Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or 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): ______
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): ______
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.
If “Yes” is marked, indicate below the file number assigned
to registrant in connection with Rule 12g3-2(b): 82-________.
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.
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:
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.
The accompanying notes form an integral part
of these unaudited condensed consolidated interim financial statements.
The accompanying notes form
an integral part of these unaudited condensed consolidated interim financial statements.
The accompanying notes form an integral part
of these unaudited condensed consolidated interim financial statements.
The accompanying notes form an integral
part of these unaudited condensed consolidated interim financial statements.
The accompanying notes form an integral part
of these unaudited condensed consolidated interim financial statements.
The accompanying notes form an integral part of these unaudited
condensed consolidated interim financial statements.
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:
|
|
•
|
Pharmaceutical Services and Active Ingredients (“PSAI”);
|
|
|
•
|
Proprietary Products; and
|
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
|
|
|
-
|
|
|
|
-
|
|
|
|
91
|
|
|
|
91
|
|
|
Other liabilities and provisions(3)
|
|
|
24,911
|
|
|
|
24,911
|
|
|
|
25,317
|
|
|
|
25,317
|
|
|
Total
|
|
Rs.
|
69,343
|
|
|
Rs.
|
69,343
|
|
|
Rs.
|
65,680
|
|
|
Rs.
|
65,680
|
|
|
|
(1)
|
Interest accrued but not due on investments is included in other assets.
|
|
|
(2)
|
Other assets that are not financial assets (such as receivables from statutory authorities, export benefit receivables, prepaid expenses, advances paid and certain other receivables) of Rs.13,118 and Rs.10,476 as of December 31, 2020 and March 31, 2020, respectively, are not included.
|
|
|
(3)
|
Other liabilities and provisions that are not financial liabilities (such as statutory dues payable, deferred revenue, advances from customers and certain other accruals) of Rs.11,989 and Rs.10,725 as of December 31, 2020 and March 31, 2020, respectively, are not included.
|
Fair value hierarchy
Level 1 - Quoted prices (unadjusted) in active
markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from
prices).
Level 3 - Inputs for the assets or liabilities
that are not based on observable market data (unobservable inputs).
The following table presents
the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of December 31, 2020:
|
Particulars
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
FVTPL - Financial asset - Investments in units of mutual funds
|
|
Rs.
|
6,214
|
|
|
Rs.
|
-
|
|
|
Rs.
|
-
|
|
|
Rs.
|
6,214
|
|
|
FVTOCI - Financial asset - Investment in equity securities
|
|
|
3,287
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,287
|
|
|
Derivative financial instruments – net gain on outstanding foreign exchange forward, option, swap contracts and interest rate swap contracts(1)
|
|
|
-
|
|
|
|
990
|
|
|
|
-
|
|
|
|
990
|
|
|
Contingent consideration pursuant to the Business Transfer Agreement with Wockhardt Limited (Refer to Note 29 for details)
|
|
|
-
|
|
|
|
-
|
|
|
|
561
|
|
|
|
561
|
|
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 (continued)
The following table presents
the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of March 31, 2020:
|
Particulars
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
FVTPL - Financial asset - Investments in units of mutual funds
|
|
Rs.
|
13,832
|
|
|
Rs.
|
-
|
|
|
Rs.
|
-
|
|
|
Rs.
|
13,832
|
|
|
FVTOCI - Financial asset - Investment in equity securities
|
|
|
303
|
|
|
|
-
|
|
|
|
-
|
|
|
|
303
|
|
|
FVTOCI - Financial asset - Investment in market linked debentures
|
|
|
1,993
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,993
|
|
|
Derivative financial instruments – net loss on outstanding foreign exchange forward, option, swap contracts and interest rate swap contracts(1)
|
|
|
-
|
|
|
|
(497
|
)
|
|
|
-
|
|
|
|
(497
|
)
|
|
|
(1)
|
The Company enters into derivative financial instruments with various counterparties, principally financial institutions and banks. Derivatives valued using valuation techniques with market observable inputs are mainly interest rate swaps, foreign exchange forward option and swap contracts. The most frequently applied valuation techniques include forward pricing, swap models and Black-Scholes-Merton models (for option valuation), using present value calculations. The models incorporate various inputs including foreign exchange forward rates, interest rate curves and forward rate curves.
|
As at December 31, 2020
and March 31, 2020, the changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives
designated in hedge relationships and other financial instruments recognized at fair value.
Hedges of foreign currency exchange rate
risks
The Company is exposed
to exchange rate risk which arises from its foreign exchange revenues and expenses, primarily in U.S. dollars, U.K. pounds sterling,
Russian roubles, Brazilian reals, Swiss francs, South African rands, Kazakhstan tenges, Romanian new leus and Euros, and foreign
currency debt in U.S. dollars, South African rands, Russian roubles, Brazilian reals and Mexican pesos.
The Company uses foreign
exchange forward contracts, option contracts and swap contracts (derivative financial instruments) to mitigate its risk of changes
in foreign currency exchange rates. The Company also uses non-derivative financial instruments as part of its foreign currency
exposure risk mitigation strategy. Non-derivative financial instruments consist of investments in mutual funds, bonds and market
linked debentures, commercial papers, equity and debt securities, trade receivables, cash and cash equivalents, loans and borrowings,
and trade payables.
Details of gain/(loss) recognized in respect
of derivative contracts
The following table presents
details in respect of the gain/(loss) recognized in respect of derivative contracts during the applicable period ended:
|
|
|
For the nine months
ended December 31,
|
|
|
For the three months
ended December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Net gain/(loss) recognized in finance costs in respect of foreign exchange derivative contracts and cross currency interest rate swaps contracts
|
|
Rs.
|
2,092
|
|
|
Rs.
|
(859
|
)
|
|
Rs.
|
706
|
|
|
Rs.
|
(544
|
)
|
|
Net gain/(loss) recognized in equity in respect of hedges of highly probable forecast transactions, net of amounts reclassified from equity and recognized as component of revenue
|
|
|
976
|
|
|
|
(400
|
)
|
|
|
59
|
|
|
|
(129
|
)
|
|
Net gain/(loss) reclassified from equity and recognized as component of revenue on occurrence of forecasted transaction
|
|
|
69
|
|
|
|
34
|
|
|
|
162
|
|
|
|
(32
|
)
|
The net carrying amount
of the Company’s “hedging reserve” as a component of equity before adjusting for tax impact was a gain of Rs.255
as at December 31, 2020, as compared to a loss of Rs.721 as at March 31, 2020.
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)
22. Contingencies
The Company is involved
in disputes, lawsuits, claims, governmental and/or regulatory inspections, inquiries, investigations and proceedings (collectively,
“Legal Proceedings”), including patent and commercial matters that arise from time to time in the ordinary course of
business. Most of the claims involve complex issues. Often, these issues are subject to uncertainties and therefore the probability
of a loss, if any, being sustained and an estimate of the amount of any loss is difficult to ascertain. Consequently, for a majority
of these claims, it is not possible to make a reasonable estimate of the expected financial effect, if any, that will result from
ultimate resolution of the proceedings. This is due to a number of factors, including: the stage of the proceedings (in many cases
trial dates have not been set) and the overall length and extent of pre-trial discovery; the entitlement of the parties to an action
to appeal a decision; clarity as to theories of liability; damages and governing law; uncertainties in timing of litigation; and
the possible need for further legal proceedings to establish the appropriate amount of damages, if any. In these cases, the Company
discloses information with respect to the nature and facts of the case. The Company also believes that disclosure of the amount
sought by plaintiffs, if that is known, would not be meaningful with respect to those legal proceedings.
Although there can be
no assurance regarding the outcome of any of the Legal Proceedings referred to in this Note, the Company does not expect them to
have a materially adverse effect on its financial position, as it believes that the likelihood of loss in excess of amounts accrued
(if any) is not probable. However, if one or more of such Legal Proceedings were to result in judgments against the Company, such
judgments could be material to its results of operations in a given period.
Note 32 to the Consolidated
Financial Statements in the Company’s Annual Report on Form 20-F for the year ended March 31, 2020 contains a summary of
significant Legal Proceedings. The following is a summary, as of the date of this quarterly report, of significant developments
in those proceedings as well as any new significant proceedings commenced since the date such Annual Report on Form 20-F was filed.
Product and patent related matters
Launch of product
On June 14, 2018, the
U.S. FDA granted the Company final approval for buprenorphine and naloxone sublingual film, 2 mg/0.5 mg, 4 mg/1 mg, 8 mg/2 mg,
and 12 mg/3 mg dosages, a therapeutic equivalent generic version of Suboxone® sublingual film. The U.S. FDA approval came after
the conclusion of litigation in the U.S. District Court for the District of Delaware (the “Delaware District Court”),
where the Delaware District Court held that patents covering Suboxone® sublingual film would not be infringed by the Company’s
commercial launch of its generic sublingual film product. In light of the favorable decision from the Delaware District Court,
the Company launched its generic sublingual film product in the United States immediately following the U.S. FDA approval on June
14, 2018. On July 12, 2019, the U.S. Court of Appeals for the Federal Circuit (“the Court of Appeals”) affirmed the
Delaware District Court’s ruling that the Company’s generic version of Suboxone® sublingual films did not infringe
the two remaining patents at issue in the Delaware District Court’s case (U.S. patent numbers 8,603,514 and 8,015,150).
After the Delaware District
Court’s decision, Indivior filed a second lawsuit against the Company alleging infringement of three additional U.S. patents
(numbers 9,687,454, 9,855,221 and 9,931,305) in the U.S. District Court for the District of New Jersey (the “New Jersey District
Court”), styled Indivior Inc. et al. v. Dr. Reddy’s Laboratories S.A., Civil Action No. 2:17-cv-07111 (D.N.J.). Following
the launch, on June 15, 2018, Indivior filed an emergency application for a temporary restraining order and preliminary injunction
against the Company in the New Jersey District Court. Indivior’s motion alleged that the Company’s generic sublingual
film product infringed one of three U.S. patents (number 9,931,305) at issue in the New Jersey District Court. Pending a hearing
and decision on the injunction application, the New Jersey District Court initially issued a temporary restraining order against
the Company with respect to further sales, offer for sales, and imports of its generic sublingual film product in the United States.
Subsequently, on July 14, 2018, the New Jersey District Court granted a preliminary injunction in favor of Indivior. Under the
order, Indivior was required to and did post a bond of U.S.$72 to pay the costs and damages sustained by the Company if it was
found to be wrongfully enjoined. The Company immediately appealed the decision, and the Court of Appeals agreed to expedite the
appeal.
On November 20, 2018,
the Court of Appeals issued a decision vacating the preliminary injunction. The Court of Appeals denied Indivior’s petition
for rehearing on February 4, 2019.
Indivior subsequently
filed two emergency motions in the Court of Appeals to stay issuance of the mandate and to keep the preliminary injunction in place,
which the Court of Appeals denied. Indivior then petitioned the U.S. Supreme Court to stay issuance of the mandate.
Indivior’s petition
was denied by the Chief Justice of the U.S. Supreme Court on February 19, 2019, and the mandate was issued on the same day. The
Company resumed sales of its generic sublingual film product after the mandate was issued.
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)
22. Contingencies (continued)
On February 19, 2019,
the New Jersey District Court entered a stipulated order of dismissal of Indivior’s claims under U.S. patent number 9,855,221.
On November 5, 2019, the New Jersey District Court issued its claim construction decision construing certain terms in U.S. patent
numbers 9,931,305 and 9,687,454. After such claim construction decision, on January 8, 2020, the New Jersey District Court entered
a stipulated order that the Company’s generic sublingual film product does not infringe the asserted claims in U.S. patent
number 9,931,305. In the stipulated order, Indivior reserved the ability to appeal the New Jersey District Court’s claim
construction order. The Company filed a motion requesting that the New Jersey District Court enter partial final judgment in the
Company’s favor relating to the allegations of infringement of U.S. patent number 9,931,305, which the District Court denied
without prejudice on August 24, 2020, pending resolution of Indivior’s allegations relating to U.S. patent number 9,687,454.
On November 11, 2019,
a Magistrate Judge in the District of New Jersey granted the Company leave to file a counterclaim against Indivior that alleges
that Indivior engaged in anticompetitive conduct by making false or misleading statements to the New Jersey District Court during
the preliminary injunction proceedings in violation of federal antitrust laws. Indivior appealed the Magistrate Judge’s ruling
to the District Court Judge and, on August 24, 2020, the District Court Judge denied Indivior’s appeal. The District Court
did grant Indivior’s motion to bifurcate the patent claims and the antitrust claims into two separate trials. No trial date
has been set and discovery on both the patent and antitrust claims is ongoing. Fact discovery is scheduled to close on January
29, 2021.
In addition to the District
Court proceeding, on November 13, 2018, the Company filed two petitions for inter-partes review challenging the validity of certain
claims of U.S. patent number 9,687,454 before the Patent Trial and Appeal Board (“PTAB”). On June 13, 2019, the PTAB
agreed to institute inter-partes review on one of the two petitions filed by the Company. The PTAB heard oral argument in the pending
inter-partes review challenge on March 3, 2020.
On June 2, 2020, the PTAB
issued a final written decision in the Company’s favor finding that the Company had demonstrated that claims 1–5, 7,
and 9–14 of the ’454 patent were unpatentable. The PTAB upheld the validity of only one of the challenged claims, claim
8. Additionally, claim 6 was not at issue in the inter-partes review and therefore not subject to the final written decision. Claims
6 and 8 remain asserted against the Company in the New Jersey District Court litigation. Indivior filed a timely notice of appeal
of the PTAB’s Final Written Decision (“ FWD”) for claims 1-5, 7, and 9-14, and the Company cross appealed the
PTAB’s FWD on claim 8. In the PTAB appeal, Indivior submitted its principal appeal brief on December 9, 2020. The Company’s
responsive appeal brief is currently due on February 18, 2021.
The Company intends to
vigorously defend its positions and pursue a claim for damages caused by the preliminary injunction. Any liability that may arise
on account of this litigation is unascertainable. Accordingly, no provision was made in these interim financial statements.
Matters relating to National Pharmaceutical Pricing Authority
Norfloxacin, India litigation
As previously disclosed
in the Company’s annual and quarterly reports, the Company is involved in legal proceedings with India’s National Pharmaceutical
Pricing Authority regarding allegations on the maximum prices permissible for “specified product” Norfloxacin under
applicable price control regulations. The matter is adjourned to February 3, 2021 for hearing.
Litigation relating to Cardiovascular and Anti-diabetic formulations
As previously disclosed
in the Company’s annual and quarterly reports, the Company is involved in legal proceedings with India’s National Pharmaceutical
Pricing Authority regarding allegations that the Company violated the maximum prices permissible for various formulations in the
cardiovascular and anti-diabetic therapeutic areas under applicable price control regulations. The matter is adjourned to February
8, 2021 for hearing.
Other product and patent related matters
Namenda Litigation
In August 2015, Sergeants
Benevolent Assoc. Health & Welfare Fund (“Sergeants”) filed suit against the Company in the United States District
Court for the Southern District of New York. Sergeants alleged that certain parties, including the Company, violated federal antitrust
laws as a consequence of having settled patent litigation related to the Alzheimer’s drug Namenda® (memantine) tablets
during a period from about 2009 until 2010. Sergeants seeks to represent a class of “end payor” purchasers of Namenda®
tablets (i.e., insurers, other third-party payors and consumers).
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)
22. Contingencies (continued)
Sergeants seeks damages
based upon an allegation made in the complaint that the defendants entered into patent settlements regarding Namenda® tablets
for the purpose of delaying generic competition and facilitating the brand innovator’s attempt to shift sales from the original
immediate release product to the more recently introduced extended release product.
On August 23, 2020, the
Company and certain other defendants entered into a settlement agreement. The settlement agreement calls for the dismissal with
prejudice of the claims brought by the plaintiff on behalf of the putative class, in exchange for the payment of U.S.$0.4. The
Company paid that amount into escrow. The Court preliminarily approved the settlement on October 5, 2020. The settlement agreement
is contingent upon final court approval. The settlement agreement explicitly disclaims any liability or wrongdoing.
Following the settlement
agreement, the Company recognized such amount in the unaudited condensed consolidated interim income statement for the three months
ended September 30, 2020.
On November 5, 2019 plaintiffs
MSP Recovery Claims, Series LLC and MSPA Claims 1, LLC filed suit against the Company and other drug manufacturers in the United
States District Court for the Southern District of New York. The claims in this complaint were similar in nature to the claims
in the Sergeants lawsuit, and those cases were coordinated for discovery purposes. On April 14, 2020, with the consent of the Company
and the other defendants, plaintiffs MSP Recovery Claims, Series LLC and MSPA Claims 1, LLC voluntarily dismissed their claims
without prejudice.
Other class action complaints
containing similar allegations to the Sergeants complaint have also been filed in the U.S. District Court for the Southern District
of New York. However, apart from the Sergeants case described above, there are no such class actions that are pending and that
name the Company as a defendant.
In addition, the State
of New York filed an antitrust case in the U.S. District Court for the Southern District of New York. The case brought by the State
of New York contained some (but not all) of the allegations set forth in the class action complaints, but the Company was not named
as a party. The case brought by the State of New York was dismissed by stipulation on November 30, 2015.
The Company believes that
the likelihood of any liability, apart from the settlement payment described above, that may arise on account of alleged violation
of federal antitrust laws is not probable.
Ranitidine Recall and Litigation
As previously disclosed
in the Company’s annual and quarterly reports, following a voluntary recall of the Company’s ranitidine medications
sold in the United States due to confirmed contamination with N-Nitrosodimethylamine (“NDMA”) above levels established
by the U.S. FDA, multiple ranitidine related complaints were filed against the parent company, one of the Company’s U.S.
subsidiaries and the Company’s Swiss subsidiary, along with numerous other pharmaceutical manufacturers and retailers. These
complaints were subsumed by the June 22, 2020, filing of three new master complaints – a Master Personal Injury Complaint,
a Consolidated Consumer Class Action Complaint and a Consolidated Third-Party Payor Class Action Complaint, in the ranitidine multidistrict
litigation (“MDL”) located in the United States District Court for the Southern District of Florida (the “Florida
District Court"). More than 120 short-form complaints from individual plaintiffs have been filed against the Company in the
MDL, and the Company anticipates many additional claims. A census registry established by the Florida District Court includes over
60,000 claimants who have not filed complaints but are presenting claims for consideration in the MDL.
On December 31, 2020,
the Florida District Court ruled on multiple motions to dismiss in the MDL and granted the generic manufacturers’ motion
to dismiss based on federal preemption. The plaintiffs’ failure-to-warn and design defect claims against the Company were
dismissed with prejudice, but the Court permitted plaintiffs to attempt to replead several claims/theories. The Company expects
to challenge the amended complaints once they are filed by plaintiffs.
During the three months
ended June 30, 2020, the New Mexico State Attorney General filed suit against the Company’s U.S. subsidiary, and multiple
other manufacturers and retailers. The State of New Mexico asserts claims of statutory and common law public nuisance and negligence
claims against the Company. The Company joined in an effort to transfer the case from the Santa Fe County Court to the MDL, where
the case presently resides. The State of New Mexico is seeking to have the case transferred back to the Santa Fe County Court.
In November 2020, the City of Baltimore filed a similar action against the Company’s U.S. subsidiary, and multiple other
manufacturers and retailers. The City of Baltimore asserts public nuisance and negligence claims against the Company. The Company
has joined in an effort to transfer the case from the Circuit Court of Maryland to the MDL, and the City of Baltimore is opposing
such a transfer. In January 2021, the Company was served in a Proposition 65 case filed by the Center for Environmental Health
in the Superior Court of Alameda County, California. The plaintiff purports to bring the case on behalf of the people of California
and alleges that the Company violated Proposition 65, a California law requiring manufacturers to disclose the presence of carcinogens
in consumer products.
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)
22. Contingencies (continued)
The Company believes that
all of the aforesaid complaints and asserted claims are without merit, denies any wrongdoing and intends to vigorously defend itself
against the allegations. Also, any liability that may arise on account of these claims is unascertainable. Accordingly, no provision
was made in these interim financial statements.
United States Antitrust Multi-District Litigation
As previously disclosed
in the Company’s annual and quarterly reports, the Attorneys General for forty-nine U.S. States, plus the District of Columbia
and the Commonwealth of Puerto Rico, filed a lawsuit asserting claims against a number of pharmaceutical companies, including the
Company’s subsidiary, Dr. Reddy’s Laboratories, Inc., alleging conspiracies to fix prices and to allocate bids and
customers, and such case was subsequently consolidated with certain private plaintiff class actions in a multi-district litigation
(“MDL”) in the United States District Court for the Eastern District of Pennsylvania, MDL 2724, In re Generic Pharmaceuticals
Antitrust Pricing Litigation (the “MDL-2724”).
Antitrust Case Filed by Humana Inc.:
On August 3, 2018, Humana,
Inc., filed a complaint against the Company’s U.S. subsidiary and thirty-nine other companies alleging that they had engaged
in a conspiracy to fix prices and to allocate bids and customers in the United States in the sale of twenty-nine named generic
drugs. On December 15, 2020, Humana, Inc., filed an Amended Complaint encompassing fifty-one defendants and a total of one hundred
forty nine drugs. In the Amended Complaint, the Company’s U.S. subsidiary is specifically named as a defendant with respect
to eighteen generic drugs: allopurinol, ciprofloxacin ER, eszopiclone, fluconazole, glimepiride, isotretinoin, lamotrigine ER,
meprobamate, metroprolol succinate ER, montelukast, omeprazole sodium bicarbonate, oxaprozin, paricalcitol, ranitidine, sumatriptan,
tizanidine, valganciclovir, and zoledronic acid. The Company’s subsidiary is also named as a co-conspirator on an alleged
“overarching conspiracy” claim with respect to the other generic drugs named. The complaint also alleges violations
of Section 1 of the Sherman Act, 15 U.S.C. §1, and violations of thirty-one States’ antitrust statutes and consumer
protection statutes, and asserts claims of unjust enrichment. The complaint seeks injunctive relief, recovery of treble damages,
punitive damages, attorney's fees and costs against all named defendants on a joint and several basis. The Company denies any wrongdoing
and intends to vigorously defend against these claims.
Antitrust Case Filed by Health Care Services,
Inc.
On December 11, 2019,
Health Care Services, Inc. filed a complaint against the Company’s U.S. subsidiary and thirty-eight other defendants, involving
a total of one hundred twenty-eight generic drugs, alleging an “overarching conspiracy” to fix prices and to rig bids
and allocate customers with respect to these drugs. On December 15, 2020, Health Care Services filed an Amended Complaint naming
a total of one hundred seventy drugs. In the Amended Complaint, the Company’s U.S. subsidiary is specifically named with
respect to nineteen drugs: allopurinol, ciprofloxacin HCL, divalproex ER, eszopiclone, fluconazole, glimepiride, isotretinoin,
lamotrigine ER, meprobamate, metroprolol succinate ER, montelukast, omeprazole sodium bicarbonate, oxaprozine, paricalcitol, ranitidine,
sumatriptan, tizanidine, valganiciclovir and zoledronic acid. Plaintiffs allege that the Company’s U.S. subsidiary (as well
as all other manufacturers named) were part of a larger “overarching conspiracy” as to all of the drugs named in the
complaint. The complaint also alleges violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §1 and §2, and violations
of thirty-one States’ antitrust laws and twenty-seven States’ consumer protection statutes, and asserts claims of unjust
enrichment. The complaint seeks injunctive relief, recovery of treble damages, punitive damages, and attorney’s fees and
costs against all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against
these claims.
Antitrust Case Filed by Molina Healthcare
Inc.
On December 27, 2019,
Molina Healthcare Inc. filed a complaint against the Company’s U.S. subsidiary and forty-one other defendants, involving
a total of one hundred twenty-eight generic drugs, alleging an “overarching conspiracy” to fix prices and to rig bids
and allocate customers with respect to these drugs. On December 15, 2020, Molina Healthcare filed an Amended Complaint against
a total of fifty-eight defendants involving one hundred eighty four drugs. In the Amended Complaint, the Company’s U.S. subsidiary
is specifically named with respect to nineteen drugs: allopurinol, ciprofloxacin, divalproex ER, eszopiclone, fluconazole, glimepiride,
isotretinoin, lamotrigine ER, meprobamate, metroprolol succinate ER, montelukast, omeprazole sodium bicarbonate, oxaprozine, paricalcitol,
ranitidine, sumatriptan, tizanidine, valganciclovir and zoledronic acid. Plaintiffs allege that the Company’s U.S. subsidiary
(as well as all other manufacturers named) were part of a larger “overarching conspiracy” as to all of the drugs named
in the complaint. The complaint also alleges violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §1 and §2,
and violations of eleven States’ antitrust laws and consumer protection statutes, and asserts claims of unjust enrichment.
The complaint seeks injunctive relief, recovery of treble damages, punitive damages, and attorney’s fees and costs against
all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.
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)
22. Contingencies (continued)
Antitrust Case Filed by Cigna Corp.
On June 9, 2020, Cigna
Corp. filed a complaint against the Company’s U.S. subsidiary and forty-one other defendants, involving a total of one hundred
forty generic drugs, alleging an “overarching conspiracy” to fix prices and to rig bids and allocate customers with
respect to these drugs. On December 15, 2020, Cigna Corp. filed an Amended Complaint against a total of forty-two defendants encompassing
a total of two hundred and thirty-nine drugs. In the Amended Complaint, the Company’s U.S. subsidiary is specifically named
with respect to twelve drugs: allopurinol, ciprofloxacin HCL, divalproex ER, fluconazole, glimepiride, meprobamate, oxaprozine,
paricalcitol, pravastatin, ranitidine, tizanidine and zoledronic acid. Plaintiffs allege that the Company’s U.S. subsidiary
(as well as all other manufacturers named) were part of a larger “overarching conspiracy” as to all of the drugs named
in the complaint. The complaint also alleges violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §1 and §2,
and violations of thirty-one States’ antitrust laws and twenty-nine States’ consumer protection statutes, and asserts
claims of unjust enrichment. The complaint seeks injunctive relief, recovery of treble damages, punitive damages, and attorney’s
fees and costs against all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously
defend against these claims.
Antitrust Case Filed by Rite Aid Corporation
and Rite Aid HdqtRs. Corp.
On July 9, 2020, Rite
Aid Corporation and Rite Aid Hdqtrs Corp. filed a complaint on their own behalf, and as assignee of McKesson Corporation with regard
to drugs sold by McKesson to Rite Aid, against the Company’s U.S. subsidiary and forty-six other defendants, involving a
total of one hundred thirty-five generic drugs, alleging an “overarching conspiracy” to fix prices and to rig bids
and allocate customers with respect to these drugs. On December 15, 2020, Rite Aid filed an Amended Complaint against a total of
fifty-five defendants involving a total of one hundred eighty eight drugs. In the Amended Complaint, the Company’s U.S. subsidiary
is specifically named with respect to eleven drugs: allopurinol, ciprofloxacin ER, divalproex ER, fluconazole, glimepiride, meprobamate,
oxaprozine, paricalcitol, ranitidine, tizanidine and zoledronic acid. Plaintiff alleges that the Company’s U.S. subsidiary
was part of a larger “overarching conspiracy” with all other manufacturers named as to all of the drugs named in the
complaint; and, alternatively, was part of an overarching conspiracy with eighteen of the defendants named with regard to forty-five
of the drugs named. The complaint also alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1. The complaint seeks
injunctive relief, recovery of treble damages, and attorney’s fees and costs against all defendants on a joint and several
basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.
Antitrust Complaint
Filed by Suffolk County, New York
On August 27, 2020, Suffolk
County, New York, filed a complaint against the Company’s U.S. subsidiary and forty-six other defendants, involving a total
of one hundred thirty generic drugs, alleging an “overarching conspiracy” to fix prices and to rig bids and allocate
customers with respect to these drugs. The Company’s U.S. subsidiary is specifically named with respect to twelve drugs:
ciprofloxacin ER, divalproex ER, fenofibrate, fluconazole, glimepiride, glyburide, metformin, oxaprozin, pravastatin, ranitidine,
tizanidine and zoledronic acid. Plaintiffs allege that the Company’s U.S. subsidiary was part of a larger “overarching
conspiracy” with all other manufacturers named as to all of the drugs named in the complaint. The complaint also alleges
violations of Section 1 of the Sherman Act, 15 U.S.C. §1. The complaint seeks injunctive relief, recovery of treble damages,
and attorney’s fees and costs against all defendants on a joint and several basis. The Company denies any wrongdoing and
intends to vigorously defend against these claims.
Antitrust Complaint
Filed by J M Smith
On September 4, 2020,
J M Smith Corporation, as assignee of Burlington Drug Company, filed a complaint against the Company’s U.S. subsidiary and
fifty other defendants, involving a total of one hundred thirty generic drugs, alleging an “overarching conspiracy”
to fix prices and to rig bids and allocate customers with respect to these drugs. The Company’s U.S. subsidiary is specifically
named with respect to eleven drugs: allopurinol, ciprofloxacin ER, divalproex ER, fluconazole, glimepiride, meprobamate, oxaprozin,
paricalcitol ranitidine, tizanidine and zoledronic acid. Plaintiffs allege that the Company’s U.S. subsidiary was part of
a larger “overarching conspiracy” with all other manufacturers named as to all of the drugs named in the complaint;
The complaint also alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1. The complaint seeks injunctive relief,
recovery of treble damages, and attorney’s fees and costs against all defendants on a joint and several basis. The Company
denies any wrongdoing and intends to vigorously defend against these claims.
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)
22. Contingencies (continued)
Antitrust Complaint
Filed by Walgreen Company
On December 11, 2020,
Walgreen Company filed a complaint against the Company’s U.S. subsidiary and fifty-four other defendants, involving a total
of one hundred eighty-eight generic drugs, alleging an “overarching conspiracy” to fix prices and to rig bids and allocate
customers with respect to these drugs. Walgreen asserts claims on its own behalf and as assignee of AmeriSource Bergen for drugs
that AmeriSource Bergen sold to Walgreen. The Company’s U.S. subsidiary is specifically named with respect to eleven drugs:
allopurinol, ciprofloxacin ER, divalproex ER, fluconazole, glimepiride, meprobamate, oxaprozin, paricalcitol, ranitidine, tizanidine
and zoledronic acid. Plaintiff alleges that the Company’s U.S. subsidiary was part of a larger “overarching conspiracy”
with all other manufacturers named as to all of the drugs named in the complaint. The complaint also alleges violations of Section
1 of the Sherman Act, 15 U.S.C. §1. The complaint seeks injunctive relief, recovery of treble damages, and attorney’s
fees and costs against all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously
defend against these claims.
Antitrust Complaint
Filed by CVS Pharmacy Inc.
On December 15, 2020,
CVS Pharmacy, Inc., filed a complaint against the Company’s U.S. subsidiary and fifty-seven other defendants, involving a
total of four hundred four generic drugs, alleging an “overarching conspiracy” to fix prices and to rig bids and allocate
customers with respect to these drugs. CVS Pharmacy asserts claims on its own behalf and as assignee of Cardinal Health and McKesson
for drugs that Cardinal Health and McKesson sold to CVS. The Company’s U.S. subsidiary is specifically named with respect
to seven drugs: ciprofloxacin ER, glimepiride, meprobamate, oxaprozin, pravastatin, tizanidine and zoledronic acid. Plaintiff alleges
that the Company’s U.S. subsidiary was part of a larger “overarching conspiracy” with all other manufacturers
named as to all of the drugs named in the complaint. The complaint also alleges violations of Section 1 of the Sherman Act, 15
U.S.C. §1. The complaint seeks injunctive relief, recovery of treble damages, and attorney’s fees and costs against
all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.
Note on Antitrust Complaints
The Company believes that
all of the aforesaid complaints and asserted claims are without merit and intends to vigorously defend itself against the allegations.
Also, any liability that may arise on account of these claims is unascertainable. Accordingly, no provision was made in these interim
financial statements.
Class Action under the Canadian Competition
Act filed in Federal Court in Toronto, Canada
On June 3, 2020, a Class
Action Statement of Claim was filed by an individual consumer in Federal Court in Toronto, Canada, against the Company’s
U.S. and Canadian subsidiaries and 52 other generic drug companies. The Statement of Claim alleges an industry-wide, overarching
conspiracy to violate Section 36 of the Canadian Competition Act by conspiring to allocate the market, fix prices, and maintain
the supply of generic drugs in Canada. The action is brought on behalf of a class of all persons, from January 1, 2012 to the present,
who purchased generic drugs in the private sector. The Statement of Claim states that it seeks damages against all defendants on
a joint and several basis, attorney’s fees and costs of investigation and prosecution. An Amended Statement of Claim was
served on the Company’s U.S. and Canadian subsidiaries on January 15, 2021 and adds an additional 20 generic drug companies.
The Amended Statement of Claim also removes the identification of specific drugs and alleges a conspiracy to allocate the North
America Market as to all generic drugs in Canada.
The Company believes that
the asserted claims are without merit and intends to vigorously defend itself against the allegations. Any liability that may arise
on account of this claim is unascertainable. Accordingly, no provision was made in these interim financial statements.
Securities Class Action Litigation
As previously disclosed
in the Company’s annual and quarterly reports, on May 15, 2020, Dr. Reddy’s Laboratories Limited, Dr. Reddy’s
Laboratories, Inc., and certain of the Company’s current or former directors and officers entered into a Stipulation and
Agreement of Settlement (the “Stipulation”) with lead plaintiff the Public Employees’ Retirement System of Mississippi
in the putative securities class action filed against the defendants in the United States District Court for the District of New
Jersey. As consideration for the settlement of the class action, the Company agreed to pay U.S.$9. On December 23, 2020, the court
issued a final order and judgment approving the settlement.
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)
22. Contingencies (continued)
Subject to the terms of
the Stipulation, in exchange for the settlement consideration, lead plaintiff and members of the settlement class who do not opt-out
of this settlement would release, among other things, the claims that were asserted, or that they could have asserted, in this
class action. In entering into the settlement, the defendants do not admit, and explicitly deny, any liability or wrongdoing of
any kind.
Subject to the terms of
the Stipulation, the settlement resolves the remainder of the litigation.
As the Company is adequately
insured with respect to the aforesaid liability, the settlement did not have any impact on these interim financial statements.
The amount payable to
the plaintiffs on account of the settlement and the corresponding receivable from the insurer have been presented under “other
current assets” and “other current liabilities”, respectively, in these interim financial statements.
Indirect taxes related matters
Order from Good and
Service Tax Authorities, India
The Company has received
orders from Good and Service Tax (“GST”) authorities denying the refund with respect to refund applications filed for
deemed exports with payment of GST and supplies to SEZ with payment of GST, stating that the claims are time barred in nature.
The amount involved is Rs.18. The Company is in process of filing an appeal for the same. Accordingly, no provision was made in
these interim financial statements.
23. Internal Investigation
The Company has commenced
a detailed investigation into an anonymous complaint. The complaint alleges that healthcare professionals in Ukraine and potentially
in other countries were provided with improper payments by or on behalf of the Company in violation of U.S. anti-corruption laws.
The investigation is being carried out by a reputed independent U.S. law firm.
As the investigation is
ongoing, the Company cannot predict the final outcome with any certainty at this time. There can also be no assurance that government
enforcement actions will not be commenced against the Company in the United States and/or foreign jurisdictions in respect of the
matters that are the subject of the investigation. Such enforcement actions could lead to civil and criminal sanctions under relevant
laws. The imposition of such sanctions could have a material adverse effect on the Company’s business, results of operations
or financial condition. The Company is also unable to determine at this time the effect, if any, such investigation may have on
the Company’s financial statements, or whether the results of the investigation will indicate that its internal controls
over financial reporting were not operating effectively.
24. Impact of COVID-19
The Company considered
the uncertainty relating to the COVID-19 pandemic in assessing the recoverability of receivables, goodwill, intangible assets,
investments and other assets. For this purpose, the Company considered internal and external sources of information up to the date
of approval of these interim financial statements. The Company based on its judgments, estimates and assumptions including sensitivity
analysis, expects to fully recover the carrying amount of receivables, goodwill, intangible assets, investments and other assets.
The Company will continue
to closely monitor any material changes to future economic conditions.
25. Update on Cyber Incident
On October 22, 2020, the
Company experienced a cybersecurity incident related to ransom-ware. The Company was able to contain the incident in a timely fashion
and also ensured that all traces of the infection were completely cleansed from its network. All affected systems were restored
and brought back to normalcy in the order of priority. Based on the Company’s forensic investigation, no evidence was found
of any data breaches leading to personally identifiable information. Since then, the Company has also been focused on implementing
significant improvements to its cyber and data security systems to safeguard from such risks in the future.
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)
26. The Code on Social Security, 2020
The Code on Social Security,
2020 (“Code”) received Presidential assent in September 2020. The Code has been published in the Gazette of India.
However, the related final rules have not yet been issued and the date on which the Code will come into effect has not been notified.
The Company will assess the impact of the Code and the rules thereunder when they come into effect.
27. Secondary listing of the Company’s ADR on NSE IFSC Limited
The Company completed
the secondary listing of its American Depository Receipts (“ADRs”) on NSE IFSC Limited under the symbol ’DRREDDY’
on December 9, 2020. NSE IFSC Limited is a recognized international stock exchange established in the International Financial Services
Centre (“IFSC”) at Gujarat International Finance Tec (“GIFT”) City in Gujarat, India. IFSC is one of the
permissible jurisdictions where Depository Receipts can be listed. This listing will provide a secondary platform (other than NYSE
Inc.) to overseas investors for trading in the Company’s ADRs. This is a secondary listing of ADRs that are currently issued
by J.P. Morgan Chase Bank N.A. under its ADR Deposit Agreement with the Company, and no further capital raising or issuance of
new securities is involved.
28. Merger of Dr. Reddy’s Holdings Limited into Dr. Reddy’s Laboratories Limited
The Board of Directors,
at its meeting held on July 29, 2019, has approved the amalgamation (the “Scheme”) of Dr. Reddy’s Holdings Limited
(“DRHL”), an entity held by the Promoter Group, which holds 24.88% of Dr. Reddy’s Laboratories Limited (the “Company”)
into the Company. This is subject to the approval of shareholders, stock exchanges, the National Company Law Tribunal and other
relevant regulators.
The Scheme will lead to
simplification of the shareholding structure and reduction of shareholding tiers.
The Promoter Group cumulatively
would continue to hold the same number of shares in the Company, pre- and post the amalgamation. All costs, charges and expenses
relating to the Scheme will be borne out of the surplus assets of DRHL. Further, any expense, if exceeding the surplus assets of
DRHL, will be borne directly by the Promoters.
The Scheme also provides
that the Promoters of the Company will jointly and severally indemnify, defend and hold harmless the Company, its directors, employees,
officers, representatives, or any other person authorized by the Company (excluding the Promoters) for any liability, claim, or
demand, which may devolve upon the Company on account of this amalgamation.
The Scheme of Amalgamation
of DRHL with the Company was filed with BSE and NSE (Stock Exchanges) for their consideration and approval. No observation letters
were received from the stock exchanges on the basis of no comments received from SEBI on October 11, 2019. The Company has filed
an application with the Hon’ble National Company Law Tribunal (“NCLT”) Hyderabad, seeking direction for conducting
court convened meetings of the shareholders and unsecured creditors. The NCLT in its order dated November 22, 2019 directed the
Company to conduct meetings of the shareholders’ and creditors. The NCLT also appointed the Chairpersons and Scrutinizers
for the respective meetings. The notice convening the shareholders and unsecured creditors meetings on January 2, 2020, were circulated
within statutory timelines for approval of Scheme of Amalgamation of DRHL with the Company.
The resolutions were passed
with requisite majority of shareholders (99.98%) and unsecured creditors (100%) at the respective shareholders and unsecured creditors
meetings on January 2, 2020. The petition for approval of the Scheme has been filed with Hon’ble NCLT on January 9, 2020.
The matter is adjourned to February 22, 2021 for hearing.
29. Business Transfer Agreement with Wockhardt Limited
In February 2020, the
Company entered into a Business Transfer Agreement (“BTA”) with Wockhardt Limited (“Wockhardt”) to acquire
select divisions of its branded generics business in India and the territories of Nepal, Sri Lanka, Bhutan and Maldives for a consideration
of Rs.18,500.
The business consists
of a portfolio of 62 brands in multiple therapy areas, such as respiratory, neurology, venous malformations, dermatology, gastroenterology,
pain and vaccines. This entire portfolio was to be transferred to the Company, along with related sales and marketing teams, the
manufacturing plant located in Baddi, Himachal Pradesh and all plant employees (together the “Business Undertaking”).
The transaction involved 2,051 employees engaged in operations of the acquired Business Undertaking.
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)
29. Business Transfer Agreement with Wockhardt
Limited (continued)
As of March 31, 2020,
the acquisition of this Business Undertaking was subject to certain closing conditions, such as approval from shareholders and
lenders of Wockhardt and other requisite approvals under applicable statutes. Hence, the transaction was not accounted for in the
year ended March 31, 2020.
Due to the COVID-19 pandemic
and the consequent government restrictions, there has been a reduction in the revenue from the sales of the products forming part
of the Business Undertaking during March and April 2020. Accordingly, through an amendment to the BTA, the Company and Wockhardt
agreed that the consideration shall now be upto Rs.18,500, to be paid as per the following terms:
|
|
a)
|
an amount of Rs.14,830 to be paid on the date of closing;
|
|
|
b)
|
an amount of Rs.670 to be deposited in an escrow account which shall be released subject to adjustments for, inter alia, net working capital, employee liabilities and certain other contractual and statutory liabilities;
|
|
|
c)
|
an amount of Rs.3,000 (the “Holdback Amount”) which shall be released as follows:
|
|
|
·
|
If the revenue from sales of the products forming part of the Business Undertaking during the twelve (12) months post-closing exceeds Rs.4,800, the Company will be required to pay to Wockhardt an amount equal to two (2) times the amount by which the revenue exceeds Rs.4,800, subject to the maximum of the Holdback Amount.
|
The acquisition is in
line with the Company's strategic focus on India and has paved a path for accelerated growth and leadership in the domestic Indian
market. The Company believes that the acquired Business Undertaking offers to strengthen the Company’s pharmaceutical portfolio
and products in the Indian market.
The transaction was completed
on June 10, 2020.
The Company has accounted
for the transaction under IFRS 3, “Business Combinations”.
As of June 30, 2020, the
purchase price allocation was preliminary.
During the three months
ended September 30, 2020, the Company completed the purchase price allocation. Tabulated below are the fair values of the assets
acquired, including goodwill, and liabilities assumed on the acquisition date:
|
Particulars
|
|
Amount
|
|
|
Cash
|
|
|
14,990
|
|
|
Payment through Escrow account
|
|
|
564
|
|
|
Contingent consideration (Holdback Amount)
|
|
|
561
|
|
|
Total consideration
|
|
|
16,115
|
|
|
Assets acquired
|
|
|
|
|
|
Goodwill
|
|
|
530
|
|
|
Property, plant and equipment
|
|
|
373
|
|
|
Product related intangibles
|
|
|
14,888
|
|
|
Inventories
|
|
|
466
|
|
|
Other assets
|
|
|
245
|
|
|
Liabilities assumed
|
|
|
|
|
|
Employee benefits
|
|
|
(145
|
)
|
|
Refund liability
|
|
|
(242
|
)
|
|
Total net assets
|
|
|
16,115
|
|
The total goodwill of
Rs.530 consists largely of the synergies and economies of scale expected from the acquired business, together with the value of
the workforce acquired. The entire amount of goodwill is deductible for tax purposes.
Acquisition related costs
amounted to Rs.60 and were excluded from the consideration transferred and were recognized as expense under “Selling, general
and administrative expenses” in the interim income statements for the nine months ended December 31, 2020.
The fair value of the
contingent consideration of Rs.561 was estimated by applying the income approach. The fair value measurement is based on significant
inputs that are not observable in the market, which IFRS 13, “Fair Value Measurement” refers to as Level 3 inputs.
The significant unobservable inputs in the valuation is the estimated sales forecast.
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)
29. Business Transfer Agreement with Wockhardt
Limited (continued)
A 1% increase/(decrease)
in the sales forecast would result in loss/(gain) in the interim income statements by Rs.102. However, the maximum amount of the
Holdback Amount is Rs.3,000 as per the BTA.
The amount of revenue
included in the interim income statements for the nine months ended December 31, 2020 pertaining to the acquired business since
June 10, 2020 is Rs.3,026.
The acquired business
has been integrated into the Company’s existing activities and it is not practicable to identify the impact on the Company
profit in the period.
30. Update on the warning letter from the U.S. FDA
The Company received a
warning letter dated November 5, 2015 from the U.S. FDA relating to current Good Manufacturing Practices (“cGMPs”)
deviations at its active pharmaceutical ingredient (“API”) manufacturing facilities at Srikakulam, Andhra Pradesh and
Miryalaguda, Telangana, as well as violations at its oncology formulation manufacturing facility at Duvvada, Visakhapatnam, Andhra
Pradesh. The contents of the warning letter emanated from Form 483 observations that followed inspections of these sites by the
U.S. FDA in November 2014, January 2015 and February-March 2015.
Tabulated below are the further
updates with respect to the aforementioned sites:
|
Month and year
|
|
Update
|
|
February, March and April 2017
|
|
The U.S. FDA completed the re-inspection of the aforementioned manufacturing facilities. During the re-inspections, the U.S. FDA issued three observations with respect to the API manufacturing facility at Miryalaguda, two observations with respect to the API manufacturing facility at Srikakulam and thirteen observations with respect to the Company’s oncology formulation manufacturing facility at Duvvada.
|
|
June 2017
|
|
The U.S. FDA issued an Establishment Inspection Report (“EIR”) which indicated that the inspection of the Company’s API manufacturing facility at Miryalaguda was successfully closed.
|
|
November 2017
|
|
The Company received EIRs from the U.S. FDA for the oncology manufacturing facility at Duvvada which indicated that the inspection status of this facility remained unchanged.
|
|
February 2018
|
|
The Company received EIRs from the U.S. FDA for API manufacturing facility at Srikakulam which indicated that the inspection status of this facility remained unchanged.
|
|
June 2018
|
|
The Company requested the U.S. FDA to schedule a re-inspection of the oncology formulation manufacturing facility at Duvvada.
|
|
October 2018
|
|
The re-inspection was completed for the oncology formulation manufacturing facility at Duvvada and the U.S. FDA issued a Form 483 with eight observations.
|
|
November 2018
|
|
The Company responded to the observations identified by the U.S. FDA for the oncology formulation manufacturing facility at Duvvada in October 2018.
|
|
February 2019
|
|
The U.S. FDA issued an EIR indicating successful closure of the audit of the oncology formulation manufacturing facility at Duvvada.
|
With respect to the API
manufacturing facility at Srikakulam, subsequent to the receipt of an EIR in February 2018, the Company was asked, in October 2018,
to carry out certain detailed investigations and analyses and the Company submitted the results of the investigations and analyses.
As part of the review of the response by the U.S. FDA, certain additional follow on queries were received by the Company, and the
Company responded to all such queries in January 2019.
In February 2019, the
Company received certain other follow on questions from the U.S. FDA and the Company responded to these questions in March
2019. The U.S. FDA completed the audit on January 28, 2020. The Company was issued a Form 483 with 5 observations and responded
to the observations in February 2020. In May 2020, the Company received an EIR from the U.S. FDA, for the above-referred facility,
indicating closure of the audit and classifying the inspection of this facility as Voluntary Action Indicated (“VAI”).
With this, all facilities under warning letter are now determined as VAI.
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)
30. Update on the warning letter from the
U.S. FDA (continued)
Inspection of other facilities:
Tabulated below are the
details of the U.S. FDA inspections carried out at other facilities of the Company:
Located in India
|
Month and year
|
|
Unit
|
|
Details of observations
|
|
June 2018
|
|
API Srikakulam Plant (SEZ)
|
|
No observations were noted. An EIR indicating the closure of audit for this facility was issued by the U.S. FDA in August 2018.
|
|
November 2018
|
|
Formulations Srikakulam Plant (SEZ) Unit II
|
|
No observations were noted. An EIR indicating the closure of audit for this facility was issued by the U.S. FDA in February 2019.
|
|
January 2019
|
|
Formulations Srikakulam Plant (SEZ) Unit I
|
|
Four observations were noted. The Company responded to the observations and an EIR indicating the closure of audit for this facility was issued by the U.S. FDA in April 2019.
|
|
January 2019
|
|
API manufacturing Plant at Miryalaguda, Nalgonda
|
|
One observation was noted. The Company responded
to the observation.
In May 2019, an EIR was issued by the U.S.
FDA indicating the closure of audit and the inspection classification of the facility was determined as VAI.
|
|
January 2019
|
|
Formulations manufacturing facility at Bachupally, Hyderabad
|
|
Eleven observations were noted. The Company
responded to the observations in January 2019.
In April 2019, an EIR was issued by the U.S.
FDA indicating the closure of audit and the inspection classification of the facility was determined as VAI.
|
|
March 2019
|
|
Aurigene Discovery Technologies Limited, Hyderabad
|
|
No observations noted.
In June 2019, the Company received an EIR from
the U.S. FDA indicating the closure of audit for this facility.
|
|
June 2019
|
|
Formulations manufacturing plants, Duvvada {Vizag SEZ plant 1 (FTO VII) and Vizag SEZ plant 2(FTO IX)}
|
|
Two observations were noted. The Company responded
to the observations.
In September 2019, an EIR was issued by the
U.S. FDA indicating the closure of audit of these facilities.
|
|
July 2019
|
|
API Hyderabad plant 2, Bollaram, Hyderabad
|
|
Five observations were noted during U.S. FDA
inspection. The Company responded to the observations in August 2019.
In October 2019, an EIR was issued by the U.S.
FDA indicating the closure of audit and the inspection classification of the facility was determined as VAI.
|
|
August 2019
|
|
Formulations manufacturing plants, (Vizag SEZ plant 1), Duvvada,
Visakhapatnam
(FTO VII)
|
|
Eight observations were noted. The Company
responded to the observations in September 2019.
In February 2020, an EIR was issued by the
U.S. FDA indicating the closure of audit and the inspection classification of the facility was determined as VAI.
|
|
August 2019
|
|
Formulations manufacturing facility at Shreveport, Louisiana, U.S.A
|
|
No observations were noted.
In October 2019, an EIR was issued by the U.S.
FDA indicating the closure of the audit and the inspection classification of the facility was determined as No Action Initiated
(“NAI”).
|
|
October 2019
|
|
API Srikakulam plant (SEZ), Andhra Pradesh
|
|
Four observations were noted. The Company responded
to the observations in November 2019.
In May 2020, an EIR was issued by the U.S.
FDA indicating the closure of the audit.
|
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)
30. Update on the warning letter from the
U.S. FDA (continued)
|
Month and year
|
|
Unit
|
|
Details of observations
|
|
February 2020
|
|
Formulations Srikakulam Plant (SEZ) Unit I
|
|
No observations were noted.
In May 2020, an EIR was issued by the U.S.
FDA indicating the closure of the audit and the inspection classification of the facility was determined as NAI.
|
|
February 2020
|
|
Formulations manufacturing facility at Bachupally, Hyderabad (FTO Unit III)
|
|
One observation was noted. The Company responded to the observation in March 2020. In May 2020, an EIR was issued by the U.S. FDA indicating the closure of the audit and the inspection classification of the facility was determined as VAI.
|
|
February 2020
|
|
Integrated Product Development Organization (IPDO) at Bachupally, Hyderabad
|
|
No observation was noted.
In May 2020, an EIR was issued by the U.S.
FDA indicating the closure of the audit and the inspection classification of the facility was determined as NAI.
|
|
March 2020
|
|
API manufacturing Plant at Miryalaguda, Nalgonda
|
|
Three observations were noted. The Company
responded to the observations in March 2020.
In April 2020, an EIR was issued by the U.S.
FDA indicating the closure of the audit and the inspection classification of the facility was determined as VAI.
|
No U.S. FDA audits were
conducted during the nine months ended December 31, 2020.
31. Subsequent events
None. Please refer to
Notes 10 and 22 of these interim financial statements for the details of subsequent events relating to impairment loss assessment
and contingencies, respectively.
ITEM 2. OPERATING AND FINANCIAL REVIEW, TREND INFORMATION
The following discussion
and analysis should be read in conjunction with the audited consolidated financial statements, the related cash flow statement,
notes and the Operating and Financial Review and Prospects included in our Annual Report on Form 20-F for the fiscal year ended
March 31, 2020, and the interim financial statements included in our report on Form 6-K for the three months ended June 30, 2020
and the six months ended September 30, 2020, all of which are on file with the SEC, and the interim financial statements contained
in this report on Form 6-K.
This discussion contains
forward-looking statements that involve risks and uncertainties. When used in this discussion, the words “anticipate”,
“believe”, “estimate”, “intend”, “will” and “expect” and other similar
expressions as they relate to us or our business are intended to identify such forward-looking statements. We undertake no obligation
to publicly update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise.
Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements.
Factors that could cause or contribute to such differences include those described under the heading “Risk Factors”
in our Form 20-F. Readers are cautioned not to place reliance on these forward-looking statements that speak only as of their dates.
Section A:
Three months ended December 31, 2020 compared
to the three months ended December 31, 2019
The following table sets
forth, for the periods indicated, financial data along with respective percentages to total revenues and the increase (or decrease)
by item as a percentage of the amount over the comparable period in the previous year.
|
|
|
For the three months ended December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
Rs. in
millions
|
|
|
% of
Revenues
|
|
|
Rs. in
millions
|
|
|
% of
Revenues
|
|
|
Increase/
(Decrease)
|
|
|
Revenues
|
|
|
49,296
|
|
|
|
100.0
|
%
|
|
|
43,838
|
|
|
|
100.0
|
%
|
|
|
12.5
|
%
|
|
Gross profit
|
|
|
26,538
|
|
|
|
53.8
|
%
|
|
|
23,722
|
|
|
|
54.1
|
%
|
|
|
11.9
|
%
|
|
Selling, general and administrative expenses
|
|
|
14,387
|
|
|
|
29.2
|
%
|
|
|
12,670
|
|
|
|
28.9
|
%
|
|
|
13.6
|
%
|
|
Research and development expenses
|
|
|
4,108
|
|
|
|
8.3
|
%
|
|
|
3,949
|
|
|
|
9.0
|
%
|
|
|
4.0
|
%
|
|
Impairment of non-current assets
|
|
|
5,972
|
|
|
|
12.1
|
%
|
|
|
13,200
|
|
|
|
30.1
|
%
|
|
|
(54.8
|
%)
|
|
Other income, net
|
|
|
(128
|
)
|
|
|
(0.3
|
%)
|
|
|
(228
|
)
|
|
|
(0.5
|
%)
|
|
|
(43.9
|
%)
|
|
Results from operating activities
|
|
|
2,199
|
|
|
|
4.5
|
%
|
|
|
(5,869
|
)
|
|
|
(13.4
|
%)
|
|
|
-
|
|
|
Finance income, net
|
|
|
493
|
|
|
|
1.0
|
%
|
|
|
419
|
|
|
|
1.0
|
%
|
|
|
17.7
|
%
|
|
Share of profit of equity accounted investees, net of tax
|
|
|
151
|
|
|
|
0.3
|
%
|
|
|
176
|
|
|
|
0.4
|
%
|
|
|
(14.2
|
%)
|
|
Profit/(loss) before tax
|
|
|
2,843
|
|
|
|
5.8
|
%
|
|
|
(5,274
|
)
|
|
|
(12.0
|
%)
|
|
|
-
|
|
|
Tax expense, net
|
|
|
2,645
|
|
|
|
5.4
|
%
|
|
|
423
|
|
|
|
1.0
|
%
|
|
|
525.3
|
%
|
|
Profit/(loss) for the period
|
|
|
198
|
|
|
|
0.4
|
%
|
|
|
(5,697
|
)
|
|
|
(13.0
|
%)
|
|
|
-
|
|
Revenues
Our overall consolidated
revenues were Rs.49,296 million for the three months ended December 31, 2020, an increase of 12% as compared to Rs.43,838 million
for the three months ended December 31, 2019.
The following table sets forth, for the periods
indicated, our consolidated revenues by segment:
|
|
|
For the three months ended December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
Rs. in
millions
|
|
|
Revenues
% of Total
|
|
|
Rs. in
millions
|
|
|
Revenues
% of Total
|
|
|
Increase/
(Decrease)
|
|
|
Global Generics
|
|
|
40,751
|
|
|
|
83
|
%
|
|
|
35,927
|
|
|
|
82
|
%
|
|
|
13.4
|
%
|
|
PSAI
|
|
|
7,009
|
|
|
|
14
|
%
|
|
|
6,906
|
|
|
|
16
|
%
|
|
|
1.5
|
%
|
|
Proprietary Products
|
|
|
124
|
|
|
|
0
|
%
|
|
|
241
|
|
|
|
1
|
%
|
|
|
(48.5
|
%)
|
|
Others
|
|
|
1,412
|
|
|
|
3
|
%
|
|
|
764
|
|
|
|
2
|
%
|
|
|
84.8
|
%
|
|
Total
|
|
|
49,296
|
|
|
|
100
|
%
|
|
|
43,838
|
|
|
|
100
|
%
|
|
|
12.5
|
%
|
Segment Analysis
Global Generics
Revenues from our Global
Generics segment were Rs.40,751 million for the three months ended December 31, 2020, an increase of 13% as compared to Rs.35,927
million for the three months ended December 31, 2019.
After taking into account
the impact of exchange rate fluctuations of the Indian rupee against multiple currencies in the markets in which we operate, the
foregoing increase in revenues of this segment was attributable to the following factors:
|
|
·
|
an increase of approximately 14% resulting from the introduction of new products during the period, which also includes the contribution to our India business made by brands acquired from Wockhardt;
|
|
|
·
|
an increase of approximately 4% resulting from an increase in the sales volumes of existing products in this segment;
|
|
|
·
|
the foregoing was partially offset by a decrease of approximately 5% resulting from the net impact of changes in sales prices of the products in this segment.
|
North America (the United
States and Canada): Our Global Generics segment’s revenues from North America (the United States and Canada) were Rs.17,394
million for the three months ended December 31, 2020, an increase of 9% as compared to Rs.15,999 million for the three months ended
December 31, 2019. In U.S. dollar absolute currency terms (i.e., U.S. dollars without taking into account the effect of currency
exchange rates), such revenues increased by 4% in the three months ended December 31, 2020 as compared to the three months ended
December 31, 2019.
This increase in revenues was largely attributable
to the following:
|
|
·
|
an increase of approximately 4% on account of increased sales volumes of existing products in this segment;
|
|
|
·
|
an increase of approximately 13% on account of the introduction of new products during the period; and
|
|
|
·
|
a decrease of approximately 8% resulting from the net impact of changes in sales prices of the products in this segment.
|
During the three months
ended December 31, 2020, we made two new ANDA filing to the U.S.FDA. As of December 31, 2020, we had 89 filings pending approval
with the U.S. FDA, which includes two NDA filings under section 505(b) (2) and 87 ANDA filings. Out of these 87 ANDA filings, 48
are Paragraph IV filings and we believe we are the first to file with respect to 24 of these filings.
During the three months
ended December 31, 2020, we launched 4 new products in North America (the United States and Canada). This includes the launch of
Cinacalcet, Succinylcholine and Sapropterin in the United States and the launch of Daptomycin in Canada.
Europe: Our Global
Generics segment’s revenues from Europe are derived from Germany, the United Kingdom, Italy, France, Spain, Austria and our
out-licensing business across Europe. Such revenues were Rs.4,143 million for the three months ended December 31, 2020, an increase
of 34% as compared to Rs.3,093 million for the three months ended December 31, 2019. After taking into account the impact of exchange
rate fluctuations of the Indian rupee against the European Euro and Great Britain’s pound sterling, this increase was on
account of new products launched between January 1, 2020 and December 31, 2020, as well as increases in the sales volumes of our
existing products, which was partially offset by a decline in the sales price of our existing products.
India: Our Global
Generics segment’s revenues from India for the three months ended December 31, 2020 were Rs.9,591 million, an increase of
26% as compared to the three months ended December 31, 2019. This increase was attributable to sales from the acquired brands from
Wockhardt in June 2020, an increase in price of our existing products and new products we launched between January 1, 2020 and
December 31, 2020, and was partially offset by a decline in the sales volume of our existing products.
According to IQVIA in its
Moving Quarterly Total report for the three months ended December 31, 2020, our secondary sales in India increased by 13.5% during
such period, as compared to the India pharmaceutical market’s growth of 8.3% during such period.
Emerging Markets:
Our Global Generics segment’s revenues from “Emerging Markets” (which is comprised of Russia, other countries
of the former Soviet Union, Romania and certain other countries from our “Rest of the World” markets, primarily, China,
South Africa and Brazil) for the three months ended December 31, 2020 were Rs.9,623 million, an increase of 5% as compared to Rs.9,199
million for the three months ended December 31, 2019.
Russia: Our Global
Generics segment’s revenues from Russia for the three months ended December 31, 2020 were Rs.4,529 million, a decrease of
8% as compared to Rs.4,917 million for the three months ended December 31, 2019. In Russian rouble absolute currency terms (i.e.,
Russian roubles without taking into account the effect of currency exchange rates), such revenues increased by 4% for the three
months ended December 31, 2020 as compared to the three months ended December 31, 2019. The increase in revenues in constant currency
was on account of an increase in sales price of our existing products and new products launched between January 1, 2020 and December
31, 2020. Our over-the-counter (“OTC”) division’s revenues from Russia for the three months ended December 31,
2020 were 46% of our total revenues from Russia.
According to IQVIA, as
per its Moving Quarterly Total report for the three months ended November 30, 2020, our sales value growth and volume growth from
Russia, as compared to the Russian pharmaceutical market, was as follows:
|
|
|
For the three months ended November 30, 2020
|
|
|
|
|
Dr. Reddy's
Laboratories Ltd.
|
|
|
Russian
pharmaceutical
market
|
|
|
|
|
Sales
value
|
|
|
Volume
|
|
|
Sales
value
|
|
|
Volume
|
|
|
Prescription (Rx)
|
|
|
15.7
|
%
|
|
|
12.8
|
%
|
|
|
15.3
|
%
|
|
|
10.9
|
%
|
|
Over-the-counter (OTC)
|
|
|
23.7
|
%
|
|
|
16.9
|
%
|
|
|
22.5
|
%
|
|
|
7.6
|
%
|
|
Total (Rx + OTC)
|
|
|
19.4
|
%
|
|
|
14.3
|
%
|
|
|
18.9
|
%
|
|
|
8.7
|
%
|
Other countries of the
former Soviet Union and Romania: Our Global Generics segment’s revenues from other countries of the former Soviet Union
and Romania were Rs.2,147 million for the three months ended December 31, 2020, an increase of 18% as compared to Rs.1,818 million
for the three months ended December 31, 2019. This increase was attributable to the increase in sales volumes of our existing major
brands coupled with new products launched between January 1, 2020 and December 31, 2020.
“Rest of the World”
Markets: We refer to all markets of this segment other than North America (the United States and Canada), Europe, Russia and
other countries of the former Soviet Union, Romania and India as our “Rest of the World” markets. Our Global Generics
segment’s revenues from our “Rest of the World” markets were Rs.2,947 million for the three months ended December
31, 2020, an increase of 20% as compared to Rs.2,464 million for the three months ended December 31,2019. This increase was largely
attributable to sales from new products launched between January 1, 2020 and December 31, 2020 and increased sales volumes of our
existing products, which was partially offset by price erosion in certain of our existing products.
Pharmaceutical Services and Active Ingredients
(“PSAI”)
Our PSAI segment’s
revenues for the three months ended December 31, 2020 were Rs.7,009 million, an increase of 2% as compared to Rs.6,906 million
for the three months ended December 31, 2019. After taking into account the impact of exchange rate fluctuations of the Indian
rupee against multiple currencies in the markets in which we operate, this increase was largely attributable to an increase in
our new product sales, which was partially offset by a decline in the volumes of existing products.
Proprietary Products
Revenues from our Proprietary
Products segment were Rs.124 million for the three months ended December 31, 2020, a decline of 49% as compared to Rs.241 million
for the three months ended December 31, 2019.
Gross Profit
Our gross profit was
Rs.26,538 million for the three months ended December 31, 2020, representing 53.8% of our revenues for that period, as compared
to Rs.23,722 million for the three months ended December 31, 2019, representing 54.1% of our revenues for that period.
The following
table sets forth, for the period indicated, our gross profits by segment:
|
|
|
For the three months ended December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(Rs. in millions)
|
|
|
|
|
Gross Profit
|
|
|
% of Segment
Revenue
|
|
|
Gross Profit
|
|
|
% of Segment
Revenue
|
|
|
Global Generics
|
|
|
23,454
|
|
|
|
57.6
|
%
|
|
|
20,910
|
|
|
|
58.2
|
%
|
|
PSAI
|
|
|
1,773
|
|
|
|
25.3
|
%
|
|
|
2,072
|
|
|
|
30.0
|
%
|
|
Proprietary Products
|
|
|
100
|
|
|
|
80.6
|
%
|
|
|
246
|
|
|
|
102.1
|
%
|
|
Others
|
|
|
1,211
|
|
|
|
85.8
|
%
|
|
|
494
|
|
|
|
64.7
|
%
|
|
Total
|
|
|
26,538
|
|
|
|
53.8
|
%
|
|
|
23,722
|
|
|
|
54.1
|
%
|
The gross profit from our
Global Generics segment decreased to 57.6% for the three months ended December 31, 2020 from 58.2% for the three months ended December
31, 2019. This decrease was on account of price erosion for certain products and a decline in the export benefits received during
the quarter, partially offset by changes in our existing product mix (i.e., an increase in the proportion of sales of higher gross
margin products and a decrease in the proportion of sales of lower gross margin products).
The gross profit from our
PSAI segment decreased to 25.3% for the three months ended December 31, 2020, from 30.0% for the three months ended December 31,
2019. This decrease was primarily on account of changes in our existing products mix (i.e., a decrease in the proportion of sales
of higher gross margin products and an increase in the proportion of sales of lower gross margin products). This was partially
offset by the net benefit from exchange rates fluctuation.
Selling, general and administrative expenses
Our selling, general and
administrative expenses were Rs.14,387 million for the three months ended December 31, 2020, an increase of 14% as compared toRs.12,670
million for the three months ended December 31, 2019. After taking into account the impact of exchange rate fluctuations of the
Indian rupee against multiple currencies in the markets in which we operate, this increase was largely attributable to the following:
|
|
·
|
an increase of 4% on account of increased personnel costs for annual raises and the costs of the employees that we hired in connection with our acquisition of select brands and a plant facility at Baddi from Wockhardt;
|
|
|
·
|
an increase of 4% on account of higher legal and professional costs;
|
|
|
·
|
an increase of 3% on account of higher logistics costs for the supply of goods; and
|
|
|
·
|
an increase of 2% on account of higher depreciation and amortization charges.
|
As a proportion of our
total revenues, our selling, general and administrative expenses increased to 29.2% for the three months ended December 31, 2020
from 28.9% for the three months ended December 31, 2019.
Impairment of non-current assets
Our impairment of non-current
assets expense charges were Rs.5,972 million for the three months ended December 31, 2020 as compared to a charge of Rs.13,200
million for the three months ended December 31, 2019 (Refer to Notes 8 and 10 of our interim financial statements for further details).
Research and development expenses
Our research and development
expenses were Rs.4,108 million for the three months ended December 31, 2020, an increase of 4% as compared to Rs.3,949 million
for the three months ended December 31, 2019. This increase was primarily on account of higher developmental expenditures on certain
projects in our Global Generics segment.
As a proportion of our
total revenues, our research and development expenses were 8.3% for the three months ended December 31, 2019, 2020, as compared
to 9.0% for the three months ended December 31, 2019.
Other income, net
Our net other income was
Rs.128 million for the three months ended December 31, 2020, as compared to net other income of Rs.228 million for the three months
ended December 31, 2019.
Finance income, net
Our net finance income
was Rs.493 million for the three months ended December 31, 2020, as compared to Rs.419 million for the three months ended December
31, 2019. This increase in net finance income was due to the following: ·
|
|
·
|
profit on sale of investments, and unrealized gains on investments recorded at fair value through profit and loss, of Rs.111 million for the three months ended December 31, 2020, as compared to Rs.218 million for the three months ended December 31, 2019;
|
|
|
·
|
net interest income of Rs.69 million for the three months ended December 31, 2020, as compared to net interest income of Rs.55 million for the three months ended December 31, 2019; and
|
|
|
·
|
net foreign exchange gain of Rs.313 million for the three months ended December 31, 2020, as compared to net foreign exchange gain of Rs.146 million for the three months ended December 31, 2019.
|
Profit before tax
As a result of the above,
our profit before tax was Rs.2,843 million for the three months ended December 31, 2020, as compared to a loss before tax of Rs.5,274
million for the three months ended December 31, 2019.
Tax expense
Our consolidated weighted
average tax rate for the three months ended December 31, 2020 was an expense of 93.04% as compared to 8.0% for the three months
ended December 31, 2019. Income tax expense was Rs.2,645 million for the three months ended December 31, 2020, as compared to income
tax expense of Rs.423 million for the three months ended December 31, 2019.
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.
Profit for the period
As a result of the above,
our net profit was Rs.198 million for the three months ended December 31, 2020, representing 0.4% of our total revenues for such
period, as compared to a loss of Rs.5,697 million for the three months ended December 31, 2019, representing (13.0%) of our total
revenues for such period.
Section B:
Nine months ended December 31, 2020 compared
to the nine months ended December 31, 2019
The following table sets
forth, for the periods indicated, financial data as percentages of total revenues and the increase (or decrease) by item as a percentage
of the amount over the comparable period in the previous year.
|
|
|
For the nine months ended December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
Rs. in
millions
|
|
|
% of
Revenues
|
|
|
Rs. in
millions
|
|
|
% of
Revenues
|
|
|
Increase/
(Decrease)
|
|
|
Revenues
|
|
|
142,438
|
|
|
|
100.0
|
%
|
|
|
130,282
|
|
|
|
100.0
|
%
|
|
|
9.3
|
%
|
|
Gross profit
|
|
|
77,702
|
|
|
|
54.6
|
%
|
|
|
71,201
|
|
|
|
54.7
|
%
|
|
|
9.1
|
%
|
|
Selling, general and administrative expenses
|
|
|
40,280
|
|
|
|
28.3
|
%
|
|
|
37,952
|
|
|
|
29.1
|
%
|
|
|
6.1
|
%
|
|
Research and development expenses
|
|
|
12,447
|
|
|
|
8.7
|
%
|
|
|
11,220
|
|
|
|
8.6
|
%
|
|
|
10.9
|
%
|
|
Impairment of non-current assets
|
|
|
6,753
|
|
|
|
4.7
|
%
|
|
|
16,760
|
|
|
|
12.9
|
%
|
|
|
(59.7
|
%)
|
|
Other income, net
|
|
|
(395
|
)
|
|
|
(0.3
|
%)
|
|
|
(4,122
|
)
|
|
|
(3.2
|
%)
|
|
|
(90.4
|
%)
|
|
Results from operating activities
|
|
|
18,617
|
|
|
|
13.1
|
%
|
|
|
9,391
|
|
|
|
7.2
|
%
|
|
|
98.2
|
%
|
|
Finance income, net
|
|
|
1,335
|
|
|
|
0.9
|
%
|
|
|
1,043
|
|
|
|
0.8
|
%
|
|
|
28.0
|
%
|
|
Share of profit of equity accounted investees, net of tax
|
|
|
301
|
|
|
|
0.2
|
%
|
|
|
456
|
|
|
|
0.4
|
%
|
|
|
(34.0
|
%)
|
|
Profit before tax
|
|
|
20,253
|
|
|
|
14.2
|
%
|
|
|
10,890
|
|
|
|
8.4
|
%
|
|
|
86.0
|
%
|
|
Tax expense/(benefit), net
|
|
|
6,639
|
|
|
|
4.7
|
%
|
|
|
(966
|
)
|
|
|
(0.7
|
%)
|
|
|
-
|
|
|
Profit for the period
|
|
|
13,614
|
|
|
|
9.6
|
%
|
|
|
11,856
|
|
|
|
9.1
|
%
|
|
|
14.8
|
%
|
Revenues
Our overall consolidated
revenues were Rs.142,438 million for the nine months ended December 31, 2020, an increase of 9% as compared to Rs.130,282 million
for the nine months ended December 31, 2019.
The following table sets
forth, for the periods indicated, our consolidated revenues by segment:
|
|
|
For the nine months ended December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
Rs. in
millions
|
|
|
Revenues %
of Total
|
|
|
Rs. in
millions
|
|
|
Revenues %
of Total
|
|
|
Increase/
(Decrease)
|
|
|
Global Generics
|
|
|
115,667
|
|
|
|
81
|
%
|
|
|
101,725
|
|
|
|
78
|
%
|
|
|
13.7
|
%
|
|
PSAI
|
|
|
24,067
|
|
|
|
17
|
%
|
|
|
18,552
|
|
|
|
14
|
%
|
|
|
29.7
|
%
|
|
Proprietary Products
|
|
|
280
|
|
|
|
0
|
%
|
|
|
7,947
|
|
|
|
6
|
%
|
|
|
(96.5
|
%)
|
|
Others
|
|
|
2,424
|
|
|
|
2
|
%
|
|
|
2,058
|
|
|
|
2
|
%
|
|
|
17.8
|
%
|
|
Total
|
|
|
142,438
|
|
|
|
100
|
%
|
|
|
130,282
|
|
|
|
100
|
%
|
|
|
9.3
|
%
|
Segment Analysis
Global Generics
Revenues from our Global
Generics segment were Rs.115,667 million the nine months ended December 31, 2020, an increase of 14% as compared to Rs.101,725
million for the nine months ended December 31, 2019.
After taking into account
the impact of exchange rate fluctuations of the Indian rupee against multiple currencies in the markets in which we operate, the
foregoing increase in revenues of this segment was attributable to the following factors:
|
|
·
|
an increase of approximately 14% resulting from the introduction of new products during the intervening period;
|
|
|
·
|
an increase of approximately 3% resulting from a net increase in the sales volume of existing products in this segment; and
|
|
|
·
|
a decrease of approximately 3% resulting from the net impact of changes in sales prices of the products in this segment.
|
North America (the United
States and Canada): Our Global Generics segment’s revenues from North America (the United States and Canada) for the
nine months ended December 31, 2020 were Rs.53,003 million, an increase of 14% as compared to Rs.46,587 million for the nine months
ended December 31, 2019. In U.S. dollar absolute currency terms (i.e., U.S. dollars without taking into account the effect of currency
exchange rates), such revenues increased by 8% in nine months ended December 31, 2020 as compared to the nine months ended December
31, 2019.
During the nine months
ended December 31, 2020, we launched 21 new products in North America (the United States and Canada). We launched 18 new products
in the United States which are Fenofibrate Tabs, Nitroglycerin Patch, Amphetamine, Desmopressin Ampules, Colchicine Tabs, Abiraterone
Acetate, OTC Nicotine Lozenge, Ciprofloxacin Dexamethasone, Penicillamine Caps, Methylphenidate ER, Dexmedetomidine Fulvestrant
Inj, OTC Diclofenac, OTC Olopatadine, Dimethyl Fumarate, Cinacalcet, Succinylcholine and Sapropterin. We also launched 3 new products
in Canada, which are Cabazitaxel, Succinylcholine and Daptomycin.
Europe: Our Global
Generics segment’s revenues from Europe were Rs.11,448 million for the nine months ended December 31, 2020, an increase of
39% as compared to Rs.8,261 million for the nine months ended December 31, 2019. After taking into account the impact of exchange
rate fluctuations of the Indian rupee against the European Euro and Great Britain’s Pound sterling, this increase was largely
attributable to the new products launched.
India: Our Global
Generics segment’s revenues from India were Rs.24,975 million for the nine months ended December 31, 2020, an increase of
13% as compared to Rs.22,107 million for the nine months ended December 31, 2019. During the nine months ended December 31, 2020,
we launched 18 new brands in India.
According to IQVIA in its
Moving Annual Total report for the twelve months ended December 31, 2020, our secondary sales in India increased by 1.5% during
such period, as compared to the India pharmaceutical market’s growth of 4.4% during such period.
Emerging Markets:
Our Global Generics segment’s revenues from “Emerging Markets” (which is comprised of Russia, other countries
of the former Soviet Union, Romania and certain other countries which we refer to as our “Rest of the World” markets,
primarily China, South Africa and Brazil) for the nine months ended December 31, 2020 were Rs.26,242 million, an increase of 6%
as compared to Rs.24,770 million for the nine months ended December 31, 2019.
Russia: Our Global
Generics segment’s revenues from Russia were Rs.11,779 million for the nine months ended December 31, 2020, a decrease of
9% as compared to Rs.12,985 million for the nine months ended December 31, 2019. In Russian rouble absolute currency terms (i.e.,
Russian roubles without taking into account the effect of currency exchange rates), such revenues decreased by 2% for the nine
months ended December 31, 2020 as compared to the nine months ended December 31, 2019. Our OTC division’s revenues from Russia
for the nine months ended December 31, 2020 were 44% of our total revenues from Russia.
According to IQVIA, as
per its report for the eight months ended November 30, 2020, our sales value growth (in Russian roubles) and volume growth from
Russia, as compared to the Russian pharmaceutical market, was as follows:
|
|
|
For the eight months ended November 30, 2020
|
|
|
|
|
Dr. Reddy's
Laboratories Ltd.
|
|
|
Russian
pharmaceutical
market
|
|
|
|
|
Sales
value
|
|
|
Volume
|
|
|
Sales
value
|
|
|
Volume
|
|
|
Prescription (Rx)
|
|
|
4.2
|
%
|
|
|
-1.2
|
%
|
|
|
4.0
|
%
|
|
|
-0.3
|
%
|
|
Over-the-counter (OTC)
|
|
|
8.5
|
%
|
|
|
2.1
|
%
|
|
|
11.0
|
%
|
|
|
-1.0
|
%
|
|
Total (Rx + OTC)
|
|
|
6.2
|
%
|
|
|
-0.1
|
%
|
|
|
7.5
|
%
|
|
|
-0.7
|
%
|
Other Countries of former
Soviet Union and Romania: Our Global Generics segment’s revenues from other countries of the former Soviet Union and
Romania were Rs.5,524 million for the nine months ended December 31, 2020, an increase of 18% as compared to Rs.4,696 million for
the nine months ended December 31, 2019.
“Rest of the World”
Markets: We refer to all markets of this segment other than North America (the United States and Canada), Europe, Russia, India
and other countries of the former Soviet Union and Romania as our “Rest of the World” markets. Our Global Generics
segment’s revenues from our “Rest of the World” markets were Rs.8,939 million for the nine months ended December
31, 2020, an increase of 26% as compared to Rs.7,089 million for the nine months ended December 31, 2019.
Pharmaceutical Services and Active Ingredients
(“PSAI”)
Our PSAI segment’s
revenues for the nine months ended December 31, 2020 were Rs.24,067 million, an increase of 30% as compared to Rs.18,552 million
for the nine months ended December 31, 2019. After taking into account the impact of exchange rate fluctuations of the Indian rupee
against multiple currencies in the markets in which we operate, this increase was largely attributable to an increase in the sales
volume of our existing products and contribution from new products.
Proprietary Products
Revenues from our Proprietary
Products segment were Rs.280 million for the nine months ended December 31, 2020, a decrease of 97% as compared to Rs.7,947 million
for the nine months ended December 31, 2019. This decrease was primarily on account of divesture of our neurological product brands
ZEMBRACE® SMYTOUCH® (sumatriptan injection 3mg) & TOSYMRA™ (sumatriptan nasal spray 10mg) for Rs.7,486 million
during the nine months ended December 31, 2019.
Gross Profit
Our total gross profit
was Rs.77,702 million for the nine months ended December 31, 2020, representing 54.6% of our revenues for that period, as compared
to Rs.71,201 million for the nine months ended December 31, 2019, representing 54.7% of our revenues for that period.
|
|
|
For the nine months ended December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(Rs. in millions)
|
|
|
|
|
Gross
Profit
|
|
|
% of Segment
Revenue
|
|
|
Gross
Profit
|
|
|
% of Segment
Revenue
|
|
|
Global Generics
|
|
|
68,665
|
|
|
|
59.4
|
%
|
|
|
58,117
|
|
|
|
57.1
|
%
|
|
PSAI
|
|
|
6,913
|
|
|
|
28.7
|
%
|
|
|
4,147
|
|
|
|
22.4
|
%
|
|
Proprietary Products
|
|
|
244
|
|
|
|
87.1
|
%
|
|
|
7,751
|
|
|
|
97.5
|
%
|
|
Others
|
|
|
1,880
|
|
|
|
77.6
|
%
|
|
|
1,186
|
|
|
|
57.6
|
%
|
|
Total
|
|
|
77,702
|
|
|
|
54.6
|
%
|
|
|
71,201
|
|
|
|
54.7
|
%
|
After taking into account
the impact of the exchange rate fluctuations of the Indian rupee against multiple currencies in the markets in which we operate,
the gross profits from our Global Generics segment increased to 59.4% for the the nine months ended December 31, 2020, from 57.1%
for the nine months ended December 31, 2019. This increase is on account of the following factors:
|
|
·
|
the net benefit from exchange rate fluctuation of multiple currencies in the markets in which we operate against the Indian Rupee;
|
|
|
·
|
new product launches with higher gross margins;
|
|
|
·
|
lower inventory write-off charges; and
|
|
|
·
|
manufacturing leverage benefits of higher sales at the same levels of overheads.
|
This increase was partially offset by a reduction
on account of price erosion in certain of our products primarily in the United States and Europe.
The gross profits from
our PSAI segment increased to 28.7% for the nine months ended December 31, 2020, from 22.4% for the nine months ended December
31, 2019. This increase was primarily on account of net benefit from exchange rate fluctuation of multiple currencies against Indian
Rupee and manufacturing leverage benefits of higher sales.
Selling, general and administrative expenses
Our selling, general and
administrative expenses were Rs.40,280 million for the nine months ended December 31, 2020, an increase of 6% as compared to Rs.37,952
million for the nine months ended December 31, 2019.
After taking into account
the impact of exchange rate fluctuations of the Indian rupee against multiple currencies in the markets in which we operate, this
increase was largely attributable to the following:
|
|
·
|
an increase of 3% on account of higher logistics costs for the supply of goods; and
|
|
|
·
|
an increase of 3% on account of increased personnel cost for annual raises and the costs of the employees that we hired in connection with our acquisition of select brands and a plant facility at Baddi from Wockhardt.
|
As a proportion of our
total revenues, our selling, general and administrative expenses were 28.3% for the nine months ended December 31, 2020, as compared
to 29.1% for the nine months ended December 31, 2019.
Impairment of non-current assets
Our impairment of non-current
assets expense charge were Rs.6,753 million for the nine months ended December 31, 2020 as compared to a charge of Rs.16,760 million
for the nine months ended December 31, 2019. (Refer Note 8 and 10 of interim financial statements for further details).
Research and development expenses
Our research and development
costs were Rs.12,447 million for the nine months ended December 31, 2020, an increase of 11% as compared to Rs.11,220 million for
the nine months ended December 31, 2019. This increase was primarily on account of higher developmental expenditure on certain
projects in our Global Generics segment.
Other income, net
Our other income was Rs.395
million for the nine months ended December 31, 2020, as compared to other income of Rs.4,122 million for the nine months ended
December 31, 2019.
The other income was higher
for the nine months ended December 31, 2019 mainly on account of Rs.3,457 million received from Celgene pursuant to a settlement
agreement entered towards settlement of any claim we or our affiliates may have had for damages under section 8 of the Canadian
Patented Medicines (Notice of Compliance) Regulations in regard to our ANDS for a generic version of REVLIMID brand capsules, (Lenalidomide)
pending before Health Canada.
Finance income, net
Our net finance income
was Rs.1,335 million for the nine months ended December 31, 2020, as compared to net finance income of Rs.1,043 million for the
nine months ended December 31, 2019. This increase in net finance income was attributable to:
|
|
·
|
profit on sale of investments, and unrealized gains on investments recorded at fair value through profit and loss, of Rs.500 million for the nine months ended December 31, 2020, as compared to Rs.780 million for the nine months ended December 31, 2019;
|
|
|
·
|
net interest expense of Rs.13 million for the nine months ended December 31, 2020, as compared to net interest expense of Rs.46 million for the nine months ended December 31, 2019;
|
|
|
·
|
net foreign exchange gain of Rs.848 million for the nine months ended December 31, 2020, as compared to net foreign exchange gain of Rs.304 million for the nine months ended December 31, 2019; and
|
Profit before tax
As a result of the above,
our profit before tax was Rs.20,253 million for the nine months ended December 31, 2020, an increase of 86% as compared to Rs.10,890
million for the nine months ended December 31, 2019.
Tax expense
Our consolidated weighted
average tax rate was an expense of 32.8% for the nine months ended December 31, 2020 as compared to a benefit of 8.9% for the nine
months ended December 31, 2019. Our tax expense was Rs.6,639 million for the nine months ended December 31, 2020, as compared to
a net tax benefit of Rs.966 million for the nine months ended December 31, 2019.
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.
Profit for the period
As a result of the above,
our net profit was Rs.13,614 million for the nine months ended December 31, 2020, representing 9.6% of our total revenues for such
period, as compared to Rs.11,856 million for the nine months ended December 31, 2019, representing 9.1% of our total revenues
for such period.
ITEM 3. LIQUIDITY AND CAPITAL RESOURCES
We have primarily financed
our operations through cash flows generated from operations and a mix of long-term and short-term borrowings. Our principal liquidity
and capital needs are for the purchase of property, plant and equipment, regular business operations and research and development.
Our principal sources
of short-term liquidity are internally generated funds and short-term borrowings, which we believe are sufficient to meet our working
capital requirements.
Principal Debt Obligations
The following table provides
a list of our principal debt obligations (excluding lease obligations) outstanding as of December 31, 2020:
|
|
|
Amount
(Rs. in millions)
|
|
|
Currency(1)
|
|
Interest Rate(2)
|
|
Pre-shipment credit
|
|
Rs.
|
8,800
|
|
|
INR
|
|
1 Month T-bill + 35 bps
|
|
|
|
|
|
|
|
INR
|
|
5.75%
|
|
Other working capital borrowings
|
|
|
4,310
|
|
|
MXN
|
|
TIIE + 1.20%
|
|
|
|
|
|
|
|
BRL
|
|
4.00%
|
|
|
|
|
|
|
|
RUB
|
|
5.55%
|
|
|
|
|
|
|
|
INR
|
|
5.90%/7.30%
|
|
|
|
|
|
|
|
U.S.$
|
|
1 Month LIBOR + 125 bps
|
|
Long-term Non-convertible debentures
|
|
|
3,800
|
|
|
INR
|
|
6.77%
|
|
|
(1)
|
“INR” means Indian rupees, “U.S.$” means United States Dollars, “RUB” means Russian roubles, “MXN” means Mexican pesos and “BRL” means Brazilian reals.
|
|
|
(2)
|
“LIBOR” means the London Inter-bank Offered Rate, “TIIE” means the Equilibrium Inter-banking Interest Rate (Tasa de Interés Interbancaria de Equilibrio) and “T-bill” means the India Treasury Bill interest rate.
|
Summary of statements of cash flows
The following table summarizes our statements
of cash flows for the periods presented:
|
|
|
For the nine months ended
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(Rs. in millions)
|
|
|
Net cash from/(used in):
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
Rs.
|
24,437
|
|
|
Rs.
|
27,295
|
|
|
Investing activities
|
|
|
(13,210
|
)
|
|
|
3,247
|
|
|
Financing activities
|
|
|
(8,938
|
)
|
|
|
(30,596
|
)
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
Rs.
|
2,289
|
|
|
Rs.
|
(54
|
)
|
In addition to cash, inventory
and accounts receivable, our unused sources of liquidity included Rs.48,708 million available in credit under revolving credit
facilities with banks as of December 31, 2020.
Cash Flows from Operating Activities
The result of operating
activities was a net cash inflow of Rs.24,437 million for the nine months ended December 31, 2020, as compared to a cash inflow
of Rs.27,295 million for the nine months ended December 31, 2019.
The decrease in net cash
inflow of Rs.2,858 million was primarily due to an increase in our working capital requirements, partially offset by an increase
in our earnings.
Our average days’
sales outstanding (“DSO”) as at December 31, 2020 and December 31, 2019 were 96 days and 93 days, respectively.
There is no significant change in our DSO.
Cash Flows used in Investing Activities
Our investing activities
resulted in net cash outflow of Rs.13,210 million and net cash inflow of Rs.3,247 million for the nine months ended December 31,
2020 and 2019, respectively, which was primarily on account of the following:
|
|
·
|
the payment in connection with our acquisition of certain business assets from Wockhardt Limited, of Rs.15,514 million for the nine months ended December 31, 2020 (refer to Note 29 of our interim financial statements for further details);
|
|
|
·
|
the acquisition of property, plant and equipment, and other intangible assets, net of discards, of Rs.9,302 million for the nine months ended December 31, 2020, as compared to Rs.3,651 million for the nine months ended December 31, 2019; and
|
|
|
·
|
the net proceeds of other investments of Rs.10,535 million for the nine months ended December 31, 2020, as compared to net proceeds of other investments of Rs.5,818 million for the nine months ended December 31, 2019.
|
Cash Flows
used in Financing Activities
Our financing activities
resulted in a net cash outflow of Rs.8,938 million and of Rs.30,596 million for the nine months ended December 31, 2020 and
2019, respectively, which was primarily on account of repayment of short-term and long-term borrowings.
During the nine months
ended December 31, 2020, our net cash outflow was primarily on account of the following:
|
|
·
|
payments of dividends of Rs.4,147 million;
|
|
|
·
|
net repayment of short-term and long-term borrowings of Rs.3,290 million;
|
|
|
·
|
interest payments of Rs.995 million;
|
|
|
·
|
payments of the principal portion of lease liabilities of Rs.565 million; and
|
|
|
·
|
purchases of treasury shares of Rs.190 million.
|
During the nine months
ended December 31, 2019, our net cash outflow was primarily on account of the following:
|
|
·
|
net repayment of short-term and long-term borrowings of Rs.24,539 million;
|
|
|
·
|
payments of dividends of Rs.3,916 million;
|
|
|
·
|
interest payments of Rs.1,277 million;
|
|
|
·
|
payments of the principal portion of lease liabilities of Rs.393 million; and
|
|
|
·
|
purchases of treasury shares of Rs.474 million.
|
ITEM 4. OTHER MATTERS
None
ITEM 5. EXHIBITS