Form 6-K DR REDDYS LABORATORIES For: Oct 25

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13A-16 OR 15D-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

October 2016

Commission File Number 1-15182

 

 

DR. REDDY’S LABORATORIES LIMITED

(Translation of registrant’s name into English)

 

 

8-2-337, Road No. 3, Banjara Hills

Hyderabad, Telangana 500 034, India

+91-40-49002900

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  x                    Form 40-F  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ¨

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ¨

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ¨                     No  x

If “Yes” is marked, indicate below the file number assigned to registrant in connection with Rule 12g3-2(b): 82-            .

 

 

 

---

DISCLOSURE OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

We hereby furnish the United States Securities and Exchange Commission with copies of the following information about our public disclosures regarding our results of operations and financial condition for the quarter and half year ended September 30, 2016.

On October 25, 2016, we announced our results of operations for the quarter and half year ended September 30, 2016. We issued a press release announcing our results under International Financial Reporting Standards (“IFRS”), a copy of which is attached to this Form 6-K as Exhibit 99.1.

We have made available to the public on our web site, www.drreddys.com, the following: Indian Accounting Standards (“Ind AS”) Unaudited Standalone Financial Results and Ind AS Unaudited Consolidated Financial Results for the quarter and half year ended September 30, 2016 along with respective review reports. These documents are attached to this Form 6-K as Exhibits 99.2 and 99.3, respectively.

---

EXHIBITS

 

Exhibit Number		Description of Exhibits
99.1		Press Release, “Dr. Reddy’s Q2 and H1 FY17 Financial Results”, October 25, 2016.
99.2		Ind AS Unaudited Standalone Financial Results for the quarter and half year ended September 30, 2016, together with review report.
99.3		Ind AS Unaudited Consolidated Financial Results for the quarter and half year ended September 30, 2016, together with review report.

---

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

				DR. REDDY’S LABORATORIES LIMITED (Registrant)
Date: October 25, 2016				By:		/s/ Sandeep Poddar
						Name:		Sandeep Poddar
						Title:		Company Secretary

Exhibit 99.1

 

 

DR. REDDY’S LABORATORIES LTD. 8-2-337, Road No. 3, Banjara Hills, Hyderabad - 500034. Telangana, India.		CONTACT
		INVESTOR RELATIONS		MEDIA RELATIONS
		SAUNAK SAVLA [email protected] (Ph: +91-40-4900 2135)		CALVIN PRINTER [email protected] (Ph: +91-40-4900 2121)

Dr. Reddy’s Q2 and H1 FY17 Financial Results

 

Q2 Revenues at Rs.35.9 Bn   [QoQ growth: 11%]   Q2 EBITDA at Rs.6.4 Bn   [17.9% of Revenues]		H1 Revenues at Rs.68.2 Bn   [YoY decline: 12%]   H1 EBITDA at Rs.10.4 Bn   [15.2% of Revenues]

Hyderabad, India, October 25, 2016: Dr. Reddy’s Laboratories Ltd. (BSE: 500124 | NSE: DRREDDY | NYSE: RDY) today announced its consolidated financial results for the second quarter and half year ended September 30, 2016 under International Financial Reporting Standards (IFRS).

Q2 FY17: Key Highlights

 

•

Revenues at Rs.35.9 billion: QoQ growth: 11%

 

•

YoY decline: 10%

 

•

Gross Profit Margin at 56.0%. Lower by ~530 bps versus the same quarter last year

 

•

Research & Development (R&D) spend at Rs.5.2 billion. [14.5% of Revenues]

 

•

Selling, general & administrative (SG&A) expenses at Rs.11.8 billion [YoY increase: 6%]

 

•

Includes NPPA provision of Rs.344 million, explained in details in the note

 

•

EBITDA at Rs.6.4 billion [17.9% of Revenues]

 

•

Profit after tax at Rs.2.9 billion [8.2% of Revenues]

H1 FY17: Key Highlights

 

•

Revenues at Rs.68.2 billion

 

•

YoY decline: 12%

 

•

Gross Profit Margin at 56.1%. Lower by ~510 bps versus H1FY 16

 

•

Research & Development (R&D) spend at Rs.10.0 billion. [14.7% of Revenues]

 

•

Selling, general & administrative (SG&A) expenses at Rs.24.1 billion [YoY increase: 9%]

 

•

EBITDA at Rs.10.4 billion [15.2% of Revenues]

 

•

Profit after tax at Rs.4.2 billion [6.2% of Revenues]

Commenting on the results, Co-chairman and CEO, G V Prasad said “All our major businesses have shown sequential improvement over the previous quarter with revenues growing by 11% and EBITDA by 61%. We have made considerable progress in our remediation efforts and continue to work on addressing the concerns of the regulators. Looking ahead we will continue to focus on launching new products in our generics business, improving productivity and strengthening our quality management systems.”

---

 

All amounts in millions, except EPS		All US dollar amounts based on convenience translation rate of 1 USD = Rs.66.58

Dr. Reddy’s Laboratories Limited and Subsidiaries

Consolidated Income Statement

 

Particulars		Q2 FY 17												Q2 FY 16												Growth %
		($)				(Rs.)				%				($)				(Rs.)				%
Revenues			539				35,857				100.0				599				39,889				100.0				(10	)
Cost of revenues			237				15,760				44.0				232				15,421				38.7				2
Gross profit			302				20,097				56.0				368				24,468				61.3				(18	)
Operating Expenses
Selling, general & administrative expenses			177				11,774				32.8				166				11,058				27.7				6
Research and development expenses			78				5,214				14.5				67				4,473				11.2				17
Other operating expense / (income)			(4	)			(277	)			(0.8	)			(5	)			(320	)			(0.8	)			(13	)
Results from operating activities			51				3,386				9.4				139				9,257				23.2				(63	)
Finance expense / (income), net			(5	)			(365	)			(1.0	)			3				216				0.5				(269	)
Share of (profit) of equity accounted investees, net of income tax			(1	)			(84	)			(0.2	)			(1	)			(57	)			(0.1	)			49
Profit before income tax			58				3,835				10.7				137				9,098				22.8				(58	)
Income tax expense			13				885				2.5				28				1,880				4.7				(53	)
Profit for the period			44				2,950				8.2				108				7,218				18.1				(59	)
Diluted EPS			0.27				17.76								0.63				42.20								(58	)

EBITDA Computation

 

Particulars		Q2 FY 17								Q2 FY 16
		($)				(Rs.)				($)				(Rs.)
Profit before income tax			58				3,835				137				9,098
Interest (income) / expense net*			(5	)			(329	)			(3	)			(172	)
Depreciation			28				1,897				24				1,606
Amortization			14				950				13				860
Impairment			1				67				—				—
EBITDA			96				6,420				171				11,392
EBITDA (% to sales)							17.9								28.6

 

*	-  Includes income from Investments

Key Balance Sheet Items

 

Particulars		As on Sep 30, 2016								As on June 30, 2016
		($)				(Rs.)				($)				(Rs.)
Cash and cash equivalents and Other current Investments			321				21,379				384				25,578
Trade receivables			555				36,939				533				35,499
Inventories			428				28,516				419				27,922
Property, plant and equipment			842				56,052				825				54,951
Goodwill and Other Intangible assets			762				50,766				425				28,284
Loans and borrowings (current & non-current)			908				60,480				565				37,632
Trade payables			184				12,281				191				12,723
Equity			1,731				1,15,264				1,714				1,14,112

---

All amounts in millions, except EPS		All US dollar amounts based on convenience translation rate of 1 USD = Rs.66.58

Revenue Mix by Segment [Year on year]

 

Particulars		Q2 FY 17												Q2 FY 16												Growth %
		($)				(Rs.)				%				($)				(Rs.)				%
Global Generics			435				28,995				81				492				32,768				82				-12
North America							16,134												18,563								-13
Europe*							1,776												2,124								-16
India							6,251												5,464								14
Emerging Markets#							4,834												6,617								-27
PSAI			87				5,784				16				89				5,918				15				-2
North America							1,135												692								64
Europe							2,095												2,426								-14
India							575												724								-21
Rest of World							1,979												2,076								-5
Proprietary Products & Others			16				1,078				3				18				1,203				3				-10
Total			539				35,857				100				599				39,889				100				-10

Revenue Mix by Segment [Sequential]

 

Particulars		Q2 FY 17												Q1 FY 17												Growth %
		($)				(Rs.)				%				($)				(Rs.)				%
Global Generics			435				28,995				81				400				26,638				82				9	%
North America							16,134												15,523								4	%
Europe*							1,776												1,615								10	%
India							6,251												5,223								20	%
Emerging Markets#							4,834												4,277								13	%
PSAI			87				5,784				16				70				4,692				15				23	%
North America							1,135												643								77	%
Europe							2,095												1,947								8	%
India							575												372								55	%
Rest of World							1,979												1,730								14	%
Proprietary Products & Others			16				1,078				3				15				1,015				3				6	%
Total			539				35,857				100				486				32,345				100				11	%

 

*	Europe primarily includes Germany, UK and out licensing sales business

#	Emerging Markets refers to Russia, other CIS countries, Romania and Rest of the World markets including Venezuela

---

Segmental Analysis

Global Generics (GG)

Revenues from GG segment at Rs.29.0 billion, year-on-year decline of 12%; decline primarily on account of lower contribution from North America and loss of sales from Venezuela. However, all the businesses have grown sequentially.

 

•

Revenues from North America at Rs.16.1 billion. Year-on-year decline of 13% is primarily on account of increased competition in valgancyclovir and injectable franchise, coupled with pricing pressure and moderation in volumes off-take.

During the quarter we launched 4 new products i.e. omeprazole sodium bi-carbonate, nitroglycerin SLT, paricalcitol injection and bupropion SR.

As of September 30, 2016, cumulatively 85 generic filings are pending for approval with the USFDA (83 ANDAs and 2 NDAs under 505(b)(2) route). Of these 83 ANDAs, 56 are Para IVs out of which we believe 19 have ‘First to File’ status. Further, these 83 ANDAs include 7 ANDAs, acquired from Teva, of which 6 are Para IVs.

 

•

Revenues from Emerging Markets at Rs.4.8 billion, year-on-year decline of 27%. [Ex-Venezuela: decline of 9%]

 

•

Revenues from Russia at Rs.2.7 billion, year-on-year decline of 8%. In constant currency it declined 5%. Normalizing for the base effect, the year-on-year H1 growth is 7%.

 

•

Revenues from other CIS countries and Romania market at Rs.0.9 billion, year-on-year decline of 11%.

 

•

Revenues from Rest of World (RoW) territories at Rs.1.3 billion, year-on-year decline of 53% primarily on account of no sales in Venezuela.

 

•

Revenues from India at Rs.6.3 billion, year-on-year growth: 14%.

 

•

Revenues from Europe at Rs.1.8 billion, year-on-year decline: 16%.

Pharmaceutical Services and Active Ingredients (PSAI)

 

•

Revenues from PSAI at Rs.5.8 billion, year-on-year decline of 2%. On a sequential basis revenues registered a growth of 23% aided by improved order flow and supply situations

 

•

During the quarter, 15 DMFs were filed globally of which 3 were in the US. The cumulative number of DMF filings as of September 30, 2016 was 797.

Proprietary Products (PP)

Zembrace™Sym Touch ™(Suma 3 mg) injection and Sernivo™ (betamethasone dipropionate) Spray, 0.05% are gradually gaining traction.

---

Income Statement Highlights:

 

•

Gross profit margin at 56.0% and declined by ~530 bps over that of previous year, primarily on account of lower sales due to increased competitive intensity in some of our key molecules in the US. Gross profit margin for GG and PSAI business segments are at 62.3% and 22.0% respectively.

 

•

SG&A expenses at Rs.11.8 billion, year-on-year increase of 6%.

Given the Bombay High Court’s dismissal of the writ petition filed by the IPA (Indian Pharmaceutical Alliance) regarding price controls by the NPPA (National Pharmaceutical Pricing Authority), the Company has accrued a potential liability of Rs.344 million during the quarter.

The net increase, adjusted for the above NPPA provision, is largely due to annual increments, additional manpower deployment in the past 12 months and other sales and marketing spend for events specific to this quarter.

The sequential decline, adjusted for the above NPPA provision, is primarily on account of the reduced (a) remediation related costs and (b) launch spends by PP in the first quarter.

 

•

Research & development expenses at Rs.5.2 billion. As a % to Revenues- Q2 FY 17:14.5% | Q1 FY 17: 14.8% | Q2 FY 16: 11.2%]. Current quarter also includes some spend towards the IPR&D assets in-licensed from Xenoport and Eisai. Continued focus on building complex generics, biosimilars and differentiated products pipeline.

 

•

Net Finance income at Rs.365 million compared to the net finance expense of Rs.216 million in Q2FY16. The incremental benefit of Rs.581 million is on account of:

 

•

Net foreign exchange gain of Rs.37 million in the current quarter vs net foreign exchange loss of Rs.388 million in the previous year

 

•

Increase in profit on sales of investments by Rs.276 million.

 

•

Net increase in interest expense of Rs.118 million.

 

•

Profit after Tax at Rs.2.9 billion

 

•

Diluted earnings per share is at Rs.17.8

 

•

Capital expenditure is at Rs.3.1 billion.

---

Earnings Call Details (06:30 pm IST, 09:00 am EDT, October 25, 2016)

The Company will host an earnings call to discuss the performance and answer any questions from participants. This call will be accessible through an audio dial-in and a web-cast.

Audio conference Participants can dial-in on the numbers below

 

Primary number:				91 22 3960 0616
Secondary number:				91 22 6746 5826
International Toll Free Number		USA		18667462133
		UK		08081011573
		Singapore		8001012045
		Hong Kong		800964448

 

Playback of call:		91 22 3065 2322, 91 22 6181 3322
Conference ID:		375#
Web-cast		More details will be provided through our website, www.drreddys.com

Transcript of the event will be available at www.drreddys.com. Playback will be available for a few days.

About Dr. Reddy’s: Dr. Reddy’s Laboratories Ltd. (BSE: 500124, NSE: DRREDDY, NYSE: RDY) is an integrated pharmaceutical company, committed to providing affordable and innovative medicines for healthier lives. Through its three businesses - Pharmaceutical Services & Active Ingredients, Global Generics and Proprietary Products – Dr. Reddy’s offers a portfolio of products and services including APIs, custom pharmaceutical services, generics, biosimilars and differentiated formulations. Our major therapeutic areas of focus are gastro-intestinal, cardiovascular, diabetology, oncology, pain management and dermatology. Dr. Reddy’s operates in markets across the globe. Our major markets include – USA, India, Russia and other CIS countries. For more information, log on to: www.drreddys.com

Disclaimer: This press release may include statements of future expectations and other forward-looking statements that are based on the management’s current views and assumptions and involve known or unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words “may”, “will”, “should”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue” and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements due to without limitation, (i) general economic conditions such as performance of financial markets, credit defaults , currency exchange rates , interest rates , persistency levels and frequency / severity of insured loss events (ii) mortality and morbidity levels and trends, (iii) changing levels of competition and general competitive factors, (iv) changes in laws and regulations and in the policies of central banks and/or governments, (v) the impact of acquisitions or reorganisation , including related integration issues.

The company assumes no obligation to update any information contained herein.

Exhibit 99.2

Limited Review Report On Quarterly Financial Results and Year to Date Results of the Company Pursuant to the Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

To Board of Directors of

Dr. Reddy’s Laboratories Limited

We have reviewed the accompanying statement of unaudited standalone financial results of Dr. Reddy’s Laboratories Limited for the quarter ended September 30, 2016 and the year to-date results for the period April 01, 2016 to September 30, 2016 attached herewith, being submitted by the Company pursuant to the requirements of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

This statement is the responsibility of the Company’s Management and has been approved by the Board of Directors. Our responsibility is to issue a report on these financial statements based on our review.

We conducted our review in accordance with the Standard on Review Engagement (SRE) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Institute of Chartered Accountants of India. This standard requires that we plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and accordingly, we do not express an audit opinion.

Based on our review conducted as above, nothing has come to our attention that causes us to believe that the accompanying statement of unaudited standalone financial results prepared in accordance with applicable accounting standards i.e. Ind AS prescribed under Section 133 of the Companies Act, 2013 read with relevant rules issued thereunder or by the Institute of Chartered Accountants of India and other recognized accounting practices and policies has not disclosed the information required to be disclosed in terms of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and SEBI Circular dated 5th July, 2016 including the manner in which it is to be disclosed, or that it contains any material misstatement.

The accompanying standalone financial results and other financial information for the three and six months ended September 30, 2015, the three months ended June 30, 2016, and for the year ended March 31, 2016, have been reviewed by other auditors, who issued an unmodified review report on those statements.

For S.R. BATLIBOI & ASSOCIATES LLP

ICAI Firm Registration Number: 101049W/E300004

Chartered Accountants

per Kaustav Ghose

Partner

Membership No.: 57828

Place: Vishakhapatnam

Date: October 25, 2016

---

DR. REDDY’S LABORATORIES LIMITED

PART I : STATEMENT OF UNAUDITED STANDALONE FINANCIAL RESULTS FOR THE QUARTER AND HALF

YEAR ENDED 30 SEPTEMBER 2016

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

 

				Quarter ended												Half year ended								Year ended
Sl. No.		Particulars		30.09.2016				30.06.2016				30.09.2015				30.09.2016				30.09.2015				31.03.2016
				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
1		Income from operations
		a) Net sales / income from operations (inclusive of excise duty)			26,059				21,507				28,823				47,566				54,112				100,060
		b) License fees and service income			49				41				120				90				166				2,288
		c) Other operating income			167				89				230				256				360				571
		Total income from operations (inclusive of excise duty)			26,275				21,637				29,173				47,912				54,638				102,919
2		Expenses
		a) Cost of materials consumed			4,904				4,936				5,292				9,840				10,510				20,727
		b) Purchase of traded goods			1,816				1,594				1,480				3,410				3,023				6,104
		c) Changes in inventories of finished goods, work-in-progress and stock-in-trade			(83	)			(1,251	)			(185	)			(1,334	)			(566	)			(288	)
		d) Employee benefits expense			4,802				4,684				4,241				9,486				8,307				16,934
		e) Selling expenses			2,636				2,521				2,519				5,157				5,142				9,275
		f) Depreciation and amortisation			1,893				1,725				1,591				3,618				3,014				6,495
		g) Other expenditure			6,731				6,795				6,422				13,415				12,177				29,514
		Total expenses			22,699				21,004				21,360				43,592				41,607				88,761
3		Profit before other income and finance costs (1 - 2)			3,576				633				7,813				4,320				13,031				14,158
4		Other income			639				3,918				627				4,446				1,732				3,249
5		Profit before finance costs (3 + 4)			4,215				4,551				8,440				8,766				14,763				17,407
6		Finance costs			123				126				146				249				359				641
7		Profit before tax (5 - 6)			4,092				4,425				8,294				8,517				14,404				16,766
8		Tax expense			960				334				1,468				1,294				2,644				3,023
9		Net profit for the period / year (7 - 8)			3,132				4,091				6,826				7,223				11,760				13,743
10		Other Comprehensive income			(24	)			(124	)			(8	)			(148	)			(22	)			(289	)
11		Total Comprehensive income (9 + 10)			3,108				3,967				6,818				7,075				11,738				13,454
12		‘Paid-up equity share capital (face value Rs. 5/- each)			829				828				853				829				853				853
13		Other Equity																							119,931
14		Earnings per equity share (par value Rs. 5/- each)
		- Basic			18.91				24.13				40.02				43.10				68.98				80.59
		- Diluted			18.86				24.07				39.90				43.00				68.75				80.34
					(Not   annualised)				(Not   annualised)				(Not   annualised)				(Not   annualised)				(Not   annualised)

See accompanying notes to the financial results

---

Segment Information

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

 

				Quarter ended												Half year ended								Year ended
Sl. No.		Particulars		30.09.2016				30.06.2016				30.09.2015				30.09.2016				30.09.2015				31.03.2016
				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
		Segment wise revenue and results and capital employed:
1		Segment revenue (inclusive of excise duty):
		a) Pharmaceutical Services and Active Ingredients			5,979				5,248				6,150				11,227				11,972				23,096
		b) Global Generics			21,928				17,920				24,478				39,848				45,307				85,131
		c) Proprietary Products			—				—				1				—				1				1
		Total (inclusive of excise duty)			27,907				23,168				30,629				51,075				57,280				108,228
		Less: Inter segment revenue			1,632				1,531				1,456				3,163				2,642				5,309
		Add: Other unallocable income			—				—				—				—				—				—
		Total income from operations			26,275				21,637				29,173				47,912				54,638				102,919
2		Segment results:
		Profit / (loss) before tax and interest from each segment
		a) Pharmaceutical Services and Active Ingredients			(250	)			(743	)			152				(993	)			428				(1,324	)
		b) Global Generics			5,178				3,865				9,464				9,043				17,035				23,081
		c) Proprietary Products			(871	)			(750	)			(718	)			(1,621	)			(1,441	)			(2,975	)
		Total			4,057				2,372				8,898				6,429				16,022				18,782
		Less: (i) Interest			123				126				146				249				359				641
		(ii) Other un-allocable expenditure / (income), net			(158	)			(2,179	)			458				(2,337	)			1,259				1,375
		Total profit before tax			4,092				4,425				8,294				8,517				14,404				16,766

Global Generics includes operations of Biologics business. Inter-segment revenue represents sale from Pharmaceutical Services and Active Ingredients to Global Generics at cost.

Segmental Capital employed

As certain assets of the Company including manufacturing facilities, development facilities and treasury assets and liabilities are often deployed interchangeably across segments, it is impractical to allocate these assets and liabilities to each segment. Hence, the details for capital employed have not been disclosed in the above table.

---

Statement of assets and liabilities

All amounts in Indian Rupees millions

 

		As at				As at
PARTICULARS		30.09.2016				31.03.2016
		(Unaudited)				(Unaudited)
ASSETS
Non-current assets
Property, plant and equipment			37,073				35,938
Capital work-in-progress			6,877				6,150
Goodwill			323				323
Other intangible assets			7,707				8,131
Financial assets
Investments			17,959				17,781
Loans			1,917				2,201
Other financial assets			412				456
Deferred tax assets, net			891				635
Current tax assets, net			1,445				1,491
Other non-current assets			762				639
Total Non-Current assets			75,366				73,745
Current assets
Inventories			19,111				16,996
Financial assets
Investments			16,804				32,979
Trade receivables			43,320				38,895
Cash and cash equivalents			410				2,021
Loans			249				184
Others			11,486				11,032
Total Current assets			91,380				102,107
TOTAL – ASSETS			166,746				175,852
EQUITY AND LIABILITIES
Equity
Equity share capital			829				853
Other equity			108,128				119,931
Total Equity			108,957				120,784
Liabilities
Non-current liabilities
Financial liabilities
Borrowings			9,997				9,944
Provisions			749				665
Other Non-current liabilities			—				571
Total Non-current liabilities			10,746				11,180
Current liabilities
Financial liabilities
Borrowings			22,551				20,896
Trade payables			7,563				7,192
Other financial liabilities			14,100				13,601
Other current liabilities			726				494
Provisions			2,103				1,705
Total Current liabilities			47,043				43,888
TOTAL EQUITY AND LIABILITIES			166,746				175,852

---

Notes:

 

1.

The Company adopted Indian Accounting Standards (“Ind AS”) from 1 April 2016 and accordingly these results have been prepared in accordance with the recognition and measurement principles laid down in the Ind AS 34, Interim Financial Reporting prescribed under Section 133 of the Companies Act, 2013 read with the relevant rules issued thereunder and other accounting pronouncements generally accepted in India. Financial results for all the periods presented have been prepared in accordance with the recognition and measurement principles of Ind AS 34.

 

2.	Reconciliation between financial results as previously reported under Previous GAAP and Ind AS for the quarter and half year ended 30 September 2015

 

Particulars		Quarter ended 30.09.2015				Half year ended 30.09.2015
Net profit under previous GAAP			6,475				11,234
Impact on account of measuring investments at fair value through profit and loss			332				528
Recognition of intangible assets not eligible for recognition under Previous GAAP			—				5
Reversal of goodwill amortised under Previous GAAP			5				4
Difference in measurement of employee share based payments			(14	)			8
Impact on current and deferred taxes			30				(7	)
Others			(2	)			(12	)
Net profit under Ind AS			6,826				11,760

 

3.	Reconciliation of equity as on 31 March 2016 as previously reported under Previous GAAP to Ind AS

 

Particulars		As on 31 Mar 2016
Equity reported under Indian GAAP as on 31 March 2016							115,201
Adjustments:
Derecognition of provision for proposed dividend			4,101
Impact on account of measuring investments at fair value			1,218
Recognition of intangible assets not eligible for recognition under Previous GAAP			102
Impact on current and deferred taxes			(646	)
Impact on account of expected credit loss on trade receivables			(40	)
Others			(5	)
							4,730
Equity reported under Ind AS as on 31 March 2016							119,931

 

4.	Other expenditure for the year ended 31 March 2016 includes provision for doubtful debts of Rs.3,559 million pertaining to outstanding receivable from Venezuelan subsidiary.

 

5.

The Company received a warning letter, dated 5 November 2015 from the U.S. FDA, regarding deviations with current Good Manufacturing Practices at its API manufacturing facilities in Srikakulam, Andhra Pradesh and Miryalaguda, Telangana, as well as regarding violations at its oncology formulation manufacturing facility at Duvvada, Visakhapatnam, Andhra Pradesh. The Company submitted its response to the warning letter on 7 December 2015. The Company believes that it can resolve the issues raised by the U.S. FDA satisfactorily in a timely manner. The Company takes the matters identified by U.S. FDA in the warning letter seriously and will continue to work diligently to address the observations identified in the warning letter and is concurrently continuing to develop and implement its corrective action plans relating to the warning letter. Further, the Company has provided an update to the U.S. FDA on the progress of remediation in January 2016, March 2016, May 2016 and August 2016.

---

6.

On 26 September 2016, the Bombay High court dismissed the writ petition filed by the Indian Pharmaceutical Alliance in July 2014 contending the validity of certain notifications issued in July 2014 by the National Pharmaceutical Pricing Authority. Consequently, an amount of Rs. 344 million was recorded as a potential liability including the interest thereon. The aforesaid amount was included under “selling expenses”.

 

7.	The unaudited results have been reviewed by the Audit Committee of the Board and approved by the Board of Directors of the Company at their meeting held on 25 October 2016.

 

8.	The results for the quarter and half year ended 30 September 2015, quarter ended 30 June 2016, and the year ended 31 March 2016 have been reviewed by other auditors. An unmodified report has been issued by them thereon.

 

9.	The results for the quarter and half year ended 30 September 2016 periods presented have been subjected to a “Limited review” by the Statutory Auditors of the Company. An unqualified report has been issued by them thereon.

 

		By order of the Board
		For Dr. Reddy’s Laboratories Limited
Place: Visakhapatnam		G V Prasad
Date: 25 Oct 2016		Co-Chairman & Chief Executive Officer

Exhibit 99.3

Limited Review Report On Quarterly Financial Results and Year to Date Results of the Company Pursuant to the Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

To Board of Directors of

Dr. Reddy’s Laboratories Limited

We have reviewed the accompanying statement of unaudited consolidated financial results of Dr. Reddy’s Laboratories Limited for the quarter ended September 30, 2016 and the year to-date results for the period April 01, 2016 to September 30, 2016 attached herewith, being submitted by the company pursuant to the requirements of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

This statement is the responsibility of the Company’s Management and has been approved by the Board of Directors. Our responsibility is to issue a report on these financial statements based on our review.

We conducted our review in accordance with the Standard on Review Engagement (SRE) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Institute of Chartered Accountants of India. This standard requires that we plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and accordingly, we do not express an audit opinion.

We did not review assets of Rs. 41,724 million as at September 30, 2016, and revenues of Rs. 3,986 million and Rs. 7,495 million for the quarter and the year to date period ended September 30, 2016 respectively, included in the accompanying unaudited consolidated financial results relating to subsidiaries, whose financial information have been reviewed by other auditors and whose reports have been furnished to us. Our conclusion on the unaudited quarterly financial results, in so far as it relates to such subsidiaries is based solely on the reports of other auditors.

Based on our review conducted as above, nothing has come to our attention that causes us to believe that the accompanying statement of unaudited consolidated financial results prepared in accordance with applicable accounting standards i.e. Ind AS prescribed under Section 133 of the Companies Act, 2013 read with relevant rules issued thereunder or by the Institute of Chartered Accountants of India and other recognized accounting practices and policies has not disclosed the information required to be disclosed in terms of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and SEBI Circular dated 5th July, 2016 including the manner in which it is to be disclosed, or that it contains any material misstatement.

The accompanying consolidated financial results and other financial information for the three and six months ended September 30, 2015, the three months ended June 30, 2016, and for the year ended March 31, 2016, have been reviewed by other auditors, who issued unmodified review report on those statements.

For S.R. BATLIBOI & ASSOCIATES LLP

ICAI Firm Registration Number: 101049W/E300004

Chartered Accountants

per Kaustav Ghose

Partner

Membership No.: 57828

Place: Vishakhapatnam

Date: October 25, 2016

---

DR. REDDY’S LABORATORIES LIMITED

STATEMENT OF UNAUDITED CONSOLIDATED FINANCIAL RESULTS FOR THE QUARTER & HALF YEAR ENDED 30 SEPTEMBER 2016

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

 

				Quarter ended												Half year ended								Year ended
Sl. No.		Particulars		30.09.2016				30.06.2016				30.09.2015				30.09.2016				30.09.2015				31.03.2016
				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
1		Income from operations
		a) Net sales / income from operations (inclusive of excise duty)			35,287				31,857				39,209				67,144				76,424				152,475
		b) License fees and service income			570				488				680				1,058				1,043				2,233
		c) Other operating income			306				102				318				408				468				975
		Total income from operations (inclusive of excise duty )			36,163				32,447				40,207				68,610				77,935				155,683
2		Expenses
		a) Cost of materials consumed			5,837				6,075				7,342				11,912				14,045				26,799
		b) Purchase of traded goods			3,223				3,282				2,887				6,505				6,086				11,743
		c) Changes in inventories of finished goods, work-in-progress and stock-in-trade			(386	)			(1,793	)			(948	)			(2,179	)			(1,998	)			(957	)
		d) Employee benefits expense			8,161				8,050				7,870				16,211				15,372				31,174
		e) Selling expenses			3,549				3,268				2,994				6,817				6,124				11,811
		f) Depreciation and amortisation			2,622				2,436				2,235				5,058				4,268				9,389
		g) Other expenditure			9,509				9,663				8,737				19,172				17,111				39,260
		Total expenses			32,515				30,981				31,117				63,496				61,008				129,219
3		Profit before other income and finance costs (1 - 2)			3,648				1,466				9,090				5,114				16,927				26,464
4		Other income			438				670				724				1,108				1,482				2,950
5		Profit before finance costs (3 + 4)			4,086				2,136				9,814				6,222				18,409				29,414
6		Finance costs			126				148				215				274				496				826
7		Profit before tax (5 - 6)			3,960				1,988				9,599				5,948				17,913				28,588
8		Tax expense			956				526				1,909				1,482				3,797				7,511
9		Net profit for the period / year (7 - 8)			3,004				1,462				7,690				4,466				14,116				21,077
10		Share of profit of equity accounted investees, net of tax			85				73				57				158				106				229
11		Net Profit after taxes and share of profit of associates (9 + 10)			3,089				1,535				7,747				4,624				14,222				21,306
12		Other comprehensive income			1,646				147				(956	)			1,793				(177	)			(370	)
13		Total comprehensive income			4,735				1,682				6,791				6,417				14,045				20,936
14		Paid-up equity share capital (face value Rs. 5/- each)			829				828				853				829				853				853
15		Reserves																							124,845
16		Earnings per equity share (par value Rs. 5/- each)
		- Basic			18.64				9.06				45.42				27.59				83.41				124.93
		- Diluted			18.59				9.03				45.29				27.52				83.14				124.54
					(Not   annualised)				(Not   annualised)				(Not   annualised)				(Not   annualised)				(Not     annualised)

See accompanying notes to the financial results

---

Segment Information

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

 

Sl. No.		Particulars		Quarter ended												Half Year ended								Year ended
				30.09.2016				30.06.2016				30.09.2015				30.09.2016				30.09.2015				31.03.2016
				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
		Segment wise revenue and results:
1		Segment revenue (inclusive of excise duty):
		a) Pharmaceutical Services and Active Ingredients			7,538				6,327				6,060				13,865				11,796				28,437
		b) Global Generics			29,193				26,660				34,363				55,853				66,550				128,330
		c) Proprietary Products			588				623				665				1,211				1,361				2,659
		d) Others			498				399				617				897				930				1,704
		Total			37,817				34,009				41,705				71,826				80,637				161,130
		Less: Inter-segment revenue			1,654				1,562				1,498				3,216				2,702				5,447
		Other unallocable income			—				—				—				—				—				—
		Total income from operations			36,163				32,447				40,207				68,610				77,935				155,683
2		Segment results:
		Gross Profit from each segment
		a) Pharmaceutical Services and Active Ingredients			1,278				1,139				1,533				2,417				2,874				4,954
		b) Global Generics			18,067				16,339				22,059				34,406				42,975				84,427
		c) Proprietary Products			507				525				562				1,032				1,139				2,217
		d) Others			252				183				323				435				444				706
		Total			20,104				18,186				24,477				38,290				47,432				92,304
		Less: Other un-allocable expenditure / (income), net			16,144				16,198				14,878				32,342				29,519				63,716
		Total profit before tax			3,960				1,988				9,599				5,948				17,913				28,588

Global Generics includes operations of Biologics business. Inter-segment revenue represents sale from Pharmaceutical Services and Active Ingredients to Global Generics at cost.

Segmental Capital employed

As certain assets of the Company including manufacturing facilities, development facilities and treasury assets and liabilities are often deployed interchangeably across segments, it is impractical to allocate these assets and liabilities to each segment. Hence, the details for capital employed have not been disclosed in the above table.

Notes:

 

1

The Company adopted Indian Accounting Standards (“Ind AS”) from 1 April 2016 and accordingly these results have been prepared in accordance with the recognition and measurement principles laid down in the Ind AS 34, Interim Financial Reporting prescribed under Section 133 of the Companies Act, 2013 read with the relevant rules issued thereunder and other accounting pronouncements generally accepted in India. Financial results for all the periods presented have been prepared in accordance with the recognition and measurement principles of Ind AS 34.

---

2	Reconciliation between financial results as previously reported under Previous GAAP and Ind AS for the quarter and half year ended 30 September 2015

 

Particulars		Quarter ended 30.09.2015				Half year ended 30.09.2015
Net profit under previous GAAP			6,333				12,455
Impact on account of measuring investments at fair value through profit and loss			338				538
Recognition of intangible assets not eligible for recognition under Previous GAAP			613				609
Reversal of goodwill amortised under Previous GAAP			99				198
Difference in measurement of employee share based payments			(14	)			8
Impact on current and deferred taxes			386				438
Others			(8	)			(24	)
Net profit for the period under Ind AS			7,747				14,222

 

3	Reconciliation of equity as on 31 March 2016 as previously reported under Previous GAAP to Ind AS

 

Particulars		As on 31 Mar 2016
Equity reported under previous GAAP as on 31 March 2016							116,156
Adjustments:
Derecognition of provision for proposed dividend			4,101
Impact on account of measuring investments at fair value			1,510
Recognition of intangible assets not eligible for recognition under Previous GAAP			1,035
Impact on current and deferred taxes			1,527
Reversal of goodwill amortised under Previous GAAP			395
Impact on account of consolidation of entities previously do not qualify for consolidation under previous GAAP			226
Impact on account of expected credit loss on trade receivables			(57	)
Others			(48	)
							8,689
Equity reported under Ind AS as on 31 March 2016							124,845

---

4	Statement of Assets and Liabilities

All amounts in Indian Rupees millions

 

PARTICULARS		As at				As at
		30.09.2016				31.03.2016
ASSETS
Non-current assets
Property, plant and equipment			46,740				46,130
Capital work-in-progress			7,935				6,626
Goodwill			4,648				4,650
Other intangible assets			42,595				15,946
Financial assets
Investments			6,406				3,297
Loans			2				8
Deferred tax assets, net			7,407				5,905
Current tax assets, net			1,759				1,348
Other non-current assets			2,204				1,991
Total Non-Current assets			119,696				85,901
Current assets
Inventories			28,516				25,578
Financial assets
Investments			18,936				35,034
Trade receivables			36,884				41,250
Cash and cash equivalents			2,443				4,920
Loans			269				206
Others			11,249				10,950
Total Current assets			98,297				117,938
TOTAL ASSETS			217,993				203,839
EQUITY AND LIABILITIES
Equity
Equity share capital			829				853
Other equity			112,319				124,845
Total Equity			113,148				125,698
Liabilities
Non-current liabilities
Financial liabilities
Borrowings			10,682				10,690
Other financial liabilities			3,103				2,498
Provisions			1,026				947
Deferred tax liabilities, net			1,622				537
Total Non-current liabilities			16,433				14,672
Current liabilities
Financial liabilities
Borrowings			49,688				22,718
Trade payables			9,413				9,068
Other financial liabilities			21,007				23,230
Other current liabilities			1,137				862
Provisions			7,167				7,591
Total Current liabilities			88,412				63,469
TOTAL EQUITY AND LIABILITIES			217,993				203,839

---

5

On 10 June 2016, the Company entered into a definitive purchase agreement with Teva Pharmaceutical Industries Limited (“Teva”) and an affiliate of Allergan plc (“Allergan”) to acquire a portfolio of eight Abbreviated New Drug Applications (“ANDAs”) in the United States for USD 350 million in cash at closing. The acquisition of these ANDAs was contingent on the closing of the Teva/Allergan generics purchase transaction and approval by the U.S. Federal Trade Commission of the Company as a buyer. The acquisition was consummated on 3 August 2016 upon the completion of all closing conditions, and the Company paid Rs. 23,366 million (USD 350 million) as the consideration for the acquired portfolio of ANDAs. As the acquired ANDAs are being developed, they are recorded as intangible assets under development.

 

6

Consequent to an amendment to the collaboration, license and option agreement with Curis Inc.(“Curis”), the Company was allotted 10,208,333 equity shares in Curis in lieu of certain future milestone payments that would be due to the Company under the collaboration agreement. These equity shares are recorded at USD 1.84 per share representing the market price of such equity shares on the date of allotment. The aggregate market value of such equity shares on the date of allotment was Rs. 1,247 million (USD 18.8 million).

 

7

Other expenditure for the quarter and year ended 31 March 2016 includes foreign exchange loss of Rs. 3,845 million and Rs. 4,621 million, respectively, on account of currency devaluation and translation of monetary assets and liabilities using SIMADI / DICOM rate pertaining to the Company’s Venezuelan subsidiary.

 

8

The Company received a warning letter, dated 5 November 2015 from the U.S. FDA, regarding deviations with current Good Manufacturing Practices at its API manufacturing facilities in Srikakulam, Andhra Pradesh and Miryalaguda, Telangana, as well as regarding violations at its oncology formulation manufacturing facility at Duvvada, Visakhapatnam, Andhra Pradesh. The Company submitted its response to the warning letter on 7 December 2015. The Company believes that it can resolve the issues raised by the U.S. FDA satisfactorily in a timely manner. The Company takes the matters identified by U.S. FDA in the warning letter seriously and will continue to work diligently to address the observations identified in the warning letter and is concurrently continuing to develop and implement its corrective action plans relating to the warning letter. Further, the Company has provided an update to the U.S. FDA on the progress of remediation in January 2016, March 2016, May 2016 and August 2016.

 

9

On 26 September 2016, the Bombay High court dismissed the writ petition filed by the Indian Pharmaceutical Alliance in July 2014 contending the validity of certain notifications issued in July 2014 by the National Pharmaceutical Pricing Authority. Consequently, an amount of Rs. 344 million was recorded as a potential liability including the interest thereon. The aforesaid amount was included under “selling expenses”.

 

10	The unaudited results have been reviewed by the Audit Committee of the Board and approved by the Board of Directors of the Company at their meeting held on 25 October 2016.

 

11	The results for the quarter and half year ended 30 September 2015, quarter ended 30 June 2016, and the year ended 31 March 2016 have been reviewed by other auditors. An unmodified report has been issued by them thereon.

 

12	The results for the quarter and half year ended 30 September 2016 periods presented have been subjected to a “Limited review” by the Statutory Auditors of the Company. An unqualified report has been issued by them thereon.

 

By order of the Board

For Dr. Reddy’s Laboratories Limited

 

		G V Prasad
		Co-Chairman & Chief Executive Officer

Place: Visakhapatnam

Date: 25 October 2016