed with the Central Government on 24 August 2016, within the stipulated timeline. The cost audit reports for FY2017 will be also filed within the timeline.

BOARD''S RESPONSE ON AUDITOR''S QUALIFICATION, RESERVATION OR ADVERSE REMARK OR DISCLAIMER MADE

There are no qualifications, reservations or adverse remarks made by the statutory auditors in their report or by the practicing company secretary in the secretarial audit report. During the year, there were no instances of frauds reported by auditors under section 143(12) of the Companies Act, 2013.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE COURTS/REGULATORS

None.

INFORMATION REQUIRED UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The company has an apex complaints committee and an internal complaints committee which operate under a defined redressal system for complaints pertaining to sexual harassment of women at workplace. Details are available in the principle 3 under section 7 of the business responsibility report forming a part of this annual report.

CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES

As per section 135 of the Companies Act, 2013, the company has a board level CSR committee consisting of Mr. Bharat N Doshi (chairman), Mr. G V Prasad and Mr. K Satish Reddy. The company''s CSR policy provides a constructive framework to review and organize our social outreach programs in health, livelihood and education. During the year, the committee monitored implementation and adherence to the CSR policy. Details about the CSR policy and initiatives taken by the company during the year are available on the company''s website: www.drreddys.com. The report on CSR activities is attached as Annexure V.

BUSINESS RESPONSIBILITY REPORT

A detailed business responsibility report in term of the provisions of regulation 34 of the Listing Regulations, is available as a separate section in this annual report.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Pursuant to the provisions of the Companies Act, 2013, read with IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, as amended, declared dividends which remained unpaid or unclaimed for a period of seven years have been transferred by the company to the IEPF, which has been established by the central government.

The above referred rules now mandate transfer of dividends lying unpaid and unclaimed for a period of seven years as well as the underlying equity shares to IEPF. The company has issued individual notices to the shareholders whose equity shares are liable to be transferred to IEPF, advising them to claim their dividend on or before 31 May 2017.

EMPLOYEES STOCK OPTION SCHEMES

During the year, there has been no material change in the ''Dr. Reddy''s Employees Stock Option Scheme, 2002'' and the ''Dr. Reddy''s Employees ADR Stock Option Scheme, 2007'' (both collectively referred as ''the schemes''). The schemes are in compliance with the SEBI (Share Based Employee Benefits) Regulations,

2014. The details are available on the company''s website: www.drreddys.com/ pdf/ESOP_details.pdf.

The details also form part of note 2.28 of the notes to accounts of the standalone financial statements.

PARTICULARS OF EMPLOYEES

Disclosures pertaining to remuneration and other details as required under section 197(12) of the Companies Act, 2013, read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as Annexure VI.

In terms of section 197(12) of the Companies Act, 2013, read with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of limits set out in said rules forms part of the annual report.

Considering the first proviso to section 136(1) of the Companies Act, 2013, the annual report, excluding the aforesaid information, is being sent to the shareholders of the company and others entitled thereto. The said information is available for inspection at the registered office of the company during business hours on working days up to the date of the forthcoming 33rd AGM. Any shareholder interested in obtaining a copy thereof may write to the company secretary in this regard.

CONSERVATION OF ENERGY, RESEARCH & DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars as prescribed under section 134(3)(m) of the Companies Act, 2013, read with rule 8(3) of the Companies (Accounts) Rules, 2014 are attached as Annexure VII.

EXTRACT OF THE ANNUAL RETURN

Details forming part of the extract of the annual return in form MGT-9 are attached as Annexure VIII.

ACKNOWLEDGEMENT

Your directors place on record their sincere appreciation for the significant contribution made by our employees through their dedication, hard work and commitment, as also for the trust reposed in us by the medical fraternity and patients. We also acknowledge the support extended to us by the analysts, bankers, government agencies, media, customers, suppliers, shareholders and investors at large. We look forward to your continued support in our endeavor to accelerate access to innovative and affordable medicines because Good Health Can''t Wait.

for and on behalf of the

board of directors

K Satish Reddy

Chairman

Place: Hyderabad Date: 12 May 2017


Mar 31, 2013

Dear Members,

The Directors are pleased to present the 29th annual report for the year ended 31 March 2013.

FINANCIAL HIGHLIGHTS

Table 1 gives the financial highlights of the Company for FY2013 as compared to previous financial year on Indian GAAP standalone basis.

DIVIDEND

Your Directors are pleased to recommend a dividend of R15 on every equity share of R5 each (300%) for FY2013. The dividend, if approved at the 29th Annual General Meeting, will be paid to those shareholders whose names appear on the register of members of the Company as on 16 July 2013.

The dividend would be tax-free in the hands of the shareholders.

SHARE CAPITAL

The paid-up share capital of your Company increased by R 1.38 million in FY2013 due to the allotment of 276,129 equity shares on exercise of stock options by the eligible employees under Dr. Reddy''s Employees Stock Option Scheme, 2002 and Dr. Reddy''s Employees ADR Stock Option Scheme, 2007.

UNSECURED, REDEEMABLE, NON-CONVERTIBLE DEBENTURES

The bonus non-convertible debentures (NCDs) issued by the Company in FY2011 are listed on the Bombay Stock Exchange and the National Stock Exchange and rated LAA by ICRA.

During FY2013, the second year''s interest on these NCDs was paid on due date.

CORPORATE GOVERNANCE AND ADDITIONAL INFORMATION TO SHAREHOLDERS

A detailed report on the corporate governance systems and practices of the Company is given in a separate section of the annual report 2012-13. Detailed information for the shareholders is given in Additional Shareholders'' Information section.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the Management Discussion and Analysis is provided as a separate section in the annual report.

BUSINESS RESPONSIBILITY REPORT

A detailed Business Responsibility report is given as a separate section in the annual report.

SUBSIDIARY COMPANIES

The Company has 50 subsidiaries as on 31 March 2013.

During FY2013, the Company has acquired 98.91% of the issued and subscribed share capital of OctoPlus N.V., Netherlands, an entity listed on the Amsterdam stock exchange. OctoPlus is a specialty pharmaceutical company focused on the development and manufacture of improved injectable pharmaceuticals based on proprietary drug delivery technologies that exhibit fewer side effects, improved patient convenience and a better efficacy/ safety balance than existing therapies. Subsequently, the shares of OctoPlus N.V. were delisted from the Amsterdam stock exchange w.e.f. 16 April 2013.

Further, subsidiaries of OctoPlus N.V., namely OctoShare BV, OctoPlus Development BV, OctoPlus Technologies BV, OctoPlus Science BV, OctoPlus PolyActive Science BV and Chienna BV also become the subsidiaries of the Company.

During FY2013, Reddy Pharmaceuticals Hongkong Limited, Hongkong; Dr. Reddy''s Laboratories ILAC TICARET, Turkey; OOO Alfa, Russia; Trigenesis Therapeutics Inc., USA; and Dr. Reddy''s Laboratories (Canada) Inc., Canada ceased to be subsidiaries of the Company.

As per Section 212 of the Companies Act, 1956, the Company is required to attach the Directors'' Report, Balance Sheet and Statement of Profit and Loss of the subsidiaries to the annual report.

The Ministry of Corporate Affairs, Government of India vide its circular No. 2/2011 dated 8 February 2011 has provided an exemption to companies from complying with Section 212, provided such companies publish the audited consolidated financial statements in their annual report. Accordingly, the annual report 2012-13 does not contain the financial statements of the subsidiaries. The audited annual accounts and related information of the subsidiaries, where applicable, will be made available for inspection during business hours at our registered office in Hyderabad, India.

The same will also be published on the Company''s website, www.drreddys.com.

The members, if desire, may write to the Company Secretary at Dr. Reddy''s Laboratories Limited, 8-2-337, Road No. 3, Banjara Hills, Hyderabad 500 034 to obtain a copy of the financials of the subsidiary companies.

The consolidated financial statements, in terms of Clause 32 of the Listing Agreement and prepared in accordance with Accounting Standard 21 as specified in the Companies (Accounting Standards) Rules, 2006 also forms a part of this annual report.

TABLE 1 FINANCIAL HIGHLIGHTS IN RS. MILLION

FY2013 FY2012

Total revenue 85,757 68,215

Profit before depreciation and tax 20,660 15,603

Depreciation 3,128 3,011

Profit before tax 17,532 12,592

Tax expense 4,877 3,468

Net profit for the year 12,655 9,124

Add: Surplus at the beginning of the year 36,049 31,397

Total available for appropriation 48,704 40,521

Appropriations:

Proposed dividend on equity shares 2,548 2,331

Tax on proposed dividend 433 378

Credit of dividend distribution tax (4) -

Dividend of previous years (including tax) 3 3

Debenture Redemption Reserve 845 848

Transfer to General Reserve 1,265 912

Balance carried forward 43,614 36,049

DIRECTORS

On 15 March 2013, Dr. K Anji Reddy, Founder Chairman of the Company, passed away at Hyderabad. His mission in life was to provide affordable medicines to millions of patients worldwide while also innovating for healthier life. Under his leadership, the Company became a pioneer and trend setter in the Indian pharmaceutical industry.

Dr. Reddy also set-up the ''Dr. Reddy''s Institute of Life Sciences'' at Hyderabad, which is a public-private partnership with the Government of Andhra Pradesh for carrying out cutting edge research in Life Sciences. Critically aware of his responsibility to society, Dr. Reddy in the last decade was engaged in outcome based institutionalized philanthropy that positively impacted the lives of nearly 5 million underprivileged citizens, mainly children and youth.

The Board places on record its enormous appreciation for the contribution made by Dr. K Anji Reddy for creating and growing the Company.

Following the demise of Dr. K Anji Reddy, Founder Chairman, the Board of Directors, based on the recommendation of the Nomination, Governance and Remuneration Committee, has designated:

- Mr. G V Prasad as Chairman and Chief Executive Officer of the Company; and

- Mr. Satish Reddy as Vice Chairman in addition to his role of Managing Director and Chief Operating Officer.

The above changes were effective 30 March 2013. The terms and conditions like remuneration, balance tenure and others relating to the appointment of Mr. G V Prasad and Mr. Satish Reddy, as approved by the shareholders at their annual general meetings held on 21 July 2011 and 20 July 2012, respectively, remain the same.

The disclosure regarding change in designations of Mr. G V Prasad, Chairman and CEO and Mr. Satish Reddy, Vice Chairman and Managing Director in this section of annual report may also be regarded as an abstract and memorandum of interest of Directors under Section 302 of the Companies Act, 1956.

As per Article 113 of the Articles of Association of the Company, Dr. Ashok S Ganguly, Dr. J P Moreau and Ms. Kalpana Morparia retire by rotation at the forthcoming Annual General Meeting scheduled to be held on 31 July 2013 and being eligible, seek re-appointment.

The brief profiles of Dr. Ashok S Ganguly, Dr. J P Moreau and Ms. Kalpana Morparia are given in the Corporate Governance section of the annual report for reference of the members.

AUDITORS

The statutory auditors of the Company, B S R & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept office of the statutory auditors for FY2014, if re-appointed. The Audit Committee and the Board of Directors recommend the re-appointment of B S R & Co. as statutory auditors of the Company for FY2014 for shareholders'' approval.

COST AUDIT

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed an audit of cost accounting records in respect of Pharmaceuticals business of the Company.

Based on the recommendations of the Audit Committee, and subject to the approval of the Central Government, the Board of Directors had appointed M/s. Sagar & Associates as cost auditors of the Company for FY2013. The cost audit report would be filed with the Central Government as per timeline.

The relevant cost audit reports for FY2012 were filed within the due date on 27 February 2013. The due date for filing these reports was 28 February 2013.

SECRETARIAL AUDIT

A secretarial audit for FY2013 was carried out by Dr. K R Chandratre, practicing Company Secretary. The secretarial audit report forms a part of the annual report.

The said secretarial audit report confirms that the Company has complied with all the applicable provisions of the Companies Act, 1956, Depositories Act, 1996, Equity and Debt Listing Agreements with the Stock Exchanges, Debenture Trust Deed, Securities Contracts (Regulation) Act, 1956 and all the regulations of Securities and Exchange Board of India (SEBI) as applicable to the Company, including the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and the SEBI (Prohibition of Insider Trading) Regulations, 1992.

DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of Section 217(2AA) of the Companies Act, 1956, your Directors confirm as under:

1 In preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

2 Accounting policies have been selected and applied consistently and judgments and estimates made, are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 2012-13 and of profit of the Company for that period;

3 Proper and sufficient care has been taken to maintain adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4 Annual accounts have been prepared on a going concern basis.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO IEPF

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the declared dividends, which remained unpaid or unclaimed for a period of seven years, have been transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the said Act.

EMPLOYEES STOCK OPTION SCHEMES

The details of stock options as on 31 March 2013 under the "Dr. Reddy''s Employees Stock Option Scheme, 2002" and the "Dr. Reddy''s Employees ADR Stock Option Scheme, 2007", in terms of Guideline 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, as amended, are set out in the Annexure 1 to the Directors'' Report.

PARTICULARS OF EMPLOYEES

Pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in the Annexure 2 to the Directors'' Report.

CONSERVATION OF ENERGY RESEARCH AND DEVELOPMENTS, TECHNOLOGY ABSORPTION, FOREIGN ExCHANGE EARNING AND OUTGO

The particulars as prescribed under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are set out in the Annexure 3 to the Directors'' Report.

ACKNOWLEDGEMENT

Your Directors place on record their sincere appreciation for the significant contribution made by the employees through their dedication, hard work and commitment and the trust reposed on us by the medical fraternity and the patients. We also acknowledge the support and wise counsel extended to us by the analysts, bankers, government agencies, shareholders and investors at large. We look forward to having the same support in our endeavor to help people lead healthier lives.

For Dr. Reddy''s Laboratories Limited

G V Prasad

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

PLACE HYDERABAD

DATE 14 MAY 2013


Mar 31, 2012

The Directors are pleased to present the 28th annual report for the year ended 31 March 2012.

FINANCIAL HIGHLIGHTS

Table 1 gives the financial highlights of the Company for FY2012 as compared to previous financial year on Indian GAAP standalone basis.

DIVIDEND

Your Directors are pleased to recommend a dividend of Rs. 13.75 on every equity share of Rs. 5 each (275%) for FY2012. The dividend, if approved at the 28th Annual General Meeting, will be paid to those shareholders whose names appear on the register of members of the Company as on 3 July 2012.

The dividend would be tax-free in the hands of the shareholders.

SHARE CAPITAL

The paid-up share capital of your Company increased by Rs. 1.54 million in FY2012, due to allotment of 307,614 equity shares on exercise of stock options by the eligible employees under Dr. Reddy's Employees Stock Option Scheme, 2002 and Dr. Reddy's Employees ADR Stock Option Scheme, 2007.

UNSECURED, REDEEMABLE, NON- CONVERTIBLE DEBENTURES(NCDS)

The bonus NCDs issued by the Company in FY2011 have since been listed on the Bombay Stock Exchange and the National Stock Exchange and rated LAA by ICRA.

During FY2012, the first year's interest on these NCDs was paid on due date.

TABLE 1 FINANCIAL HIGHLIGHTS (RS.IN MILLION)

FY2012 FY2011

Income 68,215 54,241

Profit before depreciation and tax 15,603 12,998

Depreciation 3,011 2,479

Profit before tax 12,592 10,519

Taxation (3,468) (1,585)

Net profit for the year 9,124 8,934

Add: Surplus at the begining of the year 31,397 25,541

Add: Transfer from General Reserve - 5,972

Total Available For Appropriation 40,521 40,447

APPROPRIATIONS

Proposed dividend on equity shares 2,331 1,904

Tax on proposed dividend 378 309

Dividend of previous years (including tax) 3 4

Debenture Redemption Reserve 848 19

Issuance of Bonus Debentures as per scheme - 5,078

Dividend Distribution Tax on distribution as per scheme - 843

Transfer to General Reserve 912 893

Balance carried forward 36,049 31,397

CORPORATE GOVERNANCE AND ADDITIONAL INFORMATION TO SHAREHOLDERS

A detailed report on the corporate governance systems and practices of the Company are given in a separate section of the annual report 2011-12. Detailed information for the shareholders is given in Additional Shareholders' Information section.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the Management Discussion and Analysis is provided as a separate section in the annual report.

SUBSIDIARY COMPANIES

The Company has 48 subsidiaries as on 31 March 2012.

During FY2012, Dr. Reddy's Laboratories New York, Inc., USA, Limited Liability Company Dr. Reddy's Laboratories, Ukraine, and Dr. Reddy's Laboratories (Canada) Inc., Canada, were incorporated as wholly-owned subsidiaries of the Company.

As per Section 212 of the Companies Act, 1956, the Company is required to attach the Directors' Report, Balance Sheet and Profit and Loss Account of the subsidiaries to the annual report. The Ministry of Corporate Affairs, Government of India vide its circular No. 2/2011 dated 8 February 2011 has provided an exemption to companies from complying with Section 212, provided such companies publish the audited consolidated financial statements in their annual report. Accordingly, the annual report 2011-12 does not contain the financial statements of the subsidiaries. The audited annual accounts and related information of the subsidiaries, where applicable, will be made available for inspection during business hours at our registered office in Hyderabad, India. The same will also be published on the Company's website, www.drreddys.com.

The members, if desire, may write to the Company Secretary at Dr. Reddy's Laboratories Limited, 8-2-337, Road No. 3, Banjara Hills, Hyderabad - 500 034 to obtain a copy of the financials of the subsidiary companies.

The consolidated financial statements, in terms of Clause 32 of the Listing Agreement and prepared in accordance with Accounting Standard 21 as specified in the Companies (Accounting Standards) Rules, 2006 also form part of this annual report.

DIRECTORS

As per Article 113 of the Articles of Association of the Company, Dr. Omkar Goswami and Mr. Ravi Bhoothalingam retire by rotation at the forthcoming Annual General Meeting scheduled to be held on 20 July 2012 and being eligible, seek re-appointment.

The Board of Directors had appointed Mr. Sridar Iyengar as an Additional Director on the Board of the Company on 22 August 2011. He will hold this office till the conclusion of 28th Annual General Meeting scheduled to be held on 20 July 2012. Requisite notice under Section 257 of the Companies Act, 1956 has been received from a member proposing his appointment. It is proposed to appoint him as a Director of the Company, liable to retire by rotation. The resolution for the same has been included in the notice of the 28th Annual General Meeting scheduled to be held on 20 July 2012.

The brief profiles of Dr. Omkar Goswami,

Mr. Ravi Bhoothalingam and Mr. Sridar Iyengar are given in the Corporate Governance section of the annual report for reference of the members.

The Board of Directors in their meeting held on 3 February 2012 had re-appointed Mr. Satish Reddy as Whole Time Director designated as Managing Director and Chief Operating Officer of the Company for a further period of five years effective from 1 October 2012. His re-appointment is subject to the shareholders' approval and the resolution to this effect is included in the notice convening 28th Annual General Meeting scheduled to be held on 20 July 2012.

AUDITORS

The statutory auditors of the Company, B S R & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept office of the statutory auditors for FY2013, if re-appointed. The Audit Committee and the Board of Directors recommend the re-appointment of B S R & Co. as statutory auditors of the Company for FY2013 for shareholders' approval.

COST AUDIT

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the Company's bulk drug division and formulation division.

Based on the recommendations of the Audit Committee, and subject to the approval of the Central Government, the Board of Directors had appointed, Sagar & Associates as cost auditors of the Company for FY2012. The cost audit report would be filed with the Central Government as per timeline.

The relevant cost audit reports for FY2011 for bulk drug division and formulation division were filed within the due date on 26 September 2011. The due date for filing these reports was 27 September 2011.

SECRETARIAL AUDIT REPORT

A secretarial audit for FY2012 was carried out by Dr. K R Chandratre, practicing Company Secretary. The secretarial audit report forms part of this annual report.

The said secretarial audit report confirms that the Company has complied with all the applicable provisions of the Companies Act, 1956, Depositories Act, 1996, Equity and Debt Listing Agreements with the Stock Exchanges, Debenture Trust Deed, Securities Contracts (Regulation) Act, 1956 and all the regulations of Securities and Exchange Board India (SEBI) as applicable to the Company, including the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (erstwhile Regulation of 1997) and the SEBI (Prohibition of Insider Trading) Regulations, 1992.

DIRECTORS' RESPONSIBILITY STATEMENT

In terms of Section 217(2AA) of the Companies Act, 1956, your Directors confirm as under:

1. In preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

2. Accounting policies have been selected and applied consistently and judgments and estimates made, are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 2011-12 and of profit of the Company for that period;

3. Proper and sufficient care has been taken to maintain adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. Annual accounts have been prepared on a going concern basis.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO IEPF

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the declared dividends, which remained unpaid or unclaimed for a period of seven years, have been transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the said Act.

EMPLOYEES STOCK OPTION SCHEMES

Dr. Reddy's Employees Stock Option Scheme, 2002, (the Scheme) was valid for a period of ten years from the date of adoption of the Scheme i.e. upto 29 January 2012. Pursuant to Regulation 7 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employees Share Purchase Scheme) Guidelines, 1999, the terms of the Scheme may be varied by way of a special resolution in a general meeting.

Based on the recommendation of the Nomination, Governance and Compensation Committee, the Board of Directors of the Company at their meeting held on 25 October 2011, has consented to extend the validity of the Scheme for a further period of ten years with effect from 29 January 2012, subject to the approval of the shareholders. All other terms and conditions of the Scheme shall remained unchanged.

The resolution for extension of validity of the Scheme has been included in the notice of the 28th Annual General Meeting scheduled to be held on 20 July 2012.

The details of stock options as on 31 March 2012 under the "Dr. Reddy's Employees Stock Option Scheme, 2002" and the "Dr. Reddy's Employees ADR Stock Option Scheme, 2007" in terms of Guideline 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, as amended, are set out in the Annexure - 1 to the Directors' Report.

PARTICULARS OF EMPLOYEES

Pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in the Annexure - 2 to the Directors' Report.

CONSERVATION OF ENERGY RESEARCH AND DEVELOPMENTS, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING AND OUTGO

The particulars as prescribed under Section 217(1 )(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are set out in the Annexure - 3 to the Directors' Report.

QUALIFYING PERSONS FOR INTERSE TRANSFER OF SHARES

Based on the information received from the Promoters and as required under Regulation 10(1 )(a) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 2011, persons constituting "qualifying persons" as defined in the said Regulations comprises:

Dr. Reddy's Holdings Limited, Dr. Reddy's Investments and Advisory LLP, Dr. Reddy's Income Advisory LLP, APS Invest Advisory LLP, ASP Income Advisory LLP, APS Trust, Dr. Kallam Anji Reddy,

Mr. Gunupati Venkateswara Prasad, Mr. Gunupati Venkateswara Prasad (HUF), Mr. Kallam Satish Reddy, Mr. Kallam Satish Reddy (HUF), Mrs. K Samrajyam, Mrs. G Anuradha, Mrs. K Deepti Reddy, Miss. G Vani Sanjana Reddy and Miss. G Mallika Reddy.

ACKNOWLEDGEMENT

Your Directors place on record their sincere appreciation for significant contribution made by the employees through their dedication, hard work and commitment and the trust reposed on us by the medical fraternity and the patients.

We also acknowledge the support and wise counsel extended to us by the analysts, bankers, government agencies, shareholders and investors at large. We look forward to having the same support in our endeavor to help people lead healthier lives.

For Dr. Reddy's Laboratories Limited

DR. K ANJI REDDY

CHAIRMAN

Place: Hyderabad

Date: 11 May 2012


Mar 31, 2011

The Directors are pleased to present the 27th annual report for the year ended 31 March 2011.

FINANCIAL HIGHLIGHTS

table 1 gives the financial highlights of the Company for the financial year 2010-11 as compared to previous financial year on Indian GAAP standalone basis.

DIVIDEND

Your Directors are pleased to recommend a dividend of Rs. 11.25 per equity share of Rs. 5/- each (225%) for the financial year 2010-11. The dividend, if approved at the ensuing Annual General Meeting, will be paid to those shareholders whose names appear on the register of members of the Company as on 5 July 2011.

The dividend would be tax-free in the hands of the shareholders.

SHARE CAPITAL

The paid up share capital of your Company increased by Rs. 2.04 millions in the financial year ended 31 March 2011, due to allotment of 407,347 equity shares on exercise of stock options by the eligible employees under Dr. Reddys Employees Stock Option Scheme, 2002 and Dr. Reddys Employees ADR Stock Option Scheme, 2007.

ISSUE OF UNSECURED, REDEEMABLE, NON-CONVERTIBLE BONUS DEBENTURES

During the financial year, the Scheme of Arrangement between the Company and its members for issuance of unsecured, redeemable, non-convertible, fully paid up debentures of Rs. 5/- each (Bonus Debentures) from the general reserve, was approved by the Honble High Court of Judicature, Andhra Pradesh at Hyderabad vide order dated 19 July 2010. The Scheme came into effect on 1 February 2011.

1

financial highlights for the financial year ended 31 march (Rs. millions)

2011 2010

income 54,241 47,246

Gross profit 12,998 13,072

Depreciation 2,479 2,224

Profit before tax 10,519 10,848

Taxation

- Current tax (1,585) (2,387)

net profit for the year 8,934 8,461

Add: Profit and loss brought forward 25,541 20,391

Add: Adjustment on merger of Perlecan Pharma Private Ltd. - (248)

Add: Transfer from General Reserve 5,972 -

total available for appropriation 40,447 28,604

Appropriations:

Proposed dividend on equity shares 1,904 1,900

Tax on proposed dividend 309 316

Dividend of previous years (including tax) 4 1

Debenture Redemption Reserve 19 -

Issuance of Bonus Debentures as per scheme 5,078 -

Dividend Distribution Tax on distribution as per scheme 843 -

Transfer to General Reserve 893 846

Balance carried forward 31,397 25,541

Accordingly, 1,015,516,392 Bonus Debentures amounting to Rs. 5,078 millions were issued to the members, in the ratio of six debentures for every equity share held by them on the record date i.e. 18 March 2011. These Bonus Debentures have since been listed on Bombay Stock Exchange and National Stock Exchange and rated LAA+ by ICRA.

CORPORATE GOVERNANCE AND ADDITIONAL INFORMATION TO SHAREHOLDERS

A detailed report on the corporate governance systems and practices of the Company are given in a separate section of the annual report 2010-11. Detailed information for the shareholders is given in Additional Shareholders Information section.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the Management Discussion and Analysis is provided as a separate section in the annual report.

SUBSIDIARY COMPANIES

The Company has 45 subsidiaries as on 31 March 2011.

During the year, Idea2Enterprises (India) Private Limited, Dr. Reddys Laboratories Romania SRL, I-Ven Pharma Capital Limited, Dr. Reddys Laboratories Tennessee LLC and Dr. Reddys Venezuela C.A. became wholly-owned subsidiaries of the Company. Further, Dr. Reddys Laboratories (Proprietary) Limited also became wholly-owned subsidiary by virtue of purchase of its balance 40% stake by the Company.

During the year, Macred India Private Limited ceased to be a subsidiary of the Company.

As per Section 212 of the Companies Act, 1956, we are required to attach the Directors Report, Balance Sheet and Profit and Loss Account of our subsidiaries to our annual report. The Ministry of Corporate Affairs, Government of India vide its circular no. 2/2011 dated 8 February 2011 has provided an exemption to companies from complying with Section 212, provided such companies publish the audited consolidated financial statements in the annual report. Accordingly, the annual report 2010-11 does not contain the financial statements of our subsidiaries. The audited annual accounts and related information of our subsidiaries, where applicable, will be made available for inspection during business hours at our registered offce in Hyderabad, India. The same will also be published on our website, www.drreddys.com.

The consolidated financial statements, in terms of Clause 32 of the Listing Agreement and prepared in accordance with Accounting Standard 21 as specifed in Companies (Accounting Standards) Rules, 2006 also form part of this annual report.

The members, if desire, may write to Company Secretary at Dr. Reddys Laboratories Limited, 8-2-337, Road No. 3, Banjara Hills, Hyderabad – 500034 to obtain a copy of the financials of the subsidiary companies.

FIXED DEPOSITS

Your Company has not accepted any fixed deposit under Section 58A of the Companies Act, 1956 from the public.

However, pursuant to the provisions of Section 58A of the Companies Act, 1956, read with Companies (Acceptance of Deposit) Rules, 1975, the unsecured, redeemable, non-convertible, fully paid-up bonus debentures amounting to Rs. 5,078 millions, issued by the Company pursuant to the Scheme of Arrangement, approved by the Honble High Court of Judicature, Andhra Pradesh, may be classifed as deposit. No amount of principal or interest on such debentures was due as at the Balance Sheet date.

DIRECTORS

As per Article 113 of the Articles of Association of the Company, Mr. Anupam Puri and Dr. Bruce L A Carter retire by rotation at the forthcoming Annual General Meeting scheduled on 21 July 2011 and being eligible, seek re-appointment. The brief profles of Mr. Anupam Puri and Dr. Bruce L A Carter are given in the Corporate Governance section of the annual report for reference of the members.

The Board of Directors in their meeting held on 25 January 2011 had re-appointed Dr. K Anji Reddy as Whole Time Director designated as Chairman of the Company for a further period of fve years effective 13 July 2011 and Mr. G V Prasad as Whole Time Director designated as Vice-Chairman and Chief Executive Officer of the Company for a further period of fve years effective 30 January 2011. These re-appointments are subject to the shareholders approval and the resolutions to this effect have accordingly been included in the notice convening 27th Annual General Meeting scheduled on 21 July 2011.

AUDITORS

The Statutory Auditors of the Company M/s. B S R & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and have confrmed their eligibility and willingness to accept offce of the Statutory Auditors, if reappointed. The Audit Committee and the Board of Directors recommend the reappointment of M/s. B S R & Co. as Statutory Auditors of the Company for the financial year 2011-12 for shareholders approval.

COST AUDIT

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the Companys bulk drug division and formulation division.

Based on the recommendations of the Audit Committee, and subject to the approval of the Central Government the Board of Directors had appointed M/s. Sagar & Associates as Cost Auditors of the Company for the financial year 2010-11. The cost audit report would be fled with the Central Government as per timeline.

The relevant cost audit reports for the financial year 2009-10 for bulk drug division and formulation division were fled within the due date on September 16 and 17, 2010. The due date for fling these reports was 27 September 2010.

DIRECTORS RESPONSIBILITY STATEMENT

In terms of Section 217 (2AA) of the Companies Act, 1956, your Directors confrm as under:

1. In preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

2. Accounting policies have been selected and applied consistently and judgments and estimates made, are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 2010-11 and of Profit of the Company for that period;

3. Proper and suffcient care has been taken to maintain adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. Annual accounts have been prepared on an on- going concern basis.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO IEPF

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the declared dividends, which remained unpaid or unclaimed for a period of seven years have been transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the said Act.

EMPLOYEES STOCK OPTION SCHEMES

Pursuant to the provisions of Guideline 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999, as amended, the details of stock options as on 31 March 2011 under the "Dr. Reddys Employees Stock Option Scheme, 2002" and the "Dr. Reddys Employees ADR Stock

Option Scheme, 2007" are set out in the annexure – 1 to the Directors Report.

PARTICULARS OF EMPLOYEES

Pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in the annexure – 2 to the Directors Report.

CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENTS, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING AND OUTGO

The particulars as prescribed under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rule, 1988 are set out in the annexure – 3 to the Directors Report.

GROUP FOR INTER SE TRANSFER OF SHARES

Based on the information received from the Promoters and as required under Clause 3(1)(e)(i) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997, persons constituting Group as defned in the Monopolies and Restrictive Trade Practices Act, 1969, for the purpose of Regulation 3(1)(e)(i) of the aforesaid SEBI Takeover Regulations comprises:

Dr. Reddys Holdings Limited, Dr. Reddys Investments and Advisory LLP, Dr. Reddys Income Advisory LLP, APS Invest Advisory LLP, ASP Income Advisory LLP, APS Trust, Dr. Kallam Anji Reddy, Mr. Gunupati Venkateswara Prasad, Mr. Gunupati Venkateswara Prasad (HUF), Mr. Kallam Satish Reddy, Mr. Kallam Satish Reddy (HUF), Mrs. K Samrajyam, Mrs. G Anuradha, Mrs. K Deepti Reddy, Miss. G Vani Sanjana Reddy and Miss. G Mallika Reddy.

ACKNOWLEDGEMENT

Your Directors place on record their sincere appreciation for significant contribution made by the employees through their dedication, hard work and commitment and the trust reposed on us by the medical fraternity and the patients. We also acknowledge the support and wise counsel extended to us by the analysts, bankers, government agencies, shareholders and investors at large. We look forward to having the same support in our endeavor to help people lead healthier lives.

For Dr. reddys Laboratories Limited

DR. K AnJi REDDY

CHAIRMAN

Place: Hyderabad

Date: 13 may 2011


Mar 31, 2010

The Directors are pleased to present the 26th Annual Report for the year ended 31 March 2010.

Financial Highlights

table 1 gives the fnancial highlights of the Company for the fnancial year 2009-10 as compared to previous fnancial year on Indian GAAP standalone basis.

Dividend

Your Directors are pleased to recommend a dividend of Rs. 11.25 per equity share of Rs. 5 each (225%) for the fnancial year 2009-10. The dividend, if approved at the ensuing Annual General Meeting, will be paid to those shareholders whose names appear on the register of members of the Company as on 5 July 2010.

The dividend would be tax-free in the hands of the shareholders.

Bonus Debentures

During the fnancial year, the Board of Directors recommended issuance of unsecured, redeemable, non-convertible, fully paid up bonus

table 1 Financial highlights for the fnancial year ended 31 March (R s. in millions)

2010 2009

Income 47,246 42,979

Gross Proft 13,072 9,232

Depreciation 2,224 1,937

Proft before tax 10,848 7,295 Taxation

– Current tax (2,387) (1,686)

Net proft for the year 8,461 5,609

Add: Proft and loss brought forward 20,391 16,575

Add: Adjustment on merger of Perlecan Pharma Private Ltd. 248 --

Total available For appropriation 28,604 22,184

Appropriations

Proposed dividend on equity shares 1,900 1,053

Tax on proposed dividend 316 178

Dividend of previous year 1 1

Transfer to general reserve 846 561

Balance carried forward 25,541 20,391

Debentures of Rs. 5 each to the members of the Company in the ratio of 6 bonus debentures for every equity share held by the members on a record date to be fxed by the Board.

The said issuance is subject to approval of the regulatory authorities, shareholders and the Hon’ble High Court of Andhra Pradesh.

Share Capital

The paid up share capital of your Company increased by Rs. 1.88 million in the fnancial year ended 31 March 2010, due to allotment of 376,608 equity shares on exercise of stock options by the eligible employees under Dr. Reddy’s Employees Stock Option Scheme, 2002 and Dr. Reddy’s Employees ADR Stock Option Scheme, 2007.

Corporate Governance and additional information to shareholders

A detailed report on the corporate governance system and practices of the Company are given in a separate section of the annual report 2009-10. Detailed information for the shareholders is given in Additional Shareholders’ Information section.

Management Discussion and Analysis

A detailed report on the Management Discussion and Analysis is provided as a separate section in the annual report.

Subsidiary companies

During the year, Dr. Reddy’s Pharma SEZ Limited was incorporated as a wholly-owned subsidiary of the Company for the purpose of formulation manufacturing at Special Economic Zone and Perlecan Pharma Private Limited was amalgamated with the Company. Further, the Company also acquired the balance stake of 30% in Dr. Reddy’s (Australia) Pty. Ltd.

The Ministry of Corporate Affairs (MCA) had granted its approval to the Company for not attaching the documents specifed in Section 212 of the Companies Act, 1956 in respect to its subsidiary companies for the financial year 2009-10. The members may refer to the statement under Section 212 of the Companies Act, 1956 and summary information on the financials of subsidiaries, appended to the above statement in this Annual Report, in terms of the said approval of MCA, for further information on these subsidiaries.

The information on financial statements of the aforesaid subsidiaries is also available on the Company’s website.

The members, if they desire, may write to Company Secretary at Dr. Reddy’s Laboratories Limited, 7-1-27, Ameerpet, Hyderabad – 500016 to obtain a copy of the financials of the subsidiary companies.

The consolidated financial statements, in terms of Clause 32 of the Listing Agreement and prepared in accordance with Accounting Standard 21 as specified in Companies (Accounting Standards) Rules, 2006 also form part of this Annual Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposit under Section 58A of the Companies Act, 1956 and hence no amount of principal or interest was outstanding as at the Balance Sheet date.

DIRECTORS

Ms. Kalpana Morparia and Dr. J P Moreau retire by rotation at the ensuing Annual General Meeting scheduled on 23 July 2010 and are eligible for re-appointment.

The Board of Directors had appointed Dr. Ashok S Ganguly as an additional director on the Board of the Company on 23 October 2009. He will hold this office till the conclusion of 26th Annual General Meeting of the Company scheduled on 23 July 2010. Requisite notice under Section 257 of the Companies Act, 1956 has been received from a member proposing his appointment. It is proposed to appoint him as a Director of the Company liable to retire by rotation. The resolution for the same has been included in the notice of the 26th Annual General Meeting scheduled to be held on 23 July 2010.

The brief profiles of Ms. Kalpana Morparia, Dr. J P Moreau and Dr. Ashok S Ganguly are given in the Corporate Governance section of the Annual Report for reference of the members.

AUDITORS

The Statutory Auditors of the Company M/s. B S R & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept office of Statutory Auditors, if reappointed. The Audit Committee and the Board of Directors recommend reappointment of M/s. B S R & Co. as Statutory Auditors of the Company for the financial year 2010-11 for shareholder’s approval.

COST AUDIT

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the Company’s Bulk Drug division and Formulation division.

Subject to the approval of the Central Government, the Board had appointed M/s. Sagar & Associates as Cost Auditors of the Company for the financial year 2009-10. The cost audit report would be filed with the Central Government as per timeline.

SECRETARIAL AUDIT REPORT

A secretarial audit for the year 2009-10 was carried out by Dr. K R Chandratre, practicing Company Secretary. The said secretarial audit report forms part of this Annual Report.

The secretarial audit report confirms that the Company has complied with all the applicable provisions of the Companies Act, 1956, Depositories Act, 1996, Listing Agreements with the Stock Exchanges, Securities Contracts (Regulation) Act, 1956 and all the regulations of SEBI as applicable to the Company, including the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992.

DIRECTORS’ RESPONSIBILITY STATEMENT

In terms of Section 217 (2AA) of the Companies Act, 1956, your Directors confirm as under:

1. In preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

2. We have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 2009-10 and of profit of the Company for that period;

3. We have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. We have prepared the annual accounts on an on-going concern basis.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO IEPF

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the declared dividends, which remained unpaid or unclaimed for a period of 7 years have been transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the said Act.

EMPLOYEES STOCK OPTION SCHEMES

Pursuant to the provisions of Guideline 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999, as amended, the details of stock options as on 31 March 2010 under the “Dr. Reddy’s Employees Stock Option Scheme, 2002” and the “Dr. Reddy’s Employees ADR Stock Option Scheme, 2007” are set out in the Annexure – 1 to the Directors’ Report.

PARTICULARS OF EMPLOYEES

Pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of employees are set out in the Annexure – 2 to the Directors’ Report.

CONSERVATION OF ENERGY RESEARCH AND DEVELOPMENTS, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING AND OUTGO

The particulars as prescribed under Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rule, 1988 are set out in the Annexure – 3 to the Directors’ Report.

GROUP FOR INTER SE TRANSFER OF SHARES

Based on the information received from the Promoters and as required under Clause 3(1)(e)(i) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997, persons constituting Group as defined in the Monopolies and Restrictive Trade Practices Act, 1969, for the purpose of Regulation 3(1)(e)(i) of the aforesaid SEBI Takeover Regulations comprises: Dr. Reddy’s Holdings Limited, Dr. Reddy’s Investments and Advisory LLP, APS Invest Advisory LLP, Dr. K Anji Reddy, Mr. G V Prasad, Mr. Satish Reddy, Ms. K Samrajyam, Ms. G Anuradha and Ms. Deepti Reddy.

ACKNOWLEDGEMENT

Your Directors place on record their sincere appreciation for significant contribution made by the employees through their dedication, hard work and commitment and the trust reposed on us by the medical fraternity and the patients. We also acknowledge the support and wise counsel extended to us by the analysts, bankers, government agencies, shareholders and investors at large. We look forward to having the same support in our endeavor to help people lead healthier lives.

FOR DR. REDDY’S LABORATORIES LIMITED

DR. K ANJI REDDY CHAIRMAN

Place: Hyderabad Date: 3 June 2010

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