Dr. Reddy's Laboratories Ltd.-இன் இயக்குநர் அறிக்கை

Mar 31, 2023

Your Directors are pleased to present the 39th Annual Report of the Company for the year ended March 31,2023.

FINANCIAL HIGHLIGHTS AND COMPANY AFFAIRS

Table 1 gives the consolidated and standalone financial highlights of the Company based on Indian Accounting Standards (Ind AS) for FY2023 (i.e. from April 1, 2022 to March 31,2023) compared to the previous financial year.

The Company’s consolidated total income for the year was C257.3 billion, which was up by 17% over the previous year. Profit before tax (PBT) was C60.5 billion, representing an increase of 98% over the previous year.

The Company’s standalone total income for the year was C175.5 billion, which was

up by 18% over the previous year. PBT was C38.7 billion, which was higher by 74% over the previous year.

Revenues from lines of business and geographies given below are from the Company’s IFRS results.

Revenues from Global Generics were up by 19% and stood at C213.8 billion. There was growth across businesses of North America Generics, Europe and India.

Revenues from North America stood at C101.7 billion, registering a strong year on year growth of 36%. This was largely on account of revenue contribution from new products launched, increase in volumes for some of our base products and favorable forex rates movement, partly offset by high price erosions in some of our products. During the year, the Company filed 12 Abbreviated New Drug Applications (ANDAs) in the USA. As of March 31, 2023, there were 86

generic filings awaiting approval with the US Food and Drug Administration (USFDA), comprising 81 ANDAs and 5 NDAs filed under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act.

Revenues from India stood at C48.9 billion, showing a year-on-year growth of 17%.

Revenues from Emerging Markets were C45.5 billion, which remained flat year-on-year.

Revenues from Europe were C17.6 billion, a year-on-year growth of 6%.

Revenues from Pharmaceutical Services and Active Ingredients (PSAI) stood at C29.1 billion, which was lower by 5% compared to previous year. During the year, the Company filed 134 Drug Master Files (DMFs) worldwide, including 12 filings in the US.

	TABLE 1 FINANCIAL HIGHLIGHTS				(H MILLION)
	PARTICULARS	CONSOLIDATED FY2023 FY2022		STANDALONE FY2023 FY2022
	Total income	2,57,252	2,20,296	175,538	1,48,872
	Profit before depreciation, amortization, impairment and tax	73,316	50,867	47,943	30,479
	Depreciation and amortization	12,502	11,652	9,232	8,143
	Impairment of non-current assets	699	9,304	51	98
	Profit before tax and before share of equity accounted investees	60,115	29,911	38,660	22,238
	Share of profit of equity accounted investees, net of tax	370	703	-	-
	Profit before tax	60,485	30,614	38,660	22,238
	Tax expense	15,412	8,789	12,532	6,006
	Net profit for the year	45,073	21,825	26,128	16,232
	Opening balance of retained earnings	1,60,341	1,42,395	154,030	1,41,373
	Net profit for the year	45,073	21,825	26,128	16,232
	Other comprehensive income/(loss)	-	-		-
	Dividend paid during the year	(4,979)	(4,146)	(4,979)	(4,146)
	Transfer to SEZ re-investment Reserve, net	(131)	571	(131)	571
	Transfer to Debenture Redemption Reserve	(76)	(304)	-	-
	Closing balance of retained earnings	2,00,228	1,60,341	175,048	1,54,030
	Note: FY2023 represents fiscal year 2022-23, from April 1, 2022 to March 31, 2023, and analogously for FY2022 and other such labelled years.

DIVIDEND

Your Directors are pleased to recommend a dividend of C40 (800%) for FY2023, on every equity share of C5/-. As per the Dividend Distribution Policy of the Company, the amount of maximum dividend payout (including interim dividend) can be up to 20% of the cash profit under consolidated financial statement prepared under Indian

Accounting Standards (IND-AS). The recommended dividend is in line with the provision of the said policy.

The dividend, if approved at the 39th Annual General Meeting (“AGM”) will be paid to those members whose names appear on the register of members of the Company as of end of the day on July 11,2023. The total dividend pay-out will be approximately C666 crores, resulting

in a pay-out of 11.4% of the consolidated cash profit for the financial year ended March 31, 2023. Such dividend will be taxable in the hands of the members, in terms of the provisions of the Income Tax Act, 1961.

In terms of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulations”), the Dividend

Hence, the consolidated financial statements of the Company and all its subsidiaries and associates, prepared in accordance with Ind AS 110 and 111 as specified in the Companies (Indian Accounting Standards) Rules, 2015, forms part of the Integrated Annual Report. Moreover, a statement containing the salient features of the financial statements of the Company’s subsidiaries and joint ventures in the prescribed Form AOC-1, is attached as Annexure I to this Board’s Report. This statement also provides details of the performance and financial position of each subsidiary and joint venture.

In accordance with Section 136 of the Act, the audited financial statements and related information of the Company and its subsidiaries, wherever applicable, are available on the Company’s website: www.drreddys.com. These are also available for inspection during regular business hours at our registered office in Hyderabad, India and/or in electronic mode.

MATERIAL SUBSIDIARIES

In terms of Regulation 16(1)(c) of the SEBI Listing Regulations, Material Subsidiary shall mean a subsidiary, whose income or net worth exceeds ten percent of the consolidated income or net worth, respectively, of the Company and its subsidiaries in the immediately preceding accounting year. Accordingly, the Company has four material overseas subsidiary companies as on March 31, 2023, namely, Dr. Reddy’s Laboratories Inc. (USA), Dr. Reddy’s Laboratories SA (Switzerland), Dr. Reddy’s Laboratories LLC (Russia) and Reddy Holding GmbH (Germany).

Further, in terms of Regulation 24(1) of the SEBI Listing Regulations, at least one Independent Director on the Board of the Company shall be a Director on the Board of an unlisted material subsidiary, i.e. a subsidiary, whose income or net worth exceeds twenty percent of the consolidated income or net worth respectively, of the Company and its subsidiaries in the immediately preceding accounting year. In compliance with the said provisions, Mr. Arun M Kumar (DIN: 09665138), Independent Director of the Company, was appointed as a Director on the Board of Dr. Reddy’s Laboratories Inc. (USA) w.e.f. September 21,2022,

Distribution Policy, is available on the Company’s website on https://www. drreddys.com/cms/cms/sites/default/ files/2021-12/htmlCode%20%284%29.pdf

TRANSFER TO RESERVES

The Company has not proposed to transfer any amount to the general reserve for the year ended March 31, 2023.

SHARE CAPITAL

The paid-up share capital of your Company increased by C0.51 million from C832.13 million to C832.64 million in FY2023 due to allotment of 102,027 equity shares of C5 each, on exercise of stock options by eligible employees through the ‘Dr. Reddy’s Employees Stock Option Scheme, 2002’ and ‘Dr. Reddy’s Employees ADR Stock Option Scheme, 2007’. The equity shares issued pursuant to the above Employee Stock Option Schemes rank pari- passu with the existing equity shares of the Company

SCHEME OF AMALGAMATION

The Hon’ble National Company Law Tribunal (the “NCLT”), Hyderabad Bench, vide order dated April 5, 2022, has approved the Scheme of Amalgamation and Arrangement (the “Scheme”) for the merger of Dr. Reddy’s Holdings Limited (the “DRHL/ Amalgamating Company”) with the Company (the “Amalgamated Company”). The order of the Hon’ble NCLT was filed by both the companies with the Registrar of Companies, Hyderabad, on April 8, 2022. Therefore, the merger became effective on April 8, 2022. The appointed date of the Scheme was April 1, 2019.

Pursuant to the Scheme, 41,325,300 equity shares held by the Amalgamating Company in the Company stands cancelled and the equal number of shares were issued and allotted by the Company, on April 22, 2022, to the shareholders of Amalgamating Company, in aggregate, in proportion to their shareholding in the Amalgamating Company. Effectively, there is no change in the total issued and paid-up share capital of the Company pursuant to the said Scheme, as equal number of shares were cancelled, as well as issued and allotted by the Company.

PUBLIC DEPOSITS

The Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013 (the “Act”).

CHANGE IN THE NATURE OF BUSINESS, IF ANY

During the year, there was no change in the nature of business of the Company. Further, there was no significant change in the nature of business carried on by its subsidiaries.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION BETWEEN THE END OF THE FINANCIAL YEAR AND DATE OF THE REPORT There have been no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this report.

SUBSIDIARIES AND ASSOCIATES

The Company has 40 overseas subsidiary companies (including step-down subsidiaries), nine subsidiary companies (including step-down subsidiary) in India and one joint venture company as on March 31, 2023.

DRS LLC in Russia ceased to be a step-down subsidiary of the Company with effect from July 1,2022, consequent to its merger with Dr. Reddy''s Laboratories LLC, Russia.

Dr. Reddy’s Laboratories B.V. in Netherlands, ceased to be a step-down subsidiary of the Company with effect from January 25, 2023, consequent to its merger with Reddy Netherlands B.V., Netherlands.

Section 129(3) of the Act, states that where the Company has one or more subsidiaries or associate companies, it shall, in addition to its financial statements, prepare a consolidated financial statements of the Company and of all subsidiaries and associate companies in the same form and manner as that of its own and also attach along with its financial statements, a separate statement containing the salient features of the financial statements of its subsidiaries and associates.

subsequent to the resignation of Dr. Bruce L A Carter (DIN:02331774).

Mr. Sridar Iyengar (DIN: 00278512), Independent Director of the Company, is a Director on the Board of Dr. Reddy’s Laboratories SA (Switzerland).

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The Company makes investments or extends loans/ guarantees to its wholly-owned subsidiaries for their business purposes.

Details of loans, guarantees and investments covered under Section 186 of the Act, along with the purpose for which such loan or guarantee was proposed to be utilized by the recipient, form part of the notes to the financial statements provided in this Integrated Annual Report.

CORPORATE GOVERNANCE AND ADDITIONAL SHAREHOLDERS’ INFORMATION

A detailed report on the Corporate Governance systems and practices of the Company is given in a separate chapter of this Integrated Annual Report. Similarly, other information for shareholders is provided in the chapter on Additional Shareholders’ Information. The Company has also formulated a Group Governance Policy to monitor governance of its unlisted subsidiaries across the globe.

A certificate from M/s. S.R. Batliboi & Associates LLP, Statutory Auditors of the Company, confirming compliance with the conditions of corporate governance is attached to the chapter on Corporate Governance.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the Management Discussion and Analysis in terms of Regulation 34 of the SEBI Listing Regulations is provided as a separate chapter in the Integrated Annual Report.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

APPOINTMENTS

During the year, the members of the Company approved the appointment of

Mr. Arun M Kumar (DIN: 09665138), as an Independent Director of the Company through Postal Ballot, with effect from August 1, 2022. The Board opined that the above Independent Director possessed requisite experience and expertise (including the proficiency).

RETIREMENT AND RESIGNATION

Dr. Bruce L A Carter (DIN: 02331774) and Mr. Prasad R Menon (DIN:

00005078) completed their terms as Independent Directors of the Company on July 30, 2022, and October 29,

2022, respectively.

Mr. Allan Grant Oberman (DIN: 08393837) tendered his resignation as an Independent Director of the Company with effect from close of business hours on January 6, 2023, as he was moving to a commitment outside the Company that will not allow him to be able to devote sufficient time for his responsibilities as an Independent Director of the Company.

The Board placed on record its sense of deep appreciation for the services rendered by the above Independent Directors to the Company.

RETIREMENT BY ROTATION

Mr. G V Prasad (DIN:00057433) is liable to retire by rotation at the forthcoming 39th AGM and being eligible, seeks re-appointment. For reference of members, a brief profile of Mr. G V Prasad (DIN:00057433) is given in the Chapter on Corporate Governance and in the Notice convening the 39th AGM.

RE-APPOINTMENT OF WHOLETIME DIRECTOR

During the year, the members of the Company at its AGM held on July 29, 2022, approved the re-appointment of Mr. K Satish Reddy (DIN: 00129701) as a Whole-time Director of the Company, designated as the Chairman, for a period of five years, with effect from October 1,2022.

None of the Directors is disqualified under Section 164 of the Act. They are not debarred from holding the office of Director pursuant to any order of SEBI or any other authority. Further

details are provided in the chapter on Corporate Governance.

CHANGES IN KEY MANAGERIAL PERSONNEL (KMP)

During the year under review, there were no changes in the Key Managerial Personnel of the Company. As on the date of this report, the Company has the following Key Managerial Personnel as per Sections 2(51) and 203 of the Act:

S. NO. NAME OF KMP		DESIGNATION
i	Mr. G V Prasad	Co-Chairman and Managing Director
2	Mr. Erez Israeli	Chief Executive Officer
3	Mr. Parag Agarwal	Chief Financial Officer
4	Mr. K Randhir Singh Company Secretary, Compliance Officer & Head-CSR

DECLARATION BY INDEPENDENT DIRECTORS

In accordance with Section 149(7) of the Act, each Independent Director has confirmed to the Company that he or she meets the criteria of independence laid down in Section 149(6) of the Act, and is in compliance with Rule 6(3) of the Companies (Appointment and Qualifications of Directors) Rules, 2014 and Regulation 16(1 )(b) of the SEBI Listing Regulations. Further, each Independent Director has affirmed compliance to the Code of Conduct for Independent Directors as prescribed in Schedule IV of the Act. The Board has taken on record such declarations after due assessment of their veracity.

BOARD EVALUATION

Pursuant to the provisions of the Act, and the SEBI Listing Regulations, the Board has carried out performance evaluation of its own performance, the Directors (including the Chairman) individually, as well as the evaluation of the working of the Committees. An independent external agency, EgonZehnder, a leadership advisory firm on board matters, was engaged to conduct the Board evaluation for FY2023. The recommendations were discussed with the Board and individual feedback was provided.

provided by comparable companies are considered.

Pay practices at companies with which Dr. Reddy’s competes for talent, including those engaged in similar activities are reviewed from time to time.

We believe that information regarding pay practices at other companies is useful to assess the reasonableness and competitiveness of our own. Our approach is to be market aware on pay levels and not entirely market driven.

We generally position target executive pay at the top quartile of pay packages for executives in similar positions, responsibilities and/or experience in similar companies of comparable size.

We identify certain roles that are fungible across multiple industries and our comparative pool may not be limited to peer generic pharmaceutical organisations. In such cases - a wider sample is selected comprising of non-pharma marquee organisations operating in the country with whom Dr. Reddy’s competes for talent.

Executive compensation is reviewed annually. In general executive increment percentages are lesser than the average with the frontline receiving the highest increase. A higher increase may be made in the event of a role change, promotion, or in exceptional circumstances. The Company’s performance, affordability and individual performance are other considerations, while deciding on compensation.

Our current performance management follows a balanced scorecard approach comprising of current business performance, future business performance, ESG, digital, people, compliance and safety related metrics.

Each parameter is devised into a metric, financial or otherwise and is measured throughout the performance year. Nonfinancial parameters have a cap of 100% achievement while financial parameters are scored based on a predetermined grid. Additional considerations such as wind-falls, impairments and one-offs are measured separately.

Our performance management process is specifically adapted to different employee cohorts based on their specific

The Board evaluation process was completed for FY2023. Further details of Board evaluation are given in the chapter on Corporate Governance.

APPOINTMENT OF DIRECTORS AND REMUNERATION POLICY

Assessment and appointment of members to the Board are based on a combination of criteria that includes ethics, personal and professional stature, domain expertise, gender diversity and specific qualifications required for the position. For appointment of an Independent Director, the independence criteria defined in Section 149(6) of the Act, and Regulation 16(1 )(b) of the SEBI Listing Regulations are also considered.

In accordance with Section 178(3) of the Act, Regulation 19(4) of the SEBI Listing Regulations and on recommendation of the Company’s Nomination, Governance and Compensation Committee, the Board adopted a Remuneration Policy for Directors, KMP, senior management and other employees that outlines the guidelines related to performance evaluation of Directors, remuneration principles and Board diversity. The Policy forms part of the chapter on Corporate Governance.

Our executive compensation program supports attracting, motivating, and encouraging continuity of experienced and well-qualified executive officers who advance our critical business objectives and promote the creation of shareholders’ value over the long-term. The key tenets of our philosophy are designed to:

a) Attract highly talented individuals from within and across industries drawing from a diverse pool of global talent.

b) Provide long term and short-term incentives that advance the interests of shareholders and deliver levels of pay commensurate with performance.

The three principal components of the compensation package include, base salary, annual variable pay, and equity-based long-term incentives. In making decisions with respect to each element of compensation, the competitive market for executives and compensation levels

needs, the overall principles remain the same across all the models.

Performance evaluation of Management Council (“MC”) member’s focuses on achievement of MC Scorecard. Individual MC evaluation focusses on achievement of:

• the BU (Business Unit) scorecard for the year that contributes

to the delivery of the overall Company’s strategy.

• demonstration of desired behaviours which measures the commitment to sustainable growth by focussing on performance on non-financial parameters centered around the Company’s leadership behaviours. Also considered is the contribution of the individual to the wider enterprise agenda.

NUMBER OF BOARD MEETINGS

The Board of Directors met eight times during the year. In addition, an annual Board retreat was held to discuss strategic matters. The intervening gap between the meetings was within the period prescribed under the Act and the SEBI Listing Regulations. Details of Board meetings and the Board retreat are given in the chapter on Corporate Governance.

SEPARATE MEETING OF INDEPENDENT DIRECTORS

In terms of requirements under Schedule IV of the Act and Regulation 25(3) of the SEBI Listing Regulations, four separate meetings of the Independent Directors were held during FY2023. Further details are mentioned in the chapter on Corporate Governance.

COMMITTEES OF THE BOARD

As on March 31, 2023, the Board has the following Committees:

i) Audit Committee;

ii) Stakeholders’

Relationship Committee;

iii) Nomination, Governance and Compensation Committee;

iv) Sustainability and Corporate Social Responsibility Committee;

v) Risk Management Committee;

vi) Science, Technology and Operations Committee; and

vii) Banking and Authorisations Committee

All the recommendations made by the Board committees, including the Audit Committee, were accepted by the Board. The details of the above Committees are given in the Chapter on Corporate Governance.

DIRECTORS’ RESPONSIBILITY STATEMENT

In terms of Section 134(5) of the Act, your Directors state that:

1. Applicable accounting standards have been followed in the preparation of the annual accounts and that no material departures have been made from the same;

2. Accounting policies have been selected and applied consistently. Judgments and estimates made are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the FY2023 and of the profit of the Company for that period;

3. Proper and sufficient care has been taken to maintain adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. Annual accounts have been prepared on a going concern basis;

5. Adequate internal financial controls for the Company to follow have been laid down and these are operating effectively; and

6. Proper and adequate systems have been devised to ensure compliance with the provisions of all applicable laws and these systems are operating effectively.

ADEQUACY OF INTERNAL FINANCIAL CONTROL SYSTEMS

The Company has in place adequate internal financial controls with reference to its financial statements. These controls ensure the accuracy and completeness of the accounting

records and the preparation of reliable financial statements.

ENTERPRISE RISK MANAGEMENT (“ERM”)

The Company has a Risk Management Committee of the Board, consisting entirely of Independent Directors.

Details of the Committee and its terms of reference are set out in the chapter on Corporate Governance.

The Audit Committee and Risk Management Committee review key risk elements of the Company’s business, finance, operations and compliance, and their respective mitigation strategies.

The Risk Management Committee reviews strategic, business, compliance and operational risks whereas the Audit Committee reviews issues around ethics and fraud, internal control over financial reporting (ICOFR), as well as process risks and their mitigation

The Company’s Executive Risk Management Committee operates under the Company’s Risk Management Policy and focuses on risks associated with the Company’s business and compliance matters. This Committee periodically reviews matters pertaining to risk management. Additionally, the Enterprise wide Risk Management (ERM) function helps the Board and the Management to prioritize, review and measure business risks against a pre-determined risk appetite, and their suitable response, depending on whether such risks are internal, strategic or external.

During FY2023, focus areas of Risk Management Committee included review of risks and mitigations related to cyber security, data privacy, data governance, ethics and compliance risk, quality, supply chain management, geo-political risks and business continuity, foreign exchange risk, pharmacovigilance and environmental risk with focus on water risk.

RELATED PARTY TRANSACTIONS

In line with the requirements of the Act and the SEBI Listing Regulations, your Company has a Policy on Materiality of Related Party Transactions and Dealing with Related Party Transactions, which is also available on the Company’s website at https://www.drreddys.com/investors/ governance/#governance#policies-and-documents. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and related parties.

In accordance with Section 134(3)(h) of the Act, and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of the contracts or arrangements with related parties referred to in Section 188(1) of the Act, in Form AOC-2 is attached as Annexure II to this Board’s Report. All related party transactions and subsequent modifications are placed before the Audit Committee for review and approval. Prior omnibus approval is obtained for related party transactions on a quarterly basis for transactions which are of repetitive nature and/ or entered in the ordinary course of business and are at arm’s length. All contracts and arrangements with related parties were at arm’s length and in the ordinary course of business of the Company. Details of related party disclosures form part of the notes to the financial statements provided in the Integrated Annual Report.

VIGIL MECHANISM/ WHISTLEBLOWER/ OMBUDSPERSON POLICY

The Company has an Ombudsperson Policy (Whistle-Blower/Vigil mechanism) to report concerns. Reporting channels under the vigil mechanism include an independent hotline, a web based reporting site (drreddys.ethicspoint. com) and a dedicated e-mail to Chief Compliance Officer. The Ombudsperson Policy also safeguards against retaliation of those who use this mechanism. The Audit Committee Chairperson is the Chief Ombudsperson. The Policy also provides for raising concerns directly to the Chief Ombudsperson. Details of the Policy are available on the Company’s website: https://www.drreddys.com/ investor#governance#ombudsperson-policy.

STATUTORY AUDITORS

M/s. S.R. Batliboi & Associates LLP, Chartered Accountants (Firm Registration No. 101049W/E300004) were reappointed as Statutory Auditors of the Company at the 37th AGM held on July 28, 2021, for a period of five years till the conclusion of the 42nd AGM to be held in the year 2026.

SECRETARIAL AUDITOR

Pursuant to Section 204 of the Act, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s. Makarand M. Joshi & Co., Practicing Company Secretaries (Certificate of Practice No. 3662), Mumbai, India, were appointed as Secretarial Auditors of the Company for FY2023. The Secretarial Audit Report for FY2023 is annexed as Annexure III to this Report.

Further, in compliance with Regulation 24A of the SEBI Listing Regulations, the Annual Secretarial Compliance Report issued by the Secretarial Auditor, will be submitted to the stock exchanges within the statutory timelines.

Based on the consent received from M/s. Makarand M. Joshi & Co., Practicing Company Secretaries (Certificate of Practice No. 3662), Mumbai, India and on the recommendation of the Audit Committee, the Board has approved their appointment as the Secretarial Auditor of the Company for FY2024. They have confirmed their eligibility for the said reappointment.

COST AUDITOR

Pursuant to Section 148(1) of the Act, read with the relevant Rules made thereunder, the Company maintains the cost records in respect of its ‘pharmaceuticals’ business.

On the recommendation of the Audit Committee, the Board has appointed M/s. Sagar & Associates,

Cost Accountants (Firm Registration No. 000118) as Cost Auditor of the Company for FY2024 at a remuneration of C900,000 (Rupees Nine Lakhs only) plus reimbursement of out-of-pocket expenses at actuals and applicable taxes. M/s. Sagar & Associates have confirmed that they are free from disqualification specified under Section 141(3) and proviso to Section 148(3) read with Section 141(4) of the Act and that the appointment meets the requirements of the Act. They have further confirmed their independent status and an arm’s length relationship with the Company.

The provisions of the Act also require that the remuneration of the Cost Auditors be ratified by the members and therefore, the same is recommended for approval of the members at the forthcoming 39th AGM. As a matter of record, relevant Cost Audit Reports for FY2022 were filed with the Central Government on August 26, 2022, within the stipulated timeline. The Cost Audit Report for FY2023 will also be filed within the timeline.

AUDITORS’ QUALIFICATIONS, RESERVATIONS, ADVERSE REMARKS OR DISCLAIMERS

There are no qualifications, reservations, adverse remarks or disclaimers by the Statutory Auditors in their report, or by the Practicing Company Secretary in the Secretarial Audit Report. During the year, there were no instances of frauds reported by Auditors under Section 143(12) of the Act.

SECRETARIAL STANDARDS

In terms of Section 118(10) of the Act, the Company complies with Secretarial Standards 1 and 2, relating to the ‘Meetings of the Board of Directors’ and ‘General Meetings’, respectively as issued by the Institute of Company Secretaries of India (“ICSI”) and approved by the Central Government. The Company has also voluntarily adopted the recommendatory Secretarial Standards 3 on ‘Dividend’ and Secretarial Standards 4 on ‘Report of the Board of Directors’ issued by the ICSI.

SIGNIFICANT/MATERIAL ORDERS PASSED BY COURTS/ REGULATORS/TRIBUNALS

Settlement with the State of Texas: In

November 2014, the State of Texas commenced a formal inquiry into the Company’s marketing, sales, pricing and price reporting for its generic drugs dispensed in this State. The Company cooperated with this inquiry. On June 1,2022, the Company entered into a Settlement Agreement with the State of Texas. Pursuant to this settlement, on July 6, 2022, payment in the full amount of $12,900,000 was made to the State of Texas, with no admission of liability.

Veraring Litigation: A Complaint was filed on November 15, 2021, in the Supreme Court of the State of New York, County of New York (trial court level) by Teva Pharmaceutical Industries Ltd. (“Teva”) against Dr. Reddy’s Laboratories, S.A. (Case Index No. 656499/2021). This Complaint was subsequently amended by

Teva on January 26, 2022. In its amended Complaint, Teva alleges that the Company breached the supply agreements between the parties relating to Veraring, failed to pay carrying costs, and breached the implied covenant of good faith and fair dealing, seeking monetary damages and all other remedies available under law. On January 6, 2022, the Company asserted counterclaims against Teva, asserting that Teva breached its contractual obligations to the Company by, among other things, failing to adhere to cGMP and producing product unfit for human use, seeking monetary damages and all other remedies available under law. On March 15, 2023, Dr. Reddy’s Laboratories, S.A., on behalf of itself and affiliates, entered into a Settlement Agreement with Teva, on behalf of itself and affiliates, relating to the Veraring Litigation and Veraring. Pursuant to the Settlement Agreement, all claims between the parties have been dismissed with prejudice and without any admission of liability by any of the parties.

INFORMATION REQUIRED UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has a Policy to ensure prevention, prohibition and redressal of sexual harassment at the workplace. It has an Apex Committee and an Internal Complaints Committee in compliance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, which operate under a defined framework for complaints pertaining to sexual harassment at workplace. The details are available in the Principle 5 of the Business Responsibility and Sustainability Report as well as in the Corporate Governance Report forming part of this Integrated Annual Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES

As per Section 135 of the Act, the Company has a Board-level Committee, namely, Sustainability and Corporate Social Responsibility (SCSR) Committee. During the year, the name of the CSR Committee has been changed to SCSR Committee to act as nodal committee on overall sustainability goals and progress apart from CSR terms of reference. As on March 31, 2023, the Committee

consists of Dr. K P Krishnan (Chairman), Ms. Kalpana Morparia, Mr. G V Prasad and Mr. K Satish Reddy. Based on the recommendation of the said Committee, the Board has adopted a CSR policy that provides guiding principles for selection, implementation and monitoring of CSR activities and formulation of the annual action plan. During the year, the Committee monitored the CSR activities undertaken by the Company including the expenditure incurred thereon as well as implementation and adherence to the CSR policy. An impact assessment of the eligible projects has been carried by an independent agency and the report of such impact assessment was noted by the SCSR Committee and the Board. Details of the CSR Policy and initiatives taken by the Company during the year are available on the Company’s website: www.drreddys.com. The report on CSR activities as well as executive summary of the impact assessment report are attached as Annexure IV to this Board’s Report.

INTEGRATED REPORT

Your Company has voluntarily adopted the Integrated Annual Report for FY2023, which includes both financial and non-financial information. The reporting weaves together our purpose, values, strategy, governance, performance and future outlook, all of which influence the material aspects of our business.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT (BRSR)

The SEBI, vide its circular dated May 10, 2021, made Business Responsibility and Sustainability Report (BRSR) mandatory for the top 1,000 listed companies (by market capitalization) from FY2023, while disclosure was voluntary for FY2022.

The Company had voluntarily published its first BRSR for FY2022 to provide enhanced disclosures on ESG practices and priorities of the Company.

The Business Responsibility and Sustainability Report for FY2023 as mentioned under Regulation 34 of the SEBI Listing Regulations, is given as a separate chapter in this Integrated Annual Report.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)

Providing cures and reducing the disease burden are central to our purpose as a leading pharma company. We believe that society and the environment are interdependent, and truly being sustainable supports human health and well-being, a sustainable planet, and a well-integrated society. In 2022, building on our incremental work in sustainability, we launched our sustainability vision for 2030 and published our renewed ESG goals and targets. Our sustainability goals span across diverse areas we care about - from environmental and social sustainability to stronger governance, from greater access and affordability of medicines to public health issues, from greater economic equity and accountability to acceptance of greater social parity. They reveal our bold vision for the future and what we collectively strive to achieve every day.

The Company has a Board Committee, namely, Sustainability and Corporate Social Responsibility (SCSR) Committee, as the nodal committee to review the ESG and sustainability goals of the Company, its implementation, progress and other related matters as per its terms of reference.

The ESG details are available in the initial section and Business Responsibility and Sustainability Report of this Integrated Annual Report.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO THE INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Pursuant to the provisions of the Act, read with IEPF Authority (Accounting, Audit, Transfer and Refund) Rules,

2016, as amended, declared dividends which remained unpaid or unclaimed for a period of seven years have been transferred by the Company to the IEPF, which has been established by the Central Government.

The above Rules also mandate transfer of shares on which dividends are lying unpaid and unclaimed for a period of seven consecutive years to IEPF. The Company has issued individual notices to the members whose dividend is unclaimed and unpaid and advising them to claim their dividend. The details of transfer of unpaid and unclaimed amounts to IEPF are given in the chapter on Additional Shareholders Information.

EMPLOYEES STOCK OPTION SCHEMES

The Company has three employee stock option schemes namely, ‘Dr. Reddy’s Employees Stock Option Scheme, 2002’, ‘Dr. Reddy’s Employees ADR Stock Option Scheme, 2007’, and ‘Dr. Reddy’s Employees Stock Option Scheme, 2018’ (the “Schemes”). The term of Dr. Reddy’s Employees Stock Option Scheme, 2002, ended on January 28, 2022. However, the options already granted under the 2002 Scheme are eligible for exercise, in terms of the Scheme. There are no other changes in the said schemes during the year. The Schemes are in compliance with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

The details of Company’s stock option Schemes as required under Regulation 14 of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, are available on the Company’s website: https://www.drreddys.com/ investors/governance/policies-and-documents/#governance#policies-anddocuments

Your Company’s Secretarial Auditors,

M/s. Makarand M. Joshi & Co., Practising Company Secretaries, have certified that the Employee Stock Option Schemes of your Company have been implemented in accordance with the Regulations and the resolutions passed by the Members in this regard.

The details also form part of note 2.25 of the notes to accounts of the standalone financial statements.

PARTICULARS OF EMPLOYEES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are attached as Annexure V to this Board’s Report.

In terms of Section 197(12) of the Act, read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the

names and other particulars of the employees drawing remuneration in excess of limits set out in the said rules forms part of the Integrated Annual Report.

Considering the provisions of Section 136 of the Act, the Integrated Annual Report, excluding the aforesaid information, is being sent to the members of the Company and others entitled thereto. The said information is available for inspection at the registered office of the Company or through electronic mode, during business hours on working days up to the date of the forthcoming 39th AGM, by members. Any member interested in obtaining a copy thereof may write to the Company Secretary in this regard.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Particulars as prescribed under Section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules,

2014, are attached as Annexure VI to this Board’s Report.

ANNUAL RETURN

The Annual Return of the Company as on March 31, 2023, in terms of the provisions of Section 134(3)(a) of the Act, is available on the Company’s website: https://www.drreddys.com/investors/ reports-and-filings/annual-reports/

ACKNOWLEDGMENT

Your Directors place on record their sincere appreciation for the significant contribution made by your Company’s employees through their dedication,

hard work and commitment, as also for the trust reposed in your Company by the medical fraternity and patients. The Board of Directors also acknowledges the support extended by the analysts, bankers, Government of India and various countries and other government agencies, media, customers, business partners, members and investors at large.

The Board looks forward to your continued support in the Company’s endeavor to accelerate access to innovative and affordable medicines, because Good Health Can’t Wait.

For and on behalf of the Board of Directors

K Satish Reddy

Chairman DIN: 00129701

Place: Hyderabad Date: May 10, 2023

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Mar 31, 2022

Your directors are pleased to present the 38th Annual Report of the Company for the year ended March 31,2022.

The FY2022 saw several challenges with respect to multiple COVID-19 waves, heightened geo-political tensions and increase in commodity prices. These factors have impacted almost every organization and your Company was no exception. However, our teams stood up to these challenges and ended the year on a winning note with growth across most of our businesses and higher profits, while continuing to serve our patients across the globe.

FINANCIAL HIGHLIGHTS AND COMPANY AFFAIRS

Table 1 gives the consolidated and standalone financial highlights of the Company based on Indian Accounting Standards (Ind AS) for FY2022 (i.e. from April 1, 2021 to March 31, 2022) compared to the previous financial year.

The Company’s consolidated total income for the year was '' 220.3 billion, which was up by 14% over the previous year. Profit before tax (PBT) was '' 30.6 billion, representing an increase of 6% over the previous year.

The Company’s standalone total income for the year was '' 148.9 billion, which was up by 5% over the previous year.

PBT was '' 22.2 billion, which was lower by 27% over the previous year.

Revenues from lines of business and geographies given below are from the company’s IFRS results.

Revenues from Global Generics were up by 16% and stood at '' 179.2 billion. There was growth across North America Generics and Europe, with strong growth in Emerging Markets and India.

Revenues from North America stood at '' 74.9 billion, registering a year-on-year growth of 6%. This was largely on account of revenue contribution from new products launched and increase in volumes for some of our base products, partly offset by high price erosions in some of our products.

During the year, the Company filed seven Abbreviated New Drug Applications (ANDAs) in the USA. As of March 31, 2022, there were 90 generic filings awaiting approval with the US Food and Drug Administration (USFDA), comprising 87 ANDAs and three NDAs filed under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act.

Revenues from Emerging Markets were '' 45.7 billion, registering a year-on-year growth of 30%. Revenues from India stood at '' 42.0 billion, showing a year-on-year growth of 26%. Revenues from Europe were '' 16.6 billion, a year-on-year growth of 8%.

Revenues from Pharmaceutical Services and Active Ingredients (PSAI) stood at '' 30.7 billion, which was lower by

4% compared to previous year. During the year, the Company filed 139 Drug Master Files (DMFs) worldwide, including 10 filings in the US.

SCHEME OF AMALGAMATION

The Hon’ble National Company Law Tribunal (the“NCLT”), Hyderabad Bench, vide order dated April 5, 2022, has approved the Scheme of Amalgamation and Arrangement (the “Scheme”) for the merger of Dr. Reddy’s Holdings Limited (the “DRHL/ Amalgamating Company”) with the Company (the “Amalgamated Company”). The order of the Hon’ble NCLT was filed by both the companies with the Registrar of Companies, Hyderabad, on April 8, 2022. Therefore, the merger becomes effective on April 8, 2022. The appointed date of the Scheme was April 1, 2019.

Pursuant to the Scheme, 41,325,300 equity shares held by the Amalgamating Company in the Company stands cancelled and the equal number of shares were issued and allotted by the Company, on April 22, 2022, to the shareholders of Amalgamating Company, in aggregate, in proportion to their shareholding in the Amalgamating Company. Effectively, there is no change in the total issued and paid-up share capital of the Company pursuant to the said Scheme, as equal number of shares were cancelled, as well as issued and allotted by the Company.

S 1 FINANCIAL HIGHLIGHTS				('' MILLION)
PARTICULARS	CONSOLIDATED		STANDALONE
	FY2022	FY2021	FY2022	FY2021
Total income	220,296	193,389	148,872	141,502
Profit before depreciation, amortization, impairment and tax	50,867	47,411	30,479	39,062
Depreciation and amortization	11,652	12,288	8,143	8,350
Impairment of non-current assets	9,304	6,768	98	150
Profit before tax and before share of equity accounted investees	29,911	28,355	22,238	30,562
Share of profit of equity accounted investees, net of tax	703	480	-	-
Profit before tax	30,614	28,835	22,238	30,562
Tax expense	8,789	9,319	6,006	8,698
Net profit for the year	21,825	19,516	16,232	21,864
Opening balance of retained earnings	142,395	128,349	141,373	124,979
Net profit for the year	21,825	19,516	16,232	21,864
Other comprehensive income/ (loss)	-	3	-	3
Dividend paid during the year	(4,146)	(4,147)	(4,146)	(4,147)
Transfer to SEZ re-investment Reserve, net	571	(1,326)	571	(1,326)
Transfer to Debenture Redemption Reserve	(304)	-	-	-
Closing balance of retained earnings	160,341	142,395	154,030	141,373
Note: FY2022 represents fiscal year 2021-22, from April 1, 2021 to March 31, 2022, and analogously for FY2021 and other such labelled years

In accordance with Section 136 of the Act, the audited financial statements and related information of the Company and its subsidiaries, wherever applicable, are available on the Company’s website: www.drreddys.com, These are also available for inspection during regular business hours at our registered office in Hyderabad, India and/or in electronic mode,

Any member desirous of inspecting such documents are requested to write to the Company by sending an email to [email protected],

MATERIAL SUBSIDIARIES

In terms of Regulation 16(1)(c) of the Listing Regulations, Material Subsidiary shall mean a subsidiary, whose income or net worth exceeds ten percent of the consolidated income or net worth, respectively, of the Company and its subsidiaries in the immediately preceding accounting year, Accordingly, the Company has four material overseas subsidiary companies as on March 31, 2022, namely, Dr, Reddy’s Laboratories Inc, (USA), Dr, Reddy’s Laboratories SA (Switzerland),

Dr, Reddy’s Laboratories LLC (Russia) and Reddy Holding GmbH (Germany),

Further, in terms of Regulation 24(1) of the Listing Regulations, at least one Independent Director on the Board of the Company shall be a Director on the Board of an unlisted material subsidiary, i,e, a subsidiary, whose income or net worth exceeds twenty percent of the consolidated income or net worth respectively, of the Company and its subsidiaries in the immediately preceding accounting year, In compliance with the said provisions, Dr, Bruce L A Carter, Independent Director of the Company, is a Director on the Board of Dr, Reddy’s Laboratories Inc, (USA), Mr, Sridar Iyengar, Independent Director of the Company, is a Director on the Board of Dr, Reddy’s Laboratories SA (Switzerland),

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The Company makes investments or extends loans/guarantees to its wholly-owned subsidiaries for their business purposes,

Details of loans, guarantees and investments covered under Section

DIVIDEND

Your directors are pleased to recommend a dividend of '' 30 (600%) for FY2022, per equity share of '' 5/- each. The recommended dividend is in line with the Dividend Distribution Policy of the Company,

The dividend, if approved at the 38th Annual General Meeting (the “AGM”) will be paid to those members whose names appear on the register of members of the Company as of end of the day on July 12, 2022. In terms of the provisions of the Income Tax Act, 1961, such dividend will be taxable in the hands of the members,

In terms of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the “Listing Regulations”), the Dividend Distribution Policy, is available on the Company’s website on https://www.drreddys.com/ investors/governance/policies-and-documents/#governance#policies-and-documents

TRANSFER TO RESERVES

The Company has not proposed to transfer any amount to the general reserve for the year ended March 31, 2022.

SHARE CAPITAL

The paid-up share capital of your Company increased by '' 0,62 million to '' 832,13 million in FY2022 due to allotment of 124,618 equity shares, on exercise of stock options by eligible employees through the ‘Dr, Reddy’s Employees Stock Option Scheme, 2002’ and ‘Dr, Reddy’s Employees ADR Stock Option Scheme, 2007’,

PUBLIC DEPOSITS

The Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013 (“Act”), Accordingly, there is no disclosure or reporting required in respect of details relating to deposits,

CHANGE IN THE NATURE OF BUSINESS, IF ANY

During the year, there was no change in the nature of business of the Company, Further, there was no significant change in the nature of business carried on by its subsidiaries,

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There have been no such changes during the year,

SUBSIDIARIES AND ASSOCIATES

The Company has 42 overseas subsidiary companies (including step-down subsidiaries), nine subsidiary companies in India and one joint venture Company as on March 31,2022,

Dr, Reddy’s (WUXI) Pharmaceutical Co, Limited in China ceased to be a step-down subsidiary of the Company with effect from December 13, 2021, consequent to its liquidation,

Aurigene Discovery Technologies Inc, in USA, ceased to be a step-down subsidiary of the Company with effect from March 23, 2022, consequent to its liquidation,

Further, the Company acquired Nimbus Health GmbH (Nimbus) as a step-down subsidiary, on February 24, 2022,

Nimbus is a German Company, founded in 2018, specialized wholesaler of medical cannabis,

Section 129(3) of the Act, states that where the Company has one or more subsidiaries or associate companies, it shall, in addition to its financial statements, prepare a consolidated financial statements of the Company and of all subsidiaries and associate companies in the same form and manner as that of its own and also attach along with its financial statements, a separate statement containing the salient features of the financial statements of its subsidiaries and associates,

Hence, the consolidated financial statements of the Company and all its subsidiaries and associates, prepared in accordance with Ind AS 110 and Ill as specified in the Companies (Indian Accounting Standards) Rules, 2015, form part of the Annual Report, Moreover, a statement containing the salient features of the financial statements of the Company’s subsidiaries and joint ventures in the prescribed Form AOC-1, is attached as Annexure I to this Board’s Report,

This statement also provides details of the performance and financial position of each subsidiary and joint venture,

186 of the Act, along with the purpose for which such loan or guarantee was proposed to be utilized by the recipient, form part of the notes to the financial statements provided in this Annual Report,

CORPORATE GOVERNANCE AND ADDITIONAL SHAREHOLDERS’ INFORMATION

A detailed report on the Corporate Governance systems and practices of the Company is given in a separate chapter of this Annual Report, Similarly, other information for shareholders is provided in the chapter on Additional Shareholders’ Information, The Company has also formulated a Policy on Group Governance to monitor governance of its unlisted subsidiaries across the globe,

A certificate from the statutory auditors of the Company confirming compliance with the conditions of corporate governance is attached to the chapter on Corporate Governance,

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the Management Discussion and Analysis in terms of Regulation 34 of the Listing Regulations is provided as a separate chapter in the Annual Report,

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL CHANGES IN DIRECTORS

Mr, Bharat N Doshi completed his term as an Independent Director on May 10, 2021 and did not seek reappointment, The Board placed on record its sense of appreciation for the services rendered by Mr, Doshi to the Company,

During the year, Members of the Company approved the appointment of Dr, K P Krishnan and Ms, Penny Wan as Independent Directors through postal ballot, with effect from January 7, 2022 and January 28, 2022, respectively, The Board is of the opinion that the above Independent Directors possess requisite integrity, experience and expertise (including the proficiency),

Mr, K Satish Reddy, Chairman, is liable to retire by rotation at the forthcoming 38th AGM and being eligible, seeks reappointment, The Board of Directors of the Company at its meeting held on May 19, 2022, on recommendation

of the Nomination, Governance and Compensation Committee, has approved the re-appointment of Mr, K Satish Reddy as a Whole-time Director of the Company, designated as the Chairman, with effect from October 1, 2022, subject to the approval of shareholders at the forthcoming 38th AGM, For reference of the members, a brief profile of Mr, K Satish Reddy is given in the chapter on Corporate Governance and in the Notice convening the 38th AGM,

None of the directors is disqualified under Section 164(2) of the Act, They are not debarred from holding the office of Director pursuant to order of SEBI or any other authority, Further details are provided in the chapter on Corporate Governance,

CHANGES IN KEY MANAGERIAL PERSONNEL

Mr, Sandeep Poddar resigned as the Company Secretary and Compliance Officer of the Company, from close of business hours on November 18,

2021, The Board placed on record its appreciation for the work done by Mr, Poddar during his tenure, The Board of Directors, at its meeting held on March 17, 2022, appointed Mr, K Randhir Singh as the Company Secretary and Compliance Officer of the Company,

DECLARATION BY INDEPENDENT DIRECTORS

In accordance with Section 149(7) of the Act, each Independent Director has confirmed to the Company that he or she meets the criteria of independence laid down in Section 149(6) of the Act, and is in compliance with Rule 6(3) of the Companies (Appointment and Qualifications of Directors) Rules, 2014 and Regulation 16(1 )(b) of the Listing Regulations, Further, each Independent Director has affirmed compliance to the Code of Conduct for Independent Directors as prescribed in Schedule IV of the Act, The Board has taken on record such declarations after due assessment of veracity,

BOARD EVALUATION

Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, the Board has carried out performance evaluation of its own performance, the Directors (including the Chairman) individually, as well as the evaluation of the working of the Committees, The performance evaluation process has been designed in such a manner which helps to measure effectiveness of the entire Board, its Committees and Directors, Such processes help in ensuring overall performance of the Board and demonstrates a high level of corporate governance standards, There are various key performance areas and evaluation criteria which are measured and analysed during the performance evaluation process,

The Board performance was reviewed on various parameters, including composition & role of the Board, communication and relationships, Board Committees, compensation, strategic planning, governance, legal and financial duties, overall ratings, qualitative feedback, managing conflicts, diversity in the knowledge and related industry expertise, roles and responsibilities of Board members, appropriate utilization of talents and skills of Board members, etc, The evaluation of performance of the Directors including the Chairperson of the Company was conducted on various parameters, such as, attendance, participation, deliberation of various agenda items, understanding of the organization’s strategy and risk environment, representing interests of shareholders and focuses on enhancing shareholder value, proactive feedback and guidance to top management on areas of business strategy, governance and risk, to set and achieve stretch goals, functional relationships with fellow Board members and senior management, participation in Board discussions based on Director’s personal knowledge and expertise, etc,

Further details of performance evaluation are given in the chapter on Corporate Governance,

APPOINTMENT OF DIRECTORS AND REMUNERATION POLICY

Assessment and appointment of members to the Board are based on a combination of criterion that includes ethics, personal and professional stature, domain expertise, gender diversity and specific qualifications required for the position, For appointment of an Independent Director, the independence criteria defined in Section 149(6) of the

meetings and the Board retreat are given in the chapter on Corporate Governance.

SEPARATE MEETING OF INDEPENDENT DIRECTORS

In terms of requirements under Schedule IV of the Act and Regulation 25(3) of the Listing Regulations, four separate meetings of the Independent Directors were held during FY2022. Further details are mentioned in the chapter on Corporate Governance.

AUDIT COMMITTEE

As on March 31,2022, the Audit Committee of the Board of Directors consisted entirely of Independent Directors comprising of Mr. Sridar Iyengar (Chairman), Ms. Kalpana Morparia, Ms. Shikha Sharma and Dr. K P Krishnan. Further details are given in the chapter on Corporate Governance. The Board has accepted all recommendations made by the Audit Committee during the year.

The details of the Corporate Social Responsibility Committee; Nomination, Governance and Compensation Committee; Risk Management Committee; Stakeholders’ Relationship Committee; Science, Technology and Operations Committee and Banking and Authorisations Committee, are given in the Chapter on Corporate Governance

DIRECTORS’ RESPONSIBILITY STATEMENT

In terms of Section 134(5) of the Act, your Directors state that:

1. Applicable accounting standards have been followed in the preparation of the annual accounts;

2. Accounting policies have been selected and applied consistently. Judgments and estimates made are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of FY2022 and of the profit of the Company for that period;

3. Proper and sufficient care has been taken to maintain adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

Co., Practicing Company Secretaries (Certificate of Practice No. 3662), Mumbai, India, were appointed as Secretarial Auditors of the Company for FY2022. The Secretarial Audit Report for FY2022 is annexed as Annexure III to this Report.

Based on the consent received from M/s. Makarand M. Joshi & Co., Practicing Company Secretaries, Mumbai, India and on the recommendation of the Audit Committee, the Board has approved their appointment as the Secretarial Auditor of the Company for FY2023.

COST AUDITOR

Pursuant to Section 148(1) of the Act, read with the relevant Rules made thereunder, the Company maintains the cost records in respect of its ‘pharmaceuticals’ business.

On the recommendation of the Audit Committee, the Board has appointed M/s. Sagar & Associates, Cost Accountants (Firm Registration No. 000118) as Cost Auditor of the Company for the FY2023 at a remuneration of '' 700,000/- plus reimbursement of out-of-pocket expenses at actuals and applicable taxes. The provisions also require that the remuneration of the Cost Auditors be ratified by the members and therefore, the same is recommended for approval of the members at the forthcoming 38th AGM.

As a matter of record, relevant Cost Audit Reports for FY2021 were filed with the Central Government on August 19, 2021, within the stipulated timeline. The Cost Audit Report for FY2022 will also be filed within the timeline.

AUDITORS’ QUALIFICATIONS, RESERVATIONS, ADVERSE REMARKS OR DISCLAIMERS

There are no qualifications, reservations, adverse remarks or disclaimers by the Statutory Auditors in their report, or by the Practicing Company Secretaries in the Secretarial Audit Report. During the year, there were no instances of frauds reported by Auditors under Section 143(12) of the Act.

SECRETARIAL STANDARDS

In terms of Section 118(10) of the Act, the Company complies with Secretarial Standards 1 and 2, relating to the ‘Meetings of the Board of Directors’ and ‘General Meetings’, respectively as issued by the Institute of Company Secretaries of India and approved by the Central

Act, and Regulation 16(1 )(b) of the Listing Regulations is also considered.

In accordance with Section 178(3) of the Act, Regulation 19(4) of the Listing Regulations and on recommendation of the Company’s Nomination, Governance and Compensation Committee, the Board adopted a Remuneration Policy for Directors, KMP, senior management and other employees. The policy forms part of the chapter on Corporate Governance.

Our executive compensation program supports attracting, motivating, and encouraging continuity of experienced and well-qualified executive officers who advance our critical business objectives and promote the creation of shareholders’ value over the long-term. The key tenets of our philosophy are designed to:

a) Attract highly talented individuals from within and across industries drawing from a diverse pool of global talent.

b) Provide long term and short-term incentives that advance the interests of shareholders and deliver levels of pay commensurate with performance.

The three principal components of the compensation package include, base salary, annual cash-based variable pay, and equity-based long-term incentives.

In making decisions with respect to each element of compensation, the competitive market for executives and compensation levels provided by comparable companies are considered.

Executive compensation is reviewed annually. In general executive increment, percentages are lesser than the average with the frontline receiving the highest increase. A higher increase may be made in the event of a role change, promotion, or in exceptional circumstances. The Company’s performance, affordability and individual performance are other considerations, while deciding on compensation.

NUMBER OF BOARD MEETINGS

The Board of Directors met seven times during the year. In addition, an annual Board retreat was held to discuss strategic matters. The intervening gap between the meetings was within the period prescribed under the Act and Listing Regulations. Details of Board

4. Annual accounts have been prepared on a going concern basis;

5. Adequate internal financial controls for the Company to follow have been laid down and these are operating effectively; and

6. Proper and adequate systems have been devised to ensure compliance with the provisions of all applicable laws and these systems are operating effectively.

ADEQUACY OF INTERNAL FINANCIAL CONTROL SYSTEMS

The Company has in place adequate internal financial controls with reference to its financial statements. These controls ensure the accuracy and completeness of the accounting records and the preparation of reliable financial statements.

ENTERPRISE RISK MANAGEMENT (ERM)

The Company has a Risk Management Committee of the Board, consisting entirely of Independent Directors, and chaired by Ms. Shikha Sharma. Details of the Committee and its terms of reference are set out in the chapter on Corporate Governance.

The Audit and Risk Management Committees review key risk elements of the Company’s business, finance, operations and compliance, and their respective mitigation strategies. The Risk Management Committee reviews strategic, business, compliance and operational risks whereas the Audit Committee reviews issues around ethics and fraud, internal control over financial reporting (ICOFR), as well as process risks and their mitigation.

The Company’s Executive Risk Management Committee operates under the Company’s Risk Management Policy and focuses on risks associated with the Company’s business and compliance matters. This Committee periodically reviews matters pertaining to risk management. Additionally, the Enterprise wide Risk Management (ERM) function helps the Board and the Management to prioritize, review and measure business risks against a pre-determined risk appetite, and their suitable response, depending on whether such risks are internal, strategic or external.

During FY2022, focus areas of Risk Management Committee included review of risks and mitigations related to cyber security, quality, talent and capability, compliance and ethics programs across the Company, supply chain and other operating risk exposures and risk transfer through insurance.

RELATED PARTY TRANSACTIONS

In accordance with Section 134(3)(h) of the Act, and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of the contracts or arrangements with related parties referred to in Section 188(1) of the Act, in Form AOC-2, is attached as Annexure II to this Board’s Report. All contracts and arrangements with related parties were at arm’s length and in the ordinary course of business of the Company. Details of related party disclosures form part of the notes to the financial statements provided in the Annual Report.

VIGIL MECHANISM/ WHISTLEBLOWER/ OMBUDSPERSON POLICY

The Company has an Ombudsperson Policy (Whistle-Blower/ Vigil mechanism) to report concerns. Reporting channels under the vigil mechanism include an independent hotline, a web based reporting site (drreddys.ethicspoint. com) and a dedicated e-mail to Chief Compliance Officer. The Ombudsperson Policy also safeguards against retaliation of those who use this mechanism. The Audit Committee Chairperson is the Chief Ombudsperson. The Policy also provides for raising concerns directly to the Chief Ombudsperson. Details of the policy are available on the Company’s website: https://www.drreddys.com/ investors/governance/policies-and-documents/#governance.

STATUTORY AUDITORS

M/s. S.R. Batliboi & Associates LLP, Chartered Accountants (Firm Registration No. 101049W/E300004) were re-appointed as Statutory Auditors by the members of the Company at the 37th AGM held on July 28, 2021, for a period of five years till the conclusion of the 42nd AGM.

SECRETARIAL AUDITOR

Pursuant to Section 204 of the Act, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s. Makarand M. Joshi &

Government. The Company has also voluntarily adopted the recommendatory Secretarial Standards 3 on ‘Dividend’ and Secretarial Standards 4 on ‘Report of the Board of Directors’ issued by the Institute of Company Secretaries of India.

SIGNIFICANT/ MATERIAL ORDERS PASSED BY COURTS/ REGULATORS/ TRIBUNALS

Disputes with Hatchtech Pty Limited (“Hatchtech”) and related parties: On

January 21, 2022, the Company entered into a Settlement and Transfer Agreement with Hatchtech Pty Limited (an Australian Company) for, among other things, the Company to transfer and assign the product Xeglyze® (including all patents, intellectual property, regulatory approvals, marketing and commercialization rights) to Hatchtech.

In 2015, the Company acquired the Xeglyze® Product (including certain patent, intellectual property, regulatory, marketing and commercialization rights) from Hatchtech, pursuant to an Asset Purchase Agreement dated December 7, 2015. On July 24, 2020, the Company successfully obtained approval from the U.S. Food and Drug Administrations for its New Drug Application (NDA) for Xeglyze®. Since the NDA approval in July 2020, the Company and Hatchtech have been engaged in court cases and an arbitration in the United States and Australia, in which both parties have asserted claims against the other and resulting in one arbitration award. The Settlement Agreement settles and resolves all pending and remaining claims between the Parties relating to the Xeglyze® Product and the 2015 Asset Purchase Agreement, which is terminated by the Settlement Agreement, and the parties agreed to the transfer of the Xeglyze® product back to Hatchtech.

INFORMATION REQUIRED UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has a policy to ensure prevention, prohibition and redressal of sexual harassment at the workplace. It has an apex Committee and an Internal Complaints Committee which operate under a defined framework for complaints pertaining to sexual harassment at workplace. The details are available in the principle 5 of the Business Responsibility

and Sustainability Report forming part of this Annual Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES

As per Section 135 of the Act, the Company has a Board-level CSR Committee consisting of Mr. Prasad R Menon (Chairman), Mr. G V Prasad and Mr. K Satish Reddy. Based on the recommendation of the CSR Committee, the Board has adopted a CSR policy that provides guiding principles for selection, implementation and monitoring of CSR activities and formulation of the annual action plan. During the year, the Committee monitored the CSR activities undertaken by the Company including the expenditure incurred thereon as well as implementation and adherence to the CSR policy. An impact assessment of the eligible projects has been carried by an independent agency and the report of such impact assessment was noted by the Board. Details of the CSR Policy and initiatives taken by the Company during the year are available on the Company’s website: www.drreddys.com. The report on CSR activities as well as executive summary of the impact assessment report are attached as Annexure IV to this Board’s Report.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

The Company has opted to submit the Business Responsibility and Sustainability Report for FY2022 on a voluntary basis. A detailed Business Responsibility and Sustainability Report as mentioned under Regulation 34 of the Listing Regulations, is given as a separate chapter in this Annual Report.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO THE INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Pursuant to the provisions of the Act, read with IEPF Authority (Accounting, Audit, Transfer and Refund) Rules,

2016, as amended, declared dividends which remained unpaid or unclaimed for a period of seven years have been transferred by the Company to the IEPF, which has been established by the Central Government.

The above Rules also mandate transfer of shares on which dividends are lying unpaid and unclaimed for a period of

seven consecutive years to IEPF. The Company has issued individual notices to the members whose equity shares are liable to be transferred to IEPF, with respect to unclaimed and unpaid dividend for FY2015 advising them to claim their dividend on or before August 30, 2022. The details of transfer of unpaid and unclaimed amounts to IEPF are given in the chapter on Additional Shareholders Information.

EMPLOYEES STOCK OPTION SCHEMES

The Company has three stock option schemes namely, ‘Dr. Reddy’s Employees Stock Option Scheme, 2002’, ‘Dr. Reddy’s Employees ADR Stock Option Scheme, 2007’, and ‘Dr. Reddy’s Employees Stock Option Scheme, 2018’ (the “Schemes”). The term of Dr. Reddy’s Employees Stock Option Scheme, 2002, ended on January 28, 2022. However the options already granted under the 2002 Scheme are eligible for exercise, in terms of the Scheme. There are no other changes in the said schemes during the year. The Schemes are in compliance with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

The details of Company’s stock option Schemes as required under Regulation 14 of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, are available on the Company’s website: https://www.drreddys.com/ investors/governance/policies-anddo cuments/#governance#policies-and-documents

The details also form part of note 2.25 of the notes to accounts of the standalone financial statements.

PARTICULARS OF EMPLOYEES

The disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are attached as Annexure V to this Board’s Report.

In terms of Section 197(12) of the Act, read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of limits set out in the said rules forms part of the Annual Report.

Considering the provisions of Section 136 of the Act, the Annual Report, excluding the aforesaid information, is being sent to the members of the Company and others entitled thereto. The said information is available for inspection at the registered office of the Company or through electronic mode, during business hours on working days up to the date of the forthcoming 38th AGM, by members. Any member interested in obtaining a copy thereof may write to the Company Secretary in this regard.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Particulars as prescribed under Section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules,

2014, are attached as Annexure VI to this Board’s Report.

ANNUAL RETURN

The Annual Return of the Company as on March 31, 2022, in terms of the provisions of Section 134(3)(a) of the Act, is available on the Company’s website: https://www.drreddys.com/investors/ reports-and-filings/annual-reports/

ACKNOWLEDGMENT

Your directors place on record their sincere appreciation for the significant contribution made by your Company’s employees through their dedication, hard work and commitment, as also for the trust reposed in your Company by the medical fraternity and patients. The Board of Directors also acknowledges the support extended by the analysts, bankers, government agencies, media, customers, business partners, members and investors at large.

The Board looks forward to your continued support in the Company’s endeavor to accelerate access to innovative and affordable medicines, because Good Health Can''t Wait.

For and on behalf of the Board of Directors

K Satish Reddy

Chairman DIN: 00129701

Place: Hyderabad Date: May 19, 2022

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Mar 31, 2021

TABLE 1 | FINANCIAL HIGHLIGHTS				(f MILLION)
PARTICULARS	CONSOLIDATED		STANDALONE
	FY2021	FY2020	FY2021	FY2020
Total income	193,389	181,376	141,502	125,936
Profit before depreciation, amortization, impairment and tax	47,411	46,694	39,062	35,650
Depreciation and amortization	12,288	11,631	8,350	7,892
Impairment of non-current assets	6,768	16,767	150	-
Profit before tax and before share of equity accounted investees	28,355	18,296	30,562	27,758
Share of profit of equity accounted investees, net of tax	480	561	-	-
Profit before tax	28,835	18,857	30,562	27,758
Tax expense	9,319	(1,403)	8,698	(1,619)
Net profit for the year	19,516	20,260	21,864	29,377
Opening balance of retained earnings	128,349	112,000	124,979	99,511
Net profit for the year	19,516	20,260	21,864	29,377
Other comprehensive income/(loss)	3	5	3	5
Dividend paid during the year	(4,147)	(3,314)	(4,147)	(3,314)
Tax on dividend paid	-	(602)	-	(600)
Transfer to general reserve	-	-	-	-
Transfer to SEZ re-investment reserve, net	(1,326)	-	(1,326)	-
Closing balance of retained earnings	142,395	128,349	141,373	124,979
*The conversion rate is considered as US$ 1 = '' 73.14. Note: FY2021 represents fiscal year 2020-21, from April 1, 2020, to March 31, 2021, and analogously for FY2020 and other such labelled years.

nature of business of the company. Further, there was no significant change in the nature of business carried on by its subsidiaries.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There have been no such changes.

SUBSIDIARIES AND ASSOCIATES

The company had 52 subsidiaries and one joint venture company as on March 31, 2021. During FY2021, Dr. Reddy’s (Beijing) Pharmaceutical Company Limited in China and Dr. Reddy’s Formulations Limited in India were incorporated as a step-down subsidiary company and a wholly-owned subsidiary, respectively. Pursuant to sale of the membership interests in DRANU, LLC, it ceased to be a joint venture during the year. Further, the company sold its Contract Development and Manufacturing Organization (CDMO) division of Custom Pharmaceutical Services (CPS) business to Aurigene Pharmaceutical Services Limited (APSL), a wholly-owned subsidiary, on slump sale basis, for a consideration of '' 5,434.5 million.

Section 129(3) of the Act, states that where the company has one or more subsidiaries or associate companies, it shall, in addition to its financial statements, prepare a consolidated financial statements of the company and of all subsidiaries and associate companies in the same form and manner as that of its own and also attach along with its financial statements, a separate statement containing the salient features of the financial statements of its subsidiaries and associates.

Hence, the consolidated financial statements of the company and all its subsidiaries and associates, prepared in accordance with Ind AS 110 and 111 as specified in the Companies (Indian Accounting Standards) Rules, 2015, form part of the annual report. Moreover, a statement containing the salient features of the financial statements of the company’s subsidiaries and joint ventures in the prescribed Form AOC-1, is attached as Annexure I to the board’s report. This statement also provides details of the performance and financial position of each subsidiary and joint venture.

In accordance with Section 136 of the Act, the audited financial statements and related information of the company and its subsidiaries, wherever applicable, are available on the company''s website: www.drreddys.com.

Dear Member,

Your directors are pleased to present the 37th annual report for the year ended March 31, 2021.

The financial year 2021 started with COVID-19 related lockdowns in India and several parts of our major markets. The pandemic which started about 15 months back impacted almost everyone and your company was no exception. There were challenges around movement of people and all the business operations were impacted — be it manufacturing, research and development (R&D), marketing or the supply chain and logistics. Our team accepted the situation as a challenge and solved the issues one by one to ensure that your company continues to make medicines and serve its patients across the globe.

We also collaborated with multiple global partners and have been developing a number of COVID-19 related drugs. We have successfully launched a vaccine. We found new ways of working by leveraging digitalization and undertaking several precautionary measures to ensure the health and safety of our employees and business partners. We contributed our bit to support the needy and front line workers. Our actions during the pandemic have been driven by our purpose of ‘Good Health Can’t Wait’ and reflect the dynamism and empathy which are core to us.

FINANCIAL HIGHLIGHTS AND COMPANY AFFAIRS*

Table 1 gives the consolidated and standalone financial highlights of the company based on Indian Accounting Standards (Ind AS) for FY2021 (i.e. from April 1, 2020, to March 31, 2021) compared to the previous financial year.

The company’s consolidated total income for the year was f 193.39 billion, which was up by 7% over the previous year. This amounted to US$ 2.64 billion. Profit before tax (PBT) was f 28.84 billion, representing an increase of 53% over the previous year. This translated to US$ 394 million.

The company’s standalone total income for the year was f 141.50 billion, which was up by 12% over the previous year. This was US$ 1.93 billion. PBT was f 30.56 billion (US$ 418 million), which was up by 10% in rupee terms over the previous year.

Revenues from Global Generics were up by 12% and stood at f 154.4 billion. There was growth across North America Generics, Emerging Markets and India, with strong growth in Europe.

Revenues from North America stood at f 70.5 billion, registering a year-on-year growth of 9%. This was largely on account of revenue contribution from new products launched, increase in volumes for some of our base products, and favorable foreign exchange movement, partly offset by high price erosions in some of our products.

During the year, the company filed 20 abbreviated new drug applications (ANDAs) and one new drug application (NDA) under Section 505(b)(2) in the USA. As of March 31, 2021, there were 95 generic filings awaiting approval with the US Food and Drug Administration (USFDA), comprising 92 ANDAs and three NDAs filed under Section 505(b)(2). Of the 92 ANDAs, 47 are Para IV applications, and we believe that 23 of these have ‘First to File’ status.

Revenues from Emerging Markets were f 35.1 billion, registering a year-on-year growth of 7%. Revenues from India stood at f 33.4 billion, showing a year-on-year growth of 15%. Revenues from Europe were f 15.4 billion, or a year-on-year growth of 32%.

Revenues from Pharmaceutical Services and Active Ingredients (PSAI) stood at f 32 billion, with a year-on-year growth of 24%. During the year, the company filed 149 drug master files (DMFs) worldwide, including 14 filings in the US.

SCHEME OF AMALGAMATION

During FY2020, the scheme of amalgamation of Dr. Reddy’s Holdings Limited with the company was approved by the board of directors, members and unsecured creditors of the company.

The no-observation letters from the BSE Limited and National Stock Exchange of India Limited were received on the basis of no comments received from the Securities and Exchange Board of India (SEBI). The petition for approval of the said scheme was filed with the Hon’ble National Company Law Tribunal (NCLT), Hyderabad Bench.

During FY2021, hearings on the petition took place and on April 20, 2021, the Hon’ble NCLT has reserved the order.

DIVIDEND

Your directors are pleased to recommend a dividend of f 25 (500%) for FY2021, on every equity share of f 5/-. The recommended dividend is in line with the dividend distribution policy of the company.

The dividend, if approved at the 37th annual general meeting (AGM) will be paid to those members whose names appear on the register of members of the company as of end of the day on July 12, 2021. In terms of the provisions of the Income Tax Act, 1961, such dividend will be taxable in the hands of the members.

In terms of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), the dividend distribution policy, is available on the company’s website on www.drreddys.com/ investors/governance/policies-and-documents/

TRANSFER TO RESERVES

The company has not proposed to transfer any amount to the general reserve.

SHARE CAPITAL

The paid-up share capital of your company increased by f 0.65 million to f 831.51 million in FY2021 due to allotment of 129,149 equity shares, on exercise of stock options by eligible employees through the ‘Dr. Reddy''s Employees Stock Option Scheme, 2002’ and ‘Dr. Reddy’s Employees ADR Stock Option Scheme, 2007’.

On December 9, 2020, the company also listed its ADRs on NSE International Exchange in GIFT City, Gujarat (NSE IFSC).

PUBLIC DEPOSITS

The company has not accepted any deposits covered under Chapter V of the Companies Act, 2013 ("the Act"). Accordingly, there is no disclosure or reporting required in respect of details relating to deposits.

CHANGE IN THE NATURE OF BUSINESS, IF ANY

During the year, there was no change in the

These are also available for inspection during regular business hours at our registered office in Hyderabad, India and/or in electronic mode.

Any member desirous of inspecting such documents are requested to write to the company by sending an email to [email protected].

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The company makes investments or extends loans/guarantees to its wholly-owned subsidiaries for their business purposes. Details of loans, guarantees and investments covered under Section 186 of the Act, along with the purpose for which such loan or guarantee was proposed to be utilized by the recipient, form part of the notes to the financial statements provided in this annual report.

CORPORATE GOVERNANCE AND ADDITIONAL SHAREHOLDERS’ INFORMATION

A detailed report on the corporate governance systems and practices of the company is given in a separate chapter of this annual report. Similarly, other information for shareholders is provided in the chapter on Additional Shareholders’ Information. A certificate from the statutory auditors of the company confirming compliance with the conditions of corporate governance is attached to the chapter on Corporate Governance.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the Management Discussion and Analysis in terms of Regulation 34 of SEBI’s Listing Regulations is provided as a separate chapter in the annual report.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

During FY2021, members of the company approved the reappointment of Mr. G V Prasad as a whole-time director designated as co-chairman and managing director of the company for a further period of five years with effect from January 30, 2021. The members also approved the continuation of Mr. Prasad R Menon as an independent director, pursuant to regulation 17(1A) of the Listing Regulations, who attained the age of seventy five years.

Mr. G V Prasad retires by rotation at the forthcoming 37th AGM and being eligible, seeks reappointment.

Mr. Bharat N Doshi completed his term as an independent director on May 10, 2021, and does not seek reappointment. The board places on record its appreciation for his contributions as director of the company.

Mr. Saumen Chakraborty retired as chief financial officer of the company with effect from December 1, 2020. The board of directors, at its meeting held on October 28, 2020, appointed Mr. Parag Agarwal as chief financial officer of the company with effect from December 1, 2020. The board records its appreciation for the excellent work done by Mr. Chakraborty across various departments of the company, including finance, during his long stint at Dr. Reddy’s.

In accordance with Section 149(7) of the Act, each independent director has confirmed to the company that he or she meets the criteria of independence laid down in Section 149(6) of the Act, and is in compliance with Rule 6(3) of the Companies (Appointment and Qualifications of Directors) Rules, 2014 and Regulation 16(1)(b) of the Listing Regulations. Further, they have affirmed compliance to the code of conduct for independent directors as prescribed in Schedule IV of the Act.

For reference of the members, a brief profile of Mr. G V Prasad is given in the chapter on Corporate Governance and in the Notice convening the 37th AGM.

BOARD EVALUATION

As per provisions of the Act, and Regulation 17(10) of the Listing Regulations, an evaluation of the performance of the board, its committees and members was undertaken. For details, please refer to the chapter on Corporate Governance.

APPOINTMENT OF DIRECTORS AND REMUNERATION POLICY

Assessment and appointment of members to the board are based on a combination of criterion that includes ethics, personal and professional stature, domain expertise, gender diversity and specific qualifications required for the position. A potential board member is also assessed on the basis of independence criteria defined in Section 149(6) of the Act, and Regulation 16(1)(b) of the Listing Regulations.

In accordance with Section 178(3) of the Act, Regulation 19(4) of the Listing Regulations and on recommendation of the company’s nomination, governance and compensation committee, the board adopted a remuneration policy for directors, KMP, senior management and other employees. The policy is attached in the chapter on Corporate Governance.

NUMBER OF BOARD MEETINGS

The board of directors met five times during the year. In addition, an annual board retreat

was held to discuss strategic matters.

Details of board meetings and the board retreat are given in the chapter on Corporate Governance.

AUDIT COMMITTEE

As on March 31, 2021, the audit committee of the board of directors consisted entirely of independent directors: Mr. Sridar Iyengar (chairman), Ms. Kalpana Morparia,

Mr. Bharat N Doshi and Ms. Shikha Sharma. Mr. Bharat N Doshi ceased to be a member of the committee on completing his term as a director on May 10, 2021. Further details are given in the chapter on Corporate Governance. The board has accepted all recommendations made by the audit committee during the year.

DIRECTORS’ RESPONSIBILITY STATEMENT

In terms of Section 134(5) of the Act, your directors state that:

1. applicable accounting standards have been followed in the preparation of the annual accounts;

2. accounting policies have been selected and applied consistently. Judgments and estimates made are reasonable and prudent, so as to give a true and fair view of the state of affairs of the company at the end of the FY2021 and of the profit of the company for that period;

3. proper and sufficient care has been taken to maintain adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

4. annual accounts have been prepared on a going concern basis;

5. adequate internal financial controls for the company to follow have been laid down and these are operating effectively; and

6. proper and adequate systems have been devised to ensure compliance with the provisions of all applicable laws and these systems are operating effectively.

ADEQUACY OF INTERNAL FINANCIAL CONTROL SYSTEMS

The company has in place adequate internal financial controls with reference to its financial statements. These controls ensure the accuracy and completeness of the accounting records and the preparation of reliable financial statements.

ENTERPRISE RISK MANAGEMENT

The company has a risk management committee of the board, consisting entirely of independent directors, and chaired by Ms. Shikha Sharma. Details of the committee and its terms of reference are set out in the chapter on Corporate Governance.

The audit and risk management committees review key risk elements of the company’s business, finance, operations and compliance, and their respective mitigation strategies. The risk management committee reviews strategic, business, compliance and operational risks, while issues around ethics and fraud, internal control over financial reporting (ICOFR), as well as process risks and their mitigation, are reviewed by the audit committee.

The company’s finance, investment and risk management council (FIRM council) and the compliance council are management level committees which operate under a charter and focus on risks associated with the company’s business and compliance matters. The FIRM council and the compliance council periodically review matters pertaining to risk management and compliance and ethics respectively. Additionally, the enterprise wide risk management (ERM) function helps management and the board to prioritize, review and measure business risks against a pre-determined risk appetite, and their suitable response, depending on whether such risks are internal, strategic or external.

During FY2021, focus areas of risk management committee included review of cyber security, ethics and compliance program across the company and monitoring environmental and climate change related risks and other operating risk exposures.

RELATED PARTY TRANSACTIONS

In accordance with Section 134(3)(h) of the Act, and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of the contracts or arrangements with related parties referred to in Section 188(1) of the Act, in Form AOC-2 is attached as Annexure II to the board’s report. All contracts and arrangements with related parties were at arm’s length and in the ordinary course of business of the company. Details of related party disclosures form part of the notes to the financial statements provided in the annual report.

VIGIL MECHANISM/WHISTLE-

BLOWER/OMBUDSPERSON

POLICY

The company has an ombudsperson policy (whistle-blower/vigil mechanism) to report concerns. Reporting channels under the vigil mechanism include an independent hotline, a web based reporting site (drreddys.ethicspoint.com) and a dedicated e-mail to chief compliance officer. The ombudsperson policy also safeguards against retaliation of those who use this mechanism. The audit committee chairperson is the chief ombudsperson.

The policy also provides for raising concerns directly to the chief ombudsperson. Details of the policy are available on the company’s website: www.drreddys.com/investors/ governance/ombudsperson-policy.

STATUTORY AUDITORS

M/s. S.R. Batliboi & Associates LLP, chartered accountants (firm registration no. 101049W/E300004) were appointed as statutory auditors of the company at the 32nd AGM held on July 27, 2016, for a period of five years till the conclusion of the 37th AGM.

Consequently, M/s. S.R. Batliboi & Associates LLP, chartered accountants, complete their first term of five consecutive years as the statutory auditors of the company at the conclusion of 37th AGM of the company.

Pursuant to section 139(2) of the Act, the company can appoint an auditors firm for a second term of five consecutive years.

M/s. S.R. Batliboi & Associates LLP, have consented to the said reappointment, and confirmed that their reappointment, if made, would be within the limits specified under Section 141(3)(g) of the Act. They have further confirmed that they are not disqualified to be reappointed as statutory auditor in terms of the provisions of the Act, and the provisions of the Companies (Audit and Auditors) Rules, 2014, as amended from time to time.

The audit committee and the board of directors recommend the reappointment of M/s. S.R. Batliboi & Associates LLP, chartered accountants, as statutory auditors of the company from the conclusion of the 37th AGM till the conclusion of 42nd AGM, to the members.

SECRETARIAL AUDITOR

Pursuant to Section 204 of the Act, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s. Makarand M. Joshi & Co., practicing company secretaries (certificate

of practice no. 3662), Mumbai, India, were appointed as secretarial auditors of the company for FY2021. The secretarial audit report for FY2021 is annexed as Annexure III to this report.

Based on the consent received from M/s. Makarand M. Joshi & Co., practicing company secretaries (certificate of practice no. 3662), Mumbai, India and on the recommendation of the audit committee, the board has approved their appointment as the secretarial auditor of the company for FY2022.

COST AUDITORS

Pursuant to Section 148(1) of the Act, read with the relevant Rules made thereunder, the company maintains the cost records in respect of its ''pharmaceuticals'' business.

On the recommendation of the audit committee, the board has appointed M/s. Sagar & Associates, cost accountants (firm registration no. 000118) as cost auditors of the company for the FY2022 at a remuneration of ? 700,000/- plus reimbursement of out-of-pocket expenses at actuals and applicable taxes. The provisions also require that the remuneration of the cost auditors be ratified by the members. As a matter of record, relevant cost audit reports for FY2020 were filed with the Central Government on August 28, 2020, within the stipulated timeline. The cost audit report for FY2021 will also be filed within the timeline.

AUDITORS’ QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLAIMERS MADE

There are no qualifications, reservations or adverse remarks by the statutory auditors in their report, or by the practicing company secretary in the secretarial audit report. During the year, there were no instances of frauds reported by auditors under Section 143(12) of the Act.

SECRETARIAL STANDARDS

In terms of Section 118(10) of the Act, the company complies with Secretarial Standards 1 and 2, relating to the ‘Meetings of the Board of Directors’ and ‘General Meetings’ respectively as specified by the Institute of Company Secretaries of India and approved by the Central Government. The company has also voluntarily adopted the recommendatory Secretarial Standard-3 on ‘Dividend’ and Secretarial Standard-4 on ‘Report of the Board of Directors’ issued by the Institute of Company Secretaries of India.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE COURTS/REGULATORS/ TRIBUNALS

Securities class-action lawsuit in the USA

On August 25, 2017, a securities class action lawsuit was filed against the company, its then chief executive officer (CEO) and its then chief financial officer (CFO) in the United States District Court for the District of New Jersey. The company’s co-chairman, its chief operating officer (COO) of that time (since retired), and Dr. Reddy’s Laboratories, Inc., USA, were subsequently named as defendants in the case. The operative complaint alleges that the company made false or misleading statements or omissions in its public filings, in violation of the US federal securities laws, that the company’s share price dropped and its investors were affected.

On March 21, 2019, the District Court issued its decision (dated March 20, 2019) granting in part and denying in part the motion to dismiss. Pursuant to that decision, the Court dismissed the plaintiff’s claims on 17 out of the 22 alleged misstatements/omissions.

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 (collectively, the “Defendants”), have entered into a Stipulation and Agreement of Settlement (the “Stipulation”) with lead plaintiff i.e. 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 has agreed to pay US$ 9 million. The settlement is subject to the approval of the court and may be terminated prior to court''s approval pursuant to the grounds for termination set forth in the Stipulation.

Subject to the terms of the Stipulation, in exchange for the settlement consideration, the 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.

On December 23, 2020, the court issued a final order and judgment approving the settlement. Pursuant to the settlement/court order, the escrow was funded on January 4, 2021. The effective date of the settlement occurred on February 1, 2021, upon transfer of the settlement fund balance into the final escrow account.

As the company is adequately insured with respect to the aforesaid liability, the settlement did not have any impact on the company’s consolidated income statement for the year ended March 31, 2021.

INFORMATION REQUIRED UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 The company has a policy to ensure prevention, prohibition and redressal of sexual harassment at the workplace. It has an apex committee and an internal complaints committee which operate under a defined framework for complaints pertaining to sexual harassment at workplace. Details are available in the principle 3 of the Business Responsibility Report forming part of this annual report.

CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES

As per Section 135 of the Act, the company has a board-level CSR committee consisting of Mr. Prasad R Menon (chairman), Mr. G V Prasad and Mr. K Satish Reddy. Based on the recommendation of the CSR committee, the board has adopted a revised CSR policy that provides guiding principles for selection, implementation and monitoring of CSR activities and formulation of the annual action plan. During the year, the committee monitored the spend and implementation and adherence to the CSR policy. Details of the CSR policy and initiatives taken by the company during the year are available on the company’s website: www.drreddys.com. The report on CSR activities is attached as Annexure IV to the board’s report.

BUSINESS RESPONSIBILITY REPORT

A detailed Business Responsibility Report as required under Regulation 34 of the Listing Regulations, is given as a separate chapter in this annual report.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Pursuant to the provisions of the Act, read with IEPF Authority (Accounting, Audit,

Transfer and Refund) Rules, 2016, as amended, declared dividends and interest on debentures which remained unpaid or unclaimed for a period of seven years have been transferred by the company to the IEPF, which has been established by the Central Government.

The above Rules also mandate transfer of shares on which dividends are lying unpaid and unclaimed for a period of seven consecutive years to IEPF. The company has issued individual notices to the members whose equity shares are liable to be transferred to IEPF, advising them to claim their dividend on or before August 18, 2021. Details of transfer of unpaid and unclaimed amounts to IEPF are given in the chapter on Additional Shareholders Information.

EMPLOYEES STOCK OPTION SCHEMES

During the year, there has been no change in the ‘Dr. Reddy’s Employees Stock Option Scheme, 2002’, the ‘Dr. Reddy’s Employees ADR Stock Option Scheme, 2007'', and ''Dr. Reddy’s Employees Stock Option Scheme, 2018’ (collectively referred as ‘the schemes’).

The schemes are in compliance with the SEBI (Share Based Employee Benefits) Regulations, 2014.

Details are available on the company’s website: www.drreddys.com/investors/ governance/policies-and-documents/. The details also form part of note 2.24 of the notes to accounts of the standalone financial statements.

PARTICULARS OF EMPLOYEES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are attached as Annexure V to the board’s report

In terms of Section 197(12) of the Act, read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of limits set out in said rules forms part of the annual report.

Considering the first proviso to Section 136(1) of the Act, the annual report, excluding the aforesaid information, is being

sent to the members of the company and others entitled thereto. The said information is available for inspection at the registered office of the company or through electronic mode during business hours on working days up to the date of the forthcoming 37th AGM, by members. Any member interested in obtaining a copy thereof may write to the company secretary in this regard.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars as prescribed under Section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are attached as Annexure VI to the board’s report.

ANNUAL RETURN

The annual return of the company as on March 31, 2021, in terms of the provisions of Section 134(3)(a) of the Act, is available on the company’s website: www.drreddys.com/investors/reports-and-filings/annual-reports/

ACKNOWLEDGMENT

Your directors place on record their sincere appreciation for the significant contribution made by its employees through their dedication, hard work and commitment, as also for the trust reposed in the company by the medical fraternity and patients. The board of directors also acknowledge the support extended by the analysts, bankers, government agencies, media, customers, business partners, members and investors at large.

It looks forward to your continued support in the company’s endeavor to accelerate access to innovative and affordable medicines, because Good Health Can’t Wait.

For and on behalf of the board of directors

K Satish Reddy

Chairman

Place: Hyderabad Date: May 14, 2021

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Mar 31, 2019

Dear Members,

The directors are pleased to present the 35th annual report for the year ended 31 March 2019.

FINANCIAL HIGHLIGHTS

Table 1 gives the consolidated and standalone financial highlights of the company based on Indian Accounting Standards (Ind AS) for FY2019 (i.e. from 1 April 2018 to 31 March 2019) compared to the previous financial year.

COMPANY AFFAIRS*

The company’s consolidated total income for the year was Rs. 157.86 billion, which was up by 9% over the previous year. In US$ terms, this amounted to US$ 2.28 billion. Profit before taxes (PBT) was Rs. 22.9 billion, representing a growth of.70% over the previous year. In US$ terms, this translated to US$ 331 million.

The company’s standalone total income for the year was Rs. 108.64 billion, which was up by 14% over the previous year. In US$, this amounted to US$ 1.57 billion. PBT was Rs. 17 billion, which was up by 144% over the previous year. In US$ terms, this translated to US$ 246 million.

Table1 Financial Highlights (Rs. million)

	CONSOLIDATED		STANDALONE
	FY2019	FY2018	FY2019	FY2018
Total income	157,857	144,362	108,639	95,633
Profit before depreciation, amortization and tax	34,268	24,276	24,813	14,711
Depreciation and amortization	11,348	10,772	7,806	7,741
Profit before tax	22,920	13,504	17,007	6,970
Tax expense	3,858	4,380	4,234	1,301
Profit after tax	19,062	9,124	12,773	5,669
Share of profit of equity accounted investees, net of tax	438	344	-	-
Net profit for the year	19,500	9,468	12,773	5,669
Opening balance of retained earnings	96,247	90,771	90,740	89,063
Net profit for the year	19,500	9,468	12,773	5,669
Other comprehensive income/(loss)	255	-	-	-
Dividend paid during the year	(3,320)	(3,316)	(3,320)	(3,316)
Tax on dividend paid	(682)	(676)	(682)	(676)
Transfer to general reserve	-	-	-	-
Closing balance of retained earnings	112,000	96,247	99,511	90,740

* The conversion rate is considered as US$ 1 = Rs. 69.16.

Revenues from Global Generics up by 8% and stood at Rs. 123 billion. There was growth across Emerging Markets and India, revenues from North America Generics remained flat on a year-on-year basis.

Revenues from North America stood at Rs. 60 billion, and remained flat on a year-on-year basis. This was largely on account of revenue contribution from new products launched, market share gains for existing products, and favorable foreign exchange movement offset by higher price erosions in some of our key pharmaceutical products.

During the year, the company launched several new products. These included gSuboxone, gTepadina, gGleevec, gDiprivan etc. The company filed 20 abbreviated new drug applications (ANDAs) in the USA. As of.31 March 2019, there were 110 generic filings awaiting approval with the US Food and Drug Administration (USFDA), comprising 107 ANDAs and three NDAs filed under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act (FD&C Act) in the USA. Of these 107 ANDAs, 60 are Para IVs, out of which 34 are believed to have ‘First to File’ status.

Revenues from Emerging Markets was Rs. 28.9 billion, registering a year-on-year growth of.28%. Revenues from India stood at Rs. 26.2 billion, registering a year-on-year growth of.12%.

Revenues from PSAI stood at Rs. 24.1 billion, registering a year-on-year growth of.10%. During the year, the company filed nine drug master files (DMFs) in the US.

The above revenues are after excluding ‘other operating income’.

DIVIDEND

Your directors are pleased to recommend a dividend of Rs. 20 (400%) for FY2019, on every equity share of Rs. 5/-. The recommended dividend is in line with the dividend distribution policy of the company. The dividend, if approved at the 35th annual general meeting (AGM), will be paid to those shareholders whose names appear on the register of members of the company as of end of the day on 16 July 2019.

In terms of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), the company’s dividend distribution policy is attached as Annexure I to the board’s report.

TRANSFER TO RESERVES

The company has not proposed to transfer any amount to the general reserve.

SHARE CAPITAL

The paid-up share capital of your company increased by Rs. 0.78 million to Rs. 830.33 million in FY2019 due to allotment of.1,55,041 equity shares, on exercise of stock options by eligible employees through the ‘Dr. Reddy’s Employees Stock Option Scheme, 2002’ and ‘Dr. Reddy’s Employees ADR Stock Option Scheme, 2007’.

FIXED DEPOSITS

The company has not accepted any deposits covered under Chapter V of the Companies Act, 2013. Accordingly, no disclosure or reporting is required in respect of details relating to deposits.

CHANGE IN THE NATURE OF BUSINESS, IF ANY

During the year, there was no change in the nature of business of the company or any of its subsidiaries.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There have been no such changes.

SUBSIDIARIES AND ASSOCIATES

The company had 52 subsidiaries and two joint venture companies as on 31 March 2019. During FY2019, Dr. Reddy’s Laboratories (Thailand) Limited and Dr. Reddy’s Laboratories Philippines Inc. have become subsidiary companies. Pursuant to sale of all the issued and outstanding membership interests in the antibiotic manufacturing facility at Tennessee, USA, Dr. Reddy’s Laboratories Tennessee, LLC ceased to be a subsidiary during the year.

Section 129(3) of the Companies Act, 2013 states that where the company has one or more subsidiaries, it shall, in addition to its financial statements, prepare a consolidated financial statement of the company and of all subsidiaries in the same form and manner as that of its own and also attach along with its financial statement, a separate statement containing the salient features of the financial statements of its subsidiaries and associates.

Hence, the consolidated financial statements of the company and all its subsidiaries and joint ventures, prepared in accordance with Ind AS 110 and 111 as specified in the Companies (Indian Accounting Standards) Rules, 2015, form part of the annual report. Moreover, a statement containing the salient features of the financial statements of the company’s subsidiaries and joint ventures in the prescribed Form AOC-1, is attached as Annexure II to the board’s report. This statement also provides details of the performance and financial position of each subsidiary and joint venture.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statements and related information of the company and its subsidiaries, wherever applicable, are available for inspection during regular business hours at our registered office in Hyderabad, India.

These are also available on the company’s website, www.drreddys.com.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The company makes investments or extends loans/guarantees to its wholly-owned subsidiaries for their business purposes. Details of loans, guarantees and investments covered under Section 186 of the Companies Act, 2013, along with the purpose for which such loan or guarantee was proposed to be utilized by the recipient, form part of the notes to the financial statements provided in this annual report.

CORPORATE GOVERNANCE AND ADDITIONAL SHAREHOLDERS’ INFORMATION

A detailed report on the corporate governance systems and practices of the company is given in a separate chapter of this annual report. Similarly, other information for shareholders is provided in the Chapter on Additional Shareholders’ Information. A certificate from the statutory auditors of the company confirming compliance with the conditions of corporate governance is attached to the Chapter on Corporate Governance.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the Management Discussion and Analysis in terms of Regulation 34 of the Listing Regulations is provided as a separate chapter in the annual report.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. Hans Peter Hasler resigned from the board on 14 June 2018 as independent director. The board places on record its appreciation for the services rendered by Mr. Hans Peter Hasler during his tenure as a member of the board and its committees.

The shareholders of the company approved reappointment of Mr. Anupam Puri as an independent director, for second term of one year from 27 July 2018 up to 26 July 2019, under Section 149 of the Companies Act, 2013 at the 34th AGM held on 27 July 2018.

Mr. Leo Puri, Ms. Shikha Sharma and Mr. Allan Oberman were appointed as additional directors of the company, categorized as Independent with effect from 25 October 2018, 31 January 2019 and 26 March 2019 respectively. The board recommends appointment of Mr. Leo Puri, Ms. Shikha Sharma and Mr. Allan Oberman as independent directors under Section 149 of the Companies Act, 2013 for a term of five years each with effect from 25 October 2018, 31 January 2019 and 26 March 2019, respectively for approval of the shareholders at the forthcoming 35th AGM scheduled on 30 July 2019.

Further, the shareholders of the company approved the continuation of directorship of Dr. Bruce L A Carter, aged 75 years under Regulation 17(1A) of the Listing Regulations and also reappointed him as a non-executive independent director of the company for a second term of three consecutive years from 31 July 2019 up to 30 July 2022, by passing a special resolution through postal ballot.

The terms of Mr. Sridar Iyengar and Ms. Kalpana Morparia, independent directors, end at the forthcoming 35th AGM. The board recommends reappointment of Mr. Iyengar and Ms. Morparia, as independent directors under Section 149 of Companies Act, 2013 for another term of four and five years, respectively, for approval of the shareholders at the forthcoming 35th AGM scheduled on 30 July 2019.

In accordance with Section 149(7) of the Companies Act, 2013, each independent director has confirmed to the company that he or she meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of the Listing Regulations.

Mr. Anupam Puri completes his second term as an independent director. Dr. Omkar Goswami retires from the board of the company as independent director at 35th AGM to be held on 30 July 2019, and does not seek reappointment. The board wishes them well, and places on record its appreciation for their work over the long period of time that they have served as the directors of the company.

Mr. G V Prasad, retires by rotation at the forthcoming 35th AGM and being eligible, seeks reappointment.

Brief profiles of Mr. Sridar Iyengar, Ms. Kalpana Morparia, Mr. Leo Puri, Ms. Shikha Sharma, Mr. Allan Oberman and Mr. G V Prasad are given in the Chapter on Corporate Governance and the Notice convening the 35th AGM for reference of the shareholders.

There is no change in KMP during the year under review.

BOARD EVALUATION

As per provisions of the Companies Act, 2013 and Regulation 17(10) of the Listing Regulations, an evaluation of the performance of the board, its committees and members was undertaken. For details, please see the Chapter on Corporate Governance in this annual report.

APPOINTMENT OF DIRECTORS AND REMUNERATION POLICY

The assessment and appointment of members to the board is based on a combination of criterion that includes ethics, personal and professional stature, domain expertise, gender diversity and specific qualifications required for the position.

A potential board member is also assessed on the basis of independence criteria defined in Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of the Listing Regulations.

In accordance with Section 178(3) of the Companies Act, 2013, Regulation 19(4) of the Listing Regulations and on recommendations of the company’s nomination, governance and compensation committee, the board adopted a remuneration policy for directors, KMP, senior management and other employees. The policy is attached in the Chapter on Corporate Governance.

NUMBER OF BOARD MEETINGS

The board of directors met five times during the year. In addition, an annual board retreat was held to discuss strategic matters.

Details of board meetings are given in the Chapter on Corporate Governance.

AUDIT COMMITTEE

The audit committee of the board of directors consists entirely of independent directors. Presently, the committee comprises Mr. Sridar Iyengar (chairman), Dr. Omkar Goswami, Mr. Bharat N Doshi and Ms. Shikha Sharma. Further details can be seen in the Chapter on Corporate Governance. The board has accepted all recommendations made by the audit committee during the year.

BUSINESS RISK MANAGEMENT

The company has a risk management committee of the board, consisting entirely of independent directors, and chaired by Dr. Omkar Goswami. Details of the committee and its terms of reference are set out in the Chapter on Corporate Governance.

The audit and risk management committees review key risk elements of the company’s business, finance, operations and compliance, and respective mitigation strategies. The risk management committee reviews key strategic, business, compliance and operational risks, while issues around ethics and fraud, internal control over financial reporting (ICOFR), as well as process risks and their mitigation are reviewed by the audit committee.

The company’s finance, investment and risk management council (FIRM council) is a management level committee which operates under a charter and focuses on risks associated with the company’s business. The FIRM council periodically reviews matters pertaining to risk management, compliance, ethics and fraud. Additionally, the enterprise wide risk management (ERM) function helps management and the board to periodically prioritize, review and measure business risks against a pre-determined risk appetite, and their suitable response, depending on whether such risks are internal, strategic or external.

During FY2019, focus areas of risk management committee included progress on cyber security, data privacy, quality and regulatory, geo-political risk, compliance, patent infringement and other operating risk exposures.

ADEQUACY OF INTERNAL FINANCIAL CONTROL SYSTEMS

The company has in place adequate internal financial controls with reference to its financial statements. These controls ensure the accuracy and completeness of the accounting records and the preparation of reliable financial statements.

DIRECTORS’ RESPONSIBILITY STATEMENT

In terms of Section 134(5) of the Companies Act, 2013, your directors state that:

1. applicable accounting standards have been followed in the preparation of the annual accounts;

2. accounting policies have been selected and applied consistently. Judgments and estimates made are reasonable and prudent, so as to give a true and fair view of the state of affairs of the company at the end of the FY2019 and of the profit of the company for that period;

3. proper and sufficient care has been taken to maintain adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

4. annual accounts have been prepared on a going concern basis;

5. adequate internal financial controls for the company to follow have been laid down and these are operating effectively; and

6. proper and adequate systems have been devised to ensure compliance with the provisions of all applicable laws and these systems are operating effectively.

RELATED PARTY TRANSACTIONS

In accordance with Section 134(3)(h) of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contracts or arrangements entered into by the company with related parties referred to in Section 188(1) of the Companies Act, 2013 in Form AOC-2 is attached as Annexure III. All such contracts or arrangements are in the interest of the company. Details of related party disclosures form part of the notes to the financial statements provided in this annual report.

VIGIL MECHANISM/WHISTLEBLOWER/OMBUDSPERSON POLICY

The company has an ombudsperson policy (whistle-blower/vigil mechanism) to report concerns. The vigil mechanism consists of a hotline — namely, a dedicated e-mail ID and a phone number. The ombudsperson policy safeguards against retaliation of those who use this mechanism. The audit committee chairperson is the chief ombudsperson. The policy also provides access to the chairperson of the audit committee for raising concerns. Details of the policy are available on the weblink: www.drreddys.com/investors/ governance/ombudsperson-policy.

STATUTORY AUDITORS

M/s. S R Batliboi & Associates LLP, Chartered Accountants (firm registration no. 101049W/E300004) were appointed as statutory auditors of the company at the 32nd AGM held on 27 July 2016, for a period of five years commencing from the conclusion of.32nd AGM till the conclusion of the 37th AGM, subject to ratification by shareholders every year, as may be applicable. However, the Ministry of Corporate Affairs (MCA) in its notification dated 7 May 2018 has omitted the requirement under the first proviso to Section 139 of the Companies Act, 2013 and Rule 3(7) of the Companies (Audit and Auditors) Rules, 2014, regarding ratification of appointment of statutory auditors by shareholders at every subsequent AGM.

Consequently, M/s. S R Batliboi & Associates LLP, chartered accountants, continue to be the statutory auditors of the company till the conclusion of.37th AGM, as approved by shareholders at 32nd AGM held on 27 July 2016.

SECRETARIAL AUDITOR

Pursuant to Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Dr. K R Chandratre, practicing company secretary (membership no. FCS 1370 and certificate of practice no. 5144) was appointed to conduct the secretarial audit of the company for FY2019. The secretarial audit report for FY2019 is attached as Annexure IV.

Based on the consent received from Dr. K R Chandratre, and on the recommendations of the audit committee, the board has appointed him as the secretarial auditor of the company for FY2020.

COST AUDITORS

Pursuant to Section 148(1) of the Companies Act, 2013 read with the relevant rules made thereunder, the company maintains the cost audit records in respect of its pharmaceutical business.

On the recommendation of the audit committee, the board has appointed M/s. Sagar & Associates, cost accountants (firm registration no. 000118) as cost auditors of the company for the FY2020 at a remuneration of Rs. 7 lakh plus reimbursement of out-of-pocket expenses at actuals and applicable taxes. The provisions also require that the remuneration of the cost auditors be ratified by the shareholders. As a matter of record, relevant cost audit reports for FY2018 were filed with the Central Government on 23 August 2018, within the stipulated timeline. The cost audit report for FY2019 will also be filed within the timeline.

SECRETARIAL STANDARDS

In terms of Section 118(10) of the Companies Act, 2013, the company complies with Secretarial Standards 1 and 2, relating to the ‘Meetings of the Board of Directors’ and ‘General Meetings’ respectively as specified by the Institute of Company Secretaries of India and approved by the Central Government. The company has also voluntarily adopted the recommendatory Secretarial Standard-3 on ‘Dividend’ and Secretarial Standard-4 on ‘Report of the Board of Directors’ issued by the Institute of Company Secretaries of India.

BOARD’S RESPONSE ON AUDITORS’ QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLAIMERS MADE

There are no qualifications, reservations or adverse remarks made by the statutory auditors in their report, or by the practicing company secretary in the secretarial audit report. During the year, there were no instances of frauds reported by auditors under Section 143(12) of the Companies Act, 2013.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE COURTS/ REGULATOF/TRIBUNALS

On 25 August, 2017, a securities class action lawsuit was filed against the company, its Chief Executive Officer (CEO) and its Chief Financial Officer (CFO) in the United States District Court for the District of New Jersey. The company’s Co-Chairman, its Chief Operating Officer (COO) of the time (since retired), and Dr. Reddy’s Laboratories, Inc., were subsequently named as defendants in the case. The operative complaint alleges that the company made false or misleading statements or omissions in its public filings, in violation of the US federal securities laws; that the company’s share price dropped and its investors were affected.

On 21 March 2019, the District Court issued its decision (dated 20 March 2019) granting in part and denying in part the motion to dismiss. Pursuant to that decision, the Court dismissed the plaintiff’s claims on 17 out of the 22 alleged misstatements/omissions.

The company believes that all the asserted claims, including the remaining five out of.22, are without merit and intends to vigorously defend itself against the allegations. At this point, any liability that may arise on account of this claim is unascertainable. Accordingly, no provision has been made in the consolidated financial statements of the company.

INFORMATION REQUIRED UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The company has an apex complaints committee and an internal complaints committee which operate under a defined redressal system for complaints pertaining to sexual harassment of women at the workplace. Details are available in the principle 3 of the Business Responsibility Report forming a part of this annual report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

As per Section 135 of the Companies Act, 2013, the company has a board-level CSR committee consisting of Mr. Bharat N Doshi (chairman), Mr. G V Prasad and Mr. K Satish Reddy. The company’s CSR policy provides a constructive framework to review and organize our social outreach programs in health, livelihood and education.

During the year, the committee monitored implementation and adherence to the CSR policy. Details of the CSR policy and initiatives taken by the company during the year are available on the company’s website, www.drreddys.com. The report on CSR activities is attached as Annexure V.

BUSINESS RESPONSIBILITY REPORT

A detailed Business Responsibility Report as required under Regulation 34 of the Listing Regulations, is given as a separate section in this annual report.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Pursuant to the provisions of the Companies Act, 2013, read with IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, as amended, declared dividends which remained unpaid or unclaimed for a period of seven years have been transferred by the company to the IEPF, which has been established by the Central Government.

The above-referred rules also mandate transfer of shares on which dividend are lying unpaid or unclaimed for a period of seven consecutive years to IEPF. The company has issued individual notices to the shareholders whose equity shares are liable to be transferred to IEPF, advising them to claim their dividend on or before 14 August 2019. Details of transfer of unpaid and unclaimed amounts to IEPF are given in the Chapter on Additional Shareholders’ Information.

EMPLOYEES STOCK OPTION SCHEMES

During the year, the company has formulated and implemented ‘Dr. Reddy’s Employees Stock Option Scheme, 2018’ and established Dr. Reddy’s Employees ESOS Trust for its implementation and administration. Both the Scheme and implementation of the scheme through Trust were approved by the shareholders at the 34th AGM of the company.

There has been no change in the ‘Dr. Reddy’s Employees Stock Option Scheme, 2002’, the ‘Dr. Reddy’s Employees ADR Stock Option Scheme, 2007’and Dr. Reddy’s Employees Stock Option Scheme, 2018’ (collectively referred as ‘the schemes’).

The schemes are in compliance with the SEBI (Share Based Employee Benefits) Regulations, 2014.

Details are available on the company’s website: www.drreddys.com/media/904448/esop_details.pdf

The details also form part of note 2.23 of the notes to accounts of the standalone financial statements.

PARTICULARS OF EMPLOYEES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as Annexure VI.

In terms of Section 197(12) of the Companies Act, 2013, read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of limits set out in said rules forms part of the annual report.

Considering the first proviso to Section 136(1) of the Companies Act, 2013, the annual report, excluding the aforesaid information, is being sent to the shareholders of the company and others entitled thereto. The said information is available for inspection at the registered office of the company during business hours on working days up to the date of the forthcoming 35th AGM. Any shareholder interested in obtaining a copy thereof may write to the company secretary in this regard.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars as prescribed under Section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are attached as Annexure VII.

ANNUAL RETURN

Details forming part of the extract of the annual return in form MGT-9 are attached as Annexure VIII.

ACKNOWLEDGMENT

Your directors place on record their sincere appreciation for the significant contribution made by its employees through their dedication, hard work and commitment, as also for the trust reposed on the company by the medical fraternity and patients. The board of directors also acknowledge the support extended by the analysts, bankers, government agencies, media, customers, suppliers, shareholders and investors at large.

It looks forward to your continued support in the company’s endeavor to accelerate access to innovative and affordable medicines because Good Health Can’t Wait.

For and on behalf of the board of directors

K Satish Reddy

Chairman

Place : Hyderabad

Date : 17 May 2019

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Mar 31, 2018

Board’s Report

Dear Members,

Your directors are pleased to present the 34th annual report for the year ended 31 March 2018.

FINANCIAL HIGHLIGHTS

Table 1 gives the consolidated and standalone financial highlights of the company based on Ind AS for FY2018 (i.e. from 1 April 2017 to 31 March 2018) compared to the previous financial year.

COMPANY AFFAIRS

The company''s consolidated total income for the year was Rs, 144.36 billion, which was marginally up by 0.5% over the previous year. In US$ terms, this amounted to US$ 2.22 billion. Profit before taxes (PBT) was Rs, 13.5 billion, representing a decline of 13% over the previous year. In US$ terms, this translated to US$ 207 million.

The company''s standalone total income for the year was Rs, 95.63 billion, or a decline of 7% over the previous year. In US$, this amounted to US$ 1.47 billion. PBT was Rs, 7 billion, or a reduction of 55% over the previous year. In US$ terms, this translated to US$ 107 million.

TABLE FINANCIAL HIGHLIGHTS_ __(Rs, MILLION)

	CONSOLIDATED		STANDALONE
	FY2018	FY2017	FY2018	FY2017
Total income	144,362	143,676	95,633	103,110
Profit before depreciation, amortization and tax	24,276	25,803	14,711	22,796
Depreciation and amortization	10,772	10,266	7,741	7,351
Profit before tax	13,504	15,537	6,970	15,445
Tax expense	4,380	2,965	1,301	1,604
Profit after tax	9,124	12,572	5,669	13,841
Share of profit of equity accounted investees, net of tax	344	349	-	-
Net profit for the year	9,468	12,921	5,669	13,841
Add: surplus at the beginning of the year	90,771	82,595	89,063	79,930
Total available for appropriation	100,239	95,516	94,732	93,771
Appropriations:
Dividend paid during the year	3,316	3,312	3,316	3,312
Tax on dividend paid	676	674	676	674
Credit of dividend distribution tax	-	(596)	-	(633)
Transfer to general reserve	-	1,355	-	1,355
Balance carried forward	96,247	90,771	90,740	89,063

Revenues from Global Generics declined by 1% and stood at Rs, 114 billion. There was growth across Emerging Markets and India, partially offset by decline in North America Generics.

Revenues from North America declined by 6%, to Rs, 59.8 billion. This was largely on account of higher price erosions due to channel consolidation and increased competition in some of our key molecules, such as valganciclovir, azacytidine and de

cytokine. This was partly offset by revenue contribution of some new products.

During the year, the company launched several new products including gVytorin, gDoxil, gravel, gAloxi etc. The company filed 19 abbreviated new drug applications (ANDAs) and one new drug application (NDA) under section 505(b)(2) of the Federal Food, Drug and Cosmetic Act (FD&C Act) in the USA.

As of 31 March 2018, there were 110 generic filings awaiting approval with the US Food and Drug Administration or USFDA, comprising 107 ANDAs and three NDAs filed under section 505(b)(2). Of these 107 ANDAs, 63 are Para IVs, out of which 30 are believed to have ''First to File'' status.

Revenues from Emerging Markets was Rs, 22.7 billion, registering a year-on-year growth of 8%. Revenues from India stood at Rs, 23.3 billion, registering a year-on-year growth of 1%.

Revenues from PSAI stood at Rs, 22 billion, registering a year-on-year growth of 3%. During the year, the company filed 12 drug master files (DMFs) in the US.

DIVIDEND

Your directors are pleased to recommend a dividend of Rs, 20/-(400%) for FY2018, on every equity share of Rs, 5/-. The d dividend, if approved at the 34th annual general meeting (AGM), will be paid to those shareholders whose names appear on the register of members of the company as of end of the day on 17 July 2018.

In terms of regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), the company''s dividend distribution policy is attached as Annexure I to the board''s report.

TRANSFER TO RESERVES

The company has not proposed to transfer any amount to the general reserve.

SHARE CAPITAL

The paid-up share capital of your company increased by Rs, 0.85 million to Rs, 829.56 million in FY2018 due to allotment of 169,194 equity shares, on exercise of stock options by eligible employees through the ''Dr. Reddy''s Employees Stock Option Scheme, 2002'' and ''Dr. Reddy''s Employees ADR Stock Option Scheme, 2007''.

FIXED DEPOSITS

The company has not accepted any deposits covered under chapter V of the Companies Act, 2013. Accordingly, no disclosure or reporting is required in respect of details relating to deposits.

CHANGE IN THE NATURE OF BUSINESS, IF ANY

During the year, there was no change in the nature of business of the company or any of its subsidiaries.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

None.

SUBSIDIARIES AND ASSOCIATES

The company had 51 subsidiaries and two joint venture companies as on 31 March 2018. During FY2018, Dr. Reddy''s Laboratories Chile SpA.

(in Chile), Dr. Reddy''s (WUXI) Pharmaceutical Co. Limited (in China),

Dr. Reddy''s Laboratories Malaysia Sdn. Bhd. (in Malaysia) and Dr. Reddy''s Laboratories Taiwan Limited (in Taiwan) have become subsidiary companies. DRSS Solar Power Private Limited was closed and ceased to be a joint venture company.

Section 129(3) of the Companies Act,

2013 states that where the company has one or more subsidiaries, it shall, in addition to its financial statements, prepare a consolidated financial statement of the company and of all subsidiaries in the same form and manner as that of its own and also attach along with its financial statement, a separate statement containing the salient features of the financial statements of its subsidiaries.

Hence, the consolidated financial statements of the company and all its subsidiaries and joint ventures, prepared in accordance with Indian Accounting Standards (Ind AS) 110 and 111 as specified in the Companies (Indian Accounting Standards) Rules, 2015, form part of the annual report. Moreover, a statement containing the salient features of the financial statement of the company''s subsidiaries and joint ventures in the prescribed Form AOC-1, is attached as Annexure II to the board''s report. This statement also provides details of the performance and financial position of each subsidiary and joint venture.

In accordance with section 136 of the Companies Act, 2013, the audited financial statements and related information of the subsidiaries, wherever applicable, are available for inspection during regular business hours at our registered office in Hyderabad, India. These are also available on the company''s website, www.drreddys.com.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The company makes investments or extends loans/guarantees to its wholly-owned subsidiaries for their business purposes. Details of loans, guarantees and investments covered under section 186 of the Companies Act, 2013, along with the purpose for which such loan or guarantee was proposed to be utilized by the recipient, form part of the notes to the financial statements provided in this annual report.

CORPORATE GOVERNANCE AND ADDITIONAL SHAREHOLDERS'' INFORMATION

A detailed report on the corporate governance systems and practices of the company is given in a separate chapter of this annual report. Similarly, other information for shareholders is provided in the chapter on Additional Shareholders'' Information. A certificate from the statutory auditors of the company confirming compliance with the conditions of corporate governance is attached to the chapter on Corporate Governance.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the Management Discussion and Analysis in terms of the provisions of regulation 34 of the Listing Regulations is provided as a separate chapter in the annual report.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

The term of Dr. Ashok S Ganguly as an independent director of the company ended on 28 July 2017. The board places on record its appreciation for the services rendered by Dr. Ganguly during his tenure as a member of the board and its committees.

The board of directors on 30 October 2017, appointed Mr. Prasad R Menon, as an additional director of the Company, categorized as independent. The Board recommends appointment of Mr. Menon as an independent director under section 149 of the Companies Act, 2013 for a term of five years with effect from 30 October 2017, for approval of the shareholders at the forthcoming 34th AGM scheduled on 27 July 2018.

In accordance with section 149(7) of the Companies Act, 2013, each independent director has confirmed to the company that he or she meets the criteria of independence laid down in section 149(6) of the Companies Act, 2013 and regulation 16(1)(b) of the Listing Regulations.

The term of Mr. Anupam Puri as an independent director of the company is ending at the 34th AGM. The board recommends reappointment of Mr. Puri as an independent director under section 149 of the Companies Act, 2013 for a further term of one year, for approval of the shareholders at the forthcoming 34th AGM scheduled on 27 July 2018.

Mr. K Satish Reddy, retires by rotation at the forthcoming 34th AGM and being eligible, seeks reappointment.

Brief profiles of Mr. Prasad R Menon,

Mr. Anupam Puri and Mr. K Satish Reddy are given in the chapter on Corporate Governance and the Notice convening the 34th AGM for reference of the shareholders.

BOARD EVALUATION

As per provisions of the Companies Act, 2013 and regulation 17(10) of the Listing Regulations, an evaluation of the performance of the board, its committees and members was undertaken. For details, please see the chapter on Corporate Governance in this annual report.

APPOINTMENT OF DIRECTORS AND REMUNERATION POLICY

The assessment and appointment of members to the board is based on a combination of criterion that includes ethics, personal and professional stature, domain expertise, gender diversity and specific qualification required for the position. A potential board member is also assessed on the basis of independence criteria defined in section 149(6) of the Companies Act, 2013 and regulation 16(1)(b) of the Listing Regulations.

In accordance with section 178(3) of the Companies Act, 2013, regulation 19(4) of the Listing Regulations and on recommendations of the company''s nomination, governance and compensation committee, the board adopted a remuneration policy for directors, key managerial personnel (KMPs), senior management and other employees. The policy is attached in the chapter on Corporate Governance.

NUMBER OF BOARD MEETINGS

The board of directors met five times during the year. In addition, an annual board retreat was held to discuss strategic matters. Details of board meetings are given in the chapter on Corporate Governance.

AUDIT COMMITTEE

The audit committee of the board of directors consists entirely of independent directors. Presently, the committee comprises Mr. Sridar Iyengar (chairman), Dr. Omkar Goswami and Mr. Bharat N Doshi. Further details can be seen in the chapter on Corporate Governance. The board has accepted all recommendations made by the audit committee during the year.

BUSINESS RISK MANAGEMENT

The company has a risk management committee of the board, consisting entirely of independent directors.

Details of the committee and its terms of reference are set out in the chapter on Corporate Governance.

The audit and risk management committees review key risk elements of the company''s business, finance, operations and compliance, and respective mitigation strategies. The risk management committee reviews key strategic, business, compliance and operational risks, while issues around ethics and fraud, internal control over financial reporting (ICOFR), as well as process risks and their mitigation are reviewed by the audit committee.

The company''s finance, investment and risk management council (FIRM council) is a management level committee which operates under a charter and focuses on risks associated with the company''s business and investments. The FIRM council periodically reviews matters pertaining to risk management, compliance, ethics and fraud. Additionally, the enterprise-wide risk management (ERM) function helps management and the board to periodically prioritize, review and measure business risks against a pre-determined risk appetite, and their suitable response, depending on whether such risks are internal, strategic or external.

During FY2018, focus areas of risk management committee included progress on cyber security, data privacy, quality and regulatory, geo-political risk, compliance, patent infringement risk exposures as well as safety and health.

ADEQUACY OF INTERNAL FINANCIAL CONTROL SYSTEMS

The company has in place adequate internal financial controls with reference to its financial statements. These controls ensure the accuracy and completeness of the accounting records and the preparation of reliable financial statements.

DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of section 134(5) of the Companies Act, 2013, (''the Act''), your directors state that:

1. applicable accounting standards have been followed in the preparation of the annual accounts;

2. accounting policies have been selected and applied consistently. Judgments and estimates made are reasonable and prudent, so as to give a true and fair view of the state of affairs of the company at the end of the FY2018 and of the profit of the company for that period;

3. proper and sufficient care has been taken to maintain adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

4. annual accounts have been prepared on a going concern basis;

5. adequate internal financial controls for the company to follow have been laid down and these are operating effectively; and

6. proper and adequate systems have been devised to ensure compliance with the provisions of all applicable laws and these systems are operating effectively.

RELATED PARTY TRANSACTIONS

In accordance with section 134(3)(h) of the Companies Act, 2013 and rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contract or arrangement entered into by the company with related parties referred to in section 188(1) of the Companies Act, 2013 in Form AOC-2 is attached as Annexure III. All such contracts or arrangements are in the interest of the company. Details of related party disclosures form part of the notes to the financial statements provided in this annual report.

VIGIL MECHANISM/WHISTLEBLOWER POLICY

The company has an ombudsperson policy (whistle-blower/vigil mechanism) to report concerns. The vigil mechanism consists of a hotline - a dedicated e-mail ID and a phone number. The ombudsperson policy safeguards from victimization of those who use this mechanism. The audit committee chairperson is the chief ombudsperson. The policy also provides access to the chairperson of the audit committee under certain circumstances. Details of the policy are available on the company''s website, www.drreddys.com/investors/ governance/ombudsperson-policy.

STATUTORY AUDITORS

M/s. S R Batliboi & Associates LLP, chartered accountants (firm registration No. 101049W/E300004) were appointed as statutory auditors of the company at the 32 nd AGM held on 27 July 2016, for a period of five years commencing from the conclusion of 32nd AGM till the conclusion of the 37th AGM, subject to ratification by shareholders every year, as may be applicable. However, the Ministry of Corporate Affairs (MCA) vide its notification dated 7 May 2018 has omitted the requirement under first proviso to section 139 of the Companies Act, 2013 and rule 3(7) of the Companies (Audit and Auditors) Rules, 2014, regarding ratification of appointment of statutory auditors by shareholders at every subsequent AGM.

Consequently, M/s. S R Batliboi & Associates LLP, chartered accountants, continues to be the statutory auditors of the company till the conclusion of 37th AGM, as approved by shareholders at 32nd AGM held on 27 July 2016.

SECRETARIAL AUDITOR

Pursuant to section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Dr. K R Chandratre, practicing company secretary (membership no. FCS 1370 and certificate of practice no. 5144) was appointed to conduct the secretarial audit of the company for FY2018. The secretarial audit report for FY2018 is attached as Annexure IV.

Based on the consent received from Dr. K R Chandratre, and on the recommendations of the audit committee, the board has appointed him as the secretarial auditor of the company for FY2019.

COST AUDITORS

Pursuant to section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules,

2014 and the Companies (Cost Records and Audit) Rules, 2014, as amended, the company maintains the cost audit records in respect of its pharmaceutical business. On the recommendation of the audit committee, your board has appointed M/s. Sagar & Associates, cost accountants (firm registration no. 000118) as cost auditors of the company for the FY2019 at a remuneration of Rs, 7 lakhs plus reimbursement of out-of-pocket expenses at actuals and applicable taxes. The provisions also require that the remuneration of the cost auditors be ratified by the shareholders. As a matter of record, relevant cost audit reports for FY2017 were filed with the central government on 24 August 2017, within the stipulated timeline. The cost audit report for FY2018 will also be filed within the timeline.

BOARD''S RESPONSE ON AUDITORS'' QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLAIMERS MADE

There are no qualifications, reservations or adverse remarks made by the statutory auditors in their report or by the practicing company secretary in the secretarial audit report. During the year, there were no instances of frauds reported by auditors under section 143(12) of the Companies Act, 2013.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE COURTS/REGULATORS/ TRIBUNALS

None

INFORMATION REQUIRED UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The company has an apex complaints committee and an internal complaints committee which operate under a defined redressed system for complaints pertaining to sexual harassment of women at the workplace. Details are available in the principle 3 under section 7 of the Business Responsibility Report forming a part of this annual report.

CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES

As per section 135 of the Companies Act, 2013, the company has a board-level CSR committee consisting of Mr. Bharat N Doshi (chairman), Mr. G V Prasad and Mr. K Satish Reddy. The company''s CSR policy provides a constructive framework to review and organize our social outreach programs in health, livelihood and education. During the year, the committee monitored implementation and adherence to the CSR policy. Details of the CSR policy and initiatives taken by the company during the year are available on the company''s website, www.drreddys.com. The report on CSR activities is attached as Annexure V.

BUSINESS RESPONSIBILITY REPORT

A detailed Business Responsibility Report as required under regulation 34 of the Listing Regulations, is given as a separate section in this annual report.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Pursuant to the provisions of the Companies Act, 2013, read with IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, as amended, declared dividends which remained unpaid or unclaimed for a period of seven years have been transferred by the company to the IEPF, which has been established by the central government.

The above-referred rules also mandate transfer of shares on which dividend are lying unpaid and unclaimed for a period of seven consecutive years to IEPF. The company has issued individual notices to the shareholders whose equity shares are liable to be transferred to IEPF, advising them to claim their dividend on or before 5 August 2018.

EMPLOYEES STOCK OPTION SCHEMES

During the year, there has been no material change in the ''Dr. Reddy''s Employees Stock Option Scheme, 2002'' and the ''Dr. Reddy''s Employees ADR Stock Option Scheme, 2007'' (both collectively referred as ''the schemes''). The schemes are in compliance with the SEBI (Share Based Employee Benefits) Regulations, 2014. The details are available on the company''s website: www.drreddys.com/pdf/ESOP_details.pdf The details also form part of note 2.24 of the notes to accounts of the standalone financial statements.

PARTICULARS OF EMPLOYEES

Disclosures pertaining to remuneration and other details as required under section 197(12) of the Companies Act, 2013, read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as Annexure VI.

In terms of section 197(12) of the Companies Act, 2013, read with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of limits set out in said rules forms part of the annual report.

Considering the first proviso to section 136(1) of the Companies Act, 2013, the annual report, excluding the aforesaid information, is being sent to the shareholders of the company and others entitled thereto. The said information is available for inspection at the registered office of the company during business hours on working days up to the date of the forthcoming 34th AGM. Any shareholder interested in obtaining a copy thereof may write to the company secretary in this regard.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars as prescribed under section 134(3)(m) of the Companies Act, 2013, read with rule 8(3) of the Companies (Accounts) Rules, 2014 are attached as Annexure VII.

EXTRACT OF THE ANNUAL RETURN

Details forming part of the extract of the annual return in form MGT-9 are attached as Annexure VIII.

ACKNOWLEDGMENT

Your directors place on record their sincere appreciation for the significant contribution made by our employees through their dedication, hard work and commitment, as also for the trust reposed on us by the medical fraternity and patients. The board of directors also acknowledge the support extended by the analysts, bankers, government agencies, media, customers, suppliers, shareholders and investors at large. It looks forward to your continued support in the company''s endeavor to accelerate access to innovative and affordable medicines... because Good Health Can''t Wait.

For and on behalf of the board of directors

K Satish Reddy

Chairman

Place : Hyderabad

Date : 22 May 2018

---

Mar 31, 2017

Dear members,

The directors are pleased to present the 33rd annual report for the year ended 31 March 2017.

FINANCIAL HIGHLIGHTS

Table 1 gives the financial highlights of the company for FY2017 as compared to the previous financial year, on Ind AS consolidated and standalone basis.

COMPANY AFFAIRS

The company''s standalone net revenue for the year was '' 103.11 billion, a decline of 2.88% over the previous year. In US$ terms, this amounted to $ 1.59 billion. Profit before tax (PBT) was '' 15.45 billion, a decline of 7.88% over the previous year. In US$ terms, this translates into $ 238 million.

Consolidated net revenue for the year was '' 143.68 billion, a decline of 9.43% over the previous year. In US$ terms, this amounted to $ 2.21 billion. PBT was '' 15.54 billion, a decline of 45.65% over the previous year. In US$ terms, this translates into $ 240 million.

TABLE ij FINANCIAL HIGHLIGHTS ('' Million)

	CONSOLIDATED		STANDALONE
	FY2017	FY2016	FY2017	FY2016
Total revenue	143,676	158,633	103,110	106,168
Profit before depreciation, amortization and tax	25,803	37,977	22,796	23,261
Depreciation and amortization	10,266	9,389	7,351	6,495
Profit before tax	15,537	28,588	15,445	16,766
Tax expense	2,965	7,511	1,604	3,023
Profit after tax	12,572	21,077	13,841	13,743
Share of profit of equity accounted investees, net of tax	349	229	-	-
Net profit for the year	12,921	21,306	13,841	13,743
Add: surplus at the beginning of the year	82,595	67,074	79,930	72,058
Total available for appropriation	95,516	88,380	93,771	85,801
Appropriations:
Dividend paid during the year	3,312	3,411	3,312	3,411
Tax on dividend paid	674	694	674	694
Credit of dividend distribution tax	(596)	-	(633)	(32)
Transfer to general reserve	1,355	1,679	1,355	1,679
Others	-	-	-	119
Balance carried forward	90,771	82,595	89,063	79,930

Revenue from Global Generics declined by 10% and stood at '' 115.41 billion, driven largely by North America and Emerging Markets.

Revenue from North America declined by 16% and stood at '' 63.6 billion. This is primarily on account of increased competition in our key products namely Valganciclovir, Decitabine, Azacitidine etc. coupled with discontinuation of the McNeil business. During the year, the company launched 10 products, the major ones being Omeprazole Sodium Bicarbonate and Nitroglycerin Sublingual tablets. FY2017 also saw 26 ANDA filings in the USA. As of 31 March 2017, cumulatively 101 generic filings are pending for approval with the USFDA (99 ANDAs and two NDAs under 505(b)(2) route). Of these 99 ANDAs, 62 are Para IVs out of which we believe 21 have ''First to File'' status.

Revenue from Emerging Markets was '' 21.1 billion, a decline of 11% on a year-on-year basis. Revenue from India stood at '' 23.1 billion, registering a year-on-year growth of 9%.

Revenues from PSAI stood at '' 21.3 billion, a decline of 5% on a year-on-year basis. During the year, 82 DMFs were filed globally of which nine were in the US. The cumulative number of DMF filings as of 31 March 2017 was 754.

DIVIDEND

Your directors are pleased to recommend a dividend of '' 20/- on every equity share of '' 5/- (400%) for FY2017. The dividend, if approved at the 33rd annual general meeting (AGM), will be paid to those shareholders whose names appear on the register of members of the company as of the end of day on 18 July 2017.

In terms of regulations 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), the company has revised its dividend distribution policy. This policy was originally adopted on 18 May 2009. The policy is attached as Annexure I to the board''s report.

TRANSFER TO RESERVES

The company proposes to transfer '' 1,355 million to the general reserve.

SHARE CAPITAL

The paid-up share capital of your company decreased by '' 24.33 million to '' 828.71 million in FY2017 due to the following:

(a) Buyback and extinguishment of 5,077,504 equity shares,

(b) Allotment of 211,564 equity shares, on exercise of stock options by eligible employees of Dr. Reddy''s, through the ''Employees Stock Option Scheme, 2002'' and ''Dr. Reddy''s Employees ADR Stock Option Scheme, 2007''.

FIXED DEPOSITS

The company has not accepted any deposits covered under chapter V of the Companies Act, 2013. Accordingly, no disclosure or reporting is required in respect of details relating to deposits.

CHANGE IN THE NATURE OF BUSINESS, IF ANY

During the year, there was no change in the nature of business of the company or any of its subsidiaries.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

None.

SUBSIDIARIES AND ASSOCIATES

The company had 47 subsidiaries and three joint venture companies as on

31 March 2017. During FY2017,

Imperial Credit Private Limited and Dr. Reddy''s Laboratories Kazakhstan LLP, have become subsidiary companies and Reddy Cheminor SA in France, was closed and ceased to be a wholly-owned subsidiary. Further, OctoShare BV, OctoPlus Development BV, OctoPlus Technologies BV, OctoPlus Science BV, OctoPlus PolyActive Science BV and Chienna BV ceased to be subsidiaries of the company, upon their merger with Dr. Reddy''s Research and Development BV (formerly known as OctoPlus BV).

As per section 129(3) of the Companies Act, 2013, where the company has one or more subsidiaries, it shall, in addition to its financial statements, prepare a consolidated financial statement of the company and of all subsidiaries in the same form and manner as that of its own and also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiaries.

In accordance with the above, the consolidated financial statements of the company and all its subsidiaries and joint ventures, prepared in accordance with Indian Accounting Standards (Ind AS) 110 and 111 as specified in the Companies (Indian Accounting Standards) Rules, 2015, form part of the annual report. Further, a statement containing the salient features of the financial statement of our subsidiaries and joint ventures in the prescribed form AOC-1, is attached as Annexure II to the board''s report. This statement also provides details of the performance and financial position of each subsidiary.

In accordance with section 136 of the Companies Act, 2013, the audited financial statements and related information of the subsidiaries, where applicable, will be available for inspection during regular business hours at our registered office in Hyderabad, India. These are also available on the company''s website: www.drreddys.com.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The company makes investments or extends loans/guarantees to its wholly owned subsidiaries for their business purposes. Details of loans, guarantees and investments covered under section 186 of the Companies Act, 2013, along with the purpose for which such loan or guarantee was proposed to be utilized by the recipient, form part of the notes to the financial statements provided in this annual report.

CORPORATE GOVERNANCE AND ADDITIONAL SHAREHOLDERS'' INFORMATION

A detailed report on the corporate governance systems and practices of the company is given in a separate chapter of this annual report. Similarly, other information for shareholders is provided in the chapter additional shareholders'' information. A certificate from the statutory auditors of the company confirming compliance with the conditions of corporate governance is attached to the corporate governance report.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the management discussion and analysis in terms of the provisions of regulation 34 of the Listing Regulations, is provided as a separate chapter in the annual report.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

The term of Mr. Ravi Bhoothalingam as an independent director of the company ended on 27 July 2016. The board places on record its appreciation for the services rendered by Mr. Bhoothalingam during his tenure as a member of the board and its committees.

The board of directors at its meeting held on 12 May 2017, had re-appointed Mr. K Satish Reddy as whole-time director designated as chairman of the company (or such other designation as the board may deem fit), for a further period of five years with effect from 1 October 2017 (including terms and conditions of the appointment), subject to approval of the shareholders at the forthcoming 33rd AGM scheduled on 28 July 2017.

In accordance with section 149(7) of the Companies Act, 2013, each independent director has confirmed to the company that he or she meets the criteria of independence laid down in section 149(6) of the Companies Act, 2013 and regulation 16(1)(b) of the Listing Regulations.

Mr. G V Prasad, retires by rotation at the forthcoming 33rd AGM and being eligible, seeks re-appointment.

Brief profiles of Mr. K Satish Reddy and Mr. G V Prasad are given in the corporate governance section of the annual report and notice convening the 33rd AGM for reference of the shareholders.

BOARD EVALUATION

As per provisions of the Companies Act, 2013 and regulation 17(10) of the Listing Regulations, an evaluation of the performance of the board and members was undertaken. For details, please see the chapter on corporate governance in this annual report.

APPOINTMENT OF DIRECTORS AND REMUNERATION POLICY

The assessment and appointment of members to the board is based on a combination of criteria that includes ethics, personal and professional stature, domain expertise, gender diversity and specific qualification required for the position. A potential board member is also assessed on the basis of the independence criteria defined in section 149(6) of the Companies Act, 2013 and regulation 16(1)(b) of the Listing Regulations.

In accordance with section 178(3) of the Companies Act, 2013, regulation 9(4) of the Listing Regulations and on recommendations of the nomination, governance and compensation committee, the board adopted a remuneration policy for directors, key managerial personnel (KMPs) and senior management. The policy is attached to the corporate governance report.

NUMBER OF BOARD MEETINGS

The board of directors met four times during the year. In addition, an annual board retreat was held to discuss strategic matters. Details of board meetings are given in the corporate governance report.

AUDIT COMMITTEE

The audit committee of the board of directors consists entirely of independent directors. Presently, the committee comprises Mr. Sridar Iyengar (chairman), Ms. Kalpana Morparia, Dr. Omkar Goswami and Mr. Bharat N Doshi. Further details can be seen in the corporate governance report. The board has accepted all recommendations made by the audit committee during the year.

BUSINESS RISK MANAGEMENT

The company has a risk management committee of the board, consisting entirely of independent directors.

Details of the committee and its terms of reference are set out in the corporate governance report.

The audit and risk management committees review key risk elements of the company''s business, finance, operations and compliance and respective mitigation strategies. The risk management committee reviews key strategic, business, compliance and operational risks, while issues around ethics and fraud, internal control over financial reporting (ICOFR), as well as process risks and their mitigation are reviewed by the audit committee.

The company''s finance, investment and risk management council (FIRM council) is a management level committee which operates under a charter and focuses on risks associated with the company''s business and investments. The FIRM council periodically reviews matters pertaining to ethics and fraud, compliance and internal audit. Additionally, the enterprise-wide risk management (ERM) function helps the management and the board to periodically prioritize, review and measure business risks against a pre-determined risk appetite and their suitable response, depending on whether such risks are internal, strategic or external.

During FY2017, focus areas of risk management included progress on strategy execution, quality and regulatory, geo-political, compliance and patent infringement risk exposures, safety and health.

ADEQUACY OF INTERNAL FINANCIAL CONTROL SYSTEMS

The company has in place adequate internal financial controls with reference to financial statements. These controls ensure the accuracy and completeness of the accounting records and preparation of reliable financial statements.

DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of section 134(5) of the Companies Act, 2013, (''the Act''), your directors state that:

1. applicable accounting standards have been followed in the preparation of the annual accounts;

2. accounting policies have been selected and applied consistently. Judgments and estimates made are reasonable and prudent, so as to give a true and fair view of the state of affairs of the company at the end of the FY2017 and of the profit of the company for that period;

3. proper and sufficient care has been taken to maintain adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

4. annual accounts have been prepared on a going concern basis;

5. adequate internal financial controls for the company to follow have been laid down and these are operating effectively; and

6. proper and adequate systems have been devised to ensure compliance with the provisions of all applicable laws and these systems are operating effectively.

RELATED PARTY TRANSACTIONS

In accordance with section 134(3)(h) of the Companies Act, 2013 and rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contract or arrangement entered into by the company with related parties referred to in section 188(1) in form AOC-2 is attached as Annexure III. All such contracts or arrangements are in the interest of the company. Details of related party disclosures form part of the notes to the financial statements provided in this annual report.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The company has an ombudsperson policy (whistle blower/vigil mechanism) to report concerns. The vigil mechanism consists of a hotline - a dedicated email-ID and a phone number. The ombudsperson policy safeguards from victimization of those who use this mechanism. An audit committee member is the chief ombudsperson. The policy also provides access to the chairperson of the audit committee under certain circumstances. Details of the policy are also available on the company''s website: www.drreddys.com/investors/ governance/ombudsperson-policy

STATUTORY AUDITORS

M/s. S R Batliboi & Associates LLP, chartered accountants (firm registration no. 101049W/E300004) were appointed as statutory auditors of the company at the 32 nd AGM held on 27 July 2016, for a period of 5 years commencing from the conclusion of 32nd AGM till the conclusion of the 37th AGM, subject to ratification by shareholders every year, as may be applicable. The firm has consented and confirmed that the appointment is within the limits specified under section 141(3)(g) of the Companies Act, 2013. The statutory auditors have also confirmed that they are not disqualified to be appointed as such in terms of the proviso to section 139(1), section 141(2) and section 141(3) of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014.

The audit committee and the board of directors recommend to the shareholders the ratification of appointment of M/s. S R Batliboi & Associates LLP, chartered accountants, as statutory auditors of the company from the conclusion of the 33rd AGM till the conclusion of 34th AGM.

SECRETARIAL AUDITOR

Pursuant to section 204 of the Companies Act, 2013 and the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014,

Dr. K R Chandratre, practicing company secretary (membership no. FCS 1370 and certificate of practice no. 5144) was appointed to conduct the secretarial audit of the company for FY2017. The secretarial audit report for FY2017 is attached as Annexure IV.

Based on the consent received from Dr. K R Chandratre, and on the recommendations of the audit committee, the board has appointed him as the secretarial auditor of the company for FY2018.

COST AUDITORS

Pursuant to section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014 and the Companies (Cost Records and Audit) Amendment Rules, 2014, the company maintains the cost audit records in respect of its pharmaceutical business. On recommendation of the audit committee, your board has appointed M/s. Sagar & Associates, cost accountants (firm registration no. 000118) as cost auditors of the company for the FY2018 at a remuneration of '' 7 lakhs plus reimbursement out of pocket expenses at actuals and applicable taxes. The provisions also require that the remuneration of the cost auditors be ratified by the shareholders. As a matter of record, relevant cost audit reports for FY2016 were filed with the Central Government on 24 August 2016, within the stipulated timeline. The cost audit reports for FY2017 will be also filed within the timeline.

BOARD''S RESPONSE ON AUDITOR''S QUALIFICATION, RESERVATION OR ADVERSE REMARK OR DISCLAIMER MADE

There are no qualifications, reservations or adverse remarks made by the statutory auditors in their report or by the practicing company secretary in the secretarial audit report. During the year, there were no instances of frauds reported by auditors under section 143(12) of the Companies Act, 2013.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE COURTS/REGULATORS

None.

INFORMATION REQUIRED UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The company has an apex complaints committee and an internal complaints committee which operate under a defined redressal system for complaints pertaining to sexual harassment of women at workplace. Details are available in the principle 3 under section 7 of the business responsibility report forming a part of this annual report.

CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES

As per section 135 of the Companies Act, 2013, the company has a board level CSR committee consisting of Mr. Bharat N Doshi (chairman), Mr. G V Prasad and Mr. K Satish Reddy. The company''s CSR policy provides a constructive framework to review and organize our social outreach programs in health, livelihood and education. During the year, the committee monitored implementation and adherence to the CSR policy. Details about the CSR policy and initiatives taken by the company during the year are available on the company''s website: www.drreddys.com. The report on CSR activities is attached as Annexure V.

BUSINESS RESPONSIBILITY REPORT

A detailed business responsibility report in term of the provisions of regulation 34 of the Listing Regulations, is available as a separate section in this annual report.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Pursuant to the provisions of the Companies Act, 2013, read with IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, as amended, declared dividends which remained unpaid or unclaimed for a period of seven years have been transferred by the company to the IEPF, which has been established by the central government.

The above referred rules now mandate transfer of dividends lying unpaid and unclaimed for a period of seven years as well as the underlying equity shares to IEPF. The company has issued individual notices to the shareholders whose equity shares are liable to be transferred to IEPF, advising them to claim their dividend on or before 31 May 2017.

EMPLOYEES STOCK OPTION SCHEMES

During the year, there has been no material change in the ''Dr. Reddy''s Employees Stock Option Scheme, 2002'' and the ''Dr. Reddy''s Employees ADR Stock Option Scheme, 2007'' (both collectively referred as ''the schemes''). The schemes are in compliance with the SEBI (Share Based Employee Benefits) Regulations,

2014. The details are available on the company''s website: www.drreddys.com/ pdf/ESOP_details.pdf.

The details also form part of note 2.28 of the notes to accounts of the standalone financial statements.

PARTICULARS OF EMPLOYEES

Disclosures pertaining to remuneration and other details as required under section 197(12) of the Companies Act, 2013, read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as Annexure VI.

In terms of section 197(12) of the Companies Act, 2013, read with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of limits set out in said rules forms part of the annual report.

Considering the first proviso to section 136(1) of the Companies Act, 2013, the annual report, excluding the aforesaid information, is being sent to the shareholders of the company and others entitled thereto. The said information is available for inspection at the registered office of the company during business hours on working days up to the date of the forthcoming 33rd AGM. Any shareholder interested in obtaining a copy thereof may write to the company secretary in this regard.

CONSERVATION OF ENERGY, RESEARCH & DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars as prescribed under section 134(3)(m) of the Companies Act, 2013, read with rule 8(3) of the Companies (Accounts) Rules, 2014 are attached as Annexure VII.

EXTRACT OF THE ANNUAL RETURN

Details forming part of the extract of the annual return in form MGT-9 are attached as Annexure VIII.

ACKNOWLEDGEMENT

Your directors place on record their sincere appreciation for the significant contribution made by our employees through their dedication, hard work and commitment, as also for the trust reposed in us by the medical fraternity and patients. We also acknowledge the support extended to us by the analysts, bankers, government agencies, media, customers, suppliers, shareholders and investors at large. We look forward to your continued support in our endeavor to accelerate access to innovative and affordable medicines because Good Health Can''t Wait.

for and on behalf of the

board of directors

K Satish Reddy

Chairman

Place: Hyderabad Date: 12 May 2017

---

Mar 31, 2013

Dear Members,

The Directors are pleased to present the 29th annual report for the year ended 31 March 2013.

FINANCIAL HIGHLIGHTS

Table 1 gives the financial highlights of the Company for FY2013 as compared to previous financial year on Indian GAAP standalone basis.

DIVIDEND

Your Directors are pleased to recommend a dividend of R15 on every equity share of R5 each (300%) for FY2013. The dividend, if approved at the 29th Annual General Meeting, will be paid to those shareholders whose names appear on the register of members of the Company as on 16 July 2013.

The dividend would be tax-free in the hands of the shareholders.

SHARE CAPITAL

The paid-up share capital of your Company increased by R 1.38 million in FY2013 due to the allotment of 276,129 equity shares on exercise of stock options by the eligible employees under Dr. Reddy''s Employees Stock Option Scheme, 2002 and Dr. Reddy''s Employees ADR Stock Option Scheme, 2007.

UNSECURED, REDEEMABLE, NON-CONVERTIBLE DEBENTURES

The bonus non-convertible debentures (NCDs) issued by the Company in FY2011 are listed on the Bombay Stock Exchange and the National Stock Exchange and rated LAA by ICRA.

During FY2013, the second year''s interest on these NCDs was paid on due date.

CORPORATE GOVERNANCE AND ADDITIONAL INFORMATION TO SHAREHOLDERS

A detailed report on the corporate governance systems and practices of the Company is given in a separate section of the annual report 2012-13. Detailed information for the shareholders is given in Additional Shareholders'' Information section.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the Management Discussion and Analysis is provided as a separate section in the annual report.

BUSINESS RESPONSIBILITY REPORT

A detailed Business Responsibility report is given as a separate section in the annual report.

SUBSIDIARY COMPANIES

The Company has 50 subsidiaries as on 31 March 2013.

During FY2013, the Company has acquired 98.91% of the issued and subscribed share capital of OctoPlus N.V., Netherlands, an entity listed on the Amsterdam stock exchange. OctoPlus is a specialty pharmaceutical company focused on the development and manufacture of improved injectable pharmaceuticals based on proprietary drug delivery technologies that exhibit fewer side effects, improved patient convenience and a better efficacy/ safety balance than existing therapies. Subsequently, the shares of OctoPlus N.V. were delisted from the Amsterdam stock exchange w.e.f. 16 April 2013.

Further, subsidiaries of OctoPlus N.V., namely OctoShare BV, OctoPlus Development BV, OctoPlus Technologies BV, OctoPlus Science BV, OctoPlus PolyActive Science BV and Chienna BV also become the subsidiaries of the Company.

During FY2013, Reddy Pharmaceuticals Hongkong Limited, Hongkong; Dr. Reddy''s Laboratories ILAC TICARET, Turkey; OOO Alfa, Russia; Trigenesis Therapeutics Inc., USA; and Dr. Reddy''s Laboratories (Canada) Inc., Canada ceased to be subsidiaries of the Company.

As per Section 212 of the Companies Act, 1956, the Company is required to attach the Directors'' Report, Balance Sheet and Statement of Profit and Loss of the subsidiaries to the annual report.

The Ministry of Corporate Affairs, Government of India vide its circular No. 2/2011 dated 8 February 2011 has provided an exemption to companies from complying with Section 212, provided such companies publish the audited consolidated financial statements in their annual report. Accordingly, the annual report 2012-13 does not contain the financial statements of the subsidiaries. The audited annual accounts and related information of the subsidiaries, where applicable, will be made available for inspection during business hours at our registered office in Hyderabad, India.

The same will also be published on the Company''s website, www.drreddys.com.

The members, if desire, may write to the Company Secretary at Dr. Reddy''s Laboratories Limited, 8-2-337, Road No. 3, Banjara Hills, Hyderabad 500 034 to obtain a copy of the financials of the subsidiary companies.

The consolidated financial statements, in terms of Clause 32 of the Listing Agreement and prepared in accordance with Accounting Standard 21 as specified in the Companies (Accounting Standards) Rules, 2006 also forms a part of this annual report.

TABLE 1 FINANCIAL HIGHLIGHTS IN RS. MILLION

FY2013 FY2012

Total revenue 85,757 68,215

Profit before depreciation and tax 20,660 15,603

Depreciation 3,128 3,011

Profit before tax 17,532 12,592

Tax expense 4,877 3,468

Net profit for the year 12,655 9,124

Add: Surplus at the beginning of the year 36,049 31,397

Total available for appropriation 48,704 40,521

Appropriations:

Proposed dividend on equity shares 2,548 2,331

Tax on proposed dividend 433 378

Credit of dividend distribution tax (4) -

Dividend of previous years (including tax) 3 3

Debenture Redemption Reserve 845 848

Transfer to General Reserve 1,265 912

Balance carried forward 43,614 36,049

DIRECTORS

On 15 March 2013, Dr. K Anji Reddy, Founder Chairman of the Company, passed away at Hyderabad. His mission in life was to provide affordable medicines to millions of patients worldwide while also innovating for healthier life. Under his leadership, the Company became a pioneer and trend setter in the Indian pharmaceutical industry.

Dr. Reddy also set-up the ''Dr. Reddy''s Institute of Life Sciences'' at Hyderabad, which is a public-private partnership with the Government of Andhra Pradesh for carrying out cutting edge research in Life Sciences. Critically aware of his responsibility to society, Dr. Reddy in the last decade was engaged in outcome based institutionalized philanthropy that positively impacted the lives of nearly 5 million underprivileged citizens, mainly children and youth.

The Board places on record its enormous appreciation for the contribution made by Dr. K Anji Reddy for creating and growing the Company.

Following the demise of Dr. K Anji Reddy, Founder Chairman, the Board of Directors, based on the recommendation of the Nomination, Governance and Remuneration Committee, has designated:

- Mr. G V Prasad as Chairman and Chief Executive Officer of the Company; and

- Mr. Satish Reddy as Vice Chairman in addition to his role of Managing Director and Chief Operating Officer.

The above changes were effective 30 March 2013. The terms and conditions like remuneration, balance tenure and others relating to the appointment of Mr. G V Prasad and Mr. Satish Reddy, as approved by the shareholders at their annual general meetings held on 21 July 2011 and 20 July 2012, respectively, remain the same.

The disclosure regarding change in designations of Mr. G V Prasad, Chairman and CEO and Mr. Satish Reddy, Vice Chairman and Managing Director in this section of annual report may also be regarded as an abstract and memorandum of interest of Directors under Section 302 of the Companies Act, 1956.

As per Article 113 of the Articles of Association of the Company, Dr. Ashok S Ganguly, Dr. J P Moreau and Ms. Kalpana Morparia retire by rotation at the forthcoming Annual General Meeting scheduled to be held on 31 July 2013 and being eligible, seek re-appointment.

The brief profiles of Dr. Ashok S Ganguly, Dr. J P Moreau and Ms. Kalpana Morparia are given in the Corporate Governance section of the annual report for reference of the members.

AUDITORS

The statutory auditors of the Company, B S R & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept office of the statutory auditors for FY2014, if re-appointed. The Audit Committee and the Board of Directors recommend the re-appointment of B S R & Co. as statutory auditors of the Company for FY2014 for shareholders'' approval.

COST AUDIT

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed an audit of cost accounting records in respect of Pharmaceuticals business of the Company.

Based on the recommendations of the Audit Committee, and subject to the approval of the Central Government, the Board of Directors had appointed M/s. Sagar & Associates as cost auditors of the Company for FY2013. The cost audit report would be filed with the Central Government as per timeline.

The relevant cost audit reports for FY2012 were filed within the due date on 27 February 2013. The due date for filing these reports was 28 February 2013.

SECRETARIAL AUDIT

A secretarial audit for FY2013 was carried out by Dr. K R Chandratre, practicing Company Secretary. The secretarial audit report forms a part of the annual report.

The said secretarial audit report confirms that the Company has complied with all the applicable provisions of the Companies Act, 1956, Depositories Act, 1996, Equity and Debt Listing Agreements with the Stock Exchanges, Debenture Trust Deed, Securities Contracts (Regulation) Act, 1956 and all the regulations of Securities and Exchange Board of India (SEBI) as applicable to the Company, including the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and the SEBI (Prohibition of Insider Trading) Regulations, 1992.

DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of Section 217(2AA) of the Companies Act, 1956, your Directors confirm as under:

1 In preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

2 Accounting policies have been selected and applied consistently and judgments and estimates made, are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 2012-13 and of profit of the Company for that period;

3 Proper and sufficient care has been taken to maintain adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4 Annual accounts have been prepared on a going concern basis.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO IEPF

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the declared dividends, which remained unpaid or unclaimed for a period of seven years, have been transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the said Act.

EMPLOYEES STOCK OPTION SCHEMES

The details of stock options as on 31 March 2013 under the "Dr. Reddy''s Employees Stock Option Scheme, 2002" and the "Dr. Reddy''s Employees ADR Stock Option Scheme, 2007", in terms of Guideline 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, as amended, are set out in the Annexure 1 to the Directors'' Report.

PARTICULARS OF EMPLOYEES

Pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in the Annexure 2 to the Directors'' Report.

CONSERVATION OF ENERGY RESEARCH AND DEVELOPMENTS, TECHNOLOGY ABSORPTION, FOREIGN ExCHANGE EARNING AND OUTGO

The particulars as prescribed under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are set out in the Annexure 3 to the Directors'' Report.

ACKNOWLEDGEMENT

Your Directors place on record their sincere appreciation for the significant contribution made by the employees through their dedication, hard work and commitment and the trust reposed on us by the medical fraternity and the patients. We also acknowledge the support and wise counsel extended to us by the analysts, bankers, government agencies, shareholders and investors at large. We look forward to having the same support in our endeavor to help people lead healthier lives.

For Dr. Reddy''s Laboratories Limited

G V Prasad

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

PLACE HYDERABAD

DATE 14 MAY 2013

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Mar 31, 2012

The Directors are pleased to present the 28th annual report for the year ended 31 March 2012.

FINANCIAL HIGHLIGHTS

Table 1 gives the financial highlights of the Company for FY2012 as compared to previous financial year on Indian GAAP standalone basis.

DIVIDEND

Your Directors are pleased to recommend a dividend of Rs. 13.75 on every equity share of Rs. 5 each (275%) for FY2012. The dividend, if approved at the 28th Annual General Meeting, will be paid to those shareholders whose names appear on the register of members of the Company as on 3 July 2012.

The dividend would be tax-free in the hands of the shareholders.

SHARE CAPITAL

The paid-up share capital of your Company increased by Rs. 1.54 million in FY2012, due to allotment of 307,614 equity shares on exercise of stock options by the eligible employees under Dr. Reddy's Employees Stock Option Scheme, 2002 and Dr. Reddy's Employees ADR Stock Option Scheme, 2007.

UNSECURED, REDEEMABLE, NON- CONVERTIBLE DEBENTURES(NCDS)

The bonus NCDs issued by the Company in FY2011 have since been listed on the Bombay Stock Exchange and the National Stock Exchange and rated LAA by ICRA.

During FY2012, the first year's interest on these NCDs was paid on due date.

TABLE 1 FINANCIAL HIGHLIGHTS (RS.IN MILLION)

FY2012 FY2011

Income 68,215 54,241

Profit before depreciation and tax 15,603 12,998

Depreciation 3,011 2,479

Profit before tax 12,592 10,519

Taxation (3,468) (1,585)

Net profit for the year 9,124 8,934

Add: Surplus at the begining of the year 31,397 25,541

Add: Transfer from General Reserve - 5,972

Total Available For Appropriation 40,521 40,447

APPROPRIATIONS

Proposed dividend on equity shares 2,331 1,904

Tax on proposed dividend 378 309

Dividend of previous years (including tax) 3 4

Debenture Redemption Reserve 848 19

Issuance of Bonus Debentures as per scheme - 5,078

Dividend Distribution Tax on distribution as per scheme - 843

Transfer to General Reserve 912 893

Balance carried forward 36,049 31,397

CORPORATE GOVERNANCE AND ADDITIONAL INFORMATION TO SHAREHOLDERS

A detailed report on the corporate governance systems and practices of the Company are given in a separate section of the annual report 2011-12. Detailed information for the shareholders is given in Additional Shareholders' Information section.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the Management Discussion and Analysis is provided as a separate section in the annual report.

SUBSIDIARY COMPANIES

The Company has 48 subsidiaries as on 31 March 2012.

During FY2012, Dr. Reddy's Laboratories New York, Inc., USA, Limited Liability Company Dr. Reddy's Laboratories, Ukraine, and Dr. Reddy's Laboratories (Canada) Inc., Canada, were incorporated as wholly-owned subsidiaries of the Company.

As per Section 212 of the Companies Act, 1956, the Company is required to attach the Directors' Report, Balance Sheet and Profit and Loss Account of the subsidiaries to the annual report. The Ministry of Corporate Affairs, Government of India vide its circular No. 2/2011 dated 8 February 2011 has provided an exemption to companies from complying with Section 212, provided such companies publish the audited consolidated financial statements in their annual report. Accordingly, the annual report 2011-12 does not contain the financial statements of the subsidiaries. The audited annual accounts and related information of the subsidiaries, where applicable, will be made available for inspection during business hours at our registered office in Hyderabad, India. The same will also be published on the Company's website, www.drreddys.com.

The members, if desire, may write to the Company Secretary at Dr. Reddy's Laboratories Limited, 8-2-337, Road No. 3, Banjara Hills, Hyderabad - 500 034 to obtain a copy of the financials of the subsidiary companies.

The consolidated financial statements, in terms of Clause 32 of the Listing Agreement and prepared in accordance with Accounting Standard 21 as specified in the Companies (Accounting Standards) Rules, 2006 also form part of this annual report.

DIRECTORS

As per Article 113 of the Articles of Association of the Company, Dr. Omkar Goswami and Mr. Ravi Bhoothalingam retire by rotation at the forthcoming Annual General Meeting scheduled to be held on 20 July 2012 and being eligible, seek re-appointment.

The Board of Directors had appointed Mr. Sridar Iyengar as an Additional Director on the Board of the Company on 22 August 2011. He will hold this office till the conclusion of 28th Annual General Meeting scheduled to be held on 20 July 2012. Requisite notice under Section 257 of the Companies Act, 1956 has been received from a member proposing his appointment. It is proposed to appoint him as a Director of the Company, liable to retire by rotation. The resolution for the same has been included in the notice of the 28th Annual General Meeting scheduled to be held on 20 July 2012.

The brief profiles of Dr. Omkar Goswami,

Mr. Ravi Bhoothalingam and Mr. Sridar Iyengar are given in the Corporate Governance section of the annual report for reference of the members.

The Board of Directors in their meeting held on 3 February 2012 had re-appointed Mr. Satish Reddy as Whole Time Director designated as Managing Director and Chief Operating Officer of the Company for a further period of five years effective from 1 October 2012. His re-appointment is subject to the shareholders' approval and the resolution to this effect is included in the notice convening 28th Annual General Meeting scheduled to be held on 20 July 2012.

AUDITORS

The statutory auditors of the Company, B S R & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept office of the statutory auditors for FY2013, if re-appointed. The Audit Committee and the Board of Directors recommend the re-appointment of B S R & Co. as statutory auditors of the Company for FY2013 for shareholders' approval.

COST AUDIT

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the Company's bulk drug division and formulation division.

Based on the recommendations of the Audit Committee, and subject to the approval of the Central Government, the Board of Directors had appointed, Sagar & Associates as cost auditors of the Company for FY2012. The cost audit report would be filed with the Central Government as per timeline.

The relevant cost audit reports for FY2011 for bulk drug division and formulation division were filed within the due date on 26 September 2011. The due date for filing these reports was 27 September 2011.

SECRETARIAL AUDIT REPORT

A secretarial audit for FY2012 was carried out by Dr. K R Chandratre, practicing Company Secretary. The secretarial audit report forms part of this annual report.

The said secretarial audit report confirms that the Company has complied with all the applicable provisions of the Companies Act, 1956, Depositories Act, 1996, Equity and Debt Listing Agreements with the Stock Exchanges, Debenture Trust Deed, Securities Contracts (Regulation) Act, 1956 and all the regulations of Securities and Exchange Board India (SEBI) as applicable to the Company, including the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (erstwhile Regulation of 1997) and the SEBI (Prohibition of Insider Trading) Regulations, 1992.

DIRECTORS' RESPONSIBILITY STATEMENT

In terms of Section 217(2AA) of the Companies Act, 1956, your Directors confirm as under:

1. In preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

2. Accounting policies have been selected and applied consistently and judgments and estimates made, are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 2011-12 and of profit of the Company for that period;

3. Proper and sufficient care has been taken to maintain adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. Annual accounts have been prepared on a going concern basis.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO IEPF

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the declared dividends, which remained unpaid or unclaimed for a period of seven years, have been transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the said Act.

EMPLOYEES STOCK OPTION SCHEMES

Dr. Reddy's Employees Stock Option Scheme, 2002, (the Scheme) was valid for a period of ten years from the date of adoption of the Scheme i.e. upto 29 January 2012. Pursuant to Regulation 7 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employees Share Purchase Scheme) Guidelines, 1999, the terms of the Scheme may be varied by way of a special resolution in a general meeting.

Based on the recommendation of the Nomination, Governance and Compensation Committee, the Board of Directors of the Company at their meeting held on 25 October 2011, has consented to extend the validity of the Scheme for a further period of ten years with effect from 29 January 2012, subject to the approval of the shareholders. All other terms and conditions of the Scheme shall remained unchanged.

The resolution for extension of validity of the Scheme has been included in the notice of the 28th Annual General Meeting scheduled to be held on 20 July 2012.

The details of stock options as on 31 March 2012 under the "Dr. Reddy's Employees Stock Option Scheme, 2002" and the "Dr. Reddy's Employees ADR Stock Option Scheme, 2007" in terms of Guideline 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, as amended, are set out in the Annexure - 1 to the Directors' Report.

PARTICULARS OF EMPLOYEES

Pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in the Annexure - 2 to the Directors' Report.

CONSERVATION OF ENERGY RESEARCH AND DEVELOPMENTS, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING AND OUTGO

The particulars as prescribed under Section 217(1 )(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are set out in the Annexure - 3 to the Directors' Report.

QUALIFYING PERSONS FOR INTERSE TRANSFER OF SHARES

Based on the information received from the Promoters and as required under Regulation 10(1 )(a) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 2011, persons constituting "qualifying persons" as defined in the said Regulations comprises:

Dr. Reddy's Holdings Limited, Dr. Reddy's Investments and Advisory LLP, Dr. Reddy's Income Advisory LLP, APS Invest Advisory LLP, ASP Income Advisory LLP, APS Trust, Dr. Kallam Anji Reddy,

Mr. Gunupati Venkateswara Prasad, Mr. Gunupati Venkateswara Prasad (HUF), Mr. Kallam Satish Reddy, Mr. Kallam Satish Reddy (HUF), Mrs. K Samrajyam, Mrs. G Anuradha, Mrs. K Deepti Reddy, Miss. G Vani Sanjana Reddy and Miss. G Mallika Reddy.

ACKNOWLEDGEMENT

Your Directors place on record their sincere appreciation for significant contribution made by the employees through their dedication, hard work and commitment and the trust reposed on us by the medical fraternity and the patients.

We also acknowledge the support and wise counsel extended to us by the analysts, bankers, government agencies, shareholders and investors at large. We look forward to having the same support in our endeavor to help people lead healthier lives.

For Dr. Reddy's Laboratories Limited

DR. K ANJI REDDY

CHAIRMAN

Place: Hyderabad

Date: 11 May 2012

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Mar 31, 2011

The Directors are pleased to present the 27th annual report for the year ended 31 March 2011.

FINANCIAL HIGHLIGHTS

table 1 gives the financial highlights of the Company for the financial year 2010-11 as compared to previous financial year on Indian GAAP standalone basis.

DIVIDEND

Your Directors are pleased to recommend a dividend of Rs. 11.25 per equity share of Rs. 5/- each (225%) for the financial year 2010-11. The dividend, if approved at the ensuing Annual General Meeting, will be paid to those shareholders whose names appear on the register of members of the Company as on 5 July 2011.

The dividend would be tax-free in the hands of the shareholders.

SHARE CAPITAL

The paid up share capital of your Company increased by Rs. 2.04 millions in the financial year ended 31 March 2011, due to allotment of 407,347 equity shares on exercise of stock options by the eligible employees under Dr. Reddys Employees Stock Option Scheme, 2002 and Dr. Reddys Employees ADR Stock Option Scheme, 2007.

ISSUE OF UNSECURED, REDEEMABLE, NON-CONVERTIBLE BONUS DEBENTURES

During the financial year, the Scheme of Arrangement between the Company and its members for issuance of unsecured, redeemable, non-convertible, fully paid up debentures of Rs. 5/- each (Bonus Debentures) from the general reserve, was approved by the Honble High Court of Judicature, Andhra Pradesh at Hyderabad vide order dated 19 July 2010. The Scheme came into effect on 1 February 2011.

1

financial highlights for the financial year ended 31 march (Rs. millions)

2011 2010

income 54,241 47,246

Gross profit 12,998 13,072

Depreciation 2,479 2,224

Profit before tax 10,519 10,848

Taxation

- Current tax (1,585) (2,387)

net profit for the year 8,934 8,461

Add: Profit and loss brought forward 25,541 20,391

Add: Adjustment on merger of Perlecan Pharma Private Ltd. - (248)

Add: Transfer from General Reserve 5,972 -

total available for appropriation 40,447 28,604

Appropriations:

Proposed dividend on equity shares 1,904 1,900

Tax on proposed dividend 309 316

Dividend of previous years (including tax) 4 1

Debenture Redemption Reserve 19 -

Issuance of Bonus Debentures as per scheme 5,078 -

Dividend Distribution Tax on distribution as per scheme 843 -

Transfer to General Reserve 893 846

Balance carried forward 31,397 25,541

Accordingly, 1,015,516,392 Bonus Debentures amounting to Rs. 5,078 millions were issued to the members, in the ratio of six debentures for every equity share held by them on the record date i.e. 18 March 2011. These Bonus Debentures have since been listed on Bombay Stock Exchange and National Stock Exchange and rated LAA+ by ICRA.

CORPORATE GOVERNANCE AND ADDITIONAL INFORMATION TO SHAREHOLDERS

A detailed report on the corporate governance systems and practices of the Company are given in a separate section of the annual report 2010-11. Detailed information for the shareholders is given in Additional Shareholders Information section.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the Management Discussion and Analysis is provided as a separate section in the annual report.

SUBSIDIARY COMPANIES

The Company has 45 subsidiaries as on 31 March 2011.

During the year, Idea2Enterprises (India) Private Limited, Dr. Reddys Laboratories Romania SRL, I-Ven Pharma Capital Limited, Dr. Reddys Laboratories Tennessee LLC and Dr. Reddys Venezuela C.A. became wholly-owned subsidiaries of the Company. Further, Dr. Reddys Laboratories (Proprietary) Limited also became wholly-owned subsidiary by virtue of purchase of its balance 40% stake by the Company.

During the year, Macred India Private Limited ceased to be a subsidiary of the Company.

As per Section 212 of the Companies Act, 1956, we are required to attach the Directors Report, Balance Sheet and Profit and Loss Account of our subsidiaries to our annual report. The Ministry of Corporate Affairs, Government of India vide its circular no. 2/2011 dated 8 February 2011 has provided an exemption to companies from complying with Section 212, provided such companies publish the audited consolidated financial statements in the annual report. Accordingly, the annual report 2010-11 does not contain the financial statements of our subsidiaries. The audited annual accounts and related information of our subsidiaries, where applicable, will be made available for inspection during business hours at our registered offce in Hyderabad, India. The same will also be published on our website, www.drreddys.com.

The consolidated financial statements, in terms of Clause 32 of the Listing Agreement and prepared in accordance with Accounting Standard 21 as specifed in Companies (Accounting Standards) Rules, 2006 also form part of this annual report.

The members, if desire, may write to Company Secretary at Dr. Reddys Laboratories Limited, 8-2-337, Road No. 3, Banjara Hills, Hyderabad – 500034 to obtain a copy of the financials of the subsidiary companies.

FIXED DEPOSITS

Your Company has not accepted any fixed deposit under Section 58A of the Companies Act, 1956 from the public.

However, pursuant to the provisions of Section 58A of the Companies Act, 1956, read with Companies (Acceptance of Deposit) Rules, 1975, the unsecured, redeemable, non-convertible, fully paid-up bonus debentures amounting to Rs. 5,078 millions, issued by the Company pursuant to the Scheme of Arrangement, approved by the Honble High Court of Judicature, Andhra Pradesh, may be classifed as deposit. No amount of principal or interest on such debentures was due as at the Balance Sheet date.

DIRECTORS

As per Article 113 of the Articles of Association of the Company, Mr. Anupam Puri and Dr. Bruce L A Carter retire by rotation at the forthcoming Annual General Meeting scheduled on 21 July 2011 and being eligible, seek re-appointment. The brief profles of Mr. Anupam Puri and Dr. Bruce L A Carter are given in the Corporate Governance section of the annual report for reference of the members.

The Board of Directors in their meeting held on 25 January 2011 had re-appointed Dr. K Anji Reddy as Whole Time Director designated as Chairman of the Company for a further period of fve years effective 13 July 2011 and Mr. G V Prasad as Whole Time Director designated as Vice-Chairman and Chief Executive Officer of the Company for a further period of fve years effective 30 January 2011. These re-appointments are subject to the shareholders approval and the resolutions to this effect have accordingly been included in the notice convening 27th Annual General Meeting scheduled on 21 July 2011.

AUDITORS

The Statutory Auditors of the Company M/s. B S R & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and have confrmed their eligibility and willingness to accept offce of the Statutory Auditors, if reappointed. The Audit Committee and the Board of Directors recommend the reappointment of M/s. B S R & Co. as Statutory Auditors of the Company for the financial year 2011-12 for shareholders approval.

COST AUDIT

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the Companys bulk drug division and formulation division.

Based on the recommendations of the Audit Committee, and subject to the approval of the Central Government the Board of Directors had appointed M/s. Sagar & Associates as Cost Auditors of the Company for the financial year 2010-11. The cost audit report would be fled with the Central Government as per timeline.

The relevant cost audit reports for the financial year 2009-10 for bulk drug division and formulation division were fled within the due date on September 16 and 17, 2010. The due date for fling these reports was 27 September 2010.

DIRECTORS RESPONSIBILITY STATEMENT

In terms of Section 217 (2AA) of the Companies Act, 1956, your Directors confrm as under:

1. In preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

2. Accounting policies have been selected and applied consistently and judgments and estimates made, are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 2010-11 and of Profit of the Company for that period;

3. Proper and suffcient care has been taken to maintain adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. Annual accounts have been prepared on an on- going concern basis.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO IEPF

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the declared dividends, which remained unpaid or unclaimed for a period of seven years have been transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the said Act.

EMPLOYEES STOCK OPTION SCHEMES

Pursuant to the provisions of Guideline 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999, as amended, the details of stock options as on 31 March 2011 under the "Dr. Reddys Employees Stock Option Scheme, 2002" and the "Dr. Reddys Employees ADR Stock

Option Scheme, 2007" are set out in the annexure – 1 to the Directors Report.

PARTICULARS OF EMPLOYEES

Pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in the annexure – 2 to the Directors Report.

CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENTS, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING AND OUTGO

The particulars as prescribed under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rule, 1988 are set out in the annexure – 3 to the Directors Report.

GROUP FOR INTER SE TRANSFER OF SHARES

Based on the information received from the Promoters and as required under Clause 3(1)(e)(i) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997, persons constituting Group as defned in the Monopolies and Restrictive Trade Practices Act, 1969, for the purpose of Regulation 3(1)(e)(i) of the aforesaid SEBI Takeover Regulations comprises:

Dr. Reddys Holdings Limited, Dr. Reddys Investments and Advisory LLP, Dr. Reddys Income Advisory LLP, APS Invest Advisory LLP, ASP Income Advisory LLP, APS Trust, Dr. Kallam Anji Reddy, Mr. Gunupati Venkateswara Prasad, Mr. Gunupati Venkateswara Prasad (HUF), Mr. Kallam Satish Reddy, Mr. Kallam Satish Reddy (HUF), Mrs. K Samrajyam, Mrs. G Anuradha, Mrs. K Deepti Reddy, Miss. G Vani Sanjana Reddy and Miss. G Mallika Reddy.

ACKNOWLEDGEMENT

Your Directors place on record their sincere appreciation for significant contribution made by the employees through their dedication, hard work and commitment and the trust reposed on us by the medical fraternity and the patients. We also acknowledge the support and wise counsel extended to us by the analysts, bankers, government agencies, shareholders and investors at large. We look forward to having the same support in our endeavor to help people lead healthier lives.

For Dr. reddys Laboratories Limited

DR. K AnJi REDDY

CHAIRMAN

Place: Hyderabad

Date: 13 may 2011

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Mar 31, 2010

The Directors are pleased to present the 26th Annual Report for the year ended 31 March 2010.

Financial Highlights

table 1 gives the fnancial highlights of the Company for the fnancial year 2009-10 as compared to previous fnancial year on Indian GAAP standalone basis.

Dividend

Your Directors are pleased to recommend a dividend of Rs. 11.25 per equity share of Rs. 5 each (225%) for the fnancial year 2009-10. The dividend, if approved at the ensuing Annual General Meeting, will be paid to those shareholders whose names appear on the register of members of the Company as on 5 July 2010.

The dividend would be tax-free in the hands of the shareholders.

Bonus Debentures

During the fnancial year, the Board of Directors recommended issuance of unsecured, redeemable, non-convertible, fully paid up bonus

table 1 Financial highlights for the fnancial year ended 31 March (R s. in millions)

2010 2009

Income 47,246 42,979

Gross Proft 13,072 9,232

Depreciation 2,224 1,937

Proft before tax 10,848 7,295 Taxation

– Current tax (2,387) (1,686)

Net proft for the year 8,461 5,609

Add: Proft and loss brought forward 20,391 16,575

Add: Adjustment on merger of Perlecan Pharma Private Ltd. 248 --

Total available For appropriation 28,604 22,184

Appropriations

Proposed dividend on equity shares 1,900 1,053

Tax on proposed dividend 316 178

Dividend of previous year 1 1

Transfer to general reserve 846 561

Balance carried forward 25,541 20,391

Debentures of Rs. 5 each to the members of the Company in the ratio of 6 bonus debentures for every equity share held by the members on a record date to be fxed by the Board.

The said issuance is subject to approval of the regulatory authorities, shareholders and the Hon’ble High Court of Andhra Pradesh.

Share Capital

The paid up share capital of your Company increased by Rs. 1.88 million in the fnancial year ended 31 March 2010, due to allotment of 376,608 equity shares on exercise of stock options by the eligible employees under Dr. Reddy’s Employees Stock Option Scheme, 2002 and Dr. Reddy’s Employees ADR Stock Option Scheme, 2007.

Corporate Governance and additional information to shareholders

A detailed report on the corporate governance system and practices of the Company are given in a separate section of the annual report 2009-10. Detailed information for the shareholders is given in Additional Shareholders’ Information section.

Management Discussion and Analysis

A detailed report on the Management Discussion and Analysis is provided as a separate section in the annual report.

Subsidiary companies

During the year, Dr. Reddy’s Pharma SEZ Limited was incorporated as a wholly-owned subsidiary of the Company for the purpose of formulation manufacturing at Special Economic Zone and Perlecan Pharma Private Limited was amalgamated with the Company. Further, the Company also acquired the balance stake of 30% in Dr. Reddy’s (Australia) Pty. Ltd.

The Ministry of Corporate Affairs (MCA) had granted its approval to the Company for not attaching the documents specifed in Section 212 of the Companies Act, 1956 in respect to its subsidiary companies for the financial year 2009-10. The members may refer to the statement under Section 212 of the Companies Act, 1956 and summary information on the financials of subsidiaries, appended to the above statement in this Annual Report, in terms of the said approval of MCA, for further information on these subsidiaries.

The information on financial statements of the aforesaid subsidiaries is also available on the Company’s website.

The members, if they desire, may write to Company Secretary at Dr. Reddy’s Laboratories Limited, 7-1-27, Ameerpet, Hyderabad – 500016 to obtain a copy of the financials of the subsidiary companies.

The consolidated financial statements, in terms of Clause 32 of the Listing Agreement and prepared in accordance with Accounting Standard 21 as specified in Companies (Accounting Standards) Rules, 2006 also form part of this Annual Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposit under Section 58A of the Companies Act, 1956 and hence no amount of principal or interest was outstanding as at the Balance Sheet date.

DIRECTORS

Ms. Kalpana Morparia and Dr. J P Moreau retire by rotation at the ensuing Annual General Meeting scheduled on 23 July 2010 and are eligible for re-appointment.

The Board of Directors had appointed Dr. Ashok S Ganguly as an additional director on the Board of the Company on 23 October 2009. He will hold this office till the conclusion of 26th Annual General Meeting of the Company scheduled on 23 July 2010. Requisite notice under Section 257 of the Companies Act, 1956 has been received from a member proposing his appointment. It is proposed to appoint him as a Director of the Company liable to retire by rotation. The resolution for the same has been included in the notice of the 26th Annual General Meeting scheduled to be held on 23 July 2010.

The brief profiles of Ms. Kalpana Morparia, Dr. J P Moreau and Dr. Ashok S Ganguly are given in the Corporate Governance section of the Annual Report for reference of the members.

AUDITORS

The Statutory Auditors of the Company M/s. B S R & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept office of Statutory Auditors, if reappointed. The Audit Committee and the Board of Directors recommend reappointment of M/s. B S R & Co. as Statutory Auditors of the Company for the financial year 2010-11 for shareholder’s approval.

COST AUDIT

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the Company’s Bulk Drug division and Formulation division.

Subject to the approval of the Central Government, the Board had appointed M/s. Sagar & Associates as Cost Auditors of the Company for the financial year 2009-10. The cost audit report would be filed with the Central Government as per timeline.

SECRETARIAL AUDIT REPORT

A secretarial audit for the year 2009-10 was carried out by Dr. K R Chandratre, practicing Company Secretary. The said secretarial audit report forms part of this Annual Report.

The secretarial audit report confirms that the Company has complied with all the applicable provisions of the Companies Act, 1956, Depositories Act, 1996, Listing Agreements with the Stock Exchanges, Securities Contracts (Regulation) Act, 1956 and all the regulations of SEBI as applicable to the Company, including the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992.

DIRECTORS’ RESPONSIBILITY STATEMENT

In terms of Section 217 (2AA) of the Companies Act, 1956, your Directors confirm as under:

1. In preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

2. We have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 2009-10 and of profit of the Company for that period;

3. We have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. We have prepared the annual accounts on an on-going concern basis.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO IEPF

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the declared dividends, which remained unpaid or unclaimed for a period of 7 years have been transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the said Act.

EMPLOYEES STOCK OPTION SCHEMES

Pursuant to the provisions of Guideline 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999, as amended, the details of stock options as on 31 March 2010 under the “Dr. Reddy’s Employees Stock Option Scheme, 2002” and the “Dr. Reddy’s Employees ADR Stock Option Scheme, 2007” are set out in the Annexure – 1 to the Directors’ Report.

PARTICULARS OF EMPLOYEES

Pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of employees are set out in the Annexure – 2 to the Directors’ Report.

CONSERVATION OF ENERGY RESEARCH AND DEVELOPMENTS, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING AND OUTGO

The particulars as prescribed under Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rule, 1988 are set out in the Annexure – 3 to the Directors’ Report.

GROUP FOR INTER SE TRANSFER OF SHARES

Based on the information received from the Promoters and as required under Clause 3(1)(e)(i) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997, persons constituting Group as defined in the Monopolies and Restrictive Trade Practices Act, 1969, for the purpose of Regulation 3(1)(e)(i) of the aforesaid SEBI Takeover Regulations comprises: Dr. Reddy’s Holdings Limited, Dr. Reddy’s Investments and Advisory LLP, APS Invest Advisory LLP, Dr. K Anji Reddy, Mr. G V Prasad, Mr. Satish Reddy, Ms. K Samrajyam, Ms. G Anuradha and Ms. Deepti Reddy.

ACKNOWLEDGEMENT

Your Directors place on record their sincere appreciation for significant contribution made by the employees through their dedication, hard work and commitment and the trust reposed on us by the medical fraternity and the patients. We also acknowledge the support and wise counsel extended to us by the analysts, bankers, government agencies, shareholders and investors at large. We look forward to having the same support in our endeavor to help people lead healthier lives.

FOR DR. REDDY’S LABORATORIES LIMITED

DR. K ANJI REDDY CHAIRMAN

Place: Hyderabad Date: 3 June 2010