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Dr Reddys Laboratories
BSE: 500124|NSE: DRREDDY|ISIN: INE089A01023|SECTOR: Pharmaceuticals
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Notes to Accounts Year End : Mar '13
1.1: COMMITMENTS AND CONTINGENT LIABILITIES
 
                                            AS AT             AS AT
                                        31 MARCH 2013   31 MARCH 2012
 
 Contingent liabilities:
 
 Guarantees:
 
 (a) Issued by the Company on 
 behalf of subsidiaries, associates 
 and joint ventures                          16,274         17,039
 
 Claims against the Company not
 acknowledged as debts in respect of:
 
 (a) Income tax matters, pending 
 decisions on various appeals made by
 the Company and by the Department              446            432
 
 (b) Excise matters (including service 
 tax), under dispute                            301            250
 
 (c) Sales tax matters, under dispute           379            237
 
 (d) The Company has received demand for payment to the credit of the
 Drug Prices Equalisation Account under Drugs (Price Control) Order,
 1995 for few of its products which are being contested. Based on its
 best estimate, the Company has made a provision in its books of account
 towards the potential liability related to the principal and interest
 amount demanded under the aforesaid order and believes that possibility
 of any liability that may arise on account of penalty on this demand is
 not likely.
 
 (e) The Andhra Pradesh Electricity Regulatory Commission (the APERC)
 has passed various orders approving the levy of Fuel Surcharge
 Adjustment (FSA) charges for the period from 1 April 2008 to 31
 December 2012 by power distribution companies from all the consumers of
 electricity in the state of Andhra Pradesh, India. The Company filed
 separate Writs of Mandamus before the High Court of Andhra Pradesh (the
 High Court) challenging and questioning the validity and legality of
 this levy of FSA charges by the APERC for various periods.
 
 The Company, after taking into account all of the available information
 and legal provisions, has recorded an amount of RS. 233 as the
 potential liability towards FSA charges. The total amount approved by
 APERC for collection by the power distribution companies from the
 Company in respect of FSA charges for the period from 1 April 2008 to
 31 December 2012 is approximately RS. 473. As of 31 March 2013, the
 Company paid, under protest, an amount of RS. 84 demanded by the power
 distribution companies as part of monthly electricity bills. The
 Company remains exposed to additional financial liability should the
 orders passed by the APERC be upheld by the Courts.
 
 (f) The Company, along-with many other pharmaceutical companies in
 Andhra Pradesh, has received various notices from the Andhra Pradesh
 Pollution Control Board (the APP Control Board) to show cause as to
 why action should not be initiated against it for violations under the
 Indian Water Pollution Act and the Indian Air Pollution Act.
 Furthermore, the APP Control Board issued orders to the Company to (i)
 stop production of all new products at the Company''s manufacturing
 facilities in Hyderabad, India without obtaining a Consent for
 Establishment, (ii) not manufacture products at such facilities in
 excess of certain quantities specified by the APP Control Board and
 (iii) furnish a bank guarantee (similar to a letter of credit)
 totalling to RS.12.5.
 
 The Company appealed the APP Control Board orders to the Andhra Pradesh
 Pollution Appellate Board (the APP Appellate Board). The APP
 Appellate Board first stayed the APP Control Board orders and
 subsequently modified the orders, permitting the Company to file
 applications for Consents for Establishment and to increase the
 quantities of existing products which could be manufactured beyond that
 permitted by the APP Control Board, while requiring the Company not to
 manufacture new products at the specified facilities without the
 permission of the APP Control Board. The APP Appellate Board also
 reduced the total value of the Company''s bank guarantee required by the
 APP Control Board to RS. 6.25.
 
 The APP Appellate Board passed its order on 20 October 2012 in favour
 of the Company and observed that pollution load has to be determined on
 the basis of the level of effluents after treatment, and not at the
 time of generation. The APP Appellate Board set a three month time
 frame for the state government to make a decision on the proposal made
 by the pharmaceutical manufacturing industry to reconsider the state
 executive orders with respect to a ban on manufacture of pharmaceutical
 products beyond the approved quantities. The state government has not
 yet issued its decision.
 
 The APP Control Board issued further notices on 6 December 2012 and 28
 February 2013 to the Company seeking certain clarifications regarding
 the list of products, pollution (water and air) and compliance with
 Consent for Operation and Consent for Establishment pertaining to
 Company''s four active pharmaceutical ingredients manufacturing units.
 After submission of necessary clarifications by the Company, the APP
 Control Board forfeited the bank guarantee amounting to RS. 1 for two
 of the Company''s units while releasing the bank guarantee of RS. 0.25
 for third unit. Further, the APP Control Board directed the Company to
 furnish an additional bank guarantee of RS. 8 for the aforesaid two
 units. The Company is in the process of challenging the orders of APP
 Control Board before the Appellate Authority.
 
 (g) Additionally, the Company is involved in other disputes, lawsuits,
 claims, governmental and/or regulatory inspections, inquiries,
 investigations and proceedings, including patent and commercial matters
 that arise from time to time in the ordinary course of business. Except
 as discussed above, the Company does not believe that there are any
 such contingent liabilities that are expected to have any material
 adverse effect on its financial statements.
 
 1.2: RELATED PARTY DISCLOSURES
 
 a. List of all subsidiaries and other related parties with whom
 transactions have taken place during the current and previous year:
 Subsidiaries including step down subsidiaries
 
 1.  Aurigene Discovery Technologies (Malaysia) Sdn Bhd;
 
 2.  Aurigene Discovery Technologies Inc., USA;
 
 3.  Aurigene Discovery Technologies Limited, India;
 
 4.  beta Institut gemeinnutzige GmbH, Germany (formerly beta institute
 fur sozialmedizinische Forschung und Entwicklung GmbH);
 
 5.  betapharm Arzneimittel GmbH, Germany;
 
 6.  Cheminor Investments Limited, India;
 
 7.  Chienna B.V., Netherlands (from 15 February 2013);
 
 8.  Chirotech Technology Limited, UK;
 
 9.  Dr. Reddy''s Bio-sciences Limited, India;
 
 10.  Dr. Reddy''s Farmaceutica Do Brasil Ltda., Brazil;
 
 11.  Dr. Reddy''s Laboratories (Australia) Pty. Limited, Australia;
 
 12.  Dr. Reddy''s Laboratories (EU) Limited, UK;
 
 13.  Dr. Reddy''s Laboratories (Proprietary) Limited, South Africa;
 
 14.  Dr. Reddy''s Laboratories Inc., USA;
 
 15.  Dr. Reddy''s Laboratories International SA, Switzerland;
 
 16.  Dr. Reddy''s Laboratories Lousiana LLC, USA;
 
 17.  Dr. Reddy''s Laboratories Romania SRL, Romania;
 
 18.  Dr. Reddy''s Laboratories SA, Switzerland;
 
 19.  Dr. Reddy''s New Zealand Limited, New Zealand (formerly Affordable
 Health Care Limited);
 
 20.  Dr. Reddy''s Pharma SEZ Limited, India;
 
 21.  Dr. Reddy''s Srl, Italy (formerly Jet Generici Srl);
 
 22.  Dr. Reddy''s Laboratories New York, Inc., USA (from 24 May 2011);
 
 23.  Dr. Reddy''s Laboratories (Canada) Inc., Canada (till 20 September
 2012);
 
 24.  Dr. Reddy''s Laboratories (UK) Limited, UK;
 
 25.  Dr. Reddy''s Laboratories ILAC TICARET Limited SIRKETI, Turkey
 (till 04 December 2012);
 
 26.  Dr. Reddy''s Laboratories Tennessee LLC, USA;
 
 27.  Dr. Reddy''s Laboratories LLC, Ukraine (from 11 May 2011);
 
 28.  Dr. Reddy''s Venezuela C.A., Venezuela;
 
 29.  DRL Impex Limited, India (formerly DRL Investments Limited);
 
 30.  Eurobridge Consulting B.V., Netherlands;
 
 31.  Idea2Enterprises (India) Private Limited, India;
 
 32.  Industrias Quimicas Falcon de Mexico, S.A. de.C.V, Mexico;
 
 33.  I-Ven Pharma Capital Limited, India;
 
 34.  Lacock Holdings Limited, Cyprus;
 
 35.  OctoPlus Development B.V., Netherlands (from 15 February 2013);
 
 36.  OctoPlus N.V., Netherlands (from 15 February 2013);
 
 37.  OctoPlus PolyActive Sciences B.V., Netherlands (from 15 February
 2013);
 
 38.  OctoPlus Sciences B.V., Netherlands (from 15 February 2013);
 
 39.  OctoPlus Technologies B.V., Netherlands (from 15 February 2013);
 
 40.  OctoShare B.V., Netherlands (from 15 February 2013);
 
 41.  OOO Alfa, Russia (formerly OOO JV Reddy Biomed Limited) (till 16
 July 2012);
 
 42.  OOO Dr. Reddy''s Laboratories Limited, Russia;
 
 43.  OOO DRS LLC, Russia;
 
 44.  Promius Pharma LLC, USA (formerly Reddy Pharmaceuticals LLC);
 
 45.  Reddy Antilles N.V., Netherlands;
 
 46.  Reddy beta GmbH, Germany (formerly beta Healthcare Solutions
 GmbH);
 
 47.  Reddy Cheminor S.A., France;
 
 48.  Reddy Holding GmbH, Germany;
 
 49.  Reddy Netherlands B.V., Netherlands;
 
 50.  Reddy Pharma Iberia SA, Spain;
 
 51.  Reddy Pharma Italia S.p.A., Italy;
 
 52.  Reddy Pharmaceuticals Hong Kong Limited, Hong Kong (till 19
 October 2012);
 
 53.  Reddy US Therapeutics Inc., USA; and
 
 54.  Trigenesis Therapeutics Inc., USA (till 04 December 2012).
 
 Associates
 
 Macred India Private Limited, India (from 19 July 2010 till 24 February
 2012)
 
 Enterprise in which the Company holds 20% of equity shares
 
 Joint ventures
 
 - Kunshan Rotam Reddy Pharmaceutical Company Limited (Reddy
 Kunshan), China
 
 Enterprise over which the Company exercises joint control with other
 joint venture partners and holds 51.33% of equity shares
 
 DRANU LLC, USA (from 9 July 2012) Enterprise over which the Company''s
 step-down subsidiary exercises joint control with other joint venture
 partner and holds 50% of equity shares
 
 Enterprises where principal shareholders have control or significant
 influence (Significant interest entities)
 
 Dr. Reddy''s Research Foundation Enterprise over which the principal
 shareholders have significant influence Dr. Reddy''s Institute of Life
 Sciences (formerly Institute of Life Enterprise over which principal
 shareholders have significant influence Sciences)
 
 - Ecologic Technologies Limited Enterprise over which principal
 shareholders have significant influence
 
 - Ecologic Chemicals Limited (Subsidiary of Ecologic Technologies
 Subsidiary of enterprise over which principal shareholders have
 significant influence Limited)
 
 - Stamlo Hotels Private Limited Enterprise controlled by principal
 shareholders Others
 
 - Green Park Hotels and Resorts Limited (formerly Diana Hotels
 Enterprise owned by relative of a director Limited)
 
 K Samrajyam Spouse of former Chairman (Late Dr. K Anji Reddy)
 
 - G Anuradha Spouse of Chairman and Chief Executive Officer
 
 - Deepti Reddy Spouse of Vice Chairman and Managing Director
 
 Dr. Reddy''s Foundation (Formerly Dr. Reddy''s Foundation for Enterprise
 where principal shareholders are trustees
 
 Human and Social development)
 
 A. R. Life Sciences Private Limited Enterprise in which relative of a
 director has significant influence
 
 List of key Management Personnel of the Company
 
 Late Dr. K Anji Reddy (whole-time director till 15 March 2013);
 
 - G V Prasad (whole-time director);
 
 - K Satish Reddy (whole-time director);
 
 - Abhijit Mukherjee;
 
 Dr. Amit Biswas;
 
 Dr. R Ananthanarayanan;
 
 Dr. Cartikeya Reddy;
 
 Dr. Raghav Chari;
 
 - M V Ramana;
 
 - Samiran Das;
 
 - Saumen Chakraborty; and Umang Vohra.
 
 1.3: INTEREST IN JOINT VENTURE
 
 The Company has 51.33 percent interest in Kunshan Rotam Reddy
 Pharmaceutical Co. Limited (KRRP), a joint venture in China. KRRP is
 engaged in manufacturing and marketing of active pharmaceutical
 ingredients and intermediates and formulations in China. The
 contractual arrangement between shareholders of KRRP indicates joint
 control as the minority shareholders, along with the Company, have
 significant participating rights such that they jointly control the
 operations of KRRP
 
 The aggregate amount of assets, liabilities, income and expenses
 related to the Company''s share in KRRP as at and for the year ended 31
 March 2013 are given below:
 
 1.4: EMpLOYEE STOCK OpTION Scheme
 
 Dr. Reddy''s Employees Stock Option Plan 2002 (the DRL2002 Plan):The
 Company instituted the DRL 2002 Plan for all eligible employees in
 pursuance of the special resolution approved by the shareholders in the
 Annual General Meeting held on 24 September 2001. The DRL 2002 Plan
 covers all employees of DRL and its subsidiaries and directors
 (excluding promoter directors) of DRL and its subsidiaries
 (collectively, eligible employees). Under the Scheme, the
 Compensation Committee of the Board (''the Committee'') shall administer
 the Scheme and grant stock options to eligible directors and employees
 of the Company and its subsidiaries. The Committee shall determine the
 employees eligible for receiving the options, the number of options to
 be granted, the exercise price, the vesting period and the exercise
 period. The vesting period is determined on the date of the grant. The
 options issued under the DRL 2002 plan vest in periods ranging between
 one and four years and generally have a maximum contractual term of
 five years.
 
 The DRL 2002 Plan was amended on 28 July 2004 at the Annual General
 Meeting of shareholders to provide for stock options grants in two
 categories:
 
 Category A: 1,721,700 stock options out of the total of 2,295,478
 reserved for grant of options having an exercise price equal to the
 fair market value of the underlying equity shares on the date of grant;
 and
 
 Category B: 573,778 stock options out of the total of 2,295,478
 reserved for grant of options having an exercise price equal to the par
 value of the underlying equity shares (i.e., RS. 5/- per option).
 
 The DRL 2002 Plan was further amended on 27 July 2005 at the Annual
 General Meeting of shareholders to provide for stock option grants in
 two categories:
 
 Category A: 300,000 stock options out of the total of 2,295,478
 reserved for grant of options having an exercise price equal to the
 fair market value of the underlying equity shares on the date of grant;
 and
 
 Category B: 1,995,478 stock options out of the total of 2,295,478
 reserved for grant of options having exercise price equal to the par
 value of the underlying equity shares (i.e., RS. 5/- per option).
 
 The fair market value of a share on each grant date falling under
 Category A above is defined as the average closing price (after
 adjustment of Bonus issue) for 30 days prior to the grant, in the stock
 exchange where there was highest trading volume during that period.
 Notwithstanding the foregoing, the Compensation Committee may, after
 getting the approval of the shareholders in the Annual General Meeting,
 grant options with a per share exercise price other than fair market
 value and par value of the equity shares.
 
 As the number of shares that an individual employee is entitled to
 receive and the price of the option are known at the grant date, the
 scheme is considered as a fixed grant.
 
 In the case of termination of employment, all unvested options would
 stand cancelled. Options that have vested but have not been exercised
 can be exercised within the time prescribed under each option agreement
 by the Committee or if no time limit is prescribed, within three months
 of the date of employment termination, failing which they would stand
 cancelled.
 
 The term of the DRL 2002 plan expired on 29 January 2012. Consequently,
 the Board of Directors of the Company, based on the recommendation of
 the Compensation Committee, resolved to extend the term of the DRL 2002
 plan for a period of 10 years with effect from 29 January 2012, subject
 to the approval of shareholders. A resolution to this effect was
 approved by the shareholders at the Company''s Annual General Meeting
 held on 20 July 2012.
 
 During the current year, the Company under the DRL 2002 Plan has issued
 335,1 10 Category B options to eligible employees. The vesting period
 for the options granted varies from 12 to 48 months.
 
 Dr. Reddy''s Employees ADR Stock Option Plan 2007 (the DRL 2007 Plan):
 The Company instituted the DRL 2007 Plan for all eligible employees in
 pursuance of the special resolution approved by the shareholders in the
 Annual General Meeting held on 27 July 2005. The DRL 2007 Plan came
 into effect on approval of the Board of Directors on 22 January 2007.
 The DRL 2007 Plan covers all employees of DRL and its subsidiaries and
 directors (excluding promoter directors) of DRL and its subsidiaries
 (collectively, eligible employees). Under the DRL 2007 Plan, the
 Compensation Committee of the Board (the Compensation Committee)
 shall administer the DRL 2007 Plan and grant stock options to eligible
 employees of the Company and its subsidiaries. The Compensation
 Committee shall determine the employees eligible for receiving the
 options, the number of options to be granted, the exercise price, the
 vesting period and the exercise period. The vesting period is
 determined for all options issued on the date of the grant. The options
 issued under the DRL 2007 plan vest in periods ranging between one and
 four years and generally have a maximum contractual term of five years.
 
 During the current year, the Company under the DRL 2007 Plan has issued
 58,140 options to eligible employees. The vesting period for the
 options granted varies from 12 to 48 months.
 
 1.5: HEDGES OF FOREIGN CURRENCY RISK AND DERIVATIVE FINANCIAL
 INSTRUMENTS
 
 The Company is exposed to exchange rate risk which arises from its
 foreign exchange revenues and expenses, primarily in U.S. dollars,
 British pounds sterling, Russian roubles and Euros, and foreign
 currency debt in U.S. dollars, Russian roubles and Euros.
 
 The Company uses forward contracts, option contracts and currency swap
 contracts (derivatives) to mitigate its risk of changes in foreign
 currency exchange rates. Further, the Company also uses non derivative
 financial instruments as part of its foreign currency exposure risk
 mitigation strategy.
 
 Hedges of highly probable forecasted transactions
 
 The Company classifies its derivative contracts that hedge foreign
 currency risk associated with highly probable forecasted transactions
 as cash flow hedges and measures them at fair value. The effective
 portion of such cash flow hedges is recorded as part of reserves and
 surplus within the Company''s hedging reserve, and re-classified in
 the statement of profit and loss as revenue in the period corresponding
 to the occurrence of the forecasted transactions. The ineffective
 portion is immediately recorded in the statement of profit and loss.
 
 The Company also designates certain non derivative financial
 liabilities, such as foreign currency borrowings from banks, as hedging
 instruments for the hedge of foreign currency risk associated with
 highly probable forecasted transactions and, accordingly, applies cash
 flow hedge accounting for such relationships. Re-measurement gain/loss
 on such non derivative financial liabilities is recorded as part of
 reserves and surplus within the Company''s hedging reserve, and
 re-classified in the statement of profit and loss as revenue in the
 period corresponding to the occurrence of the forecasted transactions.
 
 In respect of the aforesaid hedges of highly probable forecasted
 transactions, the Company has recorded, in reserves and surplus, a net
 profit of RS. 405 and a net loss of RS. 28 for the year ended 31 March
 2013 and 2012, respectively. The Company also recorded, as part of
 revenue, a net loss of RS. 352 and RS. 344 during the years ended 31
 March 2013 and 2012, respectively.
 
 The net carrying amount of the Company''s hedging reserve was a gain
 of RS. 402 as at 31 March 2013, as compared to a loss of RS. 3 as at 31
 March 2012.
 
 Hedges of recognised assets and liabilities
 
 Changes in the fair value of derivative contracts that economically
 hedge monetary assets and liabilities in foreign currencies and for
 which no hedge accounting is applied are recognised in the statement of
 profit and loss. The changes in fair value of such derivative contracts
 as well as the foreign exchange gains and losses relating to the
 monetary items are recognised as part of foreign exchange gains and
 losses.
 
 Fair values of foreign exchange derivative contracts are determined
 under the Modified Black Scholes technique by using inputs from market
 observable data and other relevant terms of the contract with counter
 parties which are banks or financial institutions.
 
 In respect of the aforesaid foreign exchange derivative contracts and
 the ineffective portion of the derivative contracts designated as cash
 flow hedges, the Company has recorded, as part of foreign exchange
 gains and losses, a net gain of RS. 158 and a net loss of RS. 1,582 for
 the year ended 31 March 2013 and 2012, respectively.
 
 1.6: FINANCIAL RISK MANAGEMENT
 
 The Company''s activities expose it to a variety of financial risks,
 including market risk, credit risk and liquidity risk. The Company''s
 primary risk management focus is to minimize potential adverse effects
 of market risk on its financial performance. The Company''s risk
 management assessment and policies and processes are established to
 identify and analyze the risks faced by the Company, to set appropriate
 risk limits and controls, and to monitor such risks and compliance with
 the same. Risk assessment and management policies and processes are
 reviewed regularly to reflect changes in market conditions and the
 Company''s activities. The Board of Directors and the Audit Committee
 are responsible for overseeing Company''s risk assessment and management
 policies and processes.
 
 a.  Credit risk
 
 Credit risk is the risk of financial loss to the Company if a customer
 or counterparty to a financial instrument fails to meet its contractual
 obligations, and arises principally from the Company''s receivables from
 customers. Credit risk is managed through credit approvals,
 establishing credit limits and continuously monitoring the credit
 worthiness of customers to which the Company grants credit terms in the
 normal course of business. The Company establishes an allowance for
 doubtful debts and impairment that represents its estimate of incurred
 losses in respect of trade and other receivables and investments.
 
 Trade receivables
 
 The Company''s exposure to credit risk is influenced mainly by the
 individual characteristics of each customer. The demographics of the
 customer, including the default risk of the industry and country, in
 which the customer operates, also has an influence on credit risk
 assessment. As at 31 March 2013 and 31 March 2012 the maximum exposure
 to credit risk in relation to trade and other receivables is RS. 29,639
 and RS. 19,435 respectively (net of allowances).
 
 Trade receivables that are neither past due nor impaired
 
 Trade receivables amounting to RS. 23,557 and RS. 16,684 were neither
 past due nor impaired as at 31 March 2013 and 31 March 2012
 respectively.
 
 Trade receivables that are past due but not impaired
 
 b.  Liquidity risk
 
 Liquidity risk is the risk that the Company will not be able to meet
 its financial obligations as they become due. The Company manages its
 liquidity risk by ensuring, as far as possible, that it will always
 have sufficient liquidity to meet its liabilities when due, under both
 normal and stressed conditions, without incurring unacceptable losses
 or risk to the Company''s reputation.
 
 As at 31 March 2013 and 2012, the Company had unutilized credit limits
 from banks of RS. 20,364 and RS. 14,290, respectively.
 
 As at 31 March 2013, the Company had working capital of RS. 25,522
 including cash and bank balances of RS. 9,191 and current investments
 of RS. 1,966. As at 31 March 2012, the Company had working capital of
 RS. 18,614 including cash and bank balances of RS. 8,490 and current
 investments of RS. 2,070.
 
 The table below provides details regarding the contractual maturities
 of significant financial liabilities (other than provisions for
 employee benefits expense which have been disclosed in Note 2.5,
 obligations under Bonus Debentures which have been disclosed in Note
 2.40 and finance leases which have been disclosed in Note 2.44).
 
 c.  Market risk
 
 Market risk is the risk that the fair value or future cash flows of a
 financial instrument may fluctuate because of change in market prices.
 Market risk may arise as a result of changes in the interest rates,
 foreign currency exchange rates and other market changes that affect
 market risk-sensitive instruments. Market risk is attributable to all
 market risk-sensitive financial instruments including foreign currency
 receivables and payables and long term debt. The Company is exposed to
 market risk primarily related to foreign exchange rate risk, interest
 rate risk and the market value of its investments. Thus, the Company''s
 exposure to market risk is a function of investing and borrowing
 activities and revenue generating and operating activities in foreign
 currencies.
 
 Foreign exchange risk
 
 The Company''s exchange risk arises from its foreign operations, foreign
 currency revenues and expenses (primarily in U.S. dollars, British
 pounds sterling, Roubles and Euros) and foreign currency borrowings (in
 U.S. dollars, Euros and Roubles). A significant portion of the
 Company''s revenues are in these foreign currencies, while a significant
 portion of its costs are in Indian rupees. As a result, if the value of
 the Indian rupee appreciates relative to these foreign currencies, the
 Company''s financial performance gets adversely impacted. The exchange
 rate between the Indian rupee and these foreign currencies has
 fluctuated substantially in recent periods and may continue to
 fluctuate substantially in the future. Consequently, the Company uses
 derivative financial instruments, such as foreign exchange forward,
 option and swap contracts, to mitigate the risk of changes in foreign
 currency exchange rates in respect of its forecasted cash flows and
 trade receivables.
 
 The details in respect of the outstanding foreign exchange forward,
 option and swap contracts are given in Note 2.35 above.
 
 In respect of the Company''s derivative contracts, a 10%
 decrease/increase in the respective exchange rates of each of the
 currencies underlying such contracts would have resulted in an
 approximately RS. 2,219 / (1,751) increase/(decrease) in the Company''s
 hedging reserve and an approximately RS. 1,642 / (1,640)
 increase/(decrease) in the Company''s net profit as at 31 March 2013.
 
 In respect of the Company''s derivative contracts, a 10%
 decrease/increase in the respective exchange rates of each of the
 currencies underlying such contracts would have resulted in an
 approximately RS. Nil increase/decrease in the Company''s hedging
 reserve and an approximately RS. 3,870 increase/decrease in the
 Company''s net profit as at 31 March 2012.
 
 Interest rate risk
 
 As at 31 March 2013 and 31 March 2012, the Company had foreign currency
 loans of RS. 8,104 carrying a floating interest rate of LIBOR plus
 50-125 bps and RS. 6,665 carrying a floating interest rate of LIBOR
 plus 100-150 bps, respectively. Since these are short-term loans, the
 Company does not foresee any significant interest rate risk. A 10%
 increase or decrease in the floating interest rate component (i.e
 LIBOR) of the Company''s short-term borrowings would result in an
 insignificant impact on its net profit.
 
 The Company''s investments in time deposits with banks and short-term
 liquid mutual funds are for short durations, and therefore do not
 expose the Company to significant interest rate risk.
 
 Commodity rate risk
 
 Exposure to market risk with respect to commodity prices primarily
 arises from the Company''s purchases and sales of active pharmaceutical
 ingredients, including the raw material components for such active
 pharmaceutical ingredients. These are commodity products, whose prices
 may fluctuate significantly over short periods of time. The prices of
 the Company''s raw materials generally fluctuate in line with commodity
 cycles, although the prices of raw materials used in the Company''s
 active pharmaceutical ingredients business are generally more volatile.
 Cost of raw materials forms the largest portion of the Company''s
 operating expenses. Commodity price risk exposure is evaluated and
 managed through operating procedures and sourcing policies. The Company
 has historically not entered into any material derivative financial
 instruments or futures contracts to hedge exposure to fluctuations in
 commodity prices.
 
 1.7: EMpLOYEE BENEFIT pLANS
 
 1.7.1 Gratuity Plan of Dr. Reddy''s Laboratories Lmited
 
 In accordance with applicable Indian laws, the Company provides for
 gratuity, a defined benefit plan (the Gratuity Plan) covering certain
 categories of employees in India. The Gratuity Plan provides a lump sum
 payment to vested employees at retirement or termination of employment.
 The amount of payment is based on the respective employee''s last drawn
 salary and the years of employment with the Company. Effective
 September 1, 1999, the Company established the Dr. Reddy''s Laboratories
 Gratuity Fund (the Gratuity Fund). Liabilities in respect of the
 Gratuity Plan are determined by an actuarial valuation, based upon
 which the Company makes contributions to the Gratuity Fund. Trustees
 administer the contributions made to the Gratuity Fund. Amounts
 contributed to the Gratuity Fund are primarily invested in Indian
 government bonds and corporate debt securities. A small portion of the
 fund is also invested in Indian equities.
 
 1.7.2 Compensated Leave of Absence
 
 The Company provides for accumulation of compensated absences by
 certain categories of its employees. These employees can carry forward
 a portion of the unutilized compensated absences and utilize it in
 future periods or receive cash in lieu thereof as per Company policy.
 The Company records an obligation for compensated absences in the
 period in which the employee renders the services that increases this
 entitlement. The total liability recorded by the Company towards this
 benefit was RS. 331 and RS. 241 as at 31 March 2013 and 2012
 respectively.
 
 1.8: DIVIDEND REMITTANCE IN FOREIGN CURRENCY
 
 The Company does not make any direct remittances of dividends in
 foreign currencies to American Depository Receipts (ADRs) holders. The
 Company remits the equivalent of the dividends payable to the ADR
 holders in Indian Rupees to the custodian, which is the registered
 shareholder on record for all owners of the Company''s ADRs. The
 custodian purchases the foreign currencies and remits it to the
 depository bank which inturn remits the dividends to the ADR holders.
 
 1.9: SETTLEMENT AGREEMENT WITH NORDION
 
 During March 2013, the Company entered into an agreement with Nordion
 Inc., (formerly known as MDS Inc.) to settle its ongoing litigation for
 alleged breach of service obligations by Nordion Inc. during the years
 2000 to 2004. As part of the settlement, the Company received a total
 amount of RS. 1,220 (USD 22.5 million) from Nordion, out of which RS.
 108 (USD 2 million) is towards reimbursement of research and
 development cost and the same is recorded as reduction in such cost.
 The balance RS. 1,112 (USD 20.5 million) is towards ''lost profits'' and
 the same is recorded as part of other operating revenue.
 
 1.10: ISSuANCE OF BONuS DEBENTuRES
 
 The Company had, on 24 March 2011, allotted 1,015,516,392, 9.25%
 Unsecured Redeemable Non convertible Bonus Debentures aggregating to
 RS. 5,078. The interest is payable at the end of 12, 24 and 36 months
 from the initial date of issuance. The bonus debentures are redeemable
 at the end of 36 months from the initial date of issuance.  These
 debentures have been listed on the Bombay Stock Exchange Limited and
 National Stock Exchange of India Limited.
 
 As per the requirements of the Companies Act, 1956, the Company created
 a Debenture Redemption Reserve aggregating to RS. 1,712 and RS. 867 as
 at 31 March 2013 and 31 March 2012 respectively.
 
 (a) Includes gross block of RS. 6 and accumulated depreciation of RS. 4
 towards transfers from non research and development to research and
 development fixed assets during the year.
 
 (b) Includes gross block of RS. 14 and accumulated depreciation of RS.
 8 towards transfers from research and development to non research and
 development fixed assets during the year.
 
 1.11: pROVISION FOR Other Than TEMpORARY DIMINuTION IN The VALuE OF
 Long TERM INVESTMENTS
 
 For the year ended 31 March 2013:
 
 Investment in Trigenesis Therapeutics Inc.
 
 Following the Company''s decision to discontinue its research and
 development on terbinafine nail lacquer, the Company assessed the
 recoverability of money invested in its subsidiary, Trigenesis
 Therapeutics Inc. and has created a provision of RS. 222 for diminution
 in the value of long term investments for the year ended 31 March 2013.
 
 For the year ended 31 March 2012:
 
 Investment in Lacock Holdings Limited
 
 Investments include an investment of RS. 16,146 in Lacock Holdings
 Limited, Cyprus (''Lacock''), a wholly-owned subsidiary of the Company.
 The Company participates in the German generics business through
 step-down subsidiaries of Lacock, i.e. Reddy Holdings GmbH and
 betapharm Arzneimittel GmbH (''betapharm'').
 
 There have been significant changes in the German generics market such
 as decrease in the reference prices of products, increase in discounts
 offered to State Healthcare Insurance (SHI) funds, and announcement
 of a large competitive bidding sale process from several SHI funds in
 Germany, and more recently in the current year with the reference price
 cuts and announcement of large sales tender from other key SHI funds.
 
 In view of the above, management has reassessed the value attributable
 to its investment in Lacock and based on future cash flows expected
 from the business (in Lacock), believes that there is a decline, other
 than temporary, in the value of investment. Accordingly, an amount of
 RS. 2,100 has been recorded as provision for diminution in the value of
 investment for the year ended 31 March 2012.
 
 Investment in Kunshan Rotam Reddy Pharmaceutical Co. Limited
 
 An amount of RS. 175 representing a provision created in earlier years
 for decline in the long-term investment in Kunshan Rotam Reddy
 Pharmaceutical Co. Limited, a joint venture company, was reversed
 during the year ended 31 March 2012 owing to its improved business
 performance.
 
 1.12: Segment Information
 
 In accordance with AS-17 Segment Reporting, segment information has
 been given in the consolidated financial statements of Dr. Reddy''s
 Laboratories Limited and therefore no separate disclosure on segment
 information is given in these financial statements.
 
 1.13: FINANCE LEASE
 
 The Company has taken vehicles and other assets on finance lease. The
 future minimum lease payments and their present values as at 31 March
 2013 are as follows:
 
 1.14: OpERATING LEASE
 
 The Company has taken vehicles on non cancellable operating lease. The
 total future minimum lease payments under this non cancellable lease
 are as follows:
 
 Lease rentals on the said lease amounting to RS. 60 (previous year: RS.
 51) has been charged to the statement of profit and loss. Lease rent
 under cancellable operating leases amounts to RS. 249 (previous year:
 RS. 157).
 
 1.15: COMpARATIVE FIGuRES
 
 Previous year''s figures have been regrouped / reclassified wherever
 necessary, to conform to current year''s classification.
Source : Dion Global Solutions Limited
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