Dr. Reddy’s Q2 & H1 FY13 Financial Results

  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%)

Business Wire

HYDERABAD, India -- October 30, 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 FY12 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     All US dollar figures based on convenience translation rate of 1USD =
millions,        Rs. 52.92
except EPS
                   
Dr. Reddy’s Laboratories Limited and Subsidiaries
Unaudited Consolidated Income Statement
                                                                                
                   Q2 FY13                          Q2 FY12                          
Particulars      ($)     (Rs.)      %      ($)     (Rs.)      %      Growth
                                                                                     %
Revenues           544     28,809     100       429     22,678     100       27
Cost of          255    13,504    47     198    10,473    46     29   
revenues
Gross profit     289    15,305    53     231    12,205    54     25   
Operating
Expenses
Selling,
general and        151       8,013        28        136       7,217        32        11
administrative
expenses
Research and
development        33        1,759        6         28        1,459        6         21
expenses
Impairment
loss on
goodwill and       13        688          2
intangible
assets
Other
operating        (8  )   (397   )   (1  )   (4  )   (216   )   (1  )   85   
(income) /
expense
Results from
operating        99     5,242     18     71     3,745     17     40   
activities
Net finance
(income) /         (7  )     (371   )     (1  )     1         50           0         (849 )
expense
Share of
(profit) /
loss of equity   (1  )   (28    )   (0  )   (0  )   (13    )   (0  )   115  
accounted
investees
Profit before
income tax       107    5,641     20     70     3,708     16     52   
(‘PBT’)
Income tax       30     1,567     5      12     630       3      148  
expense
Profit for the   77     4,074     14     58     3,078     14     32   
period
                                                                
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                     (2 )   (94   )
in Q1 FY12 for VRS
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                             (2 )     (94   )
in Q1 FY12 for VRS
Impairment loss on goodwill and         13        688
intangible assets
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 adjustments

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 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 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 Rs.
    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 Rs. 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 in 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 FY13 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 FY12 and (c) tax
normalization on account of the annual effective tax rate and the
aforementioned adjustments

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

Appendix 1: Key Balance Sheet    (in millions)
Items
Particulars                        As on 30th Sep 12    As on 30th Jun 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      233      12,297   257      13,597
assets
Loans and borrowings (current &    660      34,901   670      35,430
non current)
Trade payables                     197      10,412   165      8,750
Equity                             1,197    63,354   1,127    59,664
                                                                   

Appendix 2: Revenue Mix by Segment         (in millions)
             Q2 FY13                      Q2 FY12                    Growth
              ($)     (Rs.)    %     ($)     (Rs.)    %     %
Global        380    20,103   70    305    16,136   71    25   
Generics
North                9,270    46           6,287    39    47   
America
Europe               1,777    9            2,117    13    (16  )
India                3,879    19           3,459    21    12   
Russia &             3,841    19           3,380    21    14   
Other CIS
RoW                  1,336    7            893      6     50   
PSAI          149    7,876    27    112    5,933    26    33   
North                1,353    17           1,068    18    27   
America
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 &    16     830      3     12     610      3     36   
Others
Total         544    28,809   100   429    22,678   100   27   
                                                         

All figures in     All US dollar figures based on convenience translation rate of 1USD = Rs.
millions,        52.92
except EPS
                                                                                  
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          479      25,369    47     372    19,701    46     29   
revenues
Gross profit     545      28,846    53     430    22,760    54     27   
Operating
Expenses
Selling,
general and        308         16,291       30        264       13,972       33        17
administrative
expenses
Research and
development        63          3,322        6         50        2,656        6         25
expenses
Impairment
loss on
goodwill and       13          688          1
intangible
assets
Other
operating        (12   )   (615   )   (1  )   (8  )   (402   )   (1  )   54   
(income) /
expense
Results from
operating        173      9,160     17     123    6,534     15     40   
activities
Net finance
(income) /         (3    )     (159   )     (0  )     2         96           0         (266 )
expense
Share of
(profit) /
loss of equity   (1    )   (47    )   (0  )   (0  )   (17    )   (0  )   176  
accounted
investees
Profit before    177      9,366     17     122    6,455     15     45   
income tax
Income tax       37       1,932     4      14     750       2      157  
expense
Profit for the   140      7,434     14     108    5,705     13     30   
period
                                                                  
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                         1      42    
Retirement Scheme
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                                 1         42
Retirement Scheme
Impairment loss on goodwill and       13        688
intangible assets
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 businesses – 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. Major
markets include India, USA, Russia and CIS, Germany, UK, Venezuela, S. Africa,
Romania 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.

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

Contact:

Dr. Reddy’s Laboratories Ltd.
Investors and Financial Analysts:
Kedar Upadhye
+91-40-66834297
kedaru@drreddys.com
or
Saunak Savla
+91-40-49002135
saunaks@drreddys.com
or
Milan Kalawadia (USA)
+1 908-203-4931
mkalawadia@drreddys.com
or
Media:
S Rajan
+91-40-49002445
rajans@drreddys.com