Financial Outlook on Dr. Reddy’s Laboratories

International Finance Project On Financial mental capacity on Dr. Reddys Laboratories Ltd. Submitted to Prof. S. K. Gupta Submitted by Date 31 Dec. 2011 SOURAV KUMAR 2K10IB30 PGDM IB 2010-2012 ASIA PACIFIC lend OF MANAGEMENT 3 &038 4, Institutional Area, Jasola, New Delhi 110025 INTRODUCTIONEstablished in 1984, Dr. Reddys Laboratories Ltd. (NYSE RDY) is an integ treadd global ph fortaceutical troupe, committed to providing affordable and innovative medicines for better lives. Through its three businesses pharmaceutical Services and Active Ingredients, Global Generics and proprietorship Products Dr. Reddys offers a portfolio of products and services including Active pharmaceutical Ingredients (APIs), Custom Pharmaceutical Services (CPS), generic wines, biosimilars, differentiated formulations and News Chemical Entities (NCEs). PURPOSE &038 VALUES Providing low- cosinet MedicinesOur Global Generics business helps reduce drug costs for individuals and g everyplacenments by take generic drugs to market as first as possible, and making them addressable to as legion(predicate) patients as possible. We market both generic small-molecule drugs and generic biopharmaceuticals. In markets with guidelines for approval, our Biologics business offers more affordable and equally effective generic biopharmaceuticals or biosimilars. We supply pharmaceutical ingredients to other generic companies done the API arm of our PSAI business, which contri just nowes to our goal of providing affordable edicine. We will continue to promote affordability in of import ways and work to expand our product offering of generics, focusing on increasing access to products with signifi lowlifet barriers to entry. We will continue to look for tonic opportunities to take generics to more patients, in collaboration with other companies. Developing in advance(p) Medicines Despite the spacious advances of medical intelligence, there argon still some unmet medical needs. Ou r Proprietary Products businesses address some of these unmet medical needs, by proceeds and bringing to market in the raw-made drugs.Through innovation in science and technology, combined with a deep understanding of underlying disease pathways, we conk out and commercialise new formulations of approved products. We similarly develop new chemical entities with improved and sanitary-characterised safety and efficacy pro cross-files. We focus our investigate on the cure beas of pain, anti-bacterials and metabolic dis smart sets. Our Custom Pharmaceutical Services arm of our PSAI business helps innovator companies get their proprietary medicines to patients faster, by providing a range of technology platforms and services. slightly THE BUSINESSThe healthcare needs of people worldwide cannot be met by one lodge alone. Collectively however we can bring new drugs to the market in a fast and efficient manner and leave the building blocks of affordable medicines. Through our PSAI business, which comprises the Active Pharmaceutical Ingredients (API) and Custom Pharmaceutical Services (CPS) businesses, we offer IP advantaged, speedy product victimization and efficient manufacturing services to our customers generic companies and innovators. This accepts us to help make good medicines available to more people around the world.The inwardness strengths of our PSAI business are the state of the art infra construction, resources and skills we are able to offer to our customers Large and diverse product portfolio cardinal FDA-inspected plants and three technology centers World class chemistry expertise Robust, big manufacturing capabilities Intellectual Property (IP) driven product development for freedom to fly the coop supply, seamless supply chain management PARTNERSHIP PHILOSPHY At the sum of money of each achievementful confederacy is a great relationship base on trust and mutual respect. As we work towards fulfilling our core draw a bead o n we theatrical role your aspirations.We recognize and embrace the fact that our cleaveners are a core component of this strategy. We understand that partnerships are successful when returnss accrue to both parties. They are built on a shared vision with well-defined and agreed-upon goals. We in addition know that that the partners thinking and interests whitethorn not always be identical, but that we share the same goala successful product. Our shared partnership successes are at the very heart of our business. From our first acquireing through product launch and beyond, we stand behind our belief in original partnership thereby combining our strengths and sharing our successes.Dr. Reddys firmly believes that the right alliances can contribute significantly to the success of our partners as well as to our witness strategy and sustainable reaping. At Dr. Reddys we aim to foster a culture of building fair, effective, and mutually beneficialwinningcollaborations. The importanc e that we situate on building winning collaborations is evidenced partly by the early and substantial involvement of senior management. In this way, we contact quick decision-making and the tryst of necessary resources to achieve success. G V Prasad Vice Chairman and chief run officerTransparent and Simple process Clarity of thought, Speed of execution, Flexibility, creativity, and transparency are critical components of our negotiation and transaction process. As no two deals are the same, we work with potential partners to social system deals through customized approaches that allow both partners to supplement unique capabilities and assets in order to achieve common goals. A bare(a) and streamlined process to progress our partnering discussions and a even organizational structure facilitates rapid decision making from initial screening to execution.As a confederation that evaluates 100+ business development opportunities in any accustomed year (many of which come to cl osure), we value the time and resources our potential partners commit to seek and complete any potential partnership. Dr. Reddys emphasizes a transparent and cooperative negotiation process and prompt decision making. We bring a report for acting swiftly and being flexible. We will work with you to reach an symmetricalness with which you will be comfortable and that will head us in the right direction toward shared success. Sustained relationship based on trust and mutual respectOur robust alliance management principles and practices allow successful execution of joint initiatives. Dr. Reddys is committed to ensuring that our partnerships succeed and flourish. every quarter Results Quarterly Results of Dr Reddys Laboratories&8212&8212&8212&8212&8212&8212- in Rs. Cr. &8212&8212&8212&8212&8212&8212- Sep 11Jun 11Mar 11Dec 10Sep 10 sales Turnover1,646. 981,696. 961,329. 161,389. 761,296. 88 other(a) Income13. 0555. 5429. 1137. 2152. 35 summate Income1,660. 031,752. 501,358. 271,42 6. 971,349. 23 Total Expenses1,390. 181,085. 201,113. 741,046. 631,022. 98 operate realise256. 80611. 76215. 42343. 13273. 0 Profit On Sale Of Assets&8212&8212&8212- Profit On Sale Of Investments&8212&8212&8212- Gain/ sledding On unconnected Exchange&8212&8212&8212- VRS Adjustment&8212&8212&8212- other(a) Extraordinary Income/Expenses&8212&8212&8212- Total Extraordinary Income/Expenses&8212&8212&8212- impose On Extraordinary Items&8212&8212&8212- Net Extra medium Income/Expenses&8212&8212&8212- perfect(a) Profit269. 85667. 30244. 53380. 34326. 25 affair15. 7815. 244. 250. 540. 13 PBDT254. 07652. 06257. 78379. 80326. 12 Depreciation73. 4068. 9365. 5063. 8961. 35 Depreciation On Revaluation Of Assets&8212&8212&8212- PBT180. 67583. 13192. 28315. 91264. 77 Tax42. 17129. 0826. 4153. receipts4. 57Net Profit138. 50454. 05165. 87262. 77220. 20 Prior days Income/Expenses&8212&8212&8212- Depreciation for Previous Years Written Back/ Provided&8212&8212&8212- Dividend&8212&8212&8212- Dividend Tax&8212&8212&8212- Dividend (%)&8212&8212&8212- honorarium Per Share8. 1726. 799. 8015. 5313. 01 script Value&8212&8212&8212- Equity84. 7684. 7484. 6384. 6184. 60 Reserves&8212&8212&8212- Face Value5. 005. 005. 005. 005. 00 ___________________________________________ Balance saddlery of the keep company ( annually) &8212&8212&8212&8212&8212&8212- In Rs. Cr. &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212 DescriptionMar-11Mar-10Mar-09Mar-08 SOURCES OF FUNDS Share Capital84. 684. 484. 284. Share Warrants &038 Outstanding39. 333. 935. 532. 5 Total Reserves5896. 35796. 35139. 44695. 2 Shareholders Funds6020. 25914. 65259. 14811. 8 Secured Loans0. 70. 82. 63. 4 Unsecured Loans1444. 1562. 4637. 7458. 9 Total Debts1444. 8563. 2640. 3462. 3 Total Liabilities74656477. 85899. 45274. 1 APPLICATION OF FUNDS Gross Block30252425. 72157. 31750. 2 less(prenominal) Accumulated Depreciation13341110. 1946. 5762. 8 little Impairment of Assets Net Block16911315. 61210. 8987. 4 fill A djustment A/c Capital Work in Progress570. 4745. 4411. 2246. 5 Pre-operative Expenses pending Assets in transit Investments24622555. 1703. 81930. 6 current Assets, Loans &038 Advances Inventories1063. 2897. 4735. 1640. 9 assorted Debtors1770. 51060. 51419. 7897. 7 bullion and Bank66. 2368384. 4536. 7 Other latest Assets1. 80. 62. 8 Loans and Advances2606. 42048. 718401250. 6 Total Current Assets5506. 34376. 44379. 83328. 7 Less Current Liabilities and Provisions Current Liabilities1440. 71447. 51050. 2680. 9 Provisions1223. 2992. 2665. 6451. 3 Total Current Liabilities2663. 92439. 71715. 81132. 2 Net Current Assets2842. 41936. 726642196. 5 Miscellaneous Expenses not written off Deferred Tax Assets / Liabilities-100. 8-75-90. 4-86. 9Total Assets74656477. 85899. 45274. 1 Contingent Liabilities2488. 22412. 21977. 93325. 8 Book Value353. 481087348. 382701310. 190024284. 143876 familiarised Book Value353. 481087348. 382701310. 19284. 1439 Profit &038 Loss Statement of the company (ann ually) &8212&8212&8212&8212&8212&8212- in Rs. Cr. &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212 DescriptionMar-11Mar-10Mar-09Mar-08 No of Months12121212 INCOME Gross Sales5284. 74543. 84239. 83449. 7 Less Inter divisional transfers Less Sales Returns Less Excise Duty97. 37480. 984. 5 Net Sales5187. 44469. 84158. 93365. 2 EXPENDITURE Increase/ cliff in Stock-79-117. 3-64. 1-93. Raw poppycock Consumed1396. 413461177. 61146. 1 Power &038 Fuel Cost144. 6104. 19077. 1 Employee Cost701. 2510413. 3368. 6 Other Manufacturing Expenses1053. 9793. 3894698. 2 General and Administration Expenses288. 7195. 6228193. 9 merchandising and Distribution Expenses477443. 8448. 7375. 4 Miscellaneous Expenses113. 991. 6121. 930 Less Expenses Capitalised Total Expenditure4096. 73367. 13309. 42795. 4 direct Profit (Excl OI)1090. 71102. 7849. 5569. 8 Other Income219220. 5101. 1191. 1 Operating Profit1309. 71323. 2950. 6760. 9 Interest9. 91627. 414. 7 PBDT1299. 81307. 2923. 2746. 2 Depr eciation247. 9222. 4193. 162 Profit Before Taxation &038 howeverional Items1051. 91084. 8729. 5584. 2 Exceptional Income / Expenses Profit Before Tax1051. 91084. 8729. 5584. 2 Provision for Tax158. 5238. 7168. 6108. 9 Profit later on Tax893. 4846. 1560. 9475. 3 Extra items Adjustments to PAT597. 2-24. 8-1. 5 Profit Balance B/F2554. 12039. 11657. 51305. 1 Appropriations4044. 72860. 42218. 41778. 9 Equity Dividend %22522512575 Earnings Per Share52. 801418450. 124407633. 307628. 258 familiarised EPS52. 801418450. 124407633. 307628. 258 Forex and External commercial borrowings &8212&8212&8212&8212&8212&8212- in Rs. Cr. &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212DescriptionMar-11Mar-10Mar-09Mar-08 EXPORTS Total Inflow In Foreign Currency3747. 73161. 43123. 32366. 8362 Exports FOB Value3671. 83013. 82892. 52259. 9061 revenue enhancement in Forex75. 9147. 6230. 8106. 9301 Frieght &038 Insurance Technology transfer fees Service Fees31111. 1197. 959. 2134 Commision Earned2. 4 Dividend received Interest Earnings33. 635. 13236. 8753 Other Exports8. 91. 40. 910. 8414 Capital Inflow Other Deemed Exports IMPORTS Total Outflow In Foreign Currency1321. 31021. 41180. 91071. 0232 Imports CIF Value533. 7486. 4553. 8658. 4784 Raw Materials533. 7486. 4553. 8658. 4784 workmanshipd GoodsStores &038 spares Other Imports Total Capital Outflow277. 3110. 7135. 577. 1814 Capital Goods277. 3110. 7135. 577. 1814 Other Capital Expenditures Repayments of Loans Investment In foreign Currency Expenditure in Foreign Currency510. 3424. 3491. 6335. 3634 Travelling Expenses5. 16109. 385 Interest Expenditure7. 5 Legal Expenses113. 166. 652. 355. 1145 Royalty proficient Fees Commision paid Others384. 6351. 7429. 3270. 8639 Dividend Paid Deemed Imports Raw Materials consumed Material Imported in Amt456. 6334. 2357231. 2115 Material Imported in %43303926. 37 Material Indigenous in Amt609. 8766. 3564. 2645. 144 Material Indigenous in %57706173. 63 Stores and spares consum ed Spare Imported in Amt52. 433. 230. 121. 2313 Spares Imported in %1513811 Spare Indigenous in Amt300. 7220. 3326. 3180. 0892 Spares Indigenous in %85879289 Dr Reddys Laboratories in News Dr Reddys Laboratories Higher capacity, New products to pump up proceeds Kiran Kabtta Somvanshi, ET Bureau Dec 26, 2011, 05. 20am IST Tags Sun Pharma Russia Germany generics Dr Reddys Laboratories, the second-largest pharma company (by sales) in India, is at an inflexion point. Its robust performance in the US and Russia is unprompted its gain.The second half of the fiscal is credibly to be better for the company than the first one characterised by more product launches and attach in market share. Its probably the right time for investors to consider this stock. BUSINESS The company is engaged in generics, bulk drugs &038 custom services and proprietary products. The genericsbusiness contributes over 70% to its amount revenues, which stood at $1. 7 one thousand thousand in FY11. DRL has foc ussed on four key regions North America, India, Russia/CIS and atomic number 63 with an objective to achieve critical mass in the base business.North America is the companys largest and strongest market, lend onethird of the companys revenues. New product launches, limited contestation products and improved market share has helped the company post a strong performance in the region. DRLs German business remains its sore point, pulling down the maturation order for the European region. The pricing pressure brought about by the tender-based business structure has adversely affected its profitability. The Indian business has been a laggard since the cultivation several quarters, but the sequential improvement in its performance in the September quarter is encouraging.Its biosimilars portfolio has done very well and has logged a growth of 22% y-o-y, hinting at a better period in the approaching months. The Russian business, though not a large contributor, has proved to be yet ano ther growth driver for the company. The OTC business, in particular, is doing well in the region. GROWTH DRIVERS DRL has targeted revenues of $3 trillion and a RoCE of 25% in FY13. The company has a strong pipeline with 76 pending ANDAs (17 dubitable approvals). It has 40 check bit IV filings of which 11 catch first to file opportunities.The company is focussing on scaling up manufacturing and having a higher(prenominal) mix of US generics in total global generics. In Germany, the company has undertaken cost control measures, and has commenced supplies to AOK tenders and launched new products outside the scope of tenders. Its effect would be visible from the current quarter. DRL has a tie-up with GSK to develop and market lease products across emerging markets outside India. FINANCIALS While its earnings have been extraordinary over the years, the companys revenues have grown at a CAGR of around 21% over the remainder decade. DRL has restructured trading operations at its Germ an and Mexican units.It has crest risky and expensive R by pulling out research in therapies like diabetes and cardiovascular. Instead, it is now channelising its R efforts towards development of limited competition products, biosimilars and new chemical entities in areas like pain management, anti-infectives and dermatology. CONCERNS Forging growth in its Indian business and profitability in its European operations is a study concern for the company. Its future growth depends on the success of its efforts in these areas. The company has raised 1,077-crore debt in the current quarter to meet working capital requirements and also to refinance old loans.This brings its total debt to over 4,200 crore. VALUATIONS The companys stock is trading at 23 times its consolidated annual earnings. These valuations are lower than its better-performing peers like Sun Pharma and Cipla. Pharma cos with enormous FCCBs may not get hit as their merchandise earnings remaining high Sanjay Pingle, Mumb ai Monday, December 19, 2011, 0800 Hrs IST Steady dispraise of rupee against US dollar bill and Euro may not have any major move on Indian pharmaceutical industry despite many pharma companies have huge exposure to foreign currency loans and bonds.To a great extend, such adverse rates will be instigate by the sizable export earnings of Indian pharma companies. persisting depreciation of Indian Rupee against US sawbuck and Euro is a great concern for Indian manufacturers having Foreign Currency Loans (FCLs) and Foreign Currency convertible Bonds (FCCBs). But the exports of these companies are apt(predicate) to shoot up in 2011-12 with depreciation of rupee in price of foreign currencies. Indian pharma companies have recorded export earnings of more than 50 per cent of their revenues to US and Europe during 2010-11 and with depreciation of Rupee export earnings are likely to go up significantly.This will reduce the adverse effect on bottom line likely with the current unfavor able foreign swap rates. Uncertainty in Euro region and recessionary conditions worldwide is making buck more firm against several currencies. At present, the exchange rate of Indian Rupee against dollar is moving near to Rs. 55 and that of Euro is moving over Rs. 71 as against Rs. 45. 87 per Dollar and Rs. 61. 13 per Euro year ago. The Dollar appreciated nearly by 20 per cent and Euro by to the highest degree 17 per cent within one year making FCL and Foreign Currency Convertible Bonds (FCCBs) payments costlier for Indian companies.The pharma industry has already incurred huge foreign currency handout during the first half of 2011-12 and these are likely to ontogenesis in the remaining part of the FY12 with adverse exchange fluctuations. though the Indian pharmaceutical companies have created strong networth position in the past, the fickle and adverse change in foreign exchange rates may put pressure on bottom line. The borrowings of Pharmabiz sample of leading 35 companies shows that the total borrowings, including secured and non-secured loan went up by 18. 3 per cent to Rs. 37,709 crore during 2010-11 from Rs. 1,899 crore in the anterior year. The secured loans, including foreign currency loans and FCCBs, of 35 companies increased by 19. 8 per cent to Rs. 21,899 crore from Rs. 18,278 crore. As against these borrowings, the net worth, equity capital plus reserves &038 surplus, of these companies stood at Rs. 68,201 crore as compared toRs. 48,811 crore in the previous year, representing a strong growth of 39. 7 per cent in 2010-11. Out of 35 companies, 23 companies availed FCL or issued FCCBs and the aggregate amount worked out to Rs. 9,560 crore in 2010-11 as compared to Rs. 10,765 crore.Thus, FCL and FCCBs comprised of 25 per cent in 2010-11 of aggregate borrowings as compared to 34 per cent in the rifle year. The reduction is mainly ascribable to redemption of FCCBs by few companies and quittance of costly FCLs. The aggregate amount of FCCBs is sued by these companies reduced by 12 per cent to Rs. 5,382 crore from Rs. 6,118 crore and foreign currency loans by 10. 1 per cent to Rs. 4,178 crore from Rs. 4,647 crore. Ranbaxy Laboratories has dramatic FCCBs aggregating to US$ 440 gazillion as at the end of December 2010. The company has shown Rs. 1,967 crore as unsecured loan for FCCBs as compared to Rs. ,048 crore in the previous year. orchid Chemicals and Pharmaceuticals has outstanding FCCBs of Rs. 523. 58 crore as against Rs. 607. 74 crore in the 2009-10. Jubilant Lifesciences has reduced its FCCBs amount to Rs. 633. 70 crore from Rs. 861 crore in the previous year. Further, Strides Arcolab has reduced its FCCBs loan to Rs. 457. 28 crore from Rs. 634. 15 crore and Aurobindo Pharma toRs. 620. 76 crore from Rs. 767. 71 crore. Wockhardts FCCB liabilities increased slightly to Rs. 458. 82 crore from Rs. 446. 40 crore and that of Plethico Pharmas to Rs. 425. 12 crore from Rs. 411. 91 crore.The foreign currency loans (FCLs) o f Jubilant Lifesciences went up to Rs. 1755. 71 crore from Rs. 1580. 48 crore and that of Cadilas to Rs. 737. 70 crore from Rs. 722. 80 crore. Biocon has successfully reduced its FCLs to Rs. 189. 94 crore from Rs. 220. 72 crore. Dr Reddys Laboratories has repaid its FCLs ofRs. 889. 90 crore during 2010-11 through three new short-term borrowings. However, FCL of lupine went up sharply to Rs 306. 54 crore from Rs. 181. 99 crore in the previous year. Further, FCL of orchidaceous plant Chemical went up to Rs. 325. 22 crore from Rs. 250. 02 crore and that of Panacea Biotec to Rs. 359. 4 crore from Rs. 293. 74 crore. Ipca Laboratories FCLs also jumped to Rs. 183. 15 crore from Rs. 125. 52 crore. The sample of Pharmabiz 35 companies have managed to reduce their liabilities in respect of FCCBs and FCLs during 2010-11 and likely to reduce risk of depreciation of Rupee against Dollar and Euro. Further rise in interest rates by run batted in will also put additional burden on the empyrean in 2011-12. However, higher exports may assist to reduce adverse impact on working. Dr. Reddys Q2 FY12 Financial Results Q2 FY12 Revenues at ? 22. 7 gazillion ($462 gazillion), YoY growth of 21% Q2 FY12 Adjusted* EBITDA at ? 5. jillion ($104 one thousand thousand), YoY growth of 20% Q2 FY12 Adjusted** PAT at ? 3. 1 one thousand thousand ($63 jillion), YoY growth of 8% Hyderabad, India, October 25, 2011 Dr. Reddys Laboratories Ltd. (NYSE RDY) today announced its unaudited consolidated financial results for the quarter finish September 30, 2011 under International Financial Reporting Standards (IFRS). Key Highlights coalesced revenues are at ? 22. 7 million ($462 million) in Q2 FY12 versus ? 18. 7 billion ($381 million) in Q2 FY11, year-on-year growth of 21%. Consolidated revenues for H1 FY12 is at ? 42. 5 billion ($866 million). oRevenues from Global Generics for Q2 FY12 are at ? 6. 1 billion ($329 million). Year-on-year growth of 18% mainly driven by North America and Russia . oRevenues from PSAI are at ? 5. 9 billion ($121 million) in Q2 FY12, growth of 28% over previous year. Adjusted* EBITDA of ? 5. 1 billion ($104 million) in Q2 FY12, is at 23% of revenues written text year-on-year growth of 20%. Consolidated familiarized EBITDA for H1 FY12 is at ? 9. 4 billion ($193 million). Adjusted** Profit after Tax for Q2 FY12 is at ? 3. 1 billion ($63 million), is at 14% of revenues with year-on-year growth of 8%. Consolidated adjusted PAT for H1 FY12 is at ? 5. 6 billion ($115 million). During the quarter, the company launched 28 new generic products, filed 17 new product registrations and filed 11 DMFs globally. Dr. Reddys today announced the final approval of its olanzapine 20 mg tablets, the generic version of Eli Lillys Zyprexafrom the USFDA. *Note Adjustments include benefit from a part reversal of provision booked in Q1 for unforced retreat scheme (VRS) floated by the company. **Note Adjustments include a) interest on bonus debentures and b) benefi t from a part reversal of provision booked in Q1 on bet of Voluntary Retirement Scheme (VRS) floated by the company. All figures in millions, except EPSAll dollar figures based on convenience rendition rate of 1USD = ? 49. 05 Dr. Reddys Laboratories Limited and Subsidiaries Unaudited Consolidated Income Statement ParticularsQ2 FY12Q2 FY11Growth % ($)(? )%($)(? )(%) Revenue46222,67910038118,70410021 Cost of revenues21410,473461788,7184720 Gross profit24912,206542049,9865322 Operating Expenses Selling, general &038 administrative expenses1477,216321165,7093126 Research and development expenses301,4596261,270715 Other operating (income) / expense(4)(215)(1)(4)(218)(1)(2) Results from operating activities763,74517663,2251716 Net finance (income) / expense1500135042Share of (profit) / loss of equity accounted investees(0)(13)(0)(0)(3)(0)- Profit / (loss) forrader income tax763,70916653,1941716 Income tax (benefit) / expense1363137327293 Profit / (loss) for the period633,07814582,86715 7 Diluted EPS0. 418. 1 0. 316. 9 Profit atonement Adjusted EBITDA ReconciliationQ2 FY12Q2 FY11 ($)(? )($)(? ) PBT763,709653,194 Interest522506 Depreciation1887915731 Amortization83896317 EBITDA1065,203874,248 Adjustments Part reversal of provision booked in Q1 for Voluntary Retirement Scheme(2)(94) Adjusted EBITDA1045,109874,248 Adjusted PAT ReconciliationQ2 FY12Q2 FY11 ($)(? ($)(? ) PAT633,078582,867 Adjustments Interest on bonus Debentures2118 Part reversal of provision booked in Q1 for Voluntary Retirement Scheme(2)(94) Tax normalizing adjustment(0)(4) Adjusted PAT633,099582,867 Segmental Analysis Global Generics Revenues from Global Generics divide are at ? 16. 1 billion ($329 million) in Q2 FY12 registering growth of 18% over previous year. Revenues from North America at ? 6. 3 billion in Q2 FY12 versus ? 4. 4 billion in Q2 FY11. Growth in USD terms of 45% was led by new product launches in the last twelve months and market share improvement in key products. 5 new products l aunched during the quarter, including limited competition products such as fondaparinux and fexofenadine pseudoephedrine D24 OTC. o24 products of our prescription portfolio consume among the Top 3 rank in market share (Source IMS Sales Volumes July 2011). oDuring the quarter, 4 ANDAs were filed. The cumulative ANDA filings as of thirtieth September, 2011 are 177. A total of 76 ANDAs are pending for approval with the USFDA of which 40 are Para IVs and 11 are FTFs. Revenues in Russia &038 Other CIS markets at ? 3. 4 billion in Q2 FY12 versus ? 2. 8 billion in Q2 FY11, year-on-year growth of 23%. Revenues in Russia at ? 2. 9 billion in Q2 FY12 versus ? 2. 3 billion in Q2 FY11, year-on-year growth in USD terms of 30%, largely driven by volume growth in key brands. ?OTC portfolio growth of 33% over previous year OTC sales at 25% of overall Russia sales. ?Dr. Reddys year-on-year secondary prescription sales growth at 20% versus industrys growth of 10%. (Source Pharmexpert August 2011). D r. Reddys is ranked 12th in market share. oRevenues in Other CIS markets remained flat at ? 477 million in Q2 FY12. Revenues in India increased by 9% to ? 3. 5 billion in Q2 FY12 versus ? . 2 billion in Q2 FY11. o3 new products launched during the quarter. oBiosimilar portfolio growth of 22% over previous year represents 6% to sales. Revenues from Europe at ? 2. 1 billion in Q2 FY12, declined by 10% over previous year. oRevenues from Germany declined by 27% to ? 1. 2 billion in Q2 FY12 due to continuing impact of tenders. oRevenues from Rest of Europe grew by 26% to ? 933 million in Q2 FY12 driven by new launches in UK and growth in out-licensing business. Pharmaceutical Services and Active Ingredients (PSAI) Revenues from PSAI are at ? 5. billion in Q2 FY 12 versus ? 4. 6 billion in Q2 FY11, year-on-year increase of 28%. oGrowth in Active Ingredients business led by new product launches in Europe. oPharmaceutical Services business grew on account of improved customer order book st atus. oDuring the quarter, 11 DMFs were filed globally, with 2 in US, 2 in Europe, 1 in Canada and 6 in rest of the markets. The cumulative DMF filings as of 30th September 2011 are 506. Income Statement Highlights Gross profit at ? 12. 2 billion ($249 million) in Q2 FY12, margin of 54% to revenues, marginal increase over previous year. Selling, General &038 Administration (SG&038A) expenses including amortization at ? 7. 2 billion ($147 million) increased by 26% over Q2 FY11. This increase is on account of a) higher freight costs both on account of increase in sales volumes as well as rate increases, b) rising prices and year-on-year increments linked increase in manpower costs across businesses, c) incremental costs at Bristol and Shreveport manufacturing facilities in the US and d) the increase in the OTC-related selling and marketing costs in Russia and other CIS markets as compared to previous year. R&038D expenses at ? 1. 5 billion ($30 million) in Q2 FY12, increase of 15% o ver Q2 FY11. Net Finance costs are at ? 50 million ($1 million) in Q2 FY 12 versus ? 35 million ($0. 7 million) in Q2 FY11 The change is on account of oNet forex gain of ? 151 million ($3 million) versus net forex loss of ? 49 million ($1 million) in Q2 FY11. oNet interest expense of ? 225 million ($5 million) in Q2 FY12 versus ? 5 million ($0. 1 million) in Q2 FY11. oProfit on sale of investments of ? 25 million ($0. 5 million) in Q2 FY12 versus ? 19 million ($0. 4 million) in Q2 FY11. Adjusted EBITDA of ? 5. 1 billion ($104 million) in Q2 FY12, is at 23% of revenues with year-on-year growth of 20%. Adjusted Profit after Tax for Q2 FY12 is at ? 3. 1 billion ($63 million), is at 14% of revenues with year-on-year growth of 8%. Adjusted EPS for Q2 FY 12 is at ? 18. 2 ($0. 4) versus ? 16. 9 ($0. 3) in Q2 FY11. Capital expenditure for H1 FY12 is at ? 3. 6 billion ($73 million). Appendix 1 Q2 FY12 Key Balance aeroplane Items (In millions) ParticularsAs on 30th Sep 11As on 30th Jun 11 $ )(? )($)(? ) Cash and cash equivalents1557,5961115,468 Trade receivables41920,56834917,136 Inventories37918,59235517,401 Property, plant and equipment64131,45062230,524 Goodwill and other intangible assets30815,11530414,921 Loans and borrowings (current &038 non-current)63831,30348823,940 Trade payables1828,9401728,433 Equity98048,08199748,902 Appendix 2 Q2 FY12 Revenue Mix by Segment (In millions) Q2 FY12Q2 FY 11Growth % ($)(? )as a %($)(? )as a %Global Generics32916,1367127913,6677318 North America 6,28739 4,4163242 Europe 2,11713 2,36617(10) India 3,45921 3,160239 Russia &038 Other CIS 3,38021 2,7512023 quarrel 8936 9747(8) PSAI1215,93326944,6172528 North America 1,06818 8141831 Europe 2,30339 1,5513448 India 75213 6531415 RoW 1,81031 1,5993513 Others1261039420245 Total46222,67810038118,70410021 Appendix 3 Q2 FY12 Revenue Mix by Geography (In millions) Q2 FY12Q2FY 11Growth % ($)(? )as a %($)(? )as a % North America1597,777341115,4642942 Europe924,53620844,1022211 India864,210197 83,8132010Russia &038 Other CIS693,38015562,7511523 Others572,77512522,573148 Total46222,67810018,70418,10021 Appendix 4 H1 FY12 Consolidated Income Statement All figures in millions, except EPS All dollar figures based on convenience translation rate of 1USD = ? 49. 05 ParticularsH1 FY12H1 FY11Growth % ($)(? )%($)(? )(%) Revenue86642,46210072435,53510019 Cost of revenues40219,7014633916,6354718 Gross profit46422,7615438518,9005320 Operating ExpensesSelling, general &038 administrative expenses28513,9723322811,1913125 Research and development expenses542,6566462,263617 Other operating (income) / expense(8)(401)(1)(8)(404)(1)(1) Results from operating activities1336,533151195,8501612 Net finance (income) / expense296042121(55) Share of (profit) / loss of equity accounted investees(0)(17)(0)(0)(8)(0)113 Profit / (loss) before income tax1326,455151155,6471614 Income tax (benefit) / expense15751214684210 Profit / (loss) for the period1165,704131014,9631415 Diluted EPS0. 733. 6 0. 629. 2Appendix 5 H1 FY12 Profit Reconciliation (In millions) Adjusted EBITDA ReconciliationH1 FY12H1 FY11 ($)(? )($)(? ) PBT1326,4551155,647 Interest9446(0)(3) Depreciation351,708291,416 Amortization1679412605 report EBITDA1929,4041567,665 Adjustments One-time charge of Voluntary Retirement Scheme142 Adjusted EBITDA1939,4451567,665 Adjusted PAT ReconciliationH1 FY12H1 FY11 ($)(? )($)(? ) report PAT1165,7041014,963 Adjustments Interest on Bonus Debentures5236 One-time charge of Voluntary Retirement Scheme142 Tax normalizing adjustment(7)(364) Adjusted PAT1155,6181014,963