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Dr Reddys Laboratories Directors Report, Dr Reddys Labs Reports by Directors
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Dr Reddys Laboratories
BSE: 500124|NSE: DRREDDY|ISIN: INE089A01023|SECTOR: Pharmaceuticals
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Download Annual Report PDF Format 2013 | 2012 | 2011
Directors Report Year End : Mar '14    « Mar 13
DEAR MEMBERS,
 
 The Directors are pleased to present the 30th annual report for the
 year ended 31 March 2014.
 
 FINANCIAL HIGHLIGHTS
 
 Table 1 gives the fi nancial highlights of the Company for FY2014
 compared to the previous fi nancial year on Indian GAAP standalone
 basis.
 
 DIVIDEND
 
 Your Directors are pleased to recommend a dividend of Rs.18 on every
 equity share of Rs.5 each (360%) for FY2014. The dividend, if approved at
 the 30th Annual General Meeting, will be paid to those shareholders
 whose names appear on the register of members of the Company as on 15
 July 2014.  The dividend is tax-free in the hands of the shareholders.
 
 SHARE CAPITAL
 
 The paid-up share capital of your Company increased by Rs.1.36 million in
 FY2014 due to the allotment of 272,393 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 unsecured, redeemable, non-convertible debentures (NCDs) of Rs.5 each
 issued by the Company in FY2011 as bonus debentures were due for
 maturity on 24 March 2014.  These were redeemed at par and paid along
 with the third and fi nal year’s interest.
 
 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 the annual report
 2013-14. Similarly, other
 
                                               FY2014      FY2013
 
 Total revenue                                 98,795      85,757
 
 Profit before depreciation and tax            28,349      20,660
 
 Depreciation                                   3,805       3,128
 
 Profit before tax                             24,544      17,532
 
 Tax expense                                    5,216       4,877
 
 Net profit for the year                       19,328      12,655
 
 Add: Surplus at the beginning of the year     43,614      36,049
 
 Total available for appropriation             62,942      48,704 
 
 Appropriations:
 
 Proposed dividend on eBuity shares             3,062       2,548
 
 Tax on proposed dividend                         520         433
 
 Credit of dividend distribution tax               (2)         (4)
 
 Dividend of previous years (including tax)         3           3
 
 Debenture Redemption Reserve                     827         845
 
 Transfer to General Reserve                    1,933       1,265
 
 Balance carried forward                       56,599      43,614
 
 detailed information for shareholders is given in chapter on Additional
 Shareholders’ Information.
 
 MANAGEMENT DISCUSSION AND ANALYSIS
 
 A detailed report on the Management Discussion and Analysis is provided
 as a separate chapter in the annual report.
 
 BUSINESS RESPONSIBILITY REPORT
 
 A detailed Business Responsibility Report is given as a separate
 chapter in the annual report.
 
 SUBSIDIARY COMPANIES
 
 The Company has 51 subsidiaries as on 31 March 2014. During FY2014, two
 subsidiaries namely, Dr. Reddy’s Laboratories Canada Inc., USA and Dr.
 Reddy’s Singapore PTE. Ltd., Singapore were incorporated. Further,
 during FY2014, Reddy US Therapeutics Inc., USA ceased to be a
 subsidiary 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 Profi t
 and Loss of the subsidiaries to the annual report. The Ministry of
 Corporate Aff airs, Government of India vide its circular No. 2/2011
 dated 8 February 2011 has provided an exemption to the companies from
 complying with Section 212, provided such companies publish the audited
 consolidated fi nancial statements in their annual report.
 
 Accordingly, the annual report 2013-14 does not contain the fi nancial
 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 offi
 ce in Hyderabad, India.  The same will also be published on the
 Company’s website: www.drreddys.com
 
 The members, if they so 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 fi nancials of the
 subsidiary companies.
 
 The consolidated fi nancial statements, in terms of Section 129 of the
 Companies Act, 2013 and Clause 32 of the Listing Agreement and prepared
 in accordance with Accounting Standard 21 as specifi ed in the
 Companies (Accounting Standards) Rules, 2006 also forms a part of this
 annual report.
 
 DIRECTORS
 
 Sub-section (10) of Section 149 of the Companies Act, 2013 (eff ective
 1 April 2014) provides that an Independent Director shall hold offi ce
 for a term of up to fi ve consecutive years on the Board of a Company;
 and shall be eligible for re-appointment on passing of a special
 resolution by the shareholders of the Company. Sub-section (11) of the
 same section states that no Independent Director shall be eligible for
 more than two consecutive terms of up to fi ve years each. In addition,
 sub-section 13 of Section 149 states that the provisions of retirement
 by rotation as defi ned in sub-sections (6) and (7) of Section 152 of
 the Act, shall not apply to such Independent Directors.
 
 The new Clause 49 notifi ed by the SEBI on April 17, 2014, most of
 which comes into eff ect from 1 October 2014, states in sub-clause II
 (B)(2) that any Independent Director “who has already served fi ve
 years or more in a listed company as on 1 October 2014, shall be
 eligible for appointment, on completion of his present term, for one
 more term of up to fi ve years only.”
 
 The appointment of Non-Executive Directors — whose sub-set comprise
 Independent Directors — under the Companies Act, 1956 was a de facto
 term of three years because one third of such fi duciaries were
 eligible for retirement by rotation. Therefore, it stands to reason
 that those Independent Directors who would complete their present
 three-year term at the ensuing AGM of the Company in July 2014, and are
 eligible for re-appointment, may be considered by the shareholders for
 re-appointment for a term of up to fi ve years.
 
 Therefore, the Board recommends to re- appoint the retiring Directors,
 Mr. Anupam Puri for an additional period of four years and Dr. Bruce L
 A Carter and Mr. Sridar Iyengar, for an additional period of fi ve
 years each, respectively.
 
 Further, the Board also recommends the appointment of Dr. Ashok S
 Ganguly, Dr. J P Moreau, Ms. Kalpana Morparia, Dr. Omkar Goswami and
 Mr. Ravi Bhoothalingam as Independent Directors under the provisions of
 the Companies Act, 2013 and Clause 49 of the Listing Agreement, not
 liable to retire by rotation and to hold offi ce for the period as
 stated in their respective resolutions and the explanatory statement
 forming part of the Notice of the AGM.
 
 The brief profi le of all the Independent Directors is given in the
 Corporate Governance section of the annual report for reference of the
 shareholders.
 
 The Board of Directors at their meeting held on 13 May 2014 has
 re-designated Mr. Satish Reddy as Chairman and Mr. G V Prasad as
 Co-Chairman, Managing Director and Chief Executive Offi cer of the
 Company.
 
 Further, pursuant to the provisions of Section 152 of the Companies
 Act, 2013 (eff ective 1 April 2014), one-third of the retiring Board
 members (other than Independent Directors), shall retire every year and
 if eligible, can be re-appointed, by the shareholders at their meeting.
 
 Hence, approval of shareholders is also being sought for variation in
 terms of appointment of Mr. G V Prasad and Mr. Satish Reddy, Executive
 Directors for making their offi ce liable to retire by rotation. All
 other terms and conditions of their appointment shall remain unchanged.
 
 The respective resolutions to the above- referred matters are included
 in the notice convening the 30th Annual General Meeting scheduled on 31
 July 2014.
 
 DIRECTORS’ RESPONSIBILITY STATEMENT
 
 In terms of Section 217(2AA) of the Companies Act, 1956, your Directors
 confi rm 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 aff airs of the Company at the end
 of the FY2014 and of profi t of the Company for that period;
 
 3.  Proper and suffi cient 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.
 
 STATUTORY AUDITORS
 
 The statutory auditors of the Company, B S R & Co. LLP, Chartered
 Accountants, retire at the ensuing Annual General Meeting and have
 confi rmed their eligibility and willingness to accept offi ce of the
 statutory auditors, if re-appointed.
 
 -Section 139(2) of the Companies Act, 2013 (eff ective 1 April 2014),
 mandates that a listed company or such other prescribed classes of
 companies shall not appoint or re- appoint an audit fi rm as Statutory
 Auditors for more than two terms of fi ve consecutive years each.
 
 Further, the companies as aforesaid, whose Statutory Auditors has held
 offi ce for a period of ten years or more are required to comply with
 these provisions, within three years from the date of commencement of
 these provisions i.e. 1 April 2014. For this purpose, the term of the
 audit fi rm before the commencement of these provisions shall be taken
 into account for calculating the period of ten consecutive years.
 
 Our auditors, M/s. B S R & Co. LLP, Chartered Accountants, are holding
 the offi ce as Statutory Auditors since FY2003. Hence, they can only be
 re-appointed for a period up to three years, i.e. up to FY2017.
 
 The Audit Committee and the Board of Directors recommend the
 re-appointment of M/s. B S R & Co. LLP, Chartered Accountants as
 statutory auditors of the Company up to FY2016, for shareholders’
 approval.
 
 COST AUDIT
 
 The Central Government, in exercise of its powers conferred under
 sub-section (1) of Section 148 of the Companies Act, 2013 (eff ective 1
 April 2014) has directed an audit of cost accounting records in respect
 of pharmaceuticals. The audit needs to be conducted by a Cost
 Accountant in Practice appointed for this purpose and whose appointment
 needs to be approved by the Board. The provisions also require that the
 remuneration of such cost auditor shall be ratifi ed by the
 shareholders.
 
 Based on the recommendations of the Audit Committee, the Board of
 Directors appointed M/s. Sagar & Associates as cost auditors of the
 Company for FY2015. The cost audit report would be fi led with the
 Central Government as per the stipulated timeline. As a matter of
 record, relevant cost audit reports for FY2013 were fi led on 27
 September 2013, three days before the due date.
 
 SECRETARIAL AUDIT REPORT
 
 A secretarial audit for FY2014 was carried out by Dr. K R Chandratre,
 practicing Company Secretary. This forms a part of the annual report.
 It confi rms 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.
 
 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 2014 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
 
 In terms of the provisions of Section 217(2A) of the Companies Act,
 1956, read with the Companies (Particulars of Employees) Rules, 1975,
 as amended, the names and other particulars of the employees are set
 out in the annexure to the Directors’ Report.  Having regard to the
 provisions of Section 219(1)(b)(iv) of the said Act, the annual report
 excluding the aforesaid information is being sent to the members of the
 Company.  Any member interested in obtaining such particulars may write
 to the Company Secretary of the Company.
 
 CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENTS, TECHNOLOGY
 ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
 
 These 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 2 to the Directors’ Report.
 
 ACKNOWLEDGEMENT
 
 Your Directors place on record their sincere appreciation for the
 signifi cant 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 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 13 May 2014
Source : Dion Global Solutions Limited
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