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Dr Reddys Laboratories Ltd.

BSE: 500124 Sector: Health care
NSE: DRREDDY ISIN Code: INE089A01023
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VOLUME 39438
52-Week high 3203.95
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P/E 52.11
Mkt Cap.(Rs cr) 39,347
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Sell Price 2372.00
Sell Qty 112.00
OPEN 2325.95
CLOSE 2313.70
VOLUME 39438
52-Week high 3203.95
52-Week low 1901.65
P/E 52.11
Mkt Cap.(Rs cr) 39,347
Buy Price 0.00
Buy Qty 0.00
Sell Price 2372.00
Sell Qty 112.00

Dr Reddys Laboratories Ltd. (DRREDDY) - Director Report

Company director report

Dear members

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

FINANCIAL HIGHLIGHTS

Table 1 gives the fi nancial highlights of the company for FY2017 as compared tothe previous fi nancial year on Ind AS consolidated and standalone basis.

COMPANY AFFAIRS

The company's standalone net revenue for the year was ` 103.11 billion adecline of 2.88% over the previous year. In US$ terms this amounted to $ 1.59 billion.Profi t before tax (PBT) was

` 15.45 billion a decline of 7.88% over the previous year. In US$ terms thistranslates 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 translatesinto $ 240 million.

Revenue from Global Generics declined by 10% and stood at ` 115.41 billiondriven largely by North America and Emerging Markets.

Revenue from North America declined by 16% and stood at ` 63.6 billion. This isprimarily on account of increased competition in our key products namely ValganciclovirDecitabine Azacitidine etc. coupled with discontinuation of the McNeil business. Duringthe year the company launched 10 products the major ones being Omeprazole SodiumBicarbonate and Nitroglycerin Sublingual tablets. FY2017 also saw 26 ANDA fi lings in theUSA. As of 31 March 2017 cumulatively 101 generic fi lings are pending for approval withthe USFDA (99 ANDAs and two NDAs under 505(b)(2) route). Of these 99 ANDAs 62 are ParaIVs 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 stoodat ` 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-yearbasis. During the year 82 DMFs were fi led globally of which nine were in the US. Thecumulative number of DMF fi lings as of 31 March 2017 was 754.

DIVIDEND

Your directors are pleased to recommend a dividend of ` 20/- on every equityshare of ` 5/- (400%) for FY2017. The dividend if approved at the 33rd annualgeneral meeting (AGM) will be paid to those shareholders whose names appear on theregister 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 DisclosureRequirements) Regulations 2015 (Listing Regulations) the company has revised itsdividend distribution policy. This policy was originally adopted on 18 May 2009. Thepolicy is attached as Annexure I to the board's report.

TRANSFER TO RESERVES

The company proposes to transfer

` 1355 million to the general reserve.

TABLE 1 FINANCIAL HIGHLIGHTS ( ` Million)
CONSOLIDATED STANDALONE
FY2017 FY2016 FY2017 FY2016
Total revenue 143676 158633 103110 106168
Profi t before depreciation amortization and tax 25803 37977 22796 23261
Depreciation and amortization 10266 9389 7351 6495
Profi t before tax 15537 28588 15445 16766
Tax expense 2965 7511 1604 3023
Profi t after tax 12572 21077 13841 13743
Share of profi t of equity accounted investees net of tax 349 229 - -
Net profi t for the year 12921 21306 13841 13743
Add: surplus at the beginning of the year 82595 67074 79930 72058
Total available for appropriation 95516 88380 93771 85801
Appropriations:
Dividend paid during the year 3312 3411 3312 3411
Tax on dividend paid 674 694 674 694
Credit of dividend distribution tax (596) - (633) (32)
Transfer to general reserve 1355 1679 1355 1679
Others - - - 119
Balance carried forward 90771 82595 89063 79930

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 5077504equity shares (b) Allotment of 211564 equity shares on exercise of stock options byeligible 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 Act2013. Accordingly no disclosure or reporting is required in respect of details relatingto 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 ofits 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 KazakhstanLLP have become subsidiary companies and Reddy Cheminor SA in France was closed andceased to be a wholly-owned subsidiary. Further OctoShare BV OctoPlus Development BVOctoPlus Technologies BV OctoPlus Science BV OctoPlus PolyActive Science BV and ChiennaBV ceased to be subsidiaries of the company upon their merger with Dr. Reddy's Researchand Development BV (formerly known as OctoPlus BV).

As per section 129(3) of the Companies Act 2013 where the company has one or moresubsidiaries it shall in addition to its fi nancial statements prepare a consolidatedfi nancial statement of the company and of all subsidiaries in the same form and manner asthat of its own and also attach along with its fi nancial statement a separate statementcontaining the salient features of the fi nancial statement of its subsidiaries.

In accordance with the above the consolidated fi nancial statements of the company andall its subsidiaries and joint ventures prepared in accordance with Indian AccountingStandards (Ind AS) 110 and 111 as specifi ed in the Companies (Indian AccountingStandards) Rules 2015 form part of the annual report. Further a statement containingthe salient features of the fi nancial statement of our subsidiaries and joint ventures inthe prescribed form AOC-1 is attached as Annexure II to the board's report. Thisstatement also provides details of the performance and fi nancial position of eachsubsidiary.

In accordance with section 136 of the Companies Act 2013 the audited fi nancialstatements and related information of the subsidiaries where applicable will beavailable for inspection during regular business hours at our registered offi ce inHyderabad 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 ownedsubsidiaries for their business purposes. Details of loans guarantees and investmentscovered under section 186 of the Companies Act 2013 along with the purpose for whichsuch loan or guarantee was proposed to be utilized by the recipient form part of thenotes to the fi nancial 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 isgiven in a separate chapter of this annual report. Similarly other information forshareholders is provided in the chapter additional shareholders' information. Acertifi cate from the statutory auditors of the company confi rming compliance with theconditions 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 theprovisions of regulation 34 of the Listing Regulations is provided as a separate chapterin the annual report.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

The term of Mr. Ravi Bhoothalingam as an independent director of the company ended on27 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. KSatish Reddy as whole-time director designated as chairman of the company (or such otherdesignation as the board may deem fi t) for a further period of fi ve years with effectfrom 1 October 2017 (including terms and conditions of the appointment) subject toapproval 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 directorhas confi rmed to the company that he or she meets the criteria of independence laid downin section 149(6) of the Companies Act 2013 and regulation 16(1)(b) of the ListingRegulations.

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

Brief profi les of Mr. K Satish Reddy and Mr. G V Prasad are given in the corporategovernance section of the annual report and notice convening the 33rd AGM forreference of the shareholders.

BOARD EVALUATION

As per provisions of the Companies Act 2013 and regulation 17(10) of the ListingRegulations an evaluation of the performance of the board and members was undertaken. Fordetails 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 ofcriteria that includes ethics personal and professional stature domain expertise genderdiversity and specifi c qualifi cation required for the position. A potential board memberis also assessed on the basis of the independence criteria defi ned in section 149(6) ofthe 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 theListing Regulations and on recommendations of the nomination governance and compensationcommittee 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 boardretreat was held to discuss strategic matters. Details of board meetings are given in the corporategovernance report.

AUDIT COMMITTEE

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

BUSINESS RISK MANAGEMENT

The company has a risk management committee of the board consisting entirely ofindependent directors. Details of the committee and its terms of reference are set out inthe corporate governance report.

The audit and risk management committees review key risk elements of the company'sbusiness fi nance operations and compliance and respective mitigation strategies. Therisk management committee reviews key strategic business compliance and operationalrisks while issues around ethics and fraud internal control over fi nancial reporting(ICOFR) as well as process risks and their mitigation are reviewed by the auditcommittee.

The company's fi nance investment and risk management council (FIRM council) is amanagement level committee which operates under a charter and focuses on risks associatedwith the company's business and investments. The FIRM council periodically reviews matterspertaining to ethics and fraud compliance and internal audit. Additionally theenterprise-wide risk management (ERM) function helps the management and the board toperiodically prioritize review and measure business risks against a pre-determined riskappetite and their suitable response depending on whether such risks are internalstrategic or external.

During FY2017 focus areas of risk management included progress on strategy executionquality and regulatory geo-political compliance and patent infringement risk exposuressafety and health.

ADEQUACY OF INTERNAL FINANCIAL CONTROL SYSTEMS

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

DIRECTORS' RESPONSIBILITY STATEMENT

In terms of section 134(5) of the Companies Act 2013 (‘the Act') your directorsstate that: 1. applicable accounting standards have been followed in the preparation ofthe 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 fairview of the state of affairs of the company at the end of the FY2017 and of the profi t ofthe company for that period;

3. proper and suffi cient care has been taken to maintain adequate accounting recordsin accordance with the provisions of this Act for safeguarding the assets of the companyand for preventing and detecting fraud and other irregularities; 4. annual accounts havebeen prepared on a going concern basis; 5. adequate internal fi nancial controls for thecompany to follow have been laid down and these are operating effectively; and 6. properand adequate systems have been devised to ensure compliance with the provisions of allapplicable 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 theCompanies (Accounts) Rules 2014 the particulars of contract or arrangement entered intoby the company with related parties referred to in section 188(1) in form AOC-2 isattached as Annexure III. All such contracts or arrangements are in the interest ofthe company. Details of related party disclosures form part of the notes to the fi nancialstatements provided in this annual report.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The company has an ombudsperson policy (whistle blower/vigil mechanism) to reportconcerns. The vigil mechanism consists of a hotline — a dedicated email-ID and aphone number. The ombudsperson policy safeguards from victimization of those who use thismechanism. An audit committee member is the chief ombudsperson. The policy also providesaccess to the chairperson of the audit committee under certain circumstances. Details ofthe 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 (fi rm registration no.101049W/E300004) were appointed as statutory auditors of the company at the 32nd AGM heldon 27 July 2016 for a period of 5 years commencing from the conclusion of 32nd AGM tillthe conclusion of the 37th AGM subject to ratifi cation by shareholders every year asmay be applicable. The fi rm has consented and confi rmed that the appointment is withinthe limits specifi ed under section 141(3)(g) of the Companies Act 2013. The statutoryauditors have also confi rmed that they are not disqualifi ed to be appointed as such interms of the proviso to section 139(1) section 141(2) and section 141(3) of the CompaniesAct 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 asstatutory auditors of the company from the conclusion of the 33rd AGM till the conclusionof 34th AGM.

SECRETARIAL AUDITOR

Pursuant to section 204 of the

Companies Act 2013 and the Companies (Appointment & Remuneration of ManagerialPersonnel) Rules 2014 Dr. K R Chandratre practicing company secretary (membership no.FCS 1370 and certifi cate of practice no. 5144) was appointed to conduct the secretarialaudit of the company for FY2017. The secretarial audit report for FY2017 is attached as AnnexureIV.

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

COST AUDITORS

Pursuant to section 148 of the Companies Act 2013 read with the Companies (Audit andAuditors) Rules 2014 and the Companies (Cost Records and Audit) Amendment Rules 2014the company maintains the cost audit records in respect of its pharmaceutical business. Onrecommendation of the audit committee your board has appointed M/s. Sagar &Associates cost accountants (fi rm registration no. 000118) as cost auditors of thecompany for the FY2018 at a remuneration of ` 7 lakhs plus reimbursement out ofpocket expenses at actuals and applicable taxes. The provisions also require that theremuneration of the cost auditors be ratifi ed by the shareholders. As a matter of recordrelevant cost audit reports for FY2016 were fi led with the Central Government on 24August 2016 within the stipulated timeline. The cost audit reports for FY2017 will bealso fi led within the timeline.

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

There are no qualifi cations reservations or adverse remarks made by the statutoryauditors in their report or by the practicing company secretary in the secretarial auditreport. During the year there were no instances of frauds reported by auditors undersection 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 (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013

The company has an apex complaints committee and an internal complaints committee whichoperate under a defi ned redressal system for complaints pertaining to sexual harassmentof women at workplace. Details are available in the principle 3 under section 7 of the businessresponsibility 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 CSRcommittee consisting of Mr. Bharat N Doshi (chairman) Mr. G V Prasad and Mr. K SatishReddy. The company's CSR policy provides a constructive framework to review and organizeour social outreach programs in health livelihood and education. During the year thecommittee monitored implementation and adherence to the CSR policy. Details about the CSRpolicy and initiatives taken by the company during the year are available on the company'swebsite: 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 ofregulation 34 of the Listing Regulations is available as a separate section in thisannual 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 whichremained unpaid or unclaimed for a period of seven years have been transferred by thecompany to the IEPF which has been established by the central government.

The above referred rules now mandate transfer of dividends lying unpaid and unclaimedfor a period of seven years as well as the underlying equity shares to IEPF. The companyhas issued individual notices to the shareholders whose equity shares are liable to betransferred 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 EmployeesStock Option Scheme 2002' and the ‘Dr. Reddy's Employees ADR Stock Option Scheme2007' (both collectively referred as ‘the schemes'). The schemes are in compliancewith the SEBI (Share Based Employee Benefi ts) Regulations 2014. The details areavailable 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 section197(12) of the Companies Act 2013 read with rule 5(1) of the Companies (Appointment andRemuneration 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) ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 astatement showing the names and other particulars of the employees drawing remuneration inexcess of limits set out in said rules forms part of the annual report.

Considering the fi rst proviso to section 136(1) of the Companies Act 2013 the annualreport excluding the aforesaid information is being sent to the shareholders of thecompany and others entitled thereto. The said information is available for inspection atthe registered offi ce of the company during business hours on working days up to the dateof the forthcoming 33rd AGM. Any shareholder interested in obtaining a copy thereof maywrite to the company secretary in this regard.

CONSERVATION OF ENERGY RESEARCH & DEVELOPMENT TECHNOLOGY ABSORPTION FOREIGNEXCHANGE EARNINGS AND OUTGO

The particulars as prescribed under section 134(3)(m) of the Companies Act 2013 readwith 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 AnnexureVIII.

ACKNOWLEDGEMENT

Your directors place on record their sincere appreciation for the signifi cantcontribution made by our employees through their dedication hard work and commitment asalso for the trust reposed in us by the medical fraternity and patients. We alsoacknowledge the support extended to us by the analysts bankers government agenciesmedia customers suppliers shareholders and investors at large. We look forward to yourcontinued support in our endeavor to accelerate access to innovative and affordablemedicines 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

ANNEXURE-I

DIVIDEND DISTRIBUTION POLICY

(Originally approved on 18 May 2009 and modifi ed by the board of directors at theirmeeting held on 25 October 2016).

KEY HIGHLIGHTS

Dividend payout will be subject to profi tability under standalone fi nancialsstatements prepared under Indian Accounting Standard (Ind AS).

Special dividend if any to be outside the scope of this policy but will be governedby the provisions under the Companies Act 2013.

Applicable to Dr. Reddy's

Laboratories Limited India only and not its subsidiaries.

INTRODUCTION

The board of directors of Dr. Reddy's Laboratories Limited (Dr. Reddy's or thecompany) aims to grow the business lines of the company and enhance the rate of return oninvestments of the shareholders. They present the dividend distribution policyconsidering: a) Preservation of a balance between the expectations of its shareholders andcompany's own need to grow and b) The profi tability of the company.

The policy is intended to ensure a regular dividend payout for maximizing theshareholder's wealth with an objective to distribute a regular dividend through an interimor fi nal dividend or a combination of both.

The annual dividend rate will be recommended by the board of directors and can vary inorder to refl ect the underlying growth of the company and to maintain a regular dividendpayment.

APPLICABILITY

This policy is a guiding principle for Dr. Reddy's Laboratories Limited India.

STATUTORY PROVISIONS

Under the Companies Act 2013 and rules made there under a company shall declare orpay dividend for any fi nancial year only out of the profi ts of the company for that financial year. The following points set out the statutory obligations of acompany/requirements under the Companies Act 2013 with respect to declaration/payment ofdividend. (Section 123).

The dividend shall be declared/paid only out of the profi ts of the company afterproviding for depreciation in accordance with the provisions of the law.

The company before declaration of any dividend in any fi nancial year may transfersuch percentage of its profi t for that fi nancial year to the general reserve.

However in case of inadequacy or absence of profi ts in any year a maximum of 10% ofpaid-up capital can be declared as dividend subject to other provisions contained in theCompanies (Declaration and Payment of Dividend) Rules 2014.

The SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 asamended requires a company to disclose its dividend distribution policy in its annualreport and on its website.

I. DECLARATION

The declaration of dividend would be subject to compliance with applicable provisionsof the Companies Act 2013 and rules made there under if any.

II. LOSSES

Before declaring any dividend the losses if any of any previous year(s) must be setoff against the profi ts of the company for the current year or previous years.

III. DECLARATION OF DIVIDEND OUT OF RESERVES

The declaration of dividend out of reserves or accumulated profi t & loss accountmay be as per the provisions of the Companies Act 2013 and rules made there under ifany.

IV. AMOUNT OF DIVIDEND

The board may endeavor to recommend dividends considering: a. The company's need forcapital for its growth/expansion plans; and b. Positive cash fl ow

The amount of maximum dividend payout (including interim dividend) is expected to be upto 20% of the cash profi t under the consolidated fi nancial statement prepared underIndian Accounting Standards (Ind-AS).

(Subject to per share amount rounding off to nearest 25 paise and further subject topercentage being adjusted to nearest multiple of 5.)

V. PARAMETERS TO BE CONSIDERED BEFORE DECLARING DIVIDEND

The major internal and external factors for deciding on dividend payment are:

1) Current year's earnings

2) Past dividend pattern

3) Liquidity – cash fl ow

4) Repayment/pre-payment of borrowing

5) Expected future earnings

80

6) Capital expenditure requirements (retained earnings) requiring ploughing back ofprofi ts i.e. future capital expenditure program including a) New projects b) Expansion ofcapacities of existing units c) Renovation/modernizations d) Acquisition of brands/businesses e) Major repairs & maintenance

7) Likelihood of crystallization of contingent liabilities if any

8) Contingency fund

9) Sale of brands/businesses 10) Social/geo-political factors/risks 11) Regulatory orproposed regulatory requirements 12) Currency risk

Prior to declaration/recommendation of any dividend as per this policy the company mayconsider any applicable covenants/conditions or restrictions imposed by any lenders JVpartners of the company or its subsidiaries. The company may decide to retain earnings inentirety for a particular year(s) for its growth/ expansion consequently resulting inshareholders' wealth creation.

VI) TIMING

1) INTERIM DIVIDEND

The board may declare the interim dividend based on review of profi ts earned duringthe current year - to date.

The interim dividend may be declared during the tenure of the fi nancial year i.e.normally at the time of reviewing and approving the quarterly/half-yearly fi nancialresults.

2) FINAL DIVIDEND

The board may recommend the fi nal dividend subject to the approval of the members ofthe company based on profi tability of the company as per the annual audited fi nancialstatements. The fi nal dividend may be recommended once in a year and shall be subject tothe approval of the members of the company at their meeting held for the purpose.

In addition to the above the board of directors of the company may also considerdeclaration of any special dividend on special occasions as and when they may deem fi tsubject to provisions of the Companies Act 2013 rules made there under and other relevantrequirements if any.

VII) CLASSES OF SHARES

At present the issued and paid-up share capital of the company comprises only equityshares. As and when the company issues any other class(es) of shares the board ofdirectors may suitably declare dividend on such class(es) in accordance with theprovisions of the Companies Act 2013.

VIII) TAXATION

The company shall be responsible for payment of dividend distribution tax as per theprovisions of Income Tax Act 1961 or such other amendments from time to time.

However the Income Tax liability if such is applicable on the dividend earned by theshareholders under the Income Tax Act 1961 or such other amendment from time to timeshall be borne by the respective shareholders and if required under the then prevalentIncome Tax laws the payment shall also be subject to deduction of tax at source.

IX) PERIODIC REVIEW OF THIS POLICY; AMENDMENTS

The board may amend modify repeal or waive any of the stipulations of this policy atany time as it determines necessary or appropriate in the exercise of its judgment or fiduciary duties and as per the provisions of the Companies Act.

ANNEXURE-II

FORM AOC-1

(Statement pursuant to fi rst proviso to sub-section (3) of section 129 read with rule5 of Companies (Accounts) Rules 2014) Statement containing salient features of the financial statement of subsidiaries/associate companies/joint ventures

Part "A": Subsidiaries

All amounts in Indian Rupees millions except share data and where otherwise stated

AS AT 31 MARCH 2017

FOR THE YEAR ENDED 31 MARCH 2017

NAME OF THE SUBSIDIARY THE FOR PERIOD REPORTING SUBSIDIARY % OF SHAREHOLDING REPORTING CURRENCY EXCHANGE RATE SHARE CAPITAL RESERVES & SURPLUS OTHER LIABILITIES TOTAL EQUITY AND LIABILITIES TOTAL ASSETS INVESTMENTS (EXCL INVESTMENT IN SUBSIDIARIES) TURNOVER PROFIT/(LOSS) BEFORE TAXATION PROVISION FOR TAXATION PROFIT/(LOSS) AFTER TAXATION PROPOSED DIVIDEND
1 Aurigene Discovery 31-03-17 100% MYR 14.65 16 11 3 30 30 - 26 4 - 4 -
Technologies (Malaysia) SDN
BHD
2 Aurigene Discovery 31-03-17 100% USD 64.85 257 (256) - 1 1 - - - - - -
Technologies Inc.
3 Aurigene Discovery 31-03-17 100% INR 1.00 905 2320 3989 7214 7214 4927 1836 449 104 345 -
Technologies Ltd.
4 beta Institut gemeinntzige 31-03-17 100% EUR 69.29 5 1 7 13 13 - - 0 - 0 -
GmbH(2)
5 betapharm Arzneimittel GmbH(2) 31-03-17 100% EUR 69.29 60 (15) 6503 6548 6548 - 8528 773 - 773 -
6 Cheminor Investments Limited 31-03-17 100% INR 1.00 1 - - 1 1 - - - - - -
7 Cheminor Employees Welfare 31-03-17 100% INR 1.00 - 252 8 260 260 260 - 23 6 17 -
Trust
8 Chienna B.V.(3) 31-03-17 100% EUR 69.29 - - - - - - - (110) (110) -
9 Chirotech Technology Limited 31-03-17 100% GBP 80.90 1060 (205) 272 1127 1127 - 1076 278 56 222 -
10 Dr. Reddy's Bio-Sciences 31-03-17 100% INR 1.00 540 (205) 83 418 418 - - (38) - (38) -
Limited
11 Dr. Reddy's Farmaceutica Do 31-03-17 100% BRL 20.55 818 (1212) 556 162 162 - 52 (180) - (180) -
Brasil Ltda.
12 Dr. Reddy's Laboratories 31-03-17 100% AUD 49.58 35 (503) 881 413 413 - 820 (6) - (6) -
(Australia) Pty. Limited
13 Dr. Reddy's Laboratories 31-03-17 100% CAD 48.59 - 105 34 139 139 - 131 - - - -
(Canada) Inc.
14 Dr. Reddy's Laboratories (EU) Limited 31-03-17 100% GBP 80.90 723 2400 787 3910 3910 - 1838 968 192 776 -
15 Dr. Reddy's Laboratories (Proprietary) Limited 31-03-17 100% ZAR 4.85 - 152 634 786 786 - 1241 (11) 19 (30) -
16 Dr. Reddy's Laboratories (UK) Limited 31-03-17 100% GBP 80.90 - 1653 1490 3143 3143 - 3206 221 81 140 -
17 Dr. Reddy's Laboratories Inc.(1) 31-03-17 100% USD 64.85 580 18361 34934 53875 53875 - 66073 8315 (831) 9146 -
18 Dr. Reddy's Laboratories International SA 31-03-17 100% CHF 64.83 275 - 1 276 276 - - (3) - (3) -
19 Dr. Reddy's Laboratories Japan KK 31-03-17 100% JPY 0.58 14 (13) - 1 1 - - (12) - (12) -
20 Dr Reddy's Laboratories Kazakhstan LLP 31-03-17 100% KZT 0.21 31 (4) 13 40 40 - - (4) - (4) -
21 Dr. Reddy's Laboratories LLC 31-03-17 100% UAH 2.40 71 (20) 926 977 977 - 1500 (432) 14 (446) -
Ukraine
22 Dr. Reddy's Laboratories Louisiana 31-03-17 100% USD 64.85 - 1803 1989 3792 3792 - 2853 (792) - (792) -
LLC (1)
23 Dr. Reddy's Laboratories New 31-03-17 100% USD 64.85 - (568) 1766 1198 1198 - - (586) 4 (590) -
York Inc.
24 Dr. Reddy's Laboratories Romania SRL 31-03-17 100% RON 15.23 24 143 34 201 201 - 410 20 11 9 -
25 Dr. Reddy's Laboratories SA 31-03-17 100% USD 64.85 5027 32613 32258 69898 69898 - 14237 (1186) (46) (1140) -
26 Dr. Reddy's Laboratories SAS 31-03-17 100% COP 0.02 49 (51) 138 136 136 - 63 (24) - (24) -
27 Dr. Reddy's Laboratories Tennessee LLC (1) 31-03-17 100% USD 64.85 1120 (2962) 2159 317 317 - 282 (825) - (825) -

 

28 Dr. Reddy's New Zealand 31-03-17 100% NZD 45.31 - 52 20 72 72 - 91 5 - 5 -
Limited
29 Dr. Reddy's Pharma SEZ Limited 31-03-17 100% INR 1.00 1 (1) - - - - - - - - -
30 Dr. Reddy's Research 31-03-17 100% INR 1.00 - 5 20 25 25 - - (1) 20 (21) -
Foundation
31 Dr. Reddy's Singapore PTE. LTD. 31-03-17 100% SGD 46.41 25 16 1 42 42 - 35 2 - 2 -
32 Dr. Reddy's Srl 31-03-17 100% EUR 69.29 6 (868) 906 44 44 - 19 (42) - (42) -
33 Dr. Reddy's Venezuela C.A. 31-03-17 100% VEF 0.09(4) 58 (4087) 4094 65 65 - 17 (19) - (19) -
34 DRL Impex Limited 31-03-17 100% INR 1.00 760 (762) 16 14 14 - - (2) - (2) -
35 Euro Bridge Consulting B.V. 31-03-17 100% EUR 69.29 41 113 - 154 154 - - (3) - (3) -
36 Idea2Enterprises (India) Private 31-03-17 100% INR 1.00 25 1510 4 1539 1539 - - - - - -
Ltd.
37 Imperial Credit Private Limited 31-03-17 100% INR 1.00 12 9 - 21 21 - - - - - -
(w e f 22.02.2017)
38 Industrias Quimicas Falcon de 31-03-17 100% MXN 3.45 594 (189) 3075 3480 3480 - 3746 350 140 210 -
Mexico S.A. de C.V.
39 Kunshan Rotam Reddy 31-03-17 51.33% RMB 9.41 - - - - - - - - - 349 -
Pharmaceutical Company
Limited(5)
40 Lacock Holdings Limited 31-03-17 100% EUR 69.29 1 125 21 147 147 - - (32) - (32) -
41 Dr. Reddy's Research and 31-03-17 100% EUR 69.29 451 (838) 1483 1096 1096 - 259 (15) (78) 63 -
Development B.V. (formerly Octoplus
BV)
42 OctoPlus Development B.V. (3) 31-03-17 100% EUR 69.29 - - - - - - 782 366 366 -
43 OctoPlus PolyActive Sciences 31-03-17 100% EUR 69.29 - - - - - - - 0 - 0 -
B.V.(3)
44 OctoPlus Sciences B.V.(3) 31-03-17 100% EUR 69.29 - - - - - - - (18) - (18) -
45 OctoPlus Technologies B.V.(3) 31-03-17 100% EUR 69.29 - - - - - - - (254) - (254) -
46 OctoShare B.V.(3) 31-03-17 100% EUR 69.29 - - - - - - - (39) - (39) -
47 OOO Dr. Reddy's Laboratories 31-03-17 100% RUB 1.15 738 1079 10288 12105 12105 - 14812 (862) 61 (923) -
Ltd.
48 OOO DRS LLC 31-03-17 100% RUB 1.15 30 89 106 225 225 - - (18) - (18) -
49 Promius Pharma LLC(1) 31-03-17 100% USD 64.85 1713 (12509) 12688 1892 1892 - 1663 (3230) - (3230) -
50 Reddy Antilles N.V. 31-03-17 100% USD 64.85 52 (186) 354 220 220 - - 10 - 10 -
51 Reddy Holding GmbH(2) 31-03-17 100% EUR 69.29 2 20200 8034 28236 28236 - - 2620 1112 1508 -
52 Reddy Netherlands B.V. 31-03-17 100% EUR 69.29 7 2713 22 2742 2742 - - (63) (25) (38) -
53 Reddy Pharma Iberia SA 31-03-17 100% EUR 69.29 566 (526) 30 70 70 - 20 (11) - (11) -
54 Reddy Pharma Italia S.R.L. 31-03-17 100% EUR 69.29 63 (124) 1089 1028 1028 - - (1) - (1) -
(formerly Reddy Pharma Italia
S.p.A.)
55 Reddy Pharma SAS 31-03-17 100% EUR 69.29 72 (60) 16 28 28 - - (41) - (41) -
56 Reddy Cheminor S A(6) 31-03-17 100% EUR 69.29 - - - - - - - - - - -

(1) Tax expense for these entities is computed together as per the tax laws of UnitedStates. The total tax expense is presented in Sl. No. 17 - Dr. Reddy's Laboratories Inc.

(2) Tax expense for these entities is computed together as per the tax laws of Germany.The total tax expense is presented in Sl. No. 51 - Reddy Holding GmbH. (3) Tax expense forthese entities is computed together as per the tax laws of Netherlands. The total taxexpense is presented in Sl. No. 41 - Dr. Reddy's Research and Development B.V. Theseentities are merged with Dr. Reddy's Research and Development B.V. w.e.f. 1 January 2017.

(4) 6.48 ` INR per VEF is derived from the DIPRO rate of VEF 10 per US$. TheCompany has used DICOM rate of VEF 709 per US$ in the consolidated fi nancial statementsfor translating Venezuelan subsidiary's net monetary assets.

(5) The investment has been accounted using equity method. Refer note 2.23 ofconsolidated fi nancial statements. (6) Entity liquidated on 20 July 2016.

Part "B": Associates and joint ventures

SHARES OF ASSOCIATE/ JOINT VENTURES HELD BY THE COMPANY ON THE YEAR END PROFIT/LOSS FOR THE YEAR ASSOCIATE/JOINT VENTURE
SL. NO. NAME OF THE ASSOCIATE/ JOINT VENTURE LATEST AUDITED BALANCE SHEET DATE NO. AMOUNT OF INVESTMENT IN ASSOCIATES/JOINT VENTURE EXTEND OF HOLDING % NET WORTH ATTRIBUTABLE TO SHAREHOLDING AS PER LATEST AUDITED BALANCE SHEET CONSIDERED IN CONSOLIDATION NOT CONSIDERED IN CONSOLIDATION DESCRIPTION OF HOW THERE IS A SIGNIFICANT INFLUENCE REASON WHY THE IS NOT CONSOLIDATED
1 DRANU LLC USA NA NA 360 50% - - - NA NA
2 DRSS Solar Power Private Limited India(1) 31-Mar-17 26000 - 26% - - - NA NA
3 DRES Energy Private LimitedIndia(2) 31-Mar-17 8580000 86 26% - (1) (1) NA NA

(1) DRSS Solar Power Private Limited India is under liquidation. (2) DRES EnergyPrivate Limited is yet to commence operations.

for and on behalf of the board of directors of Dr. Reddy's Laboratories Limited

K Satish Reddy Chairman
G V Prasad Co-Chairman & Chief Executive Offi cer
Place : Hyderabad Saumen Chakraborty President & Chief Financial Offi cer
Date : 12 May 2017 Sandeep Poddar Company Secretary

ANNEXURE-III

FORM NO. AOC – 2

(Pursuant to clause (h) of sub-section (3) of Section 134 of the Companies Act 2013and Rule 8(2) of the Companies (Accounts) Rules 2014)

Form for disclosure of particulars of contracts/arrangements entered into by thecompany with related parties referred to in sub-section (1) of section 188 of theCompanies Act 2013 including certain arm's length transactions under third provisothereto

1. Details of contracts or arrangements or transactions not at arm's length basis: None

(a) Name(s) of the related party and nature of relationship (b) Nature ofcontracts/arrangements/transactions (c) Duration of thecontracts/arrangements/transactions

(d) Salient terms of the contracts/arrangements/transactions including the value ifany

Not applicable (e) Justifi cation for entering into such contracts/arrangements ortransactions (f) Date(s) of approval by the board (g) Amount paid as advances if any (h)Date on which the special resolution was passed in general meeting as required under first proviso to section 188

2. Details of material contracts or arrangement or transactions at arm's length basis
(a) Names(s) of the related party and nature of relationship Dr. Reddy's Laboratories Inc. USA wholly owned subsidiary. Transfer or receipt of products goods materials or services. Ongoing. Transfer or receipt of products goods materials or services on arm's length for an estimated amount of up to US$ 1100 million every fi nancial year. 13 May 2014.
(b) Nature of contracts/arrangements/transactions
(c) Duration of the contracts/arrangements/transactions
(d) Salient terms of the contracts/arrangements/transactions including the
value if any
(e) Date(s) of approval by the board if any
(f) Amount paid as advances if any -