EX-99.3 9 drr0100_ex99-3.htm EXHIBIT 99.3

 

Exhibit 99.3

 

 

Oval Office, 18, iLabs Centre

Hitech City, Madhapur

Hyderabad - 500 081, India

 

Tel : +91 40 6141 6000

  

Limited Review Report – Consolidated Financial Results

 

Review Report to

The Board of Directors

Dr. Reddy’s Laboratories Limited

 

1.We have reviewed the accompanying statement of unaudited consolidated Ind AS financial results of Dr. Reddy’s Laboratories Limited Group comprising Dr. Reddy’s Laboratories Limited (the ‘Company’) comprising its subsidiaries (together referred to as ‘the Group’), and its joint ventures, for the quarter ended December 31, 2018 and year to date from April 01, 2018 to December 31, 2018 (the “Statement”) attached herewith, being submitted by the Company pursuant to the requirements of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘the Regulation’), read with SEBI Circular No. CIR/CFD/FAC/62/2016 dated July 5, 2016 (‘the Circular’).

 

2.The preparation of the Statement in accordance with the recognition and measurement principles laid down in Indian Accounting Standard 34, (Ind AS 34) “Interim Financial Reporting” prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of Companies (Indian Accounting Standards) Rules, 2015, as amended, read with the Circular is the responsibility of the Company's management and has been approved by the Board of Directors of the Company. Our responsibility is to issue express a conclusion on the Statement based on our review.

 

3.We conducted our review in accordance with the Standard on Review Engagements (SRE) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Institute of Chartered Accountants of India. This standard requires that we plan and perform the review to obtain moderate assurance as to whether the Statement is free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and accordingly, we do not express an audit opinion.

 

4.Based on our review conducted as above, nothing has come to our attention that causes us to believe that the accompanying Statement of unaudited consolidated Ind AS financial results prepared in accordance with recognition and measurement principles laid down in the applicable Indian Accounting Standards specified under Section 133 of the Companies Act, 2013, read with relevant rules issued thereunder and other recognised accounting practices and policies has not disclosed the information required to be disclosed in terms of the Regulation, read with the Circular, including the manner in which it is to be disclosed, or that it contains any material misstatement.

 

For S.R. BATLIBOI & ASSOCIATES LLP
Chartered Accountants
ICAI Firm registration number: 101049W/E300004

 

per S Balasubrahmanyam

Partner

Membership No.: 053315

Place: Hyderabad

Date: February 01, 2019

  

 

S.R. Batliboi & Associates LLP, a Limited Liability Partnership with LLP Identity No. AAB-4295

Regd. Office : 22, Camac Street, Block 'B', 3rd Floor, Kolkata-700 016

 

 

 

  

DR. REDDY'S LABORATORIES LIMITED

STATEMENT OF UNAUDITED CONSOLIDATED FINANCIAL RESULTS FOR THE QUARTER AND NINE MONTHS ENDED 31 DECEMBER 2018

 

              All amounts in Indian Rupees millions 
      Quarter ended   Nine months ended   Year ended 
Sl.     31.12.2018   30.09.2018   31.12.2017   31.12.2018   31.12.2017   31.03.2018 
 No.   Particulars  (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Audited) 
                            
1  Revenue from operations                              
   a) Net sales / income from operations   37,861    36,866    36,164    111,234    103,558    138,022 
   b) License fees and service income   639    1,112    1,896    2,451    3,121    4,006 
   c) Other operating income   146    197    281    501    592    782 
                                  
   Total revenue from operations   38,646    38,175    38,341    114,186    107,271    142,810 
                                  
2  Other income   1,023    1,282    430    2,542    1,103    1,552 
                                  
3  Total income (1 + 2)   39,669    39,457    38,771    116,728    108,374    144,362 
                                  
4  Expenses                              
   a) Cost of materials consumed   7,354    6,786    6,378    21,534    19,004    26,309 
   b) Purchase of stock-in-trade   5,418    4,567    3,906    14,415    10,013    14,501 
   c) Changes in inventories of finished goods, work-in-progress and stock-in-trade   (1,014)   (836)   83    (3,625)   1,311    (415)
   d) Employee benefits expense   8,054    8,722    8,181    25,147    24,144    32,149 
   e) Depreciation and amortisation expense   2,903    2,786    2,715    8,476    8,009    10,772 
   f) Finance costs   241    208    172    644    610    788 
   g) Selling and other expenses   10,788    11,343    11,866    33,122    34,923    46,754 
                                  
   Total expenses   33,744    33,576    33,301    99,713    98,014    130,858 
                                  
5  Profit before tax (3 - 4)   5,925    5,881    5,470    17,015    10,360    13,504 
                                  
6  Tax expense:                              
   a) Current tax   610    1,288    653    3,294    1,569    1,753 
   b) Deferred tax   401    (481)   1,875    (944)   2,319    2,627 
                                  
7  Net profit for the period before share of profit of equity accounted investees (5 - 6)   4,914    5,074    2,942    14,665    6,472    9,124 
                                  
8  Share of profit of equity accounted investees, net of tax   89    109    85    281    275    344 
                                  
9  Net profit after taxes and share of profit of associates (7 + 8)   5,003    5,183    3,027    14,946    6,747    9,468 
                                  
10  Other comprehensive income                              
   a) (i) Items that will not be reclassified subsequently to profit or loss   (438)   66    (1,430)   (886)   (3,704)   (3,710)
   (ii) Income tax relating to items that will not be reclassified subsequently to profit or loss   103    (16)   331    227    875    874 
   b) (i) Items that will be reclassified subsequently to profit or loss   199    (60)   (103)   (207)   (209)   (23)
   (ii) Income tax relating to items that will be reclassified subsequently to profit or loss   (230)   113    16    1    4    23 
   Total other comprehensive income   (366)   103    (1,186)   (865)   (3,034)   (2,836)
                                  
11  Total comprehensive income (9 + 10)   4,637    5,286    1,841    14,081    3,713    6,632 
                                  
12  Paid-up equity share capital (face value Rs. 5/- each)   830    830    829    830    829    830 
                                  
13  Other equity                            124,886 
                                  
14  Earnings per equity share (face value Rs. 5/- each)                              
   Basic   30.16    31.22    18.25    90.07    40.69    57.08 
   Diluted   30.12    31.18    18.22    89.96    40.61    56.96 
       (Not annualised)    (Not annualised)    (Not annualised)    (Not annualised)    (Not annualised)      

 

See accompanying notes to the financial results

 

 

 

 

Segment Information          All amounts in Indian Rupees millions 
      Quarter ended   Nine months ended   Year ended 
    31.12.2018   30.09.2018   31.12.2017   31.12.2018   31.12.2017   31.03.2018 
 Sl. No.   Particulars  (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Audited) 
   Segment wise revenue and results:                              
1  Segment revenue :                              
   a) Pharmaceutical Services and Active Ingredients   7,355    7,787    6,895    22,162    20,077    27,930 
   b) Global Generics   31,369    30,609    30,270    92,641    86,424    114,282 
   c) Proprietary Products   735    772    2,136    2,237    3,403    4,250 
   d) Others   482    635    389    1,555    1,411    1,840 
   Total   39,941    39,803    39,690    118,595    111,315    148,302 
   Less: Inter-segment revenue   1,295    1,628    1,349    4,409    4,044    5,492 
   Total revenue from operations   38,646    38,175    38,341    114,186    107,271    142,810 
                                  
2  Segment results:                              
   Gross profit from each segment                              
   a) Pharmaceutical Services and Active Ingredients   1,833    1,705    1,302    4,730    2,960    4,477 
   b) Global Generics   18,049    18,111    17,912    54,916    50,684    67,190 
   c) Proprietary Products   628    653    2,022    1,875    3,073    3,799 
   d) Others   249    436    181    878    716    869 
   Total   20,759    20,905    21,417    62,399    57,433    76,335 
   Less: Selling and other un-allocable expenditure / (income), net   14,834    15,024    15,947    45,384    47,073    62,831 
   Total profit before tax   5,925    5,881    5,470    17,015    10,360    13,504 

 

Global Generics includes operations of Biologics business. Inter-segment revenue represents sale from Pharmaceutical Services and Active Ingredients to Global Generics at cost.

 

Segmental Capital employed

 

As certain assets of the Company including manufacturing facilities, development facilities and treasury assets and liabilities are often deployed interchangeably across segments, it is impractical to allocate these assets and liabilities to each segment. Hence, the details for capital employed have not been disclosed in the above table.

 

Notes:

 

1These results have been prepared in accordance with the Ind AS notified under Section 133 of the Companies Act, 2013, read with the Companies (Indian Accounting Standards) Rules 2015 as amended.

 

2Post implementation of Goods and Services Tax (“GST”) in India with effect from 1 July 2017, revenues are disclosed net of GST. Revenues for the period prior to 1 July 2017 included excise duty which is now subsumed in the GST. Accordingly, revenues for the nine months ended 31 December 2017 and year ended 31 March 2018 are not comparable with those of the other periods presented.

 

3The Company received a warning letter, dated 5 November 2015 from the U.S. FDA, regarding deviations with current Good Manufacturing Practices at its API manufacturing facilities in Srikakulam, Andhra Pradesh and Miryalaguda, Telangana, as well as regarding violations at its oncology formulation manufacturing facility at Duvvada, Visakhapatnam, Andhra Pradesh. The Company submitted its response to the warning letter on 7 December 2015. The Company has provided an update to the U.S. FDA on the progress of remediation in January 2016, March 2016, May 2016 and August 2016. The U.S. FDA completed the reinspection of the aforementioned facilities in March and April 2017. The Company has responded to the observations identified by the U.S. FDA. The Company received Establishment Inspection Report ("EIR") from the U.S. FDA for API manufacturing facility at Miryalaguda in June 2017 which indicates that the audit is closed. With regard to the Oncology manufacturing facility at Duvvada and API manufacturing facility at Srikakulam, the Company received EIRs from the U.S. FDA in November 2017 and February 2018, respectively, which indicates that the status remains unchanged. In June 2018, the Company requested the U.S. FDA to schedule an inspection of the oncology formulation manufacturing facility at Duvvada. In October 2018, the re-inspection was completed and the U.S.FDA issued Form 483 with eight observations. The Company responded to these observations identified by U.S. FDA in November 2018 and awaiting to hear from agency. With respect to API manufacturing facility at Srikakulam, the Company was asked to carry out certain detailed investigations and analyses. In response, the Company submitted the results of the investigations and analyses in October 2018. As part of the review of the response by the U.S. FDA, certain additional follow on queries have been received by the Company. The Company responded to all queries in January 2019 to U.S. FDA and awaiting re-inspection by the U.S. FDA.

 

4Ind AS 115, Revenue from Contracts with Customers, mandatory for reporting periods beginning on or after 1 April 2018, replaces existing revenue recognition requirements. Under the modified retrospective approach, there were no significant adjustments required to the retained earnings as at 1 April 2018. Also, the application of Ind AS 115 did not have any significant impact on recognition and measurement of revenue and related items in the financial results of the Company.

 

5During the three months ended 31 December 2018, the Company sold one of its API manufacturing business units located in Jeedimetla, Hyderabad to Therapiva Private Limited.  This sale was done by way of slump sale including all related property, plant and equipment, current assets, current liabilities, and transfer of employees. An amount of Rs. 423 million representing the profit on sale of such business unit was included under the head “other income”.

 

6"Other income" for the three months ended 30 September 2018 and nine months ended 31 December 2018 includes gain of Rs. 460 million on account of sale of rights relating to an intangible asset forming part of Company’s Proprietary Products Segment and sale of membership interest in Dr. Reddy’s Laboratories Tennessee, LLC.

 

7In the United States of America, The Tax Cuts and Jobs Act of 2017 was approved and enacted in to law on 22 December 2017 which resulted in a reduction of the federal income tax rate from 35% to 21%.
Consequent to this enactment, the Company has re-measured its U.S. deferred tax assets and liabilities based on the new tax law and this resulted in a charge of Rs. 873 million for the three months ended 31 December 2017.

 

8The unaudited results have been reviewed by the Audit Committee of the Board and approved by the Board of Directors of the Company at their meeting held on 1 February 2019.

 

9The results for the quarter and nine months ended 31 December 2018 were subject to a "Limited Review" by the Statutory Auditors of the Company. An unqualified report has been issued by them thereon.

 

By order of the Board

For Dr. Reddy's Laboratories Limited 

 

Place: Hyderabad

G V Prasad 

Date: 1 February 2019

Co-Chairman & Chief Executive Officer