Dr Reddy Laboratories : . Reddy’s Q1 FY17 Financial Results

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Press ReleaseDr.Reddy's •

DR. REDDY'S LABORATORIES LTD.

8-2-337, Road No. 3, Banjara Hills, Hyderabad - 500034. Telangana, India.

INVESTOR RELATIONS MEDIA RELATIONS

KEDAR UPADHYE •CALVIN PRINTER

• kedaru@drreddys.comcalvinprinter@drreddys .com

  •(Ph:+91-40-66834297) (Ph:+91-40- 49002121)

  Dr. Reddy's Q1 FY17 Financial Results

  Revenues att32.3 billion

  {YoY decline of 14%)

  EBITDA att4.0 billion

  {12.3% of the revenues)

  PAT attt.3 billion

  {3.9% of the revenues)

  Hyderabad,India, July 26,2016: Dr.Reddy's Laboratories Ltd. {BSE:500124INSE: DRREDDY INYSE:ROY) today announced its consolidated financial results for the first quarter ended June 30, 2016under International Financial Reporting Standards (IFRS).

  Ql FY17: Key Highlights

  • Consolidated revenues at'{32 .3 billion, year-on-year decline of14%

  • Gross Profit Margin at 56.2%,declined by "'490bps over that of last year

  • Research & Development (R&D) spend at {4.8billion, year on year increase of 9%.Continued focus on building complex generics and differentiated products pipeline

  • Selling,general & administrative (SG&A) expenses at H2.3billion,year on year increase of 12%

  • EBITDA at {4.0billion, 12.3%of revenues

  • Profit after tax at U.3billion,3.9%of revenues

    Co-chairman and CEO, GV Prasad said "We have come through a very difficult first quarter, with our top and bottom lines impacted by a decline in volume growth, particularly in the US market and the loss of business in Venezuela. We also faced a number of challenges in the quarter including price erosion and delayed launches as a result of the warning letter, which significantly impacted our earnings. However, we continue to take actions that focus on remediation, strengthening our quality systems and executing on our strong product pipeline. We remain focused on generating long term, sustainable growth."

    All amounts in millions, except EPS All US dollar amounts based on convenience translation rate of I USO ="f.67.51

    Particulars	Q1 FY 17			Ql F¥ 16			Growth %
    	($)	(Rs.)	%	($)	(Rs.)	%
    Revenues Cost of revenues	479 210	32,345 14,167	100.0 43.8	557 217	37,578 14,631	100.0 38.9	(14) (3)
    Gross profit	269	18,178	56.2	340	22,947	61.1	(21)
    Operating Expenses	182	12,284	38.0	163	10,973	29.2	12
    Selling,general &administrative expenses
    Research and development expenses	71	4,802	14.8	65	4,387	11.7	9
    Other operating expense I(income)	(1)	(96)	(0.3)	(2)	(125)	(0.3)	(23)
    Results from operating activities	18	1,188	3.7	114	7,712	20.5	(85)
    Finance expense I(income), net	(7)	(445)	(1.4)	(3)	(216)	(0.6)	106
    Share of (profit) of equity accounted investees, net of income tax	(1)	(74}	(0.2}	(1)	(49)	(0.1)	49
    Profit before income tax	25	1,707	5.3	118	7,977	21.2	(79)
    Income tax expense	1	444	1.4	25	1,720	4.6	(74)
    Profit for the period	19	1,263	3.9	93	6,257	16.6	(80)

    Dr. Reddy's Laboratories Limited and Subsidiaries Consolidated Income Statement

    IDiluted EP5 0.11 7.43 0.54 36.58 (80)

    EBITDA Computation

    Particulars	Ql FY 17		QlFV 16
    	($)	(Rs.)	($')	(Rs.)
    Profit before tax	25	1,707	118	7,977
    Interest (income) Iexpense net*	(6)	(409)	(5)	(304)
    Depreciation	26	1,760	23	1,519
    Amortization	14	921	11	749
    EBITDA	59	3,979	147	9,941
    EBITDA (%to sales)	12.3	26.5

  • Includes income from investments

All amounts in millions, except EPS All US dollar amounts based on convenience translation rate of I USD ='{67.51

Key Balance Sheet Items

Particulars			Ason 301hJune 16			As on 3151March 16
			($)	(Rs.)		($)	(Rs.)
Cash and cash equivalents and Other current Investments			379	25,578		592	39,955
Trade receivables			526	35,499		612	41,306
Inventories			414	27,922		379	25,578
Property, plant and equipment			814	54,951		799	53,961
Goodwill and Other Intangible assets			419	28,284		365	24,644
Loans and borrowings (current &non-current)			557	37,632		496	33,513
Trade payables			188	12,723		182	12,300
Equity			1,690	1,14,112		1,901	1,28,336
Revenue Mix by Segment
Particulars	Ql FY 17			Ql FY 16			Growth %
	($)	(Rs.)	%	($)	(Bs.)	%
Global Generics	395	26,638	82	459	30,961	82	(14)
North America	15,523	18,516	(16)
Europe*	1,615	1,912	(16)
India	5,223	4,756	10
Emerging Markets#	4,277	5,777	(26)
PSAI	70	4,692	15	83	5,614	15	(16)
North America	643	580	11
Europe	1,947	2,350	(17)
India	372	670	(44)
Rest of World	1,730	2,014	(14)
Proprietary Products & Others	15	1,015	3	15	1,003	3	1
total	479	32,345	100	557	37,578	100	(14)

• Europe primarily includes Germany, UK and out licensing sales business

  # Emerging Markets refers to Russia, other CIS countries, Romania and Rest of the World markets including Venezuela.

  Segmental Analysis

  Global Generics

  Revenues from Global Generics segment are at n6.6 billion, year-on-year decline of 14%; decline primarily on account of lower contribution from North America and loss of sales from Venezuela.

• Revenues from North America at U5.5 billion,year-on-year decline of 16%. Decline primarily on account of increased competition primarily in valgancyclovir and azacitidine, coupled with pricing pressure and moderation in volumes off-take.

  As of 30th June, 2016, cumulatively 78 generic filings are pending for approval with the USFDA (76 ANDAs and 2 NDAs under 50S(b)(2) route). Of these 76 ANDAs, SOare Para IVs out of which we believe 18 have 'First to File' status.

• Revenues from Emerging Markets at 't4.3 billion, year-on-year decline of 26%.

Revenues from Russia at n.3 billion, year-on-year growth of 2%. Moderate growth primarily on account of depreciation of Ruble, in constant currency revenues grew by 23% year-on-year. Sequentially, the revenues have been stable.

Revenues from other CIS countries and Romania market at W.7 billion, year-on-year decline of 15%.

Revenues from Rest of World (RoW) territories at n.3 billion, year-on-year decline of 53% primarily on account of no sales in Venezuela. Ex-Venezuela it grew by 19%.

• Revenues from India at 't5.2 billion, year-on-year growth of 10%. NPPA pricing notifications and the WPI based annual price decline impacted growth. Portfolio acquired from UCB well-integrated into our supply chain.

• Revenues from Europe at n.6 billion, year-on-year decline of 16%. Pharmaceutical Services and Active Ingredients (PSAI)

• Revenues from PSAI at 't4.7 billion, year-on-year decline of 16%. Decline primarily on account of lower dispatches in API business on account of the ongoing remediation activities

• During the quarter, 19 DMFs were filed globally of which 2 were in the US.The cumulative number of DMF filings as of 30th June, 2016 was 784.

Proprietary Products (PP)

Subsequent to the approvals received from USFDA for 2 NDAs, the company had launched these two molecules Zembrace™Sym Touch ™(Suma 3 mg) injection and Sernivo™ (betamethasone dipropionate) Spray, 0.05% in the US. The performance of these two molecules is gradually picking up traction.