EX-99.2 3 drr0388_ex99-2.htm EXHIBIT 99.2

Exhibit 99.2

 

 

Dr. Reddy’s Laboratories Ltd.

8-2-337, Road No. 3, Banjara Hills,

Hyderabad - 500 034, Telangana,
India.

CIN : L85195TG1984PLC004507  

 

Tel      : +91 40 4900 2900

Fax     : +91 40 4900 2999

Email : mail@drreddys.com

www.drreddys.com

 

DR. REDDY'S LABORATORIES LIMITED

Audited consolidated financial results of Dr. Reddy's Laboratories Limited and its subsidiaries for the quarter and year ended 31 March 2022 prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB)

 

    All amounts in Indian Rupees millions 
       Quarter ended   Year ended 
Sl. No.   Particulars  31.03.2022   31.12.2021   31.03.2021   31.03.2022   31.03.2021 
       (Audited)   (Unaudited)   (Audited)   (Audited)   (Audited) 
 1   Revenues   54,368    53,197    47,284    214,391    189,722 
 2   Cost of revenues   25,625    24,585    21,909    100,551    86,645 
 3   Gross profit (1 - 2)   28,743    28,612    25,375    113,840    103,077 
 4   Selling, general and administrative expenses   15,674    15,411    14,370    62,081    54,650 
 5   Research and development expenses   4,326    4,159    4,094    17,482    16,541 
 6   Impairment of non-current assets   7,515    47    1,835    7,562    8,588 
 7   Other income, net   (291)   (240)   (587)   (2,761)   (982)
     Total operating expenses   27,224    19,377    19,712    84,364    78,797 
 8   Results from operating activities [(3) - (4 + 5 + 6 + 7)]   1,519    9,235    5,663    29,476    24,280 
     Finance income   1,175    504    615    3,077    2,623 
     Finance expense   (316)   (215)   (297)   (958)   (970)
 9   Finance income, net   859    289    318    2,119    1,653 
 10   Share of profit of equity accounted investees, net of tax   105    185    179    703    480 
 11   Profit before tax (8 + 9 + 10)   2,483    9,709    6,160    32,298    26,413 
 12   Tax expense/(benefit), net   1,608    2,644    2,536    8,730    9,175 
 13   Profit for the period/year (11 -12)   875    7,065    3,624    23,568    17,238 
 14   Earnings per share:                         
     Basic earnings per share of Rs.5/- each   5.28    42.58    21.86    142.08    103.94 
     Diluted earnings per share of Rs.5/- each   5.26    42.48    21.80    141.69    103.65 
          (Not annualised)      (Not annualised)      (Not annualised)            

 

 

 

 

 

 

Segment information

      All amounts in Indian Rupees millions
     Quarter ended   Year ended
Sl. No.   Particulars  31.03.2022   31.12.2021   31.03.2021   31.03.2022   31.03.2021
       (Audited)   (Unaudited)   (Audited)   (Audited)   (Audited)
     Segment wise revenue and results:          
 1   Segment revenue:                       
     a) Pharmaceutical Services and Active Ingredients   9,256    8,887    9,796    36,995   38,887
     b) Global Generics   46,118    44,508    38,737    179,170   154,404
     c) Proprietary Products   191    129    243    1,611   523
     d) Others   502    1,289    389    2,870   2,813
     Total   56,067    54,813    49,165    220,646   196,627
     Less: Inter-segment revenues   1,699    1,616    1,881    6,255   6,905
     Net revenues   54,368    53,197    47,284    214,391   189,722
                          
 2   Segment results:                       
     Gross profit from each segment                       
     a) Pharmaceutical Services and Active Ingredients   1,387    1,638    2,513    6,821   9,426
     b) Global Generics   26,830    25,731    22,446    103,270   91,111
     c) Proprietary Products   184    129    238    1,590   482
     d) Others   342    1,114    178    2,159   2,058
     Total   28,743    28,612    25,375    113,840   103,077
     Less: Selling and other un-allocable expenditure, net of other  income   26,260    18,903    19,215    81,542   76,664
     Total profit before tax   2,483    9,709    6,160    32,298   26,413

 

 

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

 

Notes:

 

  1 The above financial results have been prepared in accordance with International Financial Reporting Standards and its interpretations (IFRS), as issued by the International Accounting Standards Board (IASB).
     
  2

Revenues for the quarter and year ended 31 March 2022 includes:

a) Rs. 1,774 million towards the sale of territorial rights relating to two of the Company's anti-bacterial brands (Ciprolet® and Levolet®) in Russia and CIS region to Alium JSC;

b) Rs. 390 million towards the sale of two of the Company's Brands (Daffy bar and Combihale) in India to Mankind Pharma Limited.

The aforesaid transactions pertain to Company’s Global Generics Segment.

     
  3

During the quarter and year ended 31 March 2022, there were significant changes to the market conditions for certain of the products forming part of Company’s Global Generics and Proprietary Products segments. The changes include, decrease in the market potential of products, increased competition leading to lower volumes, and revenues not being in line with projections. Due to these adverse market developments, the Company recorded an impairment loss of Rs. 7,562 million on various non-current assets. The said impairment loss includes:

a) Rs. 4,337 million relating to PPC-06 (Tepilamide Fumarate Extended Release Tablets) in-process research and development asset;
b) Rs. 3,051 million pertaining to Shreveport Cash Generating Unit (“CGU”) comprising of Property, plant and equipment and Goodwill;
c) Rs. 174 million relating to other intangible assets.

     
  4 On 3 February 2022, the Company entered into an agreement with Nimbus Health GmbH to acquire 100% of its share capital along with the existing employees for an upfront payment of Rs. 421 million (EUR 5 million)  plus performance and milestone-based earn-outs over the next four years. As at 31 March 2022 the Company, on a provisional basis, recognised Rs. 161 million and Rs. 260 million towards the fair value of assets acquired and goodwill, respectively. The acquisition pertains to the Company's Global Generic segment.
     
  5 Included in "Selling, general and administrative expenses" for the quarter ended 31 March 2022, an amount of Rs. 983 million representing the probable outflow with respect to an ongoing Civil Investigative Demand  (“CID”) matter with the State of Texas.
     
  6 During the quarter and year ended 31 March 2022, pursuant to a change in the U.S. Income tax regulations relating to the timing of recognition of certain sales based accruals, the Company recognised current tax liability of Rs. 4,602 million with a corresponding increase in the deferred tax asset.
     
  7 On 5 April 2022 the Company received approval from the Honorable National Company Law Tribunal, Hyderabad Bench (“NCLT”) for the merger of Dr. Reddy's Holding Limited into Dr. Reddy's Laboratories Limited.  Subsequently, the Company has filed the NCLT order, with the Ministry of Company Affairs  on 8 April 2022 (‘Effective Date’).
     
  8 In September 2021, the Company completed the sale of its U.S. and Canada territory rights for ELYXYB (celecoxib oral solution) 25 mg/mL, to BioDelivery Sciences International, Inc. An amount of Rs. 1,084 million is included under the head "Revenues". This pertains to the Company’s Proprietary Products segment.
     
  9 Included in "Other income, net" for the quarter ended 30 September 2021, is Rs. 1,064 million representing the profit on sale of intangible asset, E7777  (anti-cancer agent) to Citius Pharmaceuticals, Inc. This transaction pertains to the Company’s Proprietary Products segment.
     
  10 On 14 June 2021, the Company received the arbitration decision and award in favour of Hatchtech Pty Limited regarding the Civil Litigation and Arbitration relating to the acquisition of the product Xeglyze®.  The award required the Company to pay an amount of Rs. 3,382 million (U.S.$ 46.25 million) towards milestone payments, interest, and fees. The Company was carrying Rs. 1,471 million (U.S.$ 20 million) as the provision towards this litigation. As this constitutes an adjusting subsequent event, the consolidated financial results for the quarter and year ended 31 March 2021 were adjusted to reflect the impact of this event by recognizing the balance amount of Rs. 1,911 million (U.S.$ 26.25 million) in the financial results.  Of the total amount, Rs. 1,820 million (U.S.$ 25 million) was recognised under heading "Impairment of non-current assets" and the balance Rs. 91 million (U.S.$ 1.25 million) was recognised under the heading "Selling, general and administrative expenses". The said expense forms part of the Company’s Proprietary Products segment.

 

 

 

 

 

 

 

  11

During the year ended 31 March 2021, there were significant changes to the market conditions for certain of the products forming part of Company’s Global Generics and Proprietary Products segments. The changes include the launch by competitor of generic version of the product, decrease in the market potential of products primarily due to higher than expected price erosion and increased competition, and higher than expected value erosion.  Due to these adverse market developments, the Company recorded an impairment loss of:

 - Rs. 3,291 million relating to Xeglyze®;
- Rs. 3,180 million relating to ethinyl estradiol / ethenogestral vaginal ring (a generic equivalent to NuvaRing®);
- Rs. 1,587 million relating to saxagliptin and metformin (generic version of Kombiglyze-XR) and phentermine and topiramate (generic version of Qsymia®);
- Rs. 484 million relating to other intangible assets.
Further, an amount of Rs. 46 million has been recognised as impairment of property, plant and equipment.

     
  12 Consolidated statements of financial position

 

   All amounts in Indian Rupees millions 
   As at   As at 
Particulars  31.03.2022   31.03.2021 
    (Audited)      (Audited)  
ASSETS          
Current assets          
Cash and cash equivalents   14,852    14,829 
Other investments   29,513    19,744 
Trade and other receivables   66,764    49,641 
Inventories   50,884    45,412 
Derivative financial instruments   1,906    1,218 
Tax assets   3,285    2,745 
Other current assets   13,902    14,509 
Total current assets before assets held for sale   181,106    148,098 
Assets held for sale   -    151 
Total current assets   181,106    148,249 
Non-current assets          
Property, plant and equipment   62,169    57,111 
Goodwill   4,418    4,568 
Other intangible assets   27,246    35,648 
Trade and other receivables   54    118 
Investment in equity accounted investees   4,318    3,375 
Other investments   3,668    4,958 
Deferred tax assets   12,781    10,630 
Other non-current assets   894    834 
Total non-current assets   115,548    117,242 
Total assets   296,654    265,491 
           
LIABILITIES AND EQUITY          
Current liabilities          
Trade and other payables   25,572    23,744 
Short-term borrowings   27,082    23,136 
Long-term borrowings, current portion   1,017    864 
Provisions   4,258    3,435 
Tax liabilities   5,442    1,389 
Derivative financial instruments   479    326 
Bank overdraft   -    9 
Other current liabilities   33,992    30,488 
Total current liabilities   97,842    83,391 
Non-current liabilities          
Long-term borrowings   5,746    6,299 
Deferred tax liabilities   60    338 
Provisions   57    58 
Other non-current liabilities   2,422    2,343 
Total non-current liabilities   8,285    9,038 
Total liabilities   106,127    92,429 
Equity          
Share capital   832    832 
Treasury shares   (1,601)   (1,967)
Share premium   9,280    8,887 
Share based payment reserve   1,628    1,461 
Capital redemption reserve   173    173 
Debenture redemption reserve   304    - 
Special economic zone re-investment reserve   755    1,326 
Retained earnings   175,712    156,023 
Other components of equity   3,444    6,327 
Total equity   190,527    173,062 
Total liabilities and equity        296,654    265,491 

 

 

 

 

 

 

 

13Consolidated statements of cash flows

 

   All amounts in Indian Rupees millions 
   Year ended 
Particulars  31.03.2022   31.03.2021 
  (Audited)   (Audited) 
Cash flows from/(used in) operating activities :          
Profit for the period   23,568    17,238 
Adjustments for:          
Tax expense/(benefit), net   8,730    9,175 
Fair value changes and profit on sale of financial instruments measured at FVTPL**, net   (277)   (557)
Depreciation and amortization   11,824    12,796 
Impairment of non-current assets   7,562    8,588 
Allowance for credit losses (on trade receivables and other advances)   55    230 
(Gain)/loss on sale or de-recognition of non-current assets, net   (1,119)   42 
Share of profit of equity accounted investees   (703)   (480)
Foreign exchange (gain)/loss, net   (766)   1,856 
Interest (income)/expense, net   (7)   144 
Equity settled share-based payment expense   592    584 
Dividend income   -    -*
Changes in operating assets and liabilities:          
Trade and other receivables   (17,012)   2,081 
Inventories   (5,328)   (9,881)
Trade and other payables   4,412    2,861 
Other assets and other liabilities, net   4,014    (3,258)
Cash generated from operations   35,545    41,419 
Income tax paid, net   (7,437)   (5,716)
Net cash generated from operating activities   28,108    35,703 
           
Cash flows from/(used in) investing activities :          
Expenditures on property, plant and equipment   (14,660)   (9,741)
Proceeds from sale of property, plant and equipment   370    85 
Expenditures on other intangible assets   (4,389)   (2,820)
Proceeds from sale of other intangible assets   2,946    - 
Payment for acquisition of business, net of cash acquired(1)   (326)   (15,514)
Purchase of other investments   (88,972)   (75,418)
Proceeds from sale of other investments   77,771    79,528 
Interest and dividend received   873    1,220 
Net cash used in investing activities   (26,387)   (22,660)
           
Cash flows from/(used in) financing activities :          
Proceeds from issuance of equity shares (including treasury shares)   334    269 
Purchase of treasury shares   -    (1,193)
Proceeds from short-term borrowings, net   3,520    6,791 
Proceeds from long-term borrowings   -    3,800 
Repayment of long-term borrowings   -    (3,743)
Payment of principal portion of lease liabilities   (785)   (754)
Dividend paid   (4,146)   (4,147)
Interest paid   (1,345)   (1,321)
Net cash used in financing activities   (2,422)   (298)
           
Net (decrease)/increase in cash and cash equivalents   (701)   12,745 
Effect of exchange rate changes on cash and cash equivalents   733    113 
Cash and cash equivalents at the beginning of the period(2)   14,820    1,962 
Cash and cash equivalents at the end of the period(3)     14,852    14,820 

*Rounded off to million.

**FVTPL (fair value through profit or loss)

(1)Cash and cash equivalents acquired under business combination Rs.11 million and Rs. Nil for the periods ended 31 March 2022 and 31 March 2021, respectively.

(2)Adjusted for bank-overdraft of Rs. 9 million and Rs. 91 million for the periods ended 31 March 2022 and 31 March 2021, respectively.

(3)Adjusted for bank-overdraft of Rs. Nil and Rs. 9 million for the periods ended 31 March 2022 and 31 March 2021, respectively.

 

  14

Tax expense for the year ended 31 March 2021 includes the following:

- Rs. 1,012 million of benefit, in the quarter ended 30 September 2020, on account of recognition of deferred tax asset consequent to a planned restructuring activity between the Group companies; and

- Rs. 627 million of expense, in the quarter ended 31 March 2021, on account of de-recognition of deferred tax asset due to non-availability of depreciation on goodwill pursuant to an amendment to section 2(11) of the Income Tax Act in the Finance Act, 2021.

     
  15

The Company received an anonymous complaint in September 2020, alleging that healthcare professionals in Ukraine and potentially in other countries were provided with improper payments by or on behalf of the Company in violation of U.S. anti-corruption laws, specifically the U.S. Foreign Corrupt Practices Act. The Company disclosed the matter to the U.S. Department of Justice (“DOJ”), Securities and Exchange Commission (“SEC”) and Securities Exchange Board of India. The Company engaged a U.S. law firm to conduct the investigation at the instruction of a committee of the Company’s Board of Directors. On 6 July 2021 the Company received a subpoena from the SEC for the production of related documents, which were provided to the SEC.

The Company shared the report with respect to one country with the SEC/DOJ during the quarter ended 30 September 2021, and certain other countries in the quarter ended 31 March 2022, and subsequent to the year end. The Company is complying with its listing obligations as it relates to updating the regulatory agencies. While the findings from the aforesaid investigations could result in government enforcement actions against the Company in the United States and/or foreign jurisdictions, which can lead to civil and criminal sanctions under relevant laws, the outcomes including liabilities are not reasonably ascertainable at this time.

 

 

 

 

 

 

 

  16 India’s Code on Social Security, 2020, which aims to consolidate, codify and revise certain existing social security laws, received Presidential assent in September 2020 and has been published in the Gazette of India. However, the related final rules have not yet been issued and the date on which this Code will come into effect has not been announced. The Company will assess the impact of this Code and the rules thereunder when they come into effect.
     
  17 The Company considered the uncertainties relating to the COVID-19 pandemic and the geopolitical situation in Russia and Ukraine, in assessing the recoverability of receivables, goodwill, intangible assets, investments and other assets. For this purpose, the Company considered internal and external sources of information up to the date of approval of these financial results. Based on its judgments, estimates and assumptions, including sensitivity analysis, the Company expects to fully recover the carrying amount of receivables, goodwill, intangible assets, investments and other assets.
The Company will continue to closely monitor any material changes to future economic conditions.
     
  18 The audited results were reviewed by the Audit Committee of the Board at their meeting held on 18 May 2022 and approved by the Board of Directors of the Company at their meeting held on 19 May 2022.
     
  19 The Board of Directors, at their meeting held on 19 May 2022, have recommended a final dividend of Rs.30 per share subject to approval of shareholders.
     
  20 The figures of the fourth quarter are the balancing figures between audited figures in respect of the full financial year and the published year to date figures upto the third quarter of the relevant financial year. Also the figures upto the end of third quarter were only reviewed and not subjected to audit.
     
  21 The results for the quarter and year ended 31 March 2022 periods presented have been audited by the Independent 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:  19 May 2022  Co-Chairman & Managing Director