The Directors are pleased to present the 30th annual report for the
year ended 31 March 2014.
Table 1 gives the fi nancial highlights of the Company for FY2014
compared to the previous fi nancial year on Indian GAAP standalone
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.
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
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
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
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
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.
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
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
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
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
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
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
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.
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’
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
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.
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
For Dr. Reddy’s Laboratories Limited,
G V Prasad
Chairman and Chief Executive Officer
Date 13 May 2014