CONTENTS CHAIRMAN’S LETTER 2 SECRETARIAL AUDIT REPORT 74 KEY FINANCIAL 4 DIRECTORS’ REPORT 76 HIGHLIGHTS IGAAP STANDALONE THE CREATIVE SPIRIT 6 FINANCIAL STATEMENTS 87 BUSINESS RESPONSIBILITY 16 IGAAP CONSOLIDATED REPORT FINANCIAL STATEMENTS 141 MANAGEMENT DISCUSSION 32 EXTRACT OF AUDITED & ANALYSIS IFRS CONSOLIDATED FINANCIAL STATEMENTS 191 BOARD OF DIRECTORS 44 STATEMENT PURSUANT MANAGEMENT COUNCIL 48 TO SECTION 212 OF THE COMPANIES ACT, 1956 194 CORPORATE GOVERNANCE 50 INFORMATION ON THE ADDITIONAL SHAREHOLDERS’ 63 FINANCIALS OF SUBSIDIARY 195 INFORMATION COMPANIES FIVE YEARS AT A GLANCE 72 NOTICE OF THE ANNUAL GENERAL 196 MEETING RATIO ANALYSIS 73 chairman’s LETTER Dear Shareholders, On 15 March 2013, we lost Dr. K Anji Reddy, Founder Chairman of your Company. You know what a great visionary he was, and the energy and zeal with which he built this Company. The finest tribute that we can pay to him is to continue along the path of profitable growth, be recognized as a best-in-class global pharmaceuticals major, keep building deep science, technology and R&D skills, and continually innovate to improve the lives of patients around the world. et me begin by touching upon the of the Pharmaceutical Services and Active L results for FY2013, and then move Ingredients (PSAI) segment on to describing some key developments Earnings before interest, taxes, which should play their role in defining the depreciation and amortization (EBITDA) trajectory of your Company over the next grew by 9.5% to R27.8 billion, or 24% of few years. consolidated revenues The consolidated revenue of your Profits after tax (PAT) adjusted for Company for FY2013 was R116.3 billion, impairment of intangibles and its and recorded a year-on-year growth of corresponding tax impact increased 20%. In terms of US dollars, this amounted by 17% to R17.6 billion, or 15% of to USD 2.23 billion (based on an average consolidated revenues realized rate of 1 USD = R52.10) During FY2013, your Company globally This growth was primarily driven by North launched 104 new generic products, and America and Emerging Markets in Global filed 56 newproduct registrations and 47 Generics; and by the overall performance new drug master files (DMFs) 2 DR. REDDY’S LABORATORIES LIMITED ANNUAL REPORT 2012-13 Revenue from Global Generics for FY2013 We are selecting the right products—namely, biopharmaceuticals and chemical increased by 18% to R82.6 billion—of those with great therapeutic upsides and compounds. The partnership is to co-develop which North America accounted for R37.8 having significant technical challenges—so and globally commercialize a portfolio of billion, with a growth of 19%. If one as to carve high quality niches and also create biosimilar compounds in oncology, primarily were to exclude the beneficial impact of technology-based future barriers to entry. focused on monoclonal antibodies (MAbs). olanzapine exclusivity of the earlier year and And we are successfully manufacturing compare like-to-like, the growth was 38%. them. All these are parts of an exciting, yet complex Several new product launches contributed journey. On occasions, the path will be significantly to revenues. We are building deep science and technology difficult, as it must since the payoffs are Global Generics also performed well skills—both in-house and through global so much greater. However, we have with in Emerging Markets with a 31% top-line R&D partnerships. We have our own R&D us—and are constantly creating—a world growth and R22.4 billion of revenue. Each presence in some of the leading innovation class global management team to execute key market—Russia, CIS, and the Rest of the centers of the world: these challenging goals. Through our people, World territories—grew impressively. At the Chirotech Technology Center in we will continue to focus on safety, quality, I am especially pleased with Global Cambridge, UK, which is a Center of productivity and supply chain reliability Generics’ Indian revenues. After some years Excellence (CoE) for catalysis and flexibility. These initiatives, along with of difficulties, your Company has stepped up At OctoPlus in Leiden, Netherlands, our investments in R&D, biosimilars and its Indian operations. This has led to a 13% which your Company acquired in FY2013. proprietary products should help deliver growth in the generics revenue, which rose OctoPlus has significant in-house expertise good growth and healthy shareholder to R14.6 billion. This business must continue in the development and creation of returns. growing and doing well. micro-spheres and liposomes that enhance I thank my colleagues and fellow The PSAI business has also done well. and enable controlled release of active employees for all that they do—day in and Revenue grew by 29% to R30.7 billion, pharmaceutical ingredient into humans. out—to better the performance of your mostly on increased sales to generic It is also well known for formulating Company. And my thanks to you for your customers, greater lock-ins and larger orders complex injectables good wishes. in the custom pharmaceuticals services At Princeton, USA, which is a CoE for business. developing oral solid dosages With best regards, In our search for alternate molecules as well Let me now move on to a few key areas as dosage forms like injectables, topicals, of importance. patches and inhalers, we have created R&D Over the foreseeable future, double- partnerships with several other entities, digit growth with appropriate returns on both abroad and in India—including our G V PRASAD capital will depend upon your Company’s subsidiary Aurigene and Dr. Reddy’s Institute CHAIRMAN AND CHIEF EXECUTIVE OFFICER ability to consistently succeed in introducing of Life Sciences. differentiated and hard-to-produce medicine in global markets. This involves excellence Our biosimilars play is a major investment in several elements: (i) the right choice of for the future. These products give us the molecules; (ii) Quality by Design (QbD); opportunity to provide affordable and (iii) creating global R&D partnerships; innovative medicines to patients across (iv) having top class manufacturing the globe. It is clear that any significant operations which not only meet all global pharmaceutical player will need strong standards but also ensure that all launch biologics development, manufacturing dates are met with success; (v) successful and commercialization capabilities. Your plays in biosimilars and proprietary products; Company already has successfully produced and (vi) building a best-in-class leadership four biosimilars: (i) rituximab called team that is always hungry for victory. RedituxTM, which has been in India for more We have started getting our early than five years, (ii) filgrastim, called Grafeel® successes on these fronts. In large measure, (iii) darbepoetin alpha called Cresp®, and your Company’s good business results in (iv) peg-filgrastim, which goes under the FY2013 are due to appreciable improvements name of Peg-Grafeel®. made in operations—building on a company- To further strengthen biosimilars, the wide consolidated theme of ‘Safety, Quality Company entered into an alliance with and Productivity’. As an example, in the year, Merck Serono, a division of Merck KGaA, products worth over USD 310 million were Darmstadt, Germany in June 2012. Merck developed based on the principles of Quality KGaA is a global pharmaceutical company by Design. This will increase appreciably over with proven expertise in developing, the future. manufacturing, and commercializing CHAIRMAN'S LETTER 3 KEY FINANCIAL HIGHLIGHTS CONSOLIDATED 31 March 2013, the company CONSOLIDATED PROFIT AFTER REVENUES had cumulative filings of 577 REVENUE TAX Consolidated revenues DMFs. IN K MILLION IN K MILLION increased by 20% to R116,266 million that is $2.23* billion in BUSINESS PERFORMANCE Growth Growth FY2013 from R96,737 million GLOBAL GENERICS in FY2012. Global Generics segment grew by 18% to R82,563 million in 20% 18% EBITDA FY2013 from R70,243 million EBITDA increased by 9.5% to in FY2012. Excluding the R Growth As a 27,819 million in FY2013 from beneficial impact of Olanzapine R 25,409 million in FY2012. exclusivity from FY2012 excluding percentage revenues, the year-on-year olanzapine of sales PROFIT AFTER TAX growth was 26%. Net profit of R16,776 million in impact R FY2013 from 14,262 million in Revenue from North America FY2012, a growth of 18%. grew by 19% to R37,846 million 26% 14% in FY2013 from R31,889 million FULLY DILUTED EARNINGS in FY2012. Excluding the PER SHARE. beneficial impact of olanzapine Fully diluted earnings per share exclusivity from FY2012 increased to R98.4 in FY2013 revenues, the year-on-year 116,266 from R83.8 in FY2012, a growth growth was 38%. of 17%. 16,776 Revenue from Russia and other 96,737 ANDAS IN US CIS countries grew by 28% to Dr. Reddy’s made 19 US filings R16,908 million in FY2013 from which include one NDA filing 14,262 R under section 505(b)(2) and 13,260 million in FY2012. 18 ANDA filings, bringing our cumulative ANDA filings to India showed a revenue growth R 200. As of 31 March 2013, the of 13% to 14,560 million in R company’s ANDA pipeline has FY2013 from 12,931 million in 65 ANDAs pending approval FY2012. with the US FDA, of which 38 are Paragraph IV filings and we PHARMACEUTICAL SERVICES believe eight to have first to & ACTIVE INGREDIENTS file status. Revenues grew by 29% to R30,702 million from R23,812 DMFS million in FY2012. This growth The company filed 47 DMFs in was largely driven by new FY2013. Of these 5 were filed in product launches to generic 2012 2013 2012 2013 the US, 10 in Europe and 32 in customers and improved other countries. As of customer orders. *US dollar revenues based on an average realized USD rate of 1 USD = I52.10 4 DR.