Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 (6-k)

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

For the Quarter Ended December 31, 2020

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-________.

QUARTERLY REPORT

Quarter Ended December 31, 2020

Currency of Presentation and Certain Defined Terms

In this Quarterly Report, references to “$” or “dollars” or “U.S.$” or “U.S. dollars” are to the legal currency of the United States, references to “Rs.” or “rupees” or “Indian rupees” or “INR” are to the legal currency of India, references to “MXN” are to the legal currency of Mexico, references to “ZAR” are to the legal currency of South Africa, references to “UAH” are to the legal currency of Ukraine, references to “GBP” are to the legal currency of United Kingdom and references to “EUR” or “euros” are to the legal currency of the European Union. Our unaudited condensed consolidated interim financial statements are presented in Indian rupees and are prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting” (“IAS 34”). Convenience translation into U.S. dollars with respect to our unaudited condensed consolidated interim financial statements is also presented. References to a particular “fiscal” year are to our fiscal year ended March 31 of such year. References to “ADSs” are to our American Depositary Shares. All references to “IAS” are to the International Accounting Standards, to “IASB” are to the International Accounting Standards Board, to “IFRS” are to International Financial Reporting Standards as issued by the IASB, to “SIC” are to the Standing Interpretations Committee and to "IFRIC" are to the International Financial Reporting Interpretations Committee. References to “FVTOCI” are to fair value through other comprehensive income and to “FVTPL” are to fair value through profit and loss.

References to “U.S. FDA” are to the United States Food and Drug Administration, to “ANDS” are to Abbreviated New Drug Submissions, to “NDAs” are to New Drug Applications, and to “ANDAs” are to Abbreviated New Drug Applications.

References to “U.S.” or “United States” are to the United States of America, its territories and its possessions. References to “India” are to the Republic of India. References to “EU” are to the European Union. All references to “we”, “us”, “our”, “DRL”, “Dr. Reddy’s” or the “Company” shall mean Dr. Reddy’s Laboratories Limited and its subsidiaries. “Dr. Reddy’s” is a registered trademark of Dr. Reddy’s Laboratories Limited in India. Other trademarks or trade names used in this Quarterly Report are trademarks registered in the name of Dr. Reddy’s Laboratories Limited or are pending before the respective trademark registries, unless otherwise specified. Market share data is based on information provided by IQVIA Holdings Inc. (formerly Quintiles IMS Holding Inc.) (“IQVIA”), a provider of market research to the pharmaceutical industry, unless otherwise stated.

Except as otherwise stated in this report, all convenience translations from Indian rupees to U.S. dollars are at the certified foreign exchange rate of U.S.$1.00 = Rs.73.01, as published by Federal Reserve Board of Governors on December 31, 2020. No representation is made that the Indian rupee amounts have been, could have been or could be converted into U.S. dollars at such a rate or any other rate. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.

Our main corporate website address is https://www.drreddys.com. Information contained in our website, www.drreddys.com, is not part of this Quarterly Report and no portion of such information is incorporated herein.

Forward-Looking Statements

In addition to historical information, this quarterly report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to:

•

in our generics medicines business: consolidation of our customer base and commercial alliances among our customers; the increase in the number of competitors targeting generic opportunities and seeking U.S. market exclusivity for generic versions of significant products; price erosion relating to our generic products, both from competing products and increased regulation; delays in launches of new generic products; efforts of pharmaceutical companies to limit the use of generics including through legislation and regulations; the difficulty and expense of obtaining licenses to proprietary technologies; returns, allowances and chargebacks; and investigations of the calculation of wholesale prices;

•

in our specialty medicines business: competition for our specialty products; our ability to achieve expected results from investments in our product pipeline; competition from companies with greater resources and capabilities; and the effectiveness of our patents and other measures to protect our intellectual property rights;

•

our business and operations in general, including: our ability to develop and commercialize additional pharmaceutical products; manufacturing or quality control problems, which may damage our reputation for quality production and require costly remediation; interruptions in our supply chain; disruptions of our or third party information technology systems or breaches of our data security or other cyber-attacks; the failure to recruit or retain key personnel; challenges associated with conducting business globally, including adverse effects of political or economic instability, major hostilities or terrorism; significant sales to a limited number of customers in our U.S. market; our ability to successfully bid for suitable acquisition targets or licensing opportunities, or to consummate and integrate acquisitions;

•

compliance, regulatory and litigation matters, including: costs and delays resulting from the extensive governmental regulation to which we are subject; the effects of reforms in healthcare regulation and reductions in pharmaceutical pricing, reimbursement and coverage; governmental investigations into selling and marketing practices; potential liability for patent infringement; product liability claims; increased government scrutiny of our patent settlement agreements; failure to comply with complex Medicare and Medicaid reporting and payment obligations; and environmental risks;

•

other financial and economic risks, including: our exposure to currency fluctuations and restrictions as well as credit risks; potential impairments of our intangible assets; potential significant increases in tax liabilities; and the effect on our overall effective tax rate of the termination or expiration of governmental programs or tax benefits, or of a change in our business;

•

our business and operations in general, including uncertainty regarding the magnitude, duration, and geographic reach of the COVID-19 pandemic and its impact on our business, financial condition, operations, cash flows, and liquidity and on the economy in general; manufacturing or quality control protocols; interruptions in our supply chain, including due to potential effects of the COVID-19 pandemic on our operations and business in geographic locations impacted by the pandemic and on the business operations of our customers and suppliers; our ability to successfully execute and maintain the activities and efforts related to the measures we have taken or may take in response to the COVID-19 pandemic and associated costs therewith; challenges associated with conducting business globally, including adverse effects of the COVID-19 pandemic; costs resulting from the extensive governmental regulation to which we are subject or delays in governmental processing time due to modified government operations due to the COVID-19 pandemic, including effects on product and patent approvals due to the COVID-19 pandemic; disruptions of information technology systems; and our ability to successfully compete in the marketplace; and

•

those discussed in the sections entitled “risk factors” in our most recent Annual Report on Form 20-F for the year ended March 31, 2020 and “Operating and Financial Review, Trend Information” and elsewhere in this quarterly report.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis and assumptions only as of the date hereof. In addition, readers should carefully review the other information in this quarterly report, in our most recent Annual Report on Form 20-F for the year ended March 31, 2020 and in our other periodic reports and documents filed with and/or furnished to the SEC from time to time.

TABLE OF CONTENTS

ITEM 1. FINANCIAL STATEMENTS	5
ITEM 2. OPERATING AND FINANCIAL REVIEW, TREND INFORMATION	42
ITEM 3. LIQUIDITY AND CAPITAL RESOURCES	52
ITEM 4. OTHER MATTERS	54
ITEM 5. EXHIBITS	54
SIGNATURES	55
EXHIBIT 99.1: REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	56

ITEM 1. FINANCIAL STATEMENTS

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

(in millions, except share and per share data)

		As of
Particulars	Note	December 31, 2020			December 31, 2020			March 31, 2020
		Convenience translation (See Note 2(d))
ASSETS
Current assets
Cash and cash equivalents	4	U.S.$	59		Rs.	4,321		Rs.	2,053
Other investments	5		158			11,530			23,687
Trade and other receivables	6		728			53,165			50,278
Inventories	7		607			44,309			35,066
Derivative financial instruments			26			1,907			1,105
Tax assets			27			1,977			4,379
Other current assets			220			16,059			13,802
Total current assets before assets held for sale		U.S.$	1,825		Rs.	133,268		Rs.	130,370
Assets held for sale	8		2			150			-
Total current assets		U.S.$	1,827		Rs.	133,418		Rs.	130,370
Non-current assets
Property, plant and equipment	8	U.S.$	771		Rs.	56,263		Rs.	52,332
Goodwill	9		63			4,634			3,994
Other intangible assets	10		499			36,428			27,659
Trade and other receivables	6		3			243			1,737
Investment in equity accounted investees			44			3,201			2,763
Other investments	5		74			5,431			328
Deferred tax assets			162			11,838			12,214
Other non-current assets			12			890			844
Total non-current assets		U.S.$	1,629		Rs.	118,928		Rs.	101,871
Total assets		U.S.$	3,456		Rs.	252,346		Rs.	232,241
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables		U.S.$	316		Rs.	23,072		Rs.	16,659
Short-term borrowings	11		180			13,110			16,441
Long-term borrowings, current portion	11		11			825			4,266
Provisions			52			3,815			3,800
Tax liabilities			21			1,520			573
Derivative financial instruments			13			917			1,602
Bank overdraft	4		-			-			91
Other current liabilities			419			30,613			29,382
Total current liabilities		U.S.$	1,012		Rs.	73,872		Rs.	72,814
Non-current liabilities
Long-term borrowings	11	U.S.$	89		Rs.	6,508		Rs.	1,304
Deferred tax liabilities			1			99			275
Provisions			1			58			54
Other non-current liabilities			33			2,414			2,806
Total non-current liabilities		U.S.$	124		Rs.	9,079		Rs.	4,439
Total liabilities		U.S.$	1,136		Rs.	82,951		Rs.	77,253
Equity
Share capital	12	U.S.$	11		Rs.	831		Rs.	831
Treasury shares	12		(14	)		(989	)		(1,006	)
Share premium			122			8,881			8,495
Share based payment reserve			18			1,344			1,233
Capital redemption reserve			2			173			173
Special economic zone re-investment reserve			21			1,529			-
Retained earnings			2,084			152,185			144,247
Other components of equity			75			5,441			1,015
Total equity		U.S.$	2,320		Rs.	169,395		Rs.	154,988
Total liabilities and equity		U.S.$	3,456		Rs.	252,346		Rs.	232,241

The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM INCOME STATEMENTS

(in millions, except share and per share data)

		For the nine months ended December 31,									For the three months ended December 31,
Particulars	Note	2020			2020			2019			2020			2019
		Convenience translation (See Note 2(d))
Revenues	13	U.S.$	1,951		Rs.	142,438		Rs.	130,282		Rs.	49,296		Rs.	43,838
Cost of revenues			887			64,736			59,081			22,758			20,116
Gross profit			1,064			77,702			71,201			26,538			23,722
Selling, general and administrative expenses			552			40,280			37,952			14,387			12,670
Research and development expenses			170			12,447			11,220			4,108			3,949
Impairment of non-current assets			92			6,753			16,760			5,972			13,200
Other income, net	14		(5	)		(395	)		(4,122	)		(128	)		(228	)
Total operating expenses			809			59,085			61,810			24,339			29,591
Results from operating activities (A)			255			18,617			9,391			2,199			(5,869	)
Finance income			28			2,008			1,796			681			571
Finance expense			(9	)		(673	)		(753	)		(188	)		(152	)
Finance income, net (B)	15		18			1,335			1,043			493			419
Share of profit of equity accounted investees, net of tax (C)			4			301			456			151			176
Profit/(loss) before tax [(A)+(B)+(C)]			277			20,253			10,890			2,843			(5,274	)
Tax expense/(benefit)	16		91			6,639			(966	)		2,645			423
Profit/(loss) for the period		U.S	186		Rs.	13,614		Rs.	11,856		Rs.	198		Rs.	(5,697	)
Earnings per share:
Basic earnings per share of Rs.5/- each		U.S.$	1.12		Rs.	82.08		Rs.	71.53		Rs.	1.19		Rs.	(34.37	)
Diluted earnings per share of Rs.5/- each		U.S.$	1.12		Rs.	81.85		Rs.	71.40		Rs.	1.19		Rs.	(34.37	)

The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

(in millions, except share and per share data)

	For the nine months ended December 31,									For the three months ended December 31,
Particulars	2020			2020			2019			2020			2019
	Convenience translation (See Note 2(d))
Profit/(loss) for the period	U.S.$	186		Rs.	13,614		Rs.	11,856		Rs.	198		Rs.	(5,697	)
Other comprehensive income/(loss)
Items that will not be reclassified subsequently to the consolidated income statement:
Changes in the fair value of financial instruments	U.S.$	41		Rs.	2,985		Rs.	(87)		Rs.	2,804		Rs.	(200	)
Tax impact on above items		-			-			(1	)		-			-
Total of items that will not be reclassified subsequently to the consolidated income statement	U.S.$	41		Rs.	2,985		Rs.	(88)		Rs.	2,804		Rs.	(200	)
Items that will be reclassified subsequently to the consolidated income statement:
Changes in the fair value of financial instruments	U.S.$	0		Rs.	7		Rs.	(7)		Rs.	44		Rs.	1
Foreign currency translation adjustments		10			753			958			731			703
Effective portion of changes in fair value of cash flow hedges, net		13			976			(400	)		59			(129	)
Tax impact on above items		(4	)		(295	)		136			(1	)		48
Total of items that will be reclassified subsequently to the consolidated income statement	U.S.$	20		Rs.	1,441		Rs.	687		Rs.	833		Rs.	623
Other comprehensive income for the period, net of tax	U.S.$	61		Rs.	4,426		Rs.	599		Rs.	3,637		Rs.	423
Total comprehensive income/(loss) for the period	U.S.$	247		Rs.	18,040		Rs.	12,455		Rs.	3,835		Rs.	(5,274	)

The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(in millions, except share and per share data)

	Share capital			Share premium		Treasury shares			Share- based payment reserve			Fair value reserve⁽¹⁾			Foreign currency translation reserve		Hedging reserve			Capital redemption reserve		Special economic zone re-investment reserve⁽²⁾		Actuarial gains /(losses)			Retained earnings			Total
Balance as of April 1, 2020 (A)	Rs.	831		Rs.	8,495	Rs.	(1,006	)	Rs.	1,233		Rs.	(2,405	)	Rs.	4,343	Rs.	(563	)	Rs.	173	Rs.	-	Rs.	(360	)	Rs.	144,247		Rs.	154,988
Profit for the period		-			-		-			-			-			-		-			-		-		-			13,614			13,614
Net change in fair value of equity and debt instruments		-			-		-			-			2,992			-		-			-		-		-			-			2,992
Foreign currency translation adjustments		-			-		-			-			-			753		-			-		-		-			-			753
Effective portion of changes in fair value of cash flow hedges, net of tax expense of Rs.295		-			-		-			-			-			-		681			-		-		-			-			681
Total comprehensive income (B)	Rs.	-		Rs.	-	Rs.	-		Rs.	-		Rs.	2,992		Rs.	753	Rs.	681		Rs.	-	Rs.	-	Rs.	-		Rs.	13,614		Rs.	18,040
Issue of equity shares on exercise of options		-	*		386		207			(344	)		-			-		-			-		-		-			-			249
Share-based payment expense		-			-		-			455			-			-		-			-		-		-			-			455
Purchase of treasury shares		-			-		(190	)		-			-			-		-			-		-		-			-			(190	)
Dividend paid		-			-		-			-			-			-		-			-		-		-			(4,147	)		(4,147	)
Total transactions with owners of the Company (C)	Rs.	-		Rs.	386	Rs.	17		Rs.	111		Rs.	-		Rs.	-	Rs.	-		Rs.	-	Rs.	-	Rs.	-		Rs.	(4,147	)	Rs.	(3,633	)
Transfer to special economic zone re-investment reserve (D)	Rs.	-		Rs.	-	Rs.	-		Rs.	-		Rs.	-		Rs.	-	Rs.	-		Rs.	-	Rs.	1,529	Rs.	-		Rs.	(1,529	)	Rs.	-
Balance as of December 31, 2020 [(A)+(B)+(C)+(D)]	Rs.	831		Rs.	8,881	Rs.	(989	)	Rs.	1,344		Rs.	587		Rs.	5,096	Rs.	118		Rs.	173	Rs.	1,529	Rs.	(360	)	Rs.	152,185		Rs.	169,395
Convenience translation (See note 2(d))	U.S.$	11		U.S.$	122	U.S.$	(14)		U.S.$	18		U.S.$	8		U.S.$	70	U.S.$	2		U.S.$	2	U.S.$	21	U.S.$	(5)		U.S.$	2,084		U.S.$	2,320

Rounded to the nearest million.

The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(in millions, except share and per share data)

	Share capital		Share premium		Treasury shares			Share- based payment reserve			Fair value reserve⁽¹⁾			Foreign currency translation reserve		Hedging reserve			Capital redemption reserve		Special economic zone re-investment reserve⁽²⁾		Actuarial gains /(losses)			Retained earnings			Total
Balance as of April 1, 2019 (A)	Rs.	830	Rs.	8,211	Rs.	(535	)	Rs.	990		Rs.	(1,910	)	Rs.	4,031	Rs.	156		Rs.	173	Rs.	-	Rs.	(395	)	Rs.	128,646		Rs.	140,197
Profit for the period		-		-		-			-			-			-		-			-		-		-			11,856			11,856
Net change in fair value of equity and debt instruments		-		-		-			-			(113	)		-		-			-		-		-			19	⁽³⁾		(94	)
Foreign currency translation adjustments		-		-		-			-			-			958		-			-		-		-			-			958
Effective portion of changes in fair value of cash flow hedges, net of tax benefit of Rs.136		-		-		-			-			-			-		(264	)		-		-		-			-			(264	)
Actuarial gain/(loss) on post-employment benefit obligations, net of tax expense of Rs.1		-		-		-			-			-			-		-			-		-		(1	)		-			(1	)
Total comprehensive income (B)	Rs.	-	Rs.	-	Rs.	-		Rs.	-		Rs.	(113	)	Rs.	958	Rs.	(264	)	Rs.	-	Rs.	-	Rs.	(1	)	Rs.	11,875		Rs.	12,455
Issue of equity shares on exercise of options		1		261		3			(254	)		-			-		-			-		-		-			-			11
Share-based payment expense		-		-		-			399			-			-		-			-		-		-			-			399
Purchase of treasury shares		-		-		(474	)		-			-			-		-			-		-		-			-			(474	)
Dividend paid (including corporate dividend tax)		-		-		-			-			-			-		-			-		-		-			(3,916	)		(3,916	)
Total transactions with owners of the Company (C)	Rs.	1	Rs.	261	Rs.	(471	)	Rs.	145		Rs.	-		Rs.	-	Rs.	-		Rs.	-	Rs.	-	Rs.	-		Rs.	(3,916	)	Rs.	(3,980	)
Balance as of December 31, 2019 [(A)+(B)+(C)]	Rs.	831	Rs.	8,472	Rs.	(1,006	)	Rs.	1,135		Rs.	(2,023	)	Rs	4,989	Rs.	(108	)	Rs.	173	Rs.	-	Rs.	(396	)	Rs.	136,605		Rs.	148,672

⁽¹⁾

Represents mark to market gain or loss on financial assets classified as fair value through other comprehensive income (“FVTOCI”). Depending on the category and type of the financial asset, the mark to market gain or loss is either reclassified to the income statement or to retained earnings upon disposal of the investment.

⁽²⁾

The Company has created a Special Economic Zone (“SEZ”) Reinvestment Reserve out of profits of its eligible SEZ Units in accordance with the terms of Section 10AA(1) of the Indian Income Tax Act, 1961. This reserve is to be utilized by the Company for acquiring Plant and Machinery in accordance with Section 10AA(2) of such Act.

⁽³⁾

Represents gain on disposal of financial instruments classified as FVTOCI instruments re-classified to retained earnings.

The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(in millions, except share and per share data)

	For the nine months ended December 31,
Particulars	2020			2020			2019
	Convenience translation (See Note 2(d))
Cash flows from operating activities:
Profit for the period	U.S.$	186		Rs.	13,614		Rs.	11,856
Adjustments for:
Tax expense/(benefit)		91			6,639			(966	)
Fair value changes and profit on sale of units of mutual funds, net		(7	)		(500	)		(780	)
Depreciation and amortization		132			9,627			9,507
Impairment of non-current assets		92			6,753			16,760
Allowance for credit losses (on trade receivables and other advances)		2			172			162
Loss/(gain) on sale or de-recognition of non-current assets, net		1			38			(6	)
Share of profit of equity accounted investees		(4	)		(301	)		(456	)
Foreign exchange loss, net		21			1,513			232
Interest expense, net		0			13			46
Equity settled share-based payment expense		6			455			399
Dividend income		-			-			(5	)
Changes in operating assets and liabilities:
Trade and other receivables		(22	)		(1,573	)		(6,493	)
Inventories (Refer to Note 7 for inventory write downs)		(120	)		(8,777	)		(4,166	)
Trade and other payables		56			4,061			3,025
Other assets and other liabilities, net		(53	)		(3,862	)		3,502
Cash generated from operations		382			27,872			32,617
Income tax paid, net		(47	)		(3,435	)		(5,322	)
Net cash from operating activities	U.S.$	335		Rs.	24,437		Rs.	27,295
Cash flows (used in)/from investing activities:
Expenditure on property, plant and equipment		(94	)		(6,866	)		(3,351	)
Proceeds from sale of property, plant and equipment		1			56			108
Expenditure on other intangible assets		(34	)		(2,492	)		(667	)
Proceeds from sale of other intangible assets		-			-			259
Payment for acquisition of business (Refer to Note 29 for details)		(212	)		(15,514	)		-
Purchase of other investments		(806	)		(58,876	)		(92,804	)
Proceeds from sale of other investments		951			69,411			98,622
Dividend received from equity accounted investees		-			-			392
Interest received		15			1,071			688
Net cash (used in)/from investing activities	U.S.$	(181	)	Rs.	(13,210	)	Rs.	3,247
Cash flows used in financing activities:
Proceeds from issuance of equity shares (including treasury shares)		3			249			3
Purchase of treasury shares		(3	)		(190	)		(474	)
Repayment of short-term borrowings, net		(46	)		(3,347	)		(3,425	)
Proceeds from long-term borrowings		52			3,800			-
Repayment of long-term borrowings		(51	)		(3,743	)		(21,114	)
Payment of principal portion of lease liabilities		(8	)		(565	)		(393	)
Dividend paid (December 31, 2019 including corporate dividend tax)		(57	)		(4,147	)		(3,916	)
Interest paid		(14	)		(995	)		(1,277	)
Net cash used in financing activities	U.S.$	(122	)	Rs.	(8,938	)	Rs.	(30,596	)
Net increase/(decrease) in cash and cash equivalents		31			2,289			(54	)
Effect of exchange rate changes on cash and cash equivalents		1			70			70
Cash and cash equivalents at the beginning of the period		27			1,962			2,228
Cash and cash equivalents at the end of the period (Refer to Note 4 for details)	U.S.$	59		Rs.	4,321		Rs.	2,244

The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

1. Reporting entity

Dr. Reddy’s Laboratories Limited (the “parent company”), together with its subsidiaries and joint ventures (collectively, the “Company”), is a leading India-based pharmaceutical company headquartered and having its registered office in Hyderabad, Telangana, India. Through its three businesses - Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products – the Company offers a portfolio of products and services, including Active Pharmaceutical Ingredients (“APIs”), Custom Pharmaceutical Services (“CPS”), generics, biosimilars and differentiated formulations.

The Company’s principal research and development facilities are located in the states of Telangana and Andhra Pradesh in India, Cambridge in the United Kingdom and Leiden in the Netherlands; its principal manufacturing facilities are located in the states of Telangana, Andhra Pradesh and Himachal Pradesh in India, Cuernavaca-Cuautla in Mexico, Mirfield in the United Kingdom, and Louisiana in the United States; and its principal markets are in India, Russia, the United States, the United Kingdom, and Germany. The Company’s shares trade on the Bombay Stock Exchange and the National Stock Exchange in India and on the New York Stock Exchange in the United States.

2. Basis of preparation of financial statements

a) Statement of compliance

These unaudited condensed consolidated interim financial statements (hereinafter referred to as “interim financial statements”) are prepared in accordance with IAS 34, “Interim Financial Reporting” as issued by the International Accounting Standards Board (“IASB”). They do not include all of the information required for a complete set of annual financial statements and should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 20-F for the fiscal year ended March 31, 2020. These interim financial statements were authorized for issuance by the Company’s Board of Directors on February 02, 2021.

b) Significant accounting policies

The accounting policies applied by the Company in these interim financial statements are the same as those applied by the Company in its audited consolidated financial statements as at and for the year ended March 31, 2020 contained in the Company’s Annual Report on Form 20-F.

Several amendments and interpretations apply for the first time in the fiscal year ending March 31, 2021, but do not have an impact on these interim financial statements.

c) Basis of measurement

These interim financial statements have been prepared on the historical cost convention and on an accrual basis, except for the following material items in the statements of financial position:

derivative financial instruments are measured at fair value;

financial assets are measured either at fair value or at amortized cost, depending on the classification;

employee defined benefit assets/(liabilities) are recognized as the net total of the fair value of plan assets, adjusted for actuarial gains/(losses) and the present value of the defined benefit obligation;

long-term borrowings are measured at amortized cost using the effective interest rate method;

share-based payments are measured at fair value;

investments in joint ventures are accounted for using the equity method;

assets held for sale are measured at fair value; and

right-of-use the assets are recognized at the present value of lease payments that are not paid at that date. This amount is adjusted for any lease payments made at or before the commencement date, lease incentives received and initial direct costs incurred, if any.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

2. Basis of preparation of financial statements (continued)

d) Convenience translation

These interim financial statements have been prepared in Indian rupees. Solely for the convenience of the reader, these interim financial statements as of and for the three months and nine months ended December 31, 2020 have been translated into U.S. dollars at the certified foreign exchange rate of U.S.$1.00 = Rs.73.01, as published by the Federal Reserve Board of Governors on December 31, 2020. No representation is made that the Indian rupee amounts have been, could have been or could be converted into U.S. dollars at such a rate or any other rate. Such convenience translation is not subject to review by the Company’s independent registered public accounting firm.

e) Functional and presentation currency

These interim financial statements are presented in Indian rupees, which is the functional currency of the parent company. All financial information presented in Indian rupees has been rounded to the nearest million.

In respect of certain non-Indian subsidiaries that operate as marketing arms of the parent company in their respective countries/regions, the functional currency has been determined to be the functional currency of the parent company (i.e., the Indian rupee). The operations of these entities are largely restricted to importing of finished goods from the parent company in India, sales of these products in the foreign country and making of import payments to the parent company. The cash flows realized from sales of goods are available for making import payments to the parent company and cash is paid to the parent company on a regular basis. The costs incurred by these entities are primarily the cost of goods imported from the parent company. The financing of these subsidiaries is done directly or indirectly by the parent company.

In respect of subsidiaries whose operations are self-contained and integrated within their respective countries/regions, the functional currency has been generally determined to be the local currency of those countries/regions, unless use of a different currency is considered appropriate.

f) Use of estimates and judgments

The preparation of interim financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. In preparing these interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the audited consolidated financial statements as at and for the year ended March 31, 2020.

g) New accounting standards effective as on April 1, 2020

Amendments to IFRS 3: Definition of a Business

In May 2020, the IASB issued an amendment to IFRS 3 “Business Combinations – Reference to the Conceptual Framework.” The amendment is effective as of January 1, 2020, although companies may choose to apply it earlier under certain circumstances. The amendment to IFRS 3 clarifies that to be considered a business, an integrated set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. Furthermore, it clarified that a business can exist without including all of the inputs and processes needed to create outputs. These amendments had no impact on these interim financial statements, but may impact future periods should the Company enter into any business combinations.

Amendments to IFRS 7, IFRS 9 and IAS 39: Interest Rate Benchmark Reform

The International Accounting Standards Board (“IASB”) published Interest Rate Benchmark Reform Amendments to IFRS 9, IAS 39 and IFRS 7 representing the finalization of Phase II of the project on August 27, 2020 to address issues that might affect financial reporting when an existing interest rate benchmark is replaced with an alternative benchmark interest rate.

The amendments provide a number of reliefs, which apply to all hedging relationships that are directly affected by interest rate benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainties about the timing and or amount of benchmark-based cash flows of the hedged item or the hedging instrument. These amendments had no impact on these interim financial statements as it does not have any interest rate hedge relationships.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

2. Basis of preparation of financial statements (continued)

g) New accounting standards effective as on April 1, 2020 (continued)

Amendments to IAS 1 and IAS 8: Definition of Material

The amendments provide a new definition of material that states “information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.” The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. These amendments had no impact on these interim financial statements.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

3. Segment reporting

The Chief Operating Decision Maker (“CODM”) evaluates the Company’s performance and allocates resources based on an analysis of various performance indicators by operating segments. The CODM reviews revenue and gross profit as the performance indicator for all of the operating segments, and does not review the total assets and liabilities of an operating segment. The Co-Chairman and Managing Director was previously the CODM of the Company. Pursuant to certain organizational changes, effective December 1, 2020, the office of Chief Executive Officer (“CEO”) assumed the authority and responsibility for making decisions about resources to be allocated to various segments and assessing their performance. Consequently, the CEO is currently the CODM of the Company.

The Company’s reportable operating segments are as follows:

•

Global Generics;

•

Pharmaceutical Services and Active Ingredients (“PSAI”);

•

Proprietary Products; and

•

Others.

Global Generics. This segment consists of the Company’s business of manufacturing and marketing prescription and over-the-counter finished pharmaceutical products ready for consumption by the patient, marketed under a brand name (branded formulations) or as generic finished dosages with therapeutic equivalence to branded formulations (generics). This segment includes the operations of the Company’s biologics business.

Pharmaceutical Services and Active Ingredients. This segment primarily consists of the Company’s business of manufacturing and marketing active pharmaceutical ingredients and intermediates, also known as “API”, which are the principal ingredients for finished pharmaceutical products. Active pharmaceutical ingredients and intermediates become finished pharmaceutical products when the dosages are fixed in a form ready for human consumption such as a tablet, capsule or liquid using additional inactive ingredients. This segment also includes the Company’s contract research services business and the manufacture and sale of active pharmaceutical ingredients and steroids in accordance with the specific customer requirements.

Proprietary Products. This segment consists of the Company’s business that focuses on the research and development of differentiated formulations. The segment is expected to earn revenues arising out of monetization of such assets and subsequent royalties, if any.

Others. This segment consists of the operations of the Company’s wholly-owned subsidiary, Aurigene Discovery Technologies Limited (“ADTL”), a discovery stage biotechnology company developing novel and best-in-class therapies in the fields of oncology and inflammation. ADTL works with established pharmaceutical and biotechnology companies through customized models of drug-discovery collaborations.

The measurement of each segment’s revenues, expenses and assets is consistent with the accounting policies that are used in preparation of the Company’s consolidated financial statements.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

3. Segment reporting (continued)

Information about segments:

For the nine months ended December 31, 2020

For the nine months ended December 31, 2019

Segments

Global
Generics

PSAI

Proprietary

Products

Others

Total

Global
Generics

PSAI

Proprietary

Products

Others

Total

Revenues⁽¹⁾

Rs.

115,667

Rs.

24,067

Rs.

280

Rs.

2,424

Rs.

142,438

Rs.

101,725

Rs.

18,552

Rs.

7,947

Rs.

2,058

Rs.

130,282

Gross profit

Rs.

68,665

Rs.

6,913

Rs.

244

Rs.

1,880

Rs.

77,702

Rs.

58,117

Rs.

4,147

Rs.

7,751

Rs.

1,186

Rs.

71,201

Selling, general and administrative expenses

40,280

37,952

Research and development expenses

12,447

11,220

Impairment of non-current assets

6,753

16,760

Other income, net

(395

)

(4,122

)

Results from operating activities

Rs.

18,617

Rs.

9,391

Finance income, net

1,335

1,043

Share of profit of equity accounted investees, net of tax

301

456

Profit before tax

Rs.

20,253

Rs.

10,890

Tax expense/(benefit)

6,639

(966

)

Profit for the period

Rs.

13,614

Rs.

11,856

Information about segments:

For the three months ended December 31, 2020

For the three months ended December 31, 2019

Segments

Global
Generics

PSAI

Proprietary

Products

Others

Total

Global
Generics

PSAI

Proprietary

Products

Others

Total

Revenues⁽¹⁾

Rs.

40,751

Rs.

7,009

Rs.

124

Rs.

1,412

Rs.

49,296

Rs.

35,927

Rs.

6,906

Rs.

241

Rs.

764

Rs.

43,838

Gross profit

Rs.

23,454

Rs.

1,773

Rs.

100

Rs.

1,211

Rs.

26,538

Rs.

20,910

Rs.

2,072

Rs.

246

Rs.

494

Rs.

23,722

Selling, general and administrative expenses

14,387

12,670

Research and development expenses

4,108

3,949

Impairment of non-current assets

5,972

13,200

Other income, net

(128

)

(228

)

Results from operating activities

Rs.

2,199

Rs.

(5,869

)

Finance income, net

493

419

Share of profit of equity accounted investees, net of tax

151

176

Profit/(loss) before tax

Rs.

2,843

Rs.

(5,274

)

Tax expense/(benefit)

2,645

423

Profit/(loss) for the period

Rs.

198

Rs.

(5,697

)

⁽¹⁾

Revenues for the nine months ended December 31, 2020 and 2019 do not include inter-segment revenues from the PSAI segment to the Global Generics segment, which amount to Rs.5,024 and Rs.4,432, respectively. Revenues for the three months ended December 31, 2020 and 2019 do not include inter-segment revenues from the PSAI segment to the Global Generics segment, which amount to Rs.1,736 and Rs.1,643, respectively.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

3. Segment reporting (continued)

Analysis of revenues by geography:

The following table shows the distribution of the Company’s revenues by country, based on the location of the customers:

	For the nine months ended December 30,				For the three months ended December 30,
Country	2020		2019		2020		2019
India	Rs.	27,162	Rs.	24,503	Rs.	10,230	Rs.	8,580
United States		58,088		56,882		19,647		17,261
Russia		11,779		12,986		4,529		4,917
Others		45,409		35,911		14,890		13,080
	Rs.	142,438	Rs.	130,282	Rs.	49,296	Rs.	43,838

4. Cash and cash equivalents

Cash and cash equivalents consist of the following:

	As of
	December 31, 2020		March 31, 2020
Cash on hand	Rs.	2	Rs.	2
Balances with banks		3,237		1,807
Term deposits with banks (original maturities less than 3 months)		1,082		244
Cash and cash equivalents in the statements of financial position	Rs.	4,321	Rs.	2,053
Restricted cash balances included above
Balance in unclaimed dividends and debenture interest account	Rs.	108	Rs.	111
Balances in Escrow account pursuant to the Business Transfer Agreement with Wockhardt Limited (Refer to Note 29 for details)		40		-
Other restricted cash balances		82		15

	As of
		December 31, 2020		December 31, 2019
Cash and cash equivalents in the statements of cash flow	Rs.	4,321	Rs.	2,244

5. Other investments

Other investments consist of investments in units of mutual funds, equity securities, bonds, market linked debentures, commercial paper and term deposits with banks (i.e., certificates of deposit having an original maturity period exceeding 3 months). The details of such investments as of December 31, 2020 and March 31, 2020 were as follows:

	As of December 31, 2020						As of March 31, 2020
	Cost		Unrealized gain		Fair value/ amortized cost⁽²⁾		Cost		Unrealized gain/(loss)			Fair value/ amortized cost⁽²⁾
Current portion
In units of mutual funds	Rs.	6,128	Rs.	86	Rs.	6,214	Rs.	13,686	Rs.	146		Rs.	13,832
In bonds		522		-		522		1,851		-			1,851
In commercial paper		977		-		977		967		-			967
In market linked debentures		-		-		-		2,000		(7	)		1,993
Term deposits with banks		3,817		-		3,817		5,044		-			5,044
	Rs.	11,444	Rs.	86	Rs.	11,530	Rs.	23,548	Rs.	139		Rs.	23,687
Non-current portion
In equity securities⁽¹⁾	Rs.	2,701	Rs.	587	Rs.	3,288	Rs.	2,701	Rs.	(2,397	)	Rs.	304
Term deposits with banks		2,119		-		2,119		-		-			-
Others		24		-		24		24		-			24
	Rs.	4,844	Rs.	587	Rs.	5,431	Rs.	2,725	Rs.	(2,397	)	Rs.	328

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

5. Other investments (continued)

⁽¹⁾

Primarily represents the shares of Curis, Inc. issued to the Company under a 2015 Collaboration Agreement with Curis, Inc., as amended. For further details, refer to Note 33 of the consolidated financial statements in the Company’s Annual Report on Form 20-F for the fiscal year ended March 31, 2020.

⁽²⁾

Interest accrued but not due on bonds and debentures, commercial paper and term deposits with banks is included in other current assets.

For the purpose of measurement, the aforesaid investments are classified as follows:

Investments in units of mutual funds	Fair value through profit and loss
Investments in bonds, commercial paper, term deposits and others	Amortized cost
Investments in market linked debentures	Fair value through other comprehensive income
Investments in equity securities	Fair value through other comprehensive income (on account of irrevocable option elected at time of transition)

6. Trade and other receivables

	As of
	December 31, 2020			March 31, 2020
Current
Trade and other receivables, gross	Rs.	54,478		Rs.	51,480
Less: Allowance for credit losses		(1,313	)		(1,202	)
Trade and other receivables, net	Rs.	53,165		Rs.	50,278
Non-current
Trade and other receivables, gross⁽¹⁾	Rs.	243		Rs.	1,737
Less: Allowance for credit losses		-			-
Trade and other receivables, net	Rs.	243		Rs.	1,737

⁽¹⁾

Represents amounts receivable pursuant to an out-licensing arrangement with a customer. As these amounts are not expected to be realized within twelve months from the end of the reporting date, they are disclosed as non-current.

Pursuant to an arrangement with a bank, the Company sells to the bank certain of its trade receivables forming part of its Global Generics segment, on a non-recourse basis. The receivables sold were mutually agreed upon with the bank after considering the creditworthiness and contractual terms with the customer, including any gross to net adjustments (due to rebates, discounts etc.) from the contracted amounts. As a result, the receivables sold are generally lower than the total net amount of trade receivables. The Company has transferred substantially all the risks and rewards of ownership of such receivables sold to the bank, and accordingly, the same are derecognized in the statements of financial position. As on December 31, 2020 and March 31, 2020, the amount of trade receivables de-recognized pursuant to the aforesaid arrangement was Rs.9,157 and Rs.9,049, respectively.

7. Inventories

Inventories consist of the following:

	As of
	December 31, 2020		March 31, 2020
Raw materials	Rs.	12,838	Rs.	10,594
Work-in-progress		9,542		6,806
Finished goods (includes stock-in-trade)		18,681		15,126
Packing materials, stores and spares		3,248		2,540
	Rs.	44,309	Rs.	35,066

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

7. Inventories (continued)

Details of inventories recognized in these interim financial statements are as follows:

	For the nine months ended December 30,				For the three months ended December 30,
	2020		2019		2020		2019
Raw materials, consumables and changes in finished goods and work in progress	Rs.	43,396	Rs.	37,646	Rs.	15,927	Rs.	13,481
Inventory write-downs⁽¹⁾		1,978		2,587		450		672

⁽¹⁾

Following the Company’s decision to voluntarily recall all of its ranitidine medications sold in the United States due to confirmed contamination with N-Nitrosodimethylamine (“NDMA”) above levels established by the U.S. FDA, the Company recognized Rs.231 as inventory write downs towards semi-finished and finished inventory of ranitidine during the nine months ended December 31, 2019. Further, an amount of Rs.170 was recognized as a possible refund liability (as a reduction from revenue) arising out of the Company’s decision to recall such product.

8. Property, plant and equipment

Acquisitions and disposals

	For the nine months ended December 31,				For the year ended March 31,
	2020		2019		2020
Cost of assets acquired during the period⁽¹⁾	Rs.	10,105	Rs.	3,822	Rs.	5,667
Assets acquired through business combinations⁽²⁾		373		-		-
Recognition of right-of-use asset on initial application of IFRS 16		-		1,153		1,153
Net book value of assets disposed of during the period		104		44		81
Depreciation expense		6,438		6,560		8,640
Net book value of assets held for sale (A)		196		-		-
Impairment loss recorded on write-down of assets to fair value less costs to sell (B)		46		-		-
Assets held for sale [(A)-(B)]		150		-		-

⁽¹⁾

Additions for the nine months ended December 31, 2020 include recognition of a right-of-use asset of Rs.1,852 relating to a warehousing services agreement in the United States.

⁽²⁾

Refer to Note 29 of these interim financial statements for further details.

Capital commitments

As of December 31, 2020 and March 31, 2020, the Company was committed to spend Rs.9,369 and Rs.4,888, respectively, under agreements to purchase property, plant and equipment. This amount is net of capital advances paid in respect of such purchase commitments.

9. Goodwill

Goodwill arising on business combinations is not amortized but is tested for impairment at least annually, or more frequently if there is any indication that the cash generating unit to which goodwill is allocated is impaired.

The following table presents goodwill as of December 31, 2020 and March 31, 2020:

	As of
	December 31, 2020			March 31, 2020
Opening balance, gross	Rs.	20,278		Rs.	20,176
Goodwill arising on business combinations⁽¹⁾		530			-
Effect of translation adjustments		110			102
Impairment loss⁽²⁾		(16,284	)		(16,284	)
Closing balance	Rs.	4,634		Rs.	3,994

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

9. Goodwill (continued)

⁽¹⁾

Refer to Note 29 of these interim financial statements for further details.

⁽²⁾

The impairment loss of Rs.16,284 includes Rs.16,003 pertaining to the Company’s German subsidiary, betapharm Arzneimittel GmbH, which is part of the Company’s Global Generics segment. This impairment loss was recorded for the years ended March 31, 2009 and 2010.

10. Other intangible assets

	For the nine months ended December 31,				For the year ended March 31,
	2020		2019		2020
Cost of assets acquired during the period⁽¹⁾⁽²⁾	Rs.	4,234	Rs.	1,211	Rs.	1,806
Assets acquired through business combinations⁽³⁾		14,888		-		-
Net book value of assets disposed of during the period		-		58		65
Amortization expense		3,189		2,947		3,832
Impairment loss recognized during the period⁽⁴⁾⁽⁵⁾		6,707		16,750		16,757

⁽¹⁾

Assets acquired during the nine months ended December 31, 2020 includes the following:

Rs.1,471 representing the estimated payment for the purchase of intellectual property rights relating to product forming part of Company’s Proprietary Products segment.

The Company entered into a definitive agreement with Glenmark Pharmaceuticals Limited to acquire marketing authorizations and other rights of select brands in four “Emerging Markets” countries (as discussed below). The acquired brands represent two products, (a) mometasone mono product and (b) combination of mometasone with azelastine, and are indicated for the treatment of seasonal and perennial allergic rhinitis. The total consideration paid was Rs.1,516. Following the principles of IAS 38, “Intangible assets”, the Company recognized the acquired brands at their acquisition cost. The acquisition pertains to the Company’s Global Generics segment.

⁽²⁾

Assets acquired during the nine months ended December 31, 2019 and the year ended March 31, 2020 includes, a portfolio of approved, non-marketed Abbreviated New Drug Applications (“ANDAs”) in the United States from Teva for a total consideration of Rs.277 (U.S.$4). The Company recognized these ANDAs acquired as product related intangibles.

⁽³⁾

Refer Note 29 of these interim financial statements for further details.

⁽⁴⁾

Impairment charge of Rs.6,707 for the nine months ended December 31, 2020 includes the following:

Impairment of gNuvaring: During the three months ended December 31, 2020, there were significant changes to the generics market for Ethinyl estradiol/Ethenogestral vaginal ring (a generic equivalent to Nuvaring®), one of the 8 ANDAs acquired from Teva in June 2016. The changes include the launch by a competitor of a generic version of the product in January 2021. Due to these adverse market developments, the Company tested the carrying value of this product at the product cash generating unit (“CGU”) level, being the smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount was determined by reference to the product’s value-in-use or fair value less costs to sell, whichever is higher. This resulted in the value-in-use being the recoverable value of the product. Accordingly, the Company recorded an impairment loss of Rs.3,180 for the nine months ended December 31, 2020. This impairment loss pertained to the Company’s Global Generics segment.

Impairment of saxagliptin/metformin (generic version of Kombiglyze®-XR) and phentermine and topiramate (generic version of Qsymia®): With respect to the foregoing two of the 8 ANDAs acquired from Teva in June 2016, there has been a significant decrease in the market potential of these products, primarily due to higher than expected value erosion. Accordingly, the Company assessed the recoverable amount by revisiting market volume, share and price assumptions for these two products and recorded an amount of Rs.1,587 as impairment loss for the nine months ended December 31, 2020. This impairment loss pertained to the Company’s Global Generics segment.

In view of the specific triggers occurring in the period with respect to some other product related intangible assets forming part of the Company's Global Generics and Proprietary Products segments, the Company determined that there was a decrease in the market potential of these products primarily due to higher than expected price erosion and increased competition leading to lower volumes. Consequently, the Company recorded an amount of Rs.1,940 as impairment loss for the nine months ended December 31, 2020.

The Company used the discounted cash flow approach to calculate the value-in-use which considered assumptions such as revenue projections, rate of generic penetration, estimated price erosion, the useful life of the asset and the net cash flows have been discounted based on post tax discount rate.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

10. Other intangible assets (continued)

⁽⁵⁾

Total impairment loss for the year ended March 31, 2020 and the nine months ended December 31, 2019 were Rs.16,757 and Rs.16,750, respectively. For these periods, Rs.11,137 pertained to impairment of gNuvaring, Rs.4,385 pertained to impairment of ramelteon, tobramycin and imiquimod, and the balance pertained to other product related intangibles forming part of the Company’s Global Generics and Proprietary Products segments.

Details of significant separately acquired intangible assets as of December 31, 2020 are as follows:

Particulars of the asset	Acquired from	Carrying cost
Select portfolio of branded generics business	Wockhardt Limited	Rs.	14,438
Select portfolio of dermatology, respiratory and pediatric assets	UCB India Private Limited and affiliates		4,693
Various ANDAs	Teva and an affiliate of Allergan		4,193
Intellectual property rights relating to PPC-06 (tepilamide fumarate)	Xenoport, Inc.		3,995
Commercialization rights for an anti-cancer biologic agent	Eisai Company Limited		1,823
Select Anti-Allergy brands	Glenmark Pharmaceuticals Limited		1,512
Habitrol^® brand	Novartis Consumer Health Inc.		1,350
Over the counter product brands	Ducere Pharma LLC		502
Beta brand	3i Group plc		407
Various ANDAs	Gland Pharma Limited		264

11. Loans and borrowings

Short-term borrowings

Short-term borrowings primarily consist of “pre-shipment credit” drawn by the parent company and other unsecured loans drawn by certain of its subsidiaries in Russia, Mexico, the United States, Brazil, South Africa and Switzerland which are repayable within 6 to 12 months from the date of drawdown.

Short-term borrowings consisted of the following:

	As of
	December 31, 2020		March 31, 2020
Pre-shipment credit	Rs.	8,800	Rs.	10,432
Other working capital borrowings		4,310		6,009
	Rs.	13,110	Rs.	16,441

The interest rate profile of short-term borrowings from banks were as follows:

	As of
	December 31, 2020		March 31, 2020
	Currency⁽¹⁾	Interest Rate⁽²⁾	Currency⁽¹⁾	Interest Rate⁽²⁾
Pre-shipment credit	INR	1 Month T-bill + 35 bps	INR	1 Month T-bill + 60 bps
	INR	5.75%	-	-
	-	-	U.S.$	1 Month LIBOR + 12.5 to 16 bps
Other working capital borrowings	MXN	TIIE + 1.20%	MXN	TIIE + 1.25%
	BRL	4.00%	BRL	7.25%
	RUB	5.55%	RUB	7.05%
	INR	5.90%/7.30%	INR	7.75%
	U.S.$	1 Month LIBOR + 125 bps	U.S.$	1 Month/3 Months LIBOR + 55 to 78 bps
	-	-	ZAR	1 Month JIBAR+120 bps

⁽¹⁾

“INR” means Indian rupees, “U.S.$” means United States Dollars, “RUB” means Russian roubles, “MXN” means Mexican pesos, “BRL” means Brazilian reals and “ZAR” means South African rand.

⁽²⁾

“LIBOR” means the London Inter-bank Offered Rate, “TIIE” means the Equilibrium Inter-banking Interest Rate (Tasa de Interés Interbancaria de Equilibrio), “JIBAR” means the Johannesburg Interbank Average Rate and “T-bill” means the India Treasury Bill interest rate.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

11. Loans and borrowings (continued)

Long-term borrowings

Long-term borrowings consisted of the following:

	As of
	December 31, 2020				March 31, 2020
	Non – Current		Current		Non – Current		Current
Foreign currency borrowing by the parent company	Rs.	-	Rs.	-	Rs.	-	Rs.	3,783
Non-convertible debentures by the APSL subsidiary⁽¹⁾		3,800		-		-		-
Obligations under leases⁽²⁾		2,708		825		1,304		483
	Rs.	6,508	Rs.	825	Rs.	1,304	Rs.	4,266

⁽¹⁾

“APSL subsidiary” refers to Aurigene Pharmaceutical Services Limited.

⁽²⁾

Additions for the nine months ended December 31, 2020 include right-of-use liability of Rs.1,878 relating to a warehousing services agreement in the United States.

During the nine months ended December 31, 2020, the APSL subsidiary issued non-convertible debentures for Rs.3,800. The aforesaid non-convertible debentures are repayable at par after 3 years following the date of issue.

The interest rate profiles of long-term borrowings (other than obligations under leases) were as follows:

As of

December 31, 2020

March 31, 2020

Currency⁽¹⁾

Interest Rate⁽²⁾

Currency⁽¹⁾

Interest Rate⁽²⁾

Foreign currency borrowings

U.S.$

1 Month LIBOR + 82.7 bps

Non-convertible debentures

INR

6.77

⁽¹⁾

“U.S.$” means United States dollars and “INR” means Indian rupees.

⁽²⁾

“LIBOR” means the London Inter-bank Offered Rate.

Uncommitted lines of credit from banks

The Company had uncommitted lines of credit of Rs.48,708 and Rs.39,374 as of December 31, 2020 and March 31, 2020, respectively, from its banks for working capital requirements. The Company has the right to draw upon these lines of credit based on its working capital requirements.

12. Share capital

The following table presents the changes in number of equity shares and amount of equity share capital for the nine months ended December 31, 2020 and December 31, 2019:

	As of
	December 31, 2020					December 31, 2019
	Number		Amount			Number		Amount
Opening number of equity shares/share capital		166,172,082	Rs.	831			166,065,948	Rs.	830
Add: Equity shares issued pursuant to employee stock option plans⁽¹⁾		126,034		-	*		97,200		1
Closing number of equity shares/share capital		166,298,116	Rs.	831			166,163,148	Rs.	831
Treasury shares⁽²⁾		361,504	Rs.	989			395,950	Rs.	1,006

Rounded off to nearest million.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

12. Share capital (continued)

⁽¹⁾

During the nine months ended December 31, 2020 and 2019, equity shares were issued as a result of the exercise of vested options granted to employees pursuant to the Dr. Reddy’s Employees Stock Option Scheme, 2002 and the Dr. Reddy’s Employees Stock Option Scheme, 2007. The options exercised had an exercise price of Rs.5, Rs.2,607 or Rs.2,814 per share. Upon the exercise of such options, the amount of compensation cost (computed using the grant date fair value) previously recognized in the "share-based payment reserve” was transferred to “share premium” in the unaudited condensed consolidated interim statements of changes in equity.

⁽²⁾

Pursuant to the special resolution approved by the shareholders in the Annual General Meeting held on July 27, 2018, the Dr. Reddy’s Employees ESOS Trust (the “ESOS Trust”) was formed to support the Dr. Reddy’s Employees Stock Option Scheme, 2018 by acquiring, from the Company or through secondary market acquisitions, equity shares which are used for issuance to eligible employees (as defined therein) upon exercise of stock options thereunder. During the nine months ended December 31, 2020, an aggregate of 77,725 equity shares were issued as a result of the exercise of vested options granted to employees pursuant to the Dr. Reddy’s Employees Stock Option Scheme, 2018. The options exercised had an exercise price of Rs.2,607 or Rs.2,814 per share. Upon the exercise of such options, the amount of compensation cost (computed using the grant date fair value) previously recognized in the “share based payment reserve” was transferred to “share premium” in the unaudited condensed consolidated interim statements of changes in equity. In addition, any difference between the carrying amount of treasury shares and the consideration received was recognized in the “share premium”. As of December 31, 2020 and March 31, 2020, the ESOS Trust had outstanding 361,504 and 395,950 shares, respectively, which it purchased from the secondary market for an aggregate consideration of Rs.989 and Rs.1,006, respectively.

13. Revenue from contracts with customers

	For the nine months ended December 31,				For the three months ended December 31,
	2020		2019		2020		2019
Sales	Rs.	138,119	Rs.	120,213	Rs.	47,109	Rs.	42,607
Service income		3,386		1,748		1,821		685
License fees		933		8,321		366		546
	Rs.	142,438	Rs.	130,282	Rs.	49,296	Rs.	43,838

Analysis of revenues by geography:

The following table shows the distribution of the Company’s revenues by country, based on the location of the customers:

	For the nine months ended December 31,				For the three months ended December 31,
Country	2020		2019		2020		2019
India	Rs.	27,162	Rs.	24,503	Rs.	10,230	Rs.	8,580
United States		58,088		56,882		19,647		17,261
Russia		11,779		12,986		4,529		4,917
Others		45,409		35,911		14,890		13,080
	Rs.	142,438	Rs.	130,282	Rs.	49,296	Rs.	43,838

Refund liabilities on account of sales returns amounting to Rs.3,220 and Rs.3,252 as of December 31, 2020 and March 31, 2020, respectively, have been included in provisions forming part of current liabilities.

14. Other income, net

Other income, net consists of the following:

	For the nine months ended December 31,						For the three months ended December 31,
	2020			2019			2020			2019
Loss/(gain) on sale/disposal of non-current assets, net	Rs.	38		Rs.	(64	)	Rs.	23		Rs.	(45	)
Sale of spent chemicals		(179	)		(231	)		(66	)		(82	)
Scrap sales		(99	)		(117	)		(44	)		(36	)
Miscellaneous income, net⁽¹⁾		(155	)		(3,710	)		(41	)		(65	)
	Rs.	(395	)	Rs.	(4,122	)	Rs.	(128	)	Rs.	(228	)

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

14. Other income, net (continued)

⁽¹⁾

Miscellaneous income, net for the nine months ended December 31, 2019 includes Rs.3,457 (U.S.$50) received from Celgene pursuant to a settlement agreement entered into in April 2019. The agreement effectively settles any claim the Company or its affiliates may have had for damages under section 8 of the Canadian Patented Medicines (Notice of Compliance) Regulations in regard to the Company’s ANDS for a generic version of REVLIMID® brand capsules (lenalidomide) pending before Health Canada.

15. Finance income, net

Finance income, net consists of the following:

	For the nine months ended December 31,						For the three months ended December 31,
	2020			2019			2020			2019
Interest income	Rs.	660		Rs.	707		Rs.	257		Rs.	207
Fair value changes and profit on sale of units of mutual funds, net		500			780			111			218
Foreign exchange gain, net		848			304			313			146
Miscellaneous income, net		-			5			-			-
Finance income (A)	Rs.	2,008		Rs.	1,796		Rs.	681		Rs.	571
Interest expense		(673	)		(753	)		(188	)		(152	)
Finance expense (B)	Rs.	(673	)	Rs.	(753	)	Rs.	(188	)	Rs.	(152	)
Finance income, net [(A)+(B)]	Rs.	1,335		Rs.	1,043		Rs.	493		Rs.	419

16. Income taxes

Income tax expense is recognized based on the Company’s best estimate of the average annual income tax rate for the fiscal year applied to the pre-tax income of the interim period. The average annual income tax rate is determined for each taxing jurisdiction and applied individually to the interim period pre-tax income of each jurisdiction. The difference between the estimated average annual income tax rate and the enacted tax rate is accounted for by a number of factors, including the effect of differences between Indian and foreign tax rates, expenses that are not deductible for tax purposes, incomes exempted from income taxes, and effects of changes in tax laws and rates.

	For the nine months ended December 31,						For the three months ended December 31,
	2020			2019			2020			2019
Weighted average tax rate		32.78	%		(8.9	)%		93.04	%		(8.02	)%
Tax expense/(benefit)	Rs.	6,639		Rs.	(966	)	Rs.	2,645		Rs.	423
Tax expense/(benefit) recognised directly in the equity	Rs.	295		Rs.	(135	)	Rs.	1		Rs.	(48	)

The effective rate of tax for the nine months ended December 31, 2019 was lower primarily on account of recognition of a deferred tax asset related to the Minimum Alternate Tax (“MAT”) credits, losses and weighted deduction on eligible research and development expenditure in Dr. Reddy’s Laboratories Limited, India.

The effective rate of tax for the three months ended December 31, 2019 was lower primarily on account of weighted deduction on eligible research and development expenditure and on account of recognition of deferred tax assets related to losses.

Tax expenses/(benefits) recognized directly in the equity primarily relates to tax effects on the changes in fair value of financial instruments and the changes in fair value of cash flow hedges.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

17. Nature of expense

The following table shows supplemental information related to certain “nature of expense” items for the three months and nine months ended December 31, 2020 and 2019:

	For the nine months ended December 31,				For the three months ended December 31,
Depreciation	2020		2019		2020		2019
Cost of revenues	Rs.	4,595	Rs.	4,842	Rs.	1,510	Rs.	1,576
Selling, general and administrative expenses		1,118		1,000		378		308
Research and development expenses		725		718		243		247
	Rs.	6,438	Rs.	6,560	Rs.	2,131	Rs.	2,131

	For the nine months ended December 31,				For the three months ended December 31,
Amortization	2020		2019		2020		2019
Cost of revenues	Rs.	-	Rs.	175	Rs.	-	Rs.	33
Selling, general and administrative expenses		3,109		2,687		1,058		895
Research and development expenses		80		85		27		26
	Rs.	3,189	Rs.	2,947	Rs.	1,085	Rs.	954

	For the nine months ended December 31,				For the three months ended December 31,
Employee benefits	2020		2019		2020		2019
Cost of revenues	Rs.	8,701	Rs.	8,006	Rs.	2,753	Rs.	2,559
Selling, general and administrative expenses		15,111		13,885		5,225		4,707
Research and development expenses		3,557		3,356		1,179		1,111
	Rs.	27,369	Rs.	25,247	Rs.	9,157	Rs.	8,377

18. Employee benefit plans

Gratuity benefits provided by the parent company

In accordance with applicable Indian laws, the Company has a defined benefit plan which provides for gratuity payments (the “Gratuity Plan”) and covers certain categories of employees in India. The Gratuity Plan provides a lump sum gratuity payment to eligible employees at retirement or termination of their employment. The amount of the payment is based on the respective employee’s last drawn salary and the years of employment with the Company. Effective September 1, 1999, the Company established the Dr. Reddy’s Laboratories Gratuity Fund (the “Gratuity Fund”) to fund the Gratuity Plan. Liabilities in respect of the Gratuity Plan are determined by an actuarial valuation, based upon which the Company makes contributions to the Gratuity Fund. Trustees administer the contributions made to the Gratuity Fund. Amounts contributed to the Gratuity Fund are invested in bonds issued by the Government of India, in debt securities and in equity securities of Indian companies. The liability recorded by the Company towards this obligation was Rs.224 and Rs.189 as at December 31, 2020 and March 31, 2020, respectively.

Compensated absences

The Company provides for accumulation of compensated absences by certain categories of its employees. These employees can carry forward a portion of the unutilized compensated absences and utilize them in future periods or receive cash in lieu thereof as per the Company’s policy. The Company records a liability for compensated absences in the period in which the employee renders the services that increases this entitlement. The total liability recorded by the Company towards this obligation was Rs.1,030 and Rs.1,161 as at December 31, 2020 and March 31, 2020, respectively.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

19. Employee stock incentive plans

Pursuant to the special resolutions approved by the shareholders in the Annual General Meetings held on September 24, 2001, on July 27, 2005, and on July 27, 2019 respectively, the Company instituted the Dr. Reddy’s Employees Stock Option Scheme, 2002 (the “DRL 2002 Plan”), the Dr. Reddy’s Employees ADR Stock Option Scheme, 2007 (the “DRL 2007 Plan”), and Dr. Reddy’s Employees Stock Option Scheme, 2019 (the “DRL 2019 Plan”) each of which allows for grants of stock options to eligible employees.

Grants under Stock Incentive Plans

The terms and conditions of the grants made during the nine months ended December 31, 2020 under the above plans were as follows:

Particulars

Number of
instruments

Exercise price

Vesting period

Contractual
life

DRL 2002 Plan

92,092

Rs.

5.00

1 to 4 years

5 years

DRL 2007 Plan

52,316

Rs.

5.00

1 to 4 years

5 years

DRL 2007 Plan

96,080

Rs.

3,679.00

1 to 4 years

5 years

DRL 2018 Plan

150,740

Rs.

3,679.00

1 to 4 years

5 years

The above grants were made on May 19, 2020 and October 27, 2020.

The terms and conditions of the grants made during the nine months ended December 31, 2019 under the above plans were as follows:

Particulars

Number of
instruments

Exercise price

Vesting period

Contractual
life

DRL 2002 Plan

49,796

Rs.

5.00

1 to 4 years

5 years

DRL 2007 Plan

89,282

Rs.

5.00

1 to 4 years

5 years

DRL 2007 Plan

61,700

Rs.

2,814.00

1 to 4 years

5 years

DRL 2018 Plan

167,500

Rs.

2,814.00

1 to 4 years

5 years

The above grants were made on May 16, 2019 and October 31, 2019.

The fair value of services received in return for stock options granted to employees is measured by reference to the fair value of stock options granted. The fair value of stock options has been measured using the Black-Scholes-Merton valuation model at the date of the grant.

The weighted average inputs used in computing the fair value of such grants were as follows:

	October 27, 2020			May 19, 2020			May 19, 2020			October 31, 2019			May 16, 2019			May 16, 2019
Expected volatility		30.81	%		29.12	%		30.47	%		27.10	%		28.25	%		29.29	%
Exercise price	Rs.	5.00		Rs.	3,679.00		Rs.	5.00		Rs.	5.00		Rs.	2,814.00		Rs.	5.00
Option life		2.5 Years			5.0 Years			2.5 Years			2.5 Years			5.0 Years			2.5 Years
Risk-free interest rate		4.36	%		5.67	%		4.62	%		5.72	%		7.14	%		6.76	%
Expected dividends		0.49	%		0.68	%		0.68	%		0.72	%		0.71	%		0.71	%
Grant date share price	Rs.	5,099.00		Rs.	3,700.00		Rs.	3,700.00		Rs.	2,783.20		Rs.	2,801.00		Rs.	2,801.00

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

19. Employee stock incentive plans (continued)

Share-based payment expense

	For the nine months ended December 31,				For the three months ended December 31,
	2020		2019		2020		2019
Equity settled share-based payment expense⁽¹⁾	Rs.	455	Rs.	399	Rs.	151	Rs.	127
Cash settled share-based payment expense⁽²⁾		152		66		29		28
	Rs.	607	Rs.	465	Rs.	180	Rs.	155

⁽¹⁾

As of December 31, 2020 and 2019, there was Rs.799 and Rs.675, respectively, of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of 2.03 years and 1.98 years, respectively.

⁽²⁾

Certain of the Company’s employees are eligible to receive share based payment awards that are settled in cash. These awards would vest only upon satisfaction of certain service conditions which range from 1 to 4 years. These awards entitle the employees to a cash payment on the vesting date. The amount of the cash payment is determined based on the price of the Company’s ADSs at the time of vesting. As of December 31, 2020 and 2019, there was Rs.184 and Rs.129, respectively, of total unrecognized compensation cost related to unvested awards. This cost is expected to be recognized over a weighted-average period of 1.98 years and 2.02 years, respectively. This scheme does not involve dealing in or subscribing to or purchasing securities of the Company, directly or indirectly.

20. Related parties

The Company has entered into transactions with the following related parties:

	·	Green Park Hotel and Resorts Limited for hotel services;
	·	Green Park Hospitality Services Private Limited for catering and other services;
	·	Dr. Reddy’s Foundation towards contributions for social development;
	·	Kunshan Rotam Reddy Pharmaceuticals Company Limited for sales of goods and for research and development services;
	·	Pudami Educational Society towards contributions for social development;
	·	Indus Projects Private Limited for engineering services relating to civil works;
	·	CERG Advisory Private Limited for professional consulting services;
	·	Dr. Reddy’s Institute of Life Sciences for research and development services;
	·	AverQ Inc. for professional consulting services;
	·	Shravya Publications Pvt. Ltd. for professional consulting services;
	·	Samarjita Management Consultancy Private Limited for professional consulting services;
	·	Cancelled Plans LLP for the sale of scrap materials;
	·	Araku Originals Private Limited for the purchase of coffee powder;
	·	DRES Energy Private Limited for the purchase of solar power; and
	·	Stamlo Industries Limited for hotel services.

These are enterprises over which key management personnel have control or significant influence. “Key management personnel” consists of the Company’s Directors and members of the Company’s Management Council.

The Company has also entered into cancellable operating lease transactions with key management personnel and close members of their families.

Further, the Company contributes to the Dr. Reddy’s Laboratories Gratuity Fund, which maintains the plan assets of the Company’s Gratuity Plan for the benefit of its employees.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

20. Related parties (continued)

The following is a summary of significant related party transactions:

	For the nine months ended December 31,				For the three months ended December 31,
	2020		2019		2020			2019
Research and development services received	Rs.	81	Rs.	97	Rs.	29		Rs.	19
Sale of goods		22		11		1			-
Lease rentals received		1		-		-	*		-
Research and development services provided		39		58		39			-
Lease rentals paid		28		27		9			9
Catering expenses paid		221		242		82			67
Hotel expenses paid		6		18		2			7
Facility management services paid		27		-		9			-
Purchase of solar power		92		-		24			-
Civil works		35		76		20			28
Contributions towards social development		174		177		58			59
Salaries to relatives of key management personnel		6		6		1			2
Others		8		3		7			-

Rounded to the nearest million.

The Company had the following amounts due from related parties as at the following dates:

	As of
	December 31, 2020		March 31, 2020
Key management personnel and close members of their families	Rs.	8	Rs.	8
Other related parties		69		68

The Company had the following amounts due to related parties as at the following dates:

	As of
	December 31, 2020		March 31, 2020
Due to related parties	Rs.	23	Rs.	91

The following table describes the components of compensation paid or payable to key management personnel for the services rendered during the applicable period:

	For the nine months ended December 31,				For the three months ended December 31,
	2020		2019		2020		2019
Salaries and other benefits	Rs.	579	Rs.	481	Rs.	204	Rs.	166
Contributions to defined contribution plans		25		26		8		9
Commission to directors		255		205		85		75
Share-based payment expense		201		122		80		43
	Rs.	1,060	Rs.	834	Rs.	377	Rs.	293

Some of the key management personnel of the Company are also covered under the Company’s Gratuity Plan along with the other employees of the Company. Proportionate amounts of gratuity accrued under the Company’s Gratuity Plan have not been separately computed or included in the above disclosure.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

21. Financial instruments

Financial instruments by category

The carrying value and fair value of financial instruments as at December 31, 2020 and March 31, 2020 were as follows:

	As of December 31, 2020				As of March 31, 2020
	Total carrying value		Total fair value		Total carrying value		Total fair value
Assets:
Cash and cash equivalents	Rs.	4,321	Rs.	4,321	Rs.	2,053	Rs.	2,053
Other investments⁽¹⁾		16,961		16,961		24,015		24,015
Trade and other receivables		53,408		53,408		52,015		52,015
Derivative financial instruments		1,907		1,907		1,105		1,105
Other assets⁽²⁾		3,831		3,831		4,170		4,170
Total	Rs.	80,428	Rs.	80,428	Rs.	83,358	Rs.	83,358
Liabilities:
Trade and other payables	Rs.	23,072	Rs.	23,072	Rs.	16,659	Rs.	16,659
Derivative financial instruments		917		917		1,602		1,602
Long-term borrowings		7,333		7,333		5,570		5,570
Short-term borrowings		13,110		13,110		16,441		16,441
Bank overdraft		-		-

RDY

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