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Hyderabad, India, October 30th, 2012  
 
Dr. Reddy’s Q2 & H1 FY13 Financial Results

Q2 FY13 Revenues at Rs.28.8 billion
(YoY growth of 27%)

Q2 FY13 EBITDA at Rs.7.7 billion
(YoY growth of 47%)

*Adjusted Q2 FY13 PAT at Rs.4.9 billion
(YoY growth of 77%)

H1 FY13 Revenues at Rs.54.2 billion
(YoY growth of 28%)

H1 FY13 EBITDA at Rs.12.7 billion
(YoY growth of 35%)

**Adjusted H1 FY13 PAT at Rs.7.8 billion
(YoY growth of 56%)

Hyderabad, India, October 30th, 2012: Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) today announced its unaudited consolidated financial results for the quarter ended September 30, 2012 under International Financial Reporting Standards (IFRS).

Key Highlights (Q2 FY13)

  • Consolidated revenues for Q2 FY13 at Rs.28.8 billion, recorded YoY growth of 27%. Consolidated revenues for H1 FY13 at Rs.54.2 billion, recorded YoY growth of 28%.
    • Revenues from the Global Generics segment for Q2 FY13 at Rs.20.1 billion, recorded YoY growth of 25% primarily driven by North America, India and other emerging markets.
    • Revenues from the PSAI segment for Q2 FY13 at Rs.7.9 billion, recorded YoY growth of 33%.
  • EBITDA for Q2 FY13 at Rs.7.7 billion, 27% of revenues, recorded YoY growth of 47%. EBITDA for H1 FY13 at Rs.12.7 billion, 23% of revenues, recorded YoY growth of 35%.
  • PAT for Q2 FY13 at Rs.4.1 billion, 14% of revenues, recorded YoY growth of 32%. PAT for H1 FY13 at Rs.7.4 billion, 14% of revenues, recorded YoY growth of 30%.
  • *Adjusted PAT for Q2 FY13 at Rs.4.9 billion, 17% of revenues, recorded YoY growth of 77%.
  • During the quarter, the company launched 18 new generic products, filed 11 new product registrations and filed 10 DMFs globally.


    • * Adjusted for (a) impairment charges in Q2 FY13 (b) the benefit on reversal of provision for voluntary retirement scheme (‘VRS’)in Q2 FY 12 and (c) tax normalization on account of the annual effective tax rate and the aforementioned adjustments

    ** Adjusted for (a) impairment charges in Q2 FY13 (b) net charge for voluntary retirement scheme(‘VRS’) and (c) tax normalization on account of the annual effective tax rate and the aforementioned adjustments

 All figures in millions, except EPS
All dollar figures based on convenience translation rate of 1USD = Rs. 52.92

Dr. Reddy's Laboratories Ltd. and Subsidiaries
Unaudited Consolidated Income Statement

Particulars Q2 FY13 Q2 FY12 Growth %
($) (Rs.) % ($) (Rs.) (%)
Revenues 544 28,809 100 429 22,678 100 27
Cost of revenues 255 13,504 47 198 10,473 46 29
Gross profit 289 15,305 53 231 12,205 54 25
Operating Expenses              
Selling, general & administrative expenses 151 8,013 28 136 7,217 32 11
Research and development expenses 33 1,759 6 28 1,459 6 21
Impairment loss on goodwill and intangible assets 13 688 2        
Other operating (income) / expense (8) (397) (1) (4) (216) (1) 85
Results from operating activities 99 5,242 18 71 3,745 17 40
Net finance (income) / expense (7) (371) (1) 1 50 0 (849)
Share of (profit) / loss of equity accounted investees (1) (28) (0) (0) (13) (0) 115
Profit before income tax ('PBT') 107 5,641 20 70 3,708 16 52
Income tax expense 30 1,567 5 12 630 3 148
Profit for the period 77 4,074 14 58 3,078 14 32

Diluted EPS 0.5 23.9   0.3 18.1   32


Profit Computation:

EBITDA Computation Q2 FY13 Q2 FY12
($) (Rs.) ($) (Rs.)
PBT 107 5,641 70 3,708
Net Interest Expenses / (Income) (1) (32) 4 225
Depreciation 18 943 17 879
Amortization 8 433 7 389
Impairment 13 688    
Reported EBITDA 145 7,673 98 5,201
Adjustments of exceptional items:        
Part reversal of provision booked in Q1 FY12 for VRS     (2) (94)
Adjusted EBITDA 145 7,673 97 5,107

PAT Computation Q2 FY13 Q2 FY12
($) (Rs.) ($) (Rs.)
PAT 77 4,074 58 3,078
Adjustments:        

Part reversal of provision booked in Q1 FY12 for VRS
    (2) (94)

Impairment loss on goodwill and intangible assets
13 688    
Tax adjustment* 3 175 (4) (192)
Adjusted PAT 93 4,937 53 2,792

* Q2 FY13 normalized to the FY13 annual effective tax rate and Q2 FY12 normalized to the FY12 annual effective tax rate and the effect of the aforementioned transactions

SEGMENTAL ANALYSIS

Global Generics

Revenues from Global Generics segment for Q2 FY13 at Rs.20.1 billion, recorded YoY growth of 25% driven by key markets of North America, India and other emerging markets..

  • Revenues from North America for Q2 FY13 at Rs.9.3 billion, recorded YoY growth of 47%.
    • Growth is largely driven by key limited competition products of ziprasidone, tacrolimus, fondaparinux, clopidogrel, ramp-up in antibiotics portfolio and products from Shreveport facility.
    • 4 new products were launched during the quarter - atorvastatin, metoprolol, montelukast family and amoxicillin.
    • 30 products from the prescription portfolio are ranked among the Top 3 in their respective market shares.  (Source: IMS Health Volumes, August 2012)
    • During the quarter, 4 ANDAs were filed. Cumulatively, 63 ANDAs are pending for approval with the USFDA of which 33 are Para IVs and 7 have ‘First To File’ status.
  • Revenues from Russia and Other CIS markets for Q2 FY13 at Rs.3.8 billion recorded YoY growth of 14%.
    • Revenues from Russia for Q2 FY13 are at Rs.3.2 billion.
    • Revenues from Other CIS markets for Q2 FY13 at Rs.0.62 billion recorded YoY growth of 31%.
  • Revenues from India for Q2 FY13 at Rs.3.9 billion recorded YoY growth of 12%.
    • Growth driven by volume increase across most of key brands.
    • Biosimilars portfolio grew YoY by 24% during the quarter.
    • 4 new brands were launched during the quarter.
  • Revenues from Europe for Q2 FY13 at Rs.1.8 billion declined YoY by 16%.
    • Revenues from Germany for Q2 FY13 at Rs. 1.1 billion declined YoY by 11%.

Pharmaceutical Services and Active Ingredients (PSAI)

  • Revenues from PSAI for Q2 FY13 at Rs.7.9 billion, recorded YoY growth of 33%.
  • During the quarter, 10 DMFs were filed globally, including 2 in Europe. The cumulative number of DMF filings as of September 30. 2012 is 552.

Income Statement Highlights:

  • Gross profit margin at 53.1% in Q2 FY13 marginally dropped by 0.7% versus Q2 FY12. Gross profit margin for Global Generics and PSAI business segments are at 59.4% and 35.8% respectively.
  • Selling, General and Administration (SG&A) expenses including amortization at Rs.8.0 billion increased YoY by 11%.
  • Research & development expenses for Q2 FY13 at Rs.1.8 billion is at 6% of revenues.
  • During the quarter, a non-recurring and non-cash impairment charge of `688 million pertaining to product intangibles in generics portfolio and a goodwill charge wrt Italian operations has been considered.
  • Net Finance income is at Rs.371 million, in Q2 FY13 compared to the net finance cost of `50 million in Q2 FY12. The change is on account of :
    • Net incremental forex gain of Rs.187 million, primarily on account of reversal of the loss on time value of options recorded in Q1 FY13, due to the recent appreciation of the rupee.
    • Net interest income of Rs.33 million in Q2 FY13 compared to net interest expense of Rs.225 million in Q2 FY12 primarily on account of higher interest income from Fixed Deposit and mutual funds.
  • EBITDA for Q2 FY13 is Rs.7.7 billion, 27% of revenues and recorded YoY growth of 47%. This growth is supported by the increased operating leverage.
  • Profit after Tax in Q2 FY13 at Rs.4.1 billion recorded YoY growth of 32%.
  • *Adjusted Profit after tax in Q2 FY13 at Rs 4.9 billion recorded YoY growth of 77%.
  • Diluted earnings per share in Q2 FY 13 are Rs.23.9.
  • Capital expenditure for Q2 FY13 is Rs.1,8 billion.

    * * Adjusted for (a) impairment charges in Q2 FY13 (b) the benefit on reversal of provision for voluntary retirement scheme (‘VRS’)in Q2 FY 12 and (c) tax normalization on account of the annual effective tax rate and the aforementioned adjustments

      All dollar figures based on convenience translation rate of 1USD = Rs. 52.92

(in millions)Appendix 1: Key Balance Sheet Items

Particulars As on 30th Sep 12 As on 30th June 12
($) (Rs.) ($) (Rs.)
Cash and cash equivalents 390 20,641 403 21,353
Trade receivables 496 26,247 472 24,975
Inventories 414 21,885 389 20,580
Property, plant and equipment 667 35,300 653 34,550
Goodwill and other intangible assets 233 12,297 257 13,597
Loans and borrowings (current & non-current) 660 34,901 670 35,430
Trade payables 197 10,412 165 8,750
Equity 1,197 63,354 1,127 59,664


(in millions)Appendix 2: Revenue Mix by Segment

  Q2FY13 Q2FY12 Growth %
($) (Rs.) as a % ($) (Rs.) as a %
Global Generics 380 20,103 70 305 16,136 71 25
North America   9,270 46   6,287 39 47
Europe   1,777 9   2,117 13 (16)
India   3,879 19   3,459 21 12
Russia & Other CIS   3,841 19   3,380 21 14
RoW   1,336 7   893 6 50
PSAI 149 7,876 27 112 5,933 26 33
North America   1,353 17   1,068 18 27
Europe   2,906 37   2,303 39 26
India   1,148 15   752 13 53
RoW   2,469 31   1,810 31 36
Proprietary Products and Others 16 830 3 12 610 3 36
Total 544 28,809 100 429 22,678 100 27


 All figures in millions, except EPS
All dollar figures based on convenience translation rate of 1USD = Rs. 52.92

Appendix 3: Consolidated Income Statement

Particulars H1 FY13 H1 FY12 Growth %
($) (Rs.) % ($) (Rs.) (%)
Revenues 1,024 54,215 100 802 42,461 100 28
Cost of revenues 479 25,369 47 372 19,701 46 29
Gross profit 545 28,846 53 430 22,760 54 27
Operating Expenses              
Selling, general & administrative expenses 308 16,291 30 264 13,972 33 17
Research and development expenses 63 3,322 6 50 2,656 6 25
Impairment loss on goodwill and intangible assets 13 688 1        
Other operating (income) / expense (12) (615) (1) (8) (402) (1) 54
Results from operating activities 173 9,160 17 123 6,534 15 40
Net finance (income) / expense (3) (159) (0) 2 96 0 (266)
Share of (profit) / loss of equity accounted investees (1) (47) (0) (0) (17) (0) 176
Profit before income tax 177 9,366 17 122 6,455 15 45
Income tax expense 37 1,932 4 14 750 2 157
Profit for the period 140 7,434 14 108 5,705 13 30

Diluted EPS 0.8 43.6   0.6 33.5   30


Appendix 4: Profit Computation

EBITDA Computation H1 FY13 H1 FY12
($) (Rs.) ($) (Rs.)
PBT 177 9,366 122 6,455

Net Interest Expenses / (Income)

0 12 8 446
Depreciation
35 1,839 32 1,708
Amortization 16 833 15 794
Impairment 13 688    
Reported EBITDA 241 12,738 178 9,403

 Adjustments of exceptional items:

       

 One-time charge of Voluntary Retirement Scheme

    1 42

Adjusted EBITDA
241 12,738 178 9,445

PAT Computation H1 FY13 H1 FY12
($) (Rs.) ($) (Rs.)
PAT 140 7,434 108 5,705
Adjustments:        

One-time charge of Voluntary Retirement Scheme
    1 42

Impairment loss on goodwill and intangible assets
13 688    
Tax adjustment* (5) (280) (14) (729)
Adjusted PAT 148 7,842 95 5,018

* H1 FY13 normalized to the FY13 annual effective tax rate and H1 FY12 normalized to the FY12 annual effective tax rate and the effect of the aforementioned transactions

About Dr. Reddy's
Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) is an integrated global pharmaceutical company, committed to providing affordable and innovative medicines for healthier lives. Through its three business segments - Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products – Dr. Reddy’s offers a portfolio of products and services including APIs, custom pharmaceutical services, generics, biosimilars, differentiated formulations and NCEs. Therapeutic focus is on gastro-intestinal, cardiovascular, diabetology, oncology, pain management, anti-infective and pediatrics. Focus markets include India, USA, Russia and CIS, Germany, UK, Venezuela, S. Africa, Romania, Australia and New Zealand.

For more information, log on to: www.drreddys.com
 
Disclaimer
This press release includes forward-looking statements, as defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future events. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such factors include, but are not limited to, changes in local and global economic conditions, our ability to successfully implement our strategy, the market acceptance of and demand for our products, our growth and expansion, technological change and our exposure to market risks. By their nature, these expectations and projections are only estimates and could be materially different from actual results in the future.

Contact Information

Investors and Financial Analysts:

Kedar Upadhye at kedaru@drreddys.com / +91-40-66834297
Saunak Savla at saunaks@drreddys.comm / +91-40-49002135
Milan Kalawadia (North America) at mkalawadia@drreddys.com / +1 908-203-4931

Media

S Rajan at rajans@drreddys.com / +91-40- 49002445

Note: All discussions in this release are based on unaudited consolidated IFRS financials.