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Dr Reddys Laboratories LtdIndustry : Pharmaceuticals - Indian - Bulk Drugs & Formln
BSE Code:500124
ISIN Demat:INE089A01023
Book Value(Rs):711.61
NSE Symbol:DRREDDY
Div & Yield %:0.84
Market Cap (Rs Cr.):39495.49
P/E(TTM):69.66
EPS(TTM):34.17
Face Value(Rs):5
  Change Company 

Dear members,

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

FINANCIAL HIGHLIGHTS

Table 1 gives the fi nancial highlights of the company for FY2017 as compared to the 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, a decline 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, 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.

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 fi lings in the USA. As of 31 March 2017, cumulatively 101 generic fi lings 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 fi led globally of which nine were in the US. The cumulative 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 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.

TABLE 1 FINANCIAL HIGHLIGHTS ( ` Million)
CONSOLIDATED STANDALONE
FY2017 FY2016 FY2017 FY2016
Total revenue 143,676 158,633 103,110 106,168
Profi t before depreciation, amortization and tax 25,803 37,977 22,796 23,261
Depreciation and amortization 10,266 9,389 7,351 6,495
Profi t before tax 15,537 28,588 15,445 16,766
Tax expense 2,965 7,511 1,604 3,023
Profi t after tax 12,572 21,077 13,841 13,743
Share of profi t of equity accounted investees, net of tax 349 229 - -
Net profi t 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

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 fi nancial statements, prepare a consolidated fi nancial 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 fi nancial statement, a separate statement containing the salient features of the fi nancial statement of its subsidiaries.

In accordance with the above, the consolidated fi nancial statements of the company and all its subsidiaries and joint ventures, prepared in accordance with Indian Accounting Standards (Ind AS) 110 and 111 as specifi ed in the Companies (Indian Accounting Standards) Rules, 2015, form part of the annual report. Further, a statement containing the salient features of the fi nancial 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 fi nancial position of each subsidiary.

In accordance with section 136 of the Companies Act, 2013, the audited fi nancial statements and related information of the subsidiaries, where applicable, will be available for inspection during regular business hours at our registered offi ce 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 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 is given in a separate chapter of this annual report. Similarly, other information for shareholders is provided in the chapter additional shareholders' information. A certifi cate from the statutory auditors of the company confi rming 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 fi t), for a further period of fi ve 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 confi rmed 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 profi les 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 specifi c qualifi cation required for the position. A potential board member is also assessed on the basis of the independence criteria defi ned 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, fi nance, 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 fi nancial reporting (ICOFR), as well as process risks and their mitigation are reviewed by the audit committee.

The company's fi nance, 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 fi nancial controls with reference to fi nancial statements. These controls ensure the accuracy and completeness of the accounting records and preparation of reliable fi nancial 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 profi t of the company for that period;

3. proper and suffi cient 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 fi nancial 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 fi nancial 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 (fi rm registration no. 101049W/E300004) were appointed as statutory auditors of the company at the 32nd 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 ratifi cation by shareholders every year, as may be applicable. The fi rm has consented and confi rmed that the appointment is within the limits specifi ed under section 141(3)(g) of the Companies Act, 2013. The statutory auditors have also confi rmed that they are not disqualifi ed 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 ratifi cation 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 certifi cate 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 (fi rm 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 ratifi ed by the shareholders. As a matter of record, relevant cost audit reports for FY2016 were fi led with the Central Government on 24 August 2016, within the stipulated timeline. The cost audit reports for FY2017 will be also fi led within the timeline.

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

There are no qualifi cations, 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 defi ned 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 Benefi ts) 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 fi nancial 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 fi rst 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 offi ce 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 signifi cant 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

ANNEXURE-I

DIVIDEND DISTRIBUTION POLICY

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

KEY HIGHLIGHTS

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

Special dividend, if any, to be outside the scope of this policy but will be governed by 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 the company), aims to grow the business lines of the company and enhance the rate of return on investments of the shareholders. They present the dividend distribution policy, considering: a) Preservation of a balance between the expectations of its shareholders and company'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 the shareholder's wealth with an objective to distribute a regular dividend through an interim or fi nal dividend or a combination of both.

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

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 or pay dividend, for any fi nancial year, only out of the profi ts of the company for that fi nancial year. The following points set out the statutory obligations of a company/requirements under the Companies Act, 2013 with respect to declaration/payment of dividend. (Section 123).

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

The company before declaration of any dividend in any fi nancial year, may transfer such 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% of paid-up capital can be declared as dividend, subject to other provisions contained in the Companies (Declaration and Payment of Dividend) Rules, 2014.

The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended, requires a company to disclose its dividend distribution policy in its annual report and on its website.

I. DECLARATION

The declaration of dividend would be subject to compliance with applicable provisions of 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 set off 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 account may be as per the provisions of the Companies Act, 2013 and rules made there under, if any.

IV. AMOUNT OF DIVIDEND

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

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

(Subject to per share amount rounding off to nearest 25 paise and further subject to percentage 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 of profi ts i.e. future capital expenditure program including a) New projects b) Expansion of capacities 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 or proposed regulatory requirements 12) Currency risk

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

VI) TIMING

1) INTERIM DIVIDEND

The board may declare the interim dividend, based on review of profi ts earned during the 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 nancial results.

2) FINAL DIVIDEND

The board may recommend the fi nal dividend, subject to the approval of the members of the company, based on profi tability of the company as per the annual audited fi nancial statements. The fi nal dividend may be recommended once in a year and shall be subject to the 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 consider declaration of any special dividend, on special occasions, as and when they may deem fi t, subject to provisions of the Companies Act, 2013 rules made there under and other relevant requirements, if any.

VII) CLASSES OF SHARES

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

VIII) TAXATION

The company shall be responsible for payment of dividend distribution tax as per the provisions 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 the shareholders under the Income Tax Act, 1961 or such other amendment from time to time, shall be borne by the respective shareholders and if required under the then prevalent Income 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 at any time, as it determines necessary or appropriate, in the exercise of its judgment or fi duciary 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 rule 5 of Companies (Accounts) Rules, 2014) Statement containing salient features of the fi nancial 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 2,320 3,989 7,214 7,214 4,927 1,836 449 104 345 -
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) 6,503 6,548 6,548 - 8,528 773 - 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 1,060 (205) 272 1,127 1,127 - 1,076 278 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 (1,212) 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 2,400 787 3,910 3,910 - 1,838 968 192 776 -
15 Dr. Reddy's Laboratories (Proprietary) Limited 31-03-17 100% ZAR 4.85 - 152 634 786 786 - 1,241 (11) 19 (30) -
16 Dr. Reddy's Laboratories (UK) Limited 31-03-17 100% GBP 80.90 - 1,653 1,490 3,143 3,143 - 3,206 221 81 140 -
17 Dr. Reddy's Laboratories Inc.(1) 31-03-17 100% USD 64.85 580 18,361 34,934 53,875 53,875 - 66,073 8,315 (831) 9,146 -
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 - 1,500 (432) 14 (446) -
Ukraine
22 Dr. Reddy's Laboratories Louisiana 31-03-17 100% USD 64.85 - 1,803 1,989 3,792 3,792 - 2,853 (792) - (792) -
LLC (1)
23 Dr. Reddy's Laboratories New 31-03-17 100% USD 64.85 - (568) 1,766 1,198 1,198 - - (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 5,027 32,613 32,258 69,898 69,898 - 14,237 (1,186) (46) (1,140) -
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 1,120 (2,962) 2,159 317 317 - 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 (4,087) 4,094 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 1,510 4 1,539 1,539 - - - - - -
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) 3,075 3,480 3,480 - 3,746 350 140 210 -
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) 1,483 1,096 1,096 - 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 1,079 10,288 12,105 12,105 - 14,812 (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 1,713 (12,509) 12,688 1,892 1,892 - 1,663 (3,230) - (3,230) -
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 20,200 8,034 28,236 28,236 - - 2,620 1,112 1,508 -
52 Reddy Netherlands B.V. 31-03-17 100% EUR 69.29 7 2,713 22 2,742 2,742 - - (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) 1,089 1,028 1,028 - - (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 United States. 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 for these entities is computed together as per the tax laws of Netherlands. The total tax expense is presented in Sl. No. 41 - Dr. Reddy's Research and Development B.V. These entities 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$. The Company has used DICOM rate of VEF 709 per US$ in the consolidated fi nancial statements for translating Venezuelan subsidiary's net monetary assets.

(5) The investment has been accounted using equity method. Refer note 2.23 of consolidated 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 26,000 - 26% - - - NA NA
3 DRES Energy Private Limited,India(2) 31-Mar-17 8,580,000 86 26% - (1) (1) NA NA

(1) DRSS Solar Power Private Limited, India is under liquidation. (2) DRES Energy Private 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, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014)

Form for disclosure of particulars of contracts/arrangements entered into by the company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arm's length transactions under third proviso thereto

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 of contracts/arrangements/transactions (c) Duration of the contracts/arrangements/transactions

(d) Salient terms of the contracts/arrangements/transactions including the value, if any

Not applicable (e) Justifi cation for entering into such contracts/arrangements or transactions (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 fi rst 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$ 1,100 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 -

   

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