DR REDDYS LABORATORIES LTD - Annual Report 2021

•·· Dr. Reddy's �;•

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 :[email protected] www.drreddys.com

July 2, 2021

The Secretary BSE Ltd. National Stock Exchange oflndia Ltd. New York Stock Exchange Inc. NSE IFSC Ltd.

Dear Sir/Madam,

Sub: Notice of 37th Annual General Meeting (AGM) and Annual Report 2020-21.

Pursuant to Regulation 34 of the SEBI (Listing Obligation and Disclosure Requirements) Regulations 2015, please find enclosed Notice convening the 37th AGM of the Company and Annual Report for the financial year 2020-21.

This is for your information and record.

With regards, \� \. / sa · &t\; gpda; ai(y Secretary � Enclosed: As above

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FOR HEALTH. FOR LIFE.

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Connecting science, technology and innovation

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Good Health
Can’t Wait.
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Annual Report 2020-21

CORPORATE OVERVIEW

For Health. For Life.
Our guiding philosophy	02
Letter from the Chairman and Co-Chairman	04
Our global presence	06
Our businesses	08
Key performance indicators	09
For Health. For Life - putting science, technology and innovation into practice	10
Ÿ ® Venturing into Amazon’s HealthCareAisle	12
Ÿ Living our purpose	14
Ÿ Future-ready with virtual reality	16
Ÿ Lighthouse factories	18
Ÿ A comprehensive COVID-19 portfolio	20
Ÿ Connecting science, technology, innovation and people in the face of a pandemic	22
Board of directors	24
Management council	26

STATUTORY REPORTS

Business responsibility report	28
Management discussion and analysis	40
Five years at a glance and key �nancial ratios	52
Corporate governance	54
Additional shareholders' information	70
Board’s report	80

FINANCIAL STATEMENTS

Standalone �nancial statements �Ind AS�	95
Consolidated �nancial statements �Ind AS�	169
Extract of audited IF�S consolidated �nancial statements	267
Glossary	270
Notice of the 37th annual general meeting	271

FOR HEALTH. FOR LIFE.

Connecting science, technology and innovation

In the last year and a half, the focus of the world has been on our collective health. The current pandemic has reminded us of the paramount importance of our physical and mental well-being. At the same time, it has prompted us to re�ect on how our actions as individuals have a bearing on us as a community and the entire planet.

This year's annual report is a re�ection of our e�ort to bring science, technology and innovation together to �nd solutions to challenges posed by the pandemic, and to do our best for all our stakeholders as a responsible member of the pharmaceutical industry.

‘For Health. For Life' - because Good Health Can't Wait.

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Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

OUR GUIDING PHILOSOPHY

OUR OUR PURPOSE PROMISES

OUR PRINCIPLES

OUR LEADERSHIP BEHAVIOURS

We accelerate access to a�ordable and innovative medicines because

Good Health Can’t Wait.

Bringing

expensive medicines within reach

Addressing unmet patient needs

Helping

patients manage disease better

Working

with partners to help them succeed

Enabling

and helping our partners ensure that our medicines are available where needed

Empathy

We because Good Health Can't Wait. aspire

We understand the needs of our patients and partners better than others.

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Dynamism

We solve challenges that only a few can, and do this with agility.

Aspirational Growth Mindset

Speed & Rigour In Execution

People Leadership

We target industry-leading growth through innovation, cost leadership and taking risks

We act with agility; we are disciplined and rigorous in execution

We inspire people to reach their full potential through work and continuous learning

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Innovation

Excellence

Results

Driven

Focus

We drive patient and customer-focused innovation in all areas using cutting-edge science, technology & tools

We take responsibility for outcomes and own end results for our patients

We excel by combining deep professional expertise and disciplined execution

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Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

LETTER FROM THE CHAIRMAN AND CO-CHAIRMAN

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K SATISH REDDY
Chairman
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G V PRASAD Co-Chairman and Managing Director

Dear Member,

Sputnik V vaccine

There has never been a year such as this. We pray that there never will be any more in our lifetime as well as of our children and grandchildren.

through an online platform and a home isolation program.

Ÿ In September 2020, when the �rst phase of the pandemic was still raging in India, Dr. Reddy’s signed up with the Russian Direct Investment Fund (RDIF) — Russia’s sovereign wealth fund — to cooperate on clinical trials and distribution of Sputnik V vaccine in India. Upon regulatory approval in India, RDIF committed to supply 100 million doses of the vaccine to Dr. Reddy’s.

Ÿ Dedicated separate COVID-19 care facilities were launched for employees and dependents in three locations to provide pre-hospitalization care.

As on May 14, 2021, the virus has infected over 160 million and has claimed the lives of 3.4 million people worldwide. India, the second worst infected country in the world, has witnessed over 25 million cases and more than 270,000 deaths.

Ÿ For employees working on-site, stringent social distancing and safety measures were deployed in work locations, transport facilities and cafeterias. Other measures included multiple stages of disinfection, provision of personal protective equipment, automating actions that require manual contact. Moreover, we provided a daily hardship allowance.

Your company’s core dictum is ‘Good Health Can’t Wait’.

Ÿ Thereafter, we created a partnership with the Biotechnology Industry Research Assistance Council (BIRAC) of the Department of Biotechnology, Government of India, for advisory support and to use some of BIRAC’s clinical trial centers for clinical trials of Sputnik V vaccine.

Never before in the history of Dr. Reddy’s has this maxim been more important than now. In the context of this horri�c pandemic, let us brie�y share with you what your company has done to address the situation.

Ÿ We contracted for additional insurance coverage for COVID-19 which covered hospitalization and home quarantine expenses. This was extended to our employees and their dependents in India. Employees were also provided additional COVID-19 leave.

With the pandemic �aring for the �rst time in April 2020, the primary objective was to ensure health and safety of our employees and their families while continuing to supply medicines across the world. Some of the interventions that we quickly put in place were:

Ÿ From December 2020, we commenced clinical trials of Sputnik V. Based on satisfactory data from Phase II trials, we received approval from the Drugs Controller General of India (DCGI) to conduct Phase III clinical trial on 1,500 subjects as part of a randomized, doubleblind, parallel-group, placebo-controlled study in India.

At the same time, Dr. Reddy’s acted quickly to bring various preventive and curative medicines to deal with COVID-19, including a vaccine. Let us start with our vaccine journey.

Ÿ A well-being and support plan that comprised tele-consulting, helplines, 24x7 access to clinical psychologists

Ÿ Simultaneously, Sputnik V showed strong e�cacy, immunogenicity and safety results in Phase III clinical trials conducted on 19,866 people in Russia by RDIF. The e�cacy of Sputnik V against COVID-19 was reported at 91.6%.
Ÿ In February 2021, we initiated the process with DCGI for Emergency Use Authorization of Sputnik V. This authorization was granted in April 2021.
Ÿ On May 1, 2021, the �rst consignment of imported doses of the Sputnik V vaccine landed in India. These received regulatory clearance from the Central Drugs Laboratory, Kasauli, on May 13, 2021. The soft launch of the vaccine commenced and the �rst dose of the vaccine was administered in Hyderabad on May 14, 2021.
Ÿ Further consignments of imported doses are expected over the coming period. Subsequently, supply of the Sputnik V vaccine will commence from Indian manufacturing partners. Your company is working closely with six manufacturing partners in India to ful�l regulatory requirements to ensure smooth and timely supply.
Ÿ Sputnik V makes Dr. Reddy’s, the third enterprise in India that has been authorized to supply COVID-19 vaccines.
Ÿ We will work closely with stakeholders in the government and the private sector in India to ensure the widest possible reach of the Sputnik V vaccine as part of the national inoculation e�ort. This is a rea�rmation of our determination to �ght against the COVID-19 pandemic in India.

Sputnik V is not the only commitment of your company regarding COVID-19 treatments. In addition, we have been involved in three other medicines.

a) Remdesivir: We signed a licensing agreement with Gilead Sciences, Inc. that grants us the right to register, manufacture and sell Remdesivir, a potential treatment for COVID-19, in 127 countries including India. We launched Remdesivir under the brand name “Redyx™” in India in September 2020. With the surge of COVID-19 cases in the second wave, we ramped-up our capacities to increase availability of the medicine.

® (Favipiravir):

b) Avigan® (Favipiravir): We entered into a licensing agreement with Fuji�lm Toyama Chemical Co. Ltd. to develop, sell and distribute Avigan® (Favipiravir) in all countries other than Japan, China and Russia. This has enabled us to launch Avigan® 200 mg tablets in India and few other markets. We are also conducting

Phase III trials in North America for outpatient setting with mild to moderate symptoms.

c) 2-deoxy-D-glucose (2DG™): The 2-DG has been developed by Defence Research and Development Organization (DRDO) laboratories, in collaboration with Dr. Reddy’s. The drug received emergency use approval as adjunct therapy for hospitalized moderate to severe COVID-19 patients.
We are also working on Molnupiravir, Baricitinib and other COVID-19 drugs for treatment ranging from mild to severe conditions.

To retain basic continuity across our annual letters, let us share the consolidated

�nancial results of your company for FY2021.
Ÿ Consolidated revenues were ` 189.7 billion, or a 9% growth over the previous year.
Ÿ Consolidated gross pro�t was ` 103.1 billion, which was 10% greater vis-à-vis FY2020.
Ÿ Earnings before interest, taxes,
depreciation and amortization (EBITDA) increased to ` 47.4 billion, or an increase of 2% versus the previous year.
Ÿ Operating pro�t increased by 52% to ` 24.3 billion.
Ÿ Pro�t before taxes (PBT) was 26.4 billion, which was 46% higher than 18 billion earned in the previous year.
Ÿ Pro�t after taxes (PAT) was ` 17.2 billion, or 12% less than in FY2020.
Ÿ Diluted earnings per share (EPS) was 103.65 in FY2021, versus 117.40 in FY2020.

We wish to take this opportunity of thanking every employee of your company for putting in all the extra e�orts in these trying times to make these results happen. They have done spectacular work.

Two of our key promises have been addressing unmet patient needs, and helping patients to manage disease better. Nothing has underscored the importance of these promises as the COVID-19 pandemic.

We do not know when the second wave will subside. Neither do we know whether there will be a third wave and of what intensity. But we do know that the only preventive worth the name is vaccination. And we are committed to seeing that your company plays a key role in the vaccinating program for our citizens.

Because Good Health Can’t Wait.

Many of us have lost loved ones during this pandemic, especially in the second wave. Our sincerest condolences to them and our prayers that the families have the spirit and strength to overcome their tragedies.

Stay safe. Vaccinate as soon as you can. Wear masks. Maintain social distancing. This, too, shall pass. But it needs our combined e�orts. And determination to succeed.

With our best regards and prayers,

K Satish Reddy

Chairman

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G V Prasad

Co-Chairman and Managing Director

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

GLOBAL PRESENCE

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48 Nationalities 56 HIGHLIGHTS FILINGS LAUNCHES Countries REVENUES GENERIC FILINGS NEW PRODUCTS ₹ 189.7 billion 20 ANDA �lings 273 & one NDA �ling NAG EBITDA 27 Sales & Marketing As on March 31, 2021, 95 ₹ 47.4 billion generic �lings are pending for Europe approval (92 ANDAs and three Research & Development Centres PROFIT AFTER TAX NDAs). Of these, 47 are Para 40 I� �lings and �e believe 23 of ₹ 17.2 billion these have ‘First-to-File’ Emerging Markets Manufacturing Facilities status. 116 DILUTED EPS India Headquarters ₹ 103.65 DMF FILINGS 90 14 DMFs �led in (Including Wockhardt acquired portfolio of 70 products) the US.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

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OUR
BUSINESSES
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PHARMACEUTICAL
SERVICES AND
ACTIVE
INGREDIENTS
GLOBAL
GENERICS (PSAI)
(GG)
REVENUE
REVENUE 32 billion 24%  154.4 billion 12% 16.8% of net revenues
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PROPRIETARY PRODUCTS & OTHERS

REVENUE

` 3.3 billion 69% 1.8% of net revenues

81.4% of net revenues

PROPRIETARY PRODUCTS

ACTIVE PHARMACEUTICALS INGREDIENTS

In our Proprietary Products business, we sold our U.S. and select territory rights for the commercialized portfolio of Derma and Neurology therapies that were being marketed in U.S. Our focus is now on development of di�erentiated formulations for global markets. The aim is to improve the patient’s holistic experience with our medicines, so as to improve e�cacy, ease of use and the resolution of unmet patient needs.

Active Pharmaceuticals Ingredients (API) is one of our core businesses. We partner with several leading generic formulation companies in bringing their molecules �rst to the market. Our focus on innovation-led a�ordability gives our customers access to the most complex active ingredients, while maintaining a consistent global quality standard. Our API development e�orts enable our own generics business to be cost competitive and get to market faster.

REVENUE BY GEOGRAPHY

9% North America ₹ 70.5 billion 15% India ₹ 33.4 billion

15% India ₹ 33.4 billion 7% Emerging Markets ₹ 35.1 billion 32% Europe ₹ 15.4 billion

GLOBAL GENERICS

Global generics is our biggest business driver. We o�er more than 550 high-quality generic drugs, keeping costs reasonable by leveraging our integrated operations.

AURIGENE DISCOVERY

Aurigene Discovery, a wholly-owned subsidiary, is a clinical stage biotech company committed to bringing novel therapeutics for the treatment of cancer and in�ammation. We have fully integrated drug discovery and development infrastructure from hit generation to clinical development. We have pioneered customized models of drug discovery and development collaborations with large-pharmaceutical, mid-pharmaceutical companies and biotechnology companies.

AURIGENE PHARMACEUTICAL

SERVICES

Our custom pharmaceutical business is a promising future growth driver. We o�er end-to-end product development and manufacturing services and solutions to innovator companies. Our rich and extensive knowledge repository of various types of formulations helps shorten time to market and support lifecycle management.

Our expertise in active ingredients, product development skills, a keen understanding of regulations and intellectual property rights, as well as our streamlined supply chain, makes us leaders in this segment.

BIOLOGICS

Our biosimilars, generic equivalents of the innovator’s biologics, o�er a�ordable yet equally e�ective alternatives. Our product development capabilities and commercial reach have given us an established presence in this segment. We have six products in the market and an industry leading pipeline spanning oncology and autoimmune diseases.

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Over 550
high-quality API is a
generic medicines foundational
marketed Di� erentiated business
worldwide formulations for us
that present
enhanced
benefi ts
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Note: The numbers are as per IFRS reporte� �nan��a�s

KEY PERFORMANCE INDICATORS

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EBITDA ` MILLION
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GROSS PROFIT[`][ MILLION]

REVENUE[`][ MILLION]

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FY2021 1,89,722 FY2021 1,03,077
FY2020 1,74,600 FY2020 94,009
FY2019 1,53,851 FY2019 83,430
FY2018 1,42,028 FY2018 76,304
FY2017 1,40,809 FY2017 78,691
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FY2021 47,386
FY2020 46,432
FY2019 34,189
FY2018 24,081
FY2017 25,495
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PAT ` MILLION
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NET WORTH[`][ MILLION]

PBT[`][ MILLION]

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FY2021 26,413
FY2020 18,032
FY2019 22,443
FY2018 14,341
FY2017 14,653
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FY2021 17,238
FY2020 19,498
FY2019 18,795
FY2018 9,806
FY2017 12,039
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FY2021 1,73,062
FY2020 1,54,988
FY2019 1,40,197
FY2018 1,26,460
FY2017 1,24,044
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NET DEBT TO EQUITY RATIO*

EPS (DILUTED)[`]

ROCE[%]

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FY2021 17.8
FY2020 12.2
FY2019 14.7
FY2018 8.2
FY2017 10.3
Note: The numbers are as per IFRS reported �nancials
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FY2021 103.6 (0.04) FY2021
FY2020 117.4 (0.03) FY2020
FY2019 113.1 FY2019 0.09
FY2018 59.0 FY2018 0.24
FY2017 72.1 FY2017 0.25
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* FY2021 Net debt to equity ratio computation excludes current borrowings & current investments

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

FOR HEALTH. FOR LIFE.

Putting science, technology and innovation into practice

patients globally, and, in the process, create value for all our stakeholders.

Operational

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Company Overview

Statutory Reports Financial Statements Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

VENTURING INTO AMAZON’S ® HEALTHCAREAISLE

An important milestone for the OTC team in the U.S.

Dr. Reddy's �rst began selling its over-thecounter Habitrol® brand nicotine patches on Amazon in 2016, as an experiment. Shortly after launching Habitrol®, Doan's® was added to the portfolio.

After landing on the name, the team hired another company to design the logo. With the brand and logo in hand, the team went about the business of designing the packaging in-house. Initially, the team thought they were simply going to develop and sell store-brand OTC products to Amazon, not unlike the way they sell to other big-box retailers and drug store chains. However, they quickly learned that, in order to be successful, you need to sell through Amazon, not to Amazon.

The big change came two years later in 2018 when Amazon reached out to us looking for companies that could launch Amazon-exclusive brands in the OTC space. A veteran of the OTC team, Lindsay Pro�tt, was put in charge of an exhaustive branding development program working with one of the best pharma-branding agencies in the business, Brand Institute. Under Pro�tt's leadership, the team worked through hundreds of names and naming conventions and conducted multiple brand research e�orts.

The team hired another experienced agency to help them navigate the Amazon business framework and also develop a marketing and merchandising plan speci�cally for Amazon. The key learnings, as well as strategy and brand development, took most of 2019, and by 2020, Dr. Reddy's direct-to-consumer strategic priority gained the necessary traction and proved its viability. In January this year, the HealthCareAisle®® store brand hit a key milestone, achieving US$ 100,000 of sales in a week.

Interestingly, the name 'HealthCareAisle' came gained the necessary traction and proved its up in a casual discussion among the team viability. In January this year, the HealthCareAisle®® members. Consumer research seemed to point store brand hit a key milestone, achieving to the name as innovative and likeable.

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At the current growth rate, the Amazon direct-toconsumer channel is now a key growth driver for the OTC business, and the team plans to launch products on Amazon �rst and then to other channels. Additionally, they anticipate ramping up to double their online portfolio to 50+ products in the foreseeable future.

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In January this year,
the HealthCareAisle
store brand hit a key
milestone, achieving
US$ 100,000 of sales
in a week.
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®
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Dr. Reddy’s Laboratories Limited

LIVING OUR PURPOSE

How our teams kept medicine supplies to Europe moving during the pandemic

When �ights began to be grounded at the beginning of the pandemic, our global supply chain acted quickly and with persistence to �nd new solutions. One example is the launch of a crucial generic medicine (Cinacalcet) in Europe.

STRONGER TOGETHER

To us, this story is an example of how our colleagues around the world have truly lived our brand principles of empathy and dynamism during the pandemic. It is as much a tribute to the sense of ownership and steadfastness shown by our colleagues in quickly adapting to new and unforeseen challenges posed by the pandemic, as it is to the personal and professional adjustments made by them to enable the same. The joy derived from recognizing the impact of one's work in meeting the unmet needs of patients and contributing to society is unmatched and has renewed our commitment to deliver on our purpose and responsibility towards patients and society.

In April 2020, with �ve days to go for the launch of the product, lockdowns and work-from-home policies began to be enforced in Europe. We found ourselves suddenly needing to �nd various alternatives on extremely short notice. Working remotely in many cases, colleagues began to hunt for the same. A major hurdle was the closing of airports in some countries – including at our import location in the European Union (EU), which was critical for this launch as the product was being �own in from India. To �nd alternatives, the Supply Chain team worked closely together with the Quality and Logistics teams to �nd ways to address the situation working late nights and through the weekend in an attempt to approve a new import location. In parallel, the manufacturing site in India implemented safety and hygiene measures in record time to ensure that manufacturing continued without delay.

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Hard work, collaborative
e�ort, clockwork
precision and team play
ensured that the product
made it to Europe on
time, and was launched
without delay.
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AIR, ROAD, SEA

Instead of a direct �ight from India to the �nal destination in Europe as originally planned, the new arrangement was to �y the product from India to another country with an open airport in Europe, then transport the medicines �rst by road through two more countries before taking the ferry to reach the �nal destination � of course, ensuring supply chain security at every step of the journey.

What followed was an excellent demonstration of clockwork precision and team play to ensure that the product made it to the destination on time. After due procedures, the product was launched as per plan with no delay.

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FUTURE-READY WITH VIRTUAL REALITY

Training employees using VR in Hyderabad and Vizag

As a pharmaceutical company, we believe in applying scienti�c techniques not only to come up with quality products, but also to increase overall e�ciency in our facilities around the world. Manufacturing is a key process where we have embraced future-ready innovations so that our employees can learn new things quickly and easily. At the same time, manufacturing must also ensure quality, safety and e�ciency � crucial tenets in the pharmaceutical world.

After intensive training, workers who join the shop �oor are often overwhelmed by the plant environment and machine sizes for the �rst few days. In addition, they must apply their training in this environment, which can be challenging. We realised that a simulated training environment could go a long way to teach new employees the ropes, without them being intimidated by the equipment and keeping safe.

Enter our Virtual Reality Labs in Hyderabad and Vizag, where our employees train in manufacturing processes before joining the production �oor. They get accustomed to their work environment, learn to perform safety checks, machine operations and quality checks.

The success of any virtual reality implementation project stands on selecting the most challenging scenarios and converting them into simulated cases or situations. Our content and technology partners worked seamlessly together to replicate our plant designs, machines and processes in the virtual world so that our employees can train in accurate modes and environments. For example, the VR module of our compression machine sees the employee performing various tasks virtually such as wearing PPEs, reviewing safety checks,

machine calibrations and so on. In real life, this is a huge hydraulics machine where a new operator may face a variety of safety and e�ciency challenges. Operated with Human-Machine Interface, in a real scenario, a new resource can run into various safety hazards.

Our virtual reality training programmes help to bridge gaps in skill among incoming employees. It is at least �� percent more e�cient than traditional training methods and allows trainers to monitor employees’ psychomotor skills, their levels of alertness and their reactions during emergencies. And our people, in turn, enjoy the experience.

Sridhar Sunkara, who anchored the VR fermentation module, says, “This is an excellent initiative. The machine is very interactive, it will de�nitely boost interest in learning.” In fact, those who have trained in our VR labs are eagerly awaiting the opening of our third lab in Baddi. “This setup is very good, and it provides excellent on-the-job training,” says Shweta Sharma, who attended the blender module.

As we go onwards and upwards, we know our people are the wind beneath our wings. We are committed to empowering them using the latest technologies and scienti�c know-how.

Enter our Virtual Reality Labs in Hyderabad and Vizag, where our employees train in manufacturing processes before joining the production �oor�

Company Overview Statutory Reports Financial Statements Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

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LIGHTHOUSE FACTORIES

Creating role models to lead the way to a smarter world

The world is progressing at a dizzying pace as we experience the Fourth Industrial Revolution — the automation of traditional manufacturing and industrial practices using smart tech. We too are gearing up to be future-ready, and one of the steps we've taken in this direction is to initiate an internal pilot to gradually transform our factories to become 'lighthouse' factories.

A digitally enabled factory of the future transforms the lives of the people on the shop�oor and in the labs. Integrated systems provide information about priorities, shift planning, performance against plan indicators and realignment of plans where necessary based on exceptions and delays. All equipment is monitored real-time; information tracking and decision-making are easier, thereby signi�cantly improving supply chain metrics.

The lighthouses are some of the world's most advanced factories from both digital and sustainable perspectives. These serve as beacons of light for the rest of the industry, and Dr. Reddy's wants to be at the forefront as a leading pharmaceutical company.

“The scale and speed at which new-age technology solves problems is amazing. It has to be applied aptly to improve end-to-end value for the organization,” says G V Prasad, our CoChairman and Managing Director. Of course, manufacturing e�ciency will ultimately help us to make our medicines more accessible and a�ordable, because Good Health Can't Wait.

Our �rst pilot site for this transformation �ourney is the FTO-2 manufacturing unit located in Hyderabad. We believe in embracing the most current technologies to improve manufacturing e�ciency, while at the same time contributing to sustainable goals. The transformation has signi�cant impact on our culture and capability, product quality, process robustness, e�ciency and productivity.

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We believe in embracing the
most current technologies to
improve manufacturing
e�ciency� while at the same
time contributing to
sustainable goals.
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Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

A COMPREHENSIVE COVID-19 PORTFOLIO

Contributing to the �ght against the pandemic in every way we can

The coronavirus pandemic has tested our readiness and resolve to be a part of solutions during healthcare emergencies. Through the course of 2020 and 2021, our teams swung into action to ensure that we explore every possible avenue and innovative solutions in the �ght against the COVID-19 pandemic. As a responsible pharma company, we have worked hard to develop a portfolio of drugs aimed at treating mild, moderate as well as severe COVID-19. To this portfolio, we also added a vaccine. We will continue to support the collective global e�ort against the COVID-19 pandemic.

At a time when human life is at its most vulnerable, our teams across functions are working non-stop to accelerate access to a�ordable medicines around the world.

OUR COVID-19 PORTFOLIO

SPUTNIK V VACCINE

Partnership with the Russian Direct Investment Fund in 2020

Received emergency use approval from the DCGI in April 2021

REMDESIVIR (REDYX™)

Non-exclusive licensing agreement with Gilead Sciences, Inc. in 2020

Launched in India in 2020

® FAVIPIRAVIR (AVIGAN )

Licensing agreement with FujiFilm Toyama Chemical

Commercialized in India in 2020

2-DEOXY-D-GLUCOSE (2DG™)

Partnership with Defence Research and Development Organization

Supply commenced in India in 2021

MOLNUPIRAVIR

Non-exclusive licensing agreement signed with Merck Sharp & Dohme (MSD) in 2021

BARICITINIB

Non-exclusive licensing agreement signed with Eli Lilly and company in 2021

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Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

CONNECTING SCIENCE, TECHNOLOGY, INNOVATION AND PEOPLE IN THE FACE OF A PANDEMIC

Since the beginning of the pandemic last year, Dr. Reddy’s has left no stone unturned to explore every avenue in the global �ght against the COVID-19 pandemic, and we will continue our e�orts unwaveringly. Our priority remains the health, safety and well-being of our employees, communities around us, customers, suppliers, partners, stakeholders, and our promise to make a�ordable medicines accessible to patients around the world.

ENSURING EMPLOYEE SAFETY AND WELL-BEING

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Organized a Established Introduced a home Dedicated Up-to-date information Strategic tie-ups vaccination drive in-house isolation program helpline numbers on the local situation, with hospitals for employees and emergency care with tele-consulting for emergency employee connects and and healthcare their family centres for with doctors, daily support for employee assistance centres to assist members pre-hospitalization monitoring of vitals employees programmes to support employees and care and a home the emotional, mental their families isolation kit and physical well-being of colleagues around the world

SUPPORT TO THE COMMUNITY

During the �rst wave, the need of the hour was to support those most vulnerable and most a�ected by the lockdown. Our e�orts included�
Ÿ Delivery of funding, rations, sanitizers and life-saving PPEs
Ÿ Roll-out of training programs for COVID-19 warriors to build awareness about the disease
During the second wave, we aligned e�orts to the needs of communities to do our bit to release the pressure on the medical infrastructure.

PHASE I:

PHASE II:

Ÿ Augmented medical facilities by helping set up step-down units (between ICU and general ward levels), sourcing ventilators, setting up oxygen plants.

Having initiated community awareness campaigns, access to testing and home-care medicine supply, our teams are working towards the below.

Ÿ Promotion of COVID-19 appropriate behavior at community level through IEC materials
Ÿ Provided ventilators, oxygen concentrators and medical supplies, including kits with COVID-19 therapeutic drugs to charitable hospitals across the country.
Ÿ Strengthening community awareness, surveillance, screening and triaging through FLWs
Ÿ Improving access to testing services – providing RAT kits to charitable hospitals, SuB centers and PHCs
Ÿ Worked with our Community Health Intervention Programme (CHIP), to source and distribute oximeters, thermometers and medicines to 155 villages
Ÿ Supporting home-care management of patients – working with district health department and charitable hospitals for home-based medical kits
Ÿ Strengthening Government isolation centers – providing medical supplies, clinical protocols and also tele-consultation
Ÿ Providing emergency referral transport facility
Ÿ Supported State Governments of Telangana, Andhra Pradesh, Himachal Pradesh with several thousands of medicines as per COVID-19 protocol
Ÿ Working on reduction of vaccine hesitancy
Ÿ Strengthening vaccine delivery program

We will continue to support the community in every possible way to win the battle against COVID-19.

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WE ARE ALL IN THIS TOGETHER!

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The second wave required intense e�ort in the form of manpower, awareness, training, coordination, equipment and infrastructure. Additionally, a third wave appears to be a possibility in India, and will need signi�cant reinforcement of our healthcare infrastructure on an urgent basis.

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Dr. Reddy’s has committed

₹ 50 CRORE

(~US$ 7 MILLION)

towards the COVID-19 India Collaborative Committed Fund

We have also launched Dr. Reddy’s

COVID AID

a campaign inviting our partners, global teams and employees to collaborate with us and help strengthen the infrastructure in preparation for subsequent waves.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

BOARD OF DIRECTORS

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C
M
M
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M
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K SATISH REDDY Chairman

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G V PRASAD
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Co-Chairman and Managing Director

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M C
M M
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DR. BRUCE L A CARTER
Independent Director
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ALLAN OBERMAN
Independent Director
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M C
M M
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LEO PURI
Independent Director
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SRIDAR IYENGAR Independent Director

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SHIKHA SHARMA
Independent Director
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PRASAD R MENON Independent Director

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KALPANA MORPARIA
Independent Director
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OUR BOARD LEVEL COMMITTEES

Audit committee

Nomination, governance and compensation committee Risk management committee

Science, technology and operations committee Banking and authorisations committee

Stakeholders' relationship committee Corporate social responsibility committee

C Committee chairmanship M Committee membership

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

MANAGEMENT COUNCILOUR PRODUCTS

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K SATISH G V PRASAD
REDDY Co-Chairman and
Chairman Managing Director
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EREZ ARCHANA ISRAELI BHASKAR Chief Executive Chief Human ��cer Resource ��cer

DEEPAK MARC SAPRA KIKUCHI Chief Executive Chief Executive ��cer� A�I and ��cer� �orth Services America Generics

MUKESH RATHI Chief Digital and Information ��cer

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PARAG PATRICK
AGARWAL AGHANIAN
Chief Financial Chief Executive
O�cer O�cer� European
Generics
M V RAMANA SANJAY
Chief Executive SHARMA
O�cer� �randed Global Head of
Markets (India and Manufacturing
Emerging Markets)
SAUMEN SAURI
CHAKRABORTY GUDLAVALLETI
Advisor Global Head of
Integrated Product
Development
Organization (IPDO)
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YUGANDHAR PUVVALA Global Head of Supply Chain

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

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Dr. Reddy’s Laboratories Limited

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At Dr. Reddy's, we remain mindful of the needs of all our stakeholders while creating healthy ecosystems and strong communities.

Our endeavor is to go beyond �nancial goals and legal re�uirements to meet the ethical, social and environmental expectations of our stakeholders. Therefore, we engage with them consistently to nurture trust and ensure business sustainability.

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BUSINESS RESPONSIBILITY REPORT

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Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

Disclosures on the nine principles as charted by the Ministry of Corporate ��airs in the �National Voluntary Guidelines (NVGs) on Social, Environmental and Economic Responsibilities of Business’

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PRINCIPLE 2

PRINCIPLE 1

PRINCIPLE 3

ETHICS, TRANSPARENCY & ACCOUNTABILITY

PRODUCT LIFE CYCLE SUSTAINABILITY

EMPLOYEE WELL-BEING Businesses should promote the well-being of all employees.

Businesses should conduct and govern themselves with ethics, transparency and accountability.

Businesses should provide goods and services that are safe and contribute to sustainability throughout their lifecycle.

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PRINCIPLE 6 ENVIRONMENT

PRINCIPLE 5 HUMAN RIGHTS

PRINCIPLE 4

STAKEHOLDER ENGAGEMENT

Businesses should respect the interests of and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized.

Businesses should respect and promote human rights.

Businesses should respect, protect and make e�orts to restore the environment.

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PRINCIPLE 8

PRINCIPLE 7

PRINCIPLE 9 CUSTOMER VALUE

POLICY ADVOCACY

EQUITABLE DEVELOPMENT

Businesses, when engaged in in�uencing public and regulatory policy, should do so in a responsible manner.

Businesses should support inclusive growth and equitable development.

Businesses should engage with and provide value to their customers and consumers in a responsible manner.

SECTION A

GENERAL INFORMATION ABOUT THE COMPANY CORPORATE IDENTITY NUMBER (CIN) OF THE COMPANY L85195TG1984PLC004507

NAME OF THE COMPANY

Dr. Reddy’s Laboratories Limited

REGISTERED ADDRESS

8-2-337, Road No. 3, Banjara Hills, Hyderabad 500 034, Telangana, India

WEBSITE

www.drreddys.com

E-MAIL ID [email protected]

FINANCIAL YEAR REPORTED

April 1, 2020 to March 31, 2021

SECTOR(S) THAT THE COMPANY IS ENGAGED IN (INDUSTRIAL ACTIVITY CODE-WISE) Pharmaceuticals (210)

LIST THREE KEY PRODUCTS/ SERVICES THAT THE COMPANY MANUFACTURES/PROVIDES (AS IN BALANCE SHEET) Buprenorphine & Naloxone, Omeprazole and Nimesulide

TOTAL NUMBER OF LOCATIONS WHERE BUSINESS ACTIVITY IS UNDERTAKEN BY THE COMPANY

Our manufacturing, sales and marketing operations span over 56 countries. We also serve API customers globally.

(A) Number of international locations:
We have six manufacturing facilities in Louisiana (USA), Middleburgh (USA), Mexico, Mir�eld (UK), Beverley (UK) and Kunshan Development zone (China); and three research and development facilities in Cambridge (UK), Leiden (The Netherlands) and Kuala Lumpur (Malaysia). Refer page no. 78
(B) Number of national locations We have 18 manufacturing units and six research and development facilities in India. Refer page no. 79

MARKETS SERVED BY THE COMPANY – LOCAL/STATE/NATIONAL/ INTERNATIONAL

Our major markets include the United States of America (USA), India, Russia, CIS regions and Europe.

We also reach out to patients in various other markets like South Africa, Australia, Jamaica, New Zealand, Brazil, China and Association of Southeast Asian Nations (ASEAN) countries.

SECTION B

FINANCIAL DETAILS OF THE COMPANY (AS ON MARCH 31, 2021)

PAID-UP CAPITAL (₹) 832 million

TOTAL TURNOVER FROM OPERATIONS

(STANDALONE) (₹) 133,491 million

TOTAL PROFIT AFTER TAX (STANDALONE) (₹) 21,864 million

TOTAL SPENDING ON CORPORATE SOCIAL RESPONSIBILITY (CSR) AS PERCENTAGE OF PROFIT AFTER TAX (%)

2.12% of the average net pro�ts of the company made during the immediately three preceding �nancial years.

LIST OF ACTIVITIES IN WHICH

EXPENDITURE ABOVE HAS BEEN INCURRED Refer to Principle 8 on page no. 38

SECTION C

OTHER DETAILS

DOES THE COMPANY HAVE ANY SUBSIDIARY COMPANY/COMPANIES? Yes

DO THE SUBSIDIARY COMPANY/

COMPANIES PARTICIPATE IN THE BUSINESS RESPONSIBILITY (BR) INITIATIVES OF THE PARENT COMPANY? IF YES, THEN INDICATE THE NUMBER OF SUCH SUBSIDIARY COMPANY(S)

Our subsidiary companies are closely integrated with our corporate BR initiatives.

DO ANY OTHER ENTITY/ENTITIES (E.G. SUPPLIERS, DISTRIBUTORS ETC.) THAT THE COMPANY DOES BUSINESS WITH, PARTICIPATE IN THE BR INITIATIVES OF THE COMPANY? IF YES, THEN INDICATE THE PERCENTAGE OF SUCH

ENTITY/ENTITIES?

Yes. We have a code of conduct for partners, which we expect them to follow. For more details, please refer to: www.drreddys.com/media/

720559/supplier-code-of-conduct.pdf

SECTION D

BR INFORMATION

(A) Details of the director responsible for implementation of the BR policy/policies Mr. K Satish Reddy Chairman DIN: 00129701

(B) Details of the BR Head

Mr. Thakur Pherwani Head, EHS, Sustainability and Operations Excellence Tel: +91-40-4900-2339 E-mail ID: [email protected] DIN: Not applicable

(C) Indicate the frequency with which the board of directors, committee of the board or CEO meets to assess the BR performance of the company 3–6 months

(D) Does the company publish a BR or a

Sustainability Report? What is the hyperlink for viewing this report? How frequently is it published?

Yes, the company publishes both a BR and a sustainability report. The sustainability report can be viewed at: www.drreddys.com/our-people-and-ourcitizenship/sustainability/

The BR can be viewed as part of the annual report. This report is published annually.

(E) Principle-wise (as per National

Voluntary Guidelines) BR policy/ policies.

Please refer Table 1

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

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PRINCIPLE-WISE (AS PER NVGS) BR POLICY/POLICIES |
TABLE 1
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|SL.
NO
PRINCIPLE-WISE
(AS PER NVGS)
BR POLICY/
POLICIES
P1
ETHICS,
TRANSPARENCY
AND
ACCOUNTABILITY
P2
PRODUCT
LIFE CYCLE
SUSTAINABILITY
P3
EMPLOYEE
WELLBEING
P4
STAKEHOLDER
ENGAGEMENT
P5
HUMAN RIGHTS
P6
ENVIRONMENT
P7
POLICY
ADVOCACY
P8
EQUITABLE
DEVELOPMENT
P9
CUSTOMER
VALUE
1
Do you have a
policy/policies
for-
Yes
Yes
Yes
Yes
We comply with all the
statutory requirements.
All the contracts and
standing orders include
relevant aspects of
human rights.
Yes
Yes
Yes
Not
applicable|Has the policy been
formulated in
consultation with the
relevant stakeholders?
Yes
Yes
Yes
Yes
All the standing
orders are cosigned by
the recognized union.
Yes
Yes
Yes
2
Not
applicable|Does the policy
standards? If yes,
specify?
conform to any
national/ international
We have adopted
a Code of Business
Conduct and Ethics
(COBE) which
conforms to national
and international
employees across the
group.
standards. This applies
to all the directors and
We abide by all laws of
the land and are a
signatory to the 10
principles of the UN
Global Compact. We
take into account
industry best practices
and global
benchmarks in
de�ning our policies.
needed.
Apart from that, we
continuously
benchmark our
policies with
competition in
Yes, we conform
di�erent markets and
review them as
to the required labor
laws in each country.
We abide by all laws of
the land and are a
signatory to the 10
principles of the UN
Global Compact. We
take into account
industry
best practices and
global benchmarks in
de�ning our policies.
Yes, the policy
conforms to national
standards pertinent to
human rights.
Yes, the policy is inline
with international
standards.
standards.
with national
Yes, the policy is inline
We abide by all laws of
the land and are a
signatory to the 10
principles of the UN
Global Compact. We
take into account
industry best practices
and global
benchmarks in
de�ning our policies.
3
Not
applicable|Has the policy been
approved by the
board? If yes, has it
been signed by MD/
owner/CEO/
appropriate board
director?
approved by the board
and/ or appropriately
Yes, it has been
authorized.
approval. All other
policies are approved
by CEO/MD.
placed before the
board for
consideration and
Statutory policies are
council (MC) and
relevant stakeholders
are consulted.
policies by CEO/MD.
approved by CHRO
and international
The management
Policies in India are
Statutory policies are
approval. All other
policies are approved
by CEO/MD.
placed before the
board for
consideration and
policies by CEO/
Policies in India are
approved by CHRO
and international
MD. The MC and
relevant stakeholders
are consulted.
Yes
Yes
policies are approved
by CEO/MD.
placed before the
board for
consideration and
Statutory policies are
approval. All other
4
Not
applicable|of the policy?
committee of the
board/ director/
o�cial to oversee the
implementation
Does the company
have a speci�ed
Yes
business/function
head.
The responsibility for
the implementation of
policies and their
review primarily lies
with the respective
All policy changes
are discussed in
HR leadership team
meeting. The MC and
relevant stakeholders
are consulted before
taking it for approval.
business/function
head.
The responsibility for
the implementation of
policies and their
review primarily lies
with the respective
for the implementation
of policies and their
review primarily lies
with the respective
business/function
head.
The responsibility
Yes
Yes
The responsibility for
the implementation of
policies and their
review primarily lies
with the respective
business/function
head.
5
Not
applicable|online?
Indicate the link for the
policy to be viewed
www.drreddys.com/
investors/governance/c
ode-of-business-
conduct-and-ethics-
cobe.aspx
6
www.drreddys.com/me
dia/636787/dr-reddys-
she-policy-board.pdf
NA
www.drreddys.com/me
dia/636787/dr-reddys-
she-policy-board.pdf
www.drreddys.com/
investors/governance/
code-of-business-
conduct-and-ethics-
cobe.aspx
www.drreddys.com/me
dia/636787/dr-reddys-
she-policy-board.pdf
www.drreddys.com/me
dia/993225/csr-
policy.pdf
www.drreddys.com/me
dia/636787/dr-reddys-
she-policy-board.pdf
Not
applicable|TABLE 1 |PRINCIPLE-WISE (AS PER NVGS) BR POLICY/POLICIES
SL.
NO
PRINCIPLE-WISE
(AS PER NVGS)
BR POLICY/
POLICIES
P1
ETHICS,
TRANSPARENCY
AND
ACCOUNTABILITY
P2
PRODUCT
LIFE CYCLE
SUSTAINABILITY
P3
EMPLOYEE
WELLBEING
P4
STAKEHOLDER
ENGAGEMENT
P5
HUMAN RIGHTS
P6
ENVIRONMENT
P7
POLICY
ADVOCACY
P8
EQUITABLE
DEVELOPMENT
P9
CUSTOMER
VALUE
7
Has the policy been
formally communicated
to all relevant internal
and external
stakeholders?
Yes
required to sign a
similar undertaking at
the time of joining.
Additionally, all our
policies with respect
to the nine principles
Employees are required
to sign an undertaking,
at least annually, stating
that they have read the
Code of Business
Conduct and Ethics
(COBE) and comply
with the principles of
the code. New
employees are
are available on the
company’s website.
Yes, all policies have
been communicated
to stakeholders.
at least annually, stating
Employees are required
to sign an undertaking,
that they have read
the Code of Business
Conduct and Ethics
(COBE) and comply
with the principles of
the code. New
employees are required
to sign a similar
undertaking at the time
of joining. Additionally,
all our policies with
respect to the nine
principles are available
on the company’s
website.
Yes
Yes
Yes
Employees are required
of joining. Additionally,
all our policies with
respect to the nine
principles are available
on the company’s
website.
to sign an undertaking,
at least annually, stating
that they have read the
Code of Business
Conduct and Ethics
(COBE) and comply
with the principles of
the code. New
employees are required
to sign a similar
undertaking at the time
Not
applicable|Does the company
have in-house
structure to implement
the policy/policies?
Yes
Yes
sent out on any
changes in policies.
Yes, we have an
intranet where all
policies are published
along with FAQs.
Apart from that, we
have employee
communications
Yes
Yes
Yes
Yes
Yes
8
Not
applicable|Does the company
have a grievance
grievances related to
the policy/policies?
related to the
policy/policies to
address stakeholders’
redressal mechanism
Yes
We also have a
dedicated
ombudsperson policy
to address all concerns
related to company-
level policies.
Policy grievances
are handled by the
respective business
HR partners. We also
have a common e-mail
ID wherein employees
can drop an e-mail
with their feedback.
We also have a
dedicated
ombudsperson policy
to address all concerns
related to company-
level policies.
Yes
Yes
We also have a
dedicated
ombudsperson policy
to address all concerns
related to company-
level policies.
9
Not
applicable
Not
applicable|external agency?
Has the company
carried out
independent
audit/evaluation of the
working of this policy
by an internal or
Yes
policies: Code of
Business Conduct and
Ethics (COBE), SHE
policy and principles,
quality policy,
purchase policy and
HR policies. These
policies are regularly
reviewed by various
internal and external
agencies, including
regulatory agencies.
We also proactively
follow public advocacy
through various
forums.
nine principles broadly
through the following
We comply with the
audited by the
We also have
who review HR
All policies are
internal audit team.
external auditors
policies/processes.
We comply with the
nine principles broadly
through the following
policies: Code of
Business Conduct and
Ethics (COBE), SHE
policy and principles,
quality policy,
purchase policy and
HR policies. These
policies are regularly
reviewed by various
internal and external
agencies, including
regulatory agencies.
We also proactively
follow public advocacy
through various
forums.
Yes
Yes
Yes
We comply with the
nine principles broadly
policies: Code of
Business Conduct and
Ethics (COBE), SHE
policy and principles,
quality policy,
purchase policy and
HR policies. These
policies are regularly
reviewed by various
internal and external
agencies, including
regulatory agencies.
We also proactively
follow public advocacy
through various
forums.
through the following
10
Not
applicable|
|---|---|---|---|---|---|---|---|---|---|

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

SECTION E

PRINCIPLE 1

ETHICS, TRANSPARENCY AND ACCOUNTABILITY

1. Does the policy relating to ethics, bribery and corruption cover only the company? Does it extend to the group/joint ventures/suppliers/ contractors/NGOs/others? Yes. The policy relating to ethics, bribery and corruption extends beyond our employees, both whole-time and independent directors and covers our wholly-owned subsidiaries. While contracts with our business partners, contractors and business partners include adherence to our principles concerning ethics, there is a separate code of conduct required to be adhered to by our business partners and service providers.

2. How many stakeholder complaints have been received in the past �nancial year and what percentage was satisfactorily resolved by the management? During FY2021, the company received 167 concerns through various channels of Ombuds reporting. All these concerns are investigated and acted upon. As of March 31, 2021, 23 of these concerns were pending for closure.

PRINCIPLE 2

PRODUCTS LIFE CYCLE SUSTAINABILITY

1. List up to three of your products or services whose design has incorporated social or environmental concerns, risks and/or opportunities.

Ÿ Sitagliptin
Ÿ Continuous Manufacturing (a) Atorvastatin Calcium (b) Canagli�o�in

2. For each such product, provide the following details in respect of resource use (energy, water, raw material etc.) per unit of product (optional):

i. Sitagliptin

We have continued to apply and embed 12 principles of green chemistry in our research and development pursuits. We identi�ed a synthesis of Sitagliptin in which a catalytic enantioselective carbonyl reduction aiming to develop a greener and cost e�ective route to meet the business needs without compromising on the environmental considerations is adopted.

n this endeavor, we have reduced the (a) Atorvastatin Calcium: Process Mass Intensity substantially and An existing batch/commercial quanti�ed as given below: process of high volume API (Atorvastatin Calcium) consisting of PMI COMPARISON multiple chemical conversions & unit operations is being redeveloped to �� generate a completely integrated system starting from raw materials �� to dried API via �ow processing. There are four chemical conversions �� followed by unit operations of �� crystalli�ation, �ltration, drying & powder processing involved in �� commercial process and two �� chemical conversions as per the improved CIP process . There is �� isolation & quality testing of � compounds at each of these steps. First Second A continuous manufacturing process GenerationRoute GenerationRoute is developed using �ow chemistry principles wherein isolations at all intermittent steps are eliminated ii. Continuous Manufacturing thus making the process lean. This The pharmaceutical industry has so new process has the potential to far relied on batch processes for reduce the cycle time of manufacturing drug substances as manufacturing from days to few well as drug products. However, hours. Reaction times in continuous longer campaign times, labor mode are in minutes as compared to intensive nature of batch long hours of reaction in batch manufacturing (which has a mode. Flow approach has enabled to signi�cant impact on production explore design space that would be cost) and batch rejections/batch to impractical (even impossible) in batch mode.

In this endeavor, we have reduced the Process Mass Intensity substantially and quanti�ed as given below:

The pharmaceutical industry has so far relied on batch processes for manufacturing drug substances as well as drug products. However, longer campaign times, labor intensive nature of batch manufacturing (which has a signi�cant impact on production cost) and batch rejections/batch to batch variations in the product quality (which leads to wastage/regulatory concerns) are huge drawbacks of batch processing. In addition, an increasing pressure on quality and costs has all led the pharma industry towards gradually embracing the concept of continuous manufacturing.

Few salient comparisons between batch & �ow process are mentioned in the table below:

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quality and costs has all led the PMI COMPARISON
pharma industry towards gradually
embracing the concept of continuous ��
manufacturing.
��
Continuous manufacturing o�ers
many advantages such as shorter ��
processing times, increased safety, ��
increased e�ciency, less WIP ��
material, lesser manual handling and
smaller footprint. It is also amenable ��
to real-time release testing ��
approaches.
��
At Dr. Reddy’s, the API team has
embarked upon this journey & � ATV ATN ATV
signi�cant progress has been made on Commercial CIP Continues
two products: Process Process Flow Process
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Note: ATV & ATN refers to Atorvastatin calcium

SALIENT COMPARISONS	BETWEEN BATCH AND FLOW PROCESS	BETWEEN BATCH AND FLOW PROCESS	BETWEEN BATCH AND FLOW PROCESS
	COMMERCIAL PROCESS (AVF3)	CIP PROCESS (ATN2)	FLOW PROCESS
No. of isolations steps	4	2	2
Solvents used	4 organic solvents	2 organic solvent	2 organic solvent
(Including water)	& water	& water	& water
Solvent qty./kg. of Form-I	107 litres	65 litres	~60 litres
Overall cycle time to generate API (operation + analysis)	35 days	20 days	Stage-1 (10 days) & Stage-2 (~16 hours)
Solid waste/kg. of API (carbon + celite)	0.30 kg.	0.13 kg.	0.13 kg.
Solvent reusability/kg. of API (excludingwater)	30%	70%	70%
RMC	US$ 185	US$ 150	US$ 50

This process has been successfully tested at pilot scale. Bene�ts of this approach, when implemented at commercial level, lesser space for machine, reduction in manual activity and reduction in overhead cost.

(b) Canagli�o�in

In this product, a highly exothermic & hazardous reaction involving the use of n-Butyl Lithium has been designed & optimized in�ow using a Vapourtec �ow reactor at lab. Rig, which is designed for scale up to plant, is installed at API-SEZ & few trials have been taken to establish �ow process at plant scale. Better control on reaction & inherent safety is achieved by changing this reaction from batch to �ow.

3. Does the company have procedures in place for sustainable sourcing (including transportation)? If yes, what percentage of your inputs was sourced sustainably? Yes, we have well de�ned and documented “Supplier Code of Conduct” for our business partners, wherein we ensure that our business partners are aware of the code of conduct and follow the same appropriately. The Code of Conduct addresses all the elements of sustainable sourcing with special emphasis on supply continuity, quality and compliance, capacity and capability building, long-term business relationships, and overall sustainable performance management. We also have dedicated team at SCM which helps business partners align with our vision of sustainability and for capability building.

Few of the initiatives are listed below:

Risk Mitigation:

At Dr. Reddy’s, we believe in mutually sustainable growth coupled with stability. In line with this philosophy, we conduct a business partner risk assessment to ensure the sustainability and stability of our business partners. Our business partner risk assessment framework comprises two key aspects viz. “Organizational Risks" and "Supplier Sustainability Risks".

We are associated with an independent risk assessment agency to conduct the risk assessment for our business partners. The agency M/s. Dun & Bradstreet-India conducts a full �edged sustainability assessment for our business partner and if necessary specify any improvement areas based on a scoring criteria which becomes part of the �nal assessment report.

Cost Competitiveness:

All critical business partners contributing to 80% of sales value have to undergo assessment and reassessment at a �xed frequency depending on the sourcing category i.e. (API’s, excipients, packaging etc). The frequency of assessment is once in every two years for API’s/excipients, three years for primary packaging and four years for secondary packaging.

We work with our business partners to drive the process of Cost Improvement Programmes (CIPs) wherein we jointly identify and explore new ideas or opportunities that would help in overall reduction of costs or reduce expenditure or also help in increasing e�ciency (like reduction of wastages, reduction of solvent consumption, improving process/minimising ine�ciency etc).

Ease of doing business:

In order to build transparency and to simplify business transactions, we carry out our routine transactions on a digital platform and a dedicated portal is available for our partners viz. Vikreta2Connect, which facilitates the whole process of procure to pay (P2P). It serves as a one stop solution to provide our business partners better visibility on RFQs, POs release, PO acknowledgement, ASN, invoice submission, GRNs & payment status and other related services.

We develop plans/strategy to generate savings opportunities and to stay cost competitive in end markets and improve a�ordability of the �nal product.

Alternate vendor development for imported materials that has signi�cant cost-reduction opportunity and to promote local manufacturing.

Air vs. Sea shipment:

We have a process in place to monitor the overall air vs. sea shipments to maximize the export shipments by sea, and yearly plans are laid down (market speci�c targets are assigned) for shifting �nished goods movement from air to sea.

The Vikreta portal has e�cient invoice management resulting in faster processing of invoices that has resulted in on-time payments to our business partners. Also, uploading digital invoices has promoted paperless transactions. Here, business partners can make advance shipment noti�cation before executing dispatches making the operations quite easy.

There has been an increase of approximately 2-3% in the share of sea shipments in the reporting period as compared to FY2020, contributing 57% in total export shipments in FY2021.

Forecasting Accuracy:

We have been working to improve the There has been an

forecasting model across all major increase of geographies and the overall forecast

accuracy level is above 70%. Despite approximately 2-3% the challenges due to COVID-19 we have been able to sustain and service in the share of sea

the markets without any major impact. shipments in the

There is a reduction of approx. 31% in reporting period as overall COPE (Cost of Poor Execution)

due to better forecasting and accuracy compared to FY2020,

levels, which led to less wastage while serving more volume of business during serving more volume of business during contributing 57% in

FY2021. total export shipments

Rolling forecasts on a quarterly basis in FY2021.

There is a reduction of approx. 31% in overall COPE (Cost of Poor Execution) due to better forecasting and accuracy levels, which led to less wastage while serving more volume of business during serving more volume of business during FY2021.

Rolling forecasts on a quarterly basis are also shared with our business partners to help them to plan their input materials availability, capacity allocation etc. Sharing forecasts on a regular basis has helped in better inventory management, avoiding rushorders, avoidance of air mode shipments/reduction in logistics costs.

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35
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Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

5. Does the company have a mechanism

8. What percentage of your employees were given safety & skill up-gradation training in the last year?

4. Has the company taken any steps to procure goods and services from local & small producers, including communities surrounding their place of work? If yes, what steps have been taken to improve their capacity and capability of local and small vendors? Yes, small scale industries form a crucial part of our business partner base. We have been making continuous e�orts to encourage both local and small scale business partners by hand-holding them and providing technical support to meet any speci�c requirement of Dr. Reddy's, sometimes making advance payment to help them in their sourcing activities, building capacity and supply of materials to us.

to recycle products and wastes? If yes, what is the percentage of recycled products and wastes?

9,735 employees were given safety training.

We have aspiringly taken the target to attain 100% waste neutrality by 2023 for India and globally by 2025 including plastic waste.

Approximately 8,723 employees were provided skill upgradation training in various technical and related areas.

In this reporting period of FY2021, we had achieved waste neutrality in India of 98.98% and 100% in plastic waste whereas globally waste neutrality is 98.16% & plastic waste 50%.

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On the waste water recycling front, we have nine ZLDs across our

manufacturing facilities in India, which provide 100% waste water recycling for 16 out of our 18 facilities.

Import Substitution is another initiative in our e�orts of localization that has helped us in getting better costadvantage, better management of inventory, better compliance control and it has led to signi�cant reduction in lead time and cost savings along with reduction in carbon footprint due to signi�cant reduction in transportation. Local manufacturers were encouraged to take up the related development activities of the import substitution products, and required technical support is provided by Dr. Reddy's in troubleshooting, conducting process validations, quality improvements and better process controls, and overall also providing long-term commitments.

PRINCIPLE 3

EMPLOYEE WELL-BEING

1. Please indicate the total number of

employees. 22,739

2. Please indicate the total number of

employees hired on temporary/ contractual/casual basis.

1,201

3. Please indicate the number of

permanent women employees. 3,888

PRINCIPLE 4

4. Please indicate the number of

STAKEHOLDER ENGAGEMENT

permanent employees with disabilities. 52

1. Has the company mapped its internal and external stakeholders?

Few of the initiatives taken in this direction include:

Yes, we have mapped our internal and external stakeholders.

5. Do you have an employee association that is recognized by management? Yes, we have recognized Unions.

Ÿ We help local business partners to customize their existing products to meet our product requirements and thus eliminate import shipments.

2. Out of the above, has the company identi�ed the disadvantaged, vulnerable and marginalized stakeholders?

6. What percentage of your permanent employees are members of this recognized employee association? The percentage is 2.34%

Ÿ In terms of packaging materials, procurement from small scale industries has been recorded to be about 17% of total packaging material procurement.

Yes, we have identi�ed disadvantaged, vulnerable and marginalized stakeholders.

7. Please indicate the number of

complaints relating to child labor, forced labor, involuntary labor, sexual harassment in the last �nancial year and pending, as on the end of the

3. Are there any special initiatives taken by the company to engage with the disadvantaged, vulnerable and marginalized stakeholders?

Ÿ The imports contributed to about 24% of the total packaging material procurement cost, which was reduced by around 3% in the current year especially from the large volume materials.

�nancial year.

We believe businesses must strengthen capabilities to ful�l stakeholder

Table 2 provides the details.

TABLE 2 | NUMBER OF COMPLAINTS

SL. NO.	CATEGORY	OPENING AS ON APRIL 1, 2020	FILED DURING THE FINANCIAL YEAR	DISPOSED DURING THE FINANCIAL YEAR	PENDING AS ON MARCH 31, 2021
1	Child labor/forced labor/involuntary labor	0	0	0	0
2	Sexual harassment	1	15	15	1
3	Discriminatory employment	0	0	0	0

aspirations through greater PRINCIPLE 6 The company has adopted multiple engagement. We build lasting bonds ENVIRONMENT initiatives for addressing climate change with all our stakeholders, internal and 1. Does the policy related to Principle 6 and global warming. We have adopted external, through meaningful cover only the company or extends to carbon emission targets based on the deliberations. This process helps us the group/joint ventures/suppliers/ Science Based Target Initiative (SBTi) to review our actions, rethink our contractor/NGO’s/others. reduce our CO emission by 55% by 2 roadmap, redress grievances and We have a well de�ned Safety, �ealth � 2030. We have also adopted Internal recognize new avenues of growth. Environmental policy and principles in Carbon Price, which helps us to drive further projects for CO emission 2 We have identi�ed clusters of place to motivate our employees to reduction. minimize our environmental impact. stakeholders who are directly and The policy and principles are also We also publicly disclose our carbon indirectly a�ected by our operations, communicated to all our stakeholders to emission performance and strategy and have developed targeted ensure that they are in compliance with publically through CDP (Carbon engagement mechanisms for each the policy.

We have identi�ed clusters of stakeholders who are directly and indirectly a�ected by our operations, and have developed targeted engagement mechanisms for each cluster. Table 3 gives details of our engagement platforms for each stakeholder group.

We also publicly disclose our carbon emission performance and strategy publically through CDP (Carbon Disclosure Project). In FY2021 we have achieved a “B” in Climate Strategy and an “A” in CDP-SC (supply chain) disclosure.

2. Does the company have

strategies/initiatives to address global environmental issues such as climate change, global warming, etc.?

We are also disclosing our water footprint through CDP’s water disclosure. In FY2021, we have achieved an “A-” score band in it.

PRINCIPLE 5

We are a responsible corporate committed towards managing climate change both within and beyond our sphere of in�uence.

HUMAN RIGHTS

1. Does the policy of the company on human rights cover only the company or extend to the group/joint ventures/suppliers/contractor/ NGO’s/others.

In the Dow Jones Sustainability Index, we have retained our position in the Emerging Market Index for the 5th year and are now rated 10th globally for our sustainability performance.

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At present, our policy is extended to the group, our business partners, contractors and NGOs.

We publicly report on our environmental performance through our sustainability report. Please refer to page no: 40 to 61 of our sustainability report 2019-20 where we have mentioned details regarding the environmental initiatives taken at our units.

2. How many stakeholder complaints have been received in the past �nancial year and what percent was satisfactorily resolved by the management?

We did not receive any complaints in the last �nancial year.

TABLE 3 | STAKEHOLDER ENGAGEMENT

KEY STAKEHOLDERS

ENGAGEMENT PLATFORMS

EMPLOYEES

The driving forces of the organization, our employees deserve a safe, inclusive and empowering workplace with the freedom to act, innovate and grow not just as professionals but also as individuals.

INVESTORS AND SHAREHOLDERS

Our investors and shareholders put trust and �nancial capital in the organization and expect a steady return on their investments.

SOCIETY

Through partners like Dr. Reddy’s Foundation, Naandi Foundation, NICE Foundation and local NGO partners and employee volunteering program Dr. Reddy’s Foundation for Health and Education (DRFHE) Inner circle - Relationship building programs | Abhilasha - Nursing e�ciency program | Sarathi - Doctor’s assistant program | Sanjeevani – Pharmacists program | Awareness for Life & Swasthyagraha – Awareness programs for public and employees | Manthan & Mantra - Senior Doctors programs | Quality in Healthcare - Healthcare professional programs | Partnership with the beta Institute, Germany.

Communities across the world, especially the economically weaker sections of the society, whose lives are impacted by our social contributions. Healthcare professionals who rely on today’s products and tomorrow’s innovations.

CUSTOMERS AND PARTNERS

Insurers, vendors, distributors, Government, regulators and business partners who support various aspects of our operations.

Regular business meetings, vendor meets, strategic business partner training and development.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

Our sustainability report 2019-20 can be accessed at:

https://www.drreddys.com/our-peopleand-our-citizenship/sustainability/

3. Does the company identify and assess potential environmental risks?

Yes, Dr. Reddy’s as a corporate identi�es and assesses potential environmental risks and mitigates them to eliminate environmental risks through Enterprise Risk Management (ERM) initiative.

The environmental risks as identi�ed are reviewed by the risk management committee at the board level.

Also, in FY2021, we completed the Task Force on Climate-Related Financial Disclosures (TCFD) assessment. TCFD provides guidance on disclosure of climate change-related risks and opportunities, governance, as well as setting targets and mitigation measures.

We conducted the transition and physical climate change risk assessment across the short, medium, and long-term for our manufacturing locations, business partner manufacturing locations as well as raw material and product logistics. Subsequently, mitigation measures will be developed for the identi�ed risks and opportunities.

4. Does the company have any project related to clean development mechanism? Also, if yes, whether any environment compliance report is

�led?

No, we have not �led any project under clean development mechanism.

5. Has the company undertaken any other initiatives on clean technology, energy e�ciency, renewable energy, etc.?

Yes, as a responsible corporate we have undertaken many energy conservation initiatives. In FY2021, we have implemented 161 energy conservation projects across various business units and accrued savings of ₹ 154 million.

The share of renewable energy in our total energy consumption has been increasing over the years. Solar energy consumption for FY2021 is more than 77 million kwh, increasing from 65.96 million kwh in FY2020. This renewable energy adoption has avoided carbon emission by 54,309 tonnes of CO -e in 2 FY2021. We have also generated 92.54 TJ of energy using biomass/rice husk briquettes in FY2021, thus eliminating GHG emission by 11,478 tonnes of CO -e.2

6. Are the emissions/waste generated by the company with in the permissible limits given by CPCB/SPCB for the

The key programmes are described below:

Education

�nancial year being reported?

Our education initiatives focus on enhancing the quality of education.

Yes, air emissions and waste generated by us are within the permissible limits prescribed by environmental regulators.

Ÿ Pudami neighborhood schools and English primaries aim to make available quality English medium education to children from underprivileged sections. 10 Pudami schools are educating over 4,103 students. Out of these 4,103 students enrolled in FY2021, 1,942 students were reached through online classes. Kallam Anji Reddy Vidyalaya (KARV), a model Pudami School caters to

7. Number of show cause /legal notices received from CPCB/SPCB which are pending (i.e. not resolved to satisfaction� as on end of �nancial

year. None.

PRINCIPLE 7

POLICY ADVOCACY

2,178 students. Out of these students,

1. Is your company a member of any trade and chamber or association? If Yes, name only those major ones that your business deals with:

1,742 students were reached through online classes.

Ÿ Kallam Anji Reddy Vocational Junior College (KAR-VJR) was established in 2003, trains tenth class passed students in two-year vocational courses. The college o�ers courses such as computer science, computer graphics animation, accounting and taxation and medical lab technician. The college’s strength in FY2021 was 705 students were enrolled, out of which 309 students were covered through online classes.

Ÿ Indian Pharmaceutical Alliance (IPA)
Ÿ The Confederation of Indian Industry
(CII)
Ÿ Indian Drug Manufacturers’ Association (IDMA)
Ÿ Bulk Drug Manufacturers Association
(BDMA)
Ÿ Federation of Telangana and Andhra Pradesh Chambers of Commerce and Industry (FTACCI)
Ÿ Medicines for Europe
Ÿ Federation of Indian Chambers of Commerce and Industry (FICCI) (upto March 31, 2021)

Ÿ School Improvement Programme (SIP) is implemented in 229 government schools covering 66,543 students, across seven districts of Andhra Pradesh and Telangana. Through SIP we provide remedial learning, computer skills, science education through mobile science labs, basic amenities such as safe water and sanitation. SIP also provides scholarships for meritorious students to pursue higher education.

2. Have you advocated/lobbied through above associations for the advancement or improvement of public good?

We have advocated for policy and economic reforms for the public good.

PRINCIPLE 8

EQUITABLE DEVELOPMENT

Health initiatives

1. Does the company have speci�ed programs/initiatives/projects in pursuit of the policy related to Principle 8?

Our health initiatives include: The Community Health Intervention Programme (CHIP) covers 145 villages of Srikakulam, and Vizianagaram districts. This project was started in partnership with the NICE foundation to provide primary and preventive care at the doorstep, to a large segment of rural population that do not have access to safe and reliable healthcare in the region. In FY2021, we reached out to a population of 1.93 lakhs.

We are focusing on speci�c CSR initiatives that support social development. The implementation of these programs is carried out through various partner organizations. We work primarily in the areas of education, livelihood and health.

Environmental risks as identi�ed are revie�ed by the risk management committee at the board level.

Livelihood

Our livelihood programmes,

implemented through Dr. Reddy’s Foundation (DRF), focuses on making the Indian youth employable, enhancing their earning potential.

Ÿ Grow: The program aims at delivering high quality skill training to youth to help them get better skills and jobs. It particularly focuses on improving ‘core employability’ skills to ensure that the youth is equipped with appropriate knowledge and skills for his/her profession-of-choice and help pursue their career. In FY2021, we impacted 371 youth.
Ÿ Grow PwD: Grow People with Disability, a skill development programme, where di�erently abled youth are given training in market driven skills which enables them to gain a suitable employment opportunity. In FY2021, we impacted 105 youth.
Ÿ Marking Integrated Transformation for Resourceful Agriculture (MITRA): This programme assists farmers on technology and methodology in farming. This programme helps them enhance their income by increasing productivity. In FY2021, we reached out to 30,603 farmers.

Through CHIP, in FY2021, we reached out to a population of 1.93 lakhs

2. Are the programmes/projects undertaken through in-house team/own foundation/external NGO/government structures/any other organization?

We engage with the community through our partners such as Dr. Reddy’s Foundation, Naandi Foundation, NICE Foundation, Agastya International Foundation and other similar organizations.

3. Have you done any impact assessment

of your initiative?

We review our internal assessment systems and projects from time to time. Each project has speci�c deliverables against which it is measured.

4. What is your company’s direct

contribution to community development projects – Amount in INR and the details of the projects undertaken?
We contributed ₹ 36.08 crore for community development.

For details of the projects undertaken refer to the projects listed in the CSR report.

5. Have you taken steps to ensure that

this community development initiative is successfully adopted by the community?
Our community development initiatives are inclusive and designed towards sustainability. We involve the gram panchayat or local government in the project development discussions.

For education programs, we encourage the participation of parents in the school management committee (SMC) meetings, in which even local leaders participate, to instill ownership, and a mandal education o�cer (MEO) reviews the school performance on a quarterly basis. Youth participating in the vocational skills enhancing program, pay a small percentage of the course fees. For health programs, local panchayat and villagers were involved right at the beginning. Villagers and local government authorities have given space for running out patient (OP) wards and bene�ciaries, i.e. the community members are given the responsibility of running the OP and scheduling the patients. Patients are showing a positive attitude towards minimal contribution sought from them for rendering medical services at their door steps. For other community development initiatives as well, we engage the local authorities whose active involvement encourages participation and ownership from the community members.

30,603 farmers reached through MITRA program

PRINCIPLE 9

CUSTOMER VALUE

1. What percentage of customer

complaints/consumer cases are pending as on the end of the �nancial year?

As on March 31, 2021, there were 255 complaints pending in India, 99 in Germany and 134 in the U.S.

2. Does the company display product

information on the product label, over and above what is mandated as per local laws?

Yes, for the new launches, we have complied with the labelling requirements.

3. Is there any case �led by any stakeholder against the company regarding unfair trade practices, irresponsible advertising and/ or anticompetitive behavior during the last

�ve years and pending as on end of the �nancial year?

On December 18, 2016, the Attorneys General for 19 states in the United States of America �led claims in the United States District Court for the District of Connecticut against a number of pharmaceutical companies alleging conspiracies to �x prices and to allocate bids and customers from 2013 through at least 2016, with respect to two generic drugs. Initially, our U.S. subsidiaries were not named as defendants. However, in April 2017, a total of 45 states, plus the District of Columbia and the Commonwealth of Puerto Rico, joined as plainti� s in this case (the “State AG Action”) which in August 2017, were consolidated with the private plainti� class actions pending in the multi-district litigation (“MDL-2724”) in the United States District Court for the Eastern District of Pennsylvania. On October 31, 2017, the Attorneys General for the 45 States, plus the District of Columbia and the Commonwealth of Puerto Rico, �led an amended complaint in the State AG Action in MDL-2724 which added our U.S. subsidiary, Dr. Reddy’s Laboratories, Inc., as a defendant. Further, on May 10, 2019, the Attorneys General of forty-nine U.S. States, the Commonwealth of Puerto Rico and the District of Columbia, �led a complaint in the United States District Court for the District of Connecticut against 21 generic pharmaceutical companies (including our U.S. subsidiary) and 15 individual defendants alleging that our U.S. subsidiary and the other named defendants engaged in a conspiracy to �x prices and to allocate bids and customers in the United States in the sale of the 116 named drugs. Our U.S. subsidiary is speci�cally named as a defendant with respect to �ve generic drugs (cipro�oxacin HCL tablets, glimepiride tablets, oxaprozin tablets, paricalcitol and tizanidine), and is named as an alleged co-conspirator on an alleged “overarching conspiracy” with respect to the other 13 generic drugs named. We deny the claims asserted and intend to vigorously defend against the claims asserted.

4. Did your company carry out any

consumer survey/consumer satisfaction trends? No

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

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Dr. Reddy’s Laboratories Limited
MANAGEMENT
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MANAGEMENT DISCUSSION AND ANALYSIS

Note (1) FY2021 represents �scal year 2020�21� i.e.� �rom April 1� 2020 to �arch �1� 2021� and analogously �or FY2020 and previously such labelled years.

(2) Unless otherwise stated� �nancial data given in this �anagement �iscussion and Analysis is based on the company’s consolidated results prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

For Dr. Reddy’s, ‘Good Health Can’t Wait’ re�uires us to meet �ve promises.

Bringing expensive medicines within reach.

Addressing unmet patient needs.

Driven by its core dictum of ‘Good Health Can’t Wait’

Dr. Reddy’s Laboratories Ltd. (‘Dr. Reddy’s’ or ‘the company’) is committed to accelerating access to a�ordable and innovative medicines to help patients lead healthier lives, creating healthy ecosystems and strong communities.

Helping patients manage disease better.

Working with our partners to help them succeed.

Enabling and helping our partners ensure that our medicines are available where needed.

As an integrated global pharmaceutical enterprise, we operate across three core business segments:

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Global Generics (GG), which includes branded and unbranded prescription medicine as well as over-thecounter (OTC) pharmaceutical products. It also includes the biosimilars business.

Proprietary Products (PP),

Pharmaceutical Services and Active Ingredients (PSAI), comprising Active Pharmaceutical Ingredients (APIs) and Custom Pharmaceutical Services (CPS).

which is mainly composed of the di�erentiated formulations business� focusing on certain key medical needs.

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Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

The key highlights of Dr. Reddy’s consolidated performance are given below.

CONSOLIDATED FINANCIAL RESULTS FOR FY2021 UNDER IFRS

REVENUES

₹ 189.7 billion 9%

GROSS PROFIT MARGIN

54.3% 50bps

EBITDA

₹ 47.4 billion 2%

OPERATING PROFIT

₹ 24.3 billion

52%

PROFIT BEFORE TAXES

₹ 26.4 billion 46%

PROFIT AFTER TAXES

₹ 17.2 billion 12%

DILUTED EARNINGS PER SHARE

₹ 103.65 12%

Growth over previous year

Decline over previous year

Through our portfolio of products and services, we operate in multiple therapeutic areas. Of these, the major ones are (i) gastrointestinal, (ii) oncology, (iii) cardiovascular, (iv) pain management, (v) central nervous system (CNS), (vi) respiratory, and (vii) anti-infective.

We are present in several countries across the globe, with the key geographies being the US, Europe, India, Russia, Commonwealth of Independent States (CIS) countries, China and other markets. The FY2021 has been a year with an unprecedented set of challenges due to

Ÿ Revenue from Russia was ₹ 15.8 billion , representing a year-on-year decline of 6% due to a depreciation of ruble compared to the Indian rupee. Moreover, sales were subdued on account of an overall market slowdown.

COVID-19 related disruptions impacting the demand for certain sets of products, the supply chain and operations. We rose to the challenges and ensured minimal impact to operations. We ensured the health and safety of our employees and business partners. We continued innovating new solutions to operate under the di�cult circumstances. We worked upon new avenues of growth such as development and launch of COVID-19 products portfolio and successfully integrated the portfolio acquired from Wockhardt for our India business. We were able to grow businesses across all our geographies, viz. GG for North America, Europe, India, several emerging economies, and PSAI across many parts of the world.

EBITDA growth was, however, impacted on a higher base of FY2020, when we had recognized income on the sale of our commercialized neurology products in the Proprietary Products (PP) in the US and selected territory rights.

Ÿ Revenue from other CIS countries and Romania was ₹ 7.4 billion , or an annual growth of 15%.

A SNAPSHOT OF PERFORMANCE

Ÿ Revenue from Rest of the World (RoW) territories was ₹ 11.8 billion , or a yearon-year growth of 25%.

GLOBAL GENERICS (GG)

Revenue from GG in FY2021 was

₹ 154.4 billion , which represented an increase of 12% compared to the previous year. This growth was largely attributable to impressive performances witnessed in Europe, certain emerging markets, contribution from portfolio acquired from Wockhardt for India business as well as favorable forex rates.

Revenue from India was ₹ 33.4 billion, which represented a growth of 15% compared to FY2020. This was primarily attributable to contribution from acquired portfolio of products from Wockhardt and launch of new products including those related to COVID-19. During FY2021, we launched 20 new brands in India.

Our focus on cost controls, productivity improvements and on creating a leaner and Revenue from North America Generics more de-layered business model continued (NAG) was ₹ 70.5 billion, with a growth of from the previous year. This helped us to 9% versus FY2020. This growth was become more e�cient and also improve supported by the launch of 27 new our pro�ts. products. Of these, the major new launches were Cipro�oxacin Improvements in revenue and EBITDA in Dexamethasone, OTC Diclofenac, FY2021 were mainly due to the following factors. Sapropterin, Abiraterone (Canada) and Colchicine tablets. It should be noted that Growth in branded generics markets: We while there was a healthy growth in the continued our growth momentum across sales volumes of our existing products and the key branded generics markets of India, favorable forex movement, these were CIS countries, China and some other o�set by pricing pressures on some of our regions. This was due to improved base key products, such as Buprenorphine and business as well as the launch of new Naloxone sublingual �lms, Atorvastatin, products. We also acquired a select Metoprolol and Liposomal Doxorubicin.

(NAG) was ₹ 70.5 billion, with a growth of

PHARMACEUTICAL SERVICES AND ACTIVE INGREDIENTS

(PSAI)

Revenues from PSAI stood at ₹ 32 billion, or a growth of 24% versus FY2020 mainly driven by traction in base business, services business growth and favorable forex movement. During the year, we �led 149 Drug Master Files (DMFs) worldwide, including 14 �lings in the US.

Growth in branded generics markets: We continued our growth momentum across the key branded generics markets of India, CIS countries, China and some other regions. This was due to improved base business as well as the launch of new products. We also acquired a select portfolio from Wockhardt for the India business. Growth in Russia, however, was hindered due to an overall market slowdown.

PROPRIETARY PRODUCTS (PP)

Revenue from PP was ₹ 0.5 billion . This translated to a decline of 93% following the divestment of commercialized products from our neurology franchise in FY2020.

In FY2021, we �led 20 new Abbreviated translated to a decline of 93% following the New Drug Applications (ANDAs) and one divestment of commercialized products New Drug Application (NDA) under the from our neurology franchise in FY2020. section 505(b)(2) with the US Food and Drug Administration (USFDA). As on March 31, 2021, we had 95 generic �lings pending GLOBAL PHARMACEUTICAL approval from the USFDA. These comprise 1 MARKET OUTLOOK 92 ANDAs and three New Drug Applications (NDAs) �led under the The last year marked one of the most Section 505(b)(2) route of the US Federal challenging year for all of humanity with the COVID-19 pandemic severely a�ecting the Food, Drug and Cosmetics Act. Of these, global population. The pandemic continues 47 are Para IV applications and we believe unabated with a severe second wave that 23 of these have ‘First to File’ status.

Growth in the PSAI business: PSAI growth was driven by base business traction in API, custom pharmaceutical services and a favorable forex movement.

The last year marked one of the most challenging year for all of humanity with the COVID-19 pandemic severely a�ecting the global population. The pandemic continues unabated with a severe second wave currently engul�ng India, having previously wreaked havoc on the US and certain key European nations. As on May 14, 2021, the virus has infected over 160 million and has claimed the lives of 3.4 million people worldwide. The impact of the pandemic has also been severe in terms of the indirect

Continued growth momentum in the

Europe generics business: FY2021 saw signi�cant growth in the existing geographies as well as newer markets in Europe — driven by expansion of the base business coupled with new product launches.

Revenue from Europe was ₹ 15.4 billion, representing a growth of 32% compared to FY2020. This was primarily due to expansion of the base business and new product launches. Growth was also aided by the scaling up of our businesses in newer markets of Italy, Spain and France, as well as favorable forex movement.

Moving ahead on our journey of cost

control: We continued making solid progress on the journey that began in FY2019 to trim cost structures through enhanced productivity and elimination of waste across our businesses. The initiatives that were put in place to drive cost e�ciencies and productivity improvement across manufacturing, procurement, R&D expenditures and marketing spends played a signi�cant part in improving the �nancial performance of the company. While we focused on productivity, we are also making investments to build capabilities, brands and product pipeline.

Revenue from Emerging Markets was

₹ 35.1 billion, or a growth of 7% compared to FY2020. This was driven by an improvement in our base business performance, new product launches and scale up of business in some of our new markets.

1 The outlook and the key trends discussed in this section are primarily from ‘The New Decade of Health and Science’ & ‘Global Medicine Spending and Usage Trends outlook to 2025’ by IQVIA Institute and from various other publicly available sources.

pharmaceutical market is expected to grow in the range of 3% to 6% CAGR over the next �ve years to reach US$ 1.6 trillion from US$ 1.1 trillion currently. In addition, the cumulative spend on COVID-19 vaccinations is anticipated to be around US$ 157 billion over the next �ve years. Much of this growth in vaccine demand will be in the pharmerging markets, being partially o�set by a slower growth in the developed economies.

number of casualties and su�ering due to global lockdowns, delays in health screenings and treatments along with the rise in cases of mental health disorders. COVID-19 led to a disruption in medicine usage varying in both timing and magnitude in developed and pharmerging countries alike during the last year. These included signi�cant stock-piling of over-the-counter chronic and mental health medicines during the initial stages of the pandemic. Medicine usage was also impacted by frequent and widespread global lockdowns.

The US market is expected to grow in the range of 0% to 3% CAGR over the next �ve years, down from 3% CAGR in the past �ve. Japan, the third largest global market, should see a decline in medicine spends as a result of the continued biennial price cut policy, and policies to encourage a shift to generics for older medicines. The European market should grow by US$ 35 billion in the next �ve years with a focus on generics and biosimilars. Growth in pharmerging markets is expected to be led by China, and might accelerate post-COVID-19.

The pandemic also emphasized the value of health infrastructure, medical research and science; and prompted a renewed focus on public health institutions, epidemiology and racial and ethical disparities and inequalities in health. It prompted extraordinary responses from the healthcare industry, the research community, public health administrators and governments to develop new therapeutics, repurpose existing drugs, and to develop new vaccines at speeds that have never been seen before.

Table 1 gives the historical and forecasted pharmaceuticals growth outlook for the major countries of the world.

Relentless e�orts and ingenuity of scientists and the pharmaceutical industry led to cutting the traditional timeline for the development of new vaccines from four to 12 years on an average to just seven months. Novel methods of R&D were created along with active cross-border collaborations. These have set new standards and shorter timeframes for discovery and innovation for other life-threatening diseases in the future.

The number of new active substances (NAS) launches are projected to continue with an average of 54 to 63 per year over the next �ve years.

Spend on speciality medicines is expected to be nearly 60% in developed markets and 50% globally in the next �ve years, with the older and traditional therapies becoming progressively less expensive over time.

The pandemic also proved to be a fuel for digitally-driven therapeutic change — whether these be remote and virtual patient-doctor engagements through telemedicine and tele-health, digitized clinical trials leveraging arti�cial intelligence and the introduction of new disruptive business models. Indeed, COVID-19 has become the most signi�cant trigger to force the major players in the industry to signi�cantly expand their digital capabilities well beyond their normal annual plans

Oncology and immunology, the two largest therapy areas, should grow 9% to 12% CAGR through 2025, led by signi�cant increase in new treatments and medicine use. Oncology is forecasted to add 100 new treatments over the next �ve years, contributing to an increased spend in excess of US$ 100 billion.

Equally, none can deny the major disruptions, especially ones relating to manufacturing and the supply chain.

While the landscape of the pharmaceutical Globally, the Oncology

industry was radically altered by the market is forecasted pandemic, probably more than any other

sector, the industry will surely take stock of to add 100 new

how it navigated the pandemic. And, in treatments over the doing so, it will have to be prepared for

similar sudden shifts and disruptions in next �ve years,

operations and regulations in the longer term. contributing to an Adoption of novel treatments, o�set by sti� increased spend in

competition from generics and biosimilars excess of

and patent lifecycles, will continue to in�uence medicine spending and growth in US$ 100 billion. the developed markets. The global

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Dr. Reddy’s Laboratories Limited

TABLE 1 | PHARMACEUTICAL GROWTH FORECAST FOR MAJOR COUNTRIES

REGION	2016-2020 CAGR	2021-2025 CAGR
Global	4.6%	3% to 6%
Developed	3.8%	1.5% to 4.5%
Top 10 Developed	3.8%	1.5% to 4.5%
United States	4.2%	2% to 5%
Japan	-0.2%	-2% to 1%
EU-5	4.4%	2% to 5%
Germany	5.3%	3.5% to 6.5%
France	2.4%	1% to 4%
Italy	4.2%	2% to 5%
United Kingdom	5.3%	2.5% to 5.5%
Spain	4.6%	1.5% to 4.5%
Canada	4.8%	2% to 5%
South Korea	6.8%	4.5% to 7.5%
Australia	3.3%	1% to 4%
Other Developed	4.2%	2.5% to 5.5%
Pharmerging	7.4%	7% to 10%
China	4.9%	4.5% to 7.5%
Brazil	10.7%	7.5% to 10.5%
Russia	10.8%	11% to 14%
India	9.5%	7.5% to 10.5%
Other Pharmerging	9.6%	8.5% to 11.5%
Lower income countries	3.9%	3% to 6%

While the future of medicine use will be in�uenced by a number of complex factors which shall emerge after the pandemic �nally peters out, there is expected to be a renewed focus on (i) improved and e�cient manufacturing technologies; (ii) augmenting pharmaceutical supply-chains; (iii) novel methods of drug development; and

serve a smaller number of patients. Hence, a challenge associated with this model will be to raise pro�ts through fast production to accommodate di�erent demands.

Ÿ Emergence of new API competitors and increase in high potency API (HPAPI) capacity: The competition for active pharmaceutical ingredients (APIs) is expected to increase as more programs advance into late-stage clinical trials. Strengthening of supply chains will continue to become increasingly important as companies start to think strategically to develop secondary sourcing plans and carry signi�cant inventory to minimize risks of a stock-out. Most likely, this will lead to the emergence of several new competitors in the API space. An area of growth in the industry is the high-potency active pharmaceutical ingredient (HPAPI) space. The HPAPI market alone is expected to grow to US$ 33 billion by 2025, up from US$ 16 billion in 2016. Importance of these HPAPIs lies in creating e�ective patient-centric treatments that require lesser doses to achieve the same therapeutic impact. We expect more API manufacturers, including contract service

(iv) increased adoption of digital tools.

We now share with you some key trends that are likely to emerge.

Ÿ Smaller-scale manufacturing with �e�ible production capabilities for improved e�ciency: Novel technologies such as cell and gene therapy will push the industry towards rapidly deployable facilities, with smaller scale, modular and portable plants being deployed. This will raise speed to market, diversify the manufacturing footprint globally and increase the need for real-time supply chain management. The pharmaceutical industry will also utilize such capability to cater to changing market dynamics — such as small batches of precision medicine — unlike what is needed for mass production of pharmaceuticals. On the �ip side, when a smaller number of medications are produced, these will

providers, to expand their aseptic and HPAPI capacity to meet higher customer demand.

Ÿ Greater focus on R&D value leveraging arti�cial intelligence (AI) for improved e�ciency: With an increased focus on the value of medications, pharmaceutical companies are increasingly examining their R&D practices to ensure these are re�ned and sharply focused. The estimated R&D cost of each USFDA approved drug is around US$ 2.6 billion. The use of AI in drug discovery can expedite the overall R&D process by improving success rates by 8% to 10%, resulting in savings worth billions of dollars. AI can be also used to �nd candidate molecules for drugs, develop compounds from scratch, and aid the process of synthesizing the molecules with better e�cacy.

Ÿ Renewed focus on mergers & acquisitions (M&As): 2020 was slow for M&As in the pharmaceutical industry, thanks to the economic instability brought about by COVID-19. The year saw nearly US$ 184 billion in M&A deals, which was one of the lowest in almost a decade. Instead of M&As, pharmaceutical companies focused on establishing partnerships to help �ght the pandemic and develop vaccines. They not only partnered together but also established crossindustry partnerships with academic and healthcare establishments. However, in 2021, the focus should shift back to traditional level of M&A deals. According to a report by Price Waterhouse Coopers, M&A deals in 2021 are predicted to be about US$ 250-275 billion. If that were so, it will mark a return to normal M&A activity for the industry.

Ÿ Move towards patient-centric care model: The pandemic has driven the pharmaceutical industry towards a more patient-centered care model. This requires deep understanding of a patient’s health condition and needs in order to deliver more e�cient treatment and ensure better availability of such treatments. The emphasis on treating patients with more e�ective drugs is encouraging innovators at early stages of drug production to incorporate patientcentered insights. Sounder targeting of patient’s needs will help the industry achieve better clinical results and ensure that pharmaceutical companies produce more e�ective medicines that improve their therapeutic value.

Ÿ Acceleration in digital transformation: Digital transformation in the pharmaceutical industry was already in progress before the pandemic. COVID-19 gave it an impetus like never before. Several pharmaceutical companies took many positive steps towards digitization

major products. However, this impact was EMERGING MARKETS signi�cantly o�set by an increase in volumes for some of our base products, FY2021 was ₹₹ 35.1 billion, representing a and contribution from new product launches — the important ones being year. Cipro�oxacin Dexamethasone, OTC Diclofenac, Sapropterin, Abiraterone (Canada) and Colchicine tablets. Growth was further aided by the strengthening of the US dollar against Indian rupee. Some the World markets. key developments were:

— such as appointing chief digital o�cers to their boards and implementing a data-�rst approach in their operations. The sector recognized that the digital revolution was here to stay and, in a datarich industry, o�ered considerable bene�ts. During the pandemic, many of the industry’s core activities moved to the virtual sphere. This has signi�cantly accelerated digital adaptations, both within the pharmaceutical industry and in the healthcare systems it serves.

Revenue from Emerging Markets for FY2021 was ₹₹ 35.1 billion, representing a growth of 7% compared to the previous year. Signi�cant part of the growth has been on account of increased revenues from our base business, new product launches and scaling up of business in CIS countries (including Romania) and Rest of the World markets.

Revenue from Russia for FY2021 was ₹ 15.8

Ÿ Launched Cipro�oxacin

billion , representing a 6% decline over the previous year mainly constrained by an overall market slowdown and adverse forex movement. The growth was 1% in terms of the local currency (ruble).

Ÿ Increased automation in the Dexamethasone Otic suspension, a pharmaceutical supply chain: therapeutic equivalent generic version Innovation in technology is expected to of Ciprodex® (cipro�oxacin 0.3% and ® (cipro�oxacin 0.3% and (cipro�oxacin 0.3% and impact not just drug development but dexamethasone 0.1%), used in treatment also the supply chain, ranging from of acute otitis. speed to safety to manpower. Ÿ Launched OTC Diclofenac Sodium Automation in pharmaceutical topical gel, the store brand version of manufacturing can help build more ® Voltaren , used in treatment of arthritic resilient, �exible and supply costpain. e�ective chains. These can help make the batch unit operations more e�cient, Ÿ Launched the generic version of recon�gurable and streamlined, and Sapropterin Dihydrochloride tablets, thus reduce the production-to-market used in treatment of blood timeline by allowing the faster technical phenylalanine levels. transfer of data and greater versatility of Ÿ Launched Abiraterone Acetate tablets equipment throughout the API network. USP, 250 mg, a therapeutic equivalent It may also help to get better insights ® generic version of Zytiga , used in and recommendations, whether these treatment of prostate cancer. be commercial, marketing or clinical trials data. Ÿ Launched Colchicine tablets USP, a

Dexamethasone Otic suspension, a therapeutic equivalent generic version of Ciprodex® (cipro�oxacin 0.3% and ® (cipro�oxacin 0.3% and (cipro�oxacin 0.3% and dexamethasone 0.1%), used in treatment of acute otitis.

In Russia, our key products — such as Nise, Omez, Nasivin, Cetrine and Ibuclin — were ranked among the top 200 best-selling formulation brands, as per IQVIA in its report for the 12-month period ended March 31, 2021.

Revenue from CIS countries (including Romania) was ₹ 7.4 billion, representing 15% growth over the previous year. The growth was led by Ukraine, Kazak, Uzbek and Romania including certain tender sales.

In the current �scal, Olanzapine sales continue to drive our growth momentum in China. We were the �rst Indian company to win a national tender in China in FY2020.

Ÿ Launched Colchicine tablets USP, a therapeutic equivalent generic version of Colcrys®, used in treatment of familial Mediterranean fever (FMF).

Ÿ Expansion of global vaccine

Revenue from our Rest of the World markets (which includes Brazil, China, South Africa, and certain other markets) was ₹ 11.8 billion, representing 25% growth over the previous year. This was primarily led by scaling up in the markets such as China, Vietnam, Myanmar, and Jamaica.

manufacturing capabilities: Production of vaccines has traditionally been done by a handful of companies. However, given the pandemic, individual countries want a certain level of autonomy. This has led to expansion in vaccine production capacities in Asia and the Middle East. Biologics and vaccine manufacturing capacity needed globally for COVID-19 vaccines and treatments is expected to take a signi�cant percentage of the overall available capacity. This growth in demand for vaccine manufacturing capacity that we have seen in 2020 will continue into 2021 and perhaps beyond.

Ÿ Gained market share in certain key products, such as Omeprazole DR and Metoprolol ER.

Ÿ Filed 20 new ANDAs and one NDA under section 505(b)(2), and these comprises some complex products and are across di�erent dosage forms.

Our focus is to improve market share in the chosen therapy areas through growth in the existing products as well as new product launches.

Our current priority includes accelerating new product launches and increasing the market share of existing products. The strategy is to signi�cantly expand our portfolio and ensure right cost structures for our products to be able to compete in this highly competitive market.

Our strategy for the Emerging Markets is to build a healthy pipeline of portfolio including di�erentiated and oncology products, and expansion of biosimilars across our markets. We will focus on scaling up in our major markets, which include Russia, China, Brazil, South Africa and Ukraine.

We will continue to focus on complex formulations — primarily injectables and oral solid dosage forms, as well as OTC brands in the medium term, and 505(b)(2) generics, controlled substances under class II, and non-substitutable generics in the longer term.

DR. REDDY’S MARKET PERFORMANCE, FY2021

NORTH AMERICA GENERICS (NAG)

Revenue from Emerging Markets for FY2021 was ₹ 35.1 billion

NAG is Dr. Reddy’s largest market. In FY2021, it contributed to around 46% of the company’s GG sales, and 37% of overall sales.

Revenue from the region for FY2021 was ₹ 70.5 billion (US$ 948 million),

NAG revenue for

EUROPE

Revenue from Europe in FY2021 was ₹ 15.4 billion, representing a growth of 32% vis-a-vis the previous year. This growth was due to increased revenues in our base markets of Germany and the UK,

FY2021 was

representing a growth of 9% over the

previous year. Even so, the year continued to see signi�cant price erosion due to increased competition across some

₹ 70.5 billion

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Dr. Reddy’s Laboratories Limited

and was aided by expansion in the newer markets of Italy, France and Spain. The increase in revenues was propelled by high volume growth, new product launches across all our markets and favorable forex movement.

Currently, Europe comprises 10% of our global generics sales. In the medium to long-term, we expect it to grow by leveraging our in-house portfolio, seeking in-licensing opportunities, further scaling up business in new markets including and beyond Italy, France and Spain.

Revenue from Europe for FY2021 was ₹ 15.4 billion

INDIA

Revenue from India in FY2021 was ₹ 33.4 billion, or a growth of 15% compared to previous year. According to the IQVIA in its report for the 12-month period ended March 31, 2021, our growth has been 3.1%. Our market rank as per MAT (March 2021) improved to 11, from 13 in the last year. Our growth in this market has been on account of a select portfolio acquired from Wockhardt and launch of new products.

During the year, we launched 20 brands in India, including Invista®, Redyx™, Avigan® which aided growth. Thirteen of our brands — Omez®, Omez®-D, Atarax®, Redyx™, BroZedex®, Razo-D®, Ketorol™, Nise®, Stamlo®, ® ® ® Zedex , Practin , Mintop™ and Econorm — are among the top 300 brands of the Indian pharmaceuticals market.

In the near term, we will continue to drive productivity improvement and focus on our core therapeutic areas and big brands. We also have a wide range of COVID-19 portfolio drugs including a vaccine which may contribute to growth in the near to medium term. In the medium- to long-term, our strategy is to build a healthy pipeline of di�erentiated products in relevant therapies including biosimilars, and expand our presence in new areas such as nutraceuticals.

Revenue from India for FY2021 was ₹ 33.4 billion

PSAI

The PSAI business recorded revenues of ₹32 billion in FY2021, representing a 24% growth over the previous year. In FY2021 we �led 149 drug master �les (DMFs) globally, of which 14 were in the US.

This business primarily comprises of APIs and pharmaceutical services. We believe that with recent market developments, there will be a good opportunity for us to expand our API business. We are also focusing on expanding our services business and expect it to be a growth driver. With this intent, Aurigene Pharmaceutical Services Limited (APSL), a newly formed company, has been carved out to focus on contract research, development and manufacturing operations (CDMO).

Our strategy of building a sustainable and growing business involves new product launches and ramping up of base businesses in key geographies. We will also leverage our relationships with key customers by supplying materials that have value addition instead being ‘plain-vanilla’ APIs. We aim to be a partner of choice for global generics manufacturers and achieve global leadership through costs and service.

Revenue from PSAI for FY2021 was ₹ 32 billion

PROPRIETARY PRODUCTS (PP)

The PP business recorded revenue of ₹ 0.5 billion in FY2021, a decline of 93% following the divestment of two brands of our neurology franchise in FY2020.

Going forward, our strategy is to focus on an in-house pipeline in a well calibrated manner which strives to achieve an optimal balance between risks and costs. At an overall level, this aligns well with our renewed strategy to enable us to achieve self-sustainability and pro�table growth for each of our businesses.

AURIGENE DISCOVERY

TECHNOLOGIES LIMITED (ADTL)

ADTL is our wholly-owned subsidiary and is a clinical stage biotech company committed to bringing novel therapeutics for the treatment of cancer and in�ammation. It recorded revenue of ₹ 2.8 billion in FY2021, or a growth of 1%. It is reported as part of our ‘Others’ segment.

USFDA OBSERVATIONS: AN

UPDATE

Our facilities are fully compliant with the USFDA regulations. Currently, the status for all our facilities is either ‘NAI’, which means ‘No Action Initiated’ or ‘VAI’ which means ‘Voluntary Action Initiated’. The warning letter which was issued to us in November 2015 was closed in August 2020 after USFDA ascertained that we have addressed the cited violations and deviations.

We remain fully committed to following high standards of quality and strive towards further strengthening of our quality management systems and processes for sustainability. Our plans to enhance quality management systems and operations include improvements in rigor of investigations and document control systems, standardization of instrument calibrations, strengthening controls with respect to information technology as well as shop �oor training programs, and simplifying and standardizing standard operating procedures and batch records at the shop �oor.

We have initiated additional operational improvements such as shop �oor supervision and process walks, engineering, implementation of electronic batch records to eliminate manual errors, and focus on robustness of processes. We are fully committed to produce safe and e�cacious products for our patients.

FINANCIALS

Table 2 gives the abridged IFRS consolidated revenue performance of Dr. Reddy’s for FY2021 compared to FY2020. Table 3 gives the consolidated income statement.

REVENUE

Total revenue grew by 9% to ₹ 189,772 million in FY2021. The growth was primarily aided by increase in volume and new product launches across our businesses and bene�ts due to depreciation of Rupee against the US Dollar, partially o�set by price erosion in our GG segment’s North America (the US and Canada), Europe and certain other emerging markets. FY2020 sales included the sale of the US and select territory rights for two of our neurology brands pertaining to PP segment.

GROSS PROFIT

Gross pro�t increased by 10% to ₹ 103,077 million in FY2021. This resulted in a gross pro�t margin of 5�.3% in FY2021 � representing an increase of 50 basis points compared to FY2020. The gross pro�t margin for GG was 59.0%. The GG gross pro�t margin was largely bene�ted from cost optimization initiatives taken by the company, favorable product mix and the bene�t from depreciation of rupee against the US Dollar, which was partly o�set with price erosion in the US, Europe and certain emerging markets as well as reduction in export bene�ts. For the PSAI business, the gross pro�t margin was 29.5%. PSAI’s gross pro�t margin improved primarily on account of manufacturing cost leverage, productivity initiatives taken by the company and the bene�t from depreciation of rupee against the US Dollar, which was partly o�set with price erosion and reduction in export bene�ts.

SELLING, GENERAL AND account of increased head count and annual increments; and increases pertaining to ADMINISTRATIVE EXPENSES legal and professional charges. The increase (SG&A) was o�set by lower marketing and travel SG&A expenses increased by 9% to expenses with restricted activities due to ₹ 54,650 million in FY2021. This was largely COVID-19. SG&A accounted for 28.8% of attributable to increase in logistics costs sales in FY2021 versus 28.7% in FY2020 — primarily due to COVID-19 situation; or was in-line with last year. increase in personnel costs primarily on

R&D EXPENSES

SELLING, GENERAL AND

R&D expenses for FY2021 were ₹ 16,541 million, or 8.7% of revenue, versus 8.8% in FY2020. The R&D spends in FY2021 increased by 7% over FY2020, due to an increase in the development activities pertaining to generics segment, including COVID-19 related products development.

ADMINISTRATIVE EXPENSES (SG&A)

|TABLE 2 |CONSOLIDATED REVENUE|MIX BY|SEGMENT|||||(MILLION)|
|---|---|---|---|---|---|---|---|
|PARTICULARS|(US$)|FY2021
(₹)|%|(US$)|FY2020
(₹)|%|Growth
%|
|Global Generics|��|��|��|��|��|��|��|
|North America||��|||��||�|
|(1)
Europe||��|||��||��|
|India||��|||��||��|
|(2)
Emerging Markets||��|||��||�|
|Pharmaceutical Services and Active
Ingredients (PSAI)|��|��|��|��|��|��|��|
|Proprietary Products & Others|��|��|��|��|��|��|(��)|
|Total|��|��|��|��|��|��|�|

(1) Europe includes Germany, the UK and out-licensing sales business, Italy, France and Spain.

(2) Emerging markets refer to Russia, other CIS countries, Romania and Rest of the World markets.

|TABLE 3 |CONSOLIDATED INCOME|STATEMENT|STATEMENT||||(MILLION)|(MILLION)|
|---|---|---|---|---|---|---|---|
|PARTICULARS|(US$)|FY2021
(₹)|%|(US$)|FY2020
(₹)|%|Growth
%|
|Revenues|��|��|��|��|��|��|�|
|Cost of Revenues|��|��|��|��|��|��|�|
|Gross Pro�t|��|��|��|��|��|��|��|
|Operating Expenses||||||||
|Selling, General & Administrative expenses|��|��|��|��|��|��|�|
|Research and Development expenses|��|��|��|��|��|��|�|
|Impairment of non-current assets|��|��|��|��|��|��|(��)|
|Other operating (income)|(��)|(��)|(��)|(��)|(��)|(��)|(��)|
|Results from operating activities|��|��|��|��|��|��|��|
|Finance (income), net|(��)|(��)|(��)|(��)|(��)|(��)|��|
|Share of (pro�t) of e�uity accounted
investees, net of income tax|(�)|(��)|(��)|(�)|(��)|(��)|(��)|
|Pro�t before income ta�|��|��|��|��|��|��|��|
|Income tax expense|��|��|��|(��)|(��)|(��)|(��)|
|Pro�t for the period|��|��|��|��|��|��|(��)|
|Diluted Earnings Per Share (EPS)|��|��||��|��||(��)|

Note: The conversion rate is considered as US$ 1 = ₹ 73.14

Gross pro�t increased b� 10� to ₹ 103,077 million. An increase of 50 basis points compared to FY2020.

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Dr. Reddy’s Laboratories Limited

companies. In FY2021, the net pro�t after tax was impacted largely by de-recognition of deferred tax asset due to non-availability of depreciation on goodwill pursuant to an amendment to the Income Tax Act.

IMPAIRMENT OF INTANGIBLES

In FY2021, there has been an impairment charge of ₹ 8,542 million which pertains to charges of:

Ÿ ₹ 3,180 million for the product Ethinyl Estradiol/Ethenogestral vaginal ring (generic equivalent to Nuvaring®). During the year, there were signi�cant changes to the market for the product — including the launch by a competitor of a generic version of the product in January 2021, thereby reducing the overall potential of future cash �ows for us.

LIQUIDITY AND CAPITAL

RESOURCES

The data are given in Tables 4 and 5. Cash generated from operating activities in FY2021 was ₹ 35,703 million. Investing activities net out�ow amounting to ₹ 22,660 million in FY2021 includes net investment in property, plant, equipment and intangibles to build capacity and capabilities for future business growth. Cash out�ow from �nancing activities was ₹ 298 million. Closing cash and cash equivalents as on March 31, 2021 was ₹ 14,820 million.

Ÿ ₹ 1,587 million for the product Saxagliptin/Metformin (generic version of Kombiglyze®-XR) and Phentermine and Topiramate (generic version of Qsymia®). During the year, there has been a signi�cant decrease in the market potential of these products, primarily due to higher than expected value erosion.

DEBT-EQUITY

Ÿ ₹ 3,291 million for the product Xeglyze . In view of the speci�c triggers occurring in the year with respect to the Xeglyze® forming part of the company's Proprietary Products segment, the company determined that there was a decrease in the market potential of this product.

In FY2021, total borrowings, including the current and non-current portion, increased by ₹ 8,288 million. As on March 31, 2021 the company’s debt-to-equity ratio was 0.16 as against 0.14 on March 31, 2020. The net debt-to-equity position was at (0.04) versus (0.03) last year. Table 6 gives the data.

Ÿ ₹ 484 million on other products of global generics segment, as the company determined that there was a decrease in the market potential of these products.

ENTERPRISE-WIDE RISK

MANAGEMENT (ERM)

Our ERM function operates with the following objectives:

Ÿ Proactively identify and highlight risks to relevant stakeholders;

NET FINANCE INCOME

The net �nance income was ₹ 1,653 million in FY2021 versus ₹ 1,478 million in FY2020.

Ÿ Facilitate discussions around risk prioritization and mitigation;

Ÿ Provide a framework to assess appetite;

Ÿ Develop systems to warn when the appetite is being breached; and

NET PROFIT

Ne� ��o�� e��e��e� �� 12� �o ₹ 17,238 million in FY2021. This represents a PAT margin of 9.1% of revenues versus 11.2% in FY2020. In FY2020, the net pro�t after tax was bene�tted largely due to recognition of a deferred tax asset related to the Minimum Alternate Tax (“MAT”) credits and planned restructuring activity between the group

Ÿ Provide an analysis of residual risk.

The ERM team connects with our business units and functions, which are the primary sources for risk identi�cation. It also monitors external trends on liabilities and risks reported by peers in the industry. The team collaborates with the compliance, internal audit, information security, safety

|TABLE 4 |CONSOLIDATED CASH FLOW AS PER IFRS|TABLE 4 |CONSOLIDATED CASH FLOW AS PER IFRS|(₹ MILLION)|
|---|---|---|
|PARTICULARS|FY2021|FY2020|
|Opening Cash and Cash Equivalents|��|��|
|Cash �ows from:|||
|(a) operating activities|��|��|
|(b) investing activities|(��)|(��)|
|(c) �nancing activities|(��)|(��)|
|E�ect of exchange rate changes|��|(��)|
|Closing Cash and Cash Equivalents|��|��|

and other assurance teams to identify and mitigate risks of business units, including risk relating to cyber security.

Our ERM function focuses on identi�cation of key business, and operational and strategic risks. These are carried out through structured interviews, on-call discussions, and review of incidents.

Risks are aggregated at the unit, function and organization levels and are categorized by risk groups. Our response framework categorizes these risks into (i) internal (preventable), (ii) internal (strategic) and (iii) external risks. The �nance, investment and risk management (FIRM) council is a management level committee that helps the ERM function to prioritize organizationwide risks and steer mitigation e�orts in line with our risk appetite.

Mitigation work carried out by the ERM team is periodically reviewed, and progress on key risks is discussed with the FIRM council, our senior management, as well as at the risk management committee of the board of directors. These include (i) updates on the progress of mitigation of key risks and (ii) speci�c risk-related initiatives carried out during the year.

During FY2021, risk mitigation e�orts included review of cyber security, ethics and compliance program across the company, monitoring of environmental including climate change related risks and reviews of other operating risk exposures.

HUMAN RESOURCES (HR)

With the pandemic in FY2021, the primary objective was to facilitate health and safety of our employees and their families while ensuring that we continue supplying medicines across the world. A number of interventions and support mechanisms were put in place to transition to remote working and also safeguard the well-being of those employees coming to sites. Some of these were:

Ÿ A well-being and support plan was launched comprising tele-consulting, helplines, 24x7 unlimited access to certi�ed clinical psychologists through an online platform and a home isolation program. Dedicated separate COVID-19 care facilities were launched for employees and dependents across three locations to provide pre-hospitalization care amidst the dire state of uncertainty in the external environment.

Ÿ For employees coming on-site in manufacturing and R&D, stringent social distancing and safety measures were deployed in the work locations, transport facilities and cafeterias. Other measures included multiple stages of disinfection, provision of personal protective equipment and automating actions that require manual contact. Daily hardship allowance was also provided.

Ÿ Clarifying success in terms of outcomes located in Baddi. During these times, we and behaviors aligned to the organization focused on virtual on-boarding, training and goals. induction. Cultural assimilation sessions Ÿ Frequent check-in and �exibility to focused on people and organization processes were conducted by leaders to change the goals anytime. enable seamless integration between teams.

Ÿ An additional insurance coverage for COVID-19 which covers hospitalization and home quarantine expenses was extended for employees and their dependents in India. Employees have also been provided a provision of additional COVID-19 leave.

Ÿ Continuous, real time feedback — moving away from assessments to development.

We continue to strengthen our talent moving away from assessments to processes through cadre and capability development. building interventions. Signi�cant work was Ÿ Clear feedback on performance against done in strengthening the capability goals and behaviors demonstrated building agenda in the organization. Employees were assessed against functional Digitization of the people processes is a key and behavioral skills required for them to be focus area. We have digitized processes more e�ective in their roles. As part of across the employee lifecycle which include developing future ready talent, strategic joining assistance, on-boarding, internal interventions have been designed in areas hiring, employee referrals, learning and of digital and analytics. Learning journeys compensation processes. This has resulted focused on competency building across in reducing turn-around times and speci�c cohorts were rolled out — enhanced employee experience. examples being in marketing and business In the new normal, there is also a need to development. We also invested in gauge employee engagement in real time. strengthening our learning resources to be To enable this, we launched ‘Heartbeat’ — more contemporary and set up a digital our internal engagement platform that infrastructure in the form of a Learning measures engagement levels on an Experience Platform.

Ÿ Support mechanisms to enhance work from home experience like ergonomic infrastructure and network support through mobile data plans were provided and work from home guidelines were shared.

A combination of ambiguity in the external environment with the new reality of remote working, virtual collaboration and unsupervised workdays has become the new normal. We have relooked at our people processes with that lens. In doing so, we have revamped our performance process to help employees work in this new reality and pursue individual and organizational priorities. The new performance process has been developed with the following principles in mind:

In the new normal, there is also a need to gauge employee engagement in real time. To enable this, we launched ‘Heartbeat’ — our internal engagement platform that measures engagement levels on an everyday basis across di�erent dimensions. Findings from the �rst cycle of Heartbeat indicated that 92% of employees were ready to put in discretionary e�ort for the organization and 82% would recommend Dr. Reddy’s as a great place to work. 87% to 89% valued the employee wellness, safety and respect that the organization provided.

To promote internal talent mobility, we launched ‘growth bridges’ that provide employees structured assignments and experiences equipping them to take on vertical and lateral growth opportunities.

We revamped our performance process to help employees work in this new reality and pursue individual and organizational priorities.

Diversity and inclusion continues to remain important in the organizational agenda. ‘Chrysalis’, our �agship leadership development program, has been launched for women in middle management to prepare them for senior leadership roles.

With the acquisition of select business of Wockhardt Limited, we successfully integrated the related sales and marketing teams, as well as the manufacturing plant

|TABLE 5 |CONSOLIDATED WORKING CAPITAL|||(₹ MILLION)|
|---|---|---|---|
|PARTICULARS|AS ON
MARCH 31, 2021|AS ON
MARCH 31, 2020|CHANGE|
|Trade Receivables (A)|��|��|(��)|
|Inventories (B)|��|��|��|
|Trade Payables (C)|��|��|��|
|Working Capital (A+B-C)|��|��|��|
|Other Current Assets (D)|��|��|��|
|Total Current Assets(A+B+D)|��|��|��|
|Short & Long-term loans and borrowings,currentportion(E)|��|��|��|
|Other Current Liabilities(F)|��|��|��|
|Total Current Liabilities(C+E+F)|��|��|��|

(₹ MILLION)

TABLE 6 | DEBT AND EQUITY POSITION

PARTICULARS	AS ON MARCH 31, 2021	AS ON MARCH 31, 2020	CHANGE
Total Shareholder’s Equity	��	��	��
Long-term debt (current portion)	��	��	(��)
Long-term debt (non-current portion)	��	��	��
Short-term borrowings	��	��	��
Total Debt	��	��	��

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

For the fourth year in a row, we have been featured in the 2021 Bloomberg Gender Equality Index for our commitment to gender equality. We also won the 1st Runner up position in the ‘Leadership’ category (individual) in UN WEP awards.

DIGITAL TRANSFORMATION

In FY2021, we continued to make progress on our digital transformation journey, which is structured along the lines of Digitalize the Core and Transform with Digital.

Digitalize the Core:

We continued to simplify and digitalize our core business processes across the organization and ended the year with nearly 80% digitalization of all core business processes.

We expanded the digital footprint into regulatory and clinical processes resulting in faster cycle time and lower error rates. In manufacturing, we continued to expand implementation and adoption of the Manufacturing Execution System and the Laboratory Information Management Systems which result in paperless shop�oor and labs, eliminates errors and improves productivity. We also digitalized safety processes and equipment lifecycle management across the plants.

In branded markets, our digitalization e�orts have been focused on increasing �eld productivity with improved accuracy of doctors information enriched with geocodes critical for route and call planning. Within B2B markets, digitalization of bid and tender management processes have resulted in higher win rates, improved pricing vis-à-vis pro�tability and maintaining product market share.

We extended our digital footprint to enable two major cross-functional value chain processes: ‘Selection to Launch’ and ‘Product Management’. The ‘Selection to Launch’ platform digitalizes all core processes involved across R&D, manufacturing and supply chain leading up to the new product launch. The ‘Product Management’ platform helps facilitate a 360 degree view along the product lifecycles through internal KPIs as well as market intelligence.

Transform with Digital:

We continued to deploy digital and analytics solutions to improve customer engagement and drive speed and productivity in our value chain.

Within R&D, multiple digital solutions were deployed that drove reduction in cycle time of drug development and help improve our rate of being ‘�rst time right’.

Within manufacturing, we are building Digital Lighthouse plants to increase plant productivity. These initiatives have markedly reduced Cost of Poor Quality (COPQ) and

per pack costs. Higher productivity is also enabled by scaling up of Robotic Process Automation (RPAs) as well as digitalized processes with automated incident tracking and near zero manual errors.

Market facing digital transformations are focused on improving customer and patient engagement. We had invested in Omnichannel connect platforms for our customers that helped us when the pandemic hit us. Similarly, in the B2B businesses, digital solutions have been deployed to drive improved customer service and account management. We have also deployed advanced analytics-based insights to improve productivity of sales and marketing.

Few experiments have been underway to establish new patient engagement platforms - e.g., for an integrated end-toend care management for cancer patients - as well as to look at adjacent business models in the healthcare ecosystem.

COVID-19 RELATED PRODUCTS

We have continued to play our role in the �ght against COVID-19 by acting proactively to bring multiple preventive and curative treatment options, including a vaccine. Some of our major COVID-19 products are:

Ÿ Sputnik V vaccine: We partnered with The Russian Direct Investment Fund (RDIF), Russia’s sovereign wealth fund, for conducting clinical trials and distribution of Sputnik V vaccine in India. We successfully completed Phase III trial for the vaccine, which demonstrated e�cacy at 91.6%, consistent safety and immunogenicity results. In April 2021 we received the Government of India’s approval for emergency use of Sputnik-V in India. We have launched Sputnik V in May 2021.

Ÿ Remdesivir: We signed a licensing agreement with Gilead Sciences, Inc. that grants Dr. Reddy’s the right to register, manufacture and sell Remdesivir, a potential treatment for COVID-19, in 127 countries including India. We launched Remdesivir under the brand name

“Redyx™” in India in September 2020. With the surge of COVID-19 cases in the second wave, we ramped-up our capacities to increase the availability of the medicine.

Ÿ Avigan® (Favipiravir): We entered into a licensing agreement with Fuji�lm Toyama Chemical Co. Ltd. to develop, sell and distribute Avigan® (Favipiravir) in all countries other than Japan, China and Russia. This enabled us to launch Avigan® 200 mg tablets in India and few other markets. We are also conducting Phase III trials in North America for outpatient setting with mild to moderate symptoms.

Ÿ 2-deoxy-D-glucose (2DG™) : The 2-DG

has been developed by Defence Research and Development Organization (DRDO), in collaboration with Dr. Reddy’s. The drug received emergency use as adjunct therapy for hospitalized moderate to severe COVID-19 patients.

In addition to these, we are also working on Molnupiravir, Baricitinib and several other COVID-19 drugs for treatment ranging from mild to severe conditions. We are committed to do our best in this pandemic situation.

OUTLOOK, INCLUDING COVID-19

FY2021 started with multiple COVID-19 related disruptions with lockdowns in several of our major markets. This impacted the physical connect of doctors with patients and pharma representatives and also led to several challenges on operations, supply chain and logistics. Some of these challenges continued throughout the year.

We rose to the occasion with proactive measures such as leveraging digital channels for many of our operations — examples being the enabling remote working for our employees and digitally connecting with doctors and business partners.

We managed to continue with most of our manufacturing operations through the year and ensured that supplies were available for each of our markets. We worked with innovative solutions ensuring business continuity; and while doing so we ensured the health and safety of our employees and business partners. We also converted the challenge to an opportunity with multiple set of COVID-19 related products.

The pricing pressures in the US, Europe and certain emerging markets have continued. However, our strong performance was led by volume growth and new product launches across these markets. Having said that, some delays in launch of a few key products hampered further growth.

Our commitment towards quality is re�ected in all our facilities being fully compliant with the respective regulatory agencies’ regulations.

We remain focused on improving our market share position and continue our journey towards creating a leaner business model, leveraging productivity improvement, cost control and increased e�ciencies across several functions in FY2021.

Simultaneously, we are committed to investing in business to make it even more competitive and future ready, especially

through: (i) investments in digitalization; (ii) development of complex products and biosimilars; and (iii) strengthening sales and marketing activities in branded markets. These initiatives will continue in FY2022, as well, and thus provide necessary impetus to our performance in future years.

We will remain focused on patient centric product innovation, operational excellence, continuous improvement and attaining leadership in chosen spaces. We are committed to look for opportunities aligned with our future business strategies for inorganic growth. This is re�ected in select brand acquisition from Wockhardt and other small scale acquisitions during FY2021. We will continue to seek more such opportunities in future.

The last few months have seen a second wave of COVID-19 impacting several parts of the world, and the most in India. While vaccinations and several treatment options are now available, rapid spread of the infection has led to further uncertainties in terms of business outlook. Consequently, our overall business growth may remain volatile in FY2022.

However, we believe that we have enough levers of growth in terms of expanding our market share, new product launches, scale up of several businesses and opportunities arising from COVID-19 products. These should enable us to deliver satisfactory performance in FY2022.

CAUTIONARY STATEMENT various market risks. By their nature, these The management of Dr. Reddy’s has expectations and projections are only prepared and is responsible for the �nancial estimates and could be materially di�erent statements that appear in this report. These from actual results in the future. Readers are are in conformity with International cautioned not to place undue reliance on Financial Reporting Standards (IFRS), as these forward-looking statements, which issued by the International Accounting re�ect management’s analysis and Standards Board, and accounting principles assumptions only as of the date hereof. In generally accepted in India and therefore, addition, readers should carefully review the include amounts based on informed other information in this annual report and in judgments and estimates. The management our periodic reports and other documents also accepts responsibility for the �led with all the stock exchanges. preparation of other �nancial information that is included in this report. This write up includes some forward-looking statement, within the meaning of section 27A of the US Securities Act of 1933, as amended and section 21E of the US Securities Exchange Act of 1934, as amended.

The management has based these forwardlooking statements on its current expectations and projections about future events. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to di�er materially. These factors include, but are not limited to, changes in local and global economic conditions, changes in government regulations, ability to successfully implement the strategy, manufacturing or quality control outcomes, ability to achieve expected results from investments in our product pipeline, change in market dynamics, technological change, currency �uctuations and exposure to

Our commitment towards quality is re�ected in all our facilities being fully compliant with the respective regulatory agencies’ regulations.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

FIVE YEARS AT A GLANCE

					(`MILLION)
YEAR ENDING MARCH 31	2021	2020	2019	2018	2017
INCOME STATEMENT DATA
Revenues	��	��	��	��	��
Cost of revenues*	��	��	��	��	��
Gross pro�t	��	��	��	��	��
as a % of revenues	��	��	��	��	��
OPERATING EXPENSES*
Selling, general and administrative expenses	��	��	��	��	��
Research and development expenses	��	��	��	��	��
Impairment of non-current assets	��	��	��	��	��
Other Operating (income)/expenses, net	(��)	(��)	(��)	(��)	(��)
Total operating expenses	��	��	��	��	��
Operating income	��	��	��	��	��
as a % of revenues	��	��	��	��	��
FINANCE COSTS, NET
Finance income	��	��	��	��	��
Finance expenses	(��)	(��)	(��)	(��)	(��)
Finance (expense)/income, net	��	��	��	��	��
Share of pro�t of equity accounted investees, net of income tax	��	��	��	��	��
Pro�t be�ore income tax	��	��	��	��	��
Income tax bene�t/(expense)	(��)	��	(��)	(��)	(��)
Pro�t �or t�e year	��	��	��	��	��
as a % of revenues	��	��	��	��	��
EARNINGS PER SHARE (₹)
Basic	��	��	��	��	��
Diluted	��	��	��	��	��
Dividend declared per share for the year (₹)	��	��	��	��	��
BALANCE SHEET DATA
Cash and cash equivalents, net of bank overdraft	��	��	��	��	��
Operating working capital**	��	��	��	��	��
Total assets	��	��	��	��	��
Total long-term debt, excluding current portion	��	��	��	��	��
Total stockholders' equity	��	��	��	��	��
ADDITIONAL DATA
Net cash provided by/(used in):
Operating activities	��	��	��	��	��
Investing activities	(��)	(��)	(��)	(��)	(��)
Financing activities	(��)	(��)	(��)	(��)	(��)
E�ect of exchange rate changes on cash	��	(��)	��	��	(��)
Expenditure on property, plant and equipment & Intangibles	(��)	(��)	(��)	(��)	(��)

KEY FINANCIAL RATIOS

YEAR ENDING MARCH	31	2021	2020	2019	2018	2017
PROFITABILITY RATIOS
# EBITDA margin (%)		��	��	��	��	��
Gross Margin (%)		��	��	��	��	��
Global Generics		��	��	��	��	��
PSAI		��	��	��	��	��
# Net Pro�t Margin (%)		��	��	��	��	��
# Return on Net Worth (%)		��	��	��	��	��
ASSET PRODUCTIVITY	RATIOS
Fixed Asset Turnover		��	��	��	��	��
Total Assets Turnover		��	��	��	��	��
WORKING CAPITAL RATIOS
Working Capital Days		��	��	��	��	��
# Inventory Days		��	��	��	��	��
# Debtors Days		��	��	��	��	��
# Creditor Days		��	��	��	��	��
GEARING RATIOS
# Net Debt/Equity^		(��)	(��)	��	��	��
# Interest Coverage		��	��	��	��	��
# Current Ratio		��	��	��	��	��
VALUATION RATIOS
Earnings per share (₹)		��	��	��	��	��
Book Value per share (₹)		��	��	��	��	��
Dividend Payout		��	��	��	��	��
Trailing Price/Earnings Ratio		��	��	��	��	��

(1) Fixed Asset Turnover: Net Sales/Avg Net Fixed Assets (Property, plant and equipment)

(2) Total Asset Turnover: Net Sales/Avg Total Assets

(3) Working Capital Days: Inventory Days + Receivable Days – Payable Days (4) Inventory Days: (Average of closing Inventory - as on end of September and March)/(Cost of Revenue during last 6 months) * 182

(5) Receivable Days: outstanding receivables netted-o� with the daily average sales� starting from the latest month

(6) Payable Days: (Average of closing Payables - as on end of December and March)/(Material cost during last 3 months) * 90

(7) Book Value per share: Equity/Outstanding equity shares

(8) Dividend Payout: DPS/EPS

(9) Trailing price: Closing share price on the last working day of March

^ FY2021 Net debt/equity computation excludes current borrowings & current investments #

Key �nancial ratios in terms of Schedule V(B)(1)(h) of SEBI (�isting Obligations and Disclosure Requirements) Regulations, 2015�

* Figures are restated for previous years

** Operating working capital = Trade receivables + Inventories - Trade payables

Note: The numbers are as per IFRS reported �nancials

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

CORPORATE GOVERNANCE

Dr. Reddy’s Laboratories Limited (‘Dr. Reddy’s’ or ‘the company’) believes that timely disclosures, transparent accounting policies coupled with a strong and independent board go a long way in maintaining good corporate governance, preserving shareholders’ trust and maximizing long-term corporate value. The company’s corporate governance framework is based on the following main principles:

This chapter, together with information given in the chapters on Management Discussion and Analysis and Additional Shareholders’ Information, constitute our report on corporate governance for 2020-21 (or FY2021).

Each director informs the company on an annual basis about the board and board committee positions she/he occupies in other companies, and noti�es it of any changes regarding their directorships and committee positions. In addition, the independent directors provide an annual con�rmation that they meet the criteria of independence as de�ned under Indian laws. Pursuant to a noti�cation dated October 22, 2019, issued by the Ministry of Corporate A�airs, all independent directors have completed the registration with the independent directors databank. Requisite disclosures have been received from the directors in this regard. After assessment of such disclosures, declarations and con�rmations, the board has opined that all the independent directors ful�l the conditions speci�ed under Listing Regulations and are independent of the management.

BOARD OF DIRECTORS

COMPOSITION

As on March 31, 2021, our board had 10 directors, comprising of (i) two executive directors, including the chairman of the board, and (ii) eight independent directors as de�ned under the Companies Act, 2013 ("the Act"), the Listing Regulations and the Corporate Governance Guidelines of the NYSE Listed Company Manual. Their detailed pro�les are available on the company's website: www.drreddys.com/ourstory/leadership/board-of-directors/

Appropriate composition, diversity and size of the board, with each director bringing in key expertise in di�erent areas.
Proactive �ow of accurate information to members of the board and board committees to enable e�ective discharge of �duciary duties.
Ethical business conduct by the board, management and employees.

The directors have expertise in the �elds of strategy, management and governance,

Well-developed systems of internal controls, risk management and �nancial reporting.
�nance, operations, science, technology and human resources. Such expertise enables the board to steer the company in the right direction.

Table 2 gives the composition of our board, with all relevant details.

Protection and facilitation of shareholders’ rights.

TERM OF BOARD MEMBERSHIP

On recommendations of the nomination, governance and compensation committee (NGCC), the board considers the appointment and reappointment of directors.

Adequate, timely and accurate

Table 1 gives details of their individual competence, expertise and skills.

disclosure of all material operational and
�nancial information to stakeholders.

The board provides leadership, strategic guidance, objective and independent views to the company’s management while discharging its �duciary responsibilities, thereby ensuring that the management adheres to high standards of ethics, transparency and disclosure. It regularly reviews the company’s governance, risk and compliance framework, business plans, and organization structure to align with the highest global standards.

In India, the Securities and Exchange Board of India (SEBI) regulates corporate governance for listed companies through SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations). We are in full compliance with all the applicable provisions of SEBI’s corporate governance norms. We are also in compliance with the appropriate corporate governance standards of the New York Stock Exchange, Inc. (NYSE) and NSE IFSC Exchange Rules.

Section 149(10) of the Act, provides that an independent director shall hold office up to �ve consecutive years on the board of a company from the date of appointment and shall be eligible for reappointment for a second term of up to �ve consecutive years on passing of a special resolution by the members. Moreover, independent directors cannot retire by rotation.

TABLE 1 | MATRIX OF BOARD EXPERTISE

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MANAGEMENT AND HUMAN SCIENCE, TECHNOLOGY
NAME STRATEGY FINANCE
GOVERNANCE RESOURCES AND OPERATIONS
Mr. K Satish Reddy √ √ √ √ √
Mr. G V Prasad √ √ √ √ √
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NAME Mr. K Satish Reddy Mr. G V Prasad	STRATEGY √ √	MANAGEMENT AND GOVERNANCE √ √	FINANCE √ √	HUMAN RESOURCES S √ √	CIENCE, TECHNOLOGY AND OPERATIONS √ √

Ms. Kalpana Morparia	√	√	√	√
Dr. Bruce L A Carter	√	√		√	√
Mr. Sridar Iyengar	√		√
Mr. Bharat N Doshi*	√	√	√
Mr. Prasad R Menon	√	√	√	√
Mr. Leo Puri	√	√	√	√
Ms. Shikha Sharma	√	√	√	√
Mr. Allan Oberman	√	√		√	√

Term ended on May 10, 2021, as a director.

During FY2021, the members of the company approved the continuation of directorship of Mr. Prasad R Menon (DIN: 00005078), independent director on attaining the age of 75 years under Regulation 17(1A) of the Listing Regulations.

SELECTION AND APPOINTMENT reports, investor presentations, recent OF NEW DIRECTORS press releases, research reports, code of Recommending any new member on the business conduct and ethics (COBE) board is the responsibility of the NGCC and the memorandum and articles of of the board, which consists entirely of association and a brief on company’s board independent directors. Given the existing practices. The new independent director composition of the board, the tenure individually meets with board members as well as the years left of the existing and senior management. Visits to plants members to serve on the board, and and research locations are organized for the need for new domain expertise are the director to understand the company’s reviewed by this committee. When such a operations. need becomes apparent, the committee We believe that the board should be reviews potential candidates in terms of continuously empowered with knowledge their expertise, attributes, personal and of latest developments a�ecting the professional backgrounds and their ability company and the industry. Apart from to attend meetings in India. It then places regular presentations on the company’s the details of shortlisted candidates to the business strategies and associated risks, board for its consideration. If the board expositions are made on various topics approves, the person is appointed as an covering the pharmaceutical industry. additional director, subject to the approval Updates on relevant statutory changes of members in the company’s next general and judicial pronouncements around meeting.

Additionally, members of the company approved the reappointment of Mr. G V Prasad (DIN: 00057433), as wholetime director, designated as co-chairman and managing director of the company for a further period of �ve years with e�ect from January 30, 2021.

We believe that the board should be continuously empowered with knowledge of latest developments a�ecting the company and the industry. Apart from regular presentations on the company’s business strategies and associated risks, expositions are made on various topics covering the pharmaceutical industry. Updates on relevant statutory changes and judicial pronouncements around industryrelated laws are regularly circulated to the directors. They also visit the company’s manufacturing and research locations. Each director has complete access to any of the company’s information and full freedom to interact with senior management.

Section 152 of the Act, states that onethird of the board members, other than independent directors, who are subject to retire by rotation, shall do so every year and be eligible for reappointment, if approved by the members. Accordingly, Mr. G V Prasad (DIN: 00057433) retires by rotation at the forthcoming annual general meeting (AGM) and being eligible, seeks reappointment.

FAMILIARIZATION PROCESS FOR INDEPENDENT DIRECTORS

Therefore, at the forthcoming annual general meeting, approval of members is being sought for the reappointment of Mr. G V Prasad, who retires by rotation and, being eligible, o�ers himself for the reappointment.

To familiarize a new independent director with the company, an information kit is provided containing documents about the company. It contains, inter alia , information such as its annual reports, sustainability

TABLE 2 | COMPOSITION OF OUR BOARD AND THEIR DIRECTORSHIPS AS ON MARCH 31, 2021

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DIRECTORSHIPS UNDER
SECTION 165 OF THE
RELATIONSHIP DATE OF COMPANIES ACT, 2013
NAME POSITION WITH OTHER
JOINING
DIRECTORS
PUBLIC PRIVATE
COMPANIES COMPANIES
(1) (2)
OTHER DIRECTORSHIPS COMMITTEE (2)MEMBERSHIPS CHAIRMANSHIP IN COMMITTEES
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Mr. K Satish Reddy	Chairman	Brother-in-law of Mr. G V Prasad(3)	January 18, 1993	7	6	8	1	-
Mr. G V Prasad	Co-Chairman and Managing Director	Brother-in-law of Mr. K Satish Reddy(3)	April 8, 1986	7	3	3	1	-
Ms. Kalpana Morparia	Independent Director	None	June 5, 2007	2	-	1	-	2
Dr. Bruce L A Carter	Independent Director	None	July 21, 2008	2	-	4	1	-
Mr. Sridar Iyengar	Independent Director	None	August 22, 2011	4	1	4	-	3
Mr. Bharat N Doshi*	Independent Director	None	May 11, 2016	4	-	2	2	-
Mr. Prasad R Menon	Independent Director	None	October 30, 2017	1	-	2	-	-
Mr. Leo Puri	Independent Director	None	October 25, 2018	2	-	-	-	-
Ms. Shikha Sharma	Independent Director	None	January 31, 2019	5	-	-	4	-
Mr. Allan Oberman	Independent Director	None	March 26, 2019	1	-	1	-	-

Term ended on May 10, 2021, as a director.
(1) Other directorships are those, which are not covered under Section 165 of the Act.
(2) Membership/chairmanship in audit and stakeholders’ relationship committees of all public limited companies, whether listed or not, including the company are considered. Membership/ chairmanship of foreign companies, private limited companies and those under Section 8 of the Act, have been excluded. Membership/chairmanship of our nomination, governance and compensation committee; science, technology and operations committee; corporate social responsibility committee; risk management committee; and banking and authorizations committee are also excluded.
(3) Mr. K Satish Reddy (chairman) and Mr. G V Prasad (co-chairman and managing director) are not 'relative' as de�ned under Section 2(��) of the Act.
(4) None of the directors serves as an independent director in more than seven listed companies.
(5) None of the directors holds directorships in more than 10 public limited companies.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

Details of the familiarization programs for independent directors are available on the company’s website: www.drreddys. com/media/997132/familiarizationprograms-2021.pdf

The committees were evaluated on various parameters such as e�ective discharge of their roles, responsibilities and advice given to the board for discharging its �duciary responsibilities, including adequate and periodical updates to the board on the committees’ functioning.

LETTER OF APPOINTMENT

Upon their appointment, independent directors are given a formal appointment letter containing, inter alia , the terms of appointment, roles, functions, duties and responsibilities, the company’s code of conduct, disclosures and con�dentiality. For such terms and conditions, see: www.drreddys.com/investor/governance/ policies-and-documents/terms-conditiondirectors.html

DIRECTORS’ SHAREHOLDING IN THE COMPANY

Table 3 gives details of shares/ADRs held by the directors as on March 31, 2021.

MEETINGS OF THE BOARD

The company plans and prepares the schedule of the board and board committee meetings 18 to 24 months in advance. The schedule of meetings and their agenda is �nalized in consultation with the chairman of the board, the lead independent director and committee chairpersons. Agendas are circulated in advance with appropriate presentations, detailed notes, supporting documents and executive summaries.

BOARD EVALUATION

Since FY2015, the board has carried out an annual self-evaluation of its performance, the working of its committees and peer evaluation of each director internally. Prior to that, on two such occasions, an independent expert was engaged to conduct the evaluation process. In FY2019, an independent expert was engaged to conduct the evaluation process and in FY2020 the evaluation and e�ectiveness process of the board, its committees and individual directors was undertaken internally.

Under Indian laws, the board of directors must meet at least four times a year, with a maximum gap of 120 days between two board meetings. During FY2021, all board meetings were held through video conference in accordance with the provisions of law. Our board met �ve times during the �nancial year under review: on May 20, 2020, July 29, 2020, October 28, 2020, January 29, 2021, and March 24, 2021. Details of directors’ attendance at board meetings and the AGM are given in Table 4 .

During FY2021, also the evaluation process was undertaken internally. For the purpose, each director completed a questionnaire involving peer evaluation and feedback on processes of the board and its committees. The contribution and impact of individual members were evaluated on a number of parameters, such as level of engagement, independence of judgment, con�ict resolution, contributions to enhance the board’s overall e�ectiveness, etc. Peer ratings on certain parameters, positive attributes and improvement areas for each director were provided to them on a

Our board and committee meetings typically comprise structured two-day sessions.

INFORMATION GIVEN TO THE BOARD

Among others, the company provides the following information to the board and/or its committees:

Annual operating plans and budgets, capital budgets and other updates;

con�dential basis.

TABLE 3 | SHARES/ADRs HELD BY DIRECTORS AS ON MARCH 31, 2021

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NAME NO. OF SHARES/ADRs HELD
Mr. K Satish Reddy [(1)] 898,432
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Mr. G V Prasad(1)(2)	-
Ms. Kalpana Morparia	10,800
Dr. Bruce L A Carter (ADRs)	7,800
Mr. Sridar Iyengar	-
Mr. Bharat N Doshi*	1,000
Mr. Prasad R Menon	-
Mr. Leo Puri	-
Ms. Shikha Sharma	-
Mr. Allan Oberman	-

Term ended on May 10, 2021, as a director.

(1) APS Trust owns 83.11% of Dr. Reddy’s Holdings Limited, which in turn owns 41,325,300 shares of Dr. Reddy’s Laboratories Limited. Mr. G V Prasad, Mr. K Satish Reddy, Mrs. G Anuradha, Mrs. Deepti Reddy and their bloodline descendants are the bene�ciaries of APS Trust.

(2) During the year, Mr. G V Prasad has transferred 11,17,940 equity shares from his individual account to his HUF account.

Quarterly, half-yearly and annual �nancial results of the company and its operating divisions or business segments;
Detailed presentations on the progress in research and development (R&D) and new drug discoveries;
Minutes of meetings of the board, audit committee and other committees of the board;
Information on recruitment and
remuneration of key executives below the board level including chief �nancial o�cer and the company secretary;

• Signi�cant regulatory matters concerning Indian or foreign regulatory authorities;

• Issues which involves possible public or product liability claims of a substantial nature, if any;

Risk analysis of various products, markets and businesses;
Detailed analysis of potential acquisition targets and possible divestments;
Details of any joint venture or collaboration agreements;
Transactions that involve substantial payment towards, or impairment of goodwill, brand equity or intellectual property;

• Signi�cant sale of investments, subsidiaries, assets which are not in the normal course of business;

Contracts/arrangements in which director(s) are interested;

• Materially important show cause, demand, prosecution and penalty notices, if any;

Fatal or serious accidents or dangerous occurrences, if any;
Signi�cant e�uent or pollution problems, if any;

• Material default in �nancial obligations to and by the company or substantial non-payment for goods sold by the company, if any;

Signi�cant labor problems and their proposed solutions, if any;
Signi�cant development in the human resources and industrial relations fronts;
Quarterly details of foreign exchange exposure and the steps taken by management to limit the risks of adverse exchange rate movement;
Non-compliance of any regulatory or statutory nature or listing requirements as well as shareholders’ services such as non-payment of dividend and delays in share transfer, if any;
Subsidiary companies’ minutes, �nancial statements, signi�cant transactions and investments; and
Signi�cant transactions and arrangements.

POST-MEETING FOLLOW-UP MECHANISM

Important decisions taken and suggestions made by the board and its committees are promptly communicated to the concerned departments or divisions. Action taken/ status reports on decisions/suggestions of the previous meeting(s) are followed up and placed at the next meeting for information and further recommended actions, if any.

MEETINGS OF INDEPENDENT DIRECTORS

During FY2021, our independent directors met four times in sessions without the presence of executive directors and other members of management. The company is ready to facilitate more such sessions as and when required by the independent directors. During these meetings, the independent directors reviewed the performance of the company and its senior management, that of the chairman, co-chairman and managing director, and the board. Corporate strategy, risks, competition, succession planning for the board and senior management and the quality of information given to the board were also discussed.

ANNUAL BOARD RETREAT

During FY2021, the annual board retreat was held from January 5, 2021 - January 7, 2021, at the company’s corporate o�ce, Hyderabad through video conferencing, where the board conducted a detailed strategic review of the company’s business segments and discussed various governance related matters.

DIRECTORS’ REMUNERATION

We have a policy for the remuneration of directors, key managerial personnel (KMP), senior management personnel (SMP) and other employees, which lays down principles and parameters to ensure that remunerations are competitive, reasonable, and in line with corporate and individual performance. The remuneration policy is enclosed as Annexure A to this chapter.

Executive directors are appointed/ reappointed by members’ resolution for a period of �ve years. No severance fee is payable to them. Except the commission payable, all other components of remuneration to the executive directors are �xed in line with the company’s policies. Their annual remuneration, including commission based on standalone net pro�ts of the company, is recommended by the NGCC to the board for its consideration. While recommending such a commission, the committee also takes into account the overall corporate performance in a given year and the key performance indicators (KPIs). The remunerations are within the limits approved by members. Perquisites and retirement bene�ts are paid in accordance with the company’s compensation policies, as applicable to all employees.

TABLE 4 | DIRECTORS’ ATTENDANCE AT BOARD MEETINGS AND THE AGM, FY2021

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MEETINGS HELD IN ATTENDANCE IN
ATTENDANCE AT
NAME DIRECTOR’S LAST AGM HELD
THE MEETINGS
TENURE ON JULY 30, 2020
Mr. K Satish Reddy 5 4 [(1)] Present
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NAME Mr. K Satish Reddy	IRECTORS TENURE THE 5	MEETINGS LA ON 4(1)	ST AGM HELD JULY 30, 2020 Present
Mr. G V Prasad	5	5	Present
Ms. Kalpana Morparia	5	5	Present
Dr. Bruce L A Carter	5	5	Present
Mr. Sridar Iyengar	5	5	Present
Mr. Bharat N Doshi*	5	5	Present
Mr. Prasad R Menon	5	5	Present
Mr. Leo Puri	5	5	Present
Ms. Shikha Sharma	5	5	Present
Mr. Allan Oberman	5	5	Present

Term ended on May 10, 2021, as a director. (1) Was given leave of absence on request for one meeting.

Independent directors are entitled to receive sitting fees, commission based on the standalone net pro�ts of the company and reimbursement of any expenses for attending meetings of the board and its committees. Such remuneration, including commission payable, is in conformity with the provisions of the Act, and has been considered and approved by the board and the members. The company, in compliance with Section 197 of the Act, and the Listing Regulations, has not granted any stock options to independent directors since FY2013. Remuneration paid or payable to the directors for FY2021 is given in Table 5.

auditing practices and for issuing reports based on such audits. The board of directors has entrusted the audit committee with the responsibility to supervise these processes and ensure adequate, accurate and timely disclosures that maintain the transparency, integrity and quality of �nancial control and reporting.

The primary functions of the audit committee are to:

Supervise the �nancial reporting process;
Review the quarterly and annual �nancial statements/results before placing them to the board along with audit/limited review report, related disclosures and

INDEPENDENT DIRECTORS

�ling requirements;

Independent directors of the company head the following governance and/or board committee functions:

Review the adequacy of internal controls in the company, including the plan, scope and performance of the internal audit function;
Mr. Prasad R Menon: Governance, corporate strategy, lead independent director, nomination, governance and compensation committee and corporate social responsibility committee;
Discuss with management the company’s major policies with respect to risk assessment and risk management;
Dr. Bruce L A Carter: Science, technology and operations committee;

• Hold discussions with statutory auditors on the nature, scope and process of audits and any views that they have about the �nancial control and reporting processes;

Mr. Sridar Iyengar: Audit committee; He is also the �nancial expert and chief ombudsperson for the company’s whistle-blower policy;
Ensure compliance with accounting standards and with listing requirements with respect to the �nancial statements;
Ms. Kalpana Morparia: Stakeholders’ relationship committee; and
Ms. Shikha Sharma: Risk management committee;
Recommend the appointment and removal of external auditors and their remuneration;

COMMITTEES OF THE BOARD

Recommend the appointment of auditors;

We have seven board-level committees, whose details are given below:

Review the independence of auditors;

AUDIT COMMITTEE

Ensure that adequate safeguards have been taken for legal compliance for the company and its subsidiaries;

The management is responsible for the company’s internal controls and the �nancial reporting process while the statutory auditors are responsible for performing independent audits of the company’s �nancial statements in accordance with generally accepted

Review the �nancial statements, in particular, investments made by all the subsidiary companies and their signi�cant transactions;

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

Review and approval of related party transactions;

In addition, the chairman of the committee and other members met to review other processes, particularly the internal control mechanisms to prepare for certi�cation under Section 404 of the Sarbanes-Oxley Act, 2002, and subsidiary governance oversight.

NOMINATION, GOVERNANCE AND COMPENSATION COMMITTEE

Review the functioning of whistle-blower mechanism;

The nomination, governance and compensation committee also entirely consists of independent directors. Its primary functions are to:

Review the implementation of applicable provisions of the Sarbanes-Oxley Act, 2002;

• Examine the structure, composition and functioning of the board, and recommend changes, as necessary, to improve the board’s e�ectiveness, oversee the evaluation of the board and formulation of criteria for such evaluation;

Scrutinize inter-corporate loans and investments;

The chairman, CFO and the chief internal auditor (CIA) are permanent invitees to all the audit committee meetings. The representatives of statutory auditors are also present. The company secretary o�ciates as the secretary of the committee.

Examine the valuation of undertakings or assets of the company, wherever necessary; and
Evaluate internal �nancial controls; and review suspected fraud, if any, committed against the company.
Formulate policies on the remuneration of directors, KMP and other employees and on board diversity;

Audit committee meetings are preceded by pre-audit committee conference calls with the members, the CFO, the CCO, the internal audit and compliance teams, external auditors and other key �nance personnel of the company. During these calls, key audit related matters are discussed and items that need further face-to-face discussion at the audit committee meetings are identi�ed.

Review compliance with provisions of SEBI (Prohibition of Insider Trading Regulations, 2015, and verify that the internal controls systems for ensuring compliance with these regulations are ade�uate and e�ective.

• Assess the company’s policies and processes in key areas of corporate governance, other than those explicitly assigned to other board committees, with a view to ensure that the company is at the forefront of good governance;

The audit committee comprises entirely of independent directors. All members are �nancially literate and bring in expertise in the �elds of �nance, economics, strategy and management. The committee comprises Mr. Sridar Iyengar (chairman), Ms. Kalpana Morparia and Ms. Shikha Sharma.

• Regularly examine ways to strengthen organizational health, by improving hiring, retention, motivation, development, deployment and behavior of management and other employees. In this context, the committee also reviews the framework and processes for motivating and rewarding performance at all levels of the organization, the resulting compensation awards, and makes appropriate proposals for board approval. In particular, it recommends all forms of compensation payable to the executive directors, KMP and senior management of the company;

The internal and statutory auditors of the company discuss their �ndings and updates, and submit their views to the committee. Separate discussions are held with the internal auditors to focus on compliance issues and to conduct detailed reviews of the processes and internal controls in the company. Permissible nonaudit related services undertaken by the statutory and independent auditors are also pre-approved by the committee.

Under the Indian laws, the audit committee must meet at least four times in a year, with a maximum gap of 120 days between two meetings. The audit committee met seven times during the year: on May 19, 2020, July 29, 2020, August 17, 2020, October 27, 2020, January 28, 2021, February 11, 2021, and March 24, 2021. It also met the key members of the �nance team and chief internal auditor along with the chairman and the CFO to discuss matters relating to audit, assurance and accounting.

The audit committee also reviews the performance and remuneration of the CIA and chief compliance o�cer (CCO).

Review the sexual harassment complaints, the outcome of investigations, if any, and awareness initiatives; and

Table 6 gives the composition and awareness initiatives; and attendance record of the committee, and • Review the company’s ESOP Schemes its report is enclosed as Exhibit 1 to this and recommend changes as necessary chapter. and also administering the ESOP Schemes and Dr. Reddy’s Employees ESOS Trust.

During the year, the committee also met representatives of statutory auditors without the presence of the management.

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TABLE 5 | REMUNERATION PAID OR PAYABLE TO THE DIRECTORS FOR FY2021 ( ` ’000)
NAME SALARIES PERQUISITES [(1)] COMMISSION [(2)] TOTAL
Mr. K Satish Reddy ��
Mr. G V Prasad ��
Ms. Kalpana Morparia - -� ��
Dr. Bruce L A Carter - -� ��
Mr. Sridar Iyengar - -� ��
Mr. Bharat N Doshi - -� ��
Mr. Prasad R Menon - -� ��
Mr. Leo Puri - -� ��
Ms. Shikha Sharma - -� ��
Mr. Allan Oberman - -� ��
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(1) Perquisites include medical reimbursement for self and family according to the rules of the company, leave travel assistance, personal accident insurance, leave encashment, long service award, company’s vehicle with driver for o�cial use, telephone at residence and mobile phone, contribution to provident fund and superannuation scheme. All these bene�ts are �xed in nature.

(2) Payment of commission is variable, and based on the percentage of net pro�t calculated according to section 198 of the Act. �he board of directors approved a �xed commission of _7,311,000 (US$ 100,000) per Independent director; a speci�c amount of_ 1,827,750 (US$ 25,000) to the chairman of the audit committee; _1,096,650 (US$ 15,000) to the chair of science, technology and operations committee; the nomination, governance and compensation committee; the risk management committee; the corporate social responsibility committee; and the stakeholders’ relationship committee;_ 731,100 (US$ 10,000) to the other members of the committees; _1,827,750 (US$ 25,000) to the lead independent director; and_ 365,550 (US$ 5,000) variable fee per meeting based on the attendance at the board meetings to every independent director.

The head of human resources (HR) makes periodic presentations to the committee on organization structure, talent management, leadership, succession, diversity, performance appraisals, increments, performance bonus recommendations and other HR matters.

The committee met three times during the year: on May 19, 2020, October 27, 2020, and January 28, 2021. The co-chairman and managing director is a permanent invitee to all such committee meetings. The head of HR o�ciates as the secretary of the committee. Table 7 gives the composition and attendance record of the committee, and its report is enclosed as Exhibit 2 to this chapter.

SCIENCE, TECHNOLOGY AND OPERATIONS COMMITTEE

The science, technology and operations committee of the board also entirely comprises of independent directors. Its primary functions are to:

Review scienti�c, medical and technical matters and operations involving the company’s development and discovery programs (generic and proprietary), including major internal projects and business development opportunities;
Review and monitor management’s actions in the creation of valuable intellectual property (IP);
Review the safety and quality of the company’s operations;
Review the status of non-infringement patent challenges; and
Review and monitor management’s actions and plans in building and nurturing science in the organization in line with the company’s business strategy.

The co-chairman and managing director and chief executive o�cer (CEO) are permanent invitees to all committee meetings. O�cials heading IPDO, �MO, quality, proprietary products and biologics are also invited to the meetings. The head of IPDO acts as secretary of the committee. The committee met four times during the year: on May 19, 2020, July 29, 2020, October 27, 2020, and January 29, 2021. Table 8 gives the composition and attendance record of the committee, and its report is enclosed as Exhibit 3 to this chapter.

RISK MANAGEMENT COMMITTEE

The risk management committee also consists entirely of independent directors. Its key functions are to:

Discuss with senior management regarding enterprise risk management (ERM) and management of cyber security risks and other key risks;
Ensure that it is apprised of the most signi�cant risks along with mitigating actions taken by management; and
Review risk disclosure statements in any public documents or disclosures, where applicable.
Review measures taken for e�ective exercise of voting rights by shareholders;
Review work done by the share transfer agent including adherence to the service standards;

The company has in place an enterprisewide risk management system. The risk management committee oversees and reviews the risk management framework as well as the assessment of risks, their management and mitigation procedures. The committee reports its �ndings and observations to the board. A section on risk management practices of the company under the ERM framework forms a part of the chapter on Management Discussion and Analysis in this annual report.

Review of corporate actions related to security holders;
Review investor engagement
plans/initiatives and movement in shareholdings and ownership structure; and
Review initiatives for reduction
of quantum of unclaimed dividends and ensure timely receipt of dividend/ annual report/statutory notices by the shareholders.

The chairman, CEO, CIA and the CCO are permanent invitees to all risk management committee meetings. The CFO o�ciates as the secretary of the committee. The committee met thrice during the year: on May 20, 2020, October 27, 2020, and January 28, 2021.

The committee also advises the company on various shareholders’ related matters. The committee consists of three directors, including two executive directors. The chairperson of the committee is an independent director. The committee met four times during the year: on May 19, 2020, July 28, 2020, October 27, 2020, and January 28, 2021. Table 10 gives the composition and attendance record of the committee, and its report is enclosed as Exhibit 5 to this chapter.

Table 9 gives the composition and attendance record of the committee, and its report is enclosed as Exhibit 4 to this chapter.

STAKEHOLDERS’ RELATIONSHIP

COMMITTEE

The company secretary o�ciates as the secretary of the committee and is also designated as the compliance o�cer in terms of Listing Regulations and as a nodal o�cer under IEPF Rules. An analysis of investor queries and complaints received and responded/addressed during the year is given in the chapter on Additional Shareholders’ Information.

The stakeholders’ relationship committee is empowered to perform the functions of the board relating to the handling of queries and grievances of security holders. It primarily focuses on:

Review investor complaints and their redressal;

TABLE 6 | AUDIT COMMITTEE MEMBERSHIP AND ATTENDANCE IN FY2021

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MEETINGS HELD IN THE ATTENDANCE AT
COMMITTEE MEMBERS POSITION
DIRECTOR’S TENURE THE MEETINGS
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Mr. Sridar Iyengar	Chairman	7	7
Mr. Bharat N Doshi*	Member	7	7
Ms. Shikha Sharma	Member	7	7
Mr. Leo Puri**	Member	5	5
Ms. Kalpana Morparia***	Member	2	2

Term ended on May 10, 2021, as a director.
Ceased to be a member of the committee with e�ect from �ebruary 2, 2021.
**
*** Appointed as a member of the committee with e�ect from �ebruary 2, 2021.

TABLE 7 | NOMINATION, GOVERNANCE AND COMPENSATION COMMITTEE MEMBERSHIP AND ATTENDANCE IN FY2021

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MEETINGS HELD IN THE ATTENDANCE AT
COMMITTEE MEMBERS POSITION
DIRECTOR’S TENURE THE MEETINGS
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Mr. Prasad R Menon	Chairman	3	3
Mr. Bharat N Doshi*	Member	3	3
Mr. Leo Puri**	Member	3	3
Ms. Kalpana Morparia***	Member	-	-
Mr. Allan Oberman****	Member	-	-

Term ended on May 10, 2021, as a director.
Ceased to be a member of the committee with e�ect from �ebruary 2, 2021.
**
Appointed as a member of the committee with e�ect from �ebruary 2, 2021.
**** Appointed as a member of the committee with e�ect from April 1, 2021.

(3) Apart from receiving the above remuneration, the non-executive directors do not have any pecuniary relationship or transaction with the company.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

CORPORATE SOCIAL RESPONSIBILITY (CSR) COMMITTEE

BANKING AND AUTHORIZATIONS COMMITTEE

The committee consists of three directors, including two executive directors. The chairman of the committee is an independent director. The CSR committee’s primary functions are to:

The banking and authorizations committee authorizes executive directors and selected o�cers of the company to deal with daytoday business operations such as banking, treasury, insurance, excise, customs, administration and dealing with other government/non-government authorities. It consists of two executive directors, and met six times during the year: on May 20, 2020, July 29, 2020, October 28, 2020, December 1, 2020, January 6, 2021, and January 29, 2021. The company secretary o�ciates as the secretary of the committee.

Formulate, review and recommend to the board, a CSR policy indicating the activities to be undertaken by the company as speci�ed in schedule �II of the Act;
Recommend the amount of expenditure to be incurred on the initiatives as per the CSR policy;
Provide guidance on various CSR initiatives undertaken by the company and monitor implementation and adherence to the CSR programs and policy of the company from time to time;

OTHER BOARD MATTERS

CAPITAL EXPENDITURES (CAPEX)

The board approves the annual capex budget in line with the company’s long-term strategy. An internal management committee approves all capex investments within the annual capex budget approved by the board. An update on key capex approvals (and their relevant details) granted by the internal management committee is provided to the board.

Recommend to the board an annual CSR action plan delineating the CSR projects or programmes to be undertaken during the �nancial year; and
Appoint an independent agency/�rm to carry out impact assessment study, if any.

The CSR committee met four times during the year: on May 19, 2020, July 28, 2020, October 27, 2020, and January 28, 2021. The head of CSR o�ciates as the secretary of the committee. Table 11 gives the composition and attendance record of the committee, and its report is enclosed as Exhibit 6 to this chapter.

COMPLIANCE REVIEWS

We have a chief compliance o�cer (CCO) and a full-�edged compliance team to oversee compliance activities. The company’s compliance status is periodically updated to the senior management team and presentations are given in the quarterly audit committee and risk management committee meetings. When pertinent, these are also shared with all board members.

TABLE 8 | SCIENCE, TECHNOLOGY AND OPERATIONS COMMITTEE MEMBERSHIP AND ATTENDANCE IN FY2021

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COMMITTEE MEMBERS POSITION [MEETINGS HELD IN THE ] ATTENDANCE AT
DIRECTOR’S TENURE THE MEETINGS
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Dr. Bruce L A Carter	Chairman	4	4
Ms. Kalpana Morparia*	Member	4	4
Mr. Prasad R Menon	Member	4	4
Mr. Allan Oberman	Member	4	4
Mr. Leo Puri**	Member	-	-

Ceased to be a member of the committee with e�ect from �ebruary �� 0�1.
** Appointed as a member of the committee with e�ect from �ebruary �� 0�1.

TABLE 9 | RISK MANAGEMENT COMMITTEE MEMBERSHIP AND ATTENDANCE IN FY2021

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MEETINGS HELD IN THE ATTENDANCE AT
COMMITTEE MEMBERS POSITION
DIRECTOR’S TENURE THE MEETINGS
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Ms. Shikha Sharma	Chairperson	3	3
Dr. Bruce L A Carter	Member	3	3
Mr. Sridar Iyengar	Member	3	2(1)
Mr. Allan Oberman*	Member	3	3
Mr. Leo Puri**	Member	-	-

Ceased to be a member of the committee with e�ect from April 1� �0�1.
** Appointed as a member of the committee with e�ect from �ebruary �� 0�1.
(1) Was given leave of absence on request for one meeting.

COBE AND VIGIL MECHANISM

We have adopted a code of business conduct and ethics (‘COBE’ or the ‘Code’) which applies to all directors and employees of the company, its subsidiaries and a�liates. It is the responsibility of all directors and employees to familiarize themselves with this Code and comply with its standards. The directors and the employees across the company annually a�rm compliance with the code.

A declaration of the CEO of the company to this e�ect is enclosed as Exhibit 7 to this chapter.

The company has an ombudsperson policy (whistle-blower or vigil mechanism) to report concerns on actual or suspected violations of the code. The audit committee chairperson is the chief ombudsperson. Concerns raised to the company and their resolution are reported through the chief ombudsperson to the audit committee and where applicable, to the board. During FY2021, no personnel has been denied access to the audit committee on ombudsperson issues.

The COBE and ombudsperson policy are available on the company’s website: www.drreddys.com/investors/governance/ code-of-business-conduct-and-ethicscobe/ and www.drreddys.com/investors/ governance/ombudsperson-policy

RELATED PARTY TRANSACTIONS

We have adequate procedures to identify and monitor related party transactions. All transactions with related parties are placed before the audit committee and the board for review and approval, as appropriate. Transactions entered into with related parties during the �nancial year were at arm’s length pricing and generally in the ordinary course of business. The details of related party transactions are discussed in note 2.23 to the standalone �nancial statements. The company’s policy on materiality of the related party transactions is available on the company’s website: www.drreddys.com/media/764069/policymateriality-related-party-transactions.pdf

Interested directors are not present during discussion and voting on such related party transactions. Furthermore, the transactions with directors/their relatives/ entities outside our group in which they are interested, are reviewed by an independent chartered accountant.

SUBSIDIARY COMPANIES

The audit committee reviews the �nancial statements of our subsidiaries. It also reviews the investments made by such subsidiaries, the statement of all signi�cant transactions and arrangements entered into by subsidiaries and the compliances of each materially signi�cant subsidiary on a periodic basis.

The audit committee also reviews the utilization of loans/advances/investments given by the company to its subsidiaries. The minutes of board meetings of the subsidiary companies are placed before the board for review. The company has also established a group governance policy for monitoring the governance of its subsidiaries.

Mr. Sridar Iyengar and Dr. Bruce L A Carter, independent directors of the company are also directors on the board of our material subsidiaries, Dr. Reddy’s Laboratories S.A., Switzerland and Dr. Reddy’s Laboratories, Inc., USA, respectively.

The company’s policy for determining material subsidiaries is available on the company’s website: www.drreddys.com/ media/763674/policy-for-determiningmaterial-subsidiaries.pdf

DISCLOSURE ON ACCOUNTING TREATMENT

In the preparation of �nancial statements for FY2021, there is no treatment of any transaction which is di�erent from that prescribed in the Indian Accounting Standards noti�ed by the Government of India under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014, and the Companies (Indian Accounting Standards) Rules, 2015, as amended, the guidelines issued by SEBI and other accounting principles generally accepted in India.

MANAGEMENT

Our management develops and implements policies, procedures and practices that attempt to translate the company’s core purpose and mission into reality. It also identi�es, measures, monitors and minimizes risks in the business and ensures safe, sound and e�cient operations. These risks are internally supervised and monitored through the company’s management council (MC).

MANAGEMENT COUNCIL (MC)

Our MC consists of senior management from the business and corporate functions. Page nos. 26-27 of this annual report gives details of the members of the MC. Apart from monthly meetings, the MC meets once a quarter for two-day sessions. Background notes for the monthly and quarterly meetings are circulated in advance. Listed below are some of the key issues that were considered by the MC during the year under review:

The company’s long-term strategy, growth initiatives and priorities;
Overall company performance, including performance of various business units;
Decision on major corporate policies;
Discussion and sign-o� on annual plans, budgets, investments and other major initiatives; and

are appropriately acted on and reported to the SEBI/SEs. The company also maintains a structured digital database, as required under the SEBI (Prohibition of Insider Trading) Regulations, 2015.

Discussion on business alliances proposals and organizational design.

MANAGEMENT DISCUSSION AND ANALYSIS

The chapter on Management Discussion and Analysis forms a part of this annual report.

INTERNAL CONTROL SYSTEMS AND STATUTORY AUDITS

MANAGEMENT DISCLOSURES

We have both external and internal audit systems in place. Auditors have access to all records and information of the company. The board recognizes the work of the auditors as an independent check on the information received from the management on the operations and performance of the company. The board periodically reviews the �ndings and recommendations of the statutory and internal auditors and suggests corrective actions whenever necessary.

Senior management of the company (at the internal role band of yellow and above, as well as certain identi�ed key employees) make annual disclosures to the board on all material, �nancial and commercial transactions in which they may have personal interest, if any, and which may have a potential con�ict with the interest of the company. Transactions with key managerial personnel are listed in the �nancial section of this annual report under related party transactions.

INTERNAL CONTROLS

We maintain a system of internal controls designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

PROHIBITION OF INSIDER TRADING

We have a policy prohibiting insider trading in conformity with applicable regulations of the SEBI in India and the Securities and Exchange Commission (SEC) of the USA. Necessary procedures have been laid down for directors, o�cers, designated persons and their relatives for trading in the securities of the company. These are periodically communicated to such employees who are considered as insiders of the company. Apart from this, regular insider trading awareness sessions are conducted for the bene�t of designated persons. Trading window closure/blackouts/ quiet periods, when the directors and designated persons are not permitted to trade in the securities of the company, are intimated in advance to all concerned. Violations of the policy, if any,

Organization’s strategic objective;
E�ectiveness and e�ciency of operations;
Adequacy of safeguards for assets;
Reliability of �nancial and non-�nancial reporting; and
Compliance with applicable laws and regulations.

The integrity and reliability of our internal control systems are achieved through clear policies and procedures, process automation, training and development of employees and an organization structure that segregates responsibilities.

Our internal audit team is an independent assurance and advisory function, responsible for evaluating and improving the e�ectiveness of risk management,

|TABLE 10|STAKEHOLDERS' RELATIONSHIP COMMITTEE|TABLE 10|STAKEHOLDERS' RELATIONSHIP COMMITTEE|TABLE 10|STAKEHOLDERS' RELATIONSHIP COMMITTEE|TABLE 10|STAKEHOLDERS' RELATIONSHIP COMMITTEE|
|---|---|---|---|
|MEMBERSHIP AND ATTENDANCE IN FY2021
COMMITTEE MEMBERS
POSITION
MEETINGS HELD IN THE
DIRECTOR’S TENURE
ATTENDANCE AT
THE MEETINGS||||
|Ms. Kalpana Morparia|Chairperson|4|4|
|Mr. Bharat N Doshi*|Member|4|4|
|Mr. G V Prasad|Member|4|4|
|Mr. K Satish Reddy|Member|4|4|

Term ended on May 10, 2021, as a director.

TABLE 11 | CORPORATE SOCIAL RESPONSIBILITY COMMITTEE MEMBERSHIP AND ATTENDANCE IN FY2021

COMMITTEE MEMBERS	POSITION	MEETINGS HELD IN THE DIRECTOR’S TENURE	ATTENDANCE AT THE MEETINGS
Mr. Bharat N Doshi*	Chairman	4	4
Mr. Prasad R Menon**	Chairman	-	-
Mr. K Satish Reddy	Member	4	4
Mr. G V Prasad	Member	4	4

Term ended on May 10, 2021, as a director. Chairman of the committee till April 11, 2021.
** Appointed as a member and chairman, with e�ect from April 12, 2021.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

control and governance processes. The internal audit team helps to enhance and protect organizational value by providing risk-based objective assurance, advice, and insight. The internal audit team prepares annual audit plans based on risk assessment and conducts extensive reviews covering �nancial, operational and compliance controls. Areas requiring specialized knowledge are reviewed in partnership with external experts or by recruiting resources with specialized skills. Suggested improvements in processes are identi�ed during reviews and communicated to the management on an ongoing basis.

The audit committee of the board monitors the performance of the internal audit team on a periodic basis through review of audit plans, audit �ndings and speed of issue resolution through follow ups. Each year, there are at least four meetings in which the audit committee reviews internal audit �ndings. During the year, the audit committee chairman also met the chief internal auditor without the presence of management.

CEO AND CFO CERTIFICATION

A certi�cate of the CEO as well as the CFO of the company on �nancial statements and applicable internal controls as stipulated under Regulation 17(8) of the Listing Regulations is enclosed as Exhibit 8 to this chapter.

STATUTORY AND IFRS AUDITORS

For FY2021, M/s. S.R. Batliboi & Associates LLP, chartered accountants (�rm registration no. 101049W/E300004), the statutory auditors, audited the �nancial statements prepared in accordance with the Ind AS. During the year, the company reappointed M/s. Ernst & Young Associates LLP, as an independent registered public accounting �rm (independent auditor) to audit the annual consolidated �nancial statements and for issuing an opinion on the �nancial statements prepared in accordance with IFRS as issued by the International Accounting Standard Board (IASB) for FY2021.

The statutory and independent auditors render an opinion regarding the fair presentation in the �nancial statements of the company’s �nancial condition and operating results. Their audits are conducted in accordance with generally accepted auditing standards and include a review of the internal controls, to the extent necessary, to determine the audit procedures required to support their opinion.

While auditing the operations of the company, the external auditors recorded their observations and �ndings with the management. These were then discussed by the management and the auditors at/ with the audit committee meetings – both

2. News releases, presentations, etc.:

face-to-face and via conference calls. Remedial measures suggested by the auditors and the audit committee have been either implemented or taken up for implementation by management.

The company has established systems and procedures to disseminate relevant information to its stakeholders, including members, analysts, business partners, customers, employees and the society at large. It also conducts earning calls with analysts and investors. Details of communications made during the year are produced in Table 13.

The statutory and independent auditors provide a con�rmation of their independence every �nancial year. They con�rm that the engagement team, involved in the audit of the company and its group including network �rms have complied with relevant ethical requirements regarding independence.

3. Website: The primary source of information regarding the company’s operations is the company’s website: www.drreddys.com, where all o�cial news releases and presentations made to institutional investors and analysts are posted. It contains a separate dedicated investors section, as required under Regulation 46(2) of the Listing Regulations, where the information for members is available. Webcast of the proceedings of the AGM is also made available on the company’s website.

They also con�rm that on the basis of procedures implemented within their practice, they have not identi�ed any situation or risk likely to a�ect their independence as company’s auditors for the �nancial year within the terms of the rules of conduct applicable in India.

AUDITORS ’ FEES

During FY2021, the company and its subsidiaries, on a consolidated basis paid the fees mentioned in Table 12 to M/s. S.R. Batliboi & Associates LLP, chartered accountants, the statutory auditors; and to M/s. Ernst & Young Associates LLP, the independent auditors and other entities within their network.

4. Annual report: The company’s annual report containing, inter alia , the board’s report, additional shareholders information, the corporate governance report, the business responsibility report, management’s discussion and analysis (MD&A), audited standalone and consolidated �nancial statements, auditors’ report and other important information are circulated to members and others so entitled. The annual report is also available on the company’s website in a user-friendly and downloadable form.

within their network.
		(`MILLIONS)
TABLE 12	AUDITORS’ FEES
TYPE OF SERVICE	FY2021	FY2020
Audit fees	84.4	76.0
Tax audit fees	20.2	13.1
All other fees	7.0	2.1
Total	111.6	91.2

5. Chairman’s speech: The speech given at the AGM is made available on the company’s website: www.drreddys.com.

6. Reminder to investors: Reminders to collect unclaimed dividend on shares or debenture redemption/interest are sent to the relevant shareholders and debenture holders.

AGREEMENTS WITH MEDIA

The company has not entered into any agreement with any media company and/or its associates.

SHAREHOLDERS

7. Compliances with stock exchanges: National Stock Exchange of India Limited (NSE) and BSE Limited (BSE) maintain separate online portals for electronic submission of information by listed companies. Various communications such as notices, press releases and the regular quarterly, half-yearly and annual compliances and disclosures are �led electronically on these portals. In addition, such disclosures and communications are also sent to the NYSE, NSE IFSC Limited and �led with SEC, as appropriate.

MEANS OF COMMUNICATION

1. Quarterly and annual results: Quarterly and annual results of the company are published in widely circulated national newspapers such as the Business Standard and the local vernacular daily, Andhra Prabha. These are also disseminated internationally through Business Wire and made available on the company’s website: www.drreddys. com. The �nancial results were sent, if asked for, to the registered e-mail IDs of members.

TABLE 13 | DETAILS OF COMMUNICATION MADE DURING FY2021

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MEANS OF COMMUNICATION NUMBER
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Press releases/statements	61
Earnings calls	4
Publication of results	4

8. Designated exclusive e-mail ID:

We have designated an e-mail ID exclusively for investor services: [email protected].

9. Register to receive electronic

communications: We provide an option to the members to register their e-mail ID online through the company’s website to receive electronic communications. Members who wish to receive electronic communications may register at www.drreddys.com/investors/investorservices/shareholder-information.aspx

10. Disclosures: We have a policy on the determination of materiality for disclosure of certain events.

ADDITIONAL INFORMATION ON DIRECTORS SEEKING APPOINTMENT/ REAPPOINTMENT AT THE ENSUING ANNUAL GENERAL MEETING

MR. G V PRASAD

Mr. G V Prasad (aged 60 years, DIN: 00057433) holds a Bachelor degree in Chemical Engineering from Illinois Institute of Technology, Chicago in the USA, and an M.S. in Industrial Administration from Purdue University, Indiana in the USA.

Mr. Prasad is a member of the company’s board since 1986 and serves as cochairman and managing director of the company. He leads the core team that drives the growth and performance at Dr. Reddy’s. He has played a key role in the evolution of Dr. Reddy’s from a mid-sized pharmaceutical company into a globally respected pharmaceutical major especially in developed markets. He is also passionate about sustainable manufacturing and business practices. He is widely credited as the architect of Dr. Reddy’s successful Global Generics (GG) and Active Pharmaceutical Ingredients (API) strategies, as well as the company’s foray into biosimilars, proprietary products, di�erentiated formulations, and the company’s sustainability initiatives including the adoption of green technologies and processes.

Mr. Prasad was listed among the Top 50 CEOs that India ever had by Outlook magazine in 2017 and was recognized as one of the Top Five Most Valuable CEOs of India by Business World in 2016. He was also listed in the prestigious ‘Medicine Maker 2020 and 2021 Power List’ of the most inspirational professionals shaping the future of drug development and under the category of "Small Molecules" for his remarkable work and contribution to pharmaceutical industry. He has also been named India Business Leader of the year by

CNBC Asia in 2015, Regional Honoree for the 2020 YPO Global Impact Award, r eceived the V. Krishnamurthy Award for Excellence by the Centre for Organizational Development in 2019, and was designated The Boundary Breaker at the CEO Awards in 2018.

Prior to May 2014, Mr. Prasad held titles of chairman and chief executive o�cer. He was reappointed as a whole-time director designated as co-chairman and managing director of the company at the 36th AGM of the members held on July 30, 2020, for a period of �ve years commencing January 30, 2021, to January 29, 2026, liable to retire by rotation. He retires by rotation at the forthcoming 37th AGM of the company and, being eligible, o�ers himself for reappointment.

In addition to the positions held in our wholly-owned subsidiaries, Mr. Prasad is also a director on the boards of Greenpark Hotels and Resorts Limited, Stamlo Industries Limited, Dr. Reddy’s Holdings Limited, Dr. Reddy’s Trust Services Private Limited, Dr. Reddy’s Institute of Life Sciences, International Foundation for Research and Education and Indian School of Business in India.

Apart from the committee memberships in Dr. Reddy’s, he is also a member of the nomination and remuneration committee and the corporate social responsibility committee of the company’s wholly-owned subsidiary, Aurigene Discovery Technologies Limited.

Mr. Prasad has attended all meetings of the board held during FY2021. He does not hold any equity shares in the company as on March 31, 2021.

Mr. G V Prasad and Mr. K Satish Reddy are brother-in-laws. They are not 'relative' as de�ned under Section 2(77) of the Act.

LISTED COMPANY DIRECTORSHIP OF

THE BOARD MEMBERS

Table 14 on page 64 enumerates the directors who are holding directorship in listed entities, including Dr. Reddy’s, as on March 31, 2021.

COMPLIANCE REPORT ON THE NYSE CORPORATE GOVERNANCE GUIDELINES

Pursuant to Section 303A.11 of the NYSE Listed Company Manual, a foreign private issuer, as de�ned by the SEC, must make its US investors aware of signi�cant ways in which its corporate governance practices di�er from those required of domestic companies under NYSE listing standards. A detailed analysis of this is available on the company’s website: www.drreddys.com.

COMPLIANCE REPORT ON DISCRETIONARY REQUIREMENTS UNDER REGULATION 27(1) OF THE LISTING REGULATIONS

1. The board: Our chairman is an executive director and maintains the chairman’s o�ce at the company’s expenses for the performance of his duties.

2. Shareholders’ rights: We did not send half-yearly results to the household of each shareholder(s) in FY2021. However, in addition to displaying our quarterly and half-yearly results on our website, www.drreddys.com, and publishing in widely circulated newspapers, the quarterly �nancial results are sent, if asked for, to the registered e-mail IDs of shareholders.

3. Audit �uali�cations: The auditors have

not quali�ed the �nancial statements of the company.

4. Separate post of chairman and CEO:

Mr. K Satish Reddy is the chairman of the company; Mr. G V Prasad is the cochairman and managing director and Mr. Erez Israeli is the CEO.

5. Reporting of internal audit: The chief internal auditor regularly updates the audit committee on internal audit �ndings at the committee’s meetings and conference calls.

ADDITIONAL SHAREHOLDERS’ INFORMATION

The chapter on Additional Shareholders’ Information forms a part of this annual report.

ANNEXURE A

REMUNERATION POLICY

I. CONTEXT

The purpose of this policy is to set over principles, parameters and governance framework of the remuneration for directors, KMPs, senior management personnel and employees. This policy will assist the board to ful�l its responsibility towards attracting, retaining and motivating the directors, KMPs, senior management personnel and employees through competitive and reasonable remuneration in line with the corporate and individual performance. This document outlines following policies/guidelines:

A. Performance evaluation of directors

B. Remuneration principles

C. Board diversity

II. DEFINITIONS

“Board” means board of directors of the company.

“Committee” means nomination, governance and compensation committee of the company as constituted or reconstituted by the board, from time to time.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

(iii) holds together with his relatives two per cent or more of the total voting power of the company; or

subsidiary or associate company, or their promoters, or directors, amounting to two per cent or more of its gross turnover or total income or �fty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding �nancial years or during the current �nancial year;

“Company” means Dr. Reddy’s Laboratories Limited.
“Director” means directors of the company.
(iv) is a chief executive or director, by whatever name called, of any nonpro�t organi�ation that receives twenty �ve per cent or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two per cent or more of the total voting power of the company; and

“Employee” means any person, including o�cers who are in the permanent employment of the company.

“Independent Director” As provided under clause 49 of the Listing Agreement and/or under the Companies Act, 2013, ‘independent director’ shall mean a nonexecutive director, other than a nominee director of the company:

e) who, neither himself nor any of his relatives —
(i) holds or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of the three �nancial years immediately preceding the �nancial year in which he is proposed to be appointed;
(v) is a material supplier, service provider or customer or a lessor or lessee of the company.
a) who, in the opinion of the board, is a person of integrity and possesses relevant expertise and experience;
f) who is not less than 21 years of age.
b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate company;
"Key Managerial Personnel” is as de�ned under the Companies Act, 2013 and means:-
(ii) who is not related to promoters or directors in the company, its holding, subsidiary or associate company;
- a) the chief executive o�cer or the
(ii) is or has been an employee or managing director or the manager
proprietor or a partner, in any of the (having ultimate controls over
three �nancial years immediately a�airs of the company);
preceding the �nancial year in which he is proposed to be b) the company secretary; appointed, of a �rm of auditors or c) the whole-time director; company secretaries in practice d) the chief �nancial o�cer; and
or cost auditors of the company or its holding, subsidiary or e) such other o�cer as may be prescribed associate company; or any legal or under the applicable statutory a consulting �rm that has or had provisions/regulations from time to time. any transaction with the company, “Senior Management” means o�cers/
its holding, subsidiary or associate personnel of the company who are
company amounting to ten per cent members of its core management team
or more of the gross turnover of such �rm;
c) apart from receiving director’s remuneration, has or had no pecuniary relationship with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding �nancial years or during the current �nancial year;
d) none of whose relatives has or had pecuniary relationship or transaction with the company, its holding,

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TABLE 14 | LISTED COMPANY DIRECTORSHIP OF BOARD MEMBERS AS ON MARCH 31, 2021
DIRECTOR COMPANY LISTED IN DESIGNATION HELD
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Mr. K Satish Reddy	Dr. Reddy’s Laboratories Limited India	Chairman
Mr. G V Prasad	Dr. Reddy’s Laboratories Limited India	Co-Chairman and Managing Director
Mr. Allan Oberman	Dr. Reddy’s Laboratories Limited India	Independent Director
Mr. Bharat N Doshi	Dr. Reddy’s Laboratories Limited India	Independent Director
Dr. Bruce L A Carter	Enanta Pharmaceutical Inc. USA Mirati Therapeutics Inc.	Chairman
		Director
	Dr. Reddy’s Laboratories Limited India	Independent Director
Ms. Kalpana Morparia	Philip Morris International Inc. USA	Director
	Hindustan Unilever Limited India Dr. Reddy’s Laboratories Limited	Independent Director
		Independent Director
Mr. Leo Puri	Hindustan Unilever Limited India Dr. Reddy’s Laboratories Limited	Independent Director
		Independent Director
Mr. Prasad R Menon	Dr. Reddy’s Laboratories Limited India	Independent Director
Ms. Shikha Sharma	Ambuja Cements Limited India Mahindra and Mahindra Limited Tech Mahindra Limited Tata Consumer Products Limited Dr. Reddy’s Laboratories Limited	Independent Director
		Independent Director
		Independent Director
		Independent Director
		Independent Director
Mr. Sridar Iyengar	Mahindra Holidays & Resorts India Limited India Aster DM Healthcare Limited Dr. Reddy’s Laboratories Limited	Independent Director
		Independent Director
		Independent Director

excluding board of directors comprising all members of management one level below the executive directors, including the functional heads.

Unless the context otherwise requires, words and expressions used in this policy and not de�ned herein but de�ned in the Companies Act, 2013 as may be amended from time to time shall have the meaning respectively assigned to them therein.

III. APPLICABILITY

This policy is applicable to the following:

Directors (executive and non-executive);
Key managerial personnel (KMPs);
Senior management personnel; and
and Other employees.

IV. EVALUATION OF DIRECTORS

For the purpose of determining remuneration (based on pro�tability of the company), the evaluation criteria of the executive and non-executive directors are as outlined below:

1) Executive directors:
a) Financial metrics covering growth in return on capital employed (RoCE) and pro�tability; and
b) Non-�nancial metrics covering aspects such as health, brand building, compliance, quality and sustainability of operations of the organization, as may be agreed upon from time to time with the company.
2) Non-executive directors:
a) Level of engagement, independence of judgment, etc., and their contribution in enhancing the board’s overall e�ectiveness;
b) The non-executive directors remuneration shall be globally benchmarked with similar organizations; and
c) Participation in the committees (either as chairperson or member) and the board meetings.

V. REMUNERATION OF DIRECTORS, KMPS, SENIOR MANAGEMENT PERSONNEL AND OTHER EMPLOYEES

The committee shall recommend to the board for their approval, any remuneration to be paid to the executive directors. The committee will separately review and approve the remuneration to be paid to KMPs and senior management personnel.

The level and composition of remuneration so determined by the committee shall be reasonable and su�cient required to attract, retain and motivate directors, KMPs and senior management in order to run the company successfully. There shall be a clear linkage of remuneration to performance and health targets. The remuneration shall be a mix of �xed and variable pay�long-term pay re�ecting short and long-term performance objectives appropriate to the working of the company and its strategic goals.

The key principles for each of the positions are outlined below:

1) Executive directors – The executive
directors shall be paid remuneration by way of monthly compensation and pro�t based commission. The total remuneration to be paid to the executive directors shall be within the limits prescribed under the provisions of the Companies Act, 2013, and Rules made thereunder;
2) Non-executive directors –

The non-executive directors shall receive remuneration by way of sitting fees and reimbursement of expenses for attending meetings of board or committee thereof. In addition, the nonexecutive and independent directors shall also be eligible to receive pro�t related commission, as may be approved by the shareholders of the company. They shall not be entitled to any stock options.

The chairman of the company shall propose remuneration to be paid to nonexecutive directors. The proposal for the remuneration shall be benchmarked with global pharmaceutical companies and the contribution made and time dedicated by each director;

3) KMPs and senior management
personnel – Dr. Reddy’s recognizes that those chosen to lead the organization are vital to its ongoing success and growth. Thus, these executives should be o�ered competitive and reasonable compensation so that Dr. Reddy’s can attract, retain and encourage critical talent to meet important organizational goals and strategies. The compensation will be the mix of �xed pay, variable pay, performance based incentive plans or stock options. The executive total compensation program will be �exible to di�erentiate pay to recognize an individual incumbents’ critical skills, contributions, and future potential to impact the organization’s success;
4) Other employees – The compensation

program for employees is designed to help drive performance culture and align employees for the creation of sustainable value through behaviors like execution excellence, innovation and leadership. In line with the organization principles of managing the long-term and meritocracy, there are four principles of pay which have been enumerated – ability to pay, position-linked pay, person-speci�c pay and performance-linked pay. The company may periodically review the compensation and bene�ts at all levels to ensure that the company remains competitive and is able to attract and retain desirable talent.

The committee may review the overall compensation approach for employees and on any changes done for the entire organization.

VI. BOARD DIVERSITY

Building a diverse and inclusive workplace is an integral part of Dr. Reddy’s culture. These principles are also applied to the composition of our board.

The board of directors shall have the optimum combination of directors from di�erent areas��elds of expertise and experience like operations, management, quality assurance, �nance, sales and marketing, supply chain, research and development, human resources etc., or as may be considered appropriate. The board shall have at least one member who has accounting or related �nancial management expertise and at least three members who are �nancially literate.

At least one member of the board should be a woman.

VII. CONFIDENTIALITY

The members of the committee may not disclose, in particular, the information contained in the con�dential reports they receive or the contents of con�dential discussions. They shall also ensure that any employees appointed to support them likewise comply with this rule.

VIII. REVIEW

This policy will be reviewed at appropriate time, as decided by the committee. The utility and interpretation of this policy will be at the sole discretion of the committee.

EXHIBIT 1

REPORT OF THE AUDIT COMMITTEE

To the shareholders of

Dr. Reddy’s Laboratories Limited

The audit committee of the board consists of three directors. Each member is an independent director as de�ned under Indian laws, Listing Regulations and the New York Stock Exchange Corporate Governance Guidelines. The committee operates under a written charter adopted by the board of directors, and has been vested with all the powers necessary to e�ectively discharge its responsibilities.

Dr. Reddy’s management has primary responsibility for the �nancial statements and reporting process, including the systems of internal controls. During FY2021, the audit committee met seven times. It discussed with the company’s internal auditors, statutory auditors and independent auditors the scope and plans for their respective audits. It also discussed the results of their examination, their evaluation of the company’s internal controls, and overall quality of the company’s �nancial reporting. The audit committee provides at each of its meetings

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

an opportunity for internal and external auditors to meet privately with the members of the committee, without the presence of management.

In ful�lling its oversight responsibilities, the committee reviewed and discussed the company’s quarterly unaudited and annual audited �nancial statements with the management. M/s. S.R. Batliboi & Associates LLP, chartered accountants, the company’s statutory auditors for �nancial statements prepared in accordance with Ind AS, and M/s. Ernst & Young Associates LLP, the company’s independent auditors for �nancial statements prepared in accordance with IFRS, are responsible for expressing their opinion on the conformity of the company’s �nancial statements with generally accepted accounting principles (GAAP), as applicable.

Relying on the review and discussions with the management and the auditors, the audit committee believes that the company’s �nancial statements are fairly presented in conformity with Indian accounting standards (Ind AS) and the IFRS as issued by the International Accounting Standards Board in all material aspects.

To ensure that the accounts of the company are properly maintained and that accounting transactions are in accordance with the prevailing laws and regulations, the committee reviewed the internal controls put in place by the company. In conducting such reviews, the committee found no material discrepancy or weakness in the company’s internal control systems.

During the year, the committee, inter alia, also reviewed the following:

a) Non-audit services being provided by the statutory and independent auditors and concluded that such services were not in con�ict with their independence;
b) Structure of the internal audit function, internal audit plan and chief internal auditor’s remuneration;
c) Related party transactions, as applicable;
d) The �nancial statements of the subsidiaries including their investments and signi�cant transactions; and
e) Ombudsperson process/complaints and insider trading matters.

The committee ensures that the company’s code of business conduct and ethics has a mechanism such that no personnel intending to make a complaint relating to securities and �nancial reporting shall be denied access to the audit committee.

The audit committee has recommended

to the board of directors:

a) That the audited standalone and consolidated �nancial statements of Dr. Reddy’s Laboratories Limited for the year ended March 31, 2021, prepared as

per Ind AS be approved by the board as a true and fair statement of the �nancial status of the company; and

b) That the �nancial statements prepared as per IFRS as issued by International Accounting Standards Board for the year ended March 31, 2021, be approved by the board and be included in the company’s annual report on Form 20-F, to be �led with the US Securities and Exchange Commission.

In addition, the committee also recommended the appointment of the statutory auditor, secretarial auditor, cost auditor and independent auditor to the board.

SRIDAR IYENGAR

Chairman, Audit Committee

Place: USA Date: May 13, 2021

EXHIBIT 2

REPORT OF THE NOMINATION, GOVERNANCE AND COMPENSATION COMMITTEE

To the shareholders of Dr. Reddy’s Laboratories Limited

The nomination, governance and compensation committee of the board consists of three independent directors as de�ned under Indian laws, Listing Regulations and the New York Stock Exchange Corporate Governance Guidelines. The committee operates under a written charter adopted by the board of directors, and has been vested with all the powers necessary to e�ectively discharge its responsibilities.

The committee’s primary responsibilities are to:

• Assess the company’s policies and processes in key areas of corporate governance and the impact of related signi�cant regulatory and statutory changes, if any, to ensure that the company is at the forefront of good corporate governance;

Periodically examine the structure, composition and functioning of the board, and recommend changes, as necessary, to improve the board’s e�ectiveness, oversee the evaluation of the board and formulation of criteria for such evaluation;
Examine major aspects of the company’s organizational design, and recommend changes as necessary;
Formulate policies on the remuneration of directors, KMPs and other employees and on board diversity;
Review and recommend compensation and variable pay for executive directors to the board;
Review the sexual harassment complaints, outcome of investigations, if any and awareness initiatives; and
Establish, in consultation with the
management, the compensation program for the company, and recommend it to the board for approval, and in that context:
a) Establish annual key result areas (KRAs) for the executive directors and oversee the status of their achievement;
b) Review, discuss and provide guidance to the management, on the KRAs for members of the MC, KMP and their remuneration; and
c) Review the company’s ESOP schemes and oversee its administration.

As on March 31, 2021, the company had 1,015,522 outstanding stock options, which amounts to 0.61% of total equity capital. These options are held by 247 employees of the company and its subsidiaries under:

a) Dr. Reddy’s Employees Stock Options Scheme, 2002;
b) Dr. Reddy’s Employees ADR Stock Options Scheme, 2007; and
c) Dr. Reddy’s Employees Stock Option Scheme, 2018.

359,252 stock options are exercisable at par value i.e. ` 5/- per option and 656,270 stock options are exercisable at fair market value.

The committee met three times during the �nancial year. In addition to the ful�lment of its normal responsibilities as described above, this year the committee has given special emphasis to board renewal, identifying candidates for the board, and modifying committee composition. It has also worked with management to review the organization design, plan for upgrading and retaining talent at all levels, review succession plans for key positions, and support revision of training programs and the performance enablement systems.

It also reviewed the company’s system for hiring, developing and retaining talent.

PRASAD R MENON

Chairman, Nomination, Governance and Compensation Committee

Place: Hyderabad Date: May 13, 2021

EXHIBIT 3

REPORT OF THE SCIENCE, TECHNOLOGY AND OPERATIONS COMMITTEE

To the shareholders of Dr. Reddy’s Laboratories Limited

The science, technology and operations committee of the board consists of four independent directors as de�ned under Indian laws, Listing Regulations and the New York Stock Exchange Corporate Governance Guidelines. The committee operates under a written charter adopted by the board of directors, and has been vested with all the powers necessary to e�ectively discharge its responsibilities.

The committee’s primary responsibilities are to:

Review scienti�c, medical and technical matters and operations involving the company’s development and discovery programs (generic and proprietary), including major internal projects, business development opportunities, interaction with academic and other outside research organizations;
Assist the board and the management in the creation of valuable intellectual property (IP);
Review the status of non-infringement patent challenges;
Assist the board and the management in building and nurturing science in the organization to support its business strategy; and
Review the safety and quality of the company’s operations.

The committee met four times during the �nancial year. During the year, the committee also reviewed global manufacturing, R&D, product pipeline and digital transformation in R&D. It also apprised the board on key discussions and recommendations made at such meetings.

DR. BRUCE L A CARTER

Chairman, Science, Technology and Operations Committee

Place: USA Date: May 13, 2021

EXHIBIT 4

REPORT OF THE RISK MANAGEMENT COMMITTEE

To the shareholders of Dr. Reddy’s Laboratories Limited

The risk management committee of the board consists of four directors. Each member is an independent director as de�ned under Indian laws, Listing Regulations and the New York Stock Exchange Corporate Governance Guidelines. The committee operates under a written charter adopted by the board of directors and has been vested with all the powers necessary to e�ectively discharge its responsibilities.

The committee’s primary responsibilities are to:

Discuss with senior management the company’s enterprise-level risks and provide oversight as may be needed;
Ensure it is apprised of the most signi�cant risks and emerging issues, along with actions that the management is taking and how it is ensuring e�ective enterprise risk management (ERM); and
Review risk disclosure statements in any public documents or disclosures.
The committee met thrice during the �nancial year inter alia to review key initiatives and matters. The committee also recommended appropriate interventions from time to time. It also apprised the board

on key discussions and recommendations made at such meetings and shared information on enterprise-wide risks.

SHIKHA SHARMA

Chairperson, Risk Management Committee Place: Mumbai Date: May 13, 2021

EXHIBIT 5

REPORT OF THE STAKEHOLDERS' RELATIONSHIP COMMITTEE

To the shareholders of Dr. Reddy’s Laboratories Limited

The stakeholders’ relationship committee of the board consists of three directors, including two executive directors. The chairperson is an independent director as de�ned under Indian laws, Listing Regulations and the New York Stock Exchange Corporate Governance Guidelines. The committee operates under a written charter adopted by the board of directors, and has been vested with all the powers necessary to e�ectively discharge its responsibilities.

The committee's primary responsibilities

are to:

Review investor complaints and their redressal;
Review of queries received from investors;
Review of work done by the share transfer agent including their service standards;
Review corporate actions related to security holders; and
Review investor engagement plans/initiatives and movement in shareholdings and ownership structure.

The committee met four times during the �nancial year. In addition to the ful�lment of its normal responsibilities as described above, it also reviewed the functioning of the company’s secretarial and investor relations functions. It apprised the board on key discussions and recommendations made at such committee meetings.

KALPANA MORPARIA

Chairperson, Stakeholders' Relationship Committee

Place: Mumbai Date: May 13, 2021

EXHIBIT 6

REPORT OF THE CORPORATE SOCIAL RESPONSIBILITY (CSR) COMMITTEE

To the shareholders of Dr. Reddy’s Laboratories Limited

The corporate social responsibility (CSR) committee of the board consists of three directors, including two executive directors. The chairman is an independent director as de�ned under Indian laws, Listing Regulations and the New York Stock Exchange Corporate Governance

Guidelines. The committee operates under a written charter adopted by the board of directors, and has been vested with all the powers necessary to e�ectively discharge its responsibilities.

The committee's primary responsibilities are to:

Formulate, review and recommend to the board a CSR policy indicating the activities to be undertaken by the company as speci�ed in schedule �II of the Companies Act, 2013;
Recommend the amount of expenditure to be incurred on the initiatives as per the CSR policy;
Provide guidance on various CSR initiatives undertaken by the company and to monitor their progress including their impact; and
Monitor implementation and adherence to the CSR policy of the company from time to time.

During the �nancial year, the committee met four times. It also reviewed

and apprised the board on the CSR budget and spent, key discussions and recommendations made at such meetings and shared information on the overall CSR initiatives undertaken by the company.

PRASAD R MENON

Chairman, Corporate Social Responsibility Committee

Place: Hyderabad Date: May 13, 2021

EXHIBIT 7

CEO’S DECLARATION ON COMPLIANCE WITH CODE OF BUSINESS CONDUCT AND ETHICS

Dr. Reddy’s Laboratories Limited has adopted a code of business conduct and ethics (‘COBE’ and ‘the code’) which applies to all employees and directors of the company, its subsidiaries and a�liates. Under the code, it is the responsibility of all employees and directors to familiarize themselves with the code and comply with its standards.

I hereby certify that the board members and senior management personnel of Dr. Reddy’s have a�rmed compliance with the code of the company for the �nancial year 2020-21.

EREZ ISRAELI

Chief Executive O�cer

Place: Hyderabad Date: May 14, 2021

EXHIBIT 8

CEO AND CFO CERTIFICATE TO THE BOARD PURSUANT TO REGULATION 17

(8) OF THE LISTING REGULATIONS

We, Erez Israeli, chief executive o�cer, and Parag Agarwal, chief �nancial o�cer, to the

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

best of our knowledge and belief, hereby certify that:

A. We have reviewed the �nancial
statements including the cash �ow statement (standalone and consolidated) for the �nancial year ended March 31, 2021 and that these statements:
i. do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading; and
ii. together present a true and fair view of the company’s a�airs and are in compliance with existing accounting standards, applicable laws and regulations.
B. There are no transactions entered into
by the company during the year, which are fraudulent, illegal or violate the company’s code of business conduct and ethics.
C. We accept the responsibility for establishing and maintaining internal controls for �nancial reporting and that we have evaluated the e�ectiveness of internal control systems of the company pertaining to �nancial reporting and have disclosed to the auditors and the audit committee, de�ciencies in the design or operation of such internal controls, if any, of which we are aware and the steps we have taken or propose to take to address these de�ciencies.
D. We have disclosed, wherever applicable, to the auditors and the audit committee:
i. That there were no de�ciencies in the design or operations of internal controls that could adversely a�ect the company’s ability to record, process, summarize and report �nancial data including any corrective actions;
ii. that there are no material weaknesses in the internal controls over �nancial reporting;
iii. that there are no signi�cant changes in internal control over �nancial reporting during the year;
iv. all signi�cant changes in the accounting policies during the year, if any, and that the same have been disclosed in the notes to the �nancial statements; and
v. that there are no instances of signi�cant fraud of which we have become aware of and involvement therein of the management or an employee having a signi�cant role in the company’s internal control system over �nancial reporting.

EREZ ISRAELI

Chief Executive O�cer

PARAG AGARWAL

Chief Financial O�cer

Place: Hyderabad Date: May 14, 2021

INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE WITH THE CONDITIONS OF CORPORATE GOVERNANCE AS PER PROVISIONS OF CHAPTER IV OF SECURITIES AND EXCHANGE BOARD OF INDIA (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015, AS AMENDED

The Members of Dr. Reddy’s Laboratories Limited.

8-2-337, Road No. 3, Banjara Hills Hyderabad – 500 034
The Corporate Governance Report prepared by Dr. Reddy’s Laboratories Limited (hereinafter the “Company”), contains details as speci�ed in regulations 17 to 27, clauses (b) to (i) of sub – regulation (2) of regulation 46 and para C, D, and E of Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (“the Listing Regulations”) (‘Applicable criteria’) for the year ended March 31, 2021 as required by the Company for annual submission to the Stock exchange.

MANAGEMENT’S RESPONSIBILITY

The preparation of the Corporate Governance Report is the responsibility of the Management of the Company including the preparation and maintenance of all relevant supporting records and documents. This responsibility also includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the Corporate Governance Report.
The Management along with the Board of Directors are also responsible for ensuring that the Company complies with the conditions of Corporate Governance as stipulated in the Listing Regulations, issued by the Securities and Exchange Board of India.

AUDITOR’S RESPONSIBILITY

Pursuant to the requirements of the Listing Regulations, our responsibility is to provide a reasonable assurance in the form of an opinion whether the Company has complied with the conditions of Corporate Governance as speci�ed in the Listing Regulations.
We conducted our examination of the Corporate Governance Report in accordance with the Guidance Note on Reports or Certi�cates for Special Purposes and the Guidance Note on Certi�cation of Corporate Governance, both issued by the Institute of Chartered Accountants of India (“ICAI”).

The Guidance Note on Reports or Certi�cates for Special Purposes requires that we comply with the ethical requirements of the Code of Ethics issued by the Institute of Chartered Accountants of India.

We have complied with the relevant applicable requirements of the Standard on Quality Control (SQC) 1, Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements.
The procedures selected depend on the auditor’s judgement, including the assessment of the risks associated in compliance of the Corporate Governance Report with the applicable criteria. Summary of procedures performed include:
i. Read and understood the information prepared by the Company and included in its Corporate Governance Report;
ii. Obtained and veri�ed that the
- composition of the Board of Directors with respect to executive and nonexecutive directors has been met throughout the reporting period;

iii. Obtained and read the Register of Directors as on March 31, 2021 and veri�ed that at least one independent woman director was on the Board of Directors throughout the year;

iv. Obtained and read the minutes of the following committee meetings/other meetings held April 01, 2020 to March 31, 2021:
(a) Board of Directors;
(b) Audit committee;
(c) Annual General meeting (AGM);
(d) Nomination Governance and
- Compensation committee;
(e) Stakeholders Relationship committee;
(f) Science, Technology and Operation committee;
(g) Corporate Social Responsibility committee; and
(h) Risk management committee.
v. Obtained necessary declarations from the directors of the Company.
vi. Obtained and read the policy adopted by the Company for related party transactions.
vii. Obtained the schedule of related party transactions during the year and balances at the year end. Obtained and read the minutes of the audit committee meeting wherein such related party transactions have been pre-approved prior by the audit committee.

viii. Performed necessary inquiries with the management and also obtained necessary speci�c representations from management.

The above-mentioned procedures include examining evidence supporting the particulars in the Corporate Governance Report on a test basis. Further, our scope of work under this report did not involve us performing audit tests for the purposes of expressing an opinion on the fairness or accuracy of any of the �nancial information or the �nancial statements of the Company taken as a whole.

Dr. Reddy’s Laboratories Limited having CIN (Corporate Identi�cation Number) L85195TG1984PLC004507 and having registered o�ce at 8-2-337, Road No.3, Banjara Hills, Hyderabad-500034, Telangana (hereinafter referred to as ‘the Company’), produced before us by the Company for the purpose of issuing this Certi�cate, in accordance with Regulation 34(3) read with Schedule V Para-C clause (10)(i) of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Accordingly, we do not accept or assume any liability or any duty of care or for any other purpose or to any other party to whom it is shown or into whose hands it may come without our prior consent in writing. We have no responsibility to update this report for events and circumstances occurring after the date of this report.

For S.R. BATLIBOI & ASSOCIATES LLP

Chartered Accountants

OPINION

ICAI Firm Registration Number: 101049W/E300004

Based on the procedures performed by us, as referred in paragraph 7 above, and according to the information and explanations given to us, we are of the opinion that the Company has complied with the conditions of Corporate Governance as speci�ed in the Listing Regulations, as applicable for the year ended March 31, 2021, referred to in paragraph 4 above.

In our opinion and to the best of our information and according to the veri�cations (including Director Identi�cation Number (DIN) status at the portal www.mca.gov.in) as considered necessary and explanations furnished to us by the Company and its o�cers, we hereby certify that none of the Directors on the Board of the Company as stated below (in table) for the Financial Year ending on 31st March, 2021 have been debarred or disquali�ed from being appointed or continuing as Directors of Companies by the Securities and Exchange Board of India, Ministry of Corporate A�airs or any such other Statutory Authority.

per S BALASUBRAHMANYAM

Partner

Membership Number: 053315 UDIN: 21053315AAAABM6039

Place of Signature: Chennai Date: May 14, 2021

PRACTICING COMPANY SECRETARY’S CERTIFICATE OF NON-DISQUALIFICATION OF DIRECTORS

OTHER MATTERS AND RESTRICTION ON USE

This report is neither an assurance as to

(pursuant to Regulation 34(3) and Schedule V Para C clause (10)(i) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015)

the future viability of the Company nor the e�ciency or e�ectiveness with which the management has conducted the a�airs of the Company.

Ensuring the eligibility for the appointment/ continuity of every Director on the Board is the responsibility of the management of the Company. Our responsibility is to express an opinion on these, based on our veri�cation. This certi�cate is neither an assurance as to the future viability of the Company nor of the e�ciency or e�ectiveness with which the management has conducted the a�airs of the Company.

To,

This report is addressed to and provided The Members, to the members of the Company solely Dr. Reddy’s Laboratories Limited, for the purpose of enabling it to comply 8-2-337, Road No.3, Banjara Hills, with its obligations under the Listing Hyderabad-500034, Telangana. Regulations with reference to compliance We have examined the relevant registers, with the relevant regulations of Corporate records, forms, returns and disclosures Governance and should not be used by received from the Directors of any other person or for any other purpose.

FOR R & A ASSOCIATES

==> picture [457 x 26] intentionally omitted <==

----- Start of picture text -----

SL DATE OF APPOINTMENT
NO NAME OF DIRECTOR DIN IN COMPANY (G RAGHU BABU)
----- End of picture text -----

1.	Satish Reddy Kallam	00129701	January 18, 1993	FCS. NO.# 4448, C.P. # 2820
2.	Venkateswara Prasad Gunupati	00057433	April 8, 1986	UDIN: F004448C000279351
3.	Bruce Leonard Andrews Carter	02331774	July 21, 2008	Place: Hyderabad
4.	Kalpana Jaisingh Morparia	00046081	June 5, 2007	Date: May 11, 2021
5.	Sridar Arvamudhan Iyengar	00278512	August 22, 2011
6.	Bharat Narotam Doshi	00012541	May 11, 2016
7.	Prasad Raghava Menon	00005078	October 30, 2017
8.	Leo Puri	01764813	October 25, 2018
9.	Shikha Sanjaya Sharma	00043265	January 31, 2019
10.	Allan Grant Oberman	08393837	March 26, 2019

Note: Date of appointment of all the directors are original date of appointment as per MCA records.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

ADDITIONAL SHAREHOLDERS' INFORMATION

INDIAN RETAIL INVESTORS

E-VOTING DATES

CONTACT INFORMATION

Mr. Sandeep Poddar

The cut-o� date for the purpose of determining the shareholders eligible for e-voting is Tuesday, July 20, 2021.

REGISTERED AND CORPORATE OFFICE

Company Secretary Tel: +91-40-4900 2222 Fax: +91-40-4900 2999 E-mail ID: [email protected]

Dr. Reddy’s Laboratories Limited 8-2-337, Road No. 3, Banjara Hills Hyderabad 500 034, Telangana, India Tel: +91-40-4900 2900 Fax: +91-40-4900 2999 Website: www.drreddys.com CIN: L85195TG1984PLC004507 E-mail ID: [email protected]

The e-voting commences on Saturday, July 24, 2021, at 9.00 am (IST) and ends on Tuesday, July 27, 2021, at 5.00 pm (IST).

ANNUAL GENERAL MEETING

Date: Wednesday, July 28, 2021 Time: 9.00 am (IST)

INTERNATIONAL SECURITIES IDENTIFICATION NUMBER (ISIN)

Mode: Through Video Conference (VC) facility/Other Audio Visual Means (OAVM)

ISIN is a unique identification number of a traded scrip. This number has to be quoted in each transaction relating to the dematerialized securities of the company. The ISIN number of our equity shares is INE089A01023 .

REPRESENTING OFFICERS

Correspondence to the following o�cers may be addressed at the registered and corporate o�ce of the company.

Ministry of Corporate A�airs (MCA) vide circular no. 14/2020 dated April 8, 2020, general circular no. 17/2020 dated April 13, 2020, circular no. 20/2020 dated May 5, 2020, and general circular no. 02/2021 dated January 13, 2021, has enabled convening of annual general meeting (AGM) through VC/OAVM without requiring the shareholders to physically assemble at a common venue.

COMPLIANCE OFFICER UNDER SECURITIES AND EXCHANGE BOARD OF INDIA (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015 AND NODAL OFFICER UNDER IEPF Mr. Sandeep Poddar Company Secretary Tel: +91-40-4900 2222 Fax: +91-40-4900 2999 E-mail ID: [email protected]

CUSIP NUMBER FOR ADRs

The committee on uniform security identification procedures (CUSIP) of the American Bankers Association has developed a numbering system for securities. A CUSIP number uniquely identifies a security and its issuer and this is recognized globally by organizations adhering to standards issued by the International Securities Organization. Our ADRs carry the CUSIP no. 256135203 .

Shareholders can attend the proceedings of AGM by logging on the NSDL e-voting system at www.evoting.nsdl.com

DIVIDEND

ADR INVESTORS/INSTITUTIONAL INVESTORS/FINANCIAL ANALYSTS

The board of directors of the company has proposed a dividend of 25/- on equity share ₹ of face value of 5/- each. The dividend, if ₹ declared by the shareholders at the 37th AGM scheduled to be held on July 28, 2021, will be paid on or after August 2, 2021.

Mr. Amit Agarwal Head - Investor Relations Tel: +91-40-4900 2135 Fax: +91-40-4900 2999 E-mail ID: [email protected]

DESCRIPTION OF VOTING RIGHTS

All equity shares issued by the company carry equal voting rights.

MEDIA

PERSONS HOLDING OVER 1% OF THE SHARES

BOOK CLOSURE DATES

Ms. Archana Bhaskar Chief Human Resource O�cer and Head - Corporate Communications Tel: +91-40-4900 2222 Fax: +91-40-4900 2999 E-mail ID: [email protected]

The dates of book closure are from Tuesday, July 13, 2021, to Thursday, July 15, 2021, (both days inclusive) for the purpose of payment of dividend.

Table 1 gives the names of the persons who hold more than 1% of equity shares of the company as on March 31, 2021.

FINANCIAL CALENDAR

TENTATIVE CALENDAR FOR DECLARATION OF FINANCIAL RESULTS IN FY2022

For the quarter ending June 30, 2021	Last week of July 2021
For the quarter and half-year ending September 30, 2021	Last week of October 2021
For the quarter and nine months ending December 31, 2021	Last week of January 2022
For the year ending March 31, 2022	Third week of May 2022
AGM for the year ending March 31, 2022	Last week of July 2022

LISTING ON STOCK EXCHANGES AND STOCK CODES

DETAILS OF STOCK EXCHANGE	STOCK CODE
	EQUITY SHARES ADRs
BSE Limited (BSE), P J Towers, Dalal Street, Fort, Mumbai 400 001, India	�� -
National Stock Exchange of India Limited (NSE), Exchange Plaza, C-1, Block G, Bandra Kurla Complex,Bandra(E),Mumbai 400 051,India	DRREDDY-EQ -
New York Stock Exchange Inc. (NYSE), 11, Wall Street, New York, 10005, USA	- RDY
NSE IFSC Limited, Unit No. 1201, Brigade International Financial Centre, 12th Floor, Block-14,Road 1C,Zone-1,GIFT SEZ,Gandhinagar,Gujarat 382355,India	- DRREDDY

Notes:

1. Listing fees to the Indian stock exchanges for listing of equity shares have been paid for the FY2022.

2. Listing fees to the NYSE for listing of ADRs has been paid for the CY2021.

|(1)
TABLE 1| PERSONS HOLDING 1% OR MORE OF THE EQUITY SHARES IN THE COMPANY AS ON MARCH 31, 2021|(1)
TABLE 1| PERSONS HOLDING 1% OR MORE OF THE EQUITY SHARES IN THE COMPANY AS ON MARCH 31, 2021|(1)
TABLE 1| PERSONS HOLDING 1% OR MORE OF THE EQUITY SHARES IN THE COMPANY AS ON MARCH 31, 2021|
|---|---|---|
|NAME|NO. OF SHARES|%|
|Dr. Reddy's Holdings Limited|��|��|
|Mitsubishi UFJ Financial Group, Stewart Investors & their associates|��|��|
|Blackrock and their associates|��|��|
|SBI Mutual Fund and their associates|��|��|
|Aditya Birla Sun Life Mutual Fund and their associates|��|��|
|Mirae Asset Mutual Fund and their associates|��|��|
|Government of Singapore|��|��|
|ICICI Prudential Life Insurance CompanyLimited|��|��|
|NPS Trust and their associates|��|��|
|DSP Mutual Fund and their associates|��|��|
|UTI Mutual Fund and their associates|��|��|

(1) Does not include ADR holding.

TABLE 2 | EQUITY HISTORY OF THE COMPANY SINCE INCORPORATION OF THE COMPANY UP TO MARCH 31, 2021

DATE/ FINANCIAL YEAR	PARTICULARS ISSUED CUMULATIVE CANCELLED/ EXTINGUISHED
��-Feb-��	�� Issue topromoters ��
��-Nov-��	�� Issue topromoters ��
��-Jun-��	�� Issue topromoters ��
��-Aug-��	�� Issue topublic ��
��-Sep-��	Forfeiture of 100 shares �� ��
��-Aug-��	�� Rights issue ��
��-Dec-��	�� Bonus issue(1:2) ��
��-Jan-��	�� Bonus issue(1:1) ��
��-May-��	�� Bonus issue(2:1) ��
��-May-��	�� Issue topromoters ��
��-Jul-��	�� GDR underlyingequityshares ��
��-Sep-��	�� Standard EquityFund Limited shareholders on merger ��
��-Jan-��	�� Cheminor Drugs Limited shareholders on merger ��
��-Jan-��	Cancellation of shares held in Cheminor Drugs Limited on merger �� ��
��-Apr-��	�� ADR underlyingequityshares ��
��-Jul-��	GDR conversion into ADR ��
��-Sep-��	�� American Remedies Limited shareholders on merger ��
��-Oct-��	Sub-division of one equityshare of 10/- into two equityshares of 5/- ₹ ₹ ��
��-��	�� Allotmentpursuant to exercise of stock options ��
��-��	�� Allotmentpursuant to exercise of stock options ��
��-��	�� Allotmentpursuant to exercise of stock options ��
��-Aug-��	�� Bonus issue(1:1) ��
��-Nov-��	�� ADR underlyingequityshares ��
��-Nov-��	�� ADR underlyingequityshares(green shoe option) ��
��-��	�� Allotmentpursuant to exercise of stock options ��
��-��	�� Allotmentpursuant to exercise of stock options ��
��-��	�� Allotmentpursuant to exercise of stock options ��
��-��	�� Allotmentpursuant to exercise of stock options ��
��-��	�� Allotmentpursuant to exercise of stock options ��
��-��	�� Allotmentpursuant to exercise of stock options ��
��-��	�� Allotmentpursuant to exercise of stock options ��
��-��	�� Allotmentpursuant to exercise of stock options ��
��-��	�� Allotmentpursuant to exercise of stock options ��
��-��	�� Allotmentpursuant to exercise of stock options ��
��-��	Buyback of equityshares �� ��
	�� Allotmentpursuant to exercise of stock options ��
��-��	�� Allotmentpursuant to exercise of stock options ��
��-��	�� Allotmentpursuant to exercise of stock options ��
��-��	�� Allotmentpursuant to exercise of stock options ��
��-��	�� Allotmentpursuant to exercise of stock options ��

3. The stock code on Reuters is REDY.NS and on Bloomberg is DRRD:IN.

FY2021 represents �scal year 2020�21� from April 1� 2020� to �arch 31� 2021� and analogously for FY2020 and other such labeled years.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

CHART 1 | MOVEMENT OF THE COMPANY’S SHARE PRICE ON NSE AND NIFTY 50 INDEX

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190
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120
110
100
DR. REDDY'S SHARE PRICE NIFTY 50 INDEX
APR-20 MAY-20 JUN-20 JUL-20 AUG-20 SEP-20 OCT-20 NOV-20 DEC-20 JAN-21 FEB-21 MAR-21
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Notes:

1. All values are indexed to 100 as on April 1, 2020.

2. Nifty 50 is a diversified 50 stock index accounting for 13 sectors of the Indian economy. Nifty 50 is owned and managed by NSE Indices Limited, India’s specialized company focused upon the index as a core product.

CHART 2 | MOVEMENT OF THE COMPANY’S ADR PRICES AND S&P ADR INDEX

==> picture [336 x 404] intentionally omitted <==

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190
180
170
160
150
140
130
120
110
100
DR. REDDY'S SHARE PRICE S&P ADR INDEX
Notes:
1. All values are indexed to 100 as on April 1, 2020.
2. The S&P ADR Index is based on the non-US stocks comprising the S&P Global 1200 traded in the US exchanges. For details
of the methodology used to compute this index please visit www.adr.com.
CHART 3 | PREMIUM IN PERCENT ON COMPANY’S ADR TRADED
ON NYSE VERSUS SHARE PRICE QUOTED AT NSE
4
2
0
-2
-4
-6
APR-20 MAY-20 JUN-20 JUL-20 AUG-20 SEP-20 OCT-20 NOV-20 DEC-20 JAN-21 FEB-21 MAR-21
APR-20 MAY-20 JUN-20 JUL-20 AUG-20 SEP-20 OCT-20 NOV-20 DEC-20 JAN-21 FEB-21 MAR-21
----- End of picture text -----

==> picture [232 x 6] intentionally omitted <==

----- Start of picture text -----

Note: Premium has been calculated on a daily basis using RBI reference exchange rate.
----- End of picture text -----

DEPOSITORIES

OVERSEAS DEPOSITORY OF ADRs

J.P. Morgan Chase & Co. P.O. Box 64504, St. Paul MN 55164-0504, USA

Tel: +1-651 453 2128

INDIAN CUSTODIAN OF ADRs

J.P. Morgan Chase Bank NA

India Sub-Custody, 6th Floor Paradigm B Wing, Mindspace, Malad (West) Mumbai 400 064, Maharashtra, India Tel: +91-22-6649 2617 Fax: +91-22-6649 2509 E-mail ID: india.custody.client.service@ jpmorgan.com

REGISTRAR AND TRANSFER AGENT (RTA) FOR EQUITY SHARES

(COMMON AGENCY FOR DEMAT AND PHYSICAL SHARES)

Bigshare Services Private Limited CIN: U99999MH1994PTC076534 306, Right Wing, 3rd Floor, Amrutha Ville Opp. Yashoda Hospital, Rajbhavan Road Hyderabad 500 082, Telangana, India Tel: +91-40-2337 4967 Fax: +91-40-2337 0295 E-mail ID: [email protected]

EQUITY HISTORY OF THE COMPANY

Table 2 lists the equity history of the company since the incorporation of the company up to March 31, 2021.

STOCK DATA

Table 3 gives the monthly high/low and the total number of shares/ADRs traded on monthly basis on the BSE, NSE and the NYSE during FY2021.

Chart 1 gives the movement of company’s share price on NSE vis-à-vis NIFTY 50 Index during FY2021.

Chart 2 gives the movement of company’s ADR price on NYSE vis-à-vis S&P ADR Index during FY2021.

Chart 3 gives the premium in percent on company’s ADR traded on NYSE compared to the share price quoted at NSE during FY2021.

SHAREHOLDING PATTERN AS ON MARCH 31, 2021

Tables 4 and 5 gives the data on shareholding classi�ed on the basis of category and distribution of ownership.

DIVIDEND HISTORY

Chart 4 shows the dividend history of the company from the FY2011 to FY2021.

NOMINATION FACILITY

Shareholders holding physical shares may, if they so desire, send their nominations in form SH-13 of the Companies (Share Capital and Debentures) Rules, 2015, as amended,

to the RTA of the company. Further, shareholders may cancel/vary their nomination already made, in form SH-14 by sending it to the RTA. Those holding shares in dematerialized form may contact their respective depository participant (DP) to avail the nomination facility.

be issued only in demat mode. Therefore, members holding shares in physical form are requested to consider dematerilising their holdings, for their own bene�t.

demat account details including client master list, either to the company or to the RTA. On receipt and veri�cation of these share certi�cate(s), the shares will get credited to the demat account of the shareholders.

Pursuant to the provisions of Section 46 of the Companies Act, 2013 ("the Act"), read with Rule 6(2)(a) of the Companies (Share Capital and Debentures) Rules, 2014, duplicate share certificates, in lieu of those that are lost or destroyed, should only be issued with the prior consent of the board. Therefore, based on circular no. 19/2014 dated June 12, 2014, issued by the Ministry of Corporate A�airs, and consequent to delegation of power of issuing duplicate share certi�cates by the board of directors to the stakeholders' relationship committee, the committee attends to such requests at regular intervals.

SHARE TRANSFER SYSTEM

EXCHANGE OF SHARE CERTIFICATES

All queries and requests relating to share transfers/transmissions may be addressed to our RTA.

Standard Equity Fund Limited (SEFL), Cheminor Drugs Limited (CDL) and American Remedies Limited (ARL) merged with Dr. Reddy’s Laboratories Limited in the years 1995, 2000 and 2001 respectively. Also, during the year 2001, the company sub-divided the face value of its equity shares of 10/- into 5/-. Hence, the share ₹ ₹ certificates of the above three companies and old share certificates of 10/- face ₹ value are no longer valid.

To expedite the process of share transfers, the company secretary has been delegated with the power to attend to the share transfer formalities at regular intervals.

In terms of Regulation 40(1) of SEBI Listing Regulations, as amended from time to time, members may please note that shares can be transferred only in dematerialised form with e�ect from April 1, 2019, except in case of request received for transmission or transposition of shares. Further, SEBI has �xed March 31, 2021 as the cut-o� date for re-lodgement of transfer deeds and the shares that are re-lodged for transfer shall

We periodically review the operations of our RTA. The number of shares transferred/ transmitted in physical form during the last two financial years are given in Table 6 .

Shareholders who are still holding the share certi�cates of the above three companies or of 10/- face value, are requested to submit ₹ those share certi�cates along with their

|TABLE 3 | HIGH, LOW AND NUMBER OF SHARES|TABLE 3 | HIGH, LOW AND NUMBER OF SHARES|TRADED PER MONTH ON BSE, NSE AND NYSE DURING FY2021|TRADED PER MONTH ON BSE, NSE AND NYSE DURING FY2021|
|---|---|---|---|
|MONTH|BSE
HIGH
(**)** **LOW** **(**)
NO. OF
SHARES|NSE
HIGH
(**)** **LOW** **(**)
NO. OF
SHARES|NYSE
HIGH
(US$)
LOW
(US$)
NO. OF
(1)
ADRs|
|Apr-20
��
��
��
��
��
��|||��
��
��|
|May-20
��
��
��
��
��
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��
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|Jun-20
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��
��
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��
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|Jul-20
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��
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|Aug-20
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��
��
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��
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|Sep-20
��
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|Oct-20
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��
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|Nov-20
��
��
��
��
��
��|||��
��
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|Dec-20
��
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��
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��
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|Jan-21
��
��
��
��
��
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��
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|Feb-21
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|Mar-21
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(1) One ADR is equal to one equity share. There was no trading in the company’s ADRs on NSE IFSC except 20 ADRs were traded on December 9, 2020.

TABLE 4 | DISTRIBUTION OF SHAREHOLDING ON THE BASIS OF CATEGORY

CATEGORY	AS ON MARCH 31, 2021 NO. OF SHARES % OF TOTAL	AS ON MARCH 31, 2020 % CHANGE NO. OF SHARES % OF TOTAL
(1) Promoters’ Holding
- Individuals/HUF	�� ��	�� (��) ��
- Companies �� ��		�� (��) ��
�� Sub-total (��) �� �� ��
�� Indian �nancial institutions (��) �� �� ��
�� Banks (��) �� �� ��
�� Mutual funds/UTI �� �� �� ��
Foreign holdings
�� - Foreign institutional investors/foreignportfolio investors (��) �� �� ��
�� - Non resident Indians �� �� �� ��
�� - ADRs (��) �� �� ��
�� - Foreign nationals - �� �� ��
�� Sub-total (��) �� �� ��
�� Indianpublic and corporates �� �� �� ��
�� Total - �� �� ��

(1) Change in percentage and number of shares are due to ESOP allotment and purchase of 2,600 shares by Mr. G Sharath Chandra Reddy, respectively.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

DEMATERIALIZATION OF SHARES

CHART 4 | DIVIDEND HISTORY FY2011-21 (%)

==> picture [328 x 208] intentionally omitted <==

----- Start of picture text -----

FY2021 PROPOSED 500%
FY2020 500%
FY2019 400%
FY2018 400%
FY2017 400%
FY2016 400%
FY2015 400%
FY2014 360%
FY2013 300%
FY2012 275%
FY2011 225%
----- End of picture text -----

The company’s scrip forms part of the compulsory dematerialization segment for all investors with e�ect from February 15, 1999. To facilitate easy access of the dematerialized system to the investors, we have signed up with both the depositories in India — the National Securities Depository Limited (NSDL) and the Central Depository Services (India) Limited (CDSL) and have established connectivity with the depositories through our RTA.

Chart 5 gives the breakup of dematerialized shares and shares in physical form as on March 31, 2021, compared with March 31, 2020. Dematerialization of shares is done through RTA and the dematerialization process is generally completed within 10 days from the date of receipt of a valid dematerialization request along with the relevant documents.

SECRETARIAL AUDIT

Pursuant to Section 204 of the Act, and corresponding Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a secretarial audit for FY2021 was carried out by M/s. Makarand M. Joshi & Co., practicing company secretaries, Mumbai, India (certificate of practice no. 3663) having more than 21 years of experience. The secretarial audit report forms a part of this annual report.

==> picture [335 x 199] intentionally omitted <==

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CHART 5 | BREAK UP OF SHARES IN ELECTRONIC AND PHYSICAL
FORM AS ON MARCH 31, 2021 AND MARCH 31, 2020 (%)
95.51
97.09
4.14
2.54
0.35 2021
0.37 2020
NSDL
ELECTRONIC -
CDSL
ELECTRONIC -
PHYSICAL
----- End of picture text -----

In accordance with the SEBI Circular dated February 8, 2019, the company has also obtained a Secretarial Compliance Report from M/s. Makarand M. Joshi & Co. confirming compliances with all applicable SEBI Regulations, Circulars and guidelines for the year ended March 31, 2021.

|TABLE 5 | DISTRIBUTION|OF EQUITY SHAREHOLDING|OF EQUITY SHAREHOLDING|ACCORDING TO|OWNERSHIP AS ON|MARCH 31, 2021|
|---|---|---|---|---|---|
|SHARES HELD||NO. OF
SHAREHOLDERS|% OF
SHAREHOLDERS|NO. OF
SHARES HELD|% OF
SHAREHOLDING|
|1 – 5,000||��|��|��|��|
|5,001 – 10,000||��|��|��|��|
|10,001 – 20,000||��|��|��|��|
|20,001 – 30,000||��|��|��|��|
|30,001 – 40,000||��|��|��|��|
|40,001 – 50,000||��|��|��|��|
|50,001 – 100,000||��|��|��|��|
|100,001 & above||��|��|��|��|
|Total (excluding ADRs)||��|��|��|��|
|
Equity shares underlying ADRs|(1)|�|��|��|��|
|Total||��|��|��|��|

(1) Held b� be�e��l ��e�� de ��d��

facility to all its shareholders, to enable them to cast their votes electronically. The company engages the services of NSDL for the purpose of providing such e-voting facility to all its shareholders. The shareholders have the option to vote either by physical ballot or e-voting.

In addition to the above, for each quarter of FY2021, a qualified practicing company secretary carried out the reconciliation of share capital audit to reconcile the total admitted share capital held with NSDL and CDSL and the total issued and listed share capital. The reports confirm that the total issued/paid-up share capital is in agreement with total number of shares in physical form and dematerialized form held with NSDL and CDSL.

The company dispatches the postal ballot notices and forms along with self-addressed business reply envelopes to its shareholders whose names appear on the register of members/list of beneficiaries as on the cuto� date. The postal ballot notice is sent to the shareholders in electronic form to the e- mail IDs registered with the DPs/RTA.

OUTSTANDING ADRs AND THEIR IMPACT ON EQUITY SHARES

Our ADRs are traded in the US on New York Stock Exchange, Inc. (NYSE) under the ticker symbol ‘RDY’ and also listed in India on NSE IFSC Ltd. under the ticker symbol ‘DRREDDY’. Each ADR is represented by one equity share. As on March 31, 2021, there were approximately 63 registered holders and 15,257 bene�cial shareholders of ADRs evidencing 20,299,272 ADRs.

Voting rights are reckoned on the paid-up value of the shares registered in the names of the shareholders as on the cut- o� date. Shareholders desiring to exercise their votes by physical postal ballot forms are requested to return the forms duly completed and signed, to the scrutinizer on or before the closing of the voting period. Shareholders desiring to exercise their votes by electronic mode are requested to vote before close of business hours on the last day of e-voting. The last date specified by the company for receipt of duly completed postal ballot forms or e-voting is deemed to be the date of passing of the resolution.

QUERIES AND REQUESTS RECEIVED FROM SHAREHOLDERS IN FY2021

Table 7 gives details of the nature of shareholder queries received and replied to during FY2021. Pending requests as on March 31, 2021, were under process of statutory formalities and were subsequently attended to.

The scrutinizer submits his report to the chairman of the board of directors or any person authorized by him, after the completion of scrutiny, and the consolidated results of the voting by postal ballot are then announced. The results are also displayed on the company’s website: www.drreddys.com, besides being communicated to the stock exchanges, depository and RTA.

DATE AND VENUE OF LAST THREE ANNUAL GENERAL MEETINGS

Table 8 gives the details of date, time, location and business transacted through special resolutions at last three annual general meetings.

DISCLOSURE ON LEGAL PROCEEDINGS PERTAINING TO SHARES

POSTAL BALLOT DETAILS

During the year, the company did not propose any special resolution through postal ballot.

There are three pending cases relating to disputes over title of the shares of the company, in which the company has been made a party. These cases, however, are not material in nature.

PROPOSAL TO CONDUCT POSTAL BALLOT FOR ANY MATTER IN THE ENSUING ANNUAL GENERAL MEETING

NATIONAL ELECTRONIC

There is no proposal to conduct postal ballot for any matter in the ensuing annual general meeting.

CLEARING SERVICE (NECS) FACILITY FOR REMITTANCE OF

DIVIDEND ELECTRONICALLY

The company provides the facility for remittance of dividend to shareholders through NECS. Under this facility, shareholders can receive dividends electronically by way of direct credit to their bank account. With this service, problems such as loss of dividend warrants during

PROCEDURE FOR POSTAL BALLOT

In compliance with the Listing Regulations and Sections 108, 110 and other applicable provisions of the Act, read with applicable Rules, the company provides e-voting

TABLE 6 | SHARES TRANSFERRED/TRANSMITTED IN PHYSICAL FORM

SHARES TRANSFERRED/TRANSMITTED IN PHYSICAL FORM	FY2021	FY2020
Number of transfers*/transmissions	�	��
Number of shares	��	��

postal transit/fraudulent encashment are avoided. This also expedites credit of dividend directly to the shareholder’s account as compared to the payment through physical dividend warrant. Shareholders are advised to refer to the Investor Handbook on the company’s website: www.drreddys.com, for further details on how to avail this facility.

UNCLAIMED DIVIDENDS/ INTEREST

Pursuant to Section 125 of the Act, unclaimed dividend amounts for the FY2013 of 7,676,380/- and bonus debentures ₹ redemption amount along with third and final year’s interest on debentures of ₹ 20,259,899/- has been transferred to the general revenue account of the Central Government/Investor Education and Protection Fund (IEPF).

The dividends for FY2014 which are unclaimed for seven years will be transferred to IEPF. Table 9 gives the transfer dates in this regard.

Bonus debentures, issued by the company in the year 2011, matured on March 24, 2014. These were redeemed for cash at a face value of 5/- each along with third and final ₹ year’s interest.

Shareholders who have not claimed the dividend(s) amount are, therefore, requested to do so before they are statutorily transferred to the IEPF.

The shareholders who have not cashed their dividend are requested to immediately approach the company's RTA, for making payment through electronic bank transfer. In cases where bank details for making electronic payment are not available, or electronic payment instructions have failed or rejected by the bank, duplicate warrant(s)/demand draft(s) may be issued in lieu of the original warrant(s)/demand draft(s).

The information on unclaimed dividend/interest is available on the company’s website: www.drreddys.com

TRANSFER OF UNDERLYING SHARES TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Pursuant to Section 124(6 ) of the Act, read with Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, as amended, all shares in respect of which dividend has not been paid or claimed for seven consecutive years or more shall be transferred to IEPF.

During the year, the company has transferred (transmitted) 12,824 equity shares held under 96 folios on which dividend has not been paid or claimed for seven consecutive years to IEPF.

*Transfers processed during FY2021 were all lodged within prescribed time.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

Details of equity shares liable to be transferred to IEPF are available on the company’s website: www.drreddys.com

The company has sent individual notices to the latest available addresses of the shareholders, whose dividends are lying unpaid/unclaimed for FY2014 along with subsequent seven consecutive years’ dividend, advising them to claim the dividends on or before August 18, 2021. It has also published a notice in newspapers inviting the shareholders’ attention.

dividends. If the shareholders do not claim the unpaid or unclaimed dividends and provide the requisite documents on or before August 18, 2021, the shares held by them are liable to be transferred to IEPF.

DEALING WITH SECURITIES WHICH HAVE REMAINED UNCLAIMED

Any person, whose shares and unpaid/ unclaimed dividends get transferred to the IEPF may claim the shares and unpaid/unclaimed dividends from the IEPF Authority in accordance with the prescribed procedure and submission of relevant documents procedure.

Pursuant to Regulation 39(4) of Listing Regulations read with Schedule VI of the said Regulations, the company has dematerialized shares which have been returned undelivered by postal authorities and shares lying unclaimed after subdivision.

Shareholders who have not claimed their dividends since 2013-14 can write to the company’s RTA or at the registered o�ce of the company on or before August 18, 2021, for making a valid claim for the unclaimed

TABLE 7 | SHAREHOLDER QUERIES AND PENDING COMPLAINTS RECEIVED AND REPLIED TO IN FY2021

SL. NO.	NATURE	OPENING BALANCE	RECEIVED	REPLIED	CLOSING BALANCE*
�	Change of address	-	-	-	-
�	Request for revalidation and issue of duplicate dividend warrants	-	��	��	-
�	Request for sub-division of shares (exchange)	�	��	��	-
�	Share transfers	-	-	-	-
�	Transmission of shares	-	�	�	-
�	Split/consolidation of shares	-	-	-	-
�	Stop transfer	-	��	��	-
�	Power of attorney registration	-	-	-	-
�	Change of bank mandate	-	��	��	-
��	Correction of name	-	-	-	-
��	Dematerialization of shares	-	��	��	-
��	Rematerialization of shares	-	-	-	-
��	Issue of duplicate share certi�cates	-	��	��	�
��	Requests received from shareholders	-	��	��	-
��	Complaints received through stock exchanges/SEBI etc.	-	�	�	-
��	Claim of unclaimed share certi�cates	-	��	��	-

* The company has since attended all the shareholders’ requests and queries which were pending as on March 31, 2021. The above table does not include shareholders’ disputes, which are pending in various courts.

TABLE 8 | LAST THREE ANNUAL GENERAL MEETINGS

YEAR	DATE AND TIME	LOCATION	SPECIAL RESOLUTION(S) PASSED
2017-18	July 27, 2018	The Ballroom,	Ÿ Approval for reappointment of Mr. Anupam Puri (DIN: 00209113) as an
	at 9.30 am (IST)	Hotel Park Hyatt,	independent director for a second term of one year;
		Road No. 2, Banjara Hills,	Ÿ Approval for Dr. Reddy’s Employees Stock Option Scheme, 2018 (2018
		Hyderabad 500 034	ESOS);
			Ÿ Grant of stock options to the employees of the subsidiary companies
			under 2018 ESOS;
			Ÿ Implementation of 2018 ESOS through Dr. Reddy’s Employees ESOS Trust
			(Trust); and
			Ÿ Authorization to the Trust for secondary acquisition of equity shares for
			the purpose of stock options.
2018-19	July 30, 2019	The Ballroom,	Ÿ Approval for reappointment of Mr. Sridar Iyengar (DIN: 00278512) as an
	at 9.30 am (IST)	Hotel Park Hyatt,	independent director for a second term of four years; and
		Road No. 2, Banjara Hills,	Ÿ Approval for reappointment of Ms. Kalpana Morparia (DIN: 00046081) as
		Hyderabad 500 034	an independent director for a second term of �ve years.
2019-20	July 30, 2020	Held through ideo V	Ÿ Continuation of directorship of Mr. Prasad R Menon (DIN: 00005078),
	at 9.00 am (IST)	onferencing (VC)/Other C	independent director, in terms of Regulations 17(1A) of the SEBI (Listing
		Audio Visual Means (OAVM)	Obligations and Disclosure Requirements) Regulations, 2015.

The dematerialized shares are held in an ‘unclaimed suspense account’ opened with a depositary participant associated with NSDL.

NON-COMPLIANCE ON MATTERS RELATING TO CAPITAL MARKETS

PROCEDURE FOR CONVENING AN EXTRAORDINARY GENERAL MEETING

There has been no instance of noncompliance by the company on matters relating to capital markets for the last three years.

Pursuant to the provisions of Section 100 of the Act, Companies (Management and Administration) Rules, 2014 and Secretarial Standard on General Meeting (SS-2), an extraordinary general meeting (EGM) of the company may be called by a requisition made by shareholders, either in writing or through electronic mode, at least 21 clear days prior to the proposed date of such a meeting. Such a requisition, signed by the requisitionists, shall set out the matters of consideration for which the meeting is to be called and it shall be sent to the registered o�ce of the company.

Any corporate benefits accruing on such compliance by the company on matters shares, viz. bonus shares, split etc., shall relating to capital markets for the last three also be credited to an unclaimed suspense years. account, for a period of seven years and thereafter shall be transferred by the FINANCIAL RESULTS ON THE company to IEPF, in accordance with provisions of Section 124(5) and (6) of the COMPANY’S WEBSITE Act, and Rules made thereunder. The quarterly, half-yearly and annual results

The quarterly, half-yearly and annual results of the company are displayed on its website: www.drreddys.com. Presentations to analysts, as and when made, are immediately placed on the website for the benefit of the shareholders and public at large.

Table 10 gives the details of the unclaimed shares as on March 31, 2021, held by the company.

The voting rights on such unclaimed shares shall remain frozen till the rightful owner claims these shares.

Shareholders entitled to make requisition for an EGM regarding any matter, shall be those who hold not less than one tenth of the paid-up share capital of the company on the date of receipt of the requisition.

Besides, the company also regularly provides relevant information to the stock exchanges as per the requirements of the Listing Regulations.

QUERIES AT ANNUAL GENERAL MEETING

Shareholders desiring any information with regard to the accounts are requested to INFORMATION ON DIRECTOR write to the company at e-mail ID: PROPOSED FOR APPOINTMENT/ [email protected] at an early date so as REAPPOINTMENT/ to enable the management to keep the information ready. The queries relating to CONTINUATION operational and financial performance may The information is given in the chapter on be raised at the AGM. Corporate Governance and Notice of 37th AGM .

INFORMATION ON DIRECTOR PROPOSED FOR APPOINTMENT/

PROCEDURE FOR NOMINATING A DIRECTOR ON THE BOARD

Pursuant to section 160 of the Act, any person, or some shareholders intending to propose such person for appointment as a director of the company, shall deposit a signed notice signifying his/her candidature to the o�ce of a director, at the registered

TABLE 9 | DATES OF TRANSFER OF UNCLAIMED DIVIDEND ON SHARES/INTEREST AND REDEMPTION AMOUNT ON BONUS DEBENTURES

FINANCIAL YEAR	TYPE OF PAYMENT	DATE OF DECLARATION/ PAYMENT	AMOUNT OUTSTANDING AS ON MARCH 31, 2021	DUE FOR TRANSFER ON
��-��	Debenture redemption and 3rd & fnal year interest*	��-Mar-��	��	��-Mar-��
��-��	Final dividend	��-�ul-��	��	��-Aug-��
��-��	Final dividend	��-�ul-��	��	��-Aug-��
��-��	Final dividend	��-�ul-��	��	��-Aug-��
��-��	Final dividend	��-�ul-��	��	��-Aug-��
��-��	Final dividend	��-�ul-��	��	��-Aug-��
��-��	Final dividend	��-�ul-��	��	�-Sep-��
��-��	Final dividend	��-�ul-��	��	��-Aug-��

*The unpaid debenture redemption and 3rd & �nal �ear interest amount �as transferred to �� ithin a period of 30 da�s from the due date on April �, 202�.

|TABLE|10||UNCLAIMED SHARES AS ON MARCH 31, 2021|||
|---|---|---|---|---|
|SL.
NO.||PARTICULARS|NO. OF
FOLIOS|NO. OF
SHARES|
|i�||No. of shareholders and the outstandingno. of unclaimed shares at the beginningof theyear*|��|��|
|ii�||No. of shareholders who approached to claim the unclaimed shares duringtheyear|��|��|
|iii�||No. of shareholders who claimed and weregiven the unclaimed shares duringtheyear|��|��|
|iv�||Aggregate no. of shareholders and the outstanding no. of unclaimed shares at the end of the year|��|��|

*This includes 2,040 shares under three folios dematerialized in April 2020, in the unclaimed suspense account.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

o�ce of the company, not less than 14 days before the shareholders’ meeting.

COMMODITY PRICE RISK OR FOREIGN EXCHANGE RISK

Appropriate disclosure on commodity price or foreign exchange risk and hedging activities is given in note 2.28 of the notes to the standalone �nancial statement.

All directors’ nominations are considered by the nomination, governance and compensation committee of the company’s board of directors, which entirely consists of independent directors.

CERTIFICATE FROM THE

INFORMATION ON MEMORANDUM AND ARTICLES OF ASSOCIATION

COMPANY SECRETARY

I, Sandeep Poddar, company secretary of Dr. Reddy’s Laboratories Limited, hereby con�rm that as on date of this certi�cate, the company has:

The company’s memorandum and articles of association are available on its website: www.drreddys.com.

(a) Complied with the provisions of applicable rules and regulations framed by the Securities and Exchange Board of India and the Companies Act, 2013 ("the Act"), as amended, e�ective as on date, and applicable to the company;

INVESTOR HANDBOOK/ SHAREHOLDER SERVICES

Please refer to the Investor Handbook on the company’s website: www.drreddys.com, for rights of shareholders, procedures related to transfer/dematerialization/ rematerialization/transmission of shares, nomination in respect of shareholding, change of address, unclaimed/unpaid dividend, shares underlying unpaid/unclaimed dividend, refund from IEPF, loss/misplacement of certificate(s), sub-division of shares, share certificates of amalgamated companies, power of attorney, registration of e-mail ID and registration of PAN/Bank details.

(b) Maintained all books of accounts and statutory registers prescribed under the Act;
(c) Filed all forms and returns and furnished all necessary particulars to the Registrar of Companies and/or other authorities as required under the Act;
(d) Conducted the board meetings, shareholders' meeting and postal ballot as per the Act, and the minutes thereof were properly recorded in the respective minutes books;

PLANT/FACILITY LOCATIONS OUTSIDE INDIA

ACTIVE PHARMACEUTICAL FORMULATIONS MANUFACTURING INGREDIENTS (API) FACILITIES FACILITIES

DR. REDDY’S LABORATORIES (UK)

API CUERNAVACA PLANT

Industrias Quimicas Falcon De Mexico S.A. de C.V., Carretera Federal Cuernavaca-Cuautla KM 4.5 CIVAC, Jiutepec Morelos, Mexico 62578

LIMITED

6, Riverview Road, Beverley, East Yorkshire, HU 17 OLD, United Kingdom

FORMULATIONS SHREVEPORT PLANT

API MIRFIELD PLANT

Dr. Reddy’s Laboratories Louisiana LLC 8800 Line Avenue, Shreveport, Louisiana 7110-6717, USA

Dr. Reddy’s Laboratories (EU) Limited Steanard Lane, Mirfield, West Yorkshire, WF 14, 8HZ, United Kingdom

KUNSHAN ROTAM REDDY

PHARMACEUTICAL CO. LIMITED

API MIDDLEBURGH PLANT

No. 258, Huang Pu Jiang (M) Road, Kunshan Development Zone, Jiangsu Province, P. R. China, Pin: 215 300

Dr. Reddy’s Laboratories New York Inc. 1974 Route 145, P.O. Box 500, Middleburgh, New York 12122, USA

(e) E�ected share transfers or transmissions and dispatched the certificates, wherever applicable within the time limit prescribed by various authorities;
(f) Not exceeded the borrowing or investment limits; and
(g) Paid dividend to the shareholders, transferred the unpaid dividends and the underlying shares in respect of which dividend has remained unpaid or unclaimed for seven consecutive years to the Investor Education and Protection Fund (IEPF) within the time limit and has also complied with the provisions of the IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, as amended.

The certi�cate is given by the undersigned according to the best of his knowledge and belief and based on the available information and records, knowing that on the faith and strength of what is stated above, full reliance will be placed on it by the shareholders of the company.

Sandeep Poddar

Company Secretary

Place: Hyderabad Date: May 14, 2021

RESEARCH AND DEVELOPMENT FACILITIES

TECHNOLOGY DEVELOPMENT CENTRE, CAMBRIDGE

Dr. Reddy's Laboratories (EU) Limited 410 Cambridge Science Park, Milton Road, Cambridge CB4 0PE, United Kingdom

TECHNOLOGY DEVELOPMENT CENTRE, LEIDEN

Dr. Reddy’s Research and Development B V, Zernikedreef 12, 2333 CL Leiden, The Netherlands

AURIGENE DISCOVERY TECHNOLOGIES,

(MALAYSIA) SDN BHD

Level 2, Research Management & Innovation Complex, University of Malaya, Lembah Pantai 50603 Kuala Lumpur, Malaysia

PLANT/FACILITY LOCATIONS IN INDIA

ACTIVE PHARMACEUTICAL INGREDIENTS (API) FACILITIES

FTO 2 - FORMULATIONS HYDERABAD

FTO 11 - FORMULATIONS SRIKAKULAM

PLANT

APIIC Industrial Estate, Pydibheemavaram Village, Ranastalam Mandal, Srikakulam District, Andhra Pradesh, Pin: 532 409

Sy No. 42, 43, 44P, 45, 46P, 53, 54 & 83, Bachupally Village & Mandal, Medchal-Malkajgiri District, Telangana, Pin: 500 090

CTO 1 - API HYDERABAD PLANT

Plot No. 137, 138, 145 & 146, S.V. Co-operative Industrial Estate, IDA Bollaram, Jinnaram Mandal, Sangareddy District, Telangana, Pin: 502 325

FTO 12 - FORMULATIONS BADDI PLANT

FTO 3 - FORMULATIONS HYDERABAD

Village Kunjhal, PO - Barotiwala, Baddi, Tehsil Nalagarh Road, Solan District, Himachal Pradesh, Pin: 174 103

PLANT

Sy No. 41, Bachupally Village & Mandal, Medchal-Malkajgiri District, Telangana, Pin: 500 090

CTO 2 - API HYDERABAD PLANT

Plot No. 75A, 75B, 105, 110, 111, 112 & 121/3, S.V. Co-operative Industrial Estate, IDA Bollaram, Jinnaram Mandal, Sangareddy District, Telangana, Pin: 502 325

BIOLOGICS

Survey No. 47, Bachupally Village & Mandal, Medchal-Malkajgiri District, Telangana, Pin: 500 090

FTO 6 - FORMULATIONS BADDI PLANT

Village Khol, PO - Bhud, Baddi, Nalagarh Road, Tehsil Nalagarh, Solan District, Himachal Pradesh, Pin: 173 205

CTO 3 - API HYDERABAD PLANT

RESEARCH AND DEVELOPMENT FACILITIES IN INDIA

Plot No. 116,

S.V. Co-operative Industrial Estate,

IDA Bollaram, Jinnaram Mandal, Sangareddy District, Telangana, Pin: 502 325

FTO 7 - FORMULATIONS DUVADDA

INTEGRATED PRODUCT DEVELOPMENT

ORGANISATION (IPDO)

PLANT

Plot No. P1-P9, Phase III, Duvvada, VSEZ, Visakhapatnam, Andhra Pradesh, Pin: 530 046

Sy No. 42, 45, 46 & 54 Bachupally Village & Mandal, Medchal-Malkajgiri District, Telangana, Pin: 500 090

CTO 5 - API NALGONDA PLANT

Peddadevulapally, Tripuraram Mandal, Nalgonda District, Telangana, Pin: 508 207

FTO 8 - FORMULATIONS BADDI PLANT

Village Mauja Thana, PO - Bhud, Baddi, Nalagarh Baddi Road,

IPDO, BENGALURU

39-40, KIADB Industrial Area, Electronic City Phase II, Hosur Road, Bengaluru, Karnataka, Pin: 560 100

CTO 6 - API SRIKAKULAM PLANT

Tehsil Nalagarh, Solan District, Himachal Pradesh, Pin: 173 205

Sy No. 5 to 9 & Plot No. 5/1, 5/2, 5/3 & 5/4, APIIC, IDA Pydibheemavaram, Ransthalam Mandal, Srikakulam District, Andhra Pradesh, Pin: 532 409

FTO 9 - FORMULATIONS DUVADDA

PLANT

AURIGENE DISCOVERY TECHNOLOGIES LIMITED, BENGALURU

Plot No. Q1 to Q5, Phase III, Duvvada, VSEZ, Visakhapatnam, Andhra Pradesh, Pin: 530 046

39-40, KIADB Industrial Area, Electronic City Phase II, Hosur Road, Bengaluru, Karnataka, Pin: 560 100

CTO SEZ - API SRIKAKULAM PLANT

(SEZ)

Pu1 & Developer Sector No. 28 & 34, Devunipalavalasa Village, Ranastalam Mandal, Srikakulam District, Andhra Pradesh, Pin: 532 409

FTO SEZ PU 1 - FORMULATIONS

SRIKAKULAM PLANT

Sector No. 9-14 & 17-20, Devunipalavalasa Village, Ranastalam Mandal, Srikakulam District, Andhra Pradesh, Pin: 532 409

AURIGENE PHARMACEUTICAL SERVICES LIMITED, HYDERABAD

Bollaram Road, Miyapur, Hyderabad, Telangana, Pin: 500 049

FORMULATIONS MANUFACTURING

FACILITIES

FTO SEZ PU 2 - FORMULATIONS SRIKAKULAM PLANT

TECHNOLOGY DEVELOPMENT CENTRE 1

FTO 1 - FORMULATIONS HYDERABAD

Bollaram Road, Miyapur, Hyderabad, Telangana, Pin: 500 049

PLANT

Sector No. 70, 71 & 73, Devunipalavalasa Village, Ranastalam Mandal, Srikakulam District, Andhra Pradesh, Pin: 532 409

Plot No. 137, 138, 145 & 146, S.V. Co-operative Industrial Estate, IDA Bollaram, Jinnaram Mandal, Sangareddy District, Telangana, Pin: 502 320

TECHNOLOGY DEVELOPMENT CENTRE 2

Plot 31A, IDA, Jeedimetla, Hyderabad, Telangana, Pin: 500 050

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

BOARD’S REPORT

During the year, the company �led 20 abbreviated new drug applications (ANDAs) and one new drug application (NDA) under Section 505(b)(2) in the USA. As of March 31, 2021, there were 95 generic �lings awaiting approval with the US Food and Drug Administration (USFDA), comprising 92 ANDAs and three NDAs �led under Section 505(b)(2). Of the 92 ANDAs, 47 are Para IV applications, and we believe that 23 of these have ‘First to File’ status.

Dear Member,

FINANCIAL HIGHLIGHTS AND COMPANY AFFAIRS*

Your directors are pleased to present the 37th annual report for the year ended March 31, 2021.

Table 1 gives the consolidated and standalone �nancial highlights of the company based on Indian Accounting Standards (Ind AS) for FY2021 (i.e. from April 1, 2020, to March 31, 2021) compared to the previous �nancial year.

The �nancial year 2021 started with COVID-19 related lockdowns in India and several parts of our major markets. The pandemic which started about 15 months back impacted almost everyone and your company was no exception. There were challenges around movement of people and all the business operations were impacted — be it manufacturing, research and development (R&D), marketing or the supply chain and logistics. Our team accepted the situation as a challenge and solved the issues one by one to ensure that your company continues to make medicines and serve its patients across the globe.

The company’s consolidated total income for the year was ₹ 193.39 billion, which was up by 7% over the previous year. This amounted to US$ 2.64 billion. Pro�t before tax (PBT) was ₹ 28.84 billion, representing an increase of 53% over the previous year. This translated to US$ 394 million.

Revenues from Emerging Markets were ₹ 35.1 billion, registering a year-on-year growth of 7%. Revenues from India stood at ₹ 33.4 billion, showing a year-on-year growth of 15%. Revenues from Europe were ₹ 15.4 billion, or a year-on-year growth of 32%.

The company’s standalone total income for the year was ₹ 141.50 billion, which was up by 12% over the previous year. This was US$ 1.93 billion. PBT was ₹ 30.56 billion (US$ 418 million), which was up by 10% in rupee terms over the previous year.

Revenues from Pharmaceutical Services and Active Ingredients (PSAI) stood at ₹ 32 billion, with a year-on-year growth of 24%. During the year, the company �led 149 drug master �les (DMFs) worldwide, including 14 �lings in the US.

We also collaborated with multiple global partners and have been developing a number of COVID-19 related drugs. We have successfully launched a vaccine. We found new ways of working by leveraging digitalization and undertaking several precautionary measures to ensure the health and safety of our employees and business partners. We contributed our bit to support the needy and front line workers. Our actions during the pandemic have been driven by our purpose of ‘Good Health Can’t Wait’ and re�ect the dynamism and empathy which are core to us.

Revenues from Global Generics were up by 12% and stood at ₹ 154.4 billion. There was growth across North America Generics, Emerging Markets and India, with strong growth in Europe.

SCHEME OF AMALGAMATION

Revenues from North America stood at ₹ 70.5 billion, registering a year-on-year During FY2020, the scheme of growth of 9%. This was largely on account amalgamation of Dr. Reddy’s Holdings of revenue contribution from new products Limited with the company was approved launched, increase in volumes for some of by the board of directors, members and our base products, and favorable foreign unsecured creditors of the company. exchange movement, partly o�set by high price erosions in some of our products.

TABLE 1 | FINANCIAL HIGHLIGHTS

|TABLE 1| FINANCIAL HIGHLIGHTS||(₹ MILLION)|
|---|---|---|
|PARTICULARS|CONSOLIDATED
FY2021
FY2020|STANDALONE
FY��
FY��|
|��
��
��
��
Total income|||
|��
��
��
��
Pro�t before depreciation, amortization, impairment and tax|||
|��
��
��
��
Depreciation and amortization|||
|��
��
��
-
Impairment of non-current assets|||
|��
��
��
��
Pro�t before tax and before share of e�uity accounted investees|||
|��
��
-
-
Share of pro�t of e�uity accounted investees, net of tax|||
|��
��
��
��
Pro�t before tax|||
|��
(��)
��
(��)
Tax expense|||
|��
��
��
��
Net �ro�t for t�e �ear|||
|��
��
��
��
Opening balance of retained earnings|||
|��
��
��
��
�et pro�t for the year|||
|�
�
�
�
Other comprehensive income/(loss)|||
|(��)
(��)
(��)
(��)
Dividend paid during the year|||
|(��)
-
(��)
-
Tax on dividend paid|||
|-
-
-
-
Transfer to general reserve|||
|(��)
-
(��)
-
Transfer to SEZ re-investment reserve, net|||
|��
��
��
��
Closing balance of retained earnings|||

*The conversion rate is considered as US$ 1 = ` 73.14.

Note: FY2021 represents �scal �ear 2020�21� �ro� �pril 1� 2020� to �arch 31� 2021� and analo�o�sl� �or FY2020 and other s�ch la�elled �ears.

The no-observation letters from the BSE Limited and National Stock Exchange of India Limited were received on the basis of no comments received from the Securities and Exchange Board of India (SEBI). The petition for approval of the said scheme was �led with the Hon’ble National Company Law Tribunal (NCLT), Hyderabad Bench.

During FY2021, hearings on the petition took place and on April 20, 2021, the Hon’ble NCLT has reserved the order.

DIVIDEND

Your directors are pleased to recommend a dividend of ₹ 25 (500%) for FY2021, on every equity share of ₹ 5/-. The recommended dividend is in line with the dividend distribution policy of the company.

The dividend, if approved at the 37th annual general meeting (AGM) will be paid to those members whose names appear on the register of members of the company as of end of the day on July 12, 2021. In terms of the provisions of the Income Tax Act, 1961, such dividend will be taxable in the hands of the members.

In terms of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), the dividend distribution policy, is available on the company’s website on www.drreddys.com/ investors/governance/policies-anddocuments/

TRANSFER TO RESERVES

The company has not proposed to transfer any amount to the general reserve.

SHARE CAPITAL

The paid-up share capital of your company increased by ₹ 0.65 million to ₹ 831.51 million in FY2021 due to allotment of 129,149 equity shares, on exercise of stock options by eligible employees through the ‘Dr. Reddy's Employees Stock Option Scheme, 2002’ and ‘Dr. Reddy’s Employees ADR Stock Option Scheme, 2007’.

On December 9, 2020, the company also listed its ADRs on NSE International Exchange in GIFT City, Gujarat (NSE IFSC).

PUBLIC DEPOSITS

The company has not accepted any deposits covered under Chapter V of the Companies Act, 2013 ("the Act"). Accordingly, there is no disclosure or reporting required in respect of details relating to deposits.

CHANGE IN THE NATURE OF BUSINESS, IF ANY

During the year, there was no change in the

nature of business of the company. Further, there was no signi�cant change in the nature of business carried on by its subsidiaries.

These are also available for inspection during regular business hours at our registered o�ce in Hyderabad, India and/or in electronic mode.

Any member desirous of inspecting such documents are requested to write to the company by sending an email to [email protected].

MATERIAL CHANGES AND

COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

PARTICULARS OF LOANS,

There have been no such changes.

GUARANTEES OR INVESTMENTS

SUBSIDIARIES AND ASSOCIATES The company makes investments or extends loans/guarantees to its wholly-owned The company had 52 subsidiaries and one subsidiaries for their business purposes. joint venture company as on March 31, 2021. Details of loans, guarantees and During FY2021, Dr. Reddy’s (Beijing) investments covered under Section 186 of Pharmaceutical Company Limited in China the Act, along with the purpose for which and Dr. Reddy’s Formulations Limited in such loan or guarantee was proposed to be India were incorporated as a step-down utilized by the recipient, form part of the subsidiary company and a wholly-owned notes to the �nancial statements provided subsidiary, respectively. Pursuant to sale of in this annual report. the membership interests in DRANU, LLC, it ceased to be a joint venture during the year. Further, the company sold its Contract CORPORATE GOVERNANCE Development and Manufacturing AND ADDITIONAL Organization (CDMO) division of Custom SHAREHOLDERS’ INFORMATION Pharmaceutical Services (CPS) business to Aurigene Pharmaceutical Services Limited A detailed report on the corporate (APSL), a wholly-owned subsidiary, on governance systems and practices of the slump sale basis, for a consideration of company is given in a separate chapter of ` 5,434.5 million. this annual report. Similarly, other

A detailed report on the corporate governance systems and practices of the company is given in a separate chapter of this annual report. Similarly, other information for shareholders is provided in the chapter on Additional Shareholders’ Information . A certi�cate from the statutory auditors of the company con�rming compliance with the conditions of corporate governance is attached to the chapter on Corporate Governance .

Section 129(3) of the Act, states that where the company has one or more subsidiaries or associate companies, it shall, in addition to its �nancial statements, prepare a consolidated �nancial statements of the company and of all subsidiaries and associate companies in the same form and manner as that of its own and also attach along with its �nancial statements, a separate statement containing the salient features of the �nancial statements of its subsidiaries and associates.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the Management Discussion and Analysis in terms of Regulation 34 of SEBI’s Listing Regulations is provided as a separate chapter in the annual report.

Hence, the consolidated �nancial

statements of the company and all its subsidiaries and associates, prepared in annual report. accordance with Ind AS 110 and 111 as speci�ed in the Companies (Indian BOARD OF DIRECTORS AND KEY Accounting Standards) Rules, 2015, form MANAGERIAL PERSONNEL part of the annual report. Moreover, a statement containing the salient features of During FY2021, members of the company the �nancial statements of the company’s approved the reappointment of Mr. G V subsidiaries and joint ventures in the Prasad as a whole-time director designated prescribed Form AOC-1, is attached as as co-chairman and managing director of Annexure I to the board’s report. This the company for a further period of �ve statement also provides details of the years with e�ect from �anuary 30, 2021. The performance and �nancial position of each members also approved the continuation of subsidiary and joint venture. Mr. Prasad R Menon as an independent director, pursuant to regulation 17(1A) of the In accordance with Section 136 of the Act, Listing Regulations, who attained the age of the audited �nancial statements and related seventy �ve years.

In accordance with Section 136 of the Act, the audited �nancial statements and related information of the company and its subsidiaries, wherever applicable, are available on the company's website: www.drreddys.com.

Mr. G V Prasad retires by rotation at the forthcoming 37th AGM and being eligible, seeks reappointment.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

Mr. Bharat N Doshi completed his term as an independent director on May 10, 2021, and does not seek reappointment. The board places on record its appreciation for his contributions as director of the company.

Mr. Saumen Chakraborty retired as chief �nancial o�cer of the company with e�ect from December 1, 2020. The board of directors, at its meeting held on October 28, 2020, appointed Mr. Parag Agarwal as chief �nancial o�cer of the company with e�ect from December 1, 2020. The board records its appreciation for the excellent work done by Mr. Chakraborty across various departments of the company, including

�nance, during his long stint at Dr. Reddy’s.

In accordance with Section 149(7) of the Act, each independent director has con�rmed to the company that he or she meets the criteria of independence laid down in Section 149(6) of the Act, and is in compliance with Rule 6(3) of the Companies (Appointment and �uali�cations of Directors) Rules, 2014 and Regulation 16(1)(b) of the Listing Regulations. Further, they have a�rmed compliance to the code of conduct for independent directors as prescribed in Schedule IV of the Act.

For reference of the members, a brief pro�le of Mr. G V Prasad is given in the chapter on Corporate Governance and in the Notice convening the 37th AGM.

BOARD EVALUATION

As per provisions of the Act, and Regulation 17(10) of the Listing Regulations, an evaluation of the performance of the board, its committees and members was undertaken. For details, please refer to the chapter on Corporate Governance.

APPOINTMENT OF DIRECTORS AND

REMUNERATION POLICY

Assessment and appointment of members to the board are based on a combination of criterion that includes ethics, personal and professional stature, domain expertise, gender diversity and speci�c quali�cations required for the position. A potential board member is also assessed on the basis of independence criteria de�ned in Section 149(6) of the Act, and Regulation 16(1)(b) of the Listing Regulations.

In accordance with Section 178(3) of the Act, Regulation 19(4) of the Listing Regulations and on recommendation of the company’s nomination, governance and compensation committee, the board adopted a remuneration policy for directors, KMP, senior management and other employees. The policy is attached in the chapter on Corporate Governance.

NUMBER OF BOARD MEETINGS

The board of directors met �ve times during the year. In addition, an annual board retreat

was held to discuss strategic matters. Details of board meetings and the board retreat are given in the chapter on Corporate Governance.

ENTERPRISE RISK MANAGEMENT

The company has a risk management committee of the board, consisting entirely of independent directors, and chaired by Ms. Shikha Sharma. Details of the committee and its terms of reference are set out in the chapter on Corporate Governance.

AUDIT COMMITTEE

As on March 31, 2021, the audit committee of the board of directors consisted entirely of independent directors: Mr. Sridar Iyengar (chairman), Ms. Kalpana Morparia, Mr. Bharat N Doshi and Ms. Shikha Sharma. Mr. Bharat N Doshi ceased to be a member of the committee on completing his term as a director on May 10, 2021. Further details are given in the chapter on Corporate Governance. The board has accepted all recommendations made by the audit committee during the year.

The audit and risk management committees review key risk elements of the company’s business, �nance, operations and compliance, and their respective mitigation strategies. The risk management committee reviews strategic, business, compliance and operational risks, while issues around

ethics and fraud, internal control over �nancial reporting (ICOFR), as well as process risks and their mitigation, are reviewed by the audit committee.

DIRECTORS’ RESPONSIBILITY STATEMENT

In terms of Section 134(5) of the Act, your The company’s �nance, investment and risk directors state that: management council (FIRM council) and the compliance council are management level 1. applicable accounting standards have committees which operate under a charter been followed in the preparation of the and focus on risks associated with the annual accounts; company’s business and compliance 2. accounting policies have been selected matters. The FIRM council and the and applied consistently. Judgments compliance council periodically review and estimates made are reasonable and matters pertaining to risk management and prudent, so as to give a true and fair compliance and ethics respectively. view of the state of a�airs of the Additionally, the enterprise wide risk company at the end of the FY2021 and management (ERM) function helps of the pro�t of the company for that management and the board to prioritize, period; review and measure business risks against a pre-determined risk appetite, and their 3. proper and su�cient care has been suitable response, depending on whether taken to maintain adequate accounting such risks are internal, strategic or external.

proper and su�cient care has been taken to maintain adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

During FY2021, focus areas of risk management committee included review of cyber security, ethics and compliance program across the company and monitoring environmental and climate change related risks and other operating risk exposures.

annual accounts have been prepared on a going concern basis;
adequate internal �nancial controls for the company to follow have been laid down and these are operating e�ectively; and

RELATED PARTY

TRANSACTIONS

In accordance with Section 134(3)(h) of the Act, and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of the contracts or arrangements with related parties referred to in Section 188(1) of the Act, in Form AOC-2 is attached as Annexure II to the board’s report. All contracts and arrangements with related parties were at arm’s length and in the ordinary course of business of the company. Details of related party disclosures form part of the notes to the �nancial statements provided in the annual report.

proper and adequate systems have been devised to ensure compliance with the provisions of all applicable laws and these systems are operating e�ectively.

ADEQUACY OF INTERNAL

FINANCIAL CONTROL SYSTEMS

The company has in place adequate internal �nancial controls with reference to its

�nancial statements. These controls ensure the accuracy and completeness of the accounting records and the preparation of reliable �nancial statements.

VIGIL MECHANISM/WHISTLEBLOWER/OMBUDSPERSON POLICY

The company has an ombudsperson policy (whistle-blower/vigil mechanism) to report concerns. Reporting channels under the vigil mechanism include an independent hotline, a web based reporting site (drreddys.ethicspoint.com) and a dedicated e-mail to chief compliance o�cer. The ombudsperson policy also safeguards against retaliation of those who use this mechanism. The audit committee chairperson is the chief ombudsperson. The policy also provides for raising concerns directly to the chief ombudsperson. Details of the policy are available on the company’s website: www.drreddys.com/investors/ governance/ombudsperson-policy.

STATUTORY AUDITORS

Consequently, M/s. S.R. Batliboi & Associates LLP, chartered accountants, complete their �rst term of �ve consecutive years as the statutory auditors of the company at the conclusion of 37th AGM of the company.

Pursuant to section 139(2) of the Act, the company can appoint an auditors �rm for a second term of �ve consecutive years.

The audit committee and the board of directors recommend the reappointment of M/s. S.R. Batliboi & Associates LLP, chartered accountants, as statutory auditors of the company from the conclusion of the 37th AGM till the conclusion of 42nd AGM, to the members.

SECRETARIAL AUDITOR

Pursuant to Section 204 of the Act, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s. Makarand M. Joshi & Co., practicing company secretaries (certi�cate

of practice no. 3662), Mumbai, India, were SIGNIFICANT AND MATERIAL appointed as secretarial auditors of the ORDERS PASSED BY THE company for FY2021. The secretarial audit report for FY2021 is annexed as Annexure III COURTS/REGULATORS/

to this report. TRIBUNALS

Securities class-action lawsuit in the USA

Based on the consent received from M/s. Makarand M. Joshi & Co., practicing company secretaries (certi�cate of practice no. 3662), Mumbai, India and on the recommendation of the audit committee, the board has approved their appointment as the secretarial auditor of the company for FY2022.

On August 25, 2017, a securities class action lawsuit was �led against the company, its then chief executive o�cer (CEO) and its then chief �nancial o�cer (CFO) in the United States District Court for the District of New Jersey. The company’s co-chairman, its chief operating o�cer (COO) of that time (since retired), and Dr. Reddy’s Laboratories, Inc., USA, were subsequently named as defendants in the case. The operative complaint alleges that the company made false or misleading statements or omissions in its public �lings, in violation of the US federal securities laws, that the company’s share price dropped and its investors were a�ected.

COST AUDITORS

Pursuant to Section 148(1) of the Act, read with the relevant Rules made thereunder, the company maintains the cost records in respect of its 'pharmaceuticals' business.

On the recommendation of the audit committee, the board has appointed M/s. Sagar & Associates, cost accountants (�rm registration no. 000118) as cost auditors of the company for the FY2022 at a remuneration of ₹ 700,000/- plus reimbursement of out-of-pocket expenses at actuals and applicable taxes. The provisions also require that the remuneration of the cost auditors be rati�ed by the members. As a matter of record, relevant cost audit reports for FY2020 were �led with the Central Government on August 28, 2020, within the stipulated timeline. The cost audit report for FY2021 will also be �led within the timeline.

On March 21, 2019, the District Court issued its decision (dated March 20, 2019) granting in part and denying in part the motion to dismiss. Pursuant to that decision, the Court dismissed the plainti�’s claims on 17 out of the 22 alleged misstatements/omissions.

On May 15, 2020, Dr. Reddy’s Laboratories Limited, Dr. Reddy’s Laboratories, Inc., and certain of the company’s current or former directors and o�cers (collectively, the “Defendants”), have entered into a Stipulation and Agreement of Settlement (the “Stipulation”) with lead plainti� i.e. the Public Employees’ Retirement System of Mississippi in the putative securities class action �led against the Defendants in the United States District Court for the District of New Jersey. As consideration for the settlement of the class action, the company has agreed to pay US$ 9 million. The settlement is subject to the approval of the court and may be terminated prior to court's approval pursuant to the grounds for termination set forth in the Stipulation.

AUDITORS’ QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLAIMERS MADE

There are no quali�cations, reservations or adverse remarks by the statutory auditors in their report, or by the practicing company secretary in the secretarial audit report. During the year, there were no instances of frauds reported by auditors under Section 143(12) of the Act.

Subject to the terms of the Stipulation, in exchange for the settlement consideration, the lead plainti� and members of the settlement class who do not opt-out of this settlement would release, among other things, the claims that were asserted, or that they could have asserted, in this class action. In entering into the settlement, the Defendants do not admit, and explicitly deny, any liability or wrongdoing of any kind. Subject to the terms of the Stipulation, the settlement resolves the remainder of the litigation.

SECRETARIAL STANDARDS

In terms of Section 118(10) of the Act, the company complies with Secretarial Standards 1 and 2, relating to the ‘Meetings of the Board of Directors’ and ‘General Meetings’ respectively as speci�ed by the Institute of Company Secretaries of India and approved by the Central Government. The company has also voluntarily adopted the recommendatory Secretarial Standard-3 on ‘Dividend’ and Secretarial Standard-4 on ‘Report of the Board of Directors’ issued by the Institute of Company Secretaries of India.

On December 23, 2020, the court issued a �nal order and judgment approving the settlement. Pursuant to the settlement/court order, the escrow was funded on January 4, 2021. The e�ective date of the settlement occurred on February 1, 2021, upon transfer of the settlement fund balance into the �nal escrow account.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

As the company is adequately insured with Transfer and Refund) Rules, 2016, as respect to the aforesaid liability, the amended, declared dividends and interest settlement did not have any impact on the on debentures which remained unpaid or company’s consolidated income statement unclaimed for a period of seven years have for the year ended March 31, 2021. been transferred by the company to the IEPF, which has been established by the Central Government.

INFORMATION REQUIRED

UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The above Rules also mandate transfer of shares on which dividends are lying unpaid and unclaimed for a period of seven consecutive years to IEPF. The company has issued individual notices to the members whose equity shares are liable to be transferred to IEPF, advising them to claim their dividend on or before August 18, 2021. Details of transfer of unpaid and unclaimed amounts to IEPF are given in the chapter on Additional Shareholders Information.

The company has a policy to ensure prevention, prohibition and redressal of sexual harassment at the workplace. It has an apex committee and an internal complaints committee which operate under a de�ned framework for complaints pertaining to sexual harassment at workplace. Details are available in the principle 3 of the Business Responsibility Report forming part of this annual report.

EMPLOYEES STOCK OPTION SCHEMES

During the year, there has been no change in the ‘Dr. Reddy’s Employees Stock Option Scheme, 2002’, the ‘Dr. Reddy’s Employees ADR Stock Option Scheme, 2007', and 'Dr. Reddy’s Employees Stock Option Scheme, 2018’ (collectively referred as ‘the schemes’).

CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES

As per Section 135 of the Act, the company has a board-level CSR committee consisting of Mr. Prasad R Menon (chairman), Mr. G V Prasad and Mr. K Satish Reddy. Based on the recommendation of the CSR committee, the board has adopted a revised CSR policy that provides guiding principles for selection, implementation and monitoring of CSR activities and formulation of the annual action plan. During the year, the committee monitored the spend and implementation and adherence to the CSR policy. Details of the CSR policy and initiatives taken by the company during the year are available on the company’s website: www.drreddys.com. The report on CSR activities is attached as Annexure IV to the board’s report.

The schemes are in compliance with the SEBI (Share Based Employee Bene�ts) Regulations, 2014.

Details are available on the company’s website: www.drreddys.com/investors/ governance/policies-and-documents/ . The details also form part of note 2.24 of the notes to accounts of the standalone �nancial statements.

PARTICULARS OF EMPLOYEES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are attached as Annexure V to the board’s report

BUSINESS RESPONSIBILITY REPORT

A detailed Business Responsibility Report as required under Regulation 34 of the Listing Regulations, is given as a separate chapter in this annual report.

In terms of Section 197(12) of the Act, read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of limits set out in said rules forms part of the annual report.

TRANSFER OF UNPAID AND

UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF) Pursuant to the provisions of the Act, read with IEPF Authority (Accounting, Audit,

Considering the �rst proviso to Section 136(1) of the Act, the annual report, excluding the aforesaid information, is being

sent to the members of the company and others entitled thereto. The said information is available for inspection at the registered o�ce of the company or through electronic mode during business hours on working days up to the date of the forthcoming 37th AGM, by members. Any member interested in obtaining a copy thereof may write to the company secretary in this regard.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars as prescribed under Section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are attached as Annexure VI to the board’s report.

ANNUAL RETURN

The annual return of the company as on March 31, 2021, in terms of the provisions of Section 134(3)(a) of the Act, is available on the company’s website:

www.drreddys.com/investors/reports-and�lings/annual-reports/

ACKNOWLEDGMENT

Your directors place on record their sincere appreciation for the signi�cant contribution made by its employees through their dedication, hard work and commitment, as also for the trust reposed in the company by the medical fraternity and patients. The board of directors also acknowledge the support extended by the analysts, bankers, government agencies, media, customers, business partners, members and investors at large.

It looks forward to your continued support in the company’s endeavor to accelerate access to innovative and a�ordable medicines, because Good Health Can’t Wait.

For and on behalf of the board of directors

K Satish Reddy

Chairman

Place: Hyderabad Date: May 14, 2021

ANNEXURE-I

FORM AOC-1

(Statement pursuant to �rst pro�iso to sub-section (3) of Section 12� read �it� Rule � of Companies (Accounts) Rules, 201�) (Statement containing salient features of t�e �nancial statement of subsidiaries/associate companies/�oint �entures)

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Part "A" | Subsidiaries
All amounts in Indian Rupees millions, except share data and where otherwise stated
AS AT MARCH 31, 2021 FOR THE YEAR ENDED MARCH 31, 2021
1 Aurigene Discovery

SL. NO. NAME OF THE SUBSIDIARY REPORTING PERIOD FOR THE SUBSIDIARY DATE OF INCORPORATION/ ACQUISITION % OF SHAREHOLDING REPORTING CURRENCY EXCHANGE RATE SHARE CAPITAL RESERVES & SURPLUS OTHER LIABILITIES TOTAL EQUITY AND LIABILITIES TOTAL ASSETS INVESTMENTS TURNOVER NET EXPENSE (TOTAL EXPENSE NET OF OTHER INCOME) PROFIT/(LOSS) BEFORE TAXATION PROVISION FOR TAXATION PROFIT/(LOSS) AFTER TAXATION PROPOSED DIVIDEND
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1	Aurigene Discovery
	Technologies	31/03/2021	26/09/2007	100%	MYR	17.63	16	24	2	42	42	13	25	23	2	-	2	-
	(Malaysia) Sdn. Bhd.
2	Aurigene Discovery Technologies, Inc.	31/03/2021	29/04/2002	100%	USD	73.11	257	(257)	-	-	-	-	-	1	(1)	-	(1)	-
3	Aurigene Discovery Technologies Limited	31/03/2021	10/08/2001	100%	INR	1.00	905	5,112	2,599	8,616	8,616	5,483	3,062	1,389	1,673	422	1,251	-
4	Aurigene
	Pharmaceutical	31/03/2021	16/09/2019	100%	INR	1.00	401	(4,342)	6,700	2,759	2,759	342	1,914	2,093	(179)	(619)	440	-
	Services Limited
5	beta Institut
	gemeinnützige	31/03/2021	15/02/2006	100%	EUR	85.75	5	-	4	9	9	-	-	2	(2)	-	(2)	-
	GmbH(1)
6	betapharm Arzneimittel GmbH(1)	31/03/2021	15/02/2006	100%	EUR	85.75	60	29	8,338	8,427	8,427	-	10,513	10,533	(20)	-	(20)	-
7	Cheminor Investments Limited	31/03/2021	23/01/1990	100%	INR	1.00	1	-	-	1	1	-	-	-	-	-	-	-
8	Chirotech TechnologyLimited	31/03/2021	30/04/2008	100%	GBP	100.75	1,060	217	162	1,439	1,439	-	-	(12)	12	(8)	20	-
9	DRL Impex Limited	31/03/2021	18/08/1986	100%	INR	1.00	760	(762)	13	11	11	-	-	-	-	-	-	-
10	Dr. Reddy’s Bio- Sciences Limited	31/03/2021	09/07/2003	100%	INR	1.00	589	(356)	71	304	304	-	-	28	(28)	-	(28)	-
11	Dr. Reddy's (Beijing)
	Pharmaceutical Co.	31/03/2021	19/08/2020	100%	RMB	11.16	110	(3)	8	115	115	-	58	61	(3)	-	(3)	-
	Limited
12	Dr. Reddy’s
	Farmaceutica Do	31/03/2021	06/07/2000	100%	BRL	12.83	818	(920)	1,132	1,030	1,030	-	1,262	1,189	73	31	42	-
	Brasil Ltda.
13	Dr. Reddy’s Formulations Limited	31/03/2021	11/03/2021	100%	INR	1.00	-	-	-	-	-	-	-	-	-	-	-	-
14	Dr. Reddy’s
	Laboratories (Australia) Pty.	31/03/2021	07/06/2006	100%	AUD	55.70	35	(314)	823	544	544	-	936	880	56	17	39	-
	Limited
15	Dr. Reddy’s
	Laboratories	31/03/2021	29/08/2013	100%	CAD	58.03	-	431	246	677	677	-	1,513	1,448	65	17	48	-
	(Canada), Inc.
16	Dr. Reddy's
	Laboratories Chile	31/03/2021	16/06/2017	100%	CLP	0.10	140	(71)	174	243	243	-	268	225	43	-	43	-
	SPA
17	Dr. Reddy’s
	Laboratories (EU)	31/03/2021	17/04/2002	100%	GBP	100.75	723	2,323	1,889	4,935	4,935	-	1,888	1,447	441	94	347	-
	Limited
18	Dr. Reddy’s Laboratories, Inc.(2)	31/03/2021	13/05/1992	100%	USD	73.11	580	20,656	34,170	55,406	55,406	24	68,123	64,648	3,475	(494)	3,969	-
19	Dr. Reddy’s
	Laboratories Japan	31/03/2021	14/04/2015	100%	JPY	66.12	34	(20)	4	18	18	-	29	26	3	1	2	-
	KK
20	Dr Reddy’s
	Laboratories	31/03/2021	30/11/2016	100%	KZT	0.17	81	135	979	1,195	1,195	-	2,008	1,847	161	33	128	-
	Kazakhstan LLP
21	Dr. Reddy’s Laboratories LLC	31/03/2021	11/05/2011	100%	UAH	2.62	71	165	1,355	1,591	1,591	-	3,560	3,347	213	38	175	-

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

Part "A" | Subsidiaries

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All amounts in Indian Rupees millions, except share data and where otherwise stated
AS AT MARCH 31, 2021 FOR THE YEAR ENDED MARCH 31, 2021
22 Dr. Reddy’s

SL. NO. NAME OF THE SUBSIDIARY REPORTING PERIOD FOR THE SUBSIDIARY DATE OF INCORPORATION/ ACQUISITION % OF SHAREHOLDING REPORTING CURRENCY EXCHANGE RATE SHARE CAPITAL RESERVES & SURPLUS OTHER LIABILITIES TOTAL EQUITY AND LIABILITIES TOTAL ASSETS INVESTMENTS TURNOVER NET EXPENSE (TOTAL EXPENSE NET OF OTHER INCOME) PROFIT/(LOSS) BEFORE TAXATION PROVISION FOR TAXATION PROFIT/(LOSS) AFTER TAXATION PROPOSED DIVIDEND
----- End of picture text -----*

22	Dr. Reddy’s
	Laboratories	31/03/2021	30/04/2008	100%	USD	73.11	-	(3,011)	7,543	4,532	4,532	-	2,937	3,905	(968)	-	(968)	-
	Louisiana, LLC(2)
23	Dr. Reddy’s
	Laboratories Malaysia	31/03/2021	10/07/2017	100%	MYR	17.63	49	9	88	146	146	-	182	160	22	1	21	-
	Sdn. Bhd.
24	Dr. Reddy’s
	Laboratories New	31/03/2021	24/05/2011	100%	USD	73.11	-	(2,448)	3,107	659	659	-	-	354	(354)	(10)	(344)	-
	York, LLC
25	Dr. Reddy's
	Laboratories	31/03/2021	09/05/2018	100%	PHP	1.51	20	(24)	13	9	9	-	-	11	(11)	-	(11)	-
	Philippines Inc.
26	Dr. Reddy’s
	Laboratories	31/03/2021	13/06/2002	100%	ZAR	4.94	-	403	839	1,242	1,242	-	1,822	1,705	117	33	84	-
	(Proprietary) Limited
27	Dr. Reddy’s
	Laboratories	31/03/2021	07/06/2010	100%	RON	17.44	24	409	1,177	1,610	1,610	-	2,218	2,086	132	21	111	-
	Romania SRL
28	Dr. Reddy’s Laboratories SA	31/03/2021	16/04/2007	100%	USD	73.11	20,539	21,337	13,871	55,747	55,747	2,120	24,202	28,235	(4,033)	391	(4,424)	-
29	Dr. Reddy’s Laboratories SAS	31/03/2021	04/11/2014	100%	COP	0.02	104	9	297	410	410	-	575	514	61	21	40	-
30	Dr. Reddy's
	Laboratories	31/03/2021	23/02/2018	100%	TWD	2.57	32	(16)	3	19	19	-	16	12	4	-	4	-
	Taiwan Limited
31	Dr. Reddy's
	Laboratories	31/03/2021	13/06/2018	100%	TWD	2.57	35	(53)	253	235	235	-	280	254	26	-	26	-
	(Thailand) Limited
32	Dr. Reddy’s
	Laboratories (UK)	31/03/2021	29/11/2002	100%	GBP	100.75	-	3,547	1,633	5,180	5,180	-	3,771	3,422	349	85	264	-
	Limited
33	Dr. Reddy's Research and Development B.V.	31/03/2021	15/02/2013	100%	EUR	85.75	460	1,795	1,289	3,544	3,544	-	1,051	(1,840)	2,891	-	2,891	-
34	Dr. Reddy’s S.R.L.	31/03/2021	05/08/2008	100%	EUR	85.75	6	(778)	1,458	686	686	-	828	982	(154)	-	(154)	-
35	Dr. Reddy’s New Zealand Limited	31/03/2021	01/02/2008	100%	NZD	51.17	-	82	36	118	118	-	203	202	1	-	1	-
36	Dr. Reddy’s (WUXI)
	Pharmaceutical Co.	31/03/2021	02/06/2017	100%	RMB	11.16	65	(28)	54	91	91	-	88	93	(5)	-	(5)	-
	Limited
37	Dr. Reddy's Venezuela, C.A.	31/03/2021	20/10/2010	100%	VES	0.00	58	(4,735)	4,684	7	7	-	-	(115)	115	-	115	-
38	Dr. Reddy’s Laboratories B.V.	31/03/2021	11/09/2007	100%	EUR	85.75	37	(2,625)	2,615	27	27	-	-	2,776	(2,776)	-	(2,776)	-
39	Idea2Enterprises (India) Private Limited	31/03/2021	22/05/2010	100%	INR	1.00	25	1,511	4	1,540	1,540	1	-	-	-	-	-	-
40	Imperial Credit Private Limited	31/03/2021	22/02/2017	100%	INR	1.00	12	13	-	25	25	24	-	(1)	1	-	1	-
41	Industrias Quimicas
	Falcon de Mexico,	31/03/2021	30/12/2005	100%	MXN	3.58	594	298	5,136	6,028	6,028	-	5,893	5,782	111	62	49	-
	S.A. de CV
42	Kunshan Rotam
	Reddy Pharmaceutical	31/03/2021	15/08/2001	51.33%	RMB	11.16	-	-	-	-	-	-	-	-	-	-	461	-
	CompanyLimited(3)

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Part "A" | Subsidiaries
All amounts in Indian Rupees millions, except share data and where otherwise stated
AS AT MARCH 31, 2021 FOR THE YEAR ENDED MARCH 31, 2021
43 Lacock Holdings 31/03/2021 15/12/2005 100% EUR 85.75 1 466 1 468 468 - - 2 (2) - (2) -
Limited
44 OOO Dr. Reddy's 31/03/2021 05/04/2003 100% RUB 0.97 738 1,934 11,753 14,425 14,425 - 18,603 18,371 232 53 179 -
Laboratories Limited
45 OOO DRS LLC 31/03/2021 11/09/2007 100% RUB 0.97 30 19 89 138 138 - - 4 (4) - (4) -
46 Promius Pharma,
31/03/2021 14/02/2003 100% USD 73.11 13,908 (13,865) 305 348 348 - 20 (16) 36 - 36 -
LLC [(2)]
47 Reddy Holding 31/03/2021 15/02/2006 100% EUR 85.75 1 23,931 2,998 26,930 26,930 - - (3,190) 3,190 1,057 2,133 -
GmbH [(1)]
48 Reddy Netherlands 31/03/2021 20/02/1997 100% EUR 85.75 7 2,917 - 2,924 2,924 - - (9) 9 - 9 -
B.V.
49 Reddy Pharma Iberia 31/03/2021 18/05/2006 100% EUR 85.75 (147) 394 457 704 704 - 998 992 6 (80) 86 -
S.A.U.
50 Reddy Pharma Italia 31/03/2021 13/10/2006 100% EUR 85.75 257 65 1,289 1,611 1,611 - - 1 (1) - (1) -
S.R.L.
51 Reddy Pharma SAS 31/03/2021 29/10/2015 100% EUR 85.75 386 (137) 391 640 640 - 1,135 1,038 97 (29) 126 -
52 SVAAS Wellness
Limited (formerly 31/03/2021 08/07/2009 100% INR 1.00 1 4 3 8 8 6 - 3 (3) - (3) -
Regkinetics Services
Limited)
Includes all investments excluding investment in subsidiaries. Includes all investments excluding investment in subsidiaries.
(1) Tax expense for these entities is computed together as per the tax laws of Germany. The total tax expense is presented in Sl. No. 47 - Reddy Holding GmbH.
(2) Tax expense for these entities is computed together as per the tax laws of United States. The total tax expense is presented in Sl. No. 18 - Dr. Reddy’s Laboratories, Inc.
(3) The investment has been accounted using equity method. Refer note 2.5 of consolidated �nancial statements.
(4) There were no subsidiaries which have been liquidated or sold during the year.
Part “B” | Associates and Joint ventures
All amounts in Indian Rupees millions, except share data and where otherwise stated
SHARES OF ASSOCIATE/
JOINT VENTURES HELD BY PROFIT/LOSS
THE COMPANY ON THE FOR THE YEAR
YEAR END
1 DRANU LLC, USA [(1)] NA NA 360 50% - - - NA NA
2 DRES Energy Private Limited, India 31/03/2021 8,580,000 86 26% - 19 54 NA NA

SL. NO. NAME OF THE SUBSIDIARY REPORTING PERIOD FOR THE SUBSIDIARY DATE OF INCORPORATION/ ACQUISITION % OF SHAREHOLDING REPORTING CURRENCY EXCHANGE RATE SHARE CAPITAL RESERVES & SURPLUS OTHER LIABILITIES TOTAL EQUITY AND LIABILITIES TOTAL ASSETS INVESTMENTS TURNOVER NET EXPENSE (TOTAL EXPENSE NET OF OTHER INCOME) PROFIT/(LOSS) BEFORE TAXATION PROVISION FOR TAXATION PROFIT/(LOSS) AFTER TAXATION PROPOSED DIVIDEND
SL. NO. NAME OF THE ASSOCIATE/ JOINT VENTURE LATEST AUDITED BALANCE SHEET DATE NO. AMOUNT OF INVESTMENT IN ASSOCIATES/JOINT VENTURE EXTEND OF HOLDING % NET WORTH ATTRIBUTABLE TO SHAREHOLDING AS PER LATEST AUDITED BALANCE SHEET CONSIDERED IN CONSOLIDATION NOT CONSIDERED IN CONSOLIDATION DESCRIPTION OF HOW THERE IS A SIGNIFICANT INFLUENCE REASON WHY THE ASSOCIATE/JOINT VENTURE IS NOT CONSOLIDATED
----- End of picture text -----

* Includes all investments excluding investment in subsidiaries. Includes all investments excluding investment in subsidiaries.

(1) Ceased to be a joint venture with e�ect from �arch 31, 2�21.

for and on behalf of the board of directors of Dr. Reddy's Laboratories Limited

K Satish Reddy Chairman

G V Prasad Co-Chairman & Managing Director Erez Israeli Chief Executive O�cer Parag Agarwal Chief �inancial O�cer Sandeep Poddar Company Secretary

Place : Hyderabad Date : May 14, 2021

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

ANNEXURE-II

FORM NO. AOC – 2

(Pursuant to clause (h) of sub-section (3) of Section 134 of the Companies Act, 2013, and Rule 8(2) of the Companies (Accounts) Rules, 2014) Form for disclosure of particulars of contracts/arrangements entered into by the company with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013, including certain arm’s length transactions under third proviso thereto

1. Details of contracts or arrangements or transactions not at arm’s length basis:

(a) Name(s) of the related party and nature of relationship (b) Nature of contracts/arrangements/transactions (c) Duration of the contracts/arrangements/transactions (d) Salient terms of the contracts/arrangements/transactions including the value, if any (e) �usti�cation for entering into such contracts/arrangements or transactions (f) Date(s) of approval by the board

Not Applicable

(g) Amount paid as advances, if any

(h) Date on which the special resolution was passed in general meeting as required under �rst proviso to Section 188

2.Details of material contracts or arrangement or transactions	2.Details of material contracts or arrangement or transactions	at arm’s length basis:
(a)	Names(s) of the related party and nature of relationship	Dr. Reddy’s Laboratories Inc., USA, wholly-owned subsidiary
(b)	Nature of contracts/arrangements/transactions	Transfer or receipt of products, goods, materials or services
(c)	Duration of the contracts/arrangements/transactions	Ongoing
(d)	Salient terms of the contracts/arrangements/transactions	Transfer or receipt of products, goods, materials or services on arm’s length
	including the value, if any	basis for an estimated amount of up to`36,550 million
(e)	Date(s) of approval by the board, if any	NA. However, the transactions were approved by the audit committee
(f)	Amount paid as advances, if any	-

K Satish Reddy Chairman

ANNEXURE-III

(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed there under;

returns �led and other records maintained by the Company and also the information provided by the Company, its o�cers, agents and authorized representatives during the conduct of secretarial audit, we hereby report that in our opinion, the Company has, during the audit period covering the �nancial year ended on 31st March, 2021 (hereinafter called the ‘Audit Period’ ) complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliance-mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:

SECRETARIAL AUDIT REPORT

FOR THE FINANCIAL YEAR ENDED MARCH 31, 2021

[Pursuant to Section 204(1) of the Companies Act, 2013, and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014]

(iv) Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings;

To,

The Members,

Dr. Reddy’s Laboratories Limited, 8-2-337, Road No.3, Banjara Hills, Hyderabad – 500 034, Telangana, India

(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’):-

We have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by Dr. Reddy’s Laboratories Limited (hereinafter called ‘the Company’ ). Secretarial Audit was conducted in a manner that provided us a reasonable basis for evaluating the corporate conducts/ statutory compliances and expressing our opinion thereon.

a. The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;

We have examined the books, papers, minute books, forms and returns �led and other records maintained by the Company for the �nancial year ended on 31st March, 2021 according to the provisions of:

b. The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015;
(i) The Companies Act, 2013 (the Act), and the rules made there under;
c. The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018;
(ii) The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the rules made there under;

Based on our veri�cation of the Company’s books, papers, minute books, forms and

d. The Securities and Exchange Board of India (Share Based Employee Bene�ts) Regulations, 2014;
e. The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008; (Not Applicable to the Company during the Audit Period) ;
f. The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client;
g. The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; (Not Applicable to the Company during the Audit Period) and;
h. The Securities and Exchange Board of India (Buyback of Securities) Regulations, 2018; (Not Applicable to the Company during the Audit Period).

We have also examined compliance with the applicable clauses of the following:

(i) Secretarial Standards issued by The Institute of Company Secretaries of India;
(ii) The Securities and Exchange Board of India (Listing Obligations and Disclosure requirements) Regulations, 2015.

During the period under review the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines and Standards, etc. mentioned above.

We further report that, having regard to the compliance system prevailing in the Company and on the examination of the relevant documents and records in pursuance thereof, on test- check basis, the Company has complied with the following law applicable speci�cally to the Company:

(i) The Drugs and Cosmetics Act, 1940 and Rules made thereunder;
(ii) Drugs (Prices Control) Order, 2013 and Noti�cations made thereunder and;
(iii) The Narcotic Drugs and Psychotropic Substances Act, 1985.

We further report that, the Board

ANNEXURE A

of Directors of the Company is duly constituted with proper balance of Executive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.

To The Members,

Dr. Reddy’s Laboratories Limited, 8-2-337, Road No.3, Banjara Hills, Hyderabad – 500 034, Telangana, India

Our report of even date is to be read along with this letter.

Maintenance of secretarial record is the responsibility of the management of the company. Our responsibility is to express an opinion on these secretarial records based on our audit.

Adequate notice is given to all directors to schedule the Board Meetings, agenda and detailed notes on agenda were sent at least seven days in advance and a system exists for seeking and obtaining further information and clari�cations on the agenda items before the meeting and for meaningful participation at the meeting. All decisions at Board Meetings and Committee Meetings are carried out unanimously as recorded in the minutes of the meetings of the Board of Directors or Committee of the Board, as the case may be.

We have followed the audit practices and processes as were appropriate to obtain reasonable assurance about the correctness of the contents of the Secretarial records. The veri�cation was done on test basis to ensure that correct facts are re�ected in secretarial records. We believe that the processes and practices, we followed provide a reasonable basis for our opinion.

We further report that there are adequate reasonable basis for our opinion. systems and processes in the Company 3. We have not veri�ed the correctness commensurate with the size and operations and appropriateness of �nancial records of the Company to monitor and ensure and Books of Accounts of the company. compliance with applicable laws, rules, regulations and guidelines. 4. Where ever required, we have obtained the Management representation about We further report that during the audit the compliance of laws, rules and period, the American Depository Receipts regulations and happening of events etc.

We have not veri�ed the correctness and appropriateness of �nancial records and Books of Accounts of the company.

period, the American Depository Receipts (ADRs) of the Company have been listed on NSE IFSC Limited (NSE International Exchange, GIFT City, Gujarat, India).

The compliance of the provisions of Corporate and other applicable laws, rules, regulations, standards is the responsibility of management. Our examination was limited to the veri�cation of procedures on test basis.

For Makarand M. Joshi & Co.

Practicing Company Secretaries

Makarand Joshi

The Secretarial Audit report is neither an assurance as to the future viability of the company nor of the e�cacy or e�ectiveness with which the management has conducted the a�airs of the company.

Partner

FCS No. 5533 CP No. 3662 UDIN: F005533C000301708 Peer Review No: P2009MH007000

Place: Mumbai

For Makarand M. Joshi & Co. Practicing Company Secretaries

Date: May 14, 2021

This report is to be read with our letter of even date which is annexed as Annexure A and forms an integral part of this report.

Makarand Joshi

Partner

FCS No. 5533 CP No. 3662 UDIN: F005533C000301708 Peer Review No: P2009MH007000 Place: Mumbai Date: May 14, 2021

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

ANNEXURE–IV

ANNUAL REPORT ON CORPORATE SOCIAL RESPONSIBILITY (CSR) ACTIVITIES

1. Brief outline on CSR policy of the company:

At Dr. Reddy’s, all our activities are guided by our purpose and belief "We accelerate access to a�ordable and innovative medicines because Good Health Can’t Wait. " Our business is based on a deep respect for people and the planet. Our contribution to societal change embodies our values. We will continue to catalyse replicable, sustainable, and innovative actions for social change. We believe in contributing to a sustainable community development and facilitating our e�orts towards creating shared value.

2. Composition of CSR committee:

SL. NO. 1	NAME OF THE DIRECTOR Mr. Bharat N Doshi*	DESIGNATION / NATURE OF DIRECTORSHIP Independent Director, Chairman of	NUMBER OF MEETINGS OF CSR COMMITTEE HELD DURING THE YEAR 4	NUMBER OF MEETINGS OF CSR COMMITTEE ATTENDED DURING THE YEAR 4
		CSR committee (upto April 11, 2021)
2	Mr. Prasad R Menon**	Independent Director,	-	-
		Chairman of CSR committee
3	Mr. K Satish Reddy	Chairman, member of CSR committee	4	4
4	Mr. G V Prasad	Co-chairman and Managing Director,	4	4
		member of CSR committee

Term ended on May 10, 2021, as a director.

** Appointed as a member and chairman, with e�ect from April 12, 2021.

3. The web-link where composition of CSR committee, CSR policy and CSR projects approved by the board are disclosed on the website of the company:

(a) Composition of the CSR committee - www.drreddys.com/investors/governance/committees-of-the-board/

(b) CSR policy - www.drreddys.com/media/993225/csr-policy.pdf

4. Details of impact assessment of CSR projects carried out in pursuance of sub-rule (3) of Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014, if applicable (attach the report):

There are no projects undertaken or completed in FY2021 after the e�ective date of the aforementioned rules which warrant impact assessment. The company will carry out impact assessment of projects as may be applicable, and will provide details of the same as part of its future reports as required pursuant to Rule 8(3) of the Companies (Corporate Social Responsibility Policy) Rules, 2014.

5. Details of the amount available for set-o� in pursuance of sub-rule (3) of Rule 7 of the Companies (Corporate Social Responsibility Policy) Rules, 2014, and amount required for set-o� for the �nancial year, if any:

Not Applicable

6. Average net pro�t of the company as per Section 135(5) of the Act: 17,050,145,140/- **7. (a) Two percent of average net pro�t of the company as per Section 135(5) of the Act:** 341,002,903/- (b) Surplus arising out of the CSR projects or programmes or activities of the previous �nancial years: NA (c) Amount required to be set-o� for the �nancial year, if any: NA (d) Total CSR obligation for the �nancial year (7a�7b-7c): ` 341,002,903/-

8. (a) CSR amount spent or unspent for the �nancial year:

TOTAL AMOUNT SPENT FOR THE FINANCIAL YEAR	AMOUNT UNSPENT (IN`)
	TOTAL AMOUNT TRANSFERRED TO UNSPENT CSR ACCOUNT AS PER SECTION 135 (6) AMOUNT TRANSFERRED TO ANY FUND SPECIFIED UNDER SCHEDULE VII AS PER THE SECOND PROVISION OF SECTION 135 (5)
	AMOUNT DATE OF TRANSFER NAME OF THE FUND AMOUNT DATE OF TRANSFER
`360,801,226	NA
(b) Details of CSR amount spent against ongoing projects for the �nancial year: Not Applicable

(c) Details of CSR amount spent against other than ongoing projects for the �nancial �ear:

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----- Start of picture text -----

MODE OF IMPLEMENTATION
LOCATION OF
THROUGH IMPLEMENTING
THE PROJECT
AGENCY
) `
SL. NO. NAME OF THE PROJECT ITEM FROM THE LIST OF ACTIVITIES IN SCHEDULE VII OF THE ACT LOCAL AREA (YES/NO) STATE DISTRICT AMOUNT SPENT ON THE PROJECT (IN MODE OF IMPLEMENTATION DIRECT (YES/NO) NAME CSR REGD. NUMBER
----- End of picture text -----

1	Quality education	Education	Yes	Telangana	Hyderabad	41,148,447	No	Dr. Reddy’s	CSR00000794
	support serving low-							Foundation
	income community
	schools
2	Providing quality	Education	Yes	Telangana	Ranga Reddy,	15,000,000	No	Pudami	CSR00003112
	education to low-				and Medchal -			Educational
	income peri-urban				Malkajgiri			Society
	children through
	pudami schools
3	School Improvement	Education	Yes	Telangana	Hyderabad,	35,864,553	No	Dr. Reddy’s	CSR00000794
	Programme (SIP) in			and Andhra	Nalgonda,			Foundation
	government schools			Pradesh	Krishna, Guntur,
					Visakhapatnam,
					Vizianagaram,
					and Srikakulam
4	Enabling pure	Education	Yes	Telangana	Hyderabad	5,000,000	No	University of	CSR00006281
	sciences higher							Hyderabad
	education research
	-Dr Anji ReddyChair
5	Skilling and	Livelihood	No	Kerala,	Ernakulam,	1,300,000,000	No	Dr. Reddy’s	CSR00000794
	employability			Madhya	Jabalpur,			Foundation
	program for youth			Pradesh,	Indore,
				Tamil	Chennai, and
				Nadu and	Bangalore
				Karnataka
6	MITRA - Agricultural	Livelihood	Yes	Telangana	Nalgonda and	9,900,000	No	Dr. Reddy’s	CSR00000794
	program			and Andhra	Srikakulam			Foundation
				Pradesh
7	Farmer livelihood	Livelihood	Yes	Andhra	Visakhapatnam	10,573,167	No	Naandi	CSR00001184
	project			Pradesh				Foundation
8	Psychological	Health	Yes	Telangana	Hyderabad	1,220,000	No	Roshni Trust	CSR00000664
	health support
9	Community health	Health	Yes	Telangana	Vizianagaram	15,000,000	No	NICE	CSR00000497
	intervention			and Andhra	and Srikakulam			Foundation
	programme			Pradesh
10	Community	Rural	Yes	Telangana	Nalgonda and	587,350	Yes	NA	NA
	development	development		and Andhra	Srikakulam
				Pradesh
11	COVID-19 relief	Health	Yes	Telangana,	Hyderabad,	91,683,464	Yes	NA	NA
	activities			Andhra	Nalgonda,
				Pradesh	Visakhapatnam,
				and	Vizianagaram,
				Himachal	Srikakulam, and
				Pradesh	Solan
	Total					355,976,981
(d)	Amount spent in administrative overheads:							`4,824,245
(e)	Amount spent on impact assessment, if applicable:							Not Applicable
(f)	Total amount spent for the �nancial		�ear	(�c��d��e):				`360,801,226

(f) Total amount spent for the �nancial �ear (�c��d��e):

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

(g) Excess amount for set o�, if any�

==> picture [500 x 26] intentionally omitted <==

----- Start of picture text -----

SL.
PARTICULAR AMOUNT (IN ` )
NO.
----- End of picture text -----

(i)	Two percent of average net pro�t of the company as per Section 135(5)	341,002,903
(ii)	Total amount spent for the �nancial year	360,801,226
(iii)	Excess amount spent for the �nancial year �(ii)-(i)�	19,798,323
(iv)	Surplus arising out of the CSR projects or programmes or activities of the previous �nancial years, if any	NA
(v)	Amount available for set-o� in succeeding �nancial years �(iii)-(iv)�	19,798,323

9. (a) Details of unspent CSR amount for the preceding three �nancial years� Not Applicable

(b) Details of CSR amount spent in the �nancial year for ongoing pro�ects of the preceding �nancial year(s)� Not Applicable

10. In case of creation or acquisition of capital asset, furnish the details relating to the asset so created or acquired through CSR spent in the �nancial year� Not Applicable

11. Specify the reason(s), if the company has failed to spend two per cent of the average net pro�t as per Section 135(5)� Not Applicable

G V Prasad	Prasad R Menon
Co-Chairman and Managing Director	Chairman of CSR Committee

ANNEXURE - V

Information in terms of Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

(i) The ratio of the remuneration of each director to the median remuneration of the employees of the company and the percentage increase/ (decrease) in remuneration of each director, CEO, CFO and CS for FY2021:

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----- Start of picture text -----

RATIO OF REMUNERATION
% INCREASE/(DECREASE)
OF EACH DIRECTOR TO THE
NAME DESIGNATION IN REMUNERATION
MEDIAN REMUNERATION OF
DURING/FOR FY2021
EMPLOYEES
----- End of picture text -----

Mr. K Satish Reddy(1)	Chairman	211	14
Mr. G V Prasad(1)	Co-Chairman and Managing Director	313	9
Mr. Allan Oberman	Independent director	21	(11)
Mr. Bharat N Doshi	Independent director	25	-
Dr. Bruce L A Carter	Independent director	22	(11)
Ms. Kalpana Morparia	Independent director	22	(3)
Mr. Leo Puri	Independent director	21	(11)
Mr. Prasad R Menon	Independent director	26	(3)
Ms. Shikha Sharma	Independent director	22	(3)
Mr. Sridar Iyengar	Independent director	23	(10)
Mr. Erez Israeli(5)	Chief Executive O�cer (CEO)	NA	6
Mr. Saumen Chakraborty(2)(4)(5)	Chief Financial O�cer (CFO)	NA	NA
Mr. Parag Agarwal(3)(4)(5)	Chief Financial O�cer (CFO)	NA	NA
Mr. Sandeep Poddar(5)	Company Secretary (CS)	NA	8

(1) Includes commission, salary and perquisites. They do not receive any amount as remuneration from any subsidiary company.

(2) Retired with e�ect from �ecember 1, 2020.

(3) Was appointed chief �nancial o�cer (�F�) with e�ect from �ecember 1, 2020.

(4) Remuneration in FY2021 was paid for part of the year, hence not comparable.

(�) Includes ��ed pay, actual variable pay, fuel � maintenance on actuals and e�cludes value of stoc� options.

(ii) The median remuneration of employees decreased by 1.5% in FY2021.

(iii) The number of permanent employees on the rolls of the company as on March 31, 2021, is 23,704.

(iv) Average percentage increase in the salaries of employees other than KMP for FY2021 was 6% as compared to FY2020. There was an increase of 15% in the total remuneration of executive directors and KMP for FY2021 on account of computation of remuneration, on accrual basis to executive directors and on actual basis for CEO, CFO and CS.

refrigerant and to reduce the power cooling towers running which resulted consumption. Horizontal deployment of in better power saving. Integrated Phase-IV, replacement of conventional compressor system to meet variable belt driven blower motor assembly load demand and to stop multiple with electronically commutated (EC) compressor running. Optimization motor technology in HVAC systems of RH% when no production activity. across FTO sites. Phase-V, horizontal Enhancing the e�ciencies of refrigerant deployment of automatic tube cleaning compressors by adopting artic master system in refrigeration chillers and and ECO plug technologies. Boiler heat pumps. Phase-V zero purge loss e�ciency improvement by better air dryers/HOC drier replaced in place condensate recovery. Consolidation & of purge loss drier in compressed air optimized utilization of chilled water/ network. Replacement of existing brine/air/nitrogen compressors based conventional lights with LED lights, on load for CTO sites. installation of occupancy sensors to 3. Identifying renewable power sources have energy e�cient lighting system. at low cost: Roof top solar power plants Phase–II implementation scale and bio of 2.6 MW got commissioned in FTO-2, removal system for cooling tower water FTO-7, FTO-9, FTO-PU1 and FTO-11 in place of normal chemical treatment.

cooling towers running which resulted in better power saving. Integrated compressor system to meet variable load demand and to stop multiple compressor running. Optimization of RH% when no production activity. Enhancing the e�ciencies of refrigerant compressors by adopting artic master and ECO plug technologies. Boiler e�ciency improvement by better condensate recovery. Consolidation & optimized utilization of chilled water/ brine/air/nitrogen compressors based on load for CTO sites.

ANNEXURE–VI

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

(A) CONSERVATION OF ENERGY

During the year, the company has implemented energy conservation projects across its various business units and accrued savings of approximately 154 million against an investment of 207 million.

With above energy saving projects implementation, we have reduced 23,033 tons of CO2 emissions on FY2020 base.

at low cost: Roof top solar power plants of 2.6 MW got commissioned in FTO-2, FTO-7, FTO-9, FTO-PU1 and FTO-11 plants. 1.5 MW hydel power supply started to FTO-7 and FTO-9 plants. 1 MW solar power supply started to IPDO.

Additional ` 301 million is being spend for the energy conservation projects including IOT for HVAC systems on high side & low side, FLP EC plus blowers for giving saving in FY2022.

2. Optimization of designs and

operational e�ciencies: Optimization 1 MW solar power supply started to of compressed air pressure and IPDO. integration of compressed air piping, With above renewable power additions,
arresting the air leakages & reduction of the unloading hours of air compressor emissions on FY2020 base.we have reduced 4,970 tons of CO2 units. Integration of chillers to increase the e�ciency and to stop multiple New power purchase agreements chillers running. Replaced existing signed o� for supply of 11 MW solar pumps with energy e�cient pumps, power for FTO-2, Biologics, FTO-11 & replaced existing chillers with energy IPDO plants, 5.5 MW roof top & land e�cient chillers. Optimization of mounted solar capacities for various HVAC usage by shut down/sleep mode plants to supply power in FY2022. operations based on plant operational With the above renewable capacity
requirements. Installed VFD for AHU’s addition the total roof top capacity has
to minimize power losses, installed become 8.9 MW, 45 MW third party
capacitor banks to maintain power PPA’s and 15 MW through JVC.
factor close to unity, optimization of chilled water temperature based on During the year, the company has joined environmental temperature changes. the Science Based Targets initiative's Installed heat pumps to reduce steam (SBTi) business ambition for 1.5 °C, consumption, e�ectively reduced becoming the �rst Indian and the third FO consumption by improving hot Asian pharmaceutical company to have condensate recovery, integrated chillers set its Science-Based Targets to further and DG cooling towers to stop multiple minimize environmental impact.

Major categories of energy projects are:

1. Installation of Innovative technology:

Steam operated pump trap technology adopted to use in steam distribution system, which reduced the losses in steam distribution network. Intelligent �ow controller technology adopted to use in compressed air distribution system, which reduced the losses in compressed air network replacement of conventional blowers with energy e�cient blowers in e�uent treatment operation. Replacement of conventional split AC unit with variable refrigerant volume technology in HVAC system. Replacement of conventional belt driven axial fan motor assembly with electronically commutated (EC) motor technology in cooling towers across FTO sites. Phase-II implementation of artic maser in most of the HVAC systems to regulate the �ow of

During the year, the company has joined the Science Based Targets initiative's (SBTi) business ambition for 1.5 °C, becoming the �rst Indian and the third Asian pharmaceutical company to have set its Science-Based Targets to further minimize environmental impact.

(B) TECHNOLOGY ABSORPTION

i. E�orts made towards technology absorption

The company has a full-�edged R&D division continuously engaged in research on new products and process improvement on existing products as part of continuous improvement. As a part of technology absorption and adoption, once technology is developed for a product, it is tested in a pilot plant and thereafter commercial production is performed. Innovation is embarked by an incremental approach towards cost, time, quality and complex product development by adopting cutting edge technology and our philosophy is to continuously upgrade the technology. Successful development of complex generics products accomplished through innovation and science. Improved quality by adopting quality by design concept. Technology adoption yielded improvement in robustness and cost.

ii. Bene�ts derived like product improvement, cost reduction, product development or import substitution

iii. In case of imported technology (imported during the No imported technology last three years reckoned from the beginning of the �nancial year) –

a) Details of technology imported
b) Year of import
c) Whether the technology been fully absorbed
d) If not fully absorbed, areas where absorption has not taken place, and the reasons therefore
(v) It is hereby a�rmed that the remuneration for FY2021 is as per the remuneration policy of the company.

K Satish Reddy Chairman

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

Expenditure incurred on R&D	FY2021	FY2020
a) Capital (`million)	562	654
b) Recurring*(`million)	12,542	11,343
c) Total (`million)	13,104	11,997
Total R&D expenditure as a % of total turnover	9.82%	10.12%

* Excluding depreciation and amortization

C) FOREIGN EXCHANGE EARNINGS AND OUTGO

Foreign exchange earned in term� o� actual in�o�� and �oreign exchange outgo in term� o� actual out�o�� during the �ear�

	(`MILLION)
PARTICULARS	FY2021
Foreign exchange earned in term� o� actual in�o��	97,699
Foreign exchange outgo in term� o� actual out�o��	34,420

K Satish Reddy

Chairman

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

INDEPENDENT AUDITORS' REPORT

To the Members of Dr. Reddy’s Laboratories Limited

INDEPENDENT AUDITORS' REPORT (CONTINUED)

Report on the Audit of the Standalone Ind AS Financial Statements

Opinion

We have audited the accompanying standalone Ind AS �nancial statements of Dr. Reddy’s Laboratories Limited (“the Company”), which comprise the Balance sheet as at 31 March 2021, the Statement of Pro�t and Loss, including the statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the standalone Ind AS �nancial statements, including a summary of signi�cant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS �nancial statements give the information required by the Companies Act, 2013, as amended (“the Act”) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of a�airs of the Company as at 31 March 2021, its pro�t including other comprehensive income, its cash �ows and the changes in equity for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone Ind AS �nancial statements in accordance with the Standards on Auditing (SAs), as speci�ed under section 143(10) of the Act. Our responsibilities under those Standards are further described in the ‘Auditor’s Responsibilities for the Audit of the standalone Ind AS �nancial statements’ section of our report. We are independent of the Company in accordance with the ‘Code of Ethics’ issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the �nancial statements under the provisions of the Act and the Rules thereunder, and we have ful�lled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is su�cient and appropriate to provide a basis for our audit opinion on the standalone Ind AS �nancial statements.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most signi�cance in our audit of the standalone Ind AS �nancial statements for the �nancial year ended 31 March 2021. These matters were addressed in the context of our audit of the standalone Ind AS �nancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to be communicated in our report. We have ful�lled the responsibilities described in the Auditor’s responsibilities for the audit of the standalone Ind AS �nancial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone Ind AS �nancial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying standalone Ind AS �nancial statements.

How our audit addressed the key audit matter

Key audit matters

Business transfer agreement with Wockhardt Limited (as described in note 1.3(d) o� t�e si�ni�cant acco�ntin� �olicies and note �.3� o� t�e standalone Ind A� �nancial state�ents)

Our audit procedures, among others included the following:

During the current year, the Company completed the acquisition of select divisions of the branded generics business of Wockhardt Limited in India and the territories Ÿ of Nepal, Sri Lanka, Bhutan and Maldives. The transaction was accounted for as a business combination. The Company’s accounting for the acquisition included Ÿ determining the fair value of the assets acquired, which primarily included product related intangibles. In connection with the acquisition, the Company Ÿ recognized a contingent consideration liability for acquisition consideration that is payable based on a multiple of incremental revenue targets subject to a maximum amount.

Ÿ[We evaluated the design and tested the operating e�ectiveness of the controls ] over the Company’s calculation of the estimated fair values of the intangible assets and the contingent consideration.

Ÿ We assessed the competence and independence of the third-party valuer by reference to their quali�cations and experience.

Ÿ[We tested the estimated fair value of the intangible assets and the contingent ] consideration liability, evaluated Company's selected valuation methods and tested the signi�cant assumptions used in the models. In testing the valuation of contingent consideration, we assessed, among others, the terms of the arrangement and the conditions met for the amounts to become payable.

The accounting for the business combination was complex due to the signi�cant estimation required by management to determine the fair value of the intangible assets and the contingent consideration. The signi�cant estimation uncertainty was primarily due to the sensitivity of the respective fair values to the underlying assumptions utilized in the measurement of the fair value of the intangible assets and contingent consideration. The Company used a discounted cash �ow model to measure the fair value of the intangible assets, which included signi�cant assumptions such as the discount rate, useful life, and long-term growth rate. The Company measured the contingent consideration at its estimated fair value, and the signi�cant assumptions used to determine the fair value of contingent consideration included forecasted revenue projections, revenue volatility and a risk adjusted discount rate. Considering the above, this has been included as a Key Audit Matter.

Ÿ[We compared the signi�cant assumptions to current industry, market and ] economic trends, assumptions used to value similar assets, and to the historical results of the acquired business.

Ÿ[We involved valuation specialist to assist in evaluating the appropriateness of ] the valuation model, key assumptions used in the valuation models and to test the model’s computational accuracy.

Ÿ[We tested the arithmetical accuracy of the models.]

Ÿ[We also tested the completeness and accuracy of the underlying data used in the ] model.

Key audit matters How our audit addressed the key audit matter

Assessment of carrying value of intangible assets, intangible assets under development and goodwill (as described in note 1.3(f) and 1.3(i) of the signi�cant accounting policies� and note �.�� .3 and �.� for details and movement in good�ill� other intangible assets and intangible assets under development respectively in the standalone Ind A� �nancial statements)

As at 31 March 2021, the Company has intangible assets, Our audit procedures, among others included the following: including intangible assets under development, of Rs. 22,035 million and goodwill of Rs. 853 million. Ÿ The carrying value of these intangible assets are based on future cash flows and there is a risk that the assets may assets and intangible assets under development. be impaired if cash flows are not in line with projections. Ÿ

Ÿ[We evaluated the design and tested the operating e�ectiveness of the ] Company's controls in assessing the recoverable value of goodwill, intangible assets and intangible assets under development.

Ÿ[We assessed the Company’s methodology applied in determining the CGUs to ] which these assets are allocated.

Valuation of goodwill and intangible assets is subject to management's assessment of recoverable amount, being the higher of the value in use and fair value less costs to sell, involving signi�cant judgment and are based on number of variables and estimates including projection of future sales, operating costs and pro�t margins; appropriate discount rate and terminal value growth rate; and probability of technical and regulatory success factors in applying discounted cash �ow valuation methodology. As the assessment of recoverable amount involves signi�cant degree of management judgement, we have identi�ed this a key audit matter.

Ÿ[We tested the estimated recoverable value of these assets and assessed the ] methodologies used by management in deriving the recoverable value and tested the signi�cant assumptions and the underlying data used by the Company in its analyses.

Ÿ[We compared the signi�cant assumptions to current industry, market and ] economic trends, to the Company's historical data.

Ÿ[We performed sensitivity analyses of the signi�cant assumptions to evaluate the ] potential change in the recoverable values of these assets resulting from hypothetical changes in underlying assumptions. We also assessed the recoverable value headroom by performing sensitivity testing of key assumptions used.

Ÿ[We tested the arithmetical accuracy of the models.]

Ÿ[We involved valuation specialist to assist in evaluating the methodologies used ] and signi�cant assumptions and inputs used to determine the recoverable value of certain intangible assets.

Contingencies, including litigations and tax (as described in note 1.3(k) of the signi�cant accounting policies� and note �.�� (A) containing details of contingencies in the standalone Ind A� �nancial statements)

Our audit procedures, among others included the following:

The Company is involved in disputes, lawsuits, claims, anti-trust, governmental and / or regulatory inspections, inquiries, investigations and proceedings, including patent, tax and commercial matters that arise from time to time in the ordinary course of business. Most of the claims involve complex issues. The Company assisted by their external legal counsel assesses the need to make provision or disclose a contingency on a case- to-case basis considering the underlying facts of each litigation.

Ÿ[We evaluated the design and tested the operating e�ectiveness of controls ] relating to identification and evaluation of claims, proceedings and investigations at di�erent levels in the Company, and the measurement of provisions for disputes, potential claims and litigation, contingent liabilities and disclosures.

Ÿ[We obtained a list of ongoing litigations from the Company’s in-house legal ] counsel. We selected a sample of litigations based on materiality and performed inquiries with the said counsel on the legal evaluation of these litigations. We compared the evaluation with the provision or disclosure in the standalone Ind AS �nancial statements. We tested the underlying computation of the management in relation to the measurement of provision or the contingency.

This area is signi�cant to our audit, since the accounting and disclosure for contingent legal and tax liabilities is complex and judgmental (due to the di�culty in predicting the outcome of the matter and estimating the potential impact if the outcome is unfavourable), and the amounts involved are, or can be, material to the standalone Ind AS �nancial statements.

Ÿ[We obtained legal letters from the Company’s external legal advisors with ] respect to the matters included in the summary. Where appropriate, we examined correspondences connected with the cases.

Ÿ[We inspected relevant communication with tax authorities. ]

Ÿ[We involved tax experts in assessing the nature and amount of material indirect ] tax positions and assessed the technical merits based on the correspondence and assessments from the relevant tax authorities.
Ÿ[We also evaluated the disclosures made in the standalone Ind AS �nancial ] statements.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

INDEPENDENT AUDITORS' REPORT (CONTINUED)

Key audit matters How our audit addressed the key audit matter Rebates, discounts and other deductions in Revenue (as described in note 1.3(�� o� t�e si�ni�cant acco�ntin� �o�icies o� standa�one �nd �� nancia� state�ents and note �.1� o� t�e standa�one �nd �� nancia� state�ents�

Revenue is recognised net of accrual for chargeback,	Our audit procedures, among others included the following:
rebates, sales returns and discounts, etc. The estimates relating to the accruals are important given the signifcance of revenue and also considering the	Ÿ We obtained an understanding, evaluated the design and tested the operating e�ectiveness of internal controls over the sales deduction processes.
distinctive terms of arrangement with customers.	Ÿ We also tested management’s controls over the accuracy and completeness of
These estimates are complex and requires signifcant	the estimates used to calculate the sales deductions.
judgement and estimation by the Company for establishing an appropriate accrual. Accuracy of revenues may deviate on account of change in judgements and estimates. Accordingly, the same has been considered as a key audit matter.	Ÿ We tested management’s estimated sales deductions and obtained management’s calculations for the respective estimates. We tested management’s estimates over the determination of sales deductions accruals by comparing the rates used in management’s estimate to rates in the underlying contracts and historical sales deductions data.
	Ÿ We compared the assumptions to contracted prices, historical rebates,
	discounts, allowances and returns, as applicable to current payment trends.
	Ÿ We also considered the historical accuracy of the management’s estimates in
	prior years and assessed the estimated amounts, we evaluated trends in actual
	sales and discount accrual balances.
	Ÿ We also tested the underlying data used in management's calculations for
	accuracy and completeness and veri�ed source data supporting the inventory
	levels, rebate claims paid subsequent to period end, and volume discounts
	settled during the period.
	Ÿ We tested recording of revenue in appropriate period which included the
	following procedures:
	Ÿ Performed trend analysis over sales levels as compared to previous periods;
	Ÿ Veri�ed sample sales transactions near period-end.

Other Information

The Company’s Board of Directors is responsible for the other information. The other information comprises the Statutory reports, Management discussion and analysis, corporate governance and Board’s report included in the Annual report, which we obtained prior to the date of this auditor’s report, and Corporate Overview and letter from Chairman and Co-Chairman included in the Annual report, which is expected to be made available to us after that date. The other information does not include the standalone Ind AS �nancial statements and our auditor’s report thereon.

Our opinion on the standalone Ind AS �nancial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone Ind AS �nancial statements, our responsibility is to read the other information and, in doing so, consider whether such other information is materially inconsistent with the �nancial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management for the standalone Ind AS Financial Statements

The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone Ind AS �nancial statements that give a true and fair view of the �nancial position, �nancial performance including other comprehensive income, cash �ows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) speci�ed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, ��15, as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal �nancial controls, that were operating e�ectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS �nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone Ind AS �nancial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company’s �nancial reporting process.

INDEPENDENT AUDITORS' REPORT (CONTINUED)

Auditor’s Responsibilities for the Audit of the standalone Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone Ind AS Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to in�uence the economic decisions of users taken on the basis of these standalone Ind AS �nancial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Ÿ[Identify and assess the risks of material misstatement of the standalone Ind AS �nancial statements, whether due to fraud or error, design and ] perform audit procedures responsive to those risks, and obtain audit evidence that is su�cient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Ÿ[Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. ] Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal �nancial controls with reference to �nancial statements in place and the operating e�ectiveness of such controls.
Ÿ[Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by ] management.
Ÿ[Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, ] whether a material uncertainty exists related to events or conditions that may cast signi�cant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the �nancial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Ÿ[Evaluate the overall presentation, structure and content of the standalone Ind AS �nancial statements, including the disclosures, and whether ] the standalone Ind AS �nancial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and signi�cant audit �ndings, including any signi�cant de�ciencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most signi�cance in the audit of the standalone Ind AS �nancial statements for the �nancial year ended 31 March 2021 and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest bene�ts of such communication.

Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the “Annexure 1” a statement on the matters speci�ed in paragraphs 3 and 4 of the Order.
As required by Section 143(3) of the Act, we report that:
a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
c) The Balance Sheet, the Statement of Pro�t and �oss including the Statement of Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;
d) In our opinion, the aforesaid standalone Ind AS �nancial statements comply with the Accounting Standards speci�ed under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;
e) On the basis of the written representations received from the directors as on 31 March 2021 taken on record by the Board of Directors, none of the directors is disquali�ed as on 31 March 2021 from being appointed as a director in terms of Section 164 (2) of the Act;
f) With respect to the adequacy of the internal �nancial controls with reference to these standalone Ind AS �nancial statements and the operating e�ectiveness of such controls, refer to our separate Report in “Annexure 2” to this report;
g) In our opinion, the managerial remuneration for the year ended March 31, 2021 has been paid / provided by the Company to its directors in accordance with the provisions of section 197 read with Schedule V to the Act;

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

INDEPENDENT AUDITORS' REPORT (CONTINUED)

h) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its �nancial position in its standalone Ind AS �nancial statements– Refer Note 2.29(A) to the standalone Ind AS �nancial statements�
ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts – Refer Note 2.27 to the standalone Ind AS �nancial statements�
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

for S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004

per S Balasubrahmanyam

Partner Membership Number: 53315 UDIN : 21053315AAAABK8303

Place: Chennai Date : 14 May 2021

ANNEXURE 1 TO THE INDEPENDENT AUDITORS' REPORT OF EVEN DATE ON THE STANDALONE IND AS FINANCIAL STATEMENTS OF DR. REDDY’S LABORATORIES LIMITED

(i) a) The Company has maintained proper records showing full particulars, including quantitative details and situation of �xed assets.
b) All �xed assets have not been physically veri�ed by the management during the year but there is a regular programme of veri�cation which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such veri�cation.
c) According to the information and explanations given by the management, the title deeds of immovable properties, included in property, plant and equipment are held in the name of the Company, except for the immovable properties acquired during the current year. As explained to us, Registration of title deeds is in progress in respect of an immovable property acquired during the year aggregating Rs. 194 million.
(ii) The management has conducted physical veri�cation of inventory at reasonable intervals during the year and no material discrepancies were noticed on such physical veri�cation. Inventories lying with third parties have been con�rmed by them as at 31 �arch 2021 and no material discrepancies were noticed in respect of such con�rmations.
(iii) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, �rms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Accordingly, the provisions of clause 3 (iii) (a), (b) and (c) of the Order are not applicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to us, the Company has not advanced loans to directors / to a company in which the Director is interested to which provisions of section 185 of the Companies Act, 2013 apply and hence not commented upon. In our opinion and according to the information and explanations given to us, the Company has made investments and given guarantees/provided security which is in compliance with the provisions of section 186 of the Companies Act, 2013.
(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Accordingly, the provisions of clause 3(v) of the Order are not applicable.
(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148(1) of the Companies Act, 2013, and are of the opinion that prima facie, the speci�ed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.
(vii) a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees’ state insurance, income-tax, duty of customs, goods and service tax, cess and other statutory dues applicable to it.
b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employees’ state insurance, income-tax, duty of customs, goods and service tax, cess and other statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.
c) According to the records of the Company, the dues of income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax and cess on account of any dispute, are as set out in Appendix 1.
(viii) In our opinion and according to the information and explanations given by the management, the Company has not defaulted in repayment of loans or borrowing to banks or government. There are no dues which are payable to �nancial institutions. The Company did not have any debenture holders during the year.
(ix) According to the information and explanations given by the management, the Company has not raised any money by way of initial public o�er/ further public o�er/ debt instruments and term loans hence, reporting under clause (ix) is not applicable to the Company and hence not commented upon.
(x) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the standalone Ind AS �nancial statements and according to the information and explanations given by the management, we report that no fraud by the Company or no material fraud on the Company by the o�cers and employees of the Company has been noticed or reported during the year.
(xi) According to the information and explanations given by the management, the managerial remuneration has been paid / provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act, 2013.
(xii) In our opinion, the Company is not a nidhi company. Therefore, the provisions of clause 3 (xii) of the order are not applicable to the Company and hence not commented upon.
(xiii) According to the information and explanations given by the management, transactions with the related parties are in compliance with section 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the notes to the standalone Ind AS �nancial statements, as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and on an overall examination of the balance sheet, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and hence, reporting requirements under clause 3(xiv) are not applicable to the company and, not commented upon.

101

100

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

ANNEXURE 1 TO THE INDEPENDENT AUDITORS' REPORT OF EVEN DATE ON THE STANDALONE IND AS FINANCIAL STATEMENTS OF DR. REDDY’S LABORATORIES LIMITED (CONTINUED)

(xv) According to the information and explanations given by the management, the Company has not entered into any non-cash transactions with directors or persons connected with him as referred to in section 192 of Companies Act, 2013.
(xvi) According to the information and explanations given to us, the provisions of section 45-IA of the Reserve Bank of India Act, 1934 are not applicable to the Company.

ANNEXURE 2 TO THE INDEPENDENT AUDITORS' REPORT OF EVEN DATE ON THE STANDALONE IND AS FINANCIAL STATEMENTS OF DR. REDDY’S LABORATORIES LIMITED

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal �nancial controls with reference to standalone Ind AS �nancial statements of Dr. Reddy’s �aboratories �imited (“the Company”) as of 31 March 2021 in conjunction with our audit of the standalone Ind AS �nancial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

for S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004 per S Balasubrahmanyam

Partner

Membership Number: 53315 UDIN : 21053315AAAABK8303 Place: Chennai Date: 14 May 2021

APPENDIX 1 AS REFERRED TO IN PARAGRAPH vii(c) OF ANNEXURE 1 TO INDEPENDENT AUDITORS’ REPORT	APPENDIX 1 AS REFERRED TO IN PARAGRAPH vii(c) OF ANNEXURE 1 TO INDEPENDENT AUDITORS’ REPORT	APPENDIX 1 AS REFERRED TO IN PARAGRAPH vii(c) OF ANNEXURE 1 TO INDEPENDENT AUDITORS’ REPORT	APPENDIX 1 AS REFERRED TO IN PARAGRAPH vii(c) OF ANNEXURE 1 TO INDEPENDENT AUDITORS’ REPORT
Name of the Statute	Nature of the dues	Disputed Amount in ₹ Million Amount Paid under protest in ₹ Million	Period to which the amount relates Forum where dispute is Pending
Central Excise Act, 1944	Excise Duty, Interest and Penalty	1,778 406 54 89	2001-2019 Appellate Authority - upto Commissioners
			2003-2017 CESTAT
			High Court 2002-2008
Customs Act, 1962	Custom Duty	41 6 6	2010-2020 Appellate Authority - upto Commissioners
			2010-2011 High Court
Finance Act, 1994	Cenvat Credit of Service Tax, Interest and Penalty	110 29 177 6	2012- 2016 CESTAT
			2005- 2016 Appellate Authority - upto Commissioners
	Service Tax and Penalty		CESTAT 2010-2015
Central Sales Tax Act and Sales Tax Acts of various States	Sales Tax and Penalty	103 69 207 73	2002-2015 Sales Tax Appellate Tribunal.
			2003-2018 Appellate Tribunal - Upto Commissioners
			High Court 2007-2014
CGST Act , 2017	GST	22	2017-2019 Appellate Authority – upto Commissioners
Income Tax Act, 1961	Income Tax	2 90	2002-2003 High Court
			2017-2019 Commissioner Appeal

The Company’s Management is responsible for establishing and maintaining internal �nancial controls based on the internal control over �nancial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (“ICAI”). These responsibilities include the design, implementation and maintenance of adequate internal �nancial controls that were operating e�ectively for ensuring the orderly and e�cient conduct of its business, including adherence to the Company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable �nancial information, as required under the Companies Act, 2013.

Auditor’s Responsibility

Our responsibility is to express an opinion on the Company's internal �nancial controls with reference to these standalone Ind AS �nancial statements based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) and the Standards on Auditing as speci�ed under section 143(10) of the Act, to the extent applicable to an audit of internal �nancial controls, both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal �nancial controls with reference to standalone Ind AS �nancial statements was established and maintained and if such controls operated e�ectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal �nancial controls with reference to these standalone Ind AS �nancial statements and their operating e�ectiveness. Our audit of internal �nancial controls with reference to standalone Ind AS �nancial statements included obtaining an understanding of internal �nancial controls with reference to these standalone Ind AS �nancial statements, assessing the risk that a material weakness exists, and testing and evaluating the design and operating e�ectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the standalone Ind AS �nancial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is su�cient and appropriate to provide a basis for our audit opinion on the Company’s internal �nancial controls with reference to these standalone Ind AS �nancial statements.

Meaning of Internal Financial Controls With Reference to these Standalone Ind AS Financial Statements

A company's internal �nancial controls with reference to standalone Ind AS �nancial statements is a process designed to provide reasonable assurance regarding the reliability of �nancial reporting and the preparation of �nancial statements for external purposes in accordance with generally accepted accounting principles. A company's internal �nancial controls with reference to standalone Ind AS �nancial statements includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly re�ect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of �nancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company's assets that could have a material e�ect on the standalone Ind AS �nancial statements.

Inherent Limitations of Internal Financial Controls With Reference to these Standalone Ind AS Financial Statements

Because of the inherent limitations of internal �nancial controls with reference to standalone Ind AS �nancial statements, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal �nancial controls with reference to standalone Ind AS �nancial statements to future periods are subject to the risk that the internal �nancial control with reference to standalone Ind AS �nancial statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, adequate internal �nancial controls with reference to standalone Ind AS �nancial statements and such internal �nancial controls with reference to standalone Ind AS �nancial statements were operating e�ectively as at 31 March 2021, based on the internal control over �nancial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note issued by the ICAI.

for S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004 per S Balasubrahmanyam Partner

Membership Number: 53315 UDIN : 21053315AAAABK8303

Place: Chennai Date: 14 May 2021

103

102

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

BALANCE SHEET

BALANCE SHEET
(All amounts in Indi	an Rupees millions, except share data and where otherwise stated)
PARTICULARS NOTE	AS AT 31 MARCH 2020 AS AT 31 MARCH 2021
Assets
Non-current assets
2.1 Property, plant and equipment	�� ��
Capital work-in-progress	�� ��
2.2 Goodwill	�� ��
2.3 Other intangible assets	�� ��
2.4 Intangible assets under development	�� ��
Financial assets
2.5 A Investments	�� ��
2.5 B Trade receivables	�� ��
2.5 C Loans	�� ��
2.5 D Other �nancial assets	�� ��
2.26 Deferred tax assets,net	�� ��
Tax assets,net	�� ��
2.6 A Other non-current assets	�� ��
	�� ��
Current assets
2.7 Inventories	�� ��
Financial assets
2.5 A Investments	�� ��
2.5 B Trade receivables	�� ��
2.27 Derivative instruments	�� ��
2.5 E Cash and cash equivalents	�� ��
2.5 D Other �nancial assets	�� ��
2.6 B Other current assets	�� ��
	�� ��
Total assets	�� ��

Equity and Liabilities
Equity
2.8 Equityshare capital	�� ��
Other equity	�� ��
	�� ��
Liabilities
Non-current liabilities
Financial liabilities
Borrowings 2.9 A	�� ��
Provisions 2.10 A	�� ��
Deferred tax liabilities,net 2.26	- -
Other non-current liabilities 2.11 A	�� ��
	�� ��
Current liabilities
Financial liabilities
2.9 B Borrowings	�� ��
2.9 C Tradepayables
Total outstanding dues of micro enterprises and small enterprises	�� ��
Total outstanding dues of creditors other than micro enterprises and small enterprises	�� ��
2.27 Derivative instruments	�� ��
2.9 D Other �nancial liabilities	�� ��
2.10 B Provisions	�� ��
2.11 B Other current liabilities	�� ��
	�� ��
Total equity and liabilities	�� ��
The accompanyingnotes are an integralpart of the �nancial statements�

As per our report of even date attached for and on behalf of the Board of Directors of Dr. Reddy's Laboratories Limited for S.R. Batliboi & Associates LLP Chartered Accountants ICAI Firm Registration Number: 101049W/E300004 K Satish Reddy Chairman, DIN: 00129701 per S Balasubrahmanyam G V Prasad Co-Chairman & Managing Director, DIN: 00057433 Partner Erez Israeli Chief Executive ��cer Membership Number: 53315 Parag Agarwal Chief Financial ��cer UDIN : 21053315AAAABK8303 Sandeep Poddar Company Secretary Place: Chennai Place: Hyderabad Date: 14 May 2021 Date: 14 May 2021

STATEMENT OF PROFIT AND LOSS

		(All amounts in Indian Rupees millions, except	(All amounts in Indian Rupees millions, except	share data and where otherwise stated)
PARTICULARS		NOTE	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Income
Sales		2.12	��	��
Service income and License fees		2.12	��	��
Other operatingincome		2.13	��	��
Total revenue from operations			��	��
Other income		2.14	��	��
Total income			��	��

Expenses
Cost of materials consumed			��	��
Purchase of stock-in-trade			��	��
Changes in inventories of �nished goods� work-in-progress and stock-in-trade		2.15	(��)	(��)
Employee bene�ts expense		2.16	��	��
Depreciation and amortisation expense		2.17	��	��
Impairment of non current assets			��	-
Finance costs		2.18	��	��
Sellingand other expenses		2.19	��	��
Total expenses			��	��

Pro�t before tax			��	��
Tax expense/(bene�t)		2.26
Current tax			��	��
Deferred tax			��	(��)
Pro�t for theyear			��	��

Other comprehensive income(OCI)
Items that will not be reclassi�ed subsequently to pro�t or loss			(��)	��
Income tax on items that will subsequently to pro�t or loss	not be reclassi�ed		��	(��)
			(��)	��
Items that will be reclassi�ed	subsequentlytopro�t or loss		��	(��)
Income tax on items that will pro�t or loss	be reclassi�ed subsequently to		(��)	��
			��	(��)
Total other comprehensive income/(loss)for theyear,net of tax			��	(��)

Total comprehensive income for theyear			��	��
Earningsper share:		2.22
Basic earningsper share of ₹	5/- each		��	��
Diluted earningsper share of	5/- each ₹		��	��
The accompanyingnotes are	an integralpart of the �nancial statements�
As per our report of even date attached		for and on behalf of	the Board of Directors ofDr. Reddy's Laboratories Limited
for S.R. Batliboi & Associates LLP
Chartered Accountants
ICAI Firm Registration Number:	101049W/E300004	K Satish Reddy	Chairman, DIN: 00129701
per S Balasubrahmanyam		G V Prasad	Co-Chairman & Managing Director, DIN: 00057433
Partner		Erez Israeli	Chief Executive O�cer
Membership Number: 53315		Parag Agarwal	Chief Financial O�cer
UDIN : 21053315AAAABK8303		Sandeep Poddar	Company Secretary
Place: Chennai		Place: Hyderabad
Date: 14 May 2021		Date: 14 May 2021

105

104

Dr. Reddy’s Laboratories Limited

(All amounts in Indian Rupees millions, except share data and where otherwise stated) Balance as at 1 April 2020 (A) �� (��) (��) (��) - �� �� �� �� �� �� (��) �� PARTICULARS Equity share capital Treasury (1) shares Securities (2) premium Share- based payment (3) reserve Capital (4) reserve Capital redemption (5) reserve General (6) reserve Retained earnings Special economic zone re- investment (10) reserve Cash �o� hedge (7) reserve FVTOCI (8) reserve Remeasurements of the net de�ned (9) bene�ts plan Total equity Reserves and surplus Other comprehensive income Other components of equity**	Pro�t for the year �� - - - - �� - - - - - - -	Net change in fair value of FVTOCI** equity instruments, net of tax bene�t of Nil ₹ �� - �� - - - - - - - - - -	Transfer on disposal of equity instruments classi�ed as FVTOCI instruments - - (�) - - � - - - - - - -	��ective portion of changes in fair value of cash �o� hedges, net of tax expense of ₹ 346 (Refer note 2.27) �� - - �� - - - - - - - - -	Actuarial gain/(loss) on post-employment bene�t obligations, net of tax bene�t of ₹ 62 (Refer note 2.25) (��) (��) - - - - - - - - - - -	Total comprehensive income (B) �� (��) �� �� - �� - - - - - - -	Transactions with owners of the Company	Contributions and distributions	Issue of equity shares on exercise of options (Refer note 2.8) �� - - - - - - - - (��) �� �� �	Share-based payment expense (Refer note 2.24) �� - - - - - - - - �� - - -	Purchase of treasury shares, net (��) - - - - - - - - - - (��) -	Dividend paid (��) - - - - (��) - - - - - - -	Total contributions and distributions (��) - - - - �� - - - �� �� �� �	Changes in ownership interests - - - - - - - - - - - - -	Total transactions with owners of the Company (C) (��) - - - - (��) - - - �� �� (��) �	Transfer to special economic zone re-investment reserve �� (��) - - - - - - - - - - -	Transfer from special economic zone re-investment reserve on utilization - (��) �� - - - - - - - - - -	(10) Transfer to special economic zone re-investment reserve, net (D) - - - - �� (��) - - - - - - -	Balance as at 31 March 2021 [(A)+(B)+(C)+(D)] �� (��) � �� �� �� �� �� �� �� �� (��) ��	Balance as at 1 April 2019 (A) �� (��) � �� �� �� �� �� �� �� (��) �� PARTICULARS Equity share capital Treasury (1) shares Securities (2) premium Share- based payment (3) reserve Capital (4) reserve Capital redemption (5) reserve General (6) reserve Retained earnings Special economic zone re- investment (10) reserve Cash �o� hedge (7) reserve FVTOCI (8) reserve Remeasurements of the net de�ned (9) bene�ts plan Total equity Reserves and surplus Other comprehensive income Other components of equity**	Pro�t for the year �� - - - - �� - - - - - - -	Net change in fair value of FVTOCI** equity instruments, net of tax bene�t of Nil ₹ (��) - (��) - - - - - - - - - -	Transfer on disposal of equity instruments classi�ed as FVTOCI instruments - - (�) - - � - - - - - - -	��ective portion of changes in fair value of cash �o� hedges, net of tax bene�t of 25� ₹ (Refer note 2.27) (��) - - (��) - - - - - - - - -	Actuarial gain/(loss) on post-employment bene�t obligations, net of tax expense of 33 ₹ (Refer note 2.25) �� �� - - - - - - - - - - -	Total comprehensive income (B) �� �� (��) (��) - �� - - - - - - -	Transactions with owners of the Company	Contributions and distributions	Issue of equity shares on exercise of options (Refer note 2.8) � - - - - - - - - (��) �� � �	Share-based payment expense (Refer note 2.24) �� - - - - - - - - �� - - -	Purchase of treasury shares, (��) - - - - - - - - - - (��) -	Dividend paid (including dividend distribution tax) (��) - - - - (��) - - - - - - -	Total contributions and distributions (��) - - - - �� - - - �� �� �� �	Changes in ownership interests - - - - - - - - - - - - -	Total transactions with owners of the Company (C) (��) - - - - (��) - - - �� �� (��) �	- Balance as at 31 March 2020 [(A)+(B)+(C)] �� (��) (��) (��) - �� �� �� �� �� �� (��) ��	Roun�e� o� to millions� *FVTOCI represents fair value through other comprehensive income

STATEMENT OF CHANGES IN EQUITY(CONTINUED) (All amounts in Indian Rupees millions, except share data and where otherwise stated)	Pursuant to the special resolution approved by the shareholders in the Annual General Meeting held on 27 July 2018, the Dr. Reddy’s Employees ESOS Trust (the “ESOS Trust”) was formed to support the (1)	Dr. Reddy’s Employees Stock Option Scheme, 2018 by acquiring, including through secondary market acquisitions, equity shares which are used for issuance to eligible employees upon exercise of stock	options thereunder. Refer note 2.24 of these �nancial statements for further details on the Dr. Reddy’s Employees Stock Option Scheme, 2018.	Securities premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of Section 52 of the Companies Act, 2013. (2)	Share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to employees as part of their remuneration. Refer note 2.24 for further details of these plans. (3)	The Company recognises pro�t or loss on purchase, sale, issue or cancellation of the Company’s own equity instruments to capital reserve. (4)	As per Companies Act, 2013, capital redemption reserve is created when company purchases its own shares out of free reserves or securities premium. A sum equal to the nominal value of the shares so (5)	purchased is transferred to capital redemption reserve. The reserve is utilised in accordance with the provisions of Section 69 of the Companies Act, 2013.	The general reserve is a free reserve which is used from time to time to transfer pro�ts from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of (6)	equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassi�ed subsequently to statement of pro�t and loss.	The cash �ow hedging reserve represents the cumulative e�ective portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for cash �ow hedges. (7)	Such gains or losses will be reclassi�ed to statement of pro�t and loss in the period in which the hedged transaction occurs.	This reserve represents mark to market gain or loss on �nancial assets classi�ed as F�TOCI. Depending on the category and type of the �nancial asset, the mark to market gain or loss is either reclassi�ed to (8)	statement of pro�t and loss or retained earnings upon disposal of the investment.	Remeasurements of the net de�ned bene�ts plan reserve comprises the cumulative net gains/ losses on actuarial valuation of post-employment obligations. Refer note 2.25 for further details. (9)	The Company has created a Special Economic Zone (“SEZ”) Reinvestment Reserve out of pro�ts of its eligible SEZ Units in accordance with the terms of Section 10AA(1) of the Indian Income Tax Act, 1961. This reserve is to be utilized by the Company for acquiring Plant and equipment in accordance with Section 10AA(2) of such Act. The accompanying notes are an integral part of the �nancial statements. As per our report of even date attached for and on behalf of the Board of Directors ofDr. Reddy's Laboratories Limited (10) Company Overview	for S.R. Batliboi & Associates LLP	Chartered Accountants ICAI Firm Registration Number: 101049W/E300004 per S Balasubrahmanyam K Satish Reddy Chairman, DIN: 00129701 G V Prasad Co-Chairman & Managing Director, DIN: 00057433 Statutory	UDIN : 21053315AAAABK8303 Membership Number: 53315 Partner Erez Israeli Chief Executive O�cer Sandeep Poddar Company Secretary Parag Agarwal Chief Financial O�cer Reports	Place: Chennai Date: 14 May 2021 Place: Hyderabad Date: 14 May 2021 Financial Statements	Annual Report 2020-21

107

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

STATEMENT OF CASH FLOWS

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

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|The accompanying notes are an integral part of the �nancial statements.|
|As per our report of even date attached|for and on behalf of the Board of Directors of|Dr. Reddy's Laboratories Limited|
|for|S.R. Batliboi & Associates LLP|
|Chartered Accountants|
|ICAI Firm Registration Number: 101049W/E300004|K Satish Reddy|Chairman, DIN: 00129701|
|per|S Balasubrahmanyam|G V Prasad|Co-Chairman & Managing Director, DIN: 00057433|
|Partner|Erez Israeli|Chief Executive ��cer|
|Membership Number: 53315|Parag Agarwal|Chief Financial ��cer|
|UDIN : 21053315AAAABK8303|Sandeep Poddar|Company Secretary|

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NOTE 1 | DESCRIPTION OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

1.1 DESCRIPTION OF THE COMPANY

Dr. Reddy’s Laboratories Limited (“Dr. Reddy’s” or “the Company”) is a leading India-based pharmaceutical company headquartered and having its registered o�ce in Hyderabad, Telangana, India. Through its three businesses - Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products – the Company o�ers a portfolio of products and services, including Active Pharmaceutical Ingredients (“APIs”), Custom Pharmaceutical Services (“CPS”), generics, biosimilars and di�erentiated formulations.

The Company’s principal research and development facilities are located in the states of Telangana and Andhra Pradesh in India; its principal manufacturing facilities are located in the states of Telangana, Andhra Pradesh and Himachal Pradesh in India; and its principal markets are in India, Russia, the United States, the United Kingdom and Germany. The Company's shares trade on the Bombay Stock Exchange, the National Stock Exchange, the NSE IFSC Limited in India and on the New York Stock Exchange in the United States.

1.2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS

a) Statement of compliance

These �nancial statements as of and for the year ended 31 March 2021 comply in all material aspects with the Indian Accounting Standards ("Ind AS") noti�ed under the Companies (Indian Accounting Standards) Rules, 201�, and presentation requirements of Division II of Schedule III to the Companies Act, 2013, and as amended from time to time together with the comparative period data as at and for the year ended 31 March 2020.

These �nancial statements have been prepared by the Company as a going concern on the basis of relevant Ind AS that are e�ective or elected for early adoption at the Company’s annual reporting date, 31 March 2021. These �nancial statements were authorised for issuance by the Company’s Board of Directors on 14 May 2021.

b) Basis of measurement

These �nancial statements have been prepared on the historical cost convention and on an accrual basis, except for the following material items in the balance sheet:
Ÿ[derivative �nancial instruments are measured at fair value;]
Ÿ[�nancial assets are measured either at fair value or at amortised cost depending on the classi�cation;]
Ÿ[employee de�ned bene�t assets/(liabilities) are recognised as the net total of the fair value of plan assets, adjusted for actuarial ] gains/(losses) and the present value of the de�ned bene�t obligation;
Ÿ[ long-term borrowings are measured at amortised cost using the e�ective interest rate method;]
Ÿ[share-based payments are measured at fair value;]
Ÿ[assets held for sale are measured at fair value;]
Ÿ[assets acquired and liabilities assumed as part of business combinations are measured at fair value; and]
Ÿ[right-of-use the assets are recognised at the present value of lease payments that are not paid at that date. This amount is adjusted for ] any lease payments made at or before the commencement date, lease incentives received and initial direct costs, incurred, if any.

c) Functional and presentation currency

These �nancial statements are presented in Indian rupees, which is the functional currency of Dr. Reddy’s Laboratories Limited. All �nancial information presented in Indian rupees has been rounded to the nearest million.

d) Use of estimates and judgements

The preparation of �nancial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that a�ect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may di�er from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods a�ected. In particular, information about signi�cant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most signi�cant e�ect on the amounts recognised in the �nancial statements is included in the following notes:

Ÿ[Note 1.2 (c) — Assessment of functional currency;]
Ÿ[Note 1.3 (c) — Financial instruments;]
Ÿ[Note 1.3 (d) — Business combinations; ]
Ÿ[Notes 1.3 (e) and 1.3 (f) — Useful lives of property, plant and equipment and intangible assets;]
Ÿ[Notes 1.3(g) — Determinationof cost for right-of-use assets and lease term;]
Ÿ[Note 1.3 (h) — Valuation of inventories;]
Ÿ[Note 1.3 (i) — Measurement of recoverable amounts of cash-generating units;]
Ÿ[Note 1.3 (j) — Assets and obligations relating to employee bene�ts;]
Ÿ[Note 1.3 (j) — Share-based payments;]
Ÿ[Note 1.3 (k) — Provisions and other accruals;]
Ÿ[Note 1.3 (l) —Measurement of transaction price in a revenue transaction (sales returns, rebates and chargeback provisions);]
Ÿ[Note 1.3 (n) — Evaluation of recoverability of deferred tax assets, and estimation of income tax payable and income tax expense in ] relation to an uncertain tax position; and
Ÿ[Note 1.3 (k) — Contingencies]

Place: Chennai Place: Hyderabad 108 Date: 14 May 2021 Date: 14 May 2021

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Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

e) Current and non-current c�assi�cation

All assets and liabilities have been classi�ed as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013 and Ind AS 1, Presentation of Financial Statements.

Assets:

An asset is classi�ed as current when it satis�es any of the following criteria:

Ÿ[it is expected to be realised in, or is intended for sale or consumption in, the Company’s normal operating cycle;]
Ÿ[it is held primarily for the purpose of being traded;]
Ÿ[it is expected to be realised within twelve months after the reporting date; or]
Ÿ[it is cash or a cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the ] reporting date.

Liabilities:

A liability is classi�ed as current when it satis�es any of the following criteria:

Ÿ[it is expected to be settled in the Company’s normal operating cycle;]
Ÿ[it is held primarily for the purpose of being traded;]
Ÿ[it is due to be settled within twelve months after the reporting date; or]
Ÿ[the Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting ] date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not a�ect its classi�cation.

Current assets and liabilities include the current portion of non-current assets and liabilities respectively. All other assets and liabilities are classi�ed as non-current. �eferred tax assets and liabilities are always classi�ed as non-current.

f) Prior period

Prior period amounts have been reclassi�ed to conform to the current year classi�cation.

1.3 SIGNIFICANT ACCOUNTING POLICIES

a) New Standards adopted by the Company

On 24 July 2020, the Ministry of Corporate A�airs (MCA) has issued amendments to certain Ind AS as summarised below:

Amendments to Ind AS 1 and Ind AS 8: De�nition of Material

The amendments provided a new de�nition to the word material as follows:

‘Information is material if omitting, misstating or obscuring it could reasonably be expected to in�uence decisions t�at t�e primary users of general-purpose �nancial statements ma�e on t�e basis of t�ose �nancial statements, ��ic� pro�ide �nancial information about a speci�c reporting entity.’

The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the �nancial statements. A misstatement of information is material if it could reasonably be expected to in�uence decisions made by the primary users.

An information is considered to be obscured if it is communicated in a way that would have a similar e�ect for primary users of �nancial statements to omitting or misstating that information. The amendments provided examples of circumstances that may result in information being obscured.

An entity should apply the amendments prospectively for annual periods beginning on or after 1 April 2020.

The amendments to the de�nition of material had no impact on the �nancial statements of the Company.

Amendments to Ind AS 103: De�nition of a Business

The amendments clari�ed the de�nition of a business for the purpose of identifying a business combination under Ind AS 103. As per the revised de�nition, business is ‘an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends or interest) or generating other income from ordinary activities’.

A related amendment has been made to the de�nition of ‘output’ as an element of business.

The amendments include an election to use a ‘concentration test’. This is a simpli�ed assessment that would cause an acquisition to qualify as an asset acquisition. The concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identi�able asset or a group of similar identi�able assets.

An entity is required to apply the amendments to business combinations for which the acquisition date is on or after the beginning of the �rst annual reporting period beginning on or after the 1 April 2020 and to asset acquisitions that occur on or after the beginning of that period.

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

The amendments to Ind AS 107 " Financial Instruments: Disclosures " prescribe the disclosures which entities are required to make for hedging relationships to which the reliefs as per the amendments in Ind AS 109 are applied.

These amendments are applicable for annual periods beginning on or after the 1 April 2020.

These amendments had no impact on the �nancial statements of the Company as it does not have any interest rate hedge relationships.

Amendments Ind AS 116: COVID-19 related rent concessions

Ind AS 116 has been amended to provide limited relief to lessees in respect of rent concessions arising due to COVID-19 pandemic. No relief has been allowed to the lessors.

The amendments provide a practical expedient that lessees may elect to not treat any rent concessions, provided by lessors as a direct consequence of COVID-19 pandemic, as lease modi�cations. �owever, to be eligible for this relief:

Ÿ[the revised consideration for the lease should be less than or equal to the lease consideration immediately before the change, the rent ] concession should be for a period that does not extend beyond 30 June 2021 (for example, lease rents are reduced for a period upto 30 June 2021 and increased for periods thereafter); and
Ÿ[there should be no substantial modi�cation to the other terms and conditions of the lease.]

Lessee should apply the amendments for annual reporting periods beginning on or after 1 April 2020. In case a lessee has not yet approved the �nancial statements for issue before the issuance of the amendments, then the same may be applied for annual reporting periods beginning on or after the 1 April 2019.

The aforesaid amendments had no impact on the �nancial statements of the Company.

For the year ended 31 March, 2020

Ind AS 116, “Leases”

On 30 March 2019, the Ministry of Corporate A�airs (MCA) noti�ed Ind AS 116, Leases as part of the Companies (Indian Accounting Standards (Ind AS)) Amendment Rules, 2019. Ind AS 116 replaces existing standard on leases i.e. Ind AS 17, Leases with e�ect from accounting periods beginning on or after 1 April 2019.

The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and �nance leases. Lessor accounting, however, remains largely unchanged and the distinction between operating and �nance leases is retained.

Impact of the implementation of Ind AS 116 on the Company:

The Company adopted Ind AS 116 e�ective as of 01 April 2019. Ind AS 116, “ Leases ” changed the financial statements of the Company as the majority of leases for which the Company is the lessee became on-balance sheet liabilities with corresponding right-of-use assets also recognised on the Balance sheet. The lease liability re�ects the net present value of the remaining lease payments adjusted for payments made before the commencement date, lease incentives and other items related to the lease agreement, and the right-of-use asset corresponds to the lease liability.

Upon adoption of the new standard, a portion of the annual operating lease costs, which was previously fully recognised as a rental / lease expense, is recorded as interest expense. In addition, the portion of the lease payments which represents the reduction of the lease liability is recognised in the statement of cash �ows as an out�ow from �nancing activities, which was previously fully recognised as an out�ow from operating activities.

The Company implemented the new standard on 1 April 2019, and applied the modi�ed retrospective method, with right-of-use assets measured at an amount equal to the lease liability, adjusted by the amount of the prepaid or accrued lease payments relating to those leases recognised in the balance sheet immediately before the date of initial application and will not restate prior years.

The Company elected to use the transition practical expedient that allows the standard to be applied only to contracts previously identi�ed under Ind AS 17, “ Leases ” and the contracts assessed using the guidance available under Appendix – C to Ind AS 17, “Determining Whether an Arrangement Contains a Lease”.

The Company also elected to use the recognition exemption for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option (“short-term leases”) and lease contracts for which the underlying asset is of low value (“low value assets”).

On 1 April 2019, the Company recognised lease liabilities of 332 (presented as part of borrowings) and right-of-use assets of 332 ₹ ₹ (presented as part of Property, plant and equipment).

Consequently, the Company has recognised an amount of 173 in depreciation expense and 60 in �nance costs for the year ended ₹ ₹ 31 March 2020.

Adoption of the new standard had no impact upon leases for which the Company is a lessor.

Appendix C to Ind AS 12, “Uncertainty over Income Tax Treatments”

This amendment had no impact on the �nancial statements of the Company but may impact future periods should the Company enter into any business combinations.

Amendments to Ind AS 109 and Ind AS 107: Interest Rate Benchmark Reform

The amendments to Ind AS 109 " Financial Instruments " provide a number of reliefs, which apply to all hedging relationships that are directly a�ected by interest rate benchmark reform. A hedging relationship is a�ected if the reform gives rise to uncertainty about the timing and/or amount of benchmark-based cash �ows of the hedged item or the hedging instrument.

On 30 March 2019, the Ministry of Corporate A�airs (MCA) made certain amendments to Ind AS 12, Income taxes by including Appendix C, Uncertainty over Income Tax Treatments. This appendix clari�es how the recognition and measurement requirements of Ind AS 12 are applied where there is uncertainty over income tax treatments. It does not apply to taxes or levies outside the scope of Ind AS 12, nor does it speci�cally include requirements relating to interest and penalties associated with uncertain tax treatments.

110

111

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Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

Appendix C explains how to recognise and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment. An uncertain tax treatment is any tax treatment applied by an entity where there is uncertainty over whether that treatment will be accepted by the applicable tax authority. For example, a decision to claim a deduction for a speci�c expense or not to include a speci�c item of income in a tax return is an uncertain tax treatment if its acceptability is uncertain under applicable tax law. The interpretation provides speci�c guidance in several areas where previously Ind AS 1� was silent. Appendix C applies to all aspects of income tax accounting where there is an uncertainty regarding the treatment of an item, including taxable pro�t or loss, the tax bases of assets and liabilities, tax losses and credits and tax rates.

The Company applied the interpretation e�ective 1 April ��1� using the modi�ed retrospective approach. The adoption of Appendix C did not have any material impact on the �nancial statements of the Company.

b) Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of entities within the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate at that date. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured.

Exchange di�erences arising on the settlement of monetary items or on translating monetary items at rates di�erent from those at which they were translated on initial recognition during the period or in previous �nancial statements are recognised in the statement of pro�t and loss in the period in which they arise.

However, foreign currency di�erences arising from the translation of the following items are recognised in other comprehensive income (“OCI”):

Ÿ[certain debt instruments classi�ed as measured at FVTOCI;]

Ÿ[certain equity instruments where the Company had made an irrevocable election to present in OCI subsequent changes in the fair ] value;

Ÿ[a �nancial liability designated as a hedge of the net investment in a foreign operation, to the extent that the hedge is e�ective; and ]

Ÿ[qualifying cash �ow hedges, to the extent that the hedges are e�ective.]

When several exchange rates are available, the rate used is that at which the future cash �ows represented by the transaction or balance could have been settled if those cash �ows had occurred at the measurement date.

c) Financial instruments

A �nancial instrument is any contract that gives rise to a �nancial asset of one entity and a �nancial liability or equity instrument of another entity.

Financial assets

Initial recognition and measurement

All �nancial assets are recognised initially at fair value plus, in the case of �nancial assets not recorded at fair value through pro�t or loss, transaction costs that are attributable to the acquisition of the �nancial asset. Purchases or sales of �nancial assets that require delivery of assets within a time frame established by regulation or convention in the market place (e.g., regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.

Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain signi�cant �nancing components, in which case they are recognised at fair value. The Company’s trade receivables do not contain any signi�cant �nancing component and hence are measured at the transaction price measured under Ind AS 115 "Revenue from Contracts with Customers".

Subsequent measurement

For purposes of subsequent measurement, �nancial assets are classi�ed in four categories:

Ÿ Debt instruments at amortised cost;

Ÿ Debt instruments at FVTOCI;
Ÿ Debt instruments, derivatives and equity instruments at FVTPL; and
Ÿ Equity instruments measured at fair value through FVTOCI.

Debt instruments at amortised cost

A "debt instrument" is measured at the amortised cost if both the following conditions are met:
Ÿ[the asset is held within a business model whose objective is to hold assets for collecting contractual cash �ows; and]
Ÿ[contractual terms of the asset give rise on speci�ed dates to cash �ows that are solely payments of principal and interest ("SPPI") on the ] principal amount outstanding.

After initial measurement, such �nancial assets are subsequently measured at amortised cost using the e�ective interest rate method and are subject to impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the e�ective interest rate.

Interest income from these �nancial assets is included in �nance income using the e�ective interest rate method. Any gain or loss arising on derecognition is recognised directly in statement of pro�t and loss and presented in other gains�(losses). The losses arising from impairment are recognised in the statement of pro�t and loss. This category generally applies to trade and other receivables.

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

Debt instrument at FVTOCI

A "debt instrument" is classi�ed as at the FVTOCI if both of the following criteria are met:

a) the objective of the business model is achieved both by collecting contractual cash �ows and selling the �nancial assets� and b) the asset’s contractual cash �ows represent SPPI.

Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognised in the OCI. However, the Company recognises interest income, impairment losses and reversals and foreign exchange gain or loss in the statement of pro�t and loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassi�ed to the statement of pro�t and loss. Interest earned while holding a FVTOCI debt instrument is reported as interest income using the e�ective interest rate method.

Debt instrument at FVTPL

FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorisation as at amortised cost or as FVTOCI, is classi�ed as at FVTPL.

In addition, the Company may elect to designate a debt instrument, which otherwise meets amortised cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as an "accounting mismatch").

Debt instruments included within the FVTPL category are measured at fair value with all changes recognised in the statement of pro�t and loss.

Equity investments

All equity investments within the scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classi�ed as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in OCI subsequent changes in the fair value. The Company makes such election on an instrument by-instrument basis. The classi�cation is made upon initial recognition and is irrevocable.

If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to the statement of pro�t and loss, even on sale of investment. However, on sale the Company may transfer the cumulative gain or loss within equity. Equity investments designated as FVTOCI are not subject to impairment assessment.

Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the statement of pro�t and loss.

Investments in subsidiaries and joint venture:

Investments in subsidiaries and joint venture are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries and joint venture, the di�erence between net disposal proceeds and the carrying amounts are recognised in the statement of pro�t and loss.

Upon �rst-time adoption of Ind AS, the Company has elected to measure its investments in subsidiaries and joint ventures at the Previous GAAP carrying amount as its deemed cost on the date of transition to Ind AS i.e., 1 April 2015.

Derecognition

A �nancial asset (or, where applicable, a part of a �nancial asset or part of a group of similar �nancial assets) is primarily derecognised (i.e. removed from the Company’s balance sheet) when:

Ÿ[the rights to receive cash �ows from the asset have expired� or]

Ÿ[Both (1) the Company has transferred its rights to receive cash �ows from the asset or has assumed an obligation to pay the received ] cash �ows in full without material delay to a third party under a "pass-through" arrangement� and (2) either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Company has transferred its rights to receive cash �ows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company’s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that re�ects the rights and obligations that the Company has retained.

Impairment of trade receivables and other �nancial assets

In accordance with Ind AS 109, the Company applies the expected credit loss (ECL) model for measurement and recognition of impairment loss on trade receivables or any contractual right to receive cash or another �nancial asset.

For this purpose, the Company follows a "simpli�ed approach" for recognition of impairment loss allowance on the trade receivable balances. The application of this simpli�ed approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.

As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.

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Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

Financial liabilities

Initial recognition and measurement

Financial liabilities are classi�ed, at initial recognition, as �nancial liabilities at FVTPL, loans and borrowings, payables, or as derivatives designated as hedging instruments in an e�ective hedge, as appropriate.

All �nancial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Company’s �nancial liabilities include trade and other payables, loans and borrowings including bank overdrafts and derivative �nancial instruments.

Subsequent measurement

The measurement of �nancial liabilities depends on their classi�cation, as described below�

Financial liabilities at FVTPL

Financial liabilities at FVTPL include �nancial liabilities held for trading and �nancial liabilities designated upon initial recognition as at FVTPL. Financial liabilities are classi�ed as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative �nancial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as de�ned by Ind AS 109. Separated embedded derivatives are also classi�ed as held for trading unless they are designated as e�ective hedging instruments.

Gains or losses on liabilities held for trading are recognised in the statement of pro�t and loss.

Financial liabilities designated upon initial recognition at FVTPL are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satis�ed. For liabilities designated as FVTPL, fair value gains or losses attributable to changes in own credit risk are recognised in OCI. These gains or losses are not subsequently transferred to the statement of pro�t and loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of pro�t and loss. The Company has not designated any �nancial liability as FVTPL.

Loans and borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any di�erence between the proceeds (net of transaction costs) and the redemption amount is recognised in the statement of pro�t and loss over the period of the borrowings using the e�ective interest method.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the e�ective interest rate method. Gains and losses are recognised in the statement of pro�t and loss when the liabilities are derecognised as well as through the e�ective interest rate amortisation process.

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in OCI, remains there until the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in OCI is recognised immediately in the statement of pro�t and loss.

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 pro�t 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 in the statement of pro�t and loss. If the hedged item is derecognised, the unamortised fair value is recognised immediately in the statement of pro�t and loss.

Hedges of changes in the interest rates

Consistent with its risk management policy, the Company uses interest rate swaps to mitigate the risk of changes in interest rates. The Company does not use them for trading or speculative purposes.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to insigni�cant risk of changes in value. �or this purpose, �short-term� means investments having original maturities of three months or less from the date of investment. Bank overdrafts that are repayable on demand form an integral part of the Company’s cash management and are included as a component of cash and cash equivalents for the purpose of the statement of cash �ows.

d) Business combinations

The acquisition method of accounting is used to account for all business combinations regardless of whether equity instruments or other assets are acquired. The acquisition date is the date on which control is transferred to the acquirer. Judgement is applied in determining the acquisition date and determining whether control is transferred from one party to another. Control exists when the Company is exposed to, or has rights to variable returns from its involvement with the entity and has the ability to a�ect those returns through power over the entity. In assessing control, potential voting rights are considered only if the rights are substantive.

The Company determines that it has acquired a business when the acquired set of activities and assets include an input and a substantive process that together signi�cantly contribute to the ability to create outputs. The acquired process is considered substantive if it is critical to the ability to continue producing outputs, and the inputs acquired include an organized workforce with the necessary skills, knowledge, or experience to perform that process or it signi�cantly contributes to the ability to continue producing outputs and is considered unique or scarce or cannot be replaced without signi�cant cost, e�ort, or delay in the ability to continue producing outputs.

The consideration transferred for the acquisition of a subsidiary comprises the:

Ÿ[fair values of the assets transferred;]

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the e�ective interest rate. The e�ective interest rate amortisation is included as �nance costs in the statement of pro�t and loss.

Derecognition

A �nancial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. �hen an existing �nancial liability is replaced by another from the same lender on substantially di�erent terms, or the terms of an existing liability are substantially modi�ed, such an exchange or modi�cation is treated as the derecognition of the original liability and the recognition of a new liability. The di�erence in the respective carrying amounts is recognised in the statement of pro�t and loss.

Derivative �nancial instruments

The Company is exposed to exchange rate risk which arises from its foreign exchange revenues and expenses, primarily in US dollars, UK pounds sterling, Russian roubles Brazilian reals, South African rands (“ZAR”), Romanian new leus (“RON”) and Euros, and foreign currency debt in US dollars, Russian roubles, Ukrainian hryvnias and Euros.

The Company uses derivative �nancial instruments such as foreign exchange forward contracts, option contracts and swap contracts to mitigate its risk of changes in foreign currency exchange rates. The Company also uses non-derivative �nancial instruments as part of its foreign currency exposure risk mitigation strategy. Derivatives are classi�ed as �nancial assets when the fair value is positive and as �nancial liabilities when the fair value is negative.

Hedges of highly probable forecasted transactions

The Company classi�es its derivative �nancial instruments that hedge foreign currency risk associated with highly probable forecasted transactions as cash �ow hedges and measures them at fair value. The e�ective portion of such cash �ow hedges is recorded in the Company’s hedging reserve as a component of equity and re-classi�ed to the statement of pro�t and loss as part of the hedged item in the period corresponding to the occurrence of the forecasted transactions. The ine�ective portion of such cash �ow hedges is recorded in the statement of pro�t and loss as �nance costs immediately.

The Company also designates certain non-derivative �nancial liabilities, such as foreign currency borrowings from banks, as hedging instruments for hedge of foreign currency risk associated with highly probable forecasted transactions. Accordingly, the Company applies cash �ow hedge accounting to such relationships. Remeasurement gain or loss on such non-derivative �nancial liabilities is recorded in the Company’s hedging reserve as a component of equity and reclassi�ed to the statement of pro�t and loss as part of the hedged item in the period corresponding to the occurrence of the forecasted transactions.

Ÿ[liabilities incurred to the former owners of the acquired business;]
Ÿ[equity interests issued by the Company;]

Ÿ[fair value of any asset or liability resulting from a contingent consideration arrangement; and]

Ÿ[fair value of any pre-existing equity interest in the subsidiary. ]

Identi�able assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Company recognizes any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identi�able assets. Acquisition-related costs are expensed as incurred.

The excess of the sum of:

Ÿ[the consideration transferred]

Ÿ[the amount of any non-controlling interest in the acquired entity; and]

Ÿ[the acquisition-date fair value of any previous equity interest in the acquired entity.]

over the fair value of the net identi�able assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identi�able assets of the business acquired, the di�erence is recognized directly in the statement of pro�t and loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent �nancier under comparable terms and conditions.

Contingent consideration is classi�ed either as equity or a �nancial liability. Contingent consideration classi�ed as equity is not re-measured and its subsequent settlement is accounted for within equity. Amounts classi�ed as a �nancial liability are subsequently re-measured to fair value, with changes in fair value recognized in the statement of pro�t and loss. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date. Any gains or losses arising from such re-measurement are recognized in the statement of pro�t and loss.

e) Property, plant and equipment

Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and other costs directly attributable to bringing the asset to a working condition for its intended use. Borrowing costs that are directly attributable to the construction or production of a qualifying asset are capitalised as part of the cost of that asset.

115

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Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

When parts of an item of property, plant and equipment have di�erent useful lives, they are accounted for as separate items (major

components) of property, plant and equipment.

Gains and losses upon disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within “Other income/ Selling and other expense, net” in the statement of pro�t and loss.

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic bene�ts embodied within the part will �ow to the Company and its cost can be measured reliably. The costs of repairs and maintenance are recognised in the statement of pro�t and loss as incurred.

Items of property, plant and equipment acquired through exchange of non-monetary assets are measured at fair value, unless the exchange transaction lacks commercial substance or the fair value of either the asset received or asset given up is not reliably measurable, in which case the asset exchanged is recorded at the carrying amount of the asset given up.

Depreciation

Depreciation is recognised in the statement of pro�t and loss on a straight line basis over the estimated useful lives of property, plant and equipment. Land is not depreciated but subject to impairment.

Depreciation methods, useful lives and residual values are reviewed at each reporting date and any changes are considered prospectively.

The estimated useful lives are as follows:

PARTICULARS	YEARS
Buildings
-Factoryand administrative buildings	20 to 30
-Ancillary structures	3 to 10
Plant and equipment	5 to 10
Furniture, ��tures and o�ce equipment	3 to 8
Vehicles	4 to 5

Schedule II to the Companies Act, 2013 (“Schedule”) prescribes the useful lives for various classes of tangible assets. For certain class of assets, based on the technical evaluation and assessment, the Company believes that the useful lives adopted by it best represent the period over which an asset is expected to be available for use. Accordingly, for these assets, the useful lives estimated by the Company are di�erent from those prescribed in the Schedule.

Software for internal use, which is primarily acquired from third-party vendors and which is an integral part of a tangible asset, including consultancy charges for implementing the software, is capitalised as part of the related tangible asset. Subsequent costs associated with maintaining such software are recognised as expense as incurred. The capitalised costs are amortised over the estimated useful life of the software or the remaining useful life of the tangible �xed asset, whichever is lower.

Advances paid towards the acquisition of property, plant and equipment outstanding at each reporting date and the cost of property, plant and equipment not ready to use before such date are disclosed under other non-current assets. Assets not ready for use are not depreciated but are tested for impairment.

f) Goodwill and other intangible assets

Recognition and measurement

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

Research and development	Expenditures on research activities undertaken with the prospect of gaining new scienti�c or
	technical knowledge and understanding are recognised in the statement of pro�t and loss when
	incurred.
	Development activities involve a plan or design for the production of new or substantially
	improved products and processes. Development expenditures are capitalised only if
	Ÿ development costs can be measured reliably;
	Ÿ the product or process is technically and commercially feasible;
	Ÿ future economic bene�ts are probable and
	Ÿ the Company intends to, and has su�cient resources to complete development and to use or
	sell the asset.
	The expenditures to be capitalised include the cost of materials and other costs directly
	attributable to preparing the asset for its intended use. Other development expenditures are
	recognised in the statement of pro�t and loss as incurred. As of 31 �arch 2�21, none of the
	development expenditure amounts has met the aforesaid recognition criteria.
Separate acquisition of intangible	Payments to third parties that generally take the form of up-front payments and milestones for
assets	in-licensed products, compounds and intellectual property are capitalised. The Company’s
	criteria for capitalisation of such assets are consistent with the guidance given in paragraph 25
	of Indian Accounting Standard 38 (“Ind AS 38”) (i.e., the receipt of economic bene�ts embodied
	in each intangible asset separately purchased or licensed in the transaction is considered to be
	probable).
In-Process Research and Development	Acquired research and development intangible assets that are under development are
assets (“IPR&D”) or Intangible assets	recognised as In-Process Research and Development assets (“IPR&D”) or Intangible assets
under development	under development. IPR&D assets are not amortised, but evaluated for potential impairment on
	an annual basis or when there are indications that the carrying value may not be recoverable.
	Any impairment charge on such IPR&D assets is recorded in the statement of pro�t and loss
	under "Impairment of non-current assets".
Subsequent expenditure
Other intangible assets	Subsequent expenditures are capitalised only when they increase the future economic bene�ts
	embodied in the speci�c asset to which they relate. All other expenditures, including
	expenditures on internally generated goodwill and brands, is recognised in the statement of
	pro�t and loss as incurred.
In-Process Research and Development	Subsequent expenditure on an IPR&D project acquired separately or in a business combination
assets (“IPR&D”) or Intangible assets	and recognised as an intangible asset is:
under development	Ÿ recognised as an expense when incurred, if it is a research expenditure;
	Ÿ recognised as an expense when incurred, if it is a development expenditure that does not
	satisfy the criteria for recognition as an intangible asset in paragraph 57 of Ind AS 38; and
	Ÿ added to the carrying amount of the acquired in-process research or development project, if
	it is a development expenditure that satis�es the recognition criteria in paragraph 57 of
	Ind AS 38.

Amortisation

Goodwill

Other intangible assets

Goodwill represents the excess of consideration transferred, together with the amount of non-controlling interest in the acquiree, over the fair value of the Company’s share of identi�able net assets acquired.

Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment, and any impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying value of the equity accounted investee.

Other intangible assets that are acquired by the Company and that have �nite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition.

Amortisation is recognised in the statement of pro�t and loss on a straight-line basis over the estimated useful lives of intangible assets. The amortisation expense is recognised in the statement of pro�t and loss account in the expense category that is consistent with the function of the intangible asset. Intangible assets that are not available for use are amortised from the date they are available for use.

The estimated useful lives are as follows:

PARTICULARS	YEARS
Product related intangibles	3 to 15
Other intangibles	3 to 5

The amortisation period and the amortisation method for intangible assets with a �nite useful life are reviewed at each reporting date. Changes in the expected useful lives or expected pattern of consumption of future economic bene�ts embodied in the assets are considered to modify the amortization period or method, as appropriate and are treated as change in accounting estimate.

Goodwill, intangible assets relating to products in development, other intangible assets not available for use and intangible assets having inde�nite useful life are subject to impairment testing at each reporting date. All other intangible assets are tested for impairment when there are indications that the carrying value may not be recoverable. All impairment losses are recognised immediately in the statement of pro�t and loss under "Impairment of non-current assets".

116

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Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

De-recognition of intangible assets

Intangible assets are de-recognised either on their disposal or where no future economic bene�ts are expected from their use. Losses arising on such de-recognition are recorded in the statement of pro�t and loss, and are measured as the di�erence between the net disposal proceeds, if any, and the carrying amount of respective intangible assets as at the date of de-recognition.

g) Leases

As explained in note 1.3(a) above, the Company has changed its accounting policy for leases where the Company is the lessee. The new policy is described below. Refer note 1.3(a) for the impact of the change in accounting policy.

The Company assesses at contract inception whether a contract is or contains a lease, which applies if the contract conveys the right to control the use of the identi�ed asset for a period of time in exchange for consideration. The Company recognises a right-of-use asset at the commencement date of the lease, i.e. the date the underlying asset is available for use. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments to be made over the lease term:

Ÿ[�xed payments (including in-substance �xed payments), less any lease incentives receivable ]
Ÿ[variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date]
Ÿ[amounts expected to be payable by the Company under residual value guarantees ]
Ÿ[the exercise price of a purchase option if the Company is reasonably certain to exercise that option, and]
Ÿ[payments of penalties for terminating the lease, if the lease term re�ects the Company exercising that option.]

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Company, then the lessee’s incremental borrowing rate is used. Such borrowing rate is calculated as the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. The Company’s lease liabilities are included in borrowings.

Lease payments are allocated between principal and interest cost. The interest cost is charged to statement of pro�t and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost less accumulated depreciation and accumulated impairment comprised of the following:

Ÿ[the amount of the initial measurement of lease liability]

Ÿ[any lease payments made at or before the commencement date less any lease incentives received ]

Ÿ[any initial direct costs, and]

Ÿ[restoration costs.]

Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an expense in the the statement of pro�t and loss.. Short-term leases are leases with a lease term of 1� months or less. Low-value assets comprise IT equipment and small items of o�ce furniture.

The right-of-use assets are initially recognised on the balance sheet at cost, which is calculated as the amount of the initial measurement of the corresponding lease liability, adjusted for any lease payments made at or prior to the commencement date of the lease, any lease incentive received and any initial direct costs incurred by the Company.

h) Inventories

Inventories consist of raw materials, stores and spares, work-in-progress and �nished goods and are measured at the lower of cost and net realisable value. The cost of all categories of inventories is based on the weighted average method. Cost includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of �nished goods and work-in-progress, cost includes an appropriate share of overheads based on normal operating capacity. Stores and spares consists of packing materials, engineering spares (such as machinery spare parts) and consumables (such as lubricants, cotton waste and oils), which are used in operating machines or consumed as indirect materials in the manufacturing process.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

The factors that the Company considers in determining the provision for slow moving, obsolete and other non-saleable inventory include estimated shelf life, planned product discontinuances, price changes, ageing of inventory and introduction of competitive new products, to the extent each of these factors impact the Company’s business and markets. The Company considers all these factors and adjusts the inventory provision to re�ect its actual experience on a periodic basis.

i) Impairment

Non��nan�ia� assets

The carrying amounts of the Company’s non-�nancial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have inde�nite lives or that are not yet available for use, an impairment test is performed each year at 31 March.

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

The goodwill acquired in a business combination is, for the purpose of impairment testing, allocated to cash-generating units that are expected to bene�t from the synergies of the combination.

An impairment loss is recognised in the statement of pro�t and loss if the estimated recoverable amount of an asset or its cash-generating unit is lower than its carrying amount. Impairment losses recognised in respect of cash-generating units are allocated �rst to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Goodwill that forms part of the carrying amount of an investment in joint venture is not recognised separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in joint venture is tested for impairment as a single asset when there is objective evidence that the investment in joint venture may be impaired.

j) Employee �ene�ts

Short-term employee bene�ts

Short-term employee bene�ts are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

�e�ned contribution plans

The Company’s contributions to de�ned contribution plans are charged to the statement of pro�t and loss as and when the services are received from the employees.

�e�ned bene�t plans

The net interest cost is calculated by applying the discount rate to the net balance of the de�ned bene�t obligation and the fair value of plan assets. This cost is included in employee bene�t expense in the statement of pro�t and loss. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions for de�ned bene�t obligation and plan assets are recogni�ed in OCI in the period in which they arise.

When the bene�ts under a plan are changed or when a plan is curtailed, the resulting change in bene�t that relates to past service or the gain or loss on curtailment is recognised immediately in the statement of pro�t and loss. The Company recognises gains or losses on the settlement of a de�ned bene�t plan obligation when the settlement occurs.

Termination bene�ts

Termination bene�ts are recognised as an expense in the statement of pro�t and loss when the Company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination bene�ts as a result of an o�er made to encourage voluntary redundancy. Termination bene�ts for voluntary redundancies are recognised as an expense in the statement of pro�t and loss if the Company has made an o�er encouraging voluntary redundancy, it is probable that the o�er will be accepted, and the number of acceptances can be estimated reliably.

Other long-term employee �ene�t�

The Company’s net obligation in respect of other long-term employee bene�ts is the amount of future bene�t that employees have earned in return for their service in the current and previous periods. That bene�t is discounted to determine its present value. Re-measurements are recognised in the statement of pro�t and loss in the period in which they arise.

Compensated absences

The Company’s current policies permit certain categories of its employees to accumulate and carry forward a portion of their unutilised compensated absences and utilise them in future periods or receive cash in lieu thereof in accordance with the terms of such policies. The Company measures the expected cost of accumulating compensated absences as the additional amount that the Company incurs as a result of the unused entitlement that has accumulated at the reporting date. Such measurement is based on actuarial valuation as at the reporting date carried out by a quali�ed actuary.

The recoverable amount of an asset or cash-generating unit (as de�ned below) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash �ows are discounted to their present value using a pre-tax discount rate that re�ects current market assessments of the time value of money and the risks speci�c to the asset or the cash-generating unit. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generate cash in�ows from continuing use that are largely independent of the cash in�ows of other assets or groups of assets (the �cash-generating unit�).

119

118

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

Equity settled share-based payment transactions

The grant date fair value of options granted to employees is recognised as an employee bene�t expense, , in the statement of pro�t and loss, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options. The amount recognised as an expense is adjusted to re�ect the number of awards for which the related service and performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and performance conditions at the vesting date. The expense is recorded for each separately vesting portion of the award as if the award was, in substance, multiple awards. The increase in equity recognised in connection with share-based payment transaction is presented as a separate component in equity under “share-based payment reserve”. The amount recognised as an expense is adjusted to re�ect the actual number of stock options that vest.

Cash settled share-based payment transactions

The fair value of the amount payable to employees in respect of share-based payment transactions which are settled in cash is recognised as an expense, with a corresponding increase in liabilities, over the period during which the employees become unconditionally entitled to payment. The liability is re-measured at each reporting date and at the settlement date based on the fair value of the share-based payment transaction. Any changes in the liability are recognised in the statement of pro�t and loss.

k) Provisions

A provision is recognised in the statement of pro�t and loss if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an out�ow of economic bene�ts will be required to settle the obligation. If the e�ect of the time value of money is material, provisions are determined by discounting the expected future cash �ows at a pre-tax rate that re�ects current market assessments of the time value of money and the risks speci�c to the liability. �here discounting is used, the increase in the provision due to the passage of time is recognised as a �nance cost.

Restructuring

A provision for restructuring is recognised in the statement of pro�t and loss when the Company has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating costs are not provided.

Onerous contracts

A provision for onerous contracts is recognised in the statement of pro�t and loss when the expected bene�ts to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognises any impairment loss on the assets associated with that contract.

Reimbursement rights

Expected reimbursements for expenditures required to settle a provision are recognised in the statement of pro�t and loss only when receipt of such reimbursements is virtually certain. Such reimbursements are recognised as a separate asset in the balance sheet, with a corresponding credit to the speci�c expense for which the provision has been made.

Contingent liabilities and contingent assets

A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an out�ow of resources. �here there is a possible obligation or a present obligation in respect of which the likelihood of out�ow of resources is remote, no provision or disclosure is made.

Contingent assets are not recognised in the �nancial statements. A contingent asset is disclosed where an in�ow of economic bene�ts is probable. Contingent assets are assessed continually and, if it is virtually certain that an in�ow of economic bene�ts will arise, the asset and related income are recognised in the period in which the change occurs.

l) Revenue

The Company’s revenue is derived from sales of goods, service income and income from licensing arrangements. Most of such revenue is generated from the sale of goods. The Company has generally concluded that it is the principal in its revenue arrangements.

Sale of goods

Revenue is recognised when the control of the goods has been transferred to a third party. This is usually when the title passes to the customer, either upon shipment or upon receipt of goods by the customer. At that point, the customer has full discretion over the channel and price to sell the products, and there are no unful�lled obligations that could a�ect the customer’s acceptance of the product.

Revenue from the sale of goods is measured at the transaction price which is the consideration received or receivable, net of returns, taxes and applicable trade discounts and allowances. Revenue includes shipping and handling costs billed to the customer.

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

Presented below are the points of recognition of revenue with respect to the Company’s sale of goods:

	PARTICULARS	POINT OF RECOGNITION OF REVENUE
	Sales of generic products in India	Upon delivery of products to distributors by clearing and forwarding agents of the
		Company. Control over the generic products is transferred by the Company when the
		goods are delivered to distributors from clearing and forwarding agents.
	Sales of active pharmaceutical	Upon delivery of products to customers (generally formulation manufacturers), from the
	ingredients and intermediates in India	factories of the Company.
	Export sales and other sales	Upon delivery of the products to the customers unless the terms of the applicable
	outside of India	contract provide for speci�c revenue generating activities to be completed, in which case
		revenue is recognised once all such activities are completed.

Pro�t share revenues

The Company from time to time enters into marketing arrangements with certain business partners for the sale of its products in certain markets. Under such arrangements, the Company sells its products to the business partners at a non-refundable base purchase price agreed upon in the arrangement and is also entitled to a pro�t share which is over and above the base purchase price. The pro�t share is typically dependent on the business partner’s ultimate net sale proceeds or net pro�ts, subject to any reductions or adjustments that are required by the terms of the arrangement. Such arrangements typically require the business partner to provide con�rmation of units sold and net sales or net pro�t computations for the products covered under the arrangement.

Revenue in an amount equal to the base sale price is recognised in these transactions upon delivery of products to the business partners. An additional amount representing the pro�t share component is recognised as revenue only to the extent that it is highly probable that a signi�cant reversal will not occur.

At the end of each reporting period, the Company updates the estimated transaction price (including updating its assessment of whether an estimate of variable consideration is constrained) to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period.

Out licensing arrangements, milestone payments and royalties

Revenues include amounts derived from product out-licensing agreements. These arrangements typically consist of an initial up-front payment on inception of the license and subsequent payments dependent on achieving certain milestones in accordance with the terms prescribed in the agreement. In cases where the transaction has two or more components, the Company accounts for the delivered item (for example, the transfer of title to the intangible asset) as a separate unit of accounting and records revenue upon delivery of that component, provided that the Company can make a reasonable estimate of the fair value of the undelivered component. Otherwise, non-refundable up-front license fees received in connection with product out-licensing agreements are deferred and recognised over the balance period in which the Company has pending performance obligations. Milestone payments which are contingent on achieving certain clinical milestones are recognised as revenues either on achievement of such milestones, over the performance period depending on the terms of the contract. If milestone payments are creditable against future royalty payments, the milestones are deferred and released over the period in which the royalties are anticipated to be paid.

Royalty income earned through a license is recognised when the underlying sales have occurred

Provision for chargeback, rebates and discounts

Provisions for chargeback, rebates, discounts and Medicaid payments are estimated and provided for in the year of sales and recorded as reduction of revenue. A chargeback claim is a claim made by the wholesaler for the di�erence between the price at which the product is initially invoiced to the wholesaler and the net price at which it is agreed to be procured from the Company. Provisions for such chargebacks are accrued and estimated based on historical average chargeback rate actually claimed over a period of time, current contract prices with wholesalers/other customers and estimated inventory holding by the wholesaler.

Shelf stock adjustments

Shelf stock adjustments are credits issued to customers to re�ect decreases in the selling price of products sold by the Company, and are accrued when the prices of certain products decline as a result of increased competition or otherwise. These credits are customary in the pharmaceutical industry, and are intended to reduce the customer inventory cost to better re�ect the current market prices. The determination to grant a shelf stock adjustment to a customer is based on the terms of the applicable contract, which may or may not speci�cally limit the age of the stock on which a credit would be o�ered.

Refund Liability

Any amount of variable consideration is recognised as revenue only to the extent that it is highly probable that a signi�cant reversal will not occur. The Company estimates the amount of variable consideration using the expected value method.

The Company accounts for sales returns accrual by recording refund liability concurrent with the recognition of revenue at the time of a product sale. This liability is based on the Company's estimate of expected sales returns. The Company deals in various products and operates in various markets. Accordingly, the estimate of sales returns is determined primarily by the Company's historical experience in the markets in which the Company operates. With respect to established products, the Company considers its historical experience of actual sales returns, levels of inventory in the distribution channel, estimated shelf life, any revision in the shelf life of the product, product discontinuances, price changes of competitive products, and the introduction of competitive new products, to the extent each of these factors impact the Company's business and markets. With respect to new products introduced by the Company, such products have historically been either extensions of an existing line of product where the Company has historical experience or in therapeutic categories where established products exist and are sold either by the Company or the Company's competitors. At the time of recognising the refund liability the Company also recognises an asset, (i.e., the right to the returned goods) which is included in inventories for the products expected to be returned. The Company initially measures this asset at the former carrying amount of the inventory, less any expected costs to recover the goods, including any potential decreases in the value of the returned goods.

121

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Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

Along with re-measuring the refund liability at the end of each reporting period, the Company updates the measurement of the asset recorded for any revisions to its expected level of returns, as well as any additional decreases in the value of the returned products.

Services

Revenue from services rendered, which primarily relate to contract research, is recognised in the statement of pro�t and loss as the underlying services are performed. Upfront non-refundable payments received under these arrangements are deferred and recognised as revenue over the expected period over which the related services are expected to be performed.

License fees

License fees primarily consist of income from the out-licensing of intellectual property, and other licensing and supply arrangements with various parties. Revenue from license fees is recognised when control transfers to the third party and the Company’s performance obligations are satis�ed. Some of these arrangements include certain performance obligations by the Company. Revenue from such arrangements is recognised in the period in which the Company completes all its performance obligations.

m) Shipping and handling costs

Shipping and handling costs incurred to transport products to customers, and internal transfer costs incurred to transport the products from the Company’s factories to its various points of sale, are included in selling, general and administrative expenses.

n) Other income and �nance cost

Other income consists of interest income on funds invested, dividend income and gains on the disposal of assets. Interest income is recognised in the statement of pro�t and loss as it accrues, using the e�ective interest method. Dividend income is recognised in the statement of pro�t and loss on the date that the Company’s right to receive payment is established. The associated cash �ows are classi�ed as investing activities in the statement of cash �ows. Finance expenses consist of interest expense on loans and borrowings.

Borrowing costs are recognised in the statement of pro�t and loss using the e�ective interest method. The associated cash �ows are classi�ed as �nancing activities in the statement of cash �ows.

Foreign currency gains and losses are reported on a net basis within other income and / or selling and other expenses. These primarily include: exchange di�erences arising on the settlement or translation of monetary items; 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; and the ine�ective portion of cash �ow hedges.

o) Income tax

Income tax expense consists of current and deferred tax. Income tax expense is recognised in the statement of pro�t and loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, providing for temporary di�erences between the carrying amounts of assets and liabilities for �nancial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary di�erences:

Ÿ[temporary di�erences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that a�ects ] neither accounting nor taxable pro�t;
Ÿ[temporary di�erences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will ] not reverse in the foreseeable future; and
Ÿ[taxable temporary di�erences arising upon the initial recognition of goodwill. ]

Deferred tax is measured at the tax rates that are expected to be applied to the temporary di�erences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are o�set if there is a legally enforceable right to o�set current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on di�erent tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable pro�ts will be available against which the temporary di�erence can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related deferred tax asset will be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that the future taxable pro�ts will allow the deferred tax assets to be recovered.

Any deferred tax asset or liability arising from deductible or taxable temporary di�erences in respect of unrealised inter-company pro�t or loss on inventories held by the Company in di�erent tax jurisdictions is recognised using the tax rate of the jurisdiction in which such inventories are held. Dividend distribution tax arising out of payment of dividends to shareholders under the Indian Income tax regulations is not considered as tax expense for the Company and all such taxes are recognised in the statement of changes in equity as part of the associated dividend payment.

Current and deferred tax is recognised in the statement of pro�t and loss, except to the extent that it relates to items recognised in OCI or directly in equity. In this case, the tax is also recognised in OCI or directly in equity, respectively.

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

Accruals for uncertain tax positions require management to make judgements of potential exposures. Accruals for uncertain tax positions are measured using either the most likely amount or the expected value amount depending on which method the entity expects to better predict the resolution of the uncertainty. Tax bene�ts are not recognised unless the tax positions will probably be accepted by the tax authorities. This is based upon management’s interpretation of applicable laws and regulations and the expectation of how the tax authority will resolve the matter. Once considered probable of not being accepted, management reviews each material tax bene�t and re�ects the e�ect of the uncertainty in determining the related taxable amounts.

p) Earnings per share

The Company presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the pro�t or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the pro�t or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the e�ects of all dilutive potential ordinary shares, which includes all stock options granted to employees.

q) Government grants and incentives

The Company recognises government grants only when there is reasonable assurance that the conditions attached to them will be complied with, and the grants will be received. Government grants received in relation to assets are presented as a reduction to the carrying amount of the related asset. Grants related to income are deducted in reporting the related expense in the statement of pro�t and loss.

Export entitlements from government authorities are recognised in the statement of pro�t and loss as a reduction from “Cost of materials consumed” when the right to receive credit as per the terms of the scheme is established in respect of the exports made by the Company, and where there is no signi�cant uncertainty regarding the ultimate collection of the relevant export proceeds.

r) Treasury shares

Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in statement of pro�t and loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments. Any di�erence between the carrying amount and the consideration, if reissued, is recognised in the securities premium.

s) Rounding of amounts
All amounts in Indian Rupees disclosed in the �nancial statements and notes have been rounded o� to the nearest million unless otherwise stated.

1.4 DETERMINATION OF FAIR VALUES

The Company's accounting policies and disclosures require the determination of fair value, for certain �nancial and non-�nancialassets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes speci�c to that asset or liability

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-�nancial asset takes into account a market participant's ability to generate economic bene�ts by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which su�cient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the �nancial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is signi�cant to the fair value measurement as a whole�

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 — Valuation techniques for which the lowest level input that is signi�cant to the fair value measurement is directly or indirectly observable.
Level 3 — Valuation techniques for which the lowest level input that is signi�cant to the fair value measurement is unobservable.

For assets and liabilities that are recognized in the �nancial statements at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is signi�cant to the fair value measurement as a whole) at the end of each reporting period.

External valuers are involved for valuation of signi�cant assets, such as assets acquired in a business combination and signi�cant liabilities, such as contingent consideration. Involvement of external valuers is determined by the Management, based on market knowledge, reputation, independence and whether professional standards are maintained.

123

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Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

NOTE 2 | NOTES TO FINANCIAL STATEMENTS

a) Property, plant and equipment

Property, plant and equipment, if acquired in a business combination or through an exchange of non-monetary assets, is measured at fair value on the acquisition date. For this purpose, fair value is based on appraised market values and replacement cost.

b) Intangible assets

The fair value of brands, technology related intangibles, and patents and trademarks acquired in a business combination is based on the discounted estimated royalty payments that have been avoided as a result of these brands, technology related intangibles, patents or trademarks being owned (the “relief of royalty method”). The fair value of customer related, product related and other intangibles acquired in a business combination has been determined using the multi-period excess earnings method. Under this method, value is estimated as the present value of the bene�ts anticipated from ownership of the intangible assets in excess of the returns required or the investment in the contributory assets necessary to realise those bene�ts.

c) Inventories

The fair value of inventories acquired in a business combination is determined based on its estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable pro�t margin based on the e�ort required to complete and sell the inventories.

d) Investments in equity and debt securities and units of mutual funds

The fair value of marketable equity and debt securities is determined by reference to their quoted market price at the reporting date. For debt securities where quoted market prices are not available, fair value is determined using pricing techniques such as discounted cash �ow analysis.

In respect of investments in mutual funds, the fair values represent net asset value as stated by the issuers of these mutual fund units in the published statements. Net asset values represent the price at which the issuer will issue further units in the mutual fund and the price at which issuers will redeem such units from the investors.

Accordingly, such net asset values are analogous to fair market value with respect to these investments, as transactions of these mutual funds are carried out at such prices between investors and the issuers of these units of mutual funds.

e) Derivatives

The fair value of foreign exchange forward contracts is estimated by discounting the di�erence between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds). The fair value of foreign currency option and swap contracts and interest rate swap contracts is determined based on the appropriate valuation techniques, considering the terms of the contract.

f) Non-derivative �nancial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash �ows, discounted at the market rate of interest at the reporting date. For �nance leases the market rate of interest is determined by reference to similar lease agreements. In respect of the Company’s borrowings that have �oating rates of interest, their fair value approximates carrying value.

g) Share-based payment transactions

The fair value of employee stock options is measured using the Black-Scholes-Merton valuation model. Measurement inputs include share price on grant date, exercise price of the instrument, expected volatility (based on weighted average historical volatility), expected life of the instrument (based on historical experience), expected dividends, and the risk free interest rate (based on government bonds).

h) Contingent consideration

The fair value of the contingent consideration arising out of business combination is estimated by applying the income approach. The fair value measurement is based on signi�cant inputs that are not observable in the market, which Ind AS ��3, “ Fair Value Measurement ” refers to as Level 3 inputs.

2.1 PROPERTY, PLANT AND EQUIPMENT
				FURNITURE,
PARTICULARS	LAND	BUILDINGS	PLANT AND EQUIPMENT	FIXTURES AND OFFICE	VEHICLES	TOTAL
				EQUIPMENT
Gross carrying value
Balance as at 1 April 2019	��	��	��	��	��	��
Recognition of right-of-use asset on initial (3) application of Ind AS 116	-	��	-	��	��	��
Adjusted balance as at 1 April 2019	��	��	��	��	��	��
Additions	�	��	��	��	��	��
Disposals	-	(��)	(��)	(��)	(��)	(��)
Balance as at 31 March 2020	��	��	��	��	��	��

Balance as at 1 April 2020	��	��	��	��	��	��
Assets acquired through business (1) combinations	��	��	��	��	-	��
Additions	��	��	��	��	��	��
(2) Disposals Balance as at 31 March 2021	�� -	�� (�)	�� (��)	�� (��)	�� (��)	�� (��)

Accumulated Depreciation
Balance as at 1 April 2019	-	��	��	��	��	��
Depreciation for theyear	-	��	��	��	��	��
Disposals	-	(��)	(��)	(��)	(��)	(��)
Balance as at 31 March 2020	-	��	��	��	��	��

Balance as at 1 April 2020	-	��	��	��	��	��
Depreciation for theyear	-	��	��	��	��	��
(2) Disposals	-	(�)	(��)	(��)	(��)	(��)
Balance as at 31 March 2021	-	��	��	��	��	��

Net carrying value
As at 31 March 2020	��	��	��	��	��	��
As at 31 March 2021	��	��	��	��	��	��

Refer note 2.38 of these �nancial statements for further details

(1)

(2) During the year ended 31 March 2021, the Company sold contract development and manufacturing organisation (CDMO) division of the Custom Pharmaceutical Services (CPS) business of the Company. This sale was done by way of slump sale (as de�ned under section 2(�2C) of �ndian �ncome Ta� �ct,1��1) including all related property, plant and equipment, current assets, current liabilities, and transfer of employees.

(3)

Leases:

The Company has lease contracts for various items of plant and equipment, vehicles and other equipment used in its operations. Below are the carrying amounts of right-of-use assets recognised and the movements during the year.

			FURNITURE,
PARTICULARS	BUILDINGS	PLANT AND EQUIPMENT	FIXTURES AND OFFICE	VEHICLES	TOTAL
			EQUIPMENT
Gross carrying value
Balance as at 1 April 2019	-	-	-	-	-
Recognition of right-of-use asset on initial application of Ind AS 116	��	-	��	��	��
Adjusted balance as at 1 April 2019	��	-	��	��	��
Additions	��	�	��	��	��
Disposals	-	-	-	(��)	(��)
Balance as at 31 March 2020	��	�	��	��	��

Balance as at 1 April 2020	��	�	��	��	��
Additions	��	-	�	��	��
Disposals	-	-	(�)	(��)	(��)
Balance as at 31 March 2021	��	�	��	��	��

Accumulated Depreciation
Balance as at 1 April 2019	-	-	-	-	-
Depreciation for theyear	��	�	��	��	��
Disposals	-	-	-	(��)	(��)
Balance as at 31 March 2020	��	�	��	��	��

Balance as at 1 April 2020	��	�	��	��	��
Depreciation for theyear	��	-	��	��	��
Disposals	�	-	(�)	(��)	(��)
Balance as at 31 March 2021	��	�	��	��	��

Net carrying value
As at 31 March 2020	��	�	��	��	��
As at 31 March 2021	��	�	��	��	��

125

124

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.1 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

The following are the amounts recognised in the statement of pro�t and loss

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Depreciation expense of right-of-use assets	��	��
Interest expense on lease liabilities	��	��
	��	��

The Company had total cash out�ows for leases of ₹ 377 during the year ended 31 March 2021. The maturity analysis of lease liabilities are disclosed in note 2.9 of these �nancial statements.

Capital commitments

As of 31 March 2021 and 31 March 2020, the Company was committed to spend ₹ 9,560 and 4,485, respectively, under agreements to purchase ₹ property, plant and equipment. This amount is net of capital advances paid in respect of such purchase commitments.

Interest capitalisation

During the years ended 31 March 2021 and 31 March 2020, the Company capitalised interest cost of ₹ 149 and 52, respectively, with respect to ₹ qualifying assets. The rate for capitalisation of interest cost for the years ended 31 March 2021 and 31 March 2020 was approximately 4.25% and 4.22% respectively.

Depreciation for the year includes an amount of ₹ 595 (31 March 2020: 617) pertaining to assets used for research and development. During the ₹ year, the Company incurred 522 (31 March 2020: 628) towards capital expenditure for research and development. (Refer note 2.40)₹ ₹

2.2 GOODWILL

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Gross carryingvalue
Openingbalance	323	323
Goodwill arisingon Business combination	530	-
Disposals	-	-
Closingbalance	853	323

Impairment loss
Openingbalance	-	-
Impairment loss	-	-
Disposals	-	-
Closingbalance	-	-
Net carrying value	853	323

For the purpose of impairment testing, goodwill is allocated to a cash generating unit, representing the lowest level within the Company at which goodwill is monitored for internal management purposes and which is not higher than the Company’s operating segment.

The carrying amount of goodwill was allocated to the cash generating units as follows:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Global Generics-Branded Formulations	853	323

The recoverable amounts of the above cash generating units have been assessed using a value-in-use model. Value-in-use is generally calculated as the net present value of the projected post-tax cash �ows plus a terminal value of the cash generating unit to which the goodwill is allocated. Initially, a post-tax discount rate is applied to calculate the net present value of the post-tax cash �ows. �ey assumptions upon which the Company has based its determinations of value-in-use include:

a) Estimated cash �ows for �ve years, based on management’s projections.

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.3 OTHER INTANGIBLE ASSETS

	PRODUCT	CUSTOMER
PARTICULARS	RELATED	RELATED	OTHERS	TOTAL
	INTANGIBLES	INTANGIBLES
Gross carrying value
Balance as at 1 April 2019	��	-	��	��
Additions	��	-	��	��
Disposals/ De- recognitions	(��)	-	-	(��)
Balance as at 31 March 2020	��	-	��	��

Balance as at 1 April 2020	��	-	��	��
Additions	��	-	��	��
Disposals/ De- recognitions	(��)	-	(��)	(��)
Balance as at 31 March 2021	��	-	��	��

Amortisation/impairment loss
Balance as at 1 April 2019	��	-	��	��
Amortisation for theyear	��	-	��	��
Disposals/ De- recognitions	(��)	-	-	(��)
Balance as at 31 March 2020	��	-	��	��

Balance as at 1 April 2020	��	-	��	��
Amortisation for theyear	��	-	��	��
Disposals/ De- recognitions	(��)	-	(��)	(��)
(1) Impairment loss	��	-	-	��
Balance as at 31 March 2021	��	-	��	��

Net carrying value
As at 31 March 2020	��	-	��	��
As at 31 March 2021	��	-	��	��

(1) Refer note 2.4 for “Impairment losses recorded for the year ended 31 March 2021.

Amortisation for the year includes an amount of ₹ 17 (31 March 2020: 31) pertaining to assets used for research and development. During the year, ₹ the Company incurred 40 (31 March 2020: 27) towards capital expenditure for research and development. (Refer note 2.40)₹ ₹

Details of signi�cant intangible assets as at 31 March 2021�

PARTICULARS	ACQUIRED FROM	CARRYING COST
Selectportfolio of brandedgenerics business	Wockhardt	��
Selectportfolio of dermatology,respiratoryandpediatric assets	UCB India Private �imited and a�liates	��
Select Anti-allergybrands	Glenmark	��

2.4 INTANGIBLE ASSETS UNDER DEVELOPMENT

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Openingbalance	��
_Add:_Additions duringtheyear	-	��
_Less:_Capitalisations duringtheyear	-	-
(1) _Less:_Impairments duringtheyear	(��)	-
Closing balance	��	��

(1) Impairment losses recorded for the year ended 31 March 2021:

As a result of the Company’s decision to discontinue a few products pertaining to its Global Generics segment, ₹ 150 was recorded as total impairment charge in the statement of �ro�t and loss for the year ended 31 March 2021 of which 43 was pertaining to �o�ercalciferol in�, 40 ₹ ₹ pertaining to Enalaprilat and the balance of 67 was on account of other product related intangibles ₹

b) A terminal value arrived at by extrapolating the last forecasted year cash �ows to perpetuity, using a constant long-term growth rate of 0%. This long-term growth rate takes into consideration external macroeconomic sources of data. Such long-term growth rate considered does not exceed that of the relevant business and industry sector.
c) The after tax discount rates used are based on the Company’s weighted average cost of capital.
d) The after tax discount rates used is 10.5% for the cash generating unit. The pre-tax discount rate is 15.7%.

The Company believes that any reasonably possible change in the key assumptions on which a recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash-generating unit.

127

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Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.5 FINANCIAL ASSETS

2.5 A. INVESTMENTS

Investments consist of investments in units of equity securities, mutual funds, market linked debentures, preference shares, bonds, commercial paper, and term deposits with banks (i.e., certi�cates of deposit having an original maturity period exceeding 3 months).

	PARTICULARS		AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
	i. Investments at FVTOCI
	Quoted equityshares(fully paid-up)
	25,000(31 March 2020: 58,000)equityshares of 1/- each of State Bank of India,India ₹		�	��
	Quoted equityshares(fully paid-up) (I)		�	��

	Investments in Market linked debentures(II)		-	��
	Total investments at FVTOCI(I + II) (A)		�	��

	ii. Investments carried at cost
	Unquoted equityshares(fully paid-up)
	I. In subsidiarycompanies
	105,640,410 (31 March 2020: 105,640,410) equity shares of CHF 1 each of Dr. Reddy’s Laboratories SA, Switzerland		��	��
	2,499,726 (31 March 2020: 2,499,726) equity shares of₹10/- each of Idea2Enterprises (India) Private Limited, India		��	��
	90,544,104 (31 March 2020: 90,544,104) equity shares of₹10/- each of Aurigene Discovery Technologies Limited, India		��	��
	36,249,230 (31 March 2020: 36,249,230) shares of Real $ 1 each of Dr. Reddy's Farmaceutica Do Brasil Ltda., Brazil		��	��
	140,526,270 (31 March 2020: 140,526,270) Series "A" shares of Peso 1 each of Industrias Quimicas Falcon de Mexico S.A. de C.V., Mexico		��	��
	58,932,070 (31 March 2020: 58,932,070) equity shares of₹10/- each of Dr. Reddy's Bio-sciences Limited, India		��	��
	123,000 (31 March 2020: 123,000) equity shares of₹100/- each of Imperial Credit Private Limited, India		��	��
	50,000 (31 March 2020: 50,000) equity shares of₹10/- each of Svass Wellness Limited, India (formerly Regkinetics Services Limited, India)		�	�
	134,513 (31 March 2020: 134,513) equity shares of₹10/- each of Cheminor Investments Limited, India		�	�
			��	��
	Less: Impairment
	Dr. Reddy's Farmaceutica Do Brasil Ltda.,Brazil		(��)	(��)
	Total unquoted investments in equityshares of subsidiarycompanies,net(I)		��	��

	II. Injoint ventures
	Equityshares held in Kunshan Rotam ReddyPharmaceutical Co. Limited,China	(1)	��	��
	8,580,000 (31 March 2020: 8,580,000) equity shares of₹10/- each of DRES Energy Private Limited, India		��	��
	Total unquoted investments in equityshares ofjoint ventures,net(II)		��	��

	Total investments carried at cost(I+II)(B)		��	��
(1)	Shares held in Kunshan Rotam Reddy Pharmaceutical Co. Limited, China are not denominated in number of shares as per the laws of the country.
	Investments at FVTPL
	I. Investment in unquoted equityshares
	8,859 (31 March 2020: 8,859) equity shares of 100/- each ₹ of �eedimetla E�uent Treatment Limited, India		�	�
	(1) Ordinaryshares of Biomed Russia Limited,Russia		-	-
	200,000 (31 March 2020: 200,000) equity shares of₹10/- each
	of Altek Engineering Limited, India		-	-

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.5 A. INVESTMENTS (CONTINUED)

	PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
	24,000 (31 March 2020: 24,000) equity shares of₹100/- each
	of Progressive E�uent Treatment Limited, India	-	-
	20,250 (31 March 2020: 20,250) equity shares of₹10/- each
	(2) of Shivalik Solid Waste Management Limited, India	-	-
	Total unquoted trade investments in equityshares of other companies,net(I)	�	�
(1)	Shares held in Biomed Russia Limited are not denominated in number of shares as per the laws of the country.
(2)	Rounded o� to millions in the note above.
	II. Investment inpartnership�rms
	Investment in ABCD Technologies LLP	��	-
	Total investment inpartnership�rms(II)	��	-
	III. Investment in unquoted mutual funds	��	��
	Total investments at FVTPL (I + II + III) (C)	��	��

	Investments carried at amortised cost
	Investments in 2,000,000 (31 March 2020: 2,000,000) preference shares of CHF 100 each of Dr. Reddy’s Laboratories SA,Switzerland I.	��	��
	Investments in term deposit accounts with banks (original maturitymore than 3 months) II.	��	��
	Investments in bonds III.	��	��
	Investments in commercialpaper IV.	-	��
	Total investments carried at amortised cost(D)	��	��

	Total investments(A+B+C+D)	��	��

	Current	��	��
	Non-current	��	��
		��	��

	Aggregate book value ofquoted investments	�	��
	Aggregate market value ofquoted investments	�	��
	Aggregate value of unquoted investments	��	��
	Aggregate amount of impairment in the value of investments in the unquoted equityshares	��	��
	2.5 B. TRADE RECEIVABLES
	PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
	Trade receivables from otherparties	��	��
	Receivables from subsidiaries andjoint ventures(Refer note 2.23)	��	��
		��	��
	Details of security
	Consideredgood,unsecured	��	��
	Credit impaired	��	��
		��	��
	_Less:_Allowance for credit losses	(��)	(��)
		��	��

	Current	��	��
	(1) Non-current	��	��
		��	��

(1) Represents amounts receivable pursuant to an out-licensing arrangement with a customer. As these amounts are not expected to be realised within twelve months from the end of the reporting date, they are disclosed as non-current.

In accordance with Ind AS 109, the Company uses the expected credit loss ("ECL") model for measurement and recognition of impairment loss on its trade receivables or any contractual right to receive cash or another �nancial asset that result from transactions that are within the scope of Ind AS 115. For this purpose, the Company uses a provision matrix to compute the expected credit loss amount for trade receivables. The provision matrix takes into account external and internal credit risk factors and historical data of credit losses from various customers. The details of changes in allowance for credit losses during the year ended 31 March 2021 and 31 March 2020 are as follows:

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Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.5 B. TRADE RECEIVABLES (CONTINUED)

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Balance at the beginningof theyear	��	��
Provision made duringtheyear,net of reversals	��	��
Trade receivables written o� duringtheyear	(��)	(��)
E�ect of changes in the foreign exchange rates	-	-
Balance at the end of theyear	��	��
2.5 C. LOANS
PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Consideredgood,unsecured
(1) Loans and advances to whollyowned subsidiaries	��	��
Others	-	-
	��	��
_Less:_Allowance for doubtful loans and advances	-	-
	��	��

(1) Loans and advances to wholly owned subsidiaries comprise:

PARTICULARS	BALANCE AS AT 31 MARCH 2021 31 MARCH 2020	MAXIMUM AMOUNT OUTSTANDING AT ANY TIME DURING THE YEAR ENDED 31 MARCH 2021 31 MARCH 2020
Wholly owned subsidiaries
DRL Impex Limited,India	�� ��	�� ��
(2) Dr. Reddy’s Bio-sciences Limited,India	� �	� �
(2) Cheminor Investments Limited,India	- -	- -
Dr. Reddy’s Farmaceutica Do Brasil Ltda.,Brazil	- -	- ��
Industrias Quimicas Falcon de Mexico S.A. de C.V., Mexico	- -	- -
ReddyAntilles N.V.,Netherlands	- -	- -
	�� ��
(2) Rounded o� to millions in the note above� Loans and advances to wholly owned subsidiaries are given for the purpose of working capital and other business requirements, settlement of which is neither planned nor likely to occur in the next twelve months. Loans given to DRL Impex Limited, India and Cheminor Investments Limited, India are interest free.
2.5 D. OTHER FINANCIAL ASSETS
PARTICULARS AS AT 31 MARCH 2021 AS AT 31 MARCH 2020
I. Non-current assets
Consideredgood, unsecured
Securitydeposits �� ��
�� ��
II. Current assets
Consideredgood, unsecured
Claims receivable �� ��
Interest accrued but not due on investments �� ��
Receivables from subsidiarycompanies includingstepdown subsidiaries:
Dr. Reddy’s Bio-sciences Limited,India �� ��
Aurigene Pharmaceutical Services Limited �� -
Aurigene DiscoveryTechnologies Limited,India � ��
Others � �
Other assets �� ��
�� ��
_Less:_Allowance for doubtful advances - -
�� ��

Loans and advances to wholly owned subsidiaries are given for the purpose of working capital and other business requirements, settlement of which is neither planned nor likely to occur in the next twelve months. Loans given to DRL Impex Limited, India and Cheminor Investments Limited, India are interest free.

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.5 E. CASH AND CASH EQUIVALENTS

PARTICULARS		AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Balances with banks
In current accounts		��	��
In EEFC accounts		��	��
In term deposits with banks(original maturities less than3months)		��	-
Cash on hand		-	�
Other bank balances
In unclaimed dividend accounts		��	��
In unclaimed fractional sharepayorder accounts		-	�
In unclaimed debentures and debenture interest account		��	��
LC and Bankguarantee margin money		��	��
Balances in Escrow account pursuant to the Business Transfer Agreement with Wockhardt Limited (Refer to Note 2.38 for details)		��	-
Cash and cash equivalents in the balance sheet		��	��
_Less:_Bank overdraft used for cash manangementpurposes		(�)	(�)
Cash and cash equivalents in the statement o� cash �o��includin� restricted cash�		��	��
Restricted cash balances included above
Balance in unclaimed dividend and debenture interest account		��	��
Other restricted cash balances		��	��
2.6 OTHER ASSETS
PARTICULARS		AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
A. Non-current assets
Consideredgood,unsecured
Capital advances		��	��
Dues fromjoint ventures and other relatedparties		�	��
		��	��
B. Current assets
Consideredgood, unsecured
Balances and receivables from statutoryauthorities	(1)	��	��
(2) Export bene�ts receivable		��	��
Advances to material suppliers		��	��
Prepaid expenses		��	��
Dues fromjoint ventures and other relatedparties		��	��
Others		��	��
Considered doubtful, unsecured
Other advances		��	��
		��	��
_Less:_Allowance for doubtful advances		(��)	(��)
		��	��

(1) Balances and receivables from statutory authorities primarily consist of amounts recoverable towards the goods and service tax ("GST"), excise duty, and value added tax and from customs authorities of India.

(2) Export bene�ts receivables primarily consist of amounts receivable from various government authorities of India towards incentives on export sales made by the �ompany.

2.7 INVENTORIES

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Raw materials(includes in transit 53;31 March 2020: 82) ₹ ₹	��	��
Work-in-progress	��	��
Finishedgoods	��	��
Stock-in-trade	��	��
Packingmaterials,stores and spares	��	��
	��	��

During the year ended 31 March 2021, the Company recorded inventory write-down of 1,242 (31 March 2020: 1,586) in the statement of pro�t ₹ ₹ and loss.

130

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Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.8 SHARE CAPITAL

PARTICULARS		AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Authorised share capital
240,000,000 equityshares of	5/- each(31 March 2020: 240,000,000) ₹	��	��
Issued equitycapital
166,301,431 equityshares of ₹	5/- each fully paid-up (31 March 2020: 166,172,282)	��	��
Subscribed and fully paid-up
166,301,231 equityshares of ₹	5/- each fully paid-up (31 March 2020: 166,172,082)	��	��
_Add:_Forfeited share capital(e)		-	-
		��	��

a) Reconciliation of the equity shares outstanding is set out below:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021 FOR THE YEAR ENDED 31 MARCH 2020 NO. OF SHARES AMOUNT NO. OF SHARES AMOUNT
Openingnumber of equityshares/share capital	�� �� �� ��
(1) _Add:_Equityshares issuedpursuant to employee stock optionplan	�� � �� �
Closing number of equity shares/share capital	�� �� �� ��
(2) Treasuryshares	�� �� �� ��

(1) During the years ended 31 March 2021 and 31 March 2020, equity shares were issued as a result of the exercise of vested options granted to employees pursuant to the Dr. Reddy’s Employees Stock Option Plan, 2002 and Dr. Reddy’s Employees Stock Option Plan, 2007. The options exercised had an exercise price of ₹ 5, ₹ 2,607 or 2,814 per share. Upon the exercise of such options, ₹ the amount of compensation cost (computed using the grant date fair value) previously recognised in the "share-based payment reserve” was transferred to“securities premium” in the statement of changes in equity.

(2) Pursuant to the special resolution approved by the shareholders in the Annual General Meeting held on 27 July 2018, the Dr. Reddy’s Employees ESOS Trust (the “ESOS Trust”) was formed to support the Dr. Reddy’s Employees Stock Option Scheme, 2018 by acquiring, from the Company or through secondary market acquisitions, equity shares which are used for issuance to eligible employees (as de�ned therein) upon exercise of stock options thereunder. During the year ended 31 March 2021 and 31 March 2020, an aggregate of 85,250 and 1,150 equity shares, respectively were issued as a result of the exercise of vested options granted to employees pursuant to the Dr. Reddy’s Employees Stock Option Scheme, 2018. The options exercised had an exercise price of ₹ 2,607 or 2,814 per share. Upon the exercise of such options, the amount of compensation cost (computed using the grant date fair value) previously recognised in the “share based payment ₹ reserve” was transferred to “securities premium” in the statement of changes in equity. In addition, any di�erence between the carrying amount of treasury shares and the consideration received was recognised in the “securities premium”. As of 31 March 2021 and 31 March 2020, the ESOS Trust had outstanding 575,201 and 395,950 shares, respectively, which it purchased from the secondary market for an aggregate consideration of 1,967 and 1,006, respectively. Refer note 2.24 of these �nancial statements for further details on the Dr. Reddy’s Employees Stock ₹ ₹ Option Scheme, 2018.

b) Terms / rights attached to the equity shares

The Company has only one class of equity shares having a par value of 5 per share. For all matters submitted to vote in a shareholders meeting ₹ of the Company, every holder of an equity share, as re�ected in the records of the Company as on the record date set for the shareholders meeting, shall have one vote in respect of each share held. Should the Company declare and pay any dividends, such dividends will be paid in Indian rupees to each holder of equity shares in proportion to the number of shares held to the total equity shares outstanding as on that date. Indian law on foreign exchange governs the remittance of dividends outside India. In the event of liquidation of the Company, all preferential amounts, if any, shall be discharged by the Company. The remaining assets of the Company shall be distributed to the holders of equity shares in proportion to the number of shares held to the total equity shares outstanding as on that date. Final dividends on equity shares (including dividend tax on distribution of such dividends, if any) are recorded as a liability on the date of their approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company’s Board of Directors. The details of dividends paid by the Company are as follows:

PARTICULARS		FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Dividendper share(in absolute	) ₹	��	��
Dividend distribution tax on the	dividendpaid	-	��
Dividendpaid duringtheyear		��	��

At the Company’s Board of Directors’ meeting held on 14 May 2021, the Board proposed a dividend of 25 per share and aggregating to 4,158, ₹ ₹ which is subject to the approval of the Company’s shareholders.

c) Details of shareholders holding more than 5% shares in the Company

PARTICULARS	AS AT 31 MARCH 2021 NO. OF SHARES HELD % HOLDING IN THE CLASS	AS AT 31 MARCH 2020 NO. OF SHARES HELD % HOLDING IN THE CLASS
Dr. Reddy's Holdings Limited	�� ��	�� ��
Life Insurance Corporation of India and their associates	�� ��	�� ��

(d) 217,253 (31 March 2020: 232,837) stock options are outstanding and are to be issued by the Company upon exercise of the same in accordance with the terms of exercise under the "Dr. Reddy's Employees Stock Option Plan, 2002", 412,339 (31 March 2020: 354,343) stock options are outstanding and are to be issued by the Company upon exercise of the same in accordance with the terms of exercise under the "Dr. Reddy’s Employees ADR Stock Option Plan, 2007" and 385,930 (31 March 2020: 375,775) stock options are outstanding and are to be issued by the Company upon exercise of the same in accordance with the terms of exercise under the "Dr. Reddy’s Employees Stock Option Scheme, 2018 ". (Refer note 2.24)

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.8 SHARE CAPITAL (CONTINUED)

(e) Represents 200 equity shares of 5/- each, amount paid-up 500/- (rounded o� to millions in the note above) forfeited due to non-payment of ₹ ₹ allotment money.

(f) During the year ended 31 March 2017, the Company bought-back and extinguished 5,077,504 equity shares under the buy-back of equity shares plan approved by the shareholders on 1 April 2016.

Aggregate number of shares bought-back during the period of �ve years immediately preceeding the reporting date:

PARTICULARS YEAR ENDED 31 MARCH 2017 2018 2019 2020 2021	PARTICULARS YEAR ENDED 31 MARCH 2017 2018 2019 2020 2021	PARTICULARS YEAR ENDED 31 MARCH 2017 2018 2019 2020 2021
Ordinaryshares of 5 each ₹ �� - - - -
2.9 FINANCIAL LIABILITIES
2.9 A. NON-CURRENT BORROWINGS
PARTICULARS AS AT 31 MARCH 2021 AS AT 31 MARCH 2020
Unsecured
Long-term loans from banks(a) - -
Secured
Long-term maturities of lease obligation �� ��
�� ��

2.9 B. CURRENT BORROWINGS
PARTICULARS AS AT 31 MARCH 2021 AS AT 31 MARCH 2020
From Banks
Unsecured
Pre-shipment credit(b) �� ��
� � Bank overdraft
�� � Others
�� ��
As per the loan arrangement, the Company is required to comply with certain �nancial covenants and the Company was in compliance with such covenants as at 31 March 2020. (a) Represents External Commercial Borrowing for the year ended 31 March 2020, carrying interest rate of 1 Month LIBOR plus 82.7 bps and is repayable in two equal installments in the year 31 March 2021. Current maturity of the same is shown under note 2.9 D of the �nancial statements. The aggregate maturities of long-term loans and borrowings, based on contractual maturities, as of 31 March 2021 were as follows:
PARTICULARS		AS AT31 MARCH 2021 FOREIGN CURRENCY LOAN OBLIGATIONS UNDER LEASES TOTAL
(1) Maturing in theyear ending 31 March
2021		- �� ��
2022		- �� ��
2023		- �� ��
2024		- �� ��
2025		- � �
Thereafter
		- �� ��
The aggregate maturities of long-term loans and borrowings, based on contractual maturities, as of 31 March 2020 were as follows:
PARTICULARS	AS AT31 MARCH 2020 FOREIGN CURRENCY LOAN OBLIGATIONS UNDER LEASES TOTAL
(1) Maturing in theyear ending 31 March
2020	�� �� ��
2021	- �� ��
2022	- �� ��
2023	- �� ��
2024	- �� ��
Thereafter
	�� �� ��

(a) Represents External Commercial Borrowing for the year ended 31 March 2020, carrying interest rate of 1 Month LIBOR plus 82.7 bps and is repayable in two equal installments in the year 31 March 2021. Current maturity of the same is shown under note 2.9 D of the �nancial statements.

As per the loan arrangement, the Company is required to comply with certain �nancial covenants and the Company was in compliance with such covenants as at 31 March 2020.

(1) Long-term debt obligations disclosed in the above table does not re�ect any netting o� transaction costs amo�nting to 0 and ₹ ₹ 0 as at 31 March 2021 and 31 March 2020, respectively.

132

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Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.9 B. CURRENT BORROWING (CONTINUED)

(b) Packing credit loans for the year ended 31 March 2021, comprised of INR denominated loans carrying rates of 3-months Treasury Bill plus 30 bps and �xed rate of 5.75� and are repayable within 6 to 12 months from the date of drawdown. Packing credit loans for the year ended 31 March 2020, comprised of US$ denominated loans carrying interest rates of 1 Month LIBOR plus 12.5 to 16 bps and INR denominated loans carrying rates of Treasury Bill plus 60 bps and are repayable within 6 to 12 months from the date of drawdown.

(c) The Company had uncommitted lines of credit of ₹ 18,361 and 20,743 as of 31 March 2021 and 31 March 2020, respectively, from its banks for ₹ working capital requirements. The Company has the right to draw upon these lines of credit based on its working capital requirements.

(d) Reconciliation of liabilities arising from �nancing activities

PARTICULARS	NON-CURRENT (1) BORROWINGS CURRENT (2) BORROWINGS TOTAL FOR THE YEAR ENDED 31 MARCH 2021
Openingbalance at the beginningof theyear	�� �� ��
Recognition of right-of-use liabilityduringtheyear	�� - ��
Borrowings(repaid)/made duringtheyear	- �� ��
Borrowings repaid duringtheyear	(��) (��) (��)
Payment ofprincipalportion of lease liabilities	(��) - (��)
E�ect of changes in foreign exchange rates	(��) (��) (��)
Others	- - -
Closing balance at the end of the year	�� �� ��

PARTICULARS	NON-CURRENT (1) BORROWINGS CURRENT (2) BORROWINGS TOTAL FOR THE YEAR ENDED 31 MARCH 2020
Openingbalance at the beginningof theyear	�� �� ��
Recognition of right-of-use liabilityon initial application of Ind AS 116	�� - ��
Recognition of right-of-use liabilityduringtheyear	�� - ��
Borrowings(repaid)/made duringtheyear	(��) �� ��
Borrowings repaid duringtheyear	- (��) (��)
Payment ofprincipalportion of lease liabilities	(��) - (��)
E�ect of changes in foreign exchange rates	�� �� ��
Others	� - �
Closing balance at the end of the year	�� �� ��

(1) Includes current portion.

(2) Does not include movement in bank overdraft and includes current portion.

2.9 C TRADE PAYABLES

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Tradepayables to thirdparties
(1) Due to micro,small and medium enterprises	��	��
Otherparties	��	��
Tradepayables to subsidiaries includingstepdown subsidiaries(Refer note 2.23)	��	��
	��	��

(1) (a) The principal amount remaining unpaid as at 31 March 2021 in respect of enterprises covered under the "Micro, Small and Medium Enterprises Development Act, 2006" (MSMED) is 152 ₹ (31 March 2020: ₹ 55). The interest amount computed based on the provisions under Section 16 of the MSMED is 0.00 (31 March 2020: 0.00) is remaining unpaid as of 31 March 2021. ₹ ₹ The interest amount of 0.00 that remained unpaid as at 31 March 2020 was paid fully during the current year. ₹ (b) The amount of interest due and payable for the period of delay in making payment (which have been paid but beyond the appointed day during the year) but without adding the interest speci�ed under this Act is ₹ Nil (31 March 2020: Nil).

(c) The list of undertakings covered under MSMED was determined by the Company on the basis of information available with the Company and has been relied upon by the auditors.

For details regarding the Company’s exposure to currency and liquidity risks, see note 2.28 of the �nancial statements under �Liquidity risk�.

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.9 D OTHER FINANCIAL LIABILITIES

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Accrued expenses	��	��
Payable to subsidiarycompanies includingstepdown subsidiaries(Refer note 2.23)	��	��
(1) Current maturityof long-term borrowings	-	��
Due to capital creditors	��	��
(2) Unclaimed dividends,debentures and debenture interest	��	��
Trade and securitydeposits received	��	��
Interest accrued but not due on loans	-	�
Current maturityof lease obligations	��	��
Others	��	��
	��	��

(1) Represents current outstanding amount of External Commercial Borrowing, carrying interest rate of 1 Month LIBOR plus 82.7 bps and is repayable in two equal installments in the year 31 March 2021.

(2) As per the loan arrangement, the Company is required to comply with certain �nancial covenants and the Company was in compliance with such covenants as at 31 March 2020. Unclaimed amounts are transferred to Investor Protection and Education Fund after seven years from the due date.

2.10 PROVISIONS

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
A. Non-currentprovisions
Provision for employee bene�ts(Refer note 2.25)
Compensated absences	��	��
Longservice award bene�tplan	��	��
	��	��
B. Currentprovisions
Provision for employee bene�ts(Refer note 2.25)
Compensated absences	��	��
Gratuity	��	��
Longservice award bene�tplan	��	��
(a) Otherprovisions
Refund liability	��	��
Others	��	��
	��	��

		��	��
(a)	Details of changes in other provisions during the year ended 31 March 2021 are as follows:
	PARTICULARS	(1) REFUND LIABILITY	(2) OTHERS
	Balance as at beginningof theyear	��	��
	Provision made duringtheyear,net of reversals	��	��
	Provision used duringtheyear	(��)	-
	Balance as at end of theyear	��	��

(1) Refund liability is accounted for by recording a provision based on the Company’s estimate of expected sales returns. See note 1.3(l) of these �nancial statements for the Company’s accounting policy on refund liability.

(2) Primarily consists of provision recorded towards the potential liability arising out of a litigation relating to cardiovascular and anti-diabetic formulations. Refer note 2.29 of these �nancial statements under “Product and patent related matters - Matters relating to National Pharmaceutical Pricing Authority - Litigation relating to Cardiovascular and Anti-diabetic formulations” for further details.

2.11 OTHER LIABILITIES

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
A. Non-current liabilities
Deferred revenue	��	��
Others	-	�
	��	��
B. Current liabilities
Salaryand bonuspayable	��	��
Due to statutoryauthorities	��	��
Advance from customers	��	��
Deferred revenue	��	��
	��	��

135

134

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.12 REVENUE FROM CONTRACTS WITH CUSTOMERS AND TRADE RECEIVABLES

Revenue from contracts with customers:

	PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
	Sales	��	��
	Service income	��	��
	(1) License fees	��	��
		��	��
(1)	During the year ended 31 March 2020, the Company entered into a de�niti�e agreement with Upsher-Smith La�oratories, LLC for the sale of its US and		select territory rights for ��M�RAC�	®
	® ® SYMTOUCH (sumatriptan injection) 3 mg and TOSYMRA (sumatriptan nasal spray) 10 mg, (formerly referred to as “DFN-02”) which formed part		of its Proprietary Products segment.
	License fees includes an amount of`7,486 (US$ 108.7 million) towards the aforesaid sale transaction.

Analysis of revenues by segments:

The following table shows the analysis of revenues (excluding other operating income) by segments:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Global Generics	��	��
Pharmaceutical Services and Active Ingredients	��	��
ProprietaryProducts	��	��
	��	��

Details of refund liabilities:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Balance at the beginningof theyear	��	��
Provision made duringtheyear,net of reversals	��	��
Provision used duringtheyear	(��)	(��)
Balance at the end of theyear	��	��

Current	��	��
Non-current	-	-
	��	��

Details of contract asset:

As mentioned in the accounting policies for refund liability set forth in note 1.3 (l) of these �nancial statements, the Company recognises an asset , (i.e., the right to the returned goods), which is included in inventories for the products expected to be returned. The Company initially measures this asset at the former carrying amount of the inventory, less any expected costs to recover the goods, including any potential decreases in the value of the returned goods. Along with re-measuring the refund liability at the end of each reporting period, the Company updates the measurement of the asset recorded for any revisions to its expected level of returns, as well as any additional decreases in the value of the returned products.

As on 31 March 2021 and 31 March 2020, the Company had 37 and 23, respectively as contract assets representing the right to returned goods.₹ ₹

Details of deferred revenue:

Tabulated below is the reconciliation of deferred revenue for the years ended 31 March 2021 and 31 March 2020:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Balance at the beginningof theyear	��	��
Revenue recognised duringtheyear	(��)	(��)
Milestonepayment received duringtheyear	��	��
Balance at the end of theyear	��	��

Current	��	��
Non-current	��	��
	��	��

Details of contract liabilities :

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Advance from customers	��	��
	��	��

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.13 OTHER OPERATING INCOME

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Sale of spent chemicals	��	��
Scrapsales	��	��
Miscellaneous income	��	��
	��	��

2.14 OTHER INCOME

	PARTICULARS FOR THE YEAR ENDED 31 MARCH 2021 FOR THE YEAR ENDED 31 MARCH 2020
	Interest income
	On �xed deposits �� ��
	On loans to subsidiaries - ��
	(1) On investment inpreference shares of subsidiary �� -
	Others �� ��
	(2) Dividend income - ��
	(3) Pro�t on disposal ofproperty, plant and equipment and other intangibles,net �� -
	Foreign exchangegain,net �� ��
	Fair valuegain on �nancial instruments measured at fair value throughpro�t or loss �� ��
	(4) Miscellaneous income,net �� ��
	8,011 7,432

(1) Includes ` 516 of preference dividend from Dr. Reddy's Laboratories S.A.

(2) Includes dividends received from Kunshan Rotam Reddy Pharmaceutical Company Limited, China.

(3) Pro�t on disposal of property, plant and e�uipment and other intangibles includes an amount of ` 4,772 representing the pro�t on sale of business unit during the year ended 31 March 2021. The Company sold contract development and manufacturing organisation (CDMO) division of the Custom Pharmaceutical Services (CPS) business of the Company. This sale was done by way of slump sale (as de�ned under section 2(42C) of Indian Income Ta� Act,1961) including all related property, plant and e�uipment, current assets, current liabilities, and transfer of employees.

(4) Miscellaneous income, net includes ` 3,457 (US$50 millions) received from Celgene pursuant to a settlement agreement entered into in April 2019. The agreement e�ectively settles any claim the Company or its a�liates may have had for damages under section � of the Canadian Patented Medicines (�otice of Compliance) Regulations in regard to the Company�s A�DS for a generic version of REVLIMID ® brand capsules (Lenalidomide) pending before Health Canada.

2.15 CHANGES IN INVENTORIES OF FINISHED GOODS, WORK-IN-PROGRESS AND STOCK-IN-TRADE

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020	FOR THE YEAR ENDED 31 MARCH 2020
Opening
Work-in-progress	��		��
Finishedgoods	��		��
Stock-in-trade	��	��	��	��
Closing
Work-in-progress	��		��
Finishedgoods	��		��
Stock-in-trade	��	��	��	��
		��		��

2.16 EMPLOYEE BENEFITS EXPENSE

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Salaries,wages and bonus	��	��
Contribution toprovident and other funds	��	��
Sta� welfare expenses	��	��
Share-basedpayment expenses	��	��
	��	��
2.17 DEPRECIATION AND AMORTISATION EXPENSE
PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Depreciation ofproperty, plant and equipment	��	��
Amortisation of intangible assets	��	��
	��	��

136

137

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.18 FINANCE COSTS

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021 FOR THE YEAR ENDED 31 MARCH 2020
Interest on long-term borrowings	�� ��
Interest on other borrowings	�� ��
	�� ��

2.19 SELLING AND OTHER EXPENSES

	PARTICULARS		FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020	FOR THE YEAR ENDED 31 MARCH 2020
	Consumption of stores,spares and other materials			��		��
	Clinical trial expenses			��		��
	Other research and development expenses			��		��
	Advertisements			��		��
	Commission on sales			��		��
	Carriage outward			��		��
	Other sellingexpenses			��		��
	Legal andprofessional			��		��
	Power and fuel			��		��
	Repairs and maintenance
	Buildings			��		��
	Plant and equipment			��		��
	Others			��		��
	Insurance			��		��
	Travel and conveyance			��		��
	Rent			��		��
	Rates and taxes			��		��
	Corporate Social Responsibilityand donations	(1)		��		��
	Allowance for credit losses,net(Refer note 2.5 B)			��		��
	Allowance for doubtful advances,net			�		�
	Non-Executive Directors’ remuneration			��		��
	Auditors’ remuneration(Refer note 2.21)			��		��
	Provision/(reversal ofprovision)relatingto non-current investments,net			-		-
	Loss on sale/disposal ofproperty , plant and equipment and other intangibles,net			-		��
	Othergeneral expenses			��		��
				��		��
(1)	Details of Corporate Social Responsibility expenditure in accordance with section 135 of the Companies Act, 2013:
			IN CASH	YET TO BE PAID IN CASH		TOTAL
	Gross amount required to be spent bythe Companyduringtheyear					��
	Amount spent duringtheyear endingon 31 March 2021		��		-*	��
	Amount spent duringtheyear endingon 31 March 2020		��		-	��

* Rounded o� to millions

2.20 RESEARCH AND DEVELOPMENT EXPENSES

Details of research and development expenses (excluding depreciation and amortisation expense) incurred during the year and included under various heads of expenditures are given below:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Employee bene�ts expense(included in note 2.1�)	��	��
Other expenses(included in note 2.19)
Clinical trial expenses	��	��
Materials and consumables	��	��
Power and fuel	��	��
Other research and development expenses	��	��
	��	��

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.21 AUDITORS’ REMUNERATION

	PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
	Audit fees	��	��
	Other charges – Certi�cation fee	�	�
	Reimbursement of out ofpocket expenses	�	�
		��	��
	2.22 EARNINGS PER SHARE (EPS)
	PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
	Earnings
	Pro�t attributable to equityshareholders of the Company	��	��
	Shares
	Number of equityshares at the beginningof theyear(excludingtreasuryshares)	��	��
	E�ect of treasuryshares held duringtheyear	(��)	(��)
	E�ect of equityshares issued on exercise of stock options	��	��
	Weighted average number of equity shares – Basic	��	��
	(1) Dilutive e�ect of stock options outstanding	��	��
	Weighted average number of equity shares – Diluted	��	��
	Earnings per share ofpar value₹ 5/- – Basic(₹)	��	��
	Earnings per share ofpar value₹5/- – Diluted(₹)	��	��
(1)	As at 31 March 2021 and 31 March 2020, 235,460 and 475,575 options, respectively, were excluded from the diluted weighted average number of equity shares calculation because their e�ect
	would have been anti-dilutive. The average market value of the Company’s shares for the purpose of calculating the dilutive e�ect of stock options was based on quoted market prices for the
	year during which the options were outstanding.

2.23 RELATED PARTIES

(a) List of all subsidiaries, joint ventures and other consolidating entities:

2.23 RELATED PARTIES (a) List of all subsidiaries, joint ventures and other consolidating entities:	2.23 RELATED PARTIES (a) List of all subsidiaries, joint ventures and other consolidating entities:
Subsidiaries includingstepdown subsidiaries:
1	Aurigene DiscoveryTechnologies(Malaysia)SDN BHD,Malaysia
2	Aurigene DiscoveryTechnologies Inc.,USA
3	Aurigene DiscoveryTechnologies Limited,India
4	Aurigene Pharmaceutical Services Limited,India(from 16 September 2019)
5	beta Institutgemeinnützige GmbH,Germany
6	betapharm Arzneimittel GmbH,Germany
7	Cheminor Investments Limited,India
8	Chirotech TechnologyLimited,UK(under liquidation)
9	Dr Reddy’s Laboratories Kazakhstan,Kazakhstan
10	Dr. Reddy’s(Thailand)Limited,Thailand
11	Dr. Reddy’s(WUXI)Pharmaceutical Co. Ltd,China
12	Dr. Reddy’s(Beijing)Pharmaceutical Co. Limited(from 19 August 2020)
13	Dr. Reddy’s Bio-sciences Limited,India
14	Dr. Reddy’s Formulations Limited,India(from 11 March 2021)
15	Dr. Reddy’s Farmaceutica Do Brasil Ltda.,Brazil
16	Dr. Reddy’s Laboratories(Australia)Pty. Limited,Australia
17	Dr. Reddy’s Laboratories(EU)Limited,UK
18	Dr. Reddy’s Laboratories(Proprietary)Limited,South Africa
19	Dr. Reddy’s Laboratories(UK)Limited,UK
20	Dr. Reddy’s Laboratories B.V.,Netherlands(FormerlyEurobridge ConsultingB.V.)
21	Dr. Reddy’s Laboratories Canada,Inc.,Canada
22	Dr. Reddy’s Laboratories Inc.,USA
23	Dr. Reddy’s Laboratories International SA,Switzerland(merged with Dr. Reddy’s Laboratories SA,Switzerland w.e.f 1 January2019)
24	Dr. Reddy’s Laboratories LLC,Ukraine
25	Dr. Reddy’s Laboratories Malaysia Sdn. Bhd.,Malaysia
26	Dr. Reddy’s Laboratories New York, LLC (transfer of ownership from DRL Swiss to DRL Inc. e�ective 29 October 2020 and conversion
	from Inc. toLLC e�ective 30 October 2020)
27	Dr. Reddy’s New Zealand Limited,New Zealand
28	Dr. Reddy’s Philippines Inc.,Philippines
29	Dr. Reddy’s Research and Development B.V.(formerlyOctoplus BV)

139

138

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.23 RELATED PARTIES (CONTINUED)

30	Dr. Reddy’s SRL,Italy
31	Dr. Reddy's Laboratories Chile SPA.,Chile
32	Dr. Reddy's Laboratories Japan KK,Japan
33	Dr. Reddy's Laboratories Louisiana LLC,USA
34	Dr. Reddy's Laboratories Romania S.R.L.,Romania
35	Dr. Reddy's Laboratories SA,Switzerland
36	Dr. Reddy's Laboratories SAS,Colombia
37	Dr. Reddy's Laboratories Taiwan Limited,Taiwan
38	Dr. Reddy’s Singapore PTE Limited(till 04 June 2019)
39	Dr. Reddy's Venezuela,C.A.,Venezuela
40	DRL Impex Limited,India
41	Idea2Enterprises(India)Private Limited,India
42	Imperial Credit Private Limited,India
43	Industrias Quimicas Falcon de Mexico,S.A.de C.V,Mexico
44	Lacock Holdings Limited,Cyprus
45	OOO Dr. Reddy’s Laboratories Limited,Russia
46	OOO DRS LLC,Russia
47	Promius Pharma LLC,USA
48	ReddyAntilles N.V.(till 02 November 2019)
49	ReddyHoldingGmbH,Germany
50	ReddyNetherlands B.V.,Netherlands
51	ReddyPharma Iberia SAU,Spain
52	ReddyPharma Italia S.R.L,Italy
53	ReddyPharma SAS,France
54	Svaas Wellness Limited(formerlyRegkinetics Services Limited) (name change e�ective 18 December 2020)
Joint	ventures
55	Kunshan Rotam Reddy Pharmaceutical Company	Enterprise over which the Company exercises joint control with other joint venture
	Limited (“Reddy Kunshan”), China	partners and holds 51.33% of equity shares
56	DRANU LLC, USA (under liquidation)	Enterprise over which the Company’s step down subsidiary exercises joint control
		with other joint venture partner and holds 50% of equity shares
57	DRES Energy Private Limited, India	Enterprise over which the Company exercises joint control with other joint venture
		partners and holds 26% of equity shares
Other consolidatingentities
58	Cheminor Employees Welfare Trust, India	The Company does not have any equity interests in this entity, but has signi�cant
		in�uence or control over it.
59	Dr. Reddy’s Research Foundation, India	The Company does not have any equity interests in this entity, but has signi�cant
		in�uence or control over it.
60	Dr. Reddy's Employees ESOS Trust, India	The Company does not have any equity interests in this entity, but has signi�cant
	(from 27 July 2018)	in�uence or control over it.
(b)List of other related parties with whom transactions have taken place during the current and/or previous year:
1	Dr. Reddy's Institute of Life Sciences	Enterprise over which whole-time directors have signi�cant in�uence
2	Stamlo Industries Limited	Enterprise controlled bywhole-time directors
3	Green Park Hotels and Resorts Limited	Enterprise controlled byrelative of a whole-time director
4	K Samrajyam	Mother of Chairman
5	G Anuradha	Spouse of Co-chairman
6	K Deepti Reddy	Spouse of Chairman
7	G Mallika Reddy	Daughter of Co-chairman
8	G V Sanjana Reddy	Daughter of Co-chairman
9	Akhil Ravi	Son-in-law of Co-chairman
10	Dr. Reddy’s Foundation	Enterprise over which whole-time directors and their relatives have signi�cant
		in�uence
11	Pudami Educational Society	Enterprise over which whole-time directors and their relatives have signi�cant
		in�uence
12	Indus Projects Private Limited	Enterprise over which relatives of whole-time directors have signi�cant in�uence
13	CERG AdvisoryPrivate Limited	Enterprise controlled by (erstwhile)KeyManagerial Personnel(till 30 July2019)
14	Green Park HospitalityServices Private Limited	Enterprise controlled byrelative of a whole-time director

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.23 RELATED PARTIES (CONTINUED)

15	AverQ Inc.,USA	Enterprise over which KeyManagerial Personnel have signi�cant in�uence
16	Shravya Publications Pvt. Ltd.	Enterprise over which whole-time directors and their relatives have signi�cant
		in�uence
17	Cancelled Plans LLP	Enterprise over which relatives of whole-time directors have signi�cant in�uence
18	Araku Originals Private Limited	Enterprise over which whole-time directors have signi�cant in�uence
19	Samarjita Management Consultancy Private	Enterprise controlled by Key Managerial Personnel
	Limited

(c) In accordance with the provisions of Ind AS 24, Related Party Disclosures and the Companies Act, 2013, Company’s Directors, members of the Company’s Management Council and Company Secretary are considered as Key Managerial Personnel.

List	of KeyManagerial Personnel of the Companyis as below:	of KeyManagerial Personnel of the Companyis as below:
1	K Satish Reddy	Whole-time director (Chairman)
2	G V Prasad	Whole-time director (Co-Chairman and ManagingDirector)
3	Allan Oberman	Independent director
4	Anupam Puri (till 26 July2019)	Independent director
5	Bharat Narotam Doshi	Independent director
6	Dr. Bruce LA Carter	Independent director
7	Dr. Omkar Goswami (till 30 July2019)	Independent director
8	Kalpana Morparia	Independent director
9	Leo Puri	Independent director
10	Prasad R Menon	Independent director
11	Shikha Sharma	Independent director
12	Sridar Iyengar	Independent director
13	Anil Namboodiripad	Management council member
14	Archana Bhaskar	Management council member
15	Deepak Sapra	Management council member
16	Dr. Raymond de Vre(till 31 March 2021)	Management council member
17	Erez Israeli	CEO and management council member
18	Ganadhish Kamat	Management council member
19	Marc Kikuchi	Management council member
20	Mukesh Rathi(from 1 December 2020)	Management council member
21	M V Ramana	Management council member
22	ParagAgarwal(from 1 December 2020)	Management council member
23	Patrick Aghanian(from 7 October 2019)	Management council member
24	P Yugandhar	Management council member
25	Saumen Chakraborty	Management council member
26	SanjaySharma	Management council member
27	Sauri Gudlavalleti	Management council member
28	SandeepPoddar	Companysecretary

(d) Particulars of related party transactions

The following is a summary of signi�cant related party transactions�

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Revenues from:
Subsidiaries includingstepdown subsidiaries:
Dr. Reddy’s Laboratories Inc.	��	��
OOO Dr. Reddy’s Laboratories Limited	��	��
Dr. Reddy’s Laboratories SA	��	��
Others	��	��
	��	��
Joint Ventures
ReddyKunshan	��	��
Total	��	��

140

141

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.23 RELATED PARTIES (CONTINUED)

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021 FOR THE YEAR ENDED 31 MARCH 2020
Interest income from subsidiaries including step down subsidiaries:
(1) Dr. Reddy’s Laboratories SA	�� -
Dr. Reddy’s Farmaceutica Do Brasil Ltda.	�� -
Dr. Reddy’s Bio-sciences Limited,India*	- -
Total	�� ��

Service income from subsidiaries including step down subsidiaries:
Dr. Reddy’s Laboratories Inc.	�� ��
Dr. Reddy’s Laboratories SA	�� -
Total	�� ��

Joint Ventures
ReddyKunshan	�� -
Total	- ��

Licence fees from subsidiaries including step down subsidiaries:
Dr. Reddy’s Laboratories Inc.	� ��
Total	�� �
Commission onguarantee to subsidiaries including step down subsidiaries: * Represents preference dividend Rounded o� to �illions (1)
Dr. Reddy’s Laboratories SA	�� -
Aurigene Pharmaceutical Services Limited	- ��
Total	�� ��

Lease rentals received from
Subsidiaries including step down subsidiaries:
Aurigene DiscoveryTechnologies Limited	� ��
Aurigene Pharmaceutical Services Limited	- ��
Joint ventures
DRES EnergyPrivate Limited	� �
Total	�� ��

Dividend income from Reddy Kunshan	�� -

Reimbursement of operating expenses by subsidiaries and step down subsidiaries:
Aurigene DiscoveryTechnologies Limited	� ��
Aurigene Pharmaceutical Services Limited	- ��
Dr. Reddy’s(Beijing)Pharmaceutical Co. Limited	� -
Total	�� ��

Purchases and services from
Subsidiaries includingstepdown subsidiaries
OOO Dr. Reddy’s Laboratories Limited	�� ��
Dr. Reddy’s Research and Development B.V.	�� ��
Industrias Quimicas Falcon de Mexico,S.A. de CV	�� ��
Dr. Reddy’s Laboratories LLC,Ukraine	�� ��
Dr. Reddy’s Laboratories Inc.	�� ��
Dr. Reddy’s Laboratories(EU)Limited	�� ��
Others	�� ��
Total	�� ��

Joint ventures
DRES EnergyPrivate Limited	�� ��

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.23 RELATED PARTIES (CONTINUED)

	PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
	Other relatedparties
	Dr. Reddy’s Institute of Life Sciences	��	��
	Indus Projects Private Limited	��	��
	Samarjita Management ConsultancyPrivate Limited	��	-
	Others	�	�
	Total	��	��

	Sale of assets to subsidiaries including step down subsidiaries
	Aurigene Pharmaceutical Services Limited	��	-

	Contributions towards social development
	Dr. Reddy’s Foundation	��	��
	Pudami Educational Society	��	��
	Total	��	��

	Catering services from Green Park Hospitality Services Private Limited	��	��

	Facility management services from Green Park Hospitality Services Private Limited	��	��

	Hotel expenses
	Green Park Hotels and Resorts Limited	�	��
	Stamlo Industries Limited	�	�
	Total	�	��

	Lease rentalspaid under cancellable leases to
	Key Managerial Personnel
	K Satish Reddy	��	��
	Relatives of Key Managerial Personnel	��	��
	Total	��	��

	Salaries to relatives of Key Managerial Personnel	�	�

	Remuneration to Key Managerial Personnel
	(1) Salaries and other bene�ts	��	��
	Contributions to de�ned contributionplans	��	��
	Commission to directors	��	��
	Share-basedpayments expense	��	��
	Total	��	��
(1)	Some of the Key Managerial Personnel of the Company are also covered under the Company’s Gratuity Plan along	with the other employees of the Company. Proportionate amounts of
	gratuity accrued under the Company’s Gratuity Plan have not been separately computed or included in the above disclosure.
	Investment made/(disposed) in
	Subsidiaries
	Dr. Reddy’s Laboratories SA	-	��
	ReddyAntilles N.V.	~~-~~	(��)
	Svaas Wellness Limited(formerlyRegkinetics Services Limited)	-	(��)
	Dr. Reddy's Bio-sciences Limited	-	��
	Total	-	��

	Impairment/(reversal of impairment) in the value of non-current investments:
	Subsidiaries
	ReddyAntilles N.V.	-	(��)
	Total	-	(��)

142

143

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.23 RELATED PARTIES (CONTINUED)

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Loans and advancesgiven /(repaid by), net
Subsidiaries and stepdown subsidiaries
Dr. Reddy’s Farmaceutica Do Brasil Ltda.	-	(��)
Dr. Reddy’s Bio-sciences Limited	-*	-*
Total	-	(��)
* Loans given / (repaid by) is inclusive of accrued interest

Loans and advancesgiven /(repaid by), net
Joint ventures
DRES EnergyPrivate Limited	-	(�)
Total	-	(�)

Movement in other receivables from
Subsidiaries includingstepdown subsidiaries:
Aurigene Pharmaceutical Services Limited	��	-
Aurigene DiscoveryTechnologies Limited	(��)	-
Dr. Reddy’s(Beijing)Pharmaceutical Co. Limited	�	-
Joint ventures
DRES EnergyPrivate Limited	(��)	�
Total	��	�

Guaranteegiven/(released) on behalf of Subsidiaries including step down subsidiaries
Aurigene Pharmaceutical Services Limited	��	~~-~~
Dr. Reddy’s Laboratories SA	-	(��)

(e) The Company has the following amounts due from/to related parties:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Due from relatedparties
Subsidiaries including step down subsidiaries(included in trade receivables)
Dr. Reddy’s Laboratories Inc.	��	��
OOO Dr. Reddy’s Laboratories Limited	��	��
Others	��	��
Total	��	��

Joint ventures(included in other assets)
ReddyKunshan	-	�
DRES EnergyPrivate Limited	�	��
	�	��
Others
Greenpark HospitalityServices Private Limited	��	��
Rental deposit to KeyManagerial Personnel and their relatives	�	�
Others	-*	-*
Total	��	��
*Rounded o� to �illions�

Due to relatedparties(included in tradepayables and other current liabilities)
Subsidiaries includingstepdown subsidiaries and other consolidatingentities:
OOO Dr. Reddy’s Laboratories Limited	��	��
Dr. Reddy’s Research and Development B.V.	��	��
Industrias Quimicas Falcon de Mexico,S.A. de CV	��	��
Dr. Reddy’s Laboratories LLC,Ukraine.	��	��
Dr. Reddy’s Laboratories Inc.	��	��
Dr. Reddy’s Laboratories(EU)Limited	��	��
Others	��	��
Total	��	��

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.23 RELATED PARTIES(CONTINUED)
PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Due to relatedparties(included in tradepayables and other current liabilities)(continued)
Joint ventures
DRES EnergyPrivate Limited	�	��

Others
Greenpark HospitalityServices Private Limited	��	��
Indus Projects Private Limited	��	��
Green Park Hotels & Resorts Limited	�	-*
Dr. Reddy's Institute of Life Sciences	��	-*
Total	��	��
*R��
Outstanding Guaranteegiven on behalf of Aurigene Pharmaceutical Services Limited	��	-

Equity held in subsidiaries and joint venture has been disclosed under “Financial assets-Investments” (Note 2.5 A). Loans and advances to subsidiaries and joint venture have been disclosed under “Loans” (Note 2.5 C). Other receivables from subsidiaries and joint venture have been disclosed under “Other �nancial assets” (Note 2.5 D).

2.24 EMPLOYEE STOCK INCENTIVE PLANS

Dr. Reddy’s Employees Stock Option Plan -2002 (the “DRL 2002 Plan”):

The Company instituted the DRL 2002 Plan for all eligible employees pursuant to the special resolution approved by the shareholders in the Annual General Meeting held on 24 September 2001. The DRL 2002 Plan covers all employees and directors (excluding promoter directors) of the parent company and its subsidiaries (collectively, “eligible employees”). The Nomination, Governance and Compensation Committee of the Board of the parent company (the “Committee”) administers the DRL 2002 Plan and grants stock options to eligible employees. The Committee determines which eligible employees will receive 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 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 �ve years.

The DRL 2002 Plan, as amended at annual general meetings of shareholders held on 28 July 2004 and on 27 July 2005, provides for stock option grants in two categories:

Category A: 300,000 stock options out of the total of 2,295,478 options reserved for grant 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 options reserved for grant having an exercise price equal to the par value of the underlying equity shares (i.e., 5 per option).₹

Under the DRL 2002 Plan, the exercise price of the fair market value options granted under Category A above is determined based on the average closing price for 30 days prior to the grant in the stock exchange where there is highest trading volume during that period. Notwithstanding the foregoing, the Committee may, after obtaining 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.

After the stock split e�ected in the form of a stock dividend issued by the Company in August 200�, the DRL 2002 Plan provides for stock option grants in the above two categories as follows:

	NUMBER OF OPTIONS	NUMBER OF OPTIONS
PARTICULARS	RESERVED UNDER	RESERVED UNDER	TOTAL
	CATEGORY A	CATEGORY B
Options reserved under original Plan	��	��	��
Options exercisedprior to stock dividend date(A)	��	��	��
Balance of shares that can be allotted on exercise of options(B)	��	��	��
Options arisingfrom stock dividend(C)	��	��	��
Options reserved after stock dividend(A+B+C)	��	��	��

145

144

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.24 EMPLOYEE STOCK INCENTIVE PLANS (CONTINUED)

The term of the DRL 2002 plan was extended for a period of 10 years e�ective as of 29 January 2012 by the shareholders at the Company�s Annual General Meeting held on 20 July 2012. Stock option activity under the DRL 2002 Plan for the two categories of options during the years ended 31 March 2021 and 31 March 2020 is as follows:

Category A — Fair Market Value Options: There was no stock activity under this category during the years ended 31 March 2021 and 31 March 2020 and there were no stock options outstanding under this category as of 31 March 2021 and 31 March 2020.

Category B — Par Value Options: Stock options activity under this category during the years ended 31 March 2021 and 31 March 2020 was as set forth in the below table.

PARTICULARS	SHARES ARISING OUT OF OPTIONS RANGE OF EXERCISE PRICES FOR THE YEAR ENDED 31 MARCH 2021 WEIGHTED AVERAGE EXERCISE PRICE WEIGHTED AVERAGE REMAINING USEFUL LIFE (MONTHS)
Outstandingat the beginningof theyear	�� �� �� ��
Granted duringtheyear	�� �� �� ��
Expired/forfeited duringtheyear	(��) �� �� -
Exercised duringtheyear	(��) �� �� -
Outstanding at the end of theyear	�� �� �� ��
Exercisable at the end of theyear	�� �� �� ��

PARTICULARS	SHARES ARISING OUT OF OPTIONS RANGE OF EXERCISE PRICES FOR THE YEAR ENDED 31 MARCH 2020 WEIGHTED AVERAGE EXERCISE PRICE WEIGHTED AVERAGE REMAINING USEFUL LIFE (MONTHS)
Outstandingat the beginningof theyear	�� �� �� ��
Granted duringtheyear	�� �� �� ��
Expired/forfeited duringtheyear	(��) �� �� -
Exercised duringtheyear	(��) �� �� -
Outstanding at the end of theyear	�� �� �� ��
Exercisable at the end of theyear	�� �� �� ��

The weighted average grant date fair value of options granted during the years ended 31 March 2021 and 31 March 2020 was 3,677 and 2,746 per ₹ ₹ option, respectively. The weighted average share price on the date of exercise of options during the years ended 31 March 2021 and 31 March 2020 was 4,565 and₹ ₹ 2,681 per share, respectively.

The aggregate intrinsic value of options exercised during the years ended 31 March 2021 and 31 March 2020 was ₹ 328 and ₹ 193, respectively. As of 31 March 2021, options outstanding had an aggregate intrinsic value of ₹ 980 and options exercisable had an aggregate intrinsic value of 208.₹

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 became e�ective upon its approval by the �oard of Directors on 22 January 2007. The DRL 2007 Plan covers all employees and directors (excluding promoter directors) of DRL and its subsidiaries (collectively, “eligible employees”). The Committee administers the DRL 2007 Plan and grants stock options to eligible employees. The Committee determines which eligible employees will receive 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 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 �ve years.

The DRL 2007 Plan provides for option grants in two categories:

Category A: 382,695 stock options out of the total of 1,530,779 stock options reserved for grant having an exercise price equal to the fair market value of the underlying equity shares on the date of grant; and

Category B: 1,148,084 stock options out of the total of 1,530,779 stock options reserved for grant having an exercise price equal to the par value of the underlying equity shares (i.e., 5 per option).₹

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.24 EMPLOYEE STOCK INCENTIVE PLANS (CONTINUED)

Stock options activity under the DRL 2007 Plan for the above two categories of options during the years ended 31 March 2021 and 31 March 2020 was as follows:

CATEGORY A -FAIR MARKET VALUE OPTIONS		FOR THE YEAR	ENDED 31 MARCH 2021	ENDED 31 MARCH 2021
	SHARES	RANGE OF	WEIGHTED	WEIGHTED AVERAGE
PARTICULARS	ARISING OUT OF OPTIONS	EXERCISE PRICES	AVERAGE EXERCISE PRICE	REMAINING USEFUL LIFE (MONTHS)
Outstanding at the beginning of the year	��	��to ��	��	��
Granted duringtheyear	��	��	��	��
Expired/forfeited during the year	(��)	��/ ��	��	-
Exercised during the year	(��)	��/ ��	��	-
Outstanding at the end of the year	��	��to ��	��	��
Exercisable at the end of the year	��	��to ��	��	��

CATEGORY A -FAIR MARKET VALUE OPTIONS		FOR THE YEAR	ENDED 31 MARCH 2020	ENDED 31 MARCH 2020
	SHARES	RANGE OF	WEIGHTED	WEIGHTED AVERAGE
PARTICULARS	ARISING OUT	EXERCISE	AVERAGE	REMAINING USEFUL
	OF OPTIONS	PRICES	EXERCISE PRICE	LIFE (MONTHS)
Outstanding at the beginning of the year	��	��/ ��	��	��
Granted duringtheyear	��	��	��	��
Expired/forfeited duringtheyear	(��)	��	��	-
Exercised duringtheyear	-	-	-	-
Outstanding at the end of the year	��	��to ��	��	��
Exercisable at the end of the year	��	�� ��	��	��

The weighted average grant date fair value of options granted during the years ended 31 March 2021 and 31 March 2020 was 1,255 and 993 per ₹ ₹ option, respectively. The weighted average share price on the date of exercise of options during the year ended 31 March 2021 was 4,506₹

The aggregate intrinsic value of options exercised during the year ended 31 March 2021 was 28. As of 31 March 2021, options outstanding had an ₹ aggregate intrinsic value of ₹ 466 and options exercisable had an aggregate intrinsic value of ₹ 120.

CATEGORY B — PAR VALUE OPTIONS		FOR THE YEAR	ENDED 31 MARCH 2021	ENDED 31 MARCH 2021
	SHARES	RANGE OF	WEIGHTED	WEIGHTED AVERAGE
PARTICULARS	ARISING OUT	EXERCISE	AVERAGE	REMAINING USEFUL
	OF OPTIONS	PRICES	EXERCISE PRICE	LIFE (MONTHS)
Outstandingat the beginningof theyear	��	��	��	��
Granted duringtheyear Expired/forfeited duringtheyear	(��) ��	�� ��	�� ��	- ��
Exercised duringtheyear	(��)	��	��	-
Outstanding at the end of theyear	��	��	��	��
Exercisable at the end of theyear	��	��	��	��
CATEGORY B — PAR VALUE OPTIONS		FOR THE YEAR	ENDED 31 MARCH 2020
	SHARES	RANGE OF	WEIGHTED	WEIGHTED AVERAGE
PARTICULARS	ARISING OUT	EXERCISE	AVERAGE	REMAINING USEFUL
	OF OPTIONS	PRICES	EXERCISE PRICE	LIFE (MONTHS)
Outstandingat the beginningof theyear	��	��	��	��
Granted duringtheyear	��	��	��	��
Expired/forfeited duringtheyear	(��)	��	��	-
Exercised duringtheyear	(��)	��	��	-
Outstanding at the end of theyear	��	��	��	��
Exercisable at the end of theyear	��	��	��	��

146

147

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.24 EMPLOYEE STOCK INCENTIVE PLANS (CONTINUED)

The weighted average grant date fair value of options granted during the years ended 31 March 2021 and 31 March 2020 was 3,631 and 2,747, ₹ ₹ respectively. The weighted average share price on the date of exercise of options during the years ended 31 March 2021 and 31 March 2020 was 4,334 and 2,757, respectively.₹ ₹

The aggregate intrinsic value of options exercised during the years ended 31 March 2021 and 31 March 2020 was ₹ 182 and ₹ 93, respectively. As of 31 March 2021, options outstanding had an aggregate intrinsic value of 641 and options exercisable had an aggregate intrinsic value of 69.₹ ₹

Dr. Reddy’s Employees Stock Option Scheme, 2018 (the “DRL 2018 Plan”):

The Company instituted the DRL 2018 Plan for all eligible employees pursuant to the special resolution approved by the shareholders at the Annual General Meeting held on 27 July 2018. The DRL 2018 Plan covers all employees and directors (excluding independent and promoter directors) of the parent company and its subsidiaries (collectively, “eligible employees”). Upon the exercise of options granted under the DRL 2018 Plan, the applicable equity shares may be issued directly by the Company to the eligible employee or may be transferred from the Dr. Reddy’s Employees ESOS Trust (the “ESOS Trust”) to the eligible employee. The ESOS Trust may acquire such equity shares through primary issuances by the Company and/or by way of secondary market acquisitions funded through loans from the Company. The Nomination, Governance and Compensation Committee of the Board of the parent company (the “Compensation Committee”) administers the DRL 2018 Plan and grants stock options to eligible employees, but may delegate functions and powers relating to the administration of the DRL 2018 Plan to the ESOS Trust. The Compensation Committee determines which eligible employees will receive 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 grant. The options issued under the DRL 2018 Plan vest in periods ranging between the end of one and �ve years, and generally have a maximum contractual term of �ve years.

The DRL 2018 Plan provides for option grants having an exercise price equal to the fair market value of the underlying equity shares on the date of grant as follows:

	NUMBER OF SECURITIES	NUMBER OF SECURITIES
PARTICULARS	TO BE ACQUIRED FROM	TO BE ISSUED BY	TOTAL
	SECONDARY MARKET	THE COMPANY
Options reserved against equityshares	��	��	��
Options reserved against ADRs	-	��	��
Total	��	��	��

As at 31 March 2021, the outstanding shares purchased from secondary market are 575,201 shares for an aggregate consideration of 1,967.₹

Stock option activity under the DRL 2018 Plan during the years ended 31 March 2021 and 31 March 2020 was as follows:

FAIR MARKET VALUE OPTIONS		FOR THE YEAR	ENDED 31 MARCH 2021	ENDED 31 MARCH 2021
	SHARES	RANGE OF	WEIGHTED	WEIGHTED AVERAGE
PARTICULARS	ARISING OUT	EXERCISE	AVERAGE	REMAINING USEFUL
	OF OPTIONS	PRICES	EXERCISE PRICE	LIFE (MONTHS)
Outstanding at the beginning of the year	��	��/ ��	��	��
Granted duringtheyear	��	��	��	��
Expired/forfeited during the year	(��)	��to ��	��	-
Exercised during the year	(��)	��/ ��	��	-
Outstanding at the end of the year	��	��to ��	��	��
Exercisable at the end of the year	��	�� ��	��	��

FAIR MARKET VALUE OPTIONS		FOR THE YEAR	ENDED 31 MARCH 2020	ENDED 31 MARCH 2020
	SHARES	RANGE OF	WEIGHTED	WEIGHTED AVERAGE
PARTICULARS	ARISING OUT	EXERCISE	AVERAGE	REMAINING USEFUL
	OF OPTIONS	PRICES	EXERCISE PRICE	LIFE (MONTHS)
Outstandingat the beginningof theyear	��	��	��	��
Granted during the year	��	�� /��	��	��
Expired/forfeited during the year	(��)	��to ��	��	-
Exercised during the year	(��)	��	��	-
Outstanding at the end of the year	��	�� ��	��	��
Exercisable at the end of theyear	��	��	��	��

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.24 EMPLOYEE STOCK INCENTIVE PLANS (CONTINUED)

The weighted average grant date fair value of options granted during the years ended 31 March 2021 and 31 March 2020 was 1,255 and 994 per ₹ ₹ option, respectively. The weighted average share price on the date of exercise of options during the years ended 31 March 2021 and 31 March 2020 was 4,609 and 2,914 per share, respectively.₹ ₹

The aggregate intrinsic value of options exercised during the years ended 31 March 2021 and 31 March 2020 was ₹ 165 and ₹ 0.35, respectively. As of 31 March 2021, options outstanding had an aggregate intrinsic value of 563 and options exercisable had an aggregate intrinsic value of 104.₹ ₹

Valuation of stock options:

The fair value of services received in return for stock options granted to employees is measured by reference to the fair value of stock options granted. The fair value of stock options granted under the DRL 2002 Plan, the DRL 2007 Plan and the DRL 2018 Plan has been measured using the Black–Scholes-Merton model at the date of the grant.

The Black-Scholes-Merton model includes assumptions regarding dividend yields, expected volatility, expected terms and risk free interest rates. In respect of par value options granted, the expected term of an option (or “option life”) is estimated based on the vesting term and contractual term, as well as the expected exercise behavior of the employees receiving the option. In respect of fair market value options granted, the option life is estimated based on the simpli�ed method. Expected volatility of the option is based on historical volatility, during a period equivalent to the option life, of the observed market prices of the Company’s publicly traded equity shares. Dividend yield of the options is based on recent dividend activity. Risk-free interest rates are based on the government securities yield in e�ect at the time of the grant. These assumptions re�ect management’s best estimates, but these assumptions involve inherent market uncertainties based on market conditions generally outside of the Company’s control. As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially impacted. Further, if management uses di�erent assumptions in future periods, stock-based compensation expense could be materially impacted in future years.

The estimated fair value of stock options is recognised in the statement of pro�t and loss on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards.

The weighted average inputs used in computing the fair value of options granted were as follows:

PARTICULARS	27 OCTOBER 2020 19 MAY 2020 GRANTS MADE ON 19 MAY 2020
Expected volatility	30.47% 29.12% 30.81%
Exerciseprice	₹5.00 ₹3,679.00 ₹5.00
Option life	2.5 Years 5.0 Years 2.5 Years
Risk-free interest rate	4.62% 5.67% 4.36%
Expected dividends	0.68% 0.68% 0.49%
Grant date shareprice	₹3,700.00 ₹3,700.00 ₹5,099.00

PARTICULARS	26 JANUARY 2020 31 OCTOBER 2019 GRANTS MADE ON 16 MAY 2019 16 MAY 2019
Expected volatility	29.29% 28.25% 27.10% 27.00%
Exerciseprice	₹5.00 ₹2,814.00 ₹5.00 ₹3,031.00
Option life	2.5 Years 5.0 Years 2.5 Years 5.0 Years
Risk-free interest rate	6.76% 7.14% 5.72% 6.61%
Expected dividends	0.71% 0.71% 0.72% 0.66%
Grant date shareprice	₹2,801.00 ₹2,801.00 ₹2,783.20 ₹3,031.00
Share-based payment expense
PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021 FOR THE YEAR ENDED 31 MARCH 2020
(1) Equitysettled share-basedpayment expense	�� ��
(2) Cash settled share-basedpayment expense	�� ��
	�� ��

Share-based payment expense

(1) As of 31 March 2021 and 31 March 2020, there was 612 and 515, respectively, of total unrecognised compensation cost related to unvested stock options. This cost is expected to be recognised ₹ ₹ over a weighted-average period of 1.95 years and 1.93 years, respectively.

(2) Certain of the Company’s employees are eligible for share-based payment awards that are settled in cash. These awards entitle the employees to a cash payment, on the exercise date, subject to vesting upon satisfaction of certain service conditions which range from 1 to 4 years. The amount of cash payment is determined based on the price of the Company’s ADSs at the time of vesting. As of 31 March 2021 and 31 March 2020, there was 22 and 25, respectively, of total unrecognised compensation cost related to unvested awards. This cost is expected to be ₹ ₹ recognised over a weighted-average period of 1.82 years and 1.88 years, respectively. This scheme does not involve dealing in or subscribing to or purchasing securities of the Company, directly or indirectly.

149

148

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.25 EMPLOYEE BENEFITS

Total employee bene�t expenses, including share-based payments, incurred during the years ended 31 �arch 2021 and 31 �arch 2020 amounted to 22,701 and 20,302, respectively.₹ ₹

Gratuity bene�ts �ro�ided by the Com�any

In accordance with applicable Indian laws, the Company has a de�ned bene�t plan which provides for gratuity payments (the �Gratuity Plan�) and covers certain categories of employees in India. The Gratuity Plan provides a lump sum gratuity payment to eligible employees at retirement or termination of their employment. The amount of the payment is based on the respective employee’s last drawn salary and the years of employment with the Company. E�ective 1 �eptember 1��, the Company established the Dr. Reddy’s Laboratories Gratuity Fund (the �Gratuity Fund�) to fund the Gratuity Plan. 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 invested in bonds issued by the Government of India and in debt securities and equity securities of Indian companies.

The components of gratuity cost recognised in the statement of pro�t and loss for the years ended 31 �arch 2021 and 31 �arch 2020 consist of the following:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Current service cost	��	��
Interest on net de�ned bene�t liability	�	(�)
Gratuitycost recognised in statement ofpro�t and loss	��	��
Details of the employee bene�ts obligations and plan assets are provided below:
PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Present value of funded obligations	��	��
Fair value ofplan assets	(��)	(��)
�et de�ned bene�t liabilityrecognised	��	��
Details of changes in the present value of de�ned bene�t obligations are as follows:
PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
De�ned bene�t obligations at the beginningof theyear	��	��
Current service cost	��	��
Interest on de�ned obligations	��	��
Re-measurements due to:
Actuarial loss/(gain) due to change in �nancial assumptions	��	(��
Actuarial loss/(gain) due to demographic assumptions	(��)	(��)
Actuarial loss/(gain) due to experience changes	��	��
�ene�tspaid	(��)	(��)
Liabilities assumed/(transferred)*	��	-
De�ned bene�t obli�ations at the end of theyear	��	��

Liabilities assumed/(transferred) of 25 comprises of : ₹

a) ₹ 70 increase in liability on account of acquisition of employees pursuant to the Business Transfer Agreement with Wockhardt limited. Refer to Note 2.38 of these standalone �nancial statements for further details.

b) ₹ 45 transfer of liability on account of restructuring of the pharmaceutical services business between the parent company and its subsidiary.

Details of changes in the fair value of plan assets are as follows:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Fair value ofplan assets at the beginningof theyear	��	��
Employer contributions	��	��
Interest onplan assets	��	��
Re-measurements due to:
Return onplan assets excludinginterest onplan assets	(�)	��
�ene�tspaid	(��)	(��)
Assets acquired /(transferred)*	��	-
Plan assets at the end of theyear	��	��

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.25 EMPLOYEE BENEFITS (CONTINUED)

2.25 EMPLOYEE BENEFITS(CONTINUED)
Sensitivity Analysis:
PARTICULARS	AS AT 31 MARCH 2021
De�ned bene�t obligation without e�ect ofpro�ected salary growth	��
Add: ��e�t of salary gro�th	��
De�ned bene�t obligation withpro�ected salary growth	��
De�ned bene�t obligation,usingdiscount rate minus 50 basispoints	��
De�ned bene�t obligation,usingdiscount rateplus 50 basispoints	��
De�ned bene�t obligation,usingsalary growth rateplus 50 basispoints	��
De�ned bene�t obligation,usingsalary growth rate minus 50 basispoints	��

Summary of the actuarial assumptions: The actuarial assumptions used in accounting for the Gratuity plan are as follows:

The assumptions used to determine �ene�t o�ligations:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Discount rate	��	��
Rate of compensation increase	��	��
The assumptions used to determine gratuity cost:
PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Discount rate	��	��
		8% per annum for the
Rate of compensation increase	��	�rst year and 9% per
		annum thereafter

Contributions: The Company expects to contribute 317 to the Gratuity Plan during the year ending 31 March 2021.₹

Disaggregation of plan assets: The Gratuity Plan’s weighted-average asset allocation at 31 March 2021 and 31 March 2020, by asset category, was as follows:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Funds managed byinsurers	��	��
Others	��	��
The expected future cash �ows in respect of gratuity as at 31 March 2021 were as follows:
PARTICULARS		AMOUNT
Expected contributions
Duringtheyear ended 31 March 2022(estimated)		��
Expected future bene�tpayments
31 March 2022		��
31 March 2023		��
31 March 2024		��
31 March 2025		��
31 March 2026		��
Thereafter		��

Provident fund bene�ts

Certain categories of employees of the Company receive bene�ts from a provident fund, a de�ned contribution plan. �oth the employee and employer each make monthly contributions to a government administered fund equal to 12% of the covered employee’s qualifying salary. The Company has no further obligations under the plan beyond its monthly contributions. The Company contributed 854 and 780 to the ₹ ₹ provident fund plan during the years ended 31 March 2021 and 31 March 2020, respectively.

Superannuation bene�ts

Certain categories of employees of the Company participate in superannuation, a de�ned contribution plan administered by the �ife Insurance Corporation of India. The Company makes monthly contributions based on a speci�ed percentage of each covered employee’s salary. The Company has no further obligations under the plan beyond its monthly contributions. The Company contributed 84 and 82 to the ₹ ₹ superannuation plan during the years ended 31 March 2021 and 31 March 2020, respectively.

Assets acquired/(transferred) of 26 comprise of: ₹

Compensated absences

a) ₹ 70 increase in asset on account of acquisition of employees pursuant to the Business Transfer Agreement with Wockhardt limited. Refer to Note 2.38 of these �nancial statements for further details.

b) ₹ 44 transfer of asset on account of restructuring of the pharmaceutical services business between the parent company and its subsidiary.

The Company provides for accumulation of compensated absences by certain categories of its employees. These employees can carry forward a portion of the unutilised compensated absences and utilise them in future periods or receive cash in lieu thereof as per the Company’s policy. The Company records a liability 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 obligation was 790 and₹ ₹ 902 as at 31 March 2021 and 31 March 2020, respectively.

150

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Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.26 INCOME TAXES

(a) Income tax expense/ (bene�t) recognised in the statement of pro�t and loss

Income tax expense recognised in the statement of pro�t and loss consists of the following:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Current taxes	��	��
Deferred taxes expense/(bene�t)	��	(��)
Total income tax expense recognised in the statement ofpro�t and loss	��	(��)

(b) Income tax expense/(bene�t) recognised directly in e��ity

Income tax expense/(bene�t) recognised directly in e�uity consist of the following:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Tax e�ect on e�ectiveportion of change in fair value of cash �ow hedges	��	(��)
Tax e�ect on actuarialgains/losses on de�ned bene�t obligations	(��)	��
Total income tax expense/(bene�t) recognised in the e��ity	��	(��)

(c) Reconciliation of e�ecti�e tax rate

The following is a reconciliation of the Company’s e�ective tax rates for the years ended 31 March 2021 and 31 March 2020:

PARTICULARS		FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Pro�t before income taxes		��	��
Enacted tax rate in India		��	��
Computed expected tax expense		��	��
��ect of�
Unrecognised deferred tax assets/(recognition of previously unrecognised deferred tax assets),net		-	(��)
Di�erential Tax rate impact on dividend income received from �ubsidary/�� outside India		(��)	(��)
Income exempt from income taxes		(��)	(��)
Incremental deduction allowed for research and development costs	(1)	-	(��)
Income from sale of capital assets		-	(��)
Other items		(��)	��
Income tax expense		��	(��)
E�ecti�e tax rate		��	(��)�

(1) India’s Finance Act, 2016 incorporated an amendment that reduces the weighted deduction on eligible research and development expenditure in a phased manner from 200% to 150% commencing from 1 April 2017, and from 150% to 100% e�ective from 1 April 2020�

The Company's average e�ective tax rate for the years ended 31 March 2021 and 31 March 2020 were 2�.�� and (�.�3)�, respectively.

The Company's e�ective tax rate for the year ended 31 March 2020 was lower as compared to the year ended 31 March 2021 primarily on account of:

Ÿ[de-recognition of deferred tax asset during the year ended 31 March 2021 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;

Ÿ[recognition of a deferred tax asset related to the Minimum Alternate Tax (“MAT”) credits during the �scal year ended 31 March 2020.]

Ÿ[Weighted deduction on eligible research and development expenditure in Dr. Reddy's laboratories limited, India for the year ended ] 31 March 2020.

Ÿ[income from sale of capital assets during the year ended 31 March 2020, which was set o� against the carried forward capital loss.]

(d) Unrecognised deferred tax assets

The details of unrecognised deferred tax assets are summarised below:

AS AT AS AT 31 MARCH 2021 31 MARCH 2020 - -

PARTICULARS

Taxable/Deductible temporary di�erences, net

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.26 INCOME TAXES (CONTINUED)

(e) Deferred tax assets and liabilities

The tax e�ects of signi�cant temporary di�erences that resulted in deferred tax assets and liabilities and a description of the items that created these di�erences is given below:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Deferred tax assets/(liabilities):
Minimum Alternate Tax*	��	��
Trade receivables	��	��
Operatingtax loss/capital loss	��	��
Current liabilities andprovisions	��	��
Loans	(��)	(��)
Property , plant and equipment	(��)	(��)
Investments	(��)	(��)
Net deferred tax assets/(Liabilities)	��	��

Net deferred tax assets/(Liabilities)

* As per Indian tax laws, companies are liable for a Minimum Alternate Tax (“MAT” tax) when current tax, as computed under the provisions of the Income Tax Act, 1961 (“Tax Act”), is determined to be below the MAT tax computed under section 115JB of the Tax Act. If in any year the Company pays liability as per MAT, then it is entitled to claim credit of MAT paid over and above the normal tax liability in the subsequent years. The MAT credit is eligible to be carried forward and set�o� in the future against the current tax liabilities over a period of 15 years starting from the succeeding �scal year in which such credit was generated.

In assessing whether the deferred income tax assets will be realised, management considers whether some portion or all of the deferred income tax assets will not be realised. The ultimate realisation of the deferred income tax assets and tax loss carry forwards is dependent upon the generation of future taxable income during the periods in which the temporary di�erences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategy in making this assessment. Based on the level of historical taxable income and projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes that the Company will realise the bene�ts of those recognised deductible di�erences and tax loss carry forwards.

Recoverability of deferred tax assets is based on estimates of future taxable income. Any changes in such future taxable income would impact the recoverability of deferred tax assets.

(f) Movement in deferred tax assets and liabilities during the years ended 31 March 2021 and 31 March 2020

PARTICULARS	AS AT 1 APRIL 2020	RECOGNISED IN THE STATEMENT OF PROFIT AND LOSS	RECOGNISED IN EQUITY	AS AT 31 MARCH 2021
Deferred tax assets/(liabilities)
Minimum Alternate Tax	��	��	-	��
Trade receivables	��	��	-	��
Operatingtax loss/capital loss	��	(��)	-	��
Current liabilities andprovisions	��	��	(��)	��
Loans	��	-	-	��
Property , plant and equipment	(��)	(��)	-	(��)
Investments	(��)	��	-	(��)
Net deferred tax assets/(liabilities)	��	(��)	(��)	��
PARTICULARS	AS AT 1 APRIL 2019	RECOGNISED IN THE STATEMENT OF PROFIT AND LOSS	RECOGNISED IN EQUITY	AS AT 31 MARCH 2020
Deferred tax assets/(liabilities)
Minimum Alternate Tax	��	��	-	��
Trade receivables	��	(�)	-	��
Operatingtax loss/capital loss	-	��	-	��
Current liabilities andprovisions	��	��	��	��
Loans	��	-	-	��
Property , plant and equipment	(��)	��	-	(��)
Investments	(��)	(��)	-	(��)
Net deferred tax assets/(liabilities)	(��)	��	��	��

(g) Uncertain tax positions

The Company is contesting various disallowances by the Indian Income Tax authorities. The associated tax impact for disallowances being more likely than not to be accepted by Tax authorities is ` 2,291, and accordingly, no provision is made in these �nancial statements as of 31 March 2�21.

152

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Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.27 FINANCIAL INSTRUMENTS

Non-derivative �nancial instruments

Non-derivative �nancial instruments consist of investments in mutual funds, bonds, equity and debt securities, trade receivables, cash and cash equivalents, loans and borrowings, and trade payables.

Derivative �nancial instruments

The Company uses derivative contracts like forwards, options and interest rate swaps to mitigate its risk of changes in foreign currency exchange rates and interest rates.

The carrying value and fair value of �nancial instruments as at 31 March 2021 and 31 March 2020 were as follows:

PARTICULARS	TOTAL CARRYING VALUE TOTAL FAIR VALUE/ AMORTISED COST AS AT 31 MARCH 2021	TOTAL CARRYING VALUE TOTAL FAIR VALUE/ AMORTISED COST AS AT 31 MARCH 2020
Financial assets
Cash and cash equivalents	�� ��	�� ��
Investments*	�� ��	�� ��
Trade receivables	�� ��	�� ��
Loans	�� ��	�� ��
Derivative instruments	�� ��	�� ��
Other �nancial assets	�� ��	�� ��
Total	�� ��	�� ��
Financial liabilities
Tradepayables	�� ��	�� ��
Long-term borrowings	�� ��	�� ��
Short-term borrowing	�� ��	�� ��
Derivative instruments	�� ��	�� ��
Other �nancial liabilities	�� ��	�� ��
Total	�� ��	�� ��

Interest accrued but not due on investments is included in other �nancial assets.

Fair value hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

The following table presents the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of 31 March 2021:

PARTICULARS		LEVEL 1	LEVEL 2	LEVEL 3	TOTAL
FVTPL - Financial asset - Investments in units of mutual funds		��	-	-	��
FVTPL - Financial asset – Investment in limited liability partnership�rm		-	-	��	��
FVTPL - Financial asset - Investments in equitysecurities		-	-	�	�
FVTOCI - Financial asset -Investment in equitysecurities		�	-	-	�
Derivative �nancial instruments – net gain�(loss) on outstanding foreign exchange forward, option and swapcontracts and interest rate swapcontracts	(1)	-	��	-	��
Contingent consideration pursuant to the Business Transfer Agreement with Wockhardt Limited(Refer to Note 2.38 for details)		-	-	��	��
The following table presents the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of 31 March					2020:
PARTICULARS		LEVEL 1	LEVEL 2	LEVEL 3	TOTAL
FVTPL - Financial asset - Investments in units of mutual funds		��	-	-	��
FVTPL - Financial asset - Investments in equitysecurities		-	-	�	�
FVTOCI - Financial asset - Investment in equitysecurities		��	-	-	��
FVTOCI - Financial asset - Investment in market linked debenturesn		��	-	-	��
Derivative �nancial instruments - net gain�(loss) on outstanding foreign exchange forward, option and swap contracts and interest rate swap contracts	(1)	-	(��)	-	(��)

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.27 FINANCIAL INSTRUMENTS (CONTINUED)

As at 31 March 2021 and 31 March 2020, the changes in counterparty credit risk had no material e�ect on the hedge e�ectiveness assessment for derivatives designated in hedge relationships and other �nancial instruments recognised at fair value.

Derivative Financial instruments

The Company had a derivative �nancial asset and derivative �nancial liability of 915 and 306, respectively, as at 31 March 2021 as compared to ₹ ₹ derivative �nancial asset and derivative �nancial liability of 783 and 1,524, respectively, as at 31 March 2020 towards these derivative �nancial ₹ ₹ instruments.

Details of gain/(loss) recognised in respect of derivative contracts

The following table presents details in respect of the gain/(loss) recognised in respect of derivative contracts during the applicable year ended:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Net gain/ (loss) recognised as part of statement of pro�t and loss in
respect of foreign exchange derivative contracts and cross currency	��	(��)
interest rate swaps contracts
Net gain/(loss) recognised in equity in respect of hedges of highly probable forecast transactions, net of amounts reclassi�ed from equity and recognised	��	(��)
as component of revenue
Net gain/(loss) reclassi�ed from equity and recognised as component of revenue occurrence of forecasted transaction	��	(��)

The net carrying amount of the Company’s “hedging reserve” as a component of equity before adjusting for tax impact was a gain of ₹ 452 as at 31 March 2021, as compared to a loss of 537 as at 31 March 2020. ₹

Outstanding foreign exchange derivative contracts

The following table gives details in respect of the notional amount of outstanding foreign exchange derivative contracts as of 31 March 2021:

CATEGORY	INSTRUMENT (1) CURRENCY CROSS (1) CURRENCY AMOUNTS IN MILLIONS BUY/SELL
Hedges of recognised assets and liabilities	AUD INR AUD 7 Sell Forward contract
	CHF INR CHF 200 Sell Forward contract
	Forward contract GBP INR GBP 8 Sell
	Forward contract RUB INR RUB 2,799 Sell
	Forward contract US$ INR US$353 Sell
	Forward contract US$ MXN US$10 Buy
	Forward contract US$ UAH US$9 Buy
	Forward contract ZAR INR ZAR 111 Sell
Hedges of highly probable forecasted transactions	AUD INR AUD 10 Sell Forward contract
	RUB INR RUB 6,850 Sell Forward contract
	Option contract US$ INR US$645 Sell
	Forward contract ZAR INR ZAR 148 Sell

The following table gives details in respect of the notional amount of outstanding foreign exchange derivative contracts as of 31 March 2020:

CATEGORY	INSTRUMENT (1) CURRENCY CROSS (1) CURRENCY AMOUNTS IN MILLIONS BUY/SELL
Hedges of recognised assets and liabilities	US$ INR US$ 148 Sell Forward contract
	RUB INR RUB 5,968 Sell Forward contract
	Forward contract GBP INR GBP 9 Sell
	Forward contract AUD INR AUD 4 Sell
	Forward contract CHF INR CHF 200 Sell
	Forward contract ZAR INR ZAR 71 Sell
	Option contract US$ INR US$140 Sell
Hedges of highly probable forecasted transactions	Option contract US$ INR US$ 270 Sell

(1) “INR” means Indian Rupees, “US$” means United States dollars, “RUB” means Russian roubles. “GBP” means U.K. pounds sterling, “AUD” means Australian dollars, “CHF” means Swiss francs, “ZAR” means South Aftrican rands, “MXN” means Mexican Peso and “UAH” means Ukrainian Hryvnia.

(1) The Company enters into derivative �nancial instruments with various counterparties, principally �nancial institutions and banks. �erivatives valued using valuation techniques with market observable inputs are mainly interest rate swaps, foreign exchange forward option and swap contracts. The most frequently applied valuation techniques include forward pricing, swap models and Black-Scholes-Merton models (for option valuation), using present value calculations. The models incorporate various inputs including foreign exchange forward rates, interest rate curves and forward rate curves.

155

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Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.27 FINANCIAL INSTRUMENTS (CONTINUED)

The table below summarises the periods when the cash �ows associated with highly probable forecast transactions that are classi�ed as cash �ow hedges are expected to occur:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Cash �o�s in US�
Not later than one month	��	��
Later than one month and not later than three months	��	��
Later than three months and not later than six months	��	��
Later than six months and not later than oneyear	��	��
	��	��
Cash �o�s in R�ssian Ro�b�es
Not later than one month	��	-
Later than one month and not later than three months	��	-
Later than three months and not later than six months	��	-
Later than six months and not later than oneyear	��	-
	��	-
Cash �o�s in So�th African Rands
Not later than one month	��	-
Later than one month and not later than three months	��	-
Later than three months and not later than six months	��	-
Later than six months and not later than oneyear	��	-
	��	-
Cash �o�s in A�stra�ian Do��ars
Not later than one month	��	-
Later than one month and not later than three months	��	-
Later than three months and not later than six months	��	-
Later than six months and not later than oneyear	��	-
	��	-

Hedges of changes in the interest rates:

Consistent with its risk management policy, the Company uses interest rate swaps (including cross currency interest rate swaps) to mitigate the risk of changes in interest rates. The Company does not use them for trading or speculative purposes.

A net gain/loss of Nil, representing the changes in the fair value of interest rate swaps used as hedging instrument in a cash �ow hedge is ₹ recognised in the statement of other comprehensive income. For balance interest rate swaps, the changes in fair value (including cross currency interest rate swaps) are recognised as part of the foreign exchange gain and losses and �nance costs. Accordingly the Company has recorded, as part of statement of pro�t and loss, a net gain of ₹ 1�4 and a net gain of ₹ 3� for the year ended 31 March 2021 and 31 March 2020 respectively.

The Company had outstanding cross currency swap against INR borrowing of 7,240 as at 31 March 2021 and Nil as on 31 March 2020. The swap hedges the principal repayment of underlying INR liability and transforms it into USD principal repayment liability.

2.28 FINANCIAL RISK MANAGEMENT

The Company’s activities expose it to a variety of �nancial risks, including market risk, credit risk and li�uidity risk. The Company’s primary risk management focus is to minimise potential adverse e�ects of market risk on its �nancial performance. The Company’s risk management assessment and policies and processes are established to identify and analyse 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 re�ect changes in market conditions and the Company’s activities. The �oard of Directors and the Audit Committee is responsible for overseeing the Company’s risk assessment and management policies and processes.

a. Market risk

Market risk is the risk of loss of future earnings, fair values or future cash �ows that may result from adverse changes in market rates and prices (such as interest rates, foreign currency exchange rates and commodity prices) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive �nancial instruments, all foreign currency receivables and payables and all short-term 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 foreign exchange risk arises from its foreign operations, foreign currency revenues and expenses, (primarily in United States dollars, Russian roubles, U.K pounds sterling and Euros) and foreign currency borrowings (in United States dollars). A signi�cant portion of the Company’s revenues are in these foreign currencies, while a signi�cant 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 revenues measured in Indian rupees may decrease.

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.28 FINANCIAL RISK MANAGEMENT (CONTINUED)

The exchange rate between the Indian rupee and these foreign currencies has changed substantially in recent periods and may continue to �uctuate substantially in the future. Consequently, the Company uses both derivative and non-derivative �nancial instruments, such as foreign exchange forward contracts, option contracts, currency swap contracts and foreign currency �nancial liabilities, to mitigate the risk of changes in foreign currency exchange rates in respect of its highly probable forecast transactions and recognised assets and liabilities.

The details in respect of the outstanding foreign exchange forward and option contracts are given in note 2.27 above.

In respect of the Company’s forward contracts and option contracts, a 10% decrease/increase in the respective exchange rates of each of the currencies underlying such contracts would have resulted in:

Ÿ[a 4,895/(4,267) increase/(decrease) in the Company’s hedging reserve and a 5,063/(5,063) increase/(decrease) in the Company’s net pro�t ] ₹ ₹ from such contracts, as at 31 March 2021;

Ÿ[a 1,303/(1,837) increase/(decrease) in the Company’s hedging reserve and a 4,195/(4,246) increase/(decrease) in the Company’s net pro�t ] ₹ ₹ from such contracts, as at 31 March 2020;

The following table analyses foreign currency risk from non-derivative �nancial instruments as at 31 March 2021:

			(�ll �gures in e�ui�alent �ndian	(�ll �gures in e�ui�alent �ndian	�upees �illions)
PARTICULARS	US$	EURO	RUSSIAN ROUBLES	(1) OTHERS	TOTAL
Assets:
Cash and cash equivalents	��	�	��	��	��
Trade receivables	��	��	��	��	��
Investments	-	-	-	��	��
Other �nancial assets	��	��	�	��	��
Total	��	��	��	��	��
Liabilities:
Tradepayables	��	��	-	��	��
Long-term borrowings	-	-	��	�	��
Short-term borrowings	-	-	-	-	-
Other �nancial liabilities	��	��	��	��	��
Total	��	��	��	��	��

The following table analyses foreign currency risk from non-derivative �nancial instruments as at 31 March 2020:

			(�ll �gures in e�ui�alent �ndian	(�ll �gures in e�ui�alent �ndian	�upees �illions)
PARTICULARS	US$	EURO	RUSSIAN ROUBLES	(1) OTHERS	TOTAL
Assets:
Cash and cash equivalents	��	-	�	��	��
Trade receivables	��	��	��	��	��
Investments	-	-	-	��	��
Other �nancial assets	��	��	�	�	��
Total	��	��	��	��	��
Liabilities:
Tradepayables	��	��	-	��	��
Long-term borrowings	-	-	�	��	��
Short-term borrowings	6,432	-	-	-	6,432
Other �nancial liabilities	6,127	194	1,647	234	8,202
Total	15,191	578	1,648	432	17,849

(1) Others include currencies such as Mexican pesos, U.K pounds sterling and Swiss francs.

For the years ended 31 March 2021 and 31 March 2020, every 10% depreciation/appreciation in the exchange rate between the Indian rupee and the respective currencies for the above mentioned �nancial assets/liabilities would a�ect the Company�s net pro�t by 5,897 and 4,400, respectively.

Interest rate risk

As of 31 March 2021, the Company had loans with �oating interest rates as follows: ₹ 8,800 of loans carrying a �oating interest rate of 3 Months India Treasury Bill plus 30 bps. As of 31 March 2020, the Company had loans with �oating interest rates as follows: ₹ 10,215 of loans carrying a �oating interest rate of 1 Month LIBOR plus 12.5 bps to 1 Month LIBOR plus 82.7 bps and 4,000 of loans carrying a �oating interest rate of 1 Month ₹ India Treasury Bill plus 60 bps. These loans expose the Company to risk of changes in interest rates. The Company’s treasury department monitors the interest rate movement and manages the interest rate risk based on its policies, which include entering into interest rate swaps as considered necessary.

For details of the Company’s short-term and long-term loans and borrowings, including interest rate pro�les, refer note 2.9A and 2.9B of these �nancial statements.

156

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Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.28 FINANCIAL RISK MANAGEMENT (CONTINUED)

For the years ended 31 March 2021 and 31 March 2020, every 10% increase or decrease in the �oating interest rate component (i.e., Treasury bill) applicable to its loans and borrowings would a�ect the Company’s net pro�t by ₹ 29 and 27.₹

The carrying value of the Company’s borrowings, interest component of which designated in a cash �ow hedge was ₹ Nil as of 31 March 2021 and 31 March 2020.

The Company’s investments in term deposits (i.e, certi�cates of deposit) with banks and short-term liquid mutual funds are for short durations, and therefore do not expose the Company to signi�cant interest rates 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 �uctuate signi�cantly over short periods of time. The prices of the Company’s raw materials generally �uctuate 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. As of 31 March 2021, the Company had not entered into any material derivative contracts to hedge exposure to �uctuations in commodity prices.

b. Credit risk

Credit risk is the risk of �nancial loss to the Company if a customer or counterparty to a �nancial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of expected losses in respect of trade and other receivables and investments.

Trade and other receivables

The Company’s exposure to credit risk is in�uenced 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 in�uence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

Investments

The Company limits its exposure to credit risk by generally investing in liquid securities and only with counterparties that have a good credit rating. The Company does not expect any losses from non-performance by these counter-parties, and does not have any signi�cant concentration of exposures to speci�c industry sectors or speci�c country risks.

Details of �nancial assets � not due� �ast due and im�aired

None of the Company’s cash equivalents, including term deposits (i.e., certi�cates of deposit) with banks, were past due or impaired as at 31 March 2021. The Company’s credit period for trade receivables payable by its customers generally ranges from 20 - 180 days.

The ageing of trade receivables is given below:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Neitherpast due nor impaired	��	��
Past due but not impaired
Less than 365 days	��	��
More than 365 days	��	��
	��	��
_Less:_Allowance for credit losses	(��)	(��)
Total	��	��

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.28 FINANCIAL RISK MANAGEMENT (CONTINUED)

As at 31 March 2020, the Company had working capital of 59,262, including cash and cash equivalents of 392, investments in term deposits with ₹ ₹ banks (i.e., deposits having original maturities of more than 3 months) of 5,003, investments in bonds of 1,851, investment in commercial paper ₹ ₹ of 967, investments in marked linked debentures of 1,993 and investments in mutual funds of 11,370.₹ ₹ ₹

The table below provides details regarding the contractual maturities of signi�cant �nancial liabilities (other than long-term borrowings and obligations under leases, which have been disclosed in note 2.9 A to these �nancial statements) as at 31 March 2021:

PARTICULARS	2022	2023	2024	2025	THEREAFTER	TOTAL
Tradepayables	��	-	-	-	-	��
Short-term borrowings	��	-	-	-	-	��
Other �nancial liabilities	��	-	-	-	-	��
Derivative �nancial instruments � liabilities	��	-	-	-	-	��

The table below provides details regarding the contractual maturities of signi�cant �nancial liabilities (other than long-term loans, borrowings and obligations under �nance leases, which have been disclosed in note 2.9 A to these �nancial statements) as at 31 March 2020:

PARTICULARS	��	2022	2023	2024	THEREAFTER	TOTAL
Tradepayables	��	-	-	-	-	��
Short-term borrowings	��	-	-	-	-	��
Other �nancial liabilities	��	-	-	-	-	��
Derivative �nancial instruments � liabilities	��	-	-	-	-	��

2.29 CONTINGENT LIABILITIES AND COMMITMENTS

A. Contingent liabilities (claims against the Company not acknowledged as debts)

The Company is involved in 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. The more signi�cant matters are discussed below. Most of the claims involve complex issues. Often, these issues are subject to uncertainties and therefore the probability of a loss, if any, being sustained and an estimate of the amount of any loss is di�cult to ascertain. Consequently, for a majority of these claims, it is not possible to make a reasonable estimate of the expected �nancial e�ect, if any, that will result from ultimate resolution of the proceedings. This is due to a number of factors, including: the stage of the proceedings (in many cases trial dates have not been set) and the overall length and extent of pre-trial discovery; the entitlement of the parties to an action to appeal a decision; clarity as to theories of liability; damages and governing law; uncertainties in timing of litigation; and the possible need for further legal proceedings to establish the appropriate amount of damages, if any. In these cases, the Company based on internal and external legal advice discloses information with respect to the nature and facts of the case.

The Company also believes that disclosure of the amount sought by plainti�s, if that is known, would not be meaningful with respect to those legal proceedings.

Although there can be no assurance regarding the outcome of any of the legal proceedings or investigations referred to in this Note, the Company does not expect them to have a materially adverse e�ect on its �nancial position, as it believes that the likelihood of loss in excess of amounts accrued (if any) is not probable. However, if one or more of such proceedings were to result in judgements against the Company, such judgements could be material to its results of operations in a given period.

(i) Product and patent related matters

Matters relating to National Pharmaceutical Pricing Authority

��

Refer note 2.5 B of these �nancial statements for the activity in the allowance for credit losses.

Loans and advances

Loans and advances are predominantly given to subsidiaries for the purpose of working capital and other business requirements.

Refer note 2.5 C of these �nancial statements for the activity in the allowance for doubtful advances.

Other than trade receivables and loans and advances, the Company has no signi�cant class of �nancial assets that is past due but not impaired.

c. Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its �nancial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have su�cient 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 2021 and 31 March 2020, the Company had uncommitted lines of credit from banks of ₹ 18,361 and 20,743 respectively.₹ As at 31 March 2021, the Company had working capital of ₹ 63,839, including cash and cash equivalents of 13,063, investments in term deposits ₹ with banks (i.e., deposits having original maturities of more than 3 months) of 3,402, investments in bonds of 522, investment in commercial ₹ ₹ paper of Nil, investments in marked linked debentures of Nil and investments mutual funds of 12,048. ₹ ₹ ₹

The Company manufactures and distributes Nor�oxacin, a formulations product, and in limited quantities, the active pharmaceutical ingredient nor�oxacin. Under the Drugs (Prices Control) Order (the “DPCO”), the National Pharmaceutical Pricing Authority (the “NPPA”) established by the Government of India had the authority to designate a pharmaceutical product as a “speci�ed product” and �x the maximum selling price for such product. In 1995, the NPPA issued a noti�cation and designated Nor�oxacin as a “speci�ed product” and �xed the maximum selling price. In 1996, the Company �led a statutory �orm III before the NPPA for the upward revision of the maximum selling price and a writ petition in the Andhra Pradesh High Court (the “High Court”) challenging the validity of the designation on the grounds that the applicable rules of the DPCO were not complied with while �xing the maximum selling price.

The High Court had previously granted an interim order in favour of the Company; however it subsequently dismissed the case in April 2004.

The Company �led a review petition in the High Court in April 2004 which was also dismissed by the High Court in October 2004. Subsequently, the Company appealed to the Supreme Court of India, New Delhi (the “Supreme Court”) by �ling a Special �eave Petition.

During the year ended 31 March 2006, the Company received a notice from the NPPA demanding the recovery of the price charged by the Company for sales of Nor�oxacin in excess of the maximum selling price �xed by the NPPA, which was 285 including interest.₹

159

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Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.29 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

The Company �led a writ petition in the High Court challenging this demand order. The High Court admitted the writ petition and granted an interim order, directing the Company to deposit 50% of the principal amount claimed by the NPPA, which was 77. The Company deposited ₹ this amount with the NPPA in November 2005. In February 2008, the High Court directed the Company to deposit an additional amount of ₹ 30, which was deposited by the Company in March 2008. In November 2010, the High Court allowed the Company’s application to include additional legal grounds that the Company believed strengthened its defense against the demand. For example, the Company added as grounds that trade margins should not be included in the computation of amounts overcharged, and that it was necessary for the NPPA to set the active pharmaceutical ingredient price before the process of determining the ceiling on the formulation price. In October 2013, the Company �led an additional writ petition before the Supreme Court challenging the inclusion of Nor�oxacin as a “speci�ed product” under the DPCO. In January 2015, the NPPA �led a counter a�davit stating that the inclusion of Nor�oxacin was based upon the recommendation of a committee consisting of experts in the �eld. On 20 July 2016, the Supreme Court remanded the matters concerning the inclusion of Nor�oxacin as a “speci�ed product” under the DPCO back to the High Court for further proceedings. During the three months ended 30 September 2016, the Supreme Court dismissed the Special Leave Petition pertaining to the �xing of prices for Nor�oxacin formulations.

During the three months ended 31 December 2016, a writ petition pertaining to Nor�oxacin was �led by the Company with the Delhi High Court. The matter has been adjourned to 29 July 2021 for hearing.

Based on its best estimate, the Company has recorded a provision for potential liability for sale proceeds in excess of the noti�ed selling prices, including the interest thereon, and believes that the likelihood of any further liability that may arise on account of penalties pursuant to this litigation is not probable.

Litigation relating to Cardiovascular and Anti-diabetic formulations

In July 2014, the NPPA, pursuant to the guidelines issued in May 2014 and the powers granted by the Government of India under the Drugs (Price Control) Order, 2013, issued certain noti�cations regulating the prices for 108 formulations in the cardiovascular and antidiabetic therapeutic areas. The Indian Pharmaceutical Alliance (“IPA”), in which the Company is a member, �led a writ petition in the Bombay High Court challenging the noti�cations issued by the NPPA on the grounds that they were ultra vires, ex facie and ab initio void. The Bombay High Court issued an order to stay the writ in July 2014. On 26 September 2016, the Bombay High Court dismissed the writ petition �led by the IPA and upheld the validity of the noti�cations�orders passed by the NPPA in July 2014. Further, on 25 October 2016, the IPA �led a Special Leave Petition with the Supreme Court, which was dismissed by the Supreme Court.

During the three months ended 31 December 2016, the NPPA issued show-cause notices relating to allegations that the Company exceeded the noti�ed maximum prices for 11 of its products. The Company has responded to these notices.

On 20 March 2017, the IPA �led an application before the Bombay High Court for the recall of the judgement of the Bombay High Court dated 26 September 2016. This recall application �led by the IPA was dismissed by the Bombay High Court on 4 October 2017. Further, on 13 December 2017, the IPA �led a Special Leave Petition with the Supreme Court for the recall of the judgement of the Bombay High Court dated 4 October 2017, which was dismissed by Supreme Court on 10 January 2018.

Pursuant to the order, the Company deposited 100 on 13 September 2017 and submitted a bank guarantee of 676 dated 15 September 2017 ₹ ₹ to the Registrar General, Delhi High Court. On 22 November 2017, the Delhi High Court directed the Union of India to �le a �nal counter a�davit within six weeks, subsequent to which the Company could �le a rejoinder. On 10 May 2018, the counter a�davit was �led by the Union of India. The Company subsequently �led a rejoinder and both were taken on record by the Delhi High Court. The matter has been adjourned to 3 August 2021 for hearing.

Based on its best estimate, the Company has recorded a provision of 310 under “Selling and other expenses” as a potential liability for sale ₹ proceeds in excess of the noti�ed selling prices, including the interest thereon, and believes that the likelihood of any further liability that may arise on account of penalties pursuant to this litigation is not probable.

However, if the Company is unsuccessful in such litigation, it will be required to remit the sale proceeds in excess of the noti�ed selling prices to the Government of India with interest and could potentially include penalties, which amounts are not readily ascertainable.

Class Action and Other Civil Litigation on Pricing/Reimbursement Matters

On 30 December 2015 and on 4 February 2016, respectively, a class action complaint (the “First Pricing Complaint”) and another complaint (not a class action) (the “Second Pricing Complaint”) were �led against the Company and eighteen other pharmaceutical defendants in State Court in the Commonwealth of Pennsylvania. In these actions, the class action plainti�s allege that the Company and other defendants, individually or in some cases in concert with one another, have engaged in pricing and price reporting practices in violation of various Pennsylvania state laws. More speci�cally, the plainti�s allege that� (1) the Company provided false and misleading pricing information to third party drug compendia companies for the Company’s generic drugs, and such information was relied upon by private third party payers that reimbursed for drugs sold by the Company in the United States, and (2) the Company acted in concert with certain other defendants to unfairly raise the prices of generic divalproex sodium ER (bottle of 80, 500 mg tablets ER 24H) and generic pravastatin sodium (bottle of 500, 10 mg tablets).

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.29 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

The First Pricing Complaint was removed to the U.S. District Court for the Eastern District of Pennsylvania (the “E.D.P.A. Federal Court”) and, pending the outcome of the First Pricing Complaint, the Second Pricing Complaint was stayed. On 25 September 2017, the E.D.P.A. Federal Court dismissed all the claims of the plainti�s in the First Pricing Complaint and denied leave to amend such complaint as futile. Subsequent to this decision, the plainti�s’ right to appeal the dismissal of the First Pricing Complaint expired.

Further, on 17 November 2016, certain class action complaints were �led against the Company and a number of other pharmaceutical companies as defendants in the E.D.P.A. Federal Court. Subsequently, these complaints were consolidated into one amended complaint as part of a multi-district, multi product litigation pending with the E.D.P.A. Federal Court. These complaints allege that the Company and the other named defendants have engaged in a conspiracy to �x prices and to allocate bids and customers in the sale of pravastatin sodium tablets and divalproex sodium extended-release tablets in the United States.

In March 2017, plainti�s agreed by stipulation to dismiss Dr. Reddy’s Laboratories Inc. and Dr. Reddy’s Laboratories Limited from the actions related to pravastatin sodium tablets without prejudice. The Company denies any wrongdoing and intends to vigorously defend against these allegations.

In response to the consolidated new complaint, the Company �led a motion to dismiss in October 2017. The plainti�s �led opposition to the motion to dismiss in December 2017 and a reply was �led by the Company in January 2018. In October 2018, the Court denied the motion to dismiss on the grounds that the allegations pled leave open the possibility of conspiracy. Therefore, discovery will proceed to look into this possibility.

The Company believes that the asserted claims are without merit and intends to vigorously defend itself against the allegations. Also any liability that may arise on account of these claims is unascertainable. Accordingly, no provision was made in the �nancial statements of the Company.

(ii) Civil litigation with Mezzion

On 13 January 2017, Mezzion Pharma Co. Ltd. and Mezzion International LLC (collectively, “Mezzion”) �led a complaint in the New Jersey Superior Court against the Company and its wholly owned subsidiary in the United States. The complaint pertains to the production and supply of the active pharmaceutical ingredient (“API”) for udena�l (a patented compound) and an udena�l �nished dosage product during a period from calendar years 2007 to 2015. Mezzion alleges that the Company failed to comply with the U.S. FDA’s current Good Manufacturing Practices (“cGMP”) at the time of manufacture of the API and �nished dosage forms of udena�l and, consequently, that this resulted in a delay in the �ling of a NDA for the product by Mezzion. The Company �led a motion to dismiss Mezzion’s complaint on the technical grounds that the Court lacks jurisdiction over the Company. In January 2018, the Court denied the Company’s motion to dismiss the complaint on the jurisdictional matter. The Company’s interlocutory appeal of said denial was also denied. The case is continuing in pretrial discovery.

The Company denies any wrongdoing or liability in this regard, and intends to vigorously defend against the claims asserted in Mezzion’s complaint. Any liability that may arise on account of this claim is unascertainable. Accordingly, no provision was made in the �nancial statements of the Company.

(iii) Securities Class Action Litigation

On 25 August 2017, a securities class action lawsuit was �led against the Company, its Chief Executive O�cer and its Chief Financial O�cer in the United States District Court for the District of New Jersey. The Company’s Co-Chairman, its Chief Operating O�cer, and Dr. Reddy’s Laboratories, Inc., were also subsequently named as defendants in the case. The operative complaint alleges that the Company made false or misleading statements or omissions in its public �lings, in violation of U.S. federal securities laws, and that the Company’s share price dropped and its investors were a�ected. On 9 May 2018, the Company and other defendants �led a motion to dismiss the complaint in the United States District Court for the District of New Jersey.

On 25 June 2018, the plainti�s �led an opposition to the motion to dismiss and, on 25 July 2018, a further reply in support of the motion to dismiss was �led by the Company. In August 2018, oral argument on the motion to dismiss was heard by the Court.

On 21 March 2019, the District Court issued its decision granting in part and denying in part the motion to dismiss. Pursuant to that decision, the Court dismissed the plainti�s claims with respect to seventeen out of the twenty two alleged misstatements and omissions.

On 15 May 2020, Dr. Reddy’s Laboratories Limited, Dr. Reddy’s Laboratories, Inc., and certain of the Company’s current or former directors and o�cers, have entered into a Stipulation and Agreement of Settlement (the “Stipulation”) with lead plainti� the Public Employees’ Retirement System of Mississippi in the putative securities class action �led against the defendants in the United States District Court for the District of New Jersey. As consideration for the settlement of the class action, the Company has agreed to pay US$ 9 million.

The settlement is subject to the approval of the court and may be terminated prior to court approval pursuant to the grounds for termination set forth in the Stipulation. Subject to the terms of the Stipulation, in exchange for the settlement consideration, lead plainti� and members of the settlement class who do not opt-out of this settlement would release, among other things, the claims that were asserted, or that they could have asserted, in this class action. In entering into the settlement, the defendants do not admit, and explicitly deny, any liability or wrongdoing of any kind.

Subject to the terms of the Stipulation, the settlement resolves the remainder of the litigation.

As the Company is adequately insured with respect to the aforesaid liability, the settlement did not have any impact on the Company’s statement of pro�t and loss for the year ended 31 March 2020.

The amount payable to the plainti�s on account of the settlement and the corresponding receivable from the insurer have been presented under “other current �nancial assets� and �other current �nancial liabilities”, respectively, in the balance sheet of the Company as at 31 March 2020.

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Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.29 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

On 23 December 2020, the court issued a �nal order and judgment approving the settlement. Pursuant to the settlement/court order, the escrow was funded on 4 January 2021. The e�ective date of the settlement occurred on 1 February 2021, upon transfer of the settlement fund balance into the �nal escrow account. As the transfer of funds to the �nal escrow account constitutes settlement of liability, the amount of liability has been derecognised during the three months ended 31 March 2021.

(iv) Internal Investigation

The Company has commenced a detailed investigation into an anonymous complaint. The complaint alleges 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, speci�cally the US Foreign Corrupt Practices Act. A US law �rm is conducting the investigation at the instruction of a committee of the Company's Board of Directors. The investigation is ongoing. The Company has disclosed the matter to the US Department of Justice, Securities and Exchange Commission and Securities Exchange Board of India. While the matter may result in government enforcement actions against the Company in the United States and/or foreign jurisdictions, which could lead to civil and criminal sanctions under relevant laws, the probability of such action and the outcome are not reasonably ascertainable at this time.

(v) Environmental matters

Land pollution

The Indian Council for Environmental Legal Action �led a writ in 1989 under Article 32 of the Constitution of India against the Union of India and others in the Supreme Court of India for the safety of people living in the Patancheru and Bollaram areas of Medak district of the then existing undivided state of Andhra Pradesh. The Company has been named in the list of polluting industries. In 1996, the Andhra Pradesh District Judge proposed that the polluting industries compensate farmers in the Patancheru, Bollaram and Jeedimetla areas for discharging e�uents which damaged the farmers’ agricultural land. The compensation was �xed at 0.0013 per acre for dry land and 0.0017 per acre for wet land. ₹ ₹ Accordingly, the Company has paid a total compensation of 3. The Andhra Pradesh High Court disposed of the writ petition on ₹ 12 February 2013 and transferred the case to the National Green Tribunal (“NGT”), Chennai, India. The interim orders passed in the writ petitions will continue until the matter is decided by the NGT. The NGT has, through its order dated 30 October 2015, constituted a Fact Finding Committee. The NGT has also permitted the alleged polluting industries to appoint a person on their behalf in the Fact Finding Committee. However, the Company, along with the alleged polluting industries, has challenged the constitution and composition of the Fact Finding Committee. The NGT has directed that until all the applications challenging the constitution and composition of the Fact Finding Committee are disposed of, the Fact Finding Committee shall not commence its operation.

The NGT, Chennai in a judgement dated 24 October 2017, disposed of the matter. The Bulk Drug Manufacturers Association of India (“BDMAI”), in which the Company is a member, subsequently �led a review petition against the judgement on various aspects.

The NGT, Delhi, in a judgement dated 16 November 2017 in another case in which the Company is not a party, stated that the moratorium imposed in the Patancheru and Bollaram areas shall continue until the Ministry of Environment, Forest and Climate Change passes an order keeping in view the needs of the environment and public health. The Company �led an appeal challenging this judgement.

The High Court of Hyderabad heard the Company’s appeal challenging this judgement in July 2018 and directed the respondents to �le their response within a period of four weeks. During the three months ended 30 September 2018, the respondents �led counter a�davits and the matter has now been adjourned for �nal hearing.

The appeal came up for hearing before the High Court of Hyderabad on 25 October 2018 and has been adjourned for further hearing.

On 24 April 2019, based upon the judgement of the NGT, Chennai dated 24 October 2017, the Government of Telangana has issued G.O.Ms. No 24 of 2019 that allows for expansion of production of all kinds of existing industrial units located within the stretch of Patancheru – Bollaram upon depositing an amount equivalent to 1% of the annual turnover of the respective unit for the concluded �scal year i.e., 31 March 2019. Accordingly, the Company made a provision of 29.4, representing the probable cost of expansion, during the year ended 31 March 2019. ₹

The Consent For Operation (“CFO”) for change of product mix application �led by one of the industrial unit of the Company has been recommended for issuance of CFO with change of product mix only upon payment of 0.5% of the annual turnover from the �scal years 2016-2017 to 2018- 2019 to the TSPCB. The Company intends to vigorously defend itself against the Operational Guidelines.

In November 2019, demand notices were issued by the TSPCB for collection of Corpus Fund of 0.5 % as remediation fee on the previous year turnover as per Operational Guidelines dated 3 August 2019 issued by TSPCB under the guise of G O Ms No 24 dated 24 April 2019 and G O Ms No 31 dated 24 May 2019 and basis the judgement of NGT, Chennai dated 24 October 2017 for the �scal years 2015-2016 to 2018 -2019 received by CTO-1, CTO-2 and CTO-3 of the Company.

On 22 November 2019, The Hon’ble High Court of Judicature at Hyderabad issued an Interim Order which stayed the demand on the condition that the Company deposit 60 as the remediation fee for the �scal year 2018-2019 payable in the �scal year 2019-2020. The deposit of 60 was ₹ ₹ made and the Interim Order is continuing. The matter was adjourned to 22 April 2020, but has been delayed as a result of the closure of the Court due to the COVID-19 lockdown, and a new date has not yet been rescheduled.

The Company believes that any additional liability that might arise in this regard is not probable. Accordingly, no provision relating to these claims has been made in the �nancial statements.

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.29 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

Water pollution and air pollution

During the year ended 31 March 2012, the Company, along with 14 other companies, received a notice from the Andhra Pradesh Pollution Control Board (the “APP Control Board”) to show cause as to why action should not be initiated against them 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) cease manufacturing products at such facilities in excess of certain quantities speci�ed by the APP Control Board and (iii) furnish a bank guarantee to assure compliance with the APP Control Board’s orders.

The Company appealed the APP Control Board orders to the Andhra Pradesh Pollution Appellate Board (the “APP Appellate Board”). The APP Appellate Board, on the basis of a report of a fact-�nding advisory committee, recommended to the Andhra Pradesh Government to allow expansion of units fully equipped with Zero-Liquid Discharge (“ZLD”) facilities and otherwise found no fault with the Company (on certain conditions).

The APP Appellate Board’s decision was challenged by one of the petitioners that was pending in the National Green Tribunal, (the “NGT”), Delhi.

Separately, the Andhra Pradesh Government, following recommendations of the APP Appellate Board, published a noti�cation in July 2013 that allowed expansion of production of all types of existing bulk drug and bulk drug intermediate manufacturing units subject to the installation of ZLD facilities and the outcome of cases pending in the NGT. Importantly, the noti�cation directed pollution load of industrial units to be assessed at the point of discharge (if any) as opposed to the point of generation.

In September 2013, the Ministry of Environment and Forests, based on the revised Comprehensive Environment Pollution Index, issued a noti�cation that re-imposed a moratorium on expansion of industries in certain areas where some of the Company’s manufacturing facilities are located. This noti�cation overrides the Andhra Pradesh Government’s noti�cation that conditionally permitted expansion.

The appeals �led by Mr. �. Chidambaram against the Orders of the Appellate Authority, Andhra Pradesh are disposed o� as the same do not survive for consideration as the G.O. based on which the then APPCB had passed its order which was subject matter of appeal before the Appellate Authority has itself been amended vide order 25 July 2013. However, the NGT, Delhi has passed a direction for the issue of pollution to be considered by the Joint Committee of Central Pollution Control Board, National Environmental Engineering Institute (NEERI), and the Telangana State Pollution Control Board to ascertain the present status of pollution issues in the Medak, Ranga Reddy, Mahaboobnagar and Nalagonda districts in the State of Telangana particularly in the Patancheru and Bollaram industrial clusters and �le a report within three months before the NGT, Delhi.

(vi) Fuel Surcharge Adjustments

The Andhra Pradesh Electricity Regulatory Commission (the “APERC”) passed various orders approving the levy of Fuel Surcharge Adjustment (“FSA”) charges for the period from 1 April 2008 to 31 March 2013 by power distribution companies from all the consumers of electricity in the then existing undivided state of Andhra Pradesh, India where the Company’s headquarters and principal manufacturing facilities are located. Separate writ petitions �led by the Company for various periods, challenging and questioning the validity and legality of this levy of FSA charges by the APERC, are pending before the High Court of Andhra Pradesh and the Supreme Court of India.

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 March 2013 is 482. After taking into account all of the available information and legal provisions, the Company ₹ has recorded 219 as the potential liability towards FSA charges. However, the Company has paid, under protest, an amount of 354 as ₹ ₹ demanded by the power distribution companies as part of monthly electricity bills. The Company remains exposed to additional �nancial liability should the orders passed by the APERC be upheld by the Courts.

During the three months ended 30 June 2016, the Supreme Court of India dismissed the Special Leave Petition �led by the Company in this regard for the period from 1 April 2012 to 31 March 2013. As a result, for the quarter ended 30 June 2016, the Company recognised an expenditure of 55 (by de-recognising the payments under protest) representing the FSA charges for the period from 1 April 2012 to ₹ 31 March 2013.

(vii) Indirect taxes related matters

Value Added Tax (“VAT”) matter

The Company has received various demand notices from the Government of Telangana’s Commercial Taxes Department objecting to the Company’s methodology of calculation of VAT input credit. The below table shows the details of each of such demand notice, the amount demanded and the current status of the Company’s responsive actions.

PERIOD COVERED UNDER THE NOTICE

AMOUNT DEMANDED

STATUS

The State VAT Appellate Tribunal has remanded the matter to the assessing authority to re-compute the April 2006 to March 2009 ₹ 66 plus 10% penalty eligibility and penalty orders are set-aside. The Company �led appeal against the same with the High Court, Telangana. The Company has �led an appeal before the Sales Tax Appellate Tribunal - The matter was remanded to the April 2009 to March 2011 ₹ 59 plus 10% penalty original adjudicating authority with a direction to re-calculate the eligibility for the year ended 31 March 2010. The Appellate Deputy Commissioner issued an order April 2011 to March 2014 ₹ 27 plus 10% penalty partially in favour of the Company

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Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.29 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

The Company has recorded a provision of 51 as of 31 March 2021, and believes that the likelihood of any further liability that may arise on ₹ account of the ongoing litigation is not probable.

Notices from Commissioner of Goods and Services Tax, India

In the months of November 2019 and January 2020, the Commissioner of Goods and Services Tax, India issued notices to the Company alleging that the Company has irregularly availed input tax credit of 307. The Company has received orders dropping the demand of₹ ₹ 307.

The Company has recorded a provision of 31 as on 31 March 2021 and believes that the likelihood of any further liability that may arise on ₹ account of the allegedly inappropriate claims to credits is not probable. Accordingly, no further provision was made in these �nancial statements.

Others

Additionally, the Company is in receipt of various demand notices from the Indian Sales and Service Tax authorities. The disputed amount is ₹ 474. The Company has responded to such demand notices and believes that the chances of any liability arising from such notices are less than probable. Accordingly, no provision is made in these �nancial statements as of 31 March 2021.

(viii) Others

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 e�ect on its �nancial statements.

B. Commitments:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Estimated amounts of contracts remaining to be executed on capital account and notprovided for (net of advances)	9,560	4,485

2.30 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.

2.31 SEGMENT REPORTING

In accordance with Ind AS 108, Operating Segments, segment information has been given in the consolidated �nancial statements of Dr. Reddy’s Laboratories Limited and therefore no separate disclosure on segment information is given in these �nancial statements.

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.34 OTHER UPDATES (CONTINUED)

B. Update on warning letter from the U.S. FDA

The Company received a warning letter dated 05 November 2015 from the U.S. FDA relating to current Good Manufacturing Practices (“cGMPs”) deviations at its active pharmaceutical ingredient (“API”) manufacturing facilities at Srikakulam, Andhra Pradesh and Miryalaguda, Telangana, as well as violations at its oncology formulation manufacturing facility at Duvvada, Visakhapatnam, Andhra Pradesh. The contents of the warning letter emanated from Form 483 observations that followed inspections of these sites by the U.S. FDA in November 2014, January 2015 and February-March 2015.

Tabulated below are the further updates with respect to the aforementioned sites:

MONTH AND YEAR UPDATE

	February, March	The U.S. FDA completed the re-inspection of the aforementioned manufacturing facilities. During the re-inspections, the U.S. FDA issued three observations with respect to the API manufacturing facility at
	and April 2017	Miryalaguda, two observations with respect to the API manufacturing facility at Srikakulam and thirteen
		observations with respect to the Company’s oncology formulation manufacturing facility at Duvvada.
	June 2017	The U.S. FDA issued an Establishment Inspection Report (“EIR”) which indicated that the inspection of the Company’s API manufacturingfacility at Miryalaguda was successfully closed.
	November 2017	The Company received EIRs from the U.S. FDA for the oncology manufacturing facility at Duvvada which indicated that the inspection status of this facility remained unchanged.
	February 2018	The Company received EIRs from the U.S. FDA for API manufacturing facility at Srikakulam which indicated that the inspection status of this facilityremained unchanged.
	June 2018	The Company requested the U.S. FDA to schedule a re-inspection of the oncology formulation manufacturing facility at Duvvada.
	October 2018	The re-inspection was completed for the oncology formulation manufacturing facility at Duvvada and the U.S. FDA issued a Form 483 with eight observations.
	November 2018	The Company responded to the observations identi�ed by the U.S. FDA for the oncology formulation manufacturingfacilityat Duvvada in October 2018.
	February 2019	The U.S. FDA issued an EIR indicating successful closure of the audit of the oncology formulation manufacturing facilityat Duvvada.

With respect to the API manufacturing facility at Srikakulam, subsequent to the receipt of an EIR in February 2018, the Company was asked, in October 2018, to carry out certain detailed investigations and analyses and the Company submitted the results of the investigations and analyses. As part of the review of the response by the U.S. FDA, certain additional follow on queries were received by the Company, and the Company responded to all such queries in January 2019. In February 2019, the Company received certain other follow on questions from the U.S. FDA and the Company responded to these questions in March 2019. The U.S. FDA completed the audit on 28 January 2020. The Company was issued a Form 483 with 5 observations and responded to the observations in February 2020. In May 2020, the Company received an EIR from the U.S. FDA, for the above-referred facility, indicating closure of the audit and classifying the inspection of this facility as Voluntary Action Indicated (“VAI”). With this, all facilities under warning letter are now determined as VAI.

Inspection of other facilities:

2.32 CAPITAL MANAGEMENT

For the purposes of the Company’s capital management, capital includes issued capital and all other equity reserves. The primary objective of the Company’s capital management is to maximise shareholder value. The Company manages it’s capital structure and makes adjustments in the light of changes in economic environment and the requirements of the �nancial covenants. The Company monitors capital using gearing ratio, which is total debt divided by total capital plus debt. The capital gearing ratio as on 31 March 2021 and 31 March 2020 was 7% and 9%, respectively.

2.33 IMPACT OF COVID – 19

The Company considered the uncertainty relating to the COVID-19 pandemic 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 interim �nancial statements. The Company based on its judgments, estimates and assumptions including sensitivity analysis, 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.

2.34 OTHER UPDATES

A. Update on Cyber Incident

On 22 October 2020, the Company experienced a cybersecurity incident related to ransom-ware. The Company employed two leading cyber security incident response �rms to assist with the investigation process. The incident was contained in a timely fashion and an enterprise-wide remediation was undertaken to ensure all traces of infection are completely removed from the network. Since then, the Company has strengthened a series of technical controls to augment the current cyber security posture and has also focused on implementing signi�cant improvements to its cyber and data security systems to safeguard from such risks in the future.

Tabulated below are the details of the U.S. FDA inspections carried out at other facilities of the Company: Located in India

MONTH AND YEAR UNIT

DETAILS OF OBSERVATIONS

June 2018	API Srikakulam Plant (SEZ)	No observations were noted. An EIR indicating the closure of audit for this facility was issued by the U.S. FDA in August 2018.
November 2018	Formulations Srikakulam Plant (SEZ) Unit II	No observations were noted. An EIR indicating the closure of audit for this facility was issued by the U.S. FDA in February 2019.
January 2019	Formulations Srikakulam Plant (SEZ) Unit I	Four observations were noted. The Company responded to the observations and an EIR indicating the closure of audit for this facility was issued by the U.S. FDA in April 2019.
January 2019	API manufacturing Plant at Miryalaguda, Nalgonda	In May 2019, an EIR was issued by the U.S. FDA indicating the closure of audit and the inspection classi�cation of the facility was determined as VAI. One observation was noted. The Company responded to the observation.
January 2019	Formulations manufacturing facility at Bachupally, Hyderabad	In April 2019, an EIR was issued by the U.S. FDA indicating the closure of audit and the inspection classi�cation of the facility was determined as VAI. Eleven observations were noted. The Company responded to the observations in January 2019.
	Aurigene Discovery	No observations noted.
March 2019	Technologies Limited,	In June 2019, the Company received an EIR from the U.S. FDA indicating the closure
	Hyderabad	of audit for this facility.
	Formulations manufacturing	Two observations were noted. The Company responded to the observations.
June 2019	plants, Duvvada {Vizag SEZ plant 1 (FTO VII) and Vizag SEZz	In September 2019, an EIR was issued by the U.S. FDA indicating the closure of audit of these facilities.
	plant 2(FTO IX)}

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NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.34 OTHER UPDATES

(CONTINUED)

MONTH AND YEAR UNIT DETAILS OF OBSERVATIONS

Five observations were noted during U.S. FDA inspection. The Company responded API Hyderabad plant 2, to the observations in August 2019. July 2019 Bollaram, Hyderabad In October 2019, an EIR was issued by the U.S. FDA indicating the closure of audit and the inspection classi�cation of the facility was determined as VAI. Formulations manufacturing Eight observations were noted. The Company responded to the observations in plants, (Vizag SEZ plant 1), September 2019. August 2019 Duvvada, Visakhapatnam In February 2020, an EIR was issued by the U.S. FDA indicating the closure of audit (FTO VII) and the inspection classi�cation of the facility was determined as VAI.pection classi�cation of the facility was determined as VAI.ection classi�cation of the facility was determined as VAI.y was determined as VAI. was determined as VAI.

In February 2020, an EIR was issued by the U.S. FDA indicating the closure of audit and the inspection classi�cation of the facility was determined as VAI.pection classi�cation of the facility was determined as VAI.ection classi�cation of the facility was determined as VAI.y was determined as VAI. was determined as VAI.

No observations were noted.

Formulations manufacturing In October 2019, an EIR was issued by the U.S. FDA indicating the closure of the audit August 2019 facility at Shreveport, and the inspection classi�cation of the facility was determined as No Action Initiated Louisiana, U.S.A (“NAI”). Four observations were noted. The Company responded to the observations in API Srikakulam plant (SEZ), October 2019 November 2019. Andhra Pradesh In May 2020, an EIR was issued by the U.S. FDA indicating the closure of the audit.

No observations were noted. Formulations Srikakulam Plant February 2020 In May 2020, an EIR was issued by the U.S. FDA indicating the closure of the audit and (SEZ) Unit I the inspection classi�cation of the facility was determined as NAI. Formulations manufacturing One observation was noted. The Company responded to the observation in February 2020 facility at Bachupally, March 2020. In May 2020, an EIR was issued by the U.S. FDA indicating the closure of Hyderabad (FTO Unit III) the audit and the inspection classi�cation of the facility was determined as VAI. Integrated Product No observation was noted. Development Organization February 2020 In May 2020, an EIR was issued by the U.S. FDA indicating the closure of the audit and (IPDO) at Bachupally, the inspection classi�cation of the facility was determined as NAI. Hyderabad Three observations were noted. The Company responded to the observations in API manufacturing Plant at March 2020. March 2020 Miryalaguda, Nalgonda In April 2020, an EIR was issued by the U.S. FDA indicating the closure of the audit and the inspection classi�cation of the facility was determined as VAI.

No U.S. FDA audits were conducted during the year ended 31 March 2021.

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.37 MERGER OF DR. REDDY’S HOLDINGS LIMITED INTO DR. REDDY’S LABORATORIES LIMITED (CONTINUED)

During year ended 31 March 2020, the scheme of amalgamation of Dr. Reddy’s Holdings Limited with the Company was approved by the board of directors, members and unsecured creditors of the Company. The no-observation letters from the BSE Limited and National Stock Exchange of India Limited were received on the basis of no comments received from Securities and Exchange Board of India (“SEBI”). The petition for approval of the said scheme was �led with the Hon’ble NCLT, Hyderabad Bench.

The hearings on the petition took place on 20 April 2021, and the Hon'ble NCLT reserved the issuance of an order pending its review and further analysis of the matter.

2.38 BUSINESS TRANSFER AGREEMENT WITH WOCKHARDT LIMITED

In February 2020, the Company signed a Business Transfer Agreement ("BTA") with Wockhardt Limited ("Wockhardt") to acquire select divisions of its branded generics business in India and the territories of Nepal, Sri Lanka, Bhutan and Maldives for a consideration of 18,500. ₹

The business consists of a portfolio of 62 brands in multiple therapy areas such as respiratory, neurology, venous malformations, dermatology, gastroenterology, pain and vaccines. This entire portfolio was to be transferred to the Company, along with related sales and marketing teams, the manufacturing plant located in Baddi, Himachal Pradesh and all plant employees (together the "Business Undertaking"). The transaction involved 2,051 employees engaged in operations of the acquired Business Undertaking.

As of 31 March 2020, the acquisition of this Business Undertaking was subject to certain closing conditions, such as approval from shareholders and lenders of Wockhardt and other requisite approvals under applicable statutes. Hence, the transaction was not accounted for in the year ended 31 March 2020.

Due to the COVID-19 pandemic and the consequent government restrictions, there has been a reduction in the revenue from the sales of the products forming part of the Business Undertaking during March and April 2020. Accordingly, through an amendment to the BTA, the Company and Wockhardt agreed that the consideration shall now be upto 18,500, to be paid as per the following terms: ₹ ₹

a) an amount of 14,830 to be paid on the date of closing; ₹
b) an amount of 670 to be deposited in an escrow account which shall be released subject to adjustments for, inter alia, net working capital, ₹ employee liabilities and certain other contractual and statutory liabilities;
c) an amount of 3,000 (the “Holdback Amount”) which shall be released as follows:₹
Ÿ[If the revenue from sales of the products forming part of the Business Undertaking during the twelve (12) months post-closing exceeds ] ₹ 4,800, the Company will be required to pay to Wockhardt an amount equal to two (2) times the amount by which the revenue exceeds 4,800, subject to the maximum of the Holdback Amount.₹

The acquisition is in line with the Company's strategic focus on India and has paved a path for accelerated growth and leadership in the domestic Indian market. The Company believes that the acquired Business Undertaking o�ers to strengthen the Company’s pharmaceutical portfolio and products in the Indian market.

The transaction was completed on 10 June 2020.

2.35 THE CODE ON SOCIAL SECURITY, 2020

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 �nal rules have not yet been issued and the date on which this Code will come into e�ect has not been announced. The Company will assess the impact of this Code and the rules thereunder when they come into e�ect.

2.36 SECONDARY LISTING OF THE COMPANY’S ADR ON NSE IFSC LIMITED

The Company completed the secondary listing of its American Depository Receipts (“ADRs”) on NSE IFSC Limited under the symbol ’DRREDDY’ on 9 December 2020. NSE IFSC Limited is a recognized international stock exchange established in the International Financial Services Centre (“IFSC”) at Gujarat International Finance Tec (“GIFT”) City in Gujarat, India. IFSC is one of the permissible jurisdictions where Depository Receipts can be listed. This listing will provide a secondary platform (other than NYSE Inc.) to overseas investors for trading in the Company’s ADRs. This is a secondary listing of ADRs that are currently issued by J.P. Morgan Chase Bank N.A. under its ADR Deposit Agreement with the Company, and no further capital raising or issuance of new securities is involved.

2.37 MERGER OF DR. REDDY’S HOLDINGS LIMITED INTO DR. REDDY’S LABORATORIES LIMITED

The Board of Directors, at its meeting held on 29 July 2019, has approved the amalgamation (the “Scheme”) of Dr. Reddy’s Holdings Limited (“DRHL”), an entity held by the Promoter Group, which holds 24.88% of Dr. Reddy’s Laboratories Limited (the “Company”) into the Company. This is subject to the approval of shareholders, stock exchanges, the National Company Law Tribunal and other relevant regulators.

The Scheme will lead to simpli�cation of the shareholding structure and reduction of shareholding tiers.

The Promoter Group cumulatively would continue to hold the same number of shares in the Company, pre- and post the amalgamation. All costs, charges and expenses relating to the Scheme will be borne out of the surplus assets of DRHL. Further, any expense, if exceeding the surplus assets of DRHL, will be borne directly by the Promoters.

The Scheme also provides that the Promoters of the Company will jointly and severally indemnify, defend and hold harmless the Company, its directors, employees, o�cers, representatives, or any other person authorised by the Company (excluding the Promoters) for any liability, claim, or demand, which may devolve upon the Company on account of this amalgamation.

The Company has accounted for the transaction under Ind AS 103, “Business Combinations”.

As of 30 June 2020, the purchase price allocation was preliminary.

During the three months ended 30 September 2020, the Company completed the purchase price allocation. Tabulated below are the fair values of the assets acquired, including goodwill, and liabilities assumed on the acquisition date:

PARTICULARS	AMOUNT
Cash	��
Payment through Escrow account	��
Contingent consideration(Holdback Amount)	��
Total consideration	��
Assets acquired
Goodwill	��
Property, plant and equipment	��
Product related intangibles	��
Inventories	��
Other assets	��
Liabilities assumed
Employee bene�ts(Gratuity-₹70 and Compensated absences-₹75)	(��)
Refund liability	(��)
Total net assets	��

The total goodwill of 530 consists largely of the synergies and economies of scale expected from the acquired business, together with the value of ₹ the workforce acquired. The entire amount of goodwill is deductible for tax purposes. Acquisition related costs amounted to 60 and were ₹ excluded from the consideration transferred and were recognised as expense under “Selling and other expenses” in the Statement of pro�t and loss for the year ended 31 March 2021.

The fair value of the contingent consideration of 561 was estimated by applying the income approach. The fair value measurement is based on ₹ signi�cant inputs that are not observable in the market, which Ind AS 113, “Fair Value Measurement” refers to as Level 3 inputs. The signi�cant unobservable inputs in the valuation is the estimated sales forecast. During the three months ended 31 March 2021, the Company, after taking into account the revenue of the products until twelve months post-closing (9 June 2021), re-measured the contingent consideration to 420.₹

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Dr. Reddy’s Laboratories Limited

NOTES TO FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and where otherwise stated)

2.38 BUSINESS TRANSFER AGREEMENT WITH WOCKHARDT LIMITED (CONTINUED)

The amount of revenue included in the Statement of pro�t and loss for the year ended 31 March 2021 pertaining to the acquired business since 10 June 2020 is 3,887.₹ The acquired business has been integrated into the Company’s existing activities and it is not practicable to identify the impact on the Company pro�t in the year.

2.39 RESTRUCTURING OF PHARMACEUTICAL SERVICES BUSINESS

The Board of Directors of the Company, in their meeting held on 27 March 2020, had approved the plan for restructuring of the Company’s pharmaceutical services business that involves setting up a wholly owned subsidiary and transferring the all tangible and intangible assets, contracts, permission, consents, rights, registrations, personnel and employees, other assets and liabilities on a slump sale basis (an Indian tax law concept which refers to the transfer of a business as a going concern without values being assigned to individual assets and liabilities) to the newly incorporated wholly owned subsidiary. During the year ended 31 March 2021, the Company sold contract development and manufacturing organisation (CDMO) division of the Custom Pharmaceutical Services (CPS) business of the Company. This sale was done by way of slump sale (as de�ned under section 2(42C) of Indian Income Tax Act,19�1) including all related property, plant and equipment, currentassets, current liabilities, and transfer of employees.

As the transaction is between the Company and its subsidiaries, no further disclosures are made in this regard.

2.40 PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS USED FOR RESEARCH AND DEVELOPMENT (INCLUDED IN NOTE 2.1 AND NOTE 2.3)

PARTICULARS	GROSS CARRYING VALUE ACCUMULATED DEPRECIATION/ AMORTISATION NET CARRYING VALUE
	AS AT 31 MARCH 2020 AS AT 31 MARCH 2021 AS AT 31 MARCH 2021 (b) DISPOSALS FOR THE (a) YEAR AS AT 1 APRIL 2020 AS AT 31 MARCH 2021 (b) DISPOSALS (a) ADDITIONS AS AT 1 APRIL 2020
Property, plant and equipment
Land	�� �� - - - - �� - - ��
Buildings	�� �� �� �� �� �� �� �� �� ��
Plant and equipment	�� �� �� �� �� �� �� �� �� ��
Furniture and �xtures	�� �� �� �� �� �� �� �� � ��
O�ce equipment	�� �� �� �� �� �� �� �� �� ��
Total(A)	�� �� �� (��) �� �� �� (��) �� ��

Intangible assets
Softwares	�� �� �� �� �� �� �� �� �� ��
Others	�� �� �� - - �� �� �� �� ��
Total(B)	�� �� �� (��) �� �� �� (��) �� ��

Total(A+B)	�� �� �� (��) �� �� �� (��) �� ��
Previousyear	�� �� �� �� �� �� �� �� ��

(a) Additions include transfers from non-research and development group to research and development group. The gross carrying value of such transferred assets is ₹ 34 (31 March 2020: ₹ 11) and accumulated depreciation/amortisation is ₹ 16 (31 March 2020: ₹ 2).

(b) Disposals include transfers from research and development group to non-research and development group. The gross carrying value of such transferred assets is ₹ 62 (31 March 2020: ₹ 11) and accumulated depreciation/amortisation is ₹ 38 (31 March 2020: ₹ 6).

The Company has also incurred capital expenditure of ₹ 792 towards research and development expenditure lying in Capital work in progress as on 31 March 2021.

2.41 SUBSEQUENT EVENTS

There are no signi�cant events that occurred after the balance sheet date.

As per our report of even date attached for and on behalf of the Board of Directors of Dr. Reddy's Laboratories Limited for S.R. Batliboi & Associates LLP Chartered Accountants K Satish Reddy Chairman, DIN: 00129701 ICAI Firm Registration Number: 101049W/E300004 G V Prasad Co-Chairman & Managing Director, DIN: 00057433 per S Balasubrahmanyam Erez Israeli Chief Executive O�cer Partner Parag Agarwal Chief Financial O�cer Membership Number: 53315 Sandeep Poddar Company Secretary

K Satish Reddy Chairman, DIN: 00129701 G V Prasad Co-Chairman & Managing Director, DIN: 00057433 Erez Israeli Chief Executive O�cer Parag Agarwal Chief Financial O�cer Sandeep Poddar Company Secretary Place: Hyderabad Date: 14 May 2021

Place: Chennai Date: 14 May 2021

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Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

INDEPENDENT AUDITORS’ REPORT

To the Members of Dr. Reddy’s Laboratories Limited

Report on the Audit of the Consolidated Financial Statements

Opinion

We have audited the accompanying consolidated �nancial statements of Dr. Reddy’s Laboratories Limited (hereinafter referred to as “the Holding Company”), its subsidiaries (the Holding Company and its subsidiaries together referred to as “the Group”) and its joint ventures comprising of the consolidated Balance sheet as at 31 March 2021, the consolidated Statement of Pro�t and Loss, including other comprehensive income, the consolidated Cash Flow Statement and the consolidated Statement of Changes in Equity for the year then ended, and notes to the consolidated �nancial statements, including a summary of signi�cant accounting policies and other explanatory information (hereinafter referred to as “the consolidated �nancial statements”).

In our opinion and to the best of our information and according to the explanations given to us and based on the consideration of reports of other auditors on separate �nancial statements and on the other �nancial information of the subsidiaries, the aforesaid consolidated �nancial statements give the information required by the Companies Act, 2013, as amended (“the Act”) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the consolidated state of a�airs of the Group and joint ventures as at 31 March 2021, their consolidated pro�t including other comprehensive income, their consolidated cash �ows and the consolidated statement of changes in equity for the year ended on that date.

Basis for Opinion

We conducted our audit of the consolidated �nancial statements in accordance with the Standards on Auditing (SAs), as speci�ed under section 143(10) of the Act. Our responsibilities under those Standards are further described in the ‘Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements’ section of our report. We are independent of the Group in accordance with the ‘Code of Ethics’ issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the �nancial statements under the provisions of the Act and the Rules thereunder, and we have ful�lled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is su�cient and appropriate to provide a basis for our audit opinion on the consolidated �nancial statements.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most signi�cance in our audit of the consolidated �nancial statements for the �nancial year ended 31 March 2021. These matters were addressed in the context of our audit of the consolidated �nancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to be communicated in our report. We have ful�lled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated �nancial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated �nancial statements. The results of audit procedures performed by us and by other auditors of components not audited by us, as reported by them in their audit reports furnished to us by the management, including those procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated �nancial statements.

Key audit matters How our audit addressed the key audit matter

Business transfer agreement with Wockhardt Limited (as described in note 1.3(e� o� t�e si�ni�cant acco�ntin� �olicies and note �.�� o� t�e consolidated �nancial state�ents�

During the current year, the Company completed the acquisition of select divisions of the branded generics business of Wockhardt Limited in India and the territories of Nepal, Sri Lanka, Bhutan and Maldives. The transaction was accounted for as a business combination. The Company’s accounting for the acquisition included determining the fair value of the assets acquired, which primarily included product related intangibles. In connection with the acquisition, the Company recognized a contingent consideration liability for acquisition consideration that is payable based on a multiple of incremental revenue targets subject to a maximum amount. The accounting for the business combination was complex due to the signi�cant estimation required by management to determine the fair value of the intangible assets and the contingent consideration. The signi�cant estimation uncertainty was primarily due to the sensitivity of the respective fair values to the underlying assumptions utilized in the measurement of the fair value of the intangible assets and contingent consideration. The Company used a discounted cash �ow model to measure the fair value of the intangible assets, which included signi�cant assumptions such as the discount rate, useful life, and long-term growth rate. The Company measured the contingent consideration at its estimated fair value, and the signi�cant assumptions used to determine the fair value of contingent consideration included forecasted revenue projections, revenue volatility and a risk adjusted discount rate. Considering the above, this has been included as a Key Audit Matter.

Our audit procedures, among others included the following:

We evaluated the design and tested the operating e�ectiveness of the controls over the Company’s calculation of the estimated fair values of the intangible assets and the contingent consideration.
We assessed the competence and independence of the third-party valuer by reference to their quali�cations and experience.
We tested the estimated fair value of the intangible assets and the contingent consideration liability, evaluated Company’s selected valuation methods and tested the signi�cant assumptions used in the models. In testing the valuation of contingent consideration, we assessed, among others, the terms of the arrangement and the conditions met for the amounts to become payable.
We compared the signi�cant assumptions to current industry, market and economic trends, assumptions used to value similar assets, and to the historical results of the acquired business.
We involved valuation specialist to assist in evaluating the appropriateness of the valuation model, key assumptions used in the valuation model’s, and to test the model’s computational accuracy.
We tested the arithmetical accuracy of the models
We also tested the completeness and accuracy of the underlying data used in the model.

INDEPENDENT AUDITORS’ REPORT (CONTINUED)

Key audit matters

How our audit addressed the key audit matter

Assessment of carrying value of intangible assets, intangible assets under development and goodwill (as described in note 1.3(g) and 1.3(j) of the signi�cant accounting policies� and note �.�� .3 and �.� for details and movement in good�ill� other intangible assets and intangible assets under development respectively in the consolidated �nancial statements)

Our audit procedures, among others included the following:

As at 31 March 2021, the Company has intangible assets, including intangible assets under development, of 35,248 million and goodwill of 5,599 million. The carrying value of these intangible assets are based on future cash flows and there is a risk that the assets may be impaired if cash flows are not in line with projections.

We evaluated the design and tested the operating e�ectiveness of the Company’s controls in assessing the recoverable value of goodwill, intangible assets and intangible assets under development.
We assessed the Group’s methodology applied in determining the CGUs to which these assets are allocated.
We tested the estimated recoverable value of these assets and assessed the methodologies used by management in deriving the recoverable value and tested the signi�cant assumptions and the underlying data used by the Company in its analyses.

Valuation of goodwill and intangible assets is subject to management’s assessment of recoverable amount, being the higher of the value in use and fair value less costs to sell, involving signi�cant judgment and are based on number of variables and estimates including projection of future sales, operating costs and pro�t margins; appropriate discount rate and terminal value growth rate; and probability of technical and regulatory success factors in applying discounted cash �ow valuation methodology. As the assessment of recoverable amount involves signi�cant degree of management judgement, we have identi�ed this a key audit matter.

We compared the signi�cant assumptions to current industry, market and economic trends, to the Company’s historical data.
We performed sensitivity analyses of the signi�cant assumptions to evaluate the potential change in the recoverable values of these assets resulting from hypothetical changes in underlying assumptions. We also assessed the recoverable value headroom by performing sensitivity testing of key assumptions used.
We tested the arithmetical accuracy of the models.
We involved valuation specialist to assist in evaluating the methodologies used and signi�cant assumptions and inputs used to determine the recoverable value of certain intangible assets and intangible assets under development.

Contingencies, including litigations and tax (as described in note 1.3(l) of the signi�cant accounting policies� and note �.3� (�) containing details of contingencies in the consolidated �nancial statements)

Our audit procedures, among others included the following:

The Company and certain of its subsidiaries are involved in disputes, lawsuits, claims, anti-trust, governmental and / or regulatory inspections, inquiries, investigations and proceedings, including patent, tax and commercial matters that arise from time to time in the ordinary course of business. Most of the claims involve complex issues. The Company assisted by their external legal counsel assesses the need to make provision or disclose a contingency on a case-to-case basis considering the underlying facts of each litigation.

We evaluated the design and tested the operating e�ectiveness of controls relating to identification and evaluation of claims, proceedings and investigations at di�erent levels in the group, and the measurement of provisions for disputes, potential claims and litigation, contingent liabilities and disclosures.
We obtained a list of ongoing litigations from the Company’s in-house legal counsel. We selected a sample of litigations based on materiality and performed inquiries with the said counsel on the legal evaluation of these litigations. We compared the evaluation with the provision or disclosure in the consolidated financial statements. We tested the underlying computation of the management in relation to the measurement of provision or the contingency.

This area is significant to our audit, since the accounting and disclosure for contingent legal and tax liabilities is complex and judgmental (due to the di�culty in predicting the outcome of the matter and estimating the potential impact if the outcome is unfavourable), and the amounts involved are, or can be, material to the consolidated financial statements.

We obtained legal letters from the Company’s external legal advisors with respect to the matters included in the summary. Where appropriate, we examined correspondences connected with the cases.
We inspected relevant communication with tax authorities.
We involved tax experts in assessing the nature and amount of material indirect tax positions and assessed the technical merits based on the correspondence and assessments from the relevant tax authorities.
We also evaluated the disclosures made in the consolidated �nancial statements.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

INDEPENDENT AUDITORS’ REPORT (CONTINUED)

Key audit matters How our audit addressed the key audit matter

Rebates, discounts, chargebacks, and other deductions in revenue (as described in note 1.3(m) of the si�ni�cant acco�ntin� �olicies of consolidated �nancial statements and note �.13 of the consolidated �nancial statements)

Our audit procedures, among others included the following:

Revenue is recognised net of accrual for chargeback, Our audit procedures, among others included the following: rebates, sales returns and discounts, etc. The estimates • We obtained an understanding, evaluated the design and tested the relating to the accruals are important given the significance operating e�ectiveness of internal controls over the sales deduction of revenue and also considering the distinctive terms of processes. arrangement with customers. These estimates are complex • We also tested management’s controls over the accuracy and completeness and requires significant judgement and estimation by of the estimates used to calculate the sales deductions. the Company for establishing an appropriate accrual. • We tested management’s estimated sales deductions and obtained Accuracy of revenues may deviate on account of change management’s calculations for the respective estimates. We tested in judgements and estimates. Accordingly, the same has management’s estimates over the determination of sales deductions been considered as a key audit matter. accruals by comparing the rates used in management’s estimate to rates in the underlying contracts and historical sales deductions data.
We compared the assumptions to contracted prices, historical rebates, discounts, allowances and returns, as applicable to current payment trends.
We also considered the historical accuracy of the management’s estimates in prior years and assessed the estimated amounts, we evaluated trends in actual sales and discount accrual balances.
We also tested the underlying data used in management’s calculations for accuracy and completeness and veri�ed source data supporting the inventory levels, rebate claims paid subsequent to period end, and volume discounts settled during the period.
We tested recording of revenue in appropriate period which included the following procedures: ○ Performed trend analysis over sales levels as compared to previous periods;
○ Tested management’s monitoring process over distributors’ stocking levels;
○ Veri�ed sample sales transactions near period-end

Other Information

The Holding Company’s Board of Directors is responsible for the other information. The other information comprises, Statutory reports, corporate governance and Board’s report included in the Annual report, which we obtained prior to the date of this auditor’s report and Corporate Overview and letter from Chairman and Co-Chairman included in the Annual report, which is expected to be made available to us after that date. The Other information does not include the Standalone �nancial statements, Consolidated �nancial statements and our auditor’s report thereon.

Our opinion on the consolidated �nancial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated �nancial statements, our responsibility is to read the other information and, in doing so, consider whether such other information is materially inconsistent with the consolidated �nancial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

INDEPENDENT AUDITORS’ REPORT (CONTINUED)

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated �nancial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to in�uence the economic decisions of users taken on the basis of these consolidated �nancial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated �nancial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is su�cient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Holding Company has adequate internal
�nancial controls with reference to �nancial statements in place and the operating e�ectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast signi�cant doubt on the ability of the Group and its joint ventures to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated �nancial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and its joint ventures to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated �nancial statements, including the disclosures, and whether the consolidated �nancial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain su�cient appropriate audit evidence regarding the �nancial information of the entities or business activities within the Group of which we are the independent auditors and whose �nancial information we have audited, to express an opinion on the consolidated �nancial statements. We are responsible for the direction, supervision and performance of the audit of the �nancial statements of such entities included in the consolidated �nancial statements of which we are the independent auditors. For the other entities included in the consolidated �nancial statements, which have been audited by other auditors, such other auditors remain responsible for the direction, supervision and performance of the audits carried out by them. We remain solely responsible for our audit opinion.

We communicate with those charged with governance of the Holding Company and such other entities included in the consolidated �nancial statements of which we are the independent auditors regarding, among other matters, the planned scope and timing of the audit and signi�cant audit �ndings, including any signi�cant de�ciencies in internal control that we identify during our audit.

From the matters communicated with those charged with governance, we determine those matters that were of most signi�cance in the audit of the consolidated �nancial statements for the �nancial year ended 31 March ��1 and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest bene�ts of such communication.

Responsibilities of Management for the Consolidated Financial Statements

The Holding Company’s Board of Directors is responsible for the preparation and presentation of these consolidated �nancial statements in terms of the requirements of the Act that give a true and fair view of the consolidated �nancial position, consolidated �nancial performance including other comprehensive income, consolidated cash �ows and consolidated statement of changes in equity of the Group and joint ventures in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) speci�ed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. The respective Board of Directors of the companies included in the Group and its joint ventures are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Group and of its joint ventures and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal �nancial controls, that were operating e�ectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the consolidated �nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of preparation of the consolidated �nancial statements by the Directors of the Holding Company, as aforesaid.

In preparing the consolidated �nancial statements, the respective Board of Directors of the companies included in the Group and of its joint ventures are responsible for assessing the ability of the Group and of its joint ventures to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those respective Board of Directors of the companies included in the Group and of its joint ventures are also responsible for overseeing the �nancial reporting process of the Group and of its joint ventures.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

INDEPENDENT AUDITORS’ REPORT (CONTINUED)

Other Matter

(a) We did not audit the �nancial statements and other �nancial information, in respect of two subsidiaries, whose �nancial statements include total assets of 23,729 million as at 31 March 2021 and total revenues of 32,687 million and net cash out�ows of ` 169 million for the year ended on that date. These �nancial statement and other �nancial information have been audited by other auditors, which �nancial statements, other �nancial information and auditor’s reports have been furnished to us. Our opinion on the consolidated �nancial statements, in so far as it relates to the amounts and disclosures included in respect of these subsidiaries, and our report in terms of subsections (3) of Section 143 of the Act, in so far as it relates to the aforesaid subsidiaries, is based solely on the report(s) of such other auditors.

These subsidiaries are located outside India whose �nancial statements and other �nancial information have been prepared in accordance with accounting principles generally accepted in their respective countries and which have been audited by other auditors under generally accepted auditing standards applicable in their respective countries. The Holding Company’s management has converted the �nancial statements of such subsidiaries located outside India from accounting principles generally accepted in their respective countries to accounting principles generally accepted in India. We have audited these conversion adjustments made by the Holding Company’s management. Our opinion in so far as it relates to the balances and a�airs of such subsidiaries located outside India is based on the report of other auditors and the conversion adjustments prepared by the management of the Holding Company and audited by us.

(b) Our opinion above on the consolidated �nancial statements, and our report on Other �egal and Regulatory Requirements below, is not modi�ed in respect of the above matters with respect to our reliance on the work done and the reports of the other auditors and the �nancial statements and other �nancial information certi�ed by the Management.

Report on Other Legal and Regulatory Requirements

As required by Section 143(3) of the Act, based on our audit and on the consideration of report of the other auditors on separate �nancial statements and the other �nancial information of subsidiaries, as noted in the �other matter’ paragraph we report, to the extent applicable, that� a) We/the other auditors whose report we have relied upon have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit of the aforesaid consolidated �nancial statements;

b) In our opinion, proper books of account as required by law relating to preparation of the aforesaid consolidation of the �nancial statements have been kept so far as it appears from our examination of those books and reports of the other auditors;

INDEPENDENT AUDITORS’ REPORT (CONTINUED)

g) In our opinion and based on the consideration of reports of other statutory auditors of the subsidiaries, and joint ventures incorporated in India, the managerial remuneration for the year ended 31 March 2021 has been paid / provided by the Holding Company, its subsidiaries and joint ventures incorporated in India to their directors in accordance with the provisions of section 197 read with Schedule V to the Act;
h) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us and based on the consideration of the report of the other auditors on separate �nancial statements as also the other �nancial information of the subsidiaries, as noted in the ‘Other matter’ paragraph:
i. The consolidated �nancial statements disclose the impact of pending litigations on its consolidated �nancial position of the �roup in its consolidated �nancial statements – Refer Note 2.32(A) to the consolidated �nancial statements;
ii. Provision has been made in the consolidated �nancial statements, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts – Refer Note 2.30 to the consolidated �nancial statements;
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Holding Company, its subsidiaries and joint ventures incorporated in India during the year ended 31 March 2021.

for S.R. Batliboi & Associates LLP

Chartered Accountants ICAI Firm Registration Number: 101049W/E300004 per S Balasubrahmanyam

Partner Membership Number: 053315 UDIN: 21053315AAAABL7527 Place: Chennai Date: 14 May 2021

c) The Consolidated Balance Sheet, the Consolidated Statement of Pro�t and �oss including the Statement of Other Comprehensive Income, the Consolidated Cash Flow Statement and Consolidated Statement of Changes in Equity dealt with by this Report are in agreement with the books of account maintained for the purpose of preparation of the consolidated �nancial statements;
d) In our opinion, the aforesaid consolidated �nancial statements comply with the Accounting Standards speci�ed under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;
e) On the basis of the written representations received from the directors of the Holding Company as on 31 March 2021 taken on record by the Board of Directors of the Holding Company and the reports of the statutory auditors who are appointed under Section 139 of the Act, of its subsidiary companies and joint ventures, none of the directors of the Group’s companies, its joint ventures/ incorporated in India, is disquali�ed as on 31 March 2021 from being appointed as a director in terms of Section 164 (2) of the Act;
f) With respect to the adequacy and the operating e�ectiveness of the internal �nancial controls with reference to consolidated �nancial statements of the Holding Company and its subsidiary companies and joint ventures, incorporated in India, refer to our separate Report in “Annexure 1” to this report;

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

ANNEXURE 1 TO THE INDEPENDENT AUDITORS’ REPORT OF EVEN DATE ON THE CONSOLIDATED FINANCIAL STATEMENTS OF DR. REDDY’S LABORATORIES LIMITED

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

In conjunction with our audit of the consolidated �nancial statements of Dr. Reddy’s �aboratories �imited (hereinafter referred to as the “Holding Company”) as of and for the year ended 31 March 2021, we have audited the internal �nancial controls with reference to consolidated �nancial statements of the Holding Company and its subsidiaries (the Holding Company and its subsidiaries together referred to as “the Group”) and its joint ventures, which are companies incorporated in India, as of that date.

ANNEXURE 1 TO THE INDEPENDENT AUDITORS’ REPORT OF EVEN DATE ON THE CONSOLIDATED FINANCIAL STATEMENTS OF DR. REDDY’S LABORATORIES LIMITED (CONTINUED)

Opinion

In our opinion, the Group and its joint ventures, which are companies incorporated in India, have, maintained in all material respects, adequate internal �nancial controls with reference to consolidated �nancial statements and such internal �nancial controls with reference to consolidated �nancial statements were operating e�ectively as at 31 March 2021, based on the internal control over �nancial reporting criteria established by the Holding Company considering the essential components of internal control stated in the Guidance Note issued by the ICAI.

Other Matters

Management’s Responsibility for Internal Financial Controls

The respective Board of Directors of the companies included in the Group and its joint ventures, which are companies incorporated in India, are responsible for establishing and maintaining internal �nancial controls based on the internal control over �nancial reporting criteria established by the Holding Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (“ICAI”). These responsibilities include the design, implementation and maintenance of adequate internal �nancial controls that were operating e�ectively for ensuring the orderly and e�cient conduct of its business, including adherence to the respective company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable �nancial information, as required under the Companies Act, 2013.

Auditor’s Responsibility

Our responsibility is to express an opinion on the Holding Company’s internal �nancial controls with reference to consolidated �nancial statements based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, speci�ed under section 1�3(10) of the Act, to the extent applicable to an audit of internal �nancial controls, both, issued by ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal �nancial controls with reference to consolidated �nancial statements was established and maintained and if such controls operated e�ectively in all material respects.

Our report under Section 143(3)(i) of the Act on the adequacy and operating e�ectiveness of the internal �nancial controls with reference to consolidated �nancial statements of the Holding Company, in so far as it relates to the subsidiary companies, and joint ventures, which are companies incorporated in India, is based on the corresponding reports of the auditors of such subsidiaries and joint ventures incorporated in India.

for S.R. Batliboi & Associates LLP

Chartered Accountants ICAI Firm Registration Number: 101049W/E300004

per S Balasubrahmanyam Partner Membership Number: 053315 UDIN: 21053315AAAABL7527 Place: Chennai Date: 14 May 2021

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal �nancial controls with reference to consolidated �nancial statements and their operating e�ectiveness. Our audit of internal �nancial controls with reference to consolidated �nancial statements included obtaining an understanding of internal �nancial controls with reference to consolidated �nancial statements, assessing the risk that a material weakness exists, and testing and evaluating the design and operating e�ectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the �nancial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained and the audit evidence obtained by the other auditors in terms of their reports referred to in the Other Matters paragraph below, is su�cient and appropriate to provide a basis for our audit opinion on the internal �nancial controls with reference to consolidated �nancial statements.

Meaning of Internal Financial Controls With Reference to Consolidated Financial Statements

A company’s internal �nancial control with reference to consolidated �nancial statements is a process designed to provide reasonable assurance regarding the reliability of �nancial reporting and the preparation of �nancial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal �nancial control with reference to consolidated �nancial statements includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly re�ect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of �nancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material e�ect on the �nancial statements.

Inherent Limitations of Internal Financial Controls With Reference to Consolidated Financial Statements

Because of the inherent limitations of internal �nancial controls with reference to consolidated �nancial statements, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal �nancial controls with reference to consolidated �nancial statements to future periods are subject to the risk that the internal �nancial controls with reference to consolidated �nancial statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

CONSOLIDATED BALANCE SHEET

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----- Start of picture text -----

(All amounts in Indian Rupees millions, except share data and where otherwise stated)
AS AT AS AT
PARTICULARS NOTE
31 MARCH 2021 31 MARCH 2020
Assets
----- End of picture text -----

Assets
Non-current assets
Property, plant and equipment	2.1	47,322	47,779
Capital work-in-progress		9,539	4,364
Goodwill	2.2	5,599	4,913
Other intangible assets	2.3	29,136	15,811
Intangible assets under development	2.4	6,112	10,987
Investment in equityaccounted investees	2.5	3,375	2,763
Financial assets
Investments	2.6 A	4,958	328
Trade receivables	2.6 B	118	1,737
Other �nancial assets	2.6 C	768	793
Deferred tax assets,net	2.29	10,686	12,199
Tax assets,net		2,745	4,379
Other non-current assets	2.7 A	307	209
		120,665	106,262
Current assets
Inventories	2.8	45,412	35,067
Financial assets
Investments	2.6 A	19,744	23,687
Trade receivables	2.6 B	49,641	50,278
Derivative instruments	2.30	1,218	1,105
Cash and cash equivalents	2.6 D	14,829	2,053
Other �nancial assets	2.6 C	1,858	3,377
Other current assets	2.7 B	12,650	10,424
Total current assets before assets held for sale		145,352	125,991
Assets held for sale		151	-
		145,503	125,991
Total assets		266,168	232,253

Equity and Liabilities
Equity
Equityshare capital	2.9	832	831
Other equity		175,585	155,157
		176,417	155,988
Liabilities
Non-current liabilities
Financial Liabilities
Borrowings	2.10 A	6,299	1,304
Provisions	2.11 A	508	745
Deferred tax liabilities,net	2.29	289	20
Other non-current liabilities	2.12 A	1,617	2,055
		8,713	4,124
Current liabilities
Financial Liabilities
Borrowings	2.10 B	23,145	16,532
Tradepayables	2.10 D
Total outstandingdues of micro enterprises and small enterprises		158	55
Total outstandingdues of creditors other than micro enterprises and small enterprises		17,951	15,193
Derivative instruments	2.30	326	1,602
Other �nancial liabilities	2.10 C	24,281	27,006
Liabilities for current tax,net		1,388	572
Provisions	2.11 B	5,015	4,669
Other current liabilities	2.12 B	8,774	6,512
		81,038	72,141
Total equity and liabilities		266,168	232,253
The accompanyingnotes are an integralpart of consolidated �nancial statements.

for and on behalf of the Board of Directors of Dr. Reddy's Laboratories Limited

As per our report of even date attached for S.R. Batliboi & Associates LLP

Chartered Accountants

K Satish Reddy

ICAI Firm Registration Number: 101049W/E300004 per S Balasubrahmanyam Partner Membership Number: 053315

Chairman , DIN: 00129701

Co-Chairman & Managing Director, DIN: 00057433 Chief Executive O�cer Chief Financial O�cer Company Secretary

G V Prasad

Erez Israeli

Parag Agarwal

Sandeep Poddar Place: Chenn a i Place: Hyderabad Date: 14 May 2021 Date: 14 May 2021

CONSOLIDATED STATEMENT OF PROFIT AND LOSS

==> picture [514 x 37] intentionally omitted <==

----- Start of picture text -----

(All amounts in Indian Rupees millions, except share data and where otherwise stated)
FOR THE YEAR ENDED FOR THE YEAR ENDED
PARTICULARS NOTE
31 MARCH 2021 31 MARCH 2020
Income
----- End of picture text -----

Income
Sales	2.13	184,202	163,574
Service income and License fees	2.13	5,520	11,026
Other operatingincome	2.14	753	570
Total revenue from operations		190,475	175,170
Other income	2.15	2,914	6,206
Total income		193,389	181,376

Expenses
Cost of materials consumed		42,958	29,848
Purchase of stock-in-trade		25,736	25,459
Changes in inventories of �nishedgoods,work-in-progress and stock-in-trade	2.16	(7,905)	237
Employee bene�ts expense	2.17	36,299	33,802
Depreciation and amortisation expense	2.18	12,288	11,631
Impairment of non-current assets		6,768	16,767
Finance costs	2.19	970	983
Sellingand other expenses	2.20	47,920	44,353
Total expenses		165,034	163,080
Pro�t �efore tax an� �efore share of e�uityaccounte� investees		28,355	18,296

Share ofpro�t of equityaccounted investees,net of tax		480	561

Pro�t before ta�		28,835	18,857

Tax expense/(�ene�t)	2.29
Current tax		8,172	6,616
Deferred tax		1,147	(8,019)
Pro�t for theyear		19,516	20,260

Other comprehensive income(OCI)
Items that will not be reclassi�ed subsequentlytopro�t or loss		4,026	(412)
Income tax on items that will not be reclassi�ed subsequentlytopro�t or loss		(220)	(22)
		3,806	(434)

Items that will be reclassi�ed subsequentlytopro�t or loss		1,913	(448)
Income tax on items that will be reclassi�ed subsequentlytopro�t or loss		(319)	232
		1,594	(216)

Total other comprehensive income/(loss)for theyear,net of tax		5,400	(650)

Total comprehensive income for theyear		24,916	19,610

Pro�t for theyear
Attributable to:
Equityholders of theparent		19,516	20,260
Non-controllinginterests		-	-
Total comprehensive income for theyear
Attributable to:
Equityholders of theparent		24,916	19,610
Non-controllinginterests		-	-

Earningsper share:
Basic earningsper share of`5/- each	2.23	117.67	122.22
Diluted earningsper share of`5/- each	2.23	117.34	121.99
The accompanyingnotes are an integralpart of consolidated �nancial statements.

for and on behalf of the Board of Directors of Dr. Reddy's Laboratories Limited

As per our report of even date attached for S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004 K Satish Reddy Chairman , DIN: 00129701 per S Balasubrahmanyam G V Prasad Co-Chairman & Managing Director, DIN: 00057433 Partner Erez Israeli Chief Executive O�cer Membership Number: 053315 Parag Agarwal Chief Financial O�cer Sandeep Poddar Company Secretary Place: Chenn a i Place: Hyderabad Date: 14 May 2021 Date: 14 May 2021

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

|(All amounts in Indian Rupees millions, except share data and where otherwise stated)|Other components of equity|PARTICULARS
Equity
share
capital
Total
equity
Reserves and surplus
Other comprehensive income
Treasury
shares(1)
Securities
premium(2)
Share-
based
payment
reserve(3)
Capital
reserve(4)
Capital
redemption
reserve(5)
General
reserve(6)
Special
economic zone
re-investment
reserve(7)
Retained
earnings
Cash �ow
hedge
reserve(8)
FVTOCI (9)
Remeasurements
of the net de�ned
bene�ts plan(10)
Foreign
currency
translation
reserve(11)|Balance as at 1 April 2020 (A)
831
(1,006)
5,916
1,038
267
173
20,374
-
128,349
(563)
(3,523)
(54)
4,186
155,988|Pro�t for the year
-
-
-
-
-
-
-
-
19,516
-
-
-
-
19,516|Net change in fair value of FVTOCIequity instruments and debt
instruments, net of tax expense of293 - - - - - - - - - - 3,956 - - 3,956|Transfer on disposal of equity instruments classi�ed as FVTOCI** - - - - - - - - 3 - (3) - - -|Foreign currency translation adjustments, net of tax bene�t ofNil
-
-
-
-
-
-
-
-
-
-
-
783
783|��ective portion of changes in fair value of cash �ow hedges,
net of tax expense of319 (Refer note 2.30) - - - - - - - - - 804 - - - 804|Actuarial gain/(loss) on post-employment bene�t obligations, net of tax bene�t of73 (Refer note 2.27)
-
-
-
-
-
-
-
-
-
-
-
(143)
-
(143)|Total comprehensive income (B)
-
-
-
-
-
-
-
-
19,519
804
3,953
(143)
783
24,916|Transactions with owners of the Company|Contributions and distributions|Issue of equity shares on exercise of options (Refer note 2.9)
1
232
392
(356)
-
-
-
-
-
-
-
-
-
269|Share-based payment expense (Refer note 2.28)
-
-
-
584
-
-
-
-
-
-
-
-
-
584|Purchase of treasury shares
-
(1,193)
-
-
-
-
-
-
-
-
-
-
-
(1,193)|Dividend paid
-
-
-
-
-
-
-
-
(4,147)
-
-
-
-
(4,147)|Total contributions and distributions
1
(961)
392
228
-
-
-
-
(4,147)
-
-
-
-
(4,487)|Changes in ownership interests|Total transactions with owners of the Company (C)
1
(961)
392
228
-
-
-
-
(4,147)
-
-
-
-
(4,487)|Transfer to special economic zone re-investment reserve
-
-
-
-
-
-
-
1,402
(1,402)
-
-
-
-
-|Transfer from special economic zone
re-investment reserve on utilization
-
-
-
-
-
-
-
(76)
76
-
-
-
-
-|Transfer to special economic zone
re-investment reserve, net (D)(7)
-
-
-
-
-
-
-
1,326
(1,326)
-
-
-
-
-|Balance as at 31 March 2021 [(A)+(B)+(C)+(D)]
832
(1,967)
6,308
1,266
267
173
20,374
1,326
142,395
241
430
(197)
4,969
176,417|CONSOLIDATED STATEMENT OF CHANGES IN EQUITY(CONTINUED)|Other components of equity|PARTICULARS
Equity
share
capital
Total
equity
Reserves and surplus
Other comprehensive income
Treasury
shares(1)
Securities
premium(2)
Share-
based
payment
reserve(3)
Capital
reserve(4)
Capital
redemption
reserve(5)
General
reserve(6)
Special
economic zone
re-investment
reserve(7)
Retained
earnings
Cash �ow
hedge
reserve(8)
FVTOCI(9)
Remeasurements
of the net de�ned
bene�ts plan(10)
Foreign
currency
translation
reserve(11)|Balance as at 1 April 2019 (A)
830
(535)
5,631
795
267
173
20,374
-
112,000
156
(3,042)
(89)
3,676
140,236|Pro�t for the year
-
-
-
-
-
-
-
-
20,260
-
-
-
-
20,260|Net change in fair value of FVTOCIequity instruments and debt
instruments, net of tax expense ofNil - - - - - - - - - - (476) - - (476)|Transfer on disposal of equity instruments classi�ed as FVTOCI** - 5 (5) -|Foreign currency translation adjustments, net of tax bene�t ofNil
-
-
-
-
-
-
-
-
-
-
-
-
510
510|E�ective portion of changes in fair value of cash �ow hedges,
net of tax bene�t of232 (Refer note 2.30) - - - - - - - - - (719) - - - (719)|Actuarial gain/(loss) on post-employment bene�t obligations, net of tax expense of22 (Refer note 2.27)
-
-
-
-
-
-
-
-
-
-
-
35
-
35|Total comprehensive income (B)
-
-
-
-
-
-
-
-
20,265
(719)
(481)
35
510
19,610|Transactions with owners of the Company|Contributions and distributions|Issue of equity shares on exercise of options (Refer note 2.9)
1
3
285
(278)
-
-
-
-
-
-
-
-
-
11|Share-based payment expense (Refer note 2.28)
-
-
-
521
-
-
-
-
-
-
-
-
-
521|Purchase of treasury shares
-
(474)
-
-
-
-
-
-
-
-
-
-
-
(474)|Dividend paid (including dividend distribution tax)
-
-
-
-
-
-
-
-
(3,916)
-
-
-
-
(3,916)|Total contributions and distributions
1
(471)
285
243
-
-
-
-
(3,916)
-
-
-
-
(3,858)|Changes in ownership interests|Total transactions with owners of the Company (C)
1
(471)
285
243
-
-
-
-
(3,916)
-
-
-
-
(3,858)|Balance as at 31 March 2020 [(A)+(B)+(C)]
831 (1,006)
5,916
1,038
267
173
20,374
-
128,349
(563)
(3,523)
(54)
4,186
155,988|Rounded o� to millions.|FVTOCI represents fair value through other comprehensive income.|Pursuant to the special resolution approved by the shareholders in the Annual General Meeting held on 27 July 2018, the Dr. Reddy’s Employees ESOS Trust (the “ESOS Trust”) was formed to support the Dr. Reddy’s Employees Stock Option Scheme, 2018 by
(1)|acquiring, including through secondary market acquisitions, equity shares which are used for issuance to eligible employees upon exercise of stock options thereunder. Refer to note 2.28 of these consolidated �nancial statements for further details on the|Dr. Reddy’s Employees Stock Option Scheme, 2018.|Securities premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of Section 52 of the Companies Act, 2013.
(2)|Share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration. Refer to note 2.28 for further details of these plans.
(3)|The Company recognises pro�t or loss on purchase, sale, issue or cancellation of the Company’s own equity instruments to capital reserve.
(4)|As per Companies Act, 2013, capital redemption reserve is created when company purchases its own shares out of free reserves or securities premium. A sum equal to the nominal value of the shares so purchased is transferred to capital redemption reserve. The reserve
(5)|is utilised in accordance with the provisions of Section 69 of the Companies Act, 2013.|The general reserve is a free reserve which is used from time to time to transfer pro�ts from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive
(6)|income, items included in the general reserve will not be reclassi�ed subsequently to consolidated statement of pro�t and loss.|The Company has created a Special Economic Zone (“SEZ”) Reinvestment Reserve out of pro�ts of its eligible SEZ �nits in accordance with the terms of Section 10AA(1) of the �ndian �ncome Tax Act, 1961. This reserve is to be utili�ed by the Company for acquiring Plant
(7)|and Machinery in accordance with Section 10AA(2) of such Act.|The cash �ow hedging reserve represents the cumulative e�ective portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for cash �ow hedges. Such gains or losses will be reclassi�ed to consolidated statement
(8)|of pro�t and loss in the period in which the hedged transaction occurs.|This reserve represents mark to market gain or loss on �nancial assets classi�ed as ��TOC�. Depending on the category and type of the �nancial asset, the mark to market gain or loss is either reclassi�ed to pro�t and loss account or retained earnings upon disposal
(9)|of the investment.|Remeasurements of the net de�ned bene�ts plan reserve comprises the cumulative net gains� losses on actuarial valuation of post-employment obligations. Refer note 2.27 for further details
(10)|The exchange di�erences arising from the translation of �nancial statements of foreign operations with functional currency other than �ndian rupees is recognised in other comprehensive income, net of taxes and is presented within equity in the foreign currency
(11)|translation reserve.|The accompanying notes are an integral part of consolidated �nancial statements.|As per our report of even date attached
for and on behalf of the Board of Directors ofDr. Reddy's Laboratories Limited|for S.R. Batliboi & Associates LLP|Chartered Accountants
K Satish Reddy
Chairman , DIN: 00129701|ICAI Firm Registration Number: 101049W/E300004
G V Prasad
Co-Chairman & Managing Director, DIN: 00057433|per S Balasubrahmanyam
Erez Israeli
Chief Executive O�cer|Membership Number: 0 53315
Parag Agarwal
Chief Financial O�cer|Partner
Sandeep Poddar*
Company Secretary|Place: Hyderabad
Place: Chenna i|Date: 14 May 2 0 2 1
Date: 14 May 2021|
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

CONSOLIDATED STATEMENT OF CASH FLOW

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

==> picture [513 x 37] intentionally omitted <==

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(All amounts in Indian Rupees millions, except share data and where otherwise stated)
FOR THE YEAR ENDED FOR THE YEAR ENDED
PARTICULARS
31 MARCH 2021 31 MARCH 2021
Cash �ows from � (used in) operating activities
----- End of picture text -----

Cash �ows from �(used in) operating activities
Pro�t before ta�	28,835	18,857
Adjustments for:
Fair valuegain on �nancial instruments at fair value throughpro�t or loss	(557)	(929)
Depreciation and amortisation expense	12,288	11,631
Impairment of non-current assets	6,768	16,767
Allowance for credit losses(on trade receivables and other advances)	230	190
Loss/(gain)on sale or de-recognition of non-current assets,net	42	68
Share ofpro�t of equityaccounted investees	(480)	(561)
Foreign exchange loss/(gain),net	1,853	(2,152)
Interest income	(826)	(888)
Finance costs	970	983
Equitysettled share-basedpayment expense	584	521
Dividends income	-*	(5)
Changes in operating assets and liabilities:
Trade receivables	2,081	(12,446)
Inventories	(9,881)	(1,487)
Tradepayables	2,861	1,576
Other assets and other liabilities,net	(3,349)	4,821
Cashgenerated from operations	41,419	36,946
Income taxpaid,net	(5,716)	(7,105)
Net cash from operating activities	35,703	29,841

Cash �ows from �(used in) investing activities
Expenditures onproperty, plant and equipment	(9,741)	(4,846)
Proceeds from sale ofproperty, plant and equipment	85	131
Expenditures on other intangible assets	(2,820)	(1,269)
Proceeds from sale of other intangible assets	-	259
Payment for acquisition of business(Refer note 2.40 for details)	(15,514)	-
Purchase of investments	(75,418)	(111,918)
Proceeds from sale of investments	79,528	111,704
Dividend received from equityaccounted investees	-	392
Interest and dividend received	1,220	624
Net cash used in investing activities	(22,660)	(4,923)

Cash �ows from �(used in) �nancing activities
Proceeds from issuance of equityshares(includingtreasuryshares)	269	4
Purchase of treasuryshares	(1,193)	(474)
Proceeds from short-term loans and borrowings,net(Refer note 2.10(h))	6,791	4,235
Proceeds from long-term loans and borrowings(Refer note 2.10(h))	3,800	-
Repayment of long-term loans and borrowings(Refer note 2.10(h))	(3,743)	(22,918)
Payment ofprincipalportion of lease liabilities(Refer note 2.10(h))	(754)	(482)
Dividendspaid(includingcorporate dividend tax for theyear ended 31 March 2020)	(4,147)	(3,916)
Interestpaid	(1,321)	(1,608)
Net cash used in �nancing activities	(298)	(25,159)

Net increase/(decrease)in cash and cash equivalents	12,745	(241)
E�ect of exchange rate changes on cash and cash equivalents	113	(25)
Cash and cash equivalents at the beginningof theyear(Refer note 2.6 D)	1,962	2,228
Cash and cash equivalents at the end of theyear(Refer note 2.6 D)	14,820	1,962

* Rounded o� to millions�

The accompanying notes are an integral part of consolidated �nancial statements.

for and on behalf of the Board of Directors of Dr. Reddy's Laboratories Limited

As per our report of even date attached for S.R. Batliboi & Associates LLP

Chartered Accountants

K Satish Reddy G V Prasad

ICAI Firm Registration Number: 101049W/E300004 per S Balasubrahmanyam Partner Membership Number: 053315

Chairman , DIN: 00129701

Co-Chairman & Managing Director, DIN: 00057433 Chief Executive O�cer Chief Financial O�cer Company Secretary

Erez Israeli

Parag Agarwal

Sandeep Poddar Place: Chenn a i Place: Hyderabad Date: 14 May 2021 Date: 14 May 2021

NOTE 1 | DESCRIPTION OF THE GROUP AND SIGNIFICANT ACCOUNTING POLICIES 1.1 DESCRIPTION OF THE GROUP

Dr. Reddy’s Laboratories Limited (the “parent company”), together with its subsidiaries and joint ventures (collectively, the “Company”), is a leading India-based pharmaceutical company headquartered and having its registered o�ce in Hyderabad, Telangana, India. Through its three businesses - Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products – the Company o�ers a portfolio of products and services, including Active Pharmaceutical Ingredients (“APIs”), Custom Pharmaceutical Services (“CPS”), generics, biosimilars and di�erentiated formulations.

The Company’s principal research and development facilities are located in the states of Telangana and Andhra Pradesh in India, Cambridge in the United Kingdom and Leiden in the Netherlands; its principal manufacturing facilities are located in the states of Telangana, Andhra Pradesh and Himachal Pradesh in India, Cuernavaca-Cuautla in Mexico, Mir�eld in the United Kingdom, and Louisiana in the United States; and its principal markets are in India, Russia, the United States, the United Kingdom, and Germany. The Company’s shares trade on the Bombay Stock Exchange, the National Stock Exchange, the NSE IFSC Limited in India and on the New York Stock Exchange in the United States.

Please refer note 2.26 for list of subsidiaries, step-down subsidiaries and joint ventures of the parent company.

1.2 BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

a) Statement of compliance

These consolidated �nancial statements as of and for the year ended 31 March 2021 comply in all material aspects with the Indian Accounting Standards (“Ind AS”) noti�ed under the Companies (Indian Accounting Standards) Rules 201�, and presentation requirements of Division II of Schedule III to the Companies Act, 2013, and as amended from time to time together with the comparative period data as at and for the year ended 31 March 2020.

These consolidated �nancial statements have been prepared by the Company as a going concern on the basis of relevant Ind AS that are e�ective or elected for early adoption at the Company’s annual reporting date, 31�March 2021 These consolidated �nancial statements were authorised for issuance by the Company’s Board of Directors on 14 May 2021.

b) Basis of measurement

These consolidated �nancial statements have been prepared on the historical cost convention and on an accrual basis, except for the following material items in the balance sheet:
derivative �nancial instruments are measured at fair value;
�nancial assets are measured either at fair value or at amortised cost, depending on the classi�cation;
employee de�ned bene�t assets/(liabilities) are recognised as the net total of the fair value of plan assets, adjusted for actuarial
gains/(losses) and the present value of the de�ned bene�t obligation;
long-term borrowings are measured at amortised cost using the e�ective interest rate method;
share-based payments are measured at fair value;
investments in joint ventures are accounted for using the equity method;
assets held for sale are measured at fair value;
assets acquired and liabilities assumed as part of business combinations are measured at fair value; and
right-of-use the assets are recognised at the present value of lease payments that are not paid at that date. This amount is adjusted
for any lease payments made at or before the commencement date, lease incentives received and initial direct costs, incurred, if any.

c) Functional and presentation currency

These consolidated �nancial statements are presented in Indian rupees, which is the functional currency of the parent company. All

�nancial information presented in Indian rupees has been rounded to the nearest million.

In respect of certain non-Indian subsidiaries that operate as marketing arms of the parent company in their respective countries/ regions, the functional currency has been determined to be the functional currency of the parent company (i.e., the Indian rupee). The operations of these entities are largely restricted to importing of �nished goods from the parent company in India, sales of these products in the foreign country and making of import payments to the parent company. The cash �ows realised from sales of goods are available for making import payments to the parent company and cash is paid to the parent company on a regular basis. The cash �ows realised from sales of goods are available for making import payments to the parent company and cash is paid to the parent company on a regular basis. The costs incurred by these entities are primarily the cost of goods imported from the parent company. The �nancing of these subsidiaries is done directly or indirectly by the parent company.

In respect of subsidiaries whose operations are self-contained and integrated within their respective countries/regions, the functional currency has been generally determined to be the local currency of those countries/regions, unless use of a di�erent currency is considered appropriate.

d) Use of estimates and judgements

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

Note 1.2(c) — Assessment of functional currency;
Note 1.3(b) — Evaluation of joint arrangements;
Note 1.3(d) — Financial instruments;
Note 1.3(e) — Business combinations;
Notes 1.3(f) and 1.3(g) — Useful lives of property, plant and equipment and intangible assets;
Notes 1.3(h) – Determination of cost for right-of-use assets and lease term;
Note 1.3(i) — Valuation of inventories;
Note 1.3(j) — Measurement of recoverable amounts of cash-generating units;
Note 1.3(k) — Assets and obligations relating to employee bene�ts;
Note 1.3(k) — Share-based payments;
Note 1.3(l) — Provisions and other accruals;
Note 1.3(m) — Measurement of transaction price in a revenue transaction (sales returns, rebates and chargeback provisions);
Note 1.3(p) — Evaluation of recoverability of deferred tax assets, and estimation of income tax payable and income tax expense in
relation to uncertain tax positions; and
Note 1.3(l) — Contingencies

e) Current and non-current c�assi�cation

Assets :

An asset is classi�ed as current when it satis�es any of the following criteria�

a) it is expected to be realised in, or is intended for sale or consumption in, the Company’s normal operating cycle;
b) it is held primarily for the purpose of being traded;
c) it is expected to be realised within twelve months after the reporting date; or
d) it is cash or a cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date.

Liabilities :

A liability is classi�ed as current when it satis�es any of the following criteria�

a) it is expected to be settled in the Company’s normal operating cycle;
b) it is held primarily for the purpose of being traded;
c) it is due to be settled within twelve months after the reporting date; or
d) the Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not a�ect its classi�cation.

Current assets and liabilities include the current portion of non-current assets and liabilities respectively. All other assets and liabilities are classi�ed as non-current. Deferred tax assets and liabilities are always classi�ed as non-current.

f) Prior period

Prior period amounts have been reclassi�ed to conform to the current year classi�cation.

1.3 SIGNIFICANT ACCOUNTING POLICIES

a) New Standards adopted by the Company

On 24 July 2020, the Ministry of Corporate A�airs (MCA) has issued amendments to certain Ind AS as summarised below�

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

An entity should apply the amendments prospectively for annual periods beginning on or after 1 April 2020.

The amendments to the de�nition of material had no impact on the consolidated �nancial statements of the Company.

Amendments to Ind AS 103: De�nition of a Business

The amendments introduced a revised de�nition of a business for the purpose of identifying a business combination under Ind AS 103 “Business Combinations” . As per the revised de�nition, business is ‘an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends or interest) or generating other income from ordinary activities’.

A related amendment has been made to the de�nition of ‘output’ as an element of business.

This amendment had no impact on the consolidated �nancial statements of the Company but may impact future periods should the Company enter into any business combinations.

Ind AS 109 and Ind AS 107: Interest Rate Benchmark Reform

The amendments to Ind AS 109 “Financial Instruments” provide a number of reliefs, which apply to all hedging relationships that are directly a�ected by interest rate benchmark reform. A hedging relationship is a�ected if the reform gives rise to uncertainty about the timing and/or amount of benchmark-based cash �ows of the hedged item or the hedging instrument.

The amendments to Ind AS 107 “Financial Instruments: Disclosures” prescribe the disclosures which entities are required to make for hedging relationships to which the reliefs as per the amendments in Ind AS 109 are applied.

These amendments are applicable for annual periods beginning on or after the 1 April 2020.

These amendments had no impact on the consolidated �nancial statements of the Company as it does not have any interest rate hedge relationships.

Amendments Ind AS 116: COVID-19 related rent concessions

Ind AS 116 has been amended to provide limited relief to lessees in respect of rent concessions arising due to COVID-19 pandemic. No relief has been allowed to the lessors.

the revised consideration for the lease should be less than or equal to the lease consideration immediately before the change;
the rent concession should be for a period that does not extend beyond 30 June 2021 (for example, lease rents are reduced for a period
upto 30 June 2021 and increased for periods thereafter); and
there should be no substantial modi�cation to the other terms and conditions of the lease.

The aforesaid amendments had no impact on the consolidated �nancial statements of the Company.

For the year ended 31 March 2020

Ind AS 116, “Leases”

Amendments to Ind AS 1 and Ind AS 8: De�nition of Material

The amendments provided a new de�nition to the word material as follows�

‘Information is material if omitting, misstating or obscuring it could reasonably be expected to in�uence decisions that the primary users of general-purpose �nancial statements make on the basis of those �nancial statements, which provide �nancial information about a speci�c reporting entity.’

Impact of the implementation of Ind AS 116 on the Company:

The Company adopted Ind AS 116 e�ective as of 1 April 2019. Ind AS 116, �Leases� changed the �nancial statements of the Company as the majority of leases for which the Company is the lessee became on-balance sheet liabilities with corresponding right-of-use assets also recognised on the consolidated balance sheet. The lease liability re�ects the net present value of the remaining lease payments adjusted for payments made before the commencement date, lease incentives and other items related to the lease agreement, and the right-of-use asset corresponds to the lease liability.

Upon adoption of the new standard, a portion of the annual operating lease costs, which was previously fully recognised as a rental/ lease expense, is recorded as interest expense. In addition, the portion of the lease payments which represents the reduction of the lease liability is recognised in the statement of cash �ows as an out�ow from �nancing activities, which was previously fully recognised as an out�ow from operating activities.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

The Company implemented the new standard on 1 April 2019, and applied the modi�ed retrospective method, with right-of-use assets measured at an amount equal to the lease liability, adjusted by the amount of the prepaid or accrued lease payments relating to those leases recognised in the consolidated balance sheet immediately before the date of initial application and will not restate prior years.

The Company elected to use the transition practical expedient that allows the standard to be applied only to contracts previously identi�ed under Ind AS 1�, “Leases” and the contracts assessed using the guidance available under Appendix C to Ind AS 1�, “Determining Whether an Arrangement Contains a Lease”.

On 1 April 2019, the Company recognised lease liabilities of 1,335 (presented as part of borrowings) and right-of-use assets of 1,153, after adjustments of ` 182 towards lease incentives and other items related to the lease agreement as at 31 March 2019 (presented as part of Property, plant and equipment).

Consequently, the Company has recognised an amount of 491 in depreciation expense and 230 in �nance costs for the year ended 31 March 2020.

Adoption of the new standard had no impact upon leases for which the Company is a lessor.

Appendix C to Ind AS 12, “Uncertainty over Income Tax Treatments”

Appendix C explains how to recognise and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment. An uncertain tax treatment is any tax treatment applied by an entity where there is uncertainty over whether that treatment will be accepted by the applicable tax authority. For example, a decision to claim a deduction for a speci�c expense or not to include a speci�c item of income in a tax return is an uncertain tax treatment if its acceptability is uncertain under applicable tax law. The interpretation provides speci�c guidance in several areas where previously Ind AS 12 was silent. Appendix C applies to all aspects of income tax accounting where there is an uncertainty regarding the treatment of an item, including taxable pro�t or loss, the tax bases of assets and liabilities, tax losses and credits and tax rates.

The Company applied the interpretation e�ective 1 April 2019 using the modi�ed retrospective approach. The adoption of Appendix C did not have any material impact on the �nancial statements of the Company.

b) Basis of consolidation

Subsidiaries

Subsidiaries are all entities (including special purpose entities) that are controlled by the Company. Control exists when the Company is exposed to, or has rights to variable returns from its involvement with the entity and has the ability to a�ect those returns through power over the entity. In assessing control, potential voting rights are considered only if the rights are substantive. The �nancial statements of subsidiaries are included in these consolidated �nancial statements from the date that control commences until the date that control ceases.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of pro�t and loss, statement of comprehensive income, statement of changes in equity and balance sheet respectively.

For the purpose of preparing these consolidated �nancial statements, the accounting policies of subsidiaries have been changed where necessary to align them with the policies adopted by the Company.

Joint arrangements (equity accounted investees)

Joint arrangements are those arrangements over which the parties have joint control, established by contractual agreement and requiring unanimous consent for strategic �nancial and operating decisions.

A joint arrangement is either a joint operation or a joint venture. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

With respect to joint operations, the Company recognises its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses.

Investments in joint ventures are accounted for using the equity method and are initially recognised at cost. The carrying value of the Company’s investment includes goodwill identi�ed on acquisition, net of any accumulated impairment losses. The Company does not consolidate entities where the non-controlling interest (“NCI”) holders have certain signi�cant participating rights that provide for e�ective involvement in signi�cant decisions in the ordinary course of business of such entities. Investments in such entities are accounted by the equity method of accounting. When the Company’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to zero and the recognition of further losses is discontinued except to the extent that the Company has an obligation or has made payments on behalf of the investee.

For the purpose of preparing these consolidated �nancial statements, the accounting policies of joint ventures have been changed where necessary to align them with the policies adopted by the Company. Furthermore, the �nancial statements of the joint ventures are prepared for the same reporting period as of the Company.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in full while preparing these consolidated �nancial statements. Unrealised gains or losses arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Company’s interest in the investee.

Changes in ownership interests

Acquisition of some or all of the NCI is accounted for as a transaction with equity holders in their capacity as equity holders. Consequently, the di�erence arising between the fair value of the purchase consideration paid and the carrying value of the NCI is recorded as an adjustment to retained earnings that is attributable to the parent company. The associated cash �ows are classi�ed as �nancing activities. No goodwill is recognised as a result of such transactions.

Loss of Control

Upon loss of control, the Company derecognises the assets and liabilities of the subsidiary, any NCIs and the other components of equity related to the subsidiary. Any surplus or de�cit arising on the loss of control is recognised in the consolidated statement of pro�t and loss. If the Company retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, depending on the level of in�uence retained, it is accounted for as an equity-accounted investee or as an investment measured at fair value through other comprehensive income (“FVTOCI”) or fair value through pro�t or loss (“FVT�L”), under Ind AS 109.

c) Foreign currency

Foreign currency transactions

Exchange di�erences arising on the settlement of monetary items or on translating monetary items at rates di�erent from those at which they were translated on initial recognition during the period or in previous �nancial statements are recognised in the consolidated statement of pro�t and loss in the period in which they arise.

However, foreign currency di�erences arising from the translation of the following items are recognised in other comprehensive income (“OCI”):

certain debt instruments classi�ed as measured at FVTOCI;
certain equity instruments where the Company had made an irrevocable election to present in OCI subsequent changes in the
fair value;
a �nancial liability designated as a hedge of the net investment in a foreign operation, to the extent that the hedge is e�ective; and
• qualifying cash �ow hedges, to the extent that the hedges are e�ective. When several exchange rates are available, the rate used is that at which the future cash �ows represented by the transaction or balance could have been settled if those cash �ows had occurred at the measurement date.

Foreign operations

Foreign exchange gains and losses arising from a monetary item receivable from a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of the net investment in the foreign operation and are recognised in OCI and presented within equity as foreign currency translation reserve (“FCTR”).

In case of foreign operations whose functional currency is di�erent from the parent company’s functional currency, the assets and liabilities of such foreign operations, including goodwill and fair value adjustments arising upon acquisition, are translated to the reporting currency at exchange rates at the reporting date. The income and expenses of such foreign operations are translated to the reporting currency at the monthly average exchange rates prevailing during the year. Resulting foreign currency di�erences are recognised in OCI and presented within equity as part of FCTR. When a foreign operation is disposed of, in part or in full, such that control, signi�cant in�uence or joint control is lost, the relevant amount in the FCTR is reclassi�ed to the consolidated statement of pro�t and loss.

d) Financial instruments

A �nancial instrument is any contract that gives rise to a �nancial asset of one entity and a �nancial liability or equity instrument of another entity.

Financial assets

Initial recognition and measurement

All �nancial assets are recognised initially at fair value plus, in the case of �nancial assets not recorded at fair value through pro�t or loss, transaction costs that are attributable to the acquisition of the �nancial asset. �urchases or sales of �nancial assets that require delivery of assets within a time frame established by regulation or convention in the market place (e.g., regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

Subsequent measurement

For purposes of subsequent measurement, �nancial assets are classi�ed in four categories:

Debt instruments at amortised cost;
Debt instruments at FVTOCI;
Debt instruments, derivatives and equity instruments at FVTPL; and
Equity instruments measured at FVTOCI.

Debt instruments at amortised cost

A “debt instrument” is measured at the amortised cost if both the following conditions are met:
a) the asset is held within a business model whose objective is to hold assets for collecting contractual cash �ows; and
b) contractual terms of the asset give rise on speci�ed dates to cash �ows that are solely payments of principal and interest (“SPPI”) on the principal amount outstanding.

Interest income from these �nancial assets is included in �nance income using the e�ective interest rate method. Any gain or loss arising on derecognition is recognised directly in pro�t and loss and presented in other gains�(losses). The losses arising from impairment are recognised in the consolidated statement of pro�t and loss.

This category generally applies to trade and other receivables.

Debt instrument at FVTOCI

A “debt instrument” is classi�ed as at the FVTOCI if both of the following criteria are met:

a) the objective of the business model is achieved both by collecting contractual cash �ows and selling the �nancial assets; and
b) the asset’s contractual cash �ows represent SPPI.

Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognised in the OCI. However, the Company recognises interest income, impairment losses and reversals and foreign exchange gain or loss in the consolidated statement of pro�t and loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassi�ed to the consolidated statement of pro�t and loss. Interest earned while holding a FVTOCI debt instrument is reported as interest income using the e�ective interest rate method.

Debt instrument at FVTPL

FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorisation as amortised cost or as FVTOCI, is classi�ed as at FVTPL.

In addition, the Company may elect to designate a debt instrument, which otherwise meets amortised cost or FVTOCI criteria, as FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as an “accounting mismatch”).

Debt instruments included within the FVTPL category are measured at fair value with all changes recognised in the consolidated statement of pro�t and loss.

Equity investments

All equity investments within the scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies, are classi�ed as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in OCI subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classi�cation is made upon initial recognition and is irrevocable.

If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to the consolidated statement of pro�t and loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity. Equity investments designated as FVTOCI are not subject to impairment assessment.

Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the consolidated statement of pro�t and loss.

Derecognition

A �nancial asset (or, where applicable, a part of a �nancial asset or part of a group of similar �nancial assets) is primarily derecognised (i.e. removed from the Company’s consolidated balance sheet) when:

the rights to receive cash �ows from the asset have expired; or
both (1) the Company has transferred its rights to receive cash �ows from the asset or has assumed an obligation to pay the received
cash �ows in full without material delay to a third party under a “pass-through” arrangement; and (�) either (a) the Company has
transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

Impairment of trade receivables and other �nancial assets

In accordance with Ind AS 109, the Company applies the expected credit loss ("ECL") model for measurement and recognition of impairment loss on trade receivables or any contractual right to receive cash or another �nancial asset.

For this purpose, the Company follows a “simpli�ed approach� for recognition of impairment loss allowance on the trade receivable balances. The application of this simpli�ed approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.

Financial liabilities

Initial recognition and measurement

All �nancial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Company’s �nancial liabilities include trade and other payables, loans and borrowings including bank overdrafts and derivative �nancial instruments.

Subsequent measurement

The measurement of �nancial liabilities depends on their classi�cation, as described below:

Financial liabilities at FVTPL

Gains or losses on liabilities held for trading are recognised in the consolidated statement of pro�t and loss.

Financial liabilities designated upon initial recognition at FVTPL are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satis�ed. For liabilities designated as FVTPL, fair value gains� losses attributable to changes in own credit risk are recognised in OCI. These gains or losses are not subsequently transferred to the consolidated statement of pro�t and loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the consolidated statement of pro�t and loss. The Company has not designated any �nancial liability as FVTPL.

Loans and borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any di�erence between the proceeds (net of transaction costs) and the redemption amount is recognised in the consolidated statement of pro�t and loss over the period of the borrowings using the e�ective interest method.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the e�ective interest rate method. Gains and losses are recognised in the consolidated statement of pro�t and loss when the liabilities are derecognised as well as through the e�ective interest rate amortisation process.

Derecognition

A �nancial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing �nancial liability is replaced by another from the same lender on substantially di�erent terms, or the terms of an existing liability are substantially modi�ed, such an exchange or modi�cation is treated as the derecognition of the original liability and the recognition of a new liability. The di�erence in the respective carrying amounts is recognised in the consolidated statement of pro�t and loss.

Derivative �nancial instruments

The Company is exposed to exchange rate risk which arises from its foreign exchange revenues and expenses, primarily in US dollars, UK pounds sterling, Russian roubles, Brazilian reals, Swiss francs, South African rands, Kazakhstan tenges, Romanian new leus, Australian dollars and Euros, and foreign currency debt in US dollars, Russian roubles, South African rands, Mexican pesos, Ukrainian hryvnias and Brazilian reals.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

Hedges of highly probable forecasted transactions

The Company classi�es its derivative �nancial instruments that hedge foreign currency risk associated with highly probable forecasted transactions as cash �ow hedges and measures them at fair value. The e�ective portion of such cash �ow hedges is recorded in the Company’s hedging reserve as a component of equity and re-classi�ed to the consolidated statement of pro�t and loss as part of the hedged item in the period corresponding to the occurrence of the forecasted transactions. The ine�ective portion of such cash �ow hedges is recorded in the consolidated statement of pro�t and loss as �nance costs immediately.

The Company also designates certain non-derivative �nancial liabilities, such as foreign currency borrowings from banks, as hedging instruments for hedge of foreign currency risk associated with highly probable forecasted transactions. Accordingly, the Company applies cash �ow hedge accounting to such relationships. Remeasurement gain or loss on such non-derivative �nancial liabilities is recorded in the Company’s hedging reserve as a component of equity and reclassi�ed to the consolidated statement of pro�t and loss as part of the hedged item in the period corresponding to the occurrence of the forecasted transactions.

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 consolidated statement of pro�t 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 in the consolidated statement of pro�t and loss. If the hedged item is derecognised, the unamortised fair value is recognised immediately in the consolidated statement of pro�t and loss.

Hedges of changes in the interest rates

Consistent with its risk management policy, the Company uses interest rate swaps to mitigate the risk of changes in interest rates. The Company does not use them for trading or speculative purposes.

Cash and cash equivalents

e) Business combinations

The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The acquisition date is the date on which control is transferred to the acquirer. Judgement is applied in determining the acquisition date and determining whether control is transferred from one party to another. Control exists when the Company is exposed to, or has rights to variable returns from its involvement with the entity and has the ability to a�ect those returns through power over the entity. In assessing control, potential voting rights are considered only if the rights are substantive.

The Company determines that it has acquired a business when the acquired set of activities and assets include an input and a substantive process that together signi�cantly contribute to the ability to create outputs. The acquired process is considered substantive if it is critical to the ability to continue producing outputs, and the inputs acquired include an organised workforce with the necessary skills, knowledge, or experience to perform that process or it signi�cantly contributes to the ability to continue producing outputs and is considered unique or scarce or cannot be replaced without signi�cant cost, e�ort, or delay in the ability to continue producing outputs.

The consideration transferred for the acquisition of a subsidiary is comprised of:

fair values of the assets transferred;
liabilities incurred to the former owners of the acquired business;
equity interests issued by the Company;

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

The excess of the sum of:

the consideration transferred;
the amount of any non-controlling interest in the acquired entity; and
the acquisition-date fair value of any previous equity interest in the acquired entity.

over the fair value of the net identi�able assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identi�able assets of the business acquired, the di�erence is recognised directly in the consolidated statement of pro�t and loss as a bargain purchase.

Contingent consideration is classi�ed either as equity or a �nancial liability. Contingent consideration classi�ed as equity is not re-measured and its subsequent settlement is accounted for within equity. Amounts classi�ed as a �nancial liability are subsequently re-measured to fair value, with changes in fair value recognised in the consolidated statement of pro�t and loss. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date. Any gains or losses arising from such re-measurement are recognised in the consolidated statement of pro�t and loss.

f) Property, plant and equipment

Recognition and measurement

When parts of an item of property, plant and equipment have di�erent useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Depreciation

Depreciation is recognised in the consolidated statement of pro�t and loss on a straight line basis over the estimated useful lives of property, plant and equipment. Land is not depreciated but subject to impairment.

Depreciation methods, useful lives and residual values are reviewed at each reporting date and any changes are considered prospectively.

The estimated useful lives are as follows:

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PARTICULARS YEARS
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Buildings
- Factoryand administrative buildings	20 to 50
- Ancillarystructures	3 to 15
Plant and equipment	3 to 15
Furniture,�xtures and o�ce equipment	3 to 10
Vehicles	4 to 5

fair value of any asset or liability resulting from a contingent consideration arrangement; and
fair value of any pre-existing equity interest in the subsidiary.

Identi�able assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Company recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identi�able assets. Acquisition-related costs are expensed as incurred.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

g) Goodwill and other intangible assets

Recognition and measurement

Goodwill	Goodwill represents the excess of consideration transferred, together with the amount of non-controlling
	interest in the acquiree, over the fair value of the Company’s share of identi�able net assets acquired.
	Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees,
	the carrying amount of goodwill is included in the carrying amount of the investment, and any impairment
	loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying
	value of the equity accounted investee.
Other intangible	Other intangible assets that are acquired by the Company and that have �nite useful lives are measured
assets	at cost less accumulated amortisation and accumulated impairment losses. The cost of intangible assets
	acquired in a business combination is their fair value at the date of acquisition.
Research and	Expenditures on research activities undertaken with the prospect of gaining new scienti�c or technical
development	knowledge and understanding are recognised in the consolidated statement of pro�t and loss when incurred.
	Development activities involve a plan or design for the production of new or substantially improved products
	and processes. Development expenditures are capitalised only if:

development costs can be measured reliably;
the product or process is technically and commercially feasible;
future economic bene�ts are probable and
the Company intends to, and has su�cient resources to complete development and to use or sell the asset.

	•development costs can be measured reliably; •the product or process is technically and commercially feasible; •future economic bene�ts are probable and •the Company intends to, and has su�cient resources to complete development and to use or sell the asset.
	The expenditures to be capitalised include the cost of materials and other costs directly attributable to
	preparing the asset for its intended use. Other development expenditures are recognised in the consolidated
	statement of pro�t and loss as incurred. As of 31 �arch 2021, none of the development expenditure amounts
	has met the aforesaid recognition criteria.
Separate acquisition	Payments to third parties that generally take the form of up-front payments and milestones for in-licensed
of intangible assets	products, compounds and intellectual property are capitalised. The Company’s criteria for capitalisation
	of such assets are consistent with the guidance given in paragraph 25 of Indian Accounting Standard
	(“Ind AS 38”) (i.e., the receipt of economic bene�ts embodied in each intangible asset separately purchased
	or licensed in the transaction is considered to be probable).
In-Process Research	Acquired research and development intangible assets that are under development are recognised as
and Development	In-Process Research and Development assets (“IPR&D”) or intangible assets under development. Intangible
assets (“IPR&D”)	assets under development are not amortised, but evaluated for potential impairment on an annual basis or
or Intangible assets	when there are indications that the carrying value may not be recoverable. Any impairment charge on such
under development	intangible assets under development assets is recorded in the consolidated statement of pro�t and loss
	under “Impairment of non-current assets”.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

The amortisation period and the amortisation method for intangible assets with a �nite useful life are reviewed at each reporting date. Goodwill, intangible assets relating to products in development, other intangible assets not available for use and intangible assets having inde�nite useful life are subject to impairment testing at each reporting date. All other intangible assets are tested for impairment when there are indications that the carrying value may not be recoverable. All impairment losses are recognised immediately in the consolidated statement of pro�t and loss under �Impairment of non-current assets”.

De-recognition of intangible assets

Intangible assets are de-recognised either on their disposal or where no future economic bene�ts are expected from their use. Losses arising on such de-recognition are recorded in the consolidated statement of pro�t and loss, and are measured as the di�erence between the net disposal proceeds, if any, and the carrying amount of respective intangible assets as at the date of de-recognition.

h) Leases

The Company assesses at contract inception whether a contract is or contains a lease, which applies, if the contract conveys the right to control the use of the identi�ed asset for a period of time in exchange for consideration. The Company recognises a right-of-use asset at the commencement date of the lease, i.e. the date the underlying asset is available for use. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments to be made over the lease term:

�xed payments (including in-substance �xed payments), less any lease incentives receivable
variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement
date
amounts expected to be payable by the Company under residual value guarantees
the exercise price of a purchase option if the Company is reasonably certain to exercise that option, and
payments of penalties for terminating the lease, if the lease term re�ects the Company exercising that option.

Lease payments are allocated between principal and interest cost. The interest cost is charged to pro�t or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost less accumulated depreciation and accumulated impairment comprised of the following:

the amount of the initial measurement of lease liability
any lease payments made at or before the commencement date less any lease incentives received
• any initial direct costs, and

Subsequent expenditure

Other intangible	Subsequent expenditures are capitalised only when they increase the future economic bene�ts embodied in
assets	the speci�c asset to which they relate. All other expenditures, including expenditures on internally generated
	goodwill and brands, is recognised in the consolidated statement of pro�t and loss as incurred.
In-Process Research	Subsequent expenditure on an IPR&D or intangible assets under development project acquired separately or
and Development	in a business combination and recognised as an intangible asset is:
assets (“IPR&D”)	•recognised as an expense when incurred, if it is a research expenditure;
or Intangible assets	•recognised as an expense when incurred, if it is a development expenditure that does not satisfy the
under development	criteria for recognition as an intangible asset in paragraph 57 of Ind AS 38; and
	•added to the carrying amount of the acquired IPR&D project, if it is a development expenditure that
	satis�es the recognition criteria in paragraph 57 of Ind AS 38.

Amortisation

Amortisation is recognised in the consolidated statement of pro�t and loss on a straight-line basis over the estimated useful lives of intangible assets. The amortization expense is recognised in the statement of pro�t and loss account in the expense category that is consistent with the function of the intangible asset. Intangible assets that are not available for use are amortised from the date they are available for use.

The estimated useful lives are as follows:

PARTICULARS	YEARS
Product related intangibles	3 to 20
Other intangibles	3 to 15

restoration costs.

Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an expense in consolidated statement of pro�t and loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of o�ce furniture.

The right-of-use assets are initially recognised on the consolidated balance sheet at cost, which is calculated as the amount of the initial measurement of the corresponding lease liability, adjusted for any lease payments made at or prior to the commencement date of the lease, any lease incentive received and any initial direct costs incurred by the Company.

i) Inventories

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

j) Impairment

�on-�nancial assets

The goodwill acquired in a business combination is, for the purpose of impairment testing, allocated to cash-generating units that are expected to bene�t from the synergies of the combination.

An impairment loss is recognised in the consolidated statement of pro�t and loss if the estimated recoverable amount of an asset or its cash-generating unit is lower than its carrying amount. Impairment losses recognised in respect of cash-generating units are allocated �rst to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis.

An impairment loss in respect of equity accounted investee is measured by comparing the recoverable amount of investment with its carrying amount. An impairment loss is recognised in the consolidated statement of pro�t and loss, and reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

k) Employee �ene�t�

Short-term employee bene�ts

�e�ned contribution plans

The Company’s contributions to de�ned contribution plans are charged to the consolidated statement of pro�t and loss as and when the services are received from the employees.

�e�ned bene�t plans

The liability in respect of de�ned bene�t plans and other post-employment bene�ts is calculated using the projected unit credit method consistent with the advice of quali�ed actuaries. The present value of the de�ned bene�t obligation is determined by discounting the estimated future cash out�ows using interest rates of high-quality corporate bonds that are denominated in the currency in which the bene�ts will be paid, and that have terms to maturity approximating to the terms of the related de�ned bene�t obligation. In countries where there is no deep market in such bonds, the market interest rates on government bonds are used. The current service cost of the de�ned bene�t plan, recognised in the consolidated statement of pro�t and loss in employee bene�t expense, re�ects the increase in the de�ned bene�t obligation resulting from employee service in the current year, bene�t changes, curtailments and settlements. Past service costs are recognised immediately in the consolidated statement of pro�t and loss. The net interest cost is calculated by applying the discount rate to the net balance of the de�ned bene�t obligation and the fair value of plan assets. This cost is included in employee bene�t expense in the consolidated statement of pro�t and loss. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions for de�ned bene�t obligation and plan assets are recognised in OCI in the period in which they arise.

When the bene�ts under a plan are changed or when a plan is curtailed, the resulting change in bene�t that relates to past service or the gain or loss on curtailment is recognised immediately in the consolidated statement of pro�t and loss. The Company recognises gains or losses on the settlement of a de�ned bene�t plan obligation when the settlement occurs.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

Other long-term employee bene�ts

The Company’s net obligation in respect of other long-term employee bene�ts is the amount of future bene�t that employees have earned in return for their service in the current and previous periods. That bene�t is discounted to determine its present value. Re-measurements are recognised in the consolidated statement of pro�t and loss in the period in which they arise.

Compensated absences

Equity settled share-based payment transactions

The grant date fair value of options granted to employees is recognised as an employee expense in the consolidated statement of pro�t and loss, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options. The amount recognised as an expense is adjusted to re�ect the number of awards for which the related service and performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and performance conditions at the vesting date. The expense is recorded for each separately vesting portion of the award as if the award was, in substance, multiple awards. The increase in equity recognised in connection with share-based payment transaction is presented as a separate component in equity under “share-based payment reserve”. The amount recognised as an expense is adjusted to re�ect the actual number of stoc� options that vest.

Cash settled share-based payment transactions

The liability is re-measured at each reporting date and at the settlement date based on the fair value of the share-based payment transaction. Any changes in the liability are recognised in the consolidated statement of pro�t and loss.

l)

Provisions

A provision is recognised in the consolidated statement of pro�t and loss if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an out�ow of economic bene�ts will be required to settle the obligation. If the e�ect of the time value of money is material, provisions are determined by discounting the expected future cash �ows at a pre-tax rate that re�ects current mar�et assessments of the time value of money and the ris�s speci�c to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a �nance cost.

Restructuring

A provision for restructuring is recognised in the consolidated statement of pro�t and loss when the Company has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating costs are not provided.

Onerous contracts

A provision for onerous contracts is recognised in the consolidated statement of pro�t and loss when the expected bene�ts to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognises any impairment loss on the assets associated with that contract.

Reimbursement rights

Expected reimbursements for expenditures required to settle a provision are recognised in the consolidate statement of pro�t and loss only when receipt of such reimbursements is virtually certain. Such reimbursements are recognised as a separate asset in the balance sheet, with a corresponding credit to the speci�c expense for which the provision has been made.

Contingent liabilities and contingent assets

A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an out�ow of resources. Where there is a possible obligation or a present obligation in respect of which the li�elihood of out�ow of resources is remote, no provision or disclosure is made.

Contingent assets are not recognised in the consolidated �nancial statements. A contingent asset is disclosed where an in�ow of economic bene�ts is probable. Contingent assets are assessed continually and, if it is virtually certain that an in�ow of economic bene�ts will arise, the asset and related income are recognised in the period in which the change occurs.

Termination bene�ts

Termination bene�ts are recognised as an expense in the consolidated statement of pro�t and loss when the Company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination bene�ts as a result of an o�er made to encourage voluntary redundancy. Termination bene�ts for voluntary redundancies are recognised as an expense in the consolidated statement of pro�t and loss if the Company has made an o�er encouraging voluntary redundancy, it is probable that the o�er will be accepted, and the number of acceptances can be estimated reliably.

m) Revenue

Sale of goods

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

In arriving at the transaction price, the Company considers the terms of the contract with the customers and its customary business practices. The transaction price is the amount of consideration the Company is entitled to receive in exchange for transferring promised goods or services, excluding amounts collected on behalf of third parties. The amount of consideration varies because of estimated rebates, returns and chargebacks, which are considered to be key estimates. Any amount of variable consideration is recognised as revenue only to the extent that it is highly probable that a signi�cant reversal will not occur. The Company estimates the amount of variable consideration using the expected value method.

Presented below are the points of recognition of revenue with respect to the Company’s sale of goods:

PARTICULARS POINT OF RECOGNITION OF REVENUE

Sales of generic products in India Upon delivery of products to distributors by clearing and forwarding agents of the Company. Control over the generic products is transferred by the Company when the goods are delivered to distributors from clearing and forwarding agents.

Sales of active pharmaceutical Upon delivery of products to customers (generally formulation manufacturers), from the ingredients and intermediates in factories of the Company. India Export sales and other sales Upon delivery of the products to the customers unless the terms of the applicable contract outside of India provide for speci�c revenue generating activities to be completed, in which case revenue is recognised once all such activities are completed.

Pro�t share revenues

Out licensing arrangements, milestone payments and royalties

Revenues include amounts derived from product out-licensing agreements. These arrangements typically consist of an initial up-front payment on inception of the license and subsequent payments dependent on achieving certain milestones in accordance with the terms prescribed in the agreement. In cases where the transaction has two or more components, the Company accounts for the delivered item (for example, the transfer of title to the intangible asset) as a separate unit of accounting and record revenue upon delivery of that component, provided that the Company can make a reasonable estimate of the fair value of the undelivered component. Otherwise, non-refundable up-front license fees received in connection with product out-licensing agreements are deferred and recognised over the balance period in which the Company has pending performance obligations. Milestone payments which are contingent on achieving certain clinical milestones are recognised as revenues either on achievement of such milestones, over the performance period depending on the terms of the contract. If milestone payments are creditable against future royalty payments, the milestones are deferred and released over the period in which the royalties are anticipated to be paid.

Royalty income earned through a license is recognised when the underlying sales have occurred.

Provision for chargeback, rebates and discounts

Shelf stock adjustments

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

Refund Liability

The Company accounts for sales returns accrual by recording refund liability concurrent with the recognition of revenue at the time of a product sale. This liability is based on the Company’s estimate of expected sales returns. The Company deals in various products and operates in various markets. Accordingly, the estimate of sales returns is determined primarily by the Company’s historical experience in the markets in which the Company operates. With respect to established products, the Company considers its historical experience of actual sales returns, levels of inventory in the distribution channel, estimated shelf life, any revision in the shelf life of the product, product discontinuances, price changes of competitive products, and the introduction of competitive new products, to the extent each of these factors impact the Company’s business and markets. With respect to new products introduced by the Company, such products have historically been either extensions of an existing line of product where the Company has historical experience or in therapeutic categories where established products exist and are sold either by the Company or the Company’s competitors. At the time of recognising the refund liability, the Company also recognises an asset, (i.e., the right to the returned goods) which is included in inventories for the products expected to be returned. The Company initially measures this asset at the former carrying amount of the inventory, less any expected costs to recover the goods, including any potential decreases in the value of the returned goods. Along with re-measuring the refund liability at the end of each reporting period, the Company updates the measurement of the asset recorded for any revisions to its expected level of returns, as well as any additional decreases in the value of the returned products.

Services

Revenue from services rendered, which primarily relate to contract research, is recognised in the consolidated statement of pro�t and loss as the underlying services are performed. Upfront non-refundable payments received under these arrangements are deferred and recognised as revenue over the expected period over which the related services are expected to be performed.

License fees

n) Shipping and handling costs

o) Othe� income and �nance cost

Other income consists of interest income on funds invested, dividend income and gains on the disposal of assets. Interest income is recognised in the consolidated statement of pro�t and loss as it accrues, using the e�ective interest method. Dividend income is recognised in the consolidated statement of pro�t and loss on the date that the Company’s right to receive payment is established. The associated cash �ows are classi�ed as investing activities in the statement of cash �ows. Finance expenses consist of interest expense on loans and borrowings.

Borrowing costs are recognised in the consolidated statement of pro�t and loss using the e�ective interest method. The associated cash �ows are classi�ed as �nancing activities in the statement of cash �ows.

p) Income tax

Income tax expense consists of current and deferred tax. Income tax expense is recognised in the consolidated statement of pro�t and loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

temporary di�erences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that
a�ects neither accounting nor taxable pro�t;
temporary di�erences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that
they will not reverse in the foreseeable future; and
taxable temporary di�erences arising upon the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary di�erences when they reverse, based on the laws that have been enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are o�set if there is a legally enforceable right to o�set current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on di�erent tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

A deferred tax asset is recognised to the extent that it is probable that future taxable pro�ts will be available against which the temporary di�erence can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related deferred tax will be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that the future taxable pro�ts will allow the deferred tax assets to be recovered.

Current and deferred tax is recognised in the consolidated statement of pro�t and loss, except to the extent that it relates to items recognised in OCI or directly in equity. In this case, the tax is also recognised in OCI or directly in equity, respectively.

q) Earnings per share

r) Government grants and incentives

Export entitlements from government authorities are recognised in the consolidated statement of pro�t and loss as a reduction from “Cost of materials consumed” when the right to receive credit as per the terms of the scheme is established in respect of the exports made by the Company, and where there is no signi�cant uncertainty regarding the ultimate collection of the relevant export proceeds.

s) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Chief Executive O�cer of the Company is responsible for allocating resources and assessing performance of the operating segments and accordingly is identi�ed as the chief operating decision maker.

t) Treasury shares

Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in the consolidated statement of pro�t and loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments. Any di�erence between the carrying amount and the consideration, if reissued, is recognised in the securities premium.

u) Non-currents assets held for sale

The Company classi�es non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets classi�ed as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of an asset, excluding �nance costs and income tax expense. The criteria for held for sale classi�cation is regarded as met only when the sale is highly probable, and the asset or disposal group is available for immediate sale in its present condition. Property, plant and equipment are not depreciated or amortised once classi�ed as held for sale. Assets classi�ed as held for sale are presented separately as current items in the consolidated balance sheet.

v) Rounding of amounts

All amounts disclosed in the consolidated �nancial statements and notes have been rounded o� to the nearest million unless otherwise stated.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

1.4 DETERMINATION OF FAIR VALUES

The Company’s accounting policies and disclosures require the determination of fair value, for certain �nancial and non-�nancial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes speci�c to that asset or liability.

A fair value measurement of a non-�nancial asset takes into account a market participant�s ability to generate economic bene�ts by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

All assets and liabilities for which fair value is measured or disclosed in the consolidated �nancial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is signi�cant to the fair value measurement as a whole�
Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 — Valuation techniques for which the lowest level input that is signi�cant to the fair value measurement is directly or indirectly observable.
Level 3 — Valuation techniques for which the lowest level input that is signi�cant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the consolidated �nancial statements at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is signi�cant to the fair value measurement as a whole) at the end of each reporting period.

a) Property, plant and equipment

b) Intangible assets

c) Inventories

d) Investments in equity and debt securities and units of mutual funds

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

e) Derivatives

f) Non-derivative �nancia� �iabi�ities

g) Share-based payment transactions

h) Contingent consideration

The fair value of the contingent consideration arising out of business combination is estimated by applying the income approach. The fair value measurement is based on signi�cant inputs that are not observable in the market, which Ind AS ��3, �Fair �alue Measurement” refers to as Level 3 inputs.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.1 PROPERTY, PLANT AND EQUIPMENT

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FURNITURE,
PLANT AND FIXTURES
PARTICULARS LAND BUILDINGS VEHICLES TOTAL
EQUIPMENT AND OFFICE
EQUIPMENT
----- End of picture text -----

Gross carrying value
Balance as at 1 April 2019	4,229	23,005	70,427	5,738	809	104,208
Recognition of right-of-use asset on initial application	-	723	2	28	400	1,153
of Ind AS 116
Adjusted balance as at 1 April 2019	4,229	23,728	70,429	5,766	1,209	105,361
Additions	4	997	4,278	497	295	6,071
Disposals	-	(55)	(706)	(253)	(218)	(1,232)
��ect of changes in foreign exchange rates	(84)	245	392	(38)	(76)	439
Balance as at 31 March 2020	4,149	24,915	74,393	5,972	1,210	110,639

Balance as at 1 April 2020	4,149	24,915	74,393	5,972	1,210	110,639
Assets acquired through business combinations(1)	84	113	165	11	-	373
Additions	13	2,720	4,544	437	220	7,934
Disposals	-	(35)	(852)	(134)	(182)	(1,203)
Assets held for sale (A)	(18)	(245)	(334)	(58)	-	(655)
��ect of changes in foreign exchange rates	38	3	201	30	8	280
Balance as at 31 March 2021	4,266	27,471	78,117	6,258	1,256	117,368

Accumulated Depreciation
Balance as at 1 April 2019	-	6,786	43,210	4,621	464	55,081
Depreciation for the year	-	1,299	6,382	564	379	8,624
Disposals	-	(31)	(677)	(245)	(197)	(1,150)
��ect of changes in foreign exchange rates	-	121	265	(33)	(48)	305
Balance as at 31 March 2020	-	8,175	49,180	4,907	598	62,860

Balance as at 1 April 2020	-	8,175	49,180	4,907	598	62,860
Depreciation for the year	-	1,689	5,926	553	342	8,510
Impairment for the year	4	32	9	1	-	46
Disposals	-	(26)	(773)	(125)	(136)	(1,060)
Assets held for sale (B)	(4)	(140)	(306)	(54)	-	(504)
��ect of changes in foreign exchange rates	-	13	156	25	-	194
Balance as at 31 March 2021	-	9,743	54,192	5,307	804	70,046

Net carrying value
As at 31 March 2020	4,149	16,740	25,213	1,065	612	47,779
As at 31 March 2021	4,266	17,728	23,925	951	452	47,322

Assets held for sale [(A)-(B)]	14	105	28	4	-	151

(1) Refer note 2.4� of these �nancial state�ents for further details

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.1 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Leases

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FURNITURE,
PLANT AND FIXTURES
PARTICULARS LAND BUILDINGS VEHICLES TOTAL
EQUIPMENT AND OFFICE
EQUIPMENT
----- End of picture text -----

Gross carrying value
Balance as at 1 April 2019	73	840	12	-	37	962
Recognition of right-of-use asset on initial application	-	723	2	28	400	1,153
of Ind AS 116
Adjusted balance as at 1 April 2019	73	1,563	14	28	437	2,115
Additions	-	87	3	17	146	253
Disposals	-	(1)	-	-	(56)	(57)
E�ect of changes in foreign exchange rates	5	39	1	-	3	48
Balance as at 31 March 2020	78	1,688	18	45	530	2,359

Balance as at 1 April 2020	78	1,688	18	45	530	2,359
Additions(1)	-	2,212	-	7	194	2,413
Disposals	-	-	-	(1)	(120)	(121)
E�ect of changes in foreign exchange rates	3	(14)	-	-	-	(11)
Balance as at 31 March 2021	81	3,886	18	51	604	4,640

Accumulated Depreciation
Balance as at 1 April 2019	-	454	12	-	33	499
Depreciation for the year	-	267	1	13	210	491
Disposals	-	(1)	-	-	(41)	(42)
E�ect of changes in foreign exchange rates	-	24	1	-	(3)	22
Balance as at 31 March 2020	-	744	14	13	199	970

Balance as at 1 April 2020	-	744	14	13	199	970
Depreciation for the year	-	616	1	12	202	831
Disposals	-	-	-	-	(78)	(78)
E�ect of changes in foreign exchange rates	-	(25)	-	-	(2)	(27)
Balance as at 31 March 2021	-	1,335	15	25	321	1,696

Net carrying value
As at 31 March 2020	78	944	4	32	331	1,389
As at 31 March 2021	81	2,551	3	26	283	2,944
(1) Additions for the year ended 31 March 2021 include recognition of a right-of-use asset of`1,852		relating to a warehousing	services agreement in the United States.

The following are the amounts recognised in statement of pro�t and loss�

PARTICULARS FOR THE YEAR ENDED 31 MARCH 2021 FOR THE YEAR ENDED 31 MARCH 2020
Depreciation expense of right-of-use assets 831 491
Interest expense on lease liabilities 227 230
1,058 721

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.1 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

The Company had total cash out�ows for leases of 1,252 and 972 during the year ended 31 March 2021 and 31 March 2020, respectively. The maturity analysis of lease liabilities are disclosed in note 2.10 of these consolidated �nancial statements.

Capital commitments

As of 31 March 2021 and 31 March 2020, the Company was committed to spend 9,841 and 4,888, respectively, under agreements to purchase property, plant and equipment. This amount is net of capital advances paid in respect of such purchase commitments.

Interest capitalisation

During the years ended 31 March 2021 and 31 March 2020, the Company capitalised interest cost of 149 and 52, respectively, with respect to qualifying assets. The rate for capitalisation of interest cost for the years ended 31 March 2021 and 31 March 2020 was approximately 4.25% and 4.22%, respectively.

2.2 GOODWILL

Goodwill arising upon business combinations is not amortised but tested for impairment at least annually or more frequently if there is any indication that the cash generating unit to which goodwill is allocated is impaired. Gross carrying value and accumulated amortisation with respect to goodwill represent Indian GAAP balances, that have been carried forward as such, relating to business combination entered before the transition date i.e., 1 April 2015.

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AS AT AS AT
PARTICULARS
31 MARCH 2021 31 MARCH 2020
Gross carrying value
Opening balance 37,186 35,157
Goodwill arising on business combinations [(1)] 530 -
Disposals - -
E�ect of changes in foreign exchange rates 1,193 2,029
Closing balance 38,909 37,186
Accumulated amortisation
Opening balance 32,273 30,498
Impairment loss - 10
E�ect of changes in foreign exchange rates 1,037 1,765
Closing balance 33,310 32,273
Net carrying value 5,599 4,913
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(1) Refer note 2.4� of t�ese �nancial statements for f�rt�er �etails

The carrying amount of goodwill (other than those arising upon investment in a joint venture) was allocated to the cash generating units as follows:

PARTICULARS	AS AT 31 MARCH 2021
PSAI-Active Pharmaceutical Operations	170
Global Generics-Complex Injectables	1,928
Global Generics-North America Operations	308
Global Generics-Germany Operations	2,288
Global Generics-Branded Formulations	905
	5,599

The recoverable amounts of the above cash generating units have been assessed using a value-in-use model. Value in use is generally calculated as the net present value of the projected post-tax cash �ows plus a terminal value of the cash generating unit to which the goodwill is allocated. Initially, a post-tax discount rate is applied to calculate the net present value of the post-tax cash �ows. �ey assumptions upon which the Company has based its determinations of value-in-use include:

a) Estimated cash �ows for �ve years, based on management’s projections.
b) A terminal value arrived at by extrapolating the last forecasted year cash �ows to perpetuity, using a constant long-term growth rate of 0%. This long-term growth rate takes into consideration external macroeconomic sources of data. Such long-term growth rate considered does not exceed that of the relevant business and industry sector.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.2 GOODWILL (CONTINUED)

c) The after tax discount rates used are based on the Company’s weighted average cost of capital.
d) The after tax discount rates used range from 7.6% to 10.5% for various cash generating units. The pre-tax discount rates range from 9.1% to 15.7%.

2.3 OTHER INTANGIBLE ASSETS

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PRODUCT RELATED
PARTICULARS OTHERS TOTAL
INTANGIBLES
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Gross carrying value
Balance as at 1 April 2019	39,174	1,945	41,119
Additions	3,222	165	3,387
Disposals/ De- recognitions	(597)	(1)	(598)
E�ect of changes in foreign exchange rates	1,617	5	1,622
Balance as at 31 March 2020	43,416	2,114	45,530

Balance as at 1 April 2020	43,416	2,114	45,530
Additions(1)	2,550	304	2,854
Assets acquired through business combinations(2)	14,888	-	14,888
Disposals/ De- recognitions	(152)	-	(152)
E�ect of changes in foreign exchange rates	(532)	2	(530)
Balance as at 31 March 2021	60,170	2,420	62,590

Amortisation/impairment loss
Balance as at 1 April 2019	21,894	1,101	22,995
Amortisation for the year	2,744	263	3,007
Impairment loss(3)	3,378	-	3,378
Disposals/ De- recognitions	(531)	(1)	(532)
E�ect of changes in foreign exchange rates	868	3	871
Balance as at 31 March 2020	28,353	1,366	29,719

Balance as at 1 April 2020	28,353	1,366	29,719
Amortisation for the year	3,481	297	3,778
Impairment loss(3)	443	-	443
Disposals/ De- recognitions	(152)	-	(152)
E�ect of changes in foreign exchange rates	(335)	1	(334)
Balance as at 31 March 2021	31,790	1,664	33,454

Net carrying value
As at 31 March 2020	15,063	748	15,811
As at 31 March 2021	28,380	756	29,136

(1) Assets acquired during year ended 31 March 2021 includes the following:

The Company entered into a de�niti�e agreement with Glenmar� �harmaceuticals �imited to acquire mar�eting authorizations and other rights of select brands in four “�merging Mar�ets” countries. The acquired brands represent two products, (a) a mometasone mono product and (b) a combination of mometasone with azelastine, and are indicated for the treatment of seasonal and perennial allergic rhinitis. The total consideration paid was ` 1,516. Following the principles of Ind AS 38, “Intangible assets”, the Company recognisedthe acquired brands at their acquisition cost. The acquisition pertains to the Company’s Global Generics segment.

(2) Refer Note 2.40 of these �nancial statements for further details.

(3) Refer note 2.4 for “Impairment losses recorded for the year ended 31 March 2021 and 31 March 2020.”

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.4 INTANGIBLE ASSETS UNDER DEVELOPMENT

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FOR THE YEAR ENDED FOR THE YEAR ENDED
PARTICULARS
31 MARCH 2021 31 MARCH 2020
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Balance at the beginning of the year	10,987	24,610
_Add:_Additions during the year(1)	1,737	950
_Less:_Capitalisations during the year(2)	-	(2,530)
_Less:_Impairment during the year(3)	(6,279)	(13,379)
E�ect of changes in exchange rates	(333)	1,336
Balance at end of the year	6,112	10,987

(1)

During the year ended 31 March 2021, additions includes ` 1,471 representing the expenditure for purchase of intellectual property rights relating to Xeglyze® forming part of the Company’s Proprietary Products segment.

During the year ended 31 March 2020, the Company acquired a portfolio of approved, non-marketed Abbreviated New Drug Applications (“ANDAs”) in the United States from Teva for a total consideration of ` 277. The Company recognised these ANDAs acquired as product related intangibles.

(2) During the year ended 31 March 2020, the product ramelton was available for use and are subject to amortisation. Accordingly, the Company reclassi�ed the amount from intangible assets under development to product related intangibles.

(3) Impairment losses recorded for the year ended 31 March 2021

Total impairment charges for the year ended 31 March 2021 were _6,722 which were recorded in impairment of non-current assets in the consolidated statement of pro�t and loss, of which_ 3,180 was attributable to impairment of gNuvaring, _1,471 was attributable to impairment of Xeglyze® and the balance of_ 2,071 was attributable to other product related intangibles.

Impairment of gNuvaring

During the year ended 31 March 2021, there were signi�cant changes to the generics market for Ethinyl estradiol/Ethenogestral vaginal ring (a generic equivalent to Nuvaring®), one of the 8 ANDAs acquired from Teva in June 2016. The changes include the launch by a competitor of a generic version of the product in January 2021. Due to these adverse market developments, the Company tested the carrying value of this product at the product cash generating unit (“CGU”) level, being the smallest identi�able group of assets that generate cash in�ows that are largely independent of the cash in�ows from other assets or groups of assets. The recoverable amount was determined by reference to the product’s value-in-use or fair value less costs to sell, whichever is higher. This resulted in the value-in-use being the recoverable value of the product. Accordingly, the Company recorded an impairment loss of 3,180 for the year ended 31 March 2021. This impairment loss pertained to the Company’s Global Generics segment. With this impairment, the carrying value of the asset has been reduced to Nil.

Impairment of Xeglyze®

Consequent to the decline in the market potential of the product Xeglyze® forming part of the Company's Proprietary Products segment, the Company recorded an amount of ` 3,291 as impairment loss for the year ended 31 March 2021.

Other intangible assets

With respect to the saxagliptin/metformin (generic version of Kombiglyze®-XR) and phentermine and topiramate (generic version of Qsymia®), two of the 8 ANDAs acquired from Teva in June 2016, there has been a signi�cant decrease in the market potential of these products, primarily due to higher than expected value erosion. Accordingly, the Company assessed the recoverable amount by revisiting market volume, share and price assumptions for these two products and recorded an amount of ` 1,587 as impairment loss for the year ended 31 March 2021. This impairment loss pertained to the Company’s Global Generics segment.

In view of the speci�c triggers occurring in the year with respect to some other product related intangible assets forming part of the Company's Global Generics segment, the Company determined that there was a decrease in the market potential of these products primarily due to higher than expected price erosion and increased competition leading to lower volumes. Consequently, the Company recorded an amount of ` 484 as impairment loss for the year ended 31 March 2021.

The Company used the discounted cash �ow approach to calculate the value-in-use which considered assumptions such as revenue projections, rate of generic penetration, estimated price erosion, the useful life of the asset and the net cash �ows have been discounted based on post tax discount rate.

Impairment losses recorded for the year ended 31 March 2020

Total impairment charges for the year ended 31 March 2020 were 16,757 which were recorded in impairment of non-current assets in the consolidated statement of pro�t and loss, of which 11,137 was attributable to impairment of gNuvaring and the balance of ` 5,620 was attributable to other product related intangibles.

Impairment of gNuvaring

During the year ended 31 March 2020, there were signi�cant changes to the generics market for Ethinyl estradiol / Ethenogestral vaginal ring (a generic equivalent to Nuvaring®), one of the 8 ANDAs acquired from Teva in June 2016. The changes include the launches by competitors of both generic and authorised generic versions of the product in December 2019. Due to these adverse market developments, as at 31 December 2019, the Company tested the carrying value of this product at the product cash generating unit (“CGU”) level, being the smallest identi�able group of assets that generate cash in�ows that are largely independent of the cash in�ows from other assets or groups of assets. The recoverable amount was determined by reference to the product’s value-in-use or fair value less costs to sell, whichever is higher. This resulted in the value-in-use being the recoverable value of the product. Accordingly, the Company recorded an impairment loss of ` 11,137 for the year ended 31 March 2020. This impairment loss pertained to the Company’s Global Generics segment.

The carrying value of the asset after the impairment was ` 3,269.

The Company used the discounted cash �ow approach to calculate the value in use, with the assistance of independent appraisers. The key assumptions considered in the calculation are as follows:

a. Weighted average of probability adjusted revenue projections which take into consideration di�erent scenarios such as the base case, the upside case and the downside case; b. Rate of generic penetration and estimated price erosion throughout the period;

c. Estimate of useful life over which the product is expected to generate cash �ows; and

d. the net cash �ows have been discounted based on a post-tax discounting tax rate of 8%.

Other intangible assets

In June 2019, the Company launched tobramycin inhalation solution, USP, a therapeutic equivalent generic version of TOBI[®] (tobramycin) Inhalation Solution, and in July 2019 the Company launched ramelteon tablets, 8 mg, a therapeutically equivalent generic version of Rozerem[®] (ramelteon, 8 mg) Tablets. Subsequent to their respective launches, both products experienced adverse market conditions, such as increased competition and reduced selling prices by competitors. As a result, the performance of the products was signi�cantly lower than the Company’s prior estimates. Furthermore, the Company decided to drop the launch of its planned imiquimod cream product. Accordingly, the Company assessed the recoverable amount of intangible assets associated with these three products, and recognised an impairment loss of ` 4,385 (US$ 61.4 million) for the year ended 31 March 2020. These impairment losses pertained to the Company’s Global Generics segment.

In view of the speci�c triggers occurring in the year with respect to some of other product related intangible assets forming part of the Company's Global Generics and Proprietary Products segments, the Company determined that there was a decrease in the market potential of these products primarily due to higher than expected price erosion and increased competition leading to lower volumes. Consequently, the Company recorded an amount of ` 1,235 as impairment loss for the year ended 31 March 2020.

Consequent to the materiality of the amount involved, these impairment amounts have been disclosed separately in the consolidated statement of pro�t and loss.

Interest capitalisation

During the years ended 31 March 2021 and 31 March 2020, the Company capitalised interest cost of 266 and 674, respectively, with respect to certain qualifying assets. The rate for capitalisation of interest cost for the years ended 31 March 2021 and 31 March 2020 ranged from 3.95% to 4.74% and from 2.04% to 4.60%, respectively.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.4 INTANGIBLE ASSETS UNDER DEVELOPMENT (CONTINUED)

Details of si�ni�cant intan�i�le assets �includin� intan�i�le assets under development� as at 31 �arch 2021:	Details of si�ni�cant intan�i�le assets �includin� intan�i�le assets under development� as at 31 �arch 2021:	Details of si�ni�cant intan�i�le assets �includin� intan�i�le assets under development� as at 31 �arch 2021:
PARTICULARS	ACQUIRED FROM	CARRYING COST
Select portfolio of branded generics business	Wockhardt Limited		14,241
Select portfolio of dermatology, respiratory and pediatric assets	UCB India Private Limited and a�liates		4,568
Intellectual property rights relating to PPC-06	Xenoport, Inc		4,036
Various ANDAs	Teva and an a�liate of Allergan		4,000
Commercialisation rights for an anti-cancer biologic agent	Eisai Company Limited		1,840
Select Anti-Allergy brands	Glenmark Pharmaceuticals Limited		1,487
Habitrol®brand	Novartis Consumer Health Inc.		1,181
OTC product brands	Ducere Pharma LLC		494
ANDAs	Gland Pharma Limited		262
2.5 INVESTMENT IN EQUITY ACCOUNTED INVESTEES PARTICULARS		AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Investment in unquoted equity shares
Equity shares held in Kunshan Rotam Reddy Pharmaceutical Company Limited,	China(1)	3,307	2,714
8,580,000 (31 March 2020: 8,580,000) equity shares of`10/- each of DRES Energy Private Limited, India		68	49
		3,375	2,763

(1) Shares held in Kunshan Rotam Reddy Pharmaceutical Company Limited, China are not denominated in number of shares as per the laws of the country.

Details of the Company's investment in Kunshan Rotam Reddy Pharmaceuticals Company Limited :

Kunshan Rotam Reddy Pharmaceuticals Company Limited (“Reddy Kunshan”) is engaged in manufacturing and marketing of �nished dosages in China. The Company’s interest in Reddy Kunshan was 51.3% as of 31 March 2021 and 31 March 2020. Four directors of the Company are on the board of Reddy Kunshan, which consists of eight directors. Under the terms of the joint venture agreement, all major decisions with respect to operating activities, signi�cant �nancing and other activities are taken by the approval of at least �ve of the eight directors of Reddy Kunshan’s board. As the Company does not control Reddy Kunshan’s board and the other partners have signi�cant participation rights, the Company’s interest in Reddy Kunshan has been accounted for under the equity method of accounting.

Summary �nancial information of Reddy Kunshan, as translated into the reporting currency of the Company and not adjusted for the percentage ownership held by the Company, is as follows:

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AS AT/ AS AT/
PARTICULARS FOR THE YEAR ENDED FOR THE YEAR ENDED
31 MARCH 2021 31 MARCH 2020
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Ownership	51.3%	51.3%
Total current assets	8,778	6,925
Total non-current assets	892	732
Total assets	9,670	7,657
Equity	6,088	4,931
Total current liabilities	3,582	2,726
Total equity and liabilities	9,670	7,657
Revenues	9,017	7,679
Expenses	8,118	6,554
Pro�t for the year	899	1,125
Company’s share of pro�ts for the year	461	577
Carrying value of the Company’s investment	3,307	2,714
Translation adjustment arising out of translation of foreign currency balances	438	306

During the year ended 31 March 2020, the Company recognised an amount of ` 392, representing its share of dividend declared by the equity

accounted investee, Reddy Kunshan. The amount of dividend is adjusted against the carrying amount of investment in the consolidated balance sheet.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.5 INVESTMENT IN EQUITY ACCOUNTED INVESTEES (CONTINUED)

Details of the Company's investment in DRES Energy Private Limited :
PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Carrying value of the Company’s investment	68	49
Company’s share of loss for the year	19	(16)

2.6 FINANCIAL ASSETS

2.6 A. INVESTMENTS

Investments consist of investments in units of mutual funds, market linked debentures, equity securities, bonds, commercial paper, limited liability partnership and term deposits with banks (i.e., certi�cates of deposit having an original maturity period exceeding 3 months).

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AS AT AS AT
PARTICULARS
31 MARCH 2021 31 MARCH 2020
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Investments at FVTOCI
I. Equity instruments
Quoted equityshares(fully paid up)
5,465,693(31 March 2020: 5,465,693)equityshares of US$0.05 each of Curis,Inc.(Refer note 2.33)	4,523	292
25,000(31 March 2020: 58,000)equityshares of`1/- each of State Bank of India	9	11
II. Debt instruments
Investment in market linked debentures	-	1,993
Total investments at FVTOCI (I+II) (A)	4,532	2,296
Investments at FVTPL
I. Investment in unquoted equity shares
8,859 (31 March 2020: 8,859) equity shares of`100/- each of �eedimetla E�uent Treatment	1	1
Limited, India
Ordinaryshares of Biomed Russia Limited,Russia(1)	-	-
200,000(31 March 2020: 200,000)equityshares of`10/- each of Altek EngineeringLimited,India	-	-
24,000 (31 March 2020: 24,000) equity shares of`100/- each of Progressive E�uent Treatment	-	-
Limited,India
20,250 (31 March 2020: 20,250) equity shares of`10/- each of Shivalik Solid Waste Management	-	-
Limited, India(2)
	1	1
II. Investment in unquoted mutual funds	13,263	13,832
III. Investment inpartnership �rms
ABCD Technologies LLP	400	-
Total investments at FVTPL (I+II+III) (B)	13,664	13,833
Investments carried at amortised cost
I. Investment in term deposit with banks(original maturitymore than 3 months)	5,959	5,044
II. Investment in bonds	522	1,851
III. Investment in commercialpaper	-	967
IV. Others	25	24
Total investments carried at amortised cost(C)	6,506	7,886
Total investments(A+B+C)	24,702	24,015

Current	19,744	23,687
Non-current	4,958	328
	24,702	24,015

Aggregate carryingvalue ofquoted investments	4,532	303
Aggregate market value ofquoted investments	4,532	303
Aggregate carryingvalue of unquoted investments	20,170	23,712
Aggregate amount of impairment in value of investment in unquoted equityshares	-	-

(1)

Shares held in Biomed Russia Limited, Russia are not denominated in number of shares as per the laws of the country. Rounded o� to millions.

(2)

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.6 B. TRADE RECEIVABLES

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AS AT AS AT
PARTICULARS
31 MARCH 2021 31 MARCH 2020
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Trade receivables from other parties	49,759	52,012
Receivables from joint ventures (Refer note 2.24)	-	3
	49,759	52,015
Details of security
Considered good, Unsecured	49,948	52,169
Credit impaired	1,107	1,048
	51,055	53,217
Less: Allowance for credit losses	(1,296)	(1,202)
	49,759	52,015

Current	49,641	50,278
Non-current(1)	118	1,737
	49,759	52,015

(1) Represents amounts receivable pursuant to an out-licensing arrangement with a customer. As these amounts are not expected to be realised within twelve months from the end of the reporting date, they are disclosed as non-current.

Pursuant to an arrangement with a bank, the Company sells to the bank certain of its trade receivables forming part of its Global Generics segment, on a non-recourse basis. The receivables sold were mutually agreed upon with the bank after considering the creditworthiness and contractual terms with the customer including any gross to net adjustments due to rebates, discounts etc. from the contracted amounts. As a result, the receivables sold are generally lower than the total net amount of trade receivables. The Company has transferred substantially all the risks and rewards of ownership of such receivables sold to the bank and accordingly, the same are derecognised in the consolidated balance sheet. As on 31 March 2021 and 31 March 2020, the amount of trade receivables de-recognised pursuant to the aforesaid arrangement was 9,254 (US$ 127million) and 9,049 (US$ 120 million), respectively.

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FOR THE YEAR ENDED FOR THE YEAR ENDED
PARTICULARS
31 MARCH 2021 31 MARCH 2020
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Balance at the beginning of the year	1,202	1,172
Provision made during the year, net of reversals	176	154
Trade receivables written o� during the year and e�ect of changes in the foreign	(82)	(124)
exchange rates
Balance at the end of the year	1,296	1,202

2.6 C. OTHER FINANCIAL ASSETS

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AS AT AS AT
PARTICULARS
31 MARCH 2021 31 MARCH 2020
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I.	Non-current assets
	*Considered good, Unsecured*
	Security deposits	666	613
	Other assets	102	180
		768	793
II.	Current assets
	*Considered good, Unsecured*
	Claims receivable	187	1,123
	Other assets(1)	1,671	2,254
		1,858	3,377

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.6 D. CASH AND CASH EQUIVALENTS

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AS AT AS AT
PARTICULARS
31 MARCH 2021 31 MARCH 2020
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Balances with banks
In current accounts	5,442	1,636
In EEFC accounts	8,776	59
In term deposit with banks (original maturities less than 3 months)	384	232
Cash on hand	1	2
Other bank balances
In unclaimed dividend accounts	86	86
In unclaimed fractional share pay order accounts	-	1
In unclaimed debentures and debenture interest account	20	25
LC and Bank guarantee margin money	80	12
Balances in Escrow account pursuant to the Business Transfer Agreement with Wockhardt Limited	40	-
(Refer note 2.40 for details)
Cash and cash equivalents in the consolidated balance sheet	14,829	2,053
Less: Bank overdraft used for cash management purposes (Refer note 2.10 B)	(9)	(91)
Cash and cash equivalents in the consolidated state�ent o� cash �o� �includin� restricted cash�	14,820	1,962
Restricted cash balances included above
Balance in unclaimed dividend and debenture interest account	106	112
Other restricted cash balances	120	12

2.7 OTHER ASSETS

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AS AT AS AT
PARTICULARS
31 MARCH 2021 31 MARCH 2020
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A.	Non-current assets
	*Unsecured, considered good*
	Capital advances	240	158
	Others	66	37
	Dues from joint ventures and other related parties	1	14
		307	209
B.	Current assets
	*Unsecured, considered good*
	Balances and receivables from statutory authorities(1)	7,227	4,445
	Export bene�ts receivable(2)	2,070	2,652
	Prepaid expenses	1,141	950
	Dues from other related parties	17	50
	Others(3)	2,195	2,327
	*Unsecured, considered doubtful*
	Other advances	157	114
		12,807	10,538
	_Less:_Allowance for doubtful advances	(157)	(114)
		12,650	10,424

(1) Balances and receivables from statutory authorities primarily consist of amounts recoverable towards the goods and service tax (“GST”), excise duty, and value added tax and from customs authorities of India.

(2)

Export bene�ts receivables primarily consist of amounts receivable from various government authorities of India towards incentives on export sales made by the �ompany. Others primarily includes advances given to vendors and employees.

(3)

(1) Others primarily includes security deposits, interest accrued but not due on investments and other advances.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.8 INVENTORIES

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AS AT AS AT
PARTICULARS
31 MARCH 2021 31 MARCH 2020
Raw materials (includes in transit 31 March 2021: 139; 31 March 2020: 206) 12,287 10,594
Work-in-progress 10,009 6,806
Finished goods 13,732 8,254
Stock-in-trade 6,097 6,873
Packing material, stores and spares 3,287 2,540
45,412 35,067
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During the year ended 31 March 2021, the Company recorded inventory write-down of 2,521 (31 March 2020 : 3,652) in the consolidated statement of pro�t and loss.

Following the Company’s decision to voluntarily recall all of its ranitidine medications sold in United States, due to con�rmed contamination with N-Nitrosodimethylamine ("NDMA") above levels established by the U.S. FDA, the Company recognised 373 as inventory write downs of ranitidine during the year ended 31 March 2020. Furthermore, an amount of 239 was recognised (as a reduction from revenue) as a provision for refund liabilities arising out of the Company’s recall decision.

2.9 SHARE CAPITAL

PARTICULARS Authorised share capital	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
240,000,000 equity shares of`5/- each (31 March 2020: 240,000,000)	1,200	1,200
Issued equity capital
166,301,431 equity shares of`5/- each fully paid-up (31 March 2020: 166,172,282)	832	831
Subscribed and fully paid-up
166,301,231 equity shares of`5/- each fully paid-up (31 March 2020: 166,172,082)	832	831
_Add:_Forfeited share capital (e)	-	-
	832	831

a) Reconciliation of the equity shares outstanding is set out below:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021 FOR THE YEAR ENDED 31 MARCH 2020
	NO. OF SHARES AMOUNT NO. OF SHARES AMOUNT
Opening number of equity shares/share capital	166,172,082 831 166,065,948 830
Add: Equity shares issued pursuant to employee stock option plan(1)	129,149 1 106,134 1
Closing number of equity shares/share capital	166,301,231 832 166,172,082 831
Treasury shares(2)	575,201 1,967 395,950 1,006

*Rounded o� to millions.

(1) During the years ended 31 March 2021 and 31 March 2020, equity shares were issued as a result of the exercise of vested options granted to employees pursuant to the Dr. Reddy’s Employees Stock Option Plan, 2002 and the Dr. Reddy’s Employees Stock Option Plan, 2007. The options exercised had an exercise price of _5,_ 2,607 or ` 2,814 per share. Upon the exercise of such options, the amount of compensation cost (computed using the grant date fair value) previously recognised in the "share-based payment reserve” was transferred to“securities premium” in the statement of changes in equity.

(2) Pursuant to the special resolution approved by the shareholders in the Annual General Meeting held on 27 July 2018, the Dr. Reddy’s Employees ESOS Trust (the “ESOS Trust”) was formed to support the Dr. Reddy’s Employees Stock Option Scheme, 2018 by acquiring, from the Company or through secondary market acquisitions, equity shares which are used for issuance to eligible employees (as de�ned therein) upon exercise of stock options thereunder. During the year ended 31 March 2021 and 31 March 2020, an aggregate of 85,250 and 1,150 equity shares, respectively were issued as a result of the exercise of vested options granted to employees pursuant to the Dr. Reddy’s Employees Stock Option Scheme, 2018. The options exercised had an exercise price of _2,607 or_ 2,814 per share. Upon the exercise of such options, the amount of compensation cost (computed using the grant date fair value) previously recognised in the “share based payment reserve” was transferred to “securities premium” in the statement of changes in equity. In addition, any di�erence between the carrying amount of treasury shares and the consideration received was recognised in the “securities premium”. As of 31 March 2021 and 31 March 2020, the ESOS Trust had outstanding 575,201 and 395,950 shares, respectively, which it purchased from the secondary market for an aggregate consideration of _1,967 and_ 1,006, respectively. Refer note 2.28 of these �nancial statements for further details on the Dr. Reddy’s Employees Stock Option Scheme, 2018.

b) Terms/rights attached to the equity shares

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.9 SHARE CAPITAL (CONTINUED)

In the event of liquidation of the Company, all preferential amounts, if any, shall be discharged by the Company. The remaining assets of the Company shall be distributed to the holders of equity shares in proportion to the number of shares held to the total equity shares outstanding as on that date.

Final dividends on equity shares (including dividend tax on distribution of such dividends, if any) are recorded as a liability on the date of their approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company’s Board of Directors. The details of dividends paid by the Company are as follows:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Dividend per share (in absolute`)	25	20
Dividend distribution tax on the dividend paid	-	602
Dividend paid during the year	4,147	3,314

At the Company’s Board of Directors’ meeting held on 14 May 2021, the Board proposed a dividend of 25 per share and aggregating to 4,158, which is subject to the approval of the Company’s shareholders.

c) Details of shareholders holding more than 5% shares in the Company

PARTICULARS	AS AT 31 MARCH 2021 AS AT 31 MARCH 2020
	NO. OF SHARES HELD % HOLDING IN THE CLASS NO. OF SHARES HELD % HOLDING IN THE CLASS
Dr. Reddy's Holdings Limited	41,325,300 24.85 41,325,300 24.88
Life Insurance Corporation of India and their associates	1,110,352 0.67 8,468,983 5.10

d) 217,253 (31 March 2020: 232,837) stock options are outstanding and are to be issued by the Company upon exercise of the same in accordance with the terms of exercise under the "Dr. Reddy's Employees Stock Option Plan, 2002", 412,339 (31 March 2020: 354,343) stock options are outstanding and are to be issued by the Company upon exercise of the same in accordance with the terms of exercise under the "Dr. Reddy’s Employees ADR Stock Option Plan, 2007" and 385,930 (31 March 2020: 375,775) stock options are outstanding and are to be issued by the Company upon exercise of the same in accordance with the terms of exercise under the "Dr. Reddy’s Employees Stock Option Scheme, 2018 ". (Refer note 2.28)

e) Represents 200 equity shares of 5/- each, amount paid-up 500/- (rounded o� to millions in the note above) forfeited due to non-payment of allotment money.
f) During the year ended 31 March 2017, the Company bought-back and extinguished 5,077,504 equity shares under the buy-back of equity shares plan approved by the shareholders on 1 April 2016.

Aggregate number of shares bought back during the period of �ve years immediately preceding the reporting date:

PARTICULARS	YEAR ENDED 31 MARCH
	2021 2020 2019 2018 2017

2.10 FINANCIAL LIABILITIES

2.10 A. NON-CURRENT BORROWINGS

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AS AT AS AT
PARTICULARS
31 MARCH 2021 31 MARCH 2020
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*Unsecured*
Long-term loans from banks (a)	-	-
Non-convertible debentures by the APSL subsidiary(1)	3,800	-

*Secured*
Long-term maturities of lease liabilities(2)	2,499	1,304
	6,299	1,304

The Company has only one class of equity shares having a par value of ` 5 per share. For all matters submitted to vote in a shareholders meeting of the Company, every holder of an equity share, as re�ected in the records of the Company as on the record date set for the shareholders meeting, shall have one vote in respect of each share held.

Should the Company declare and pay any dividends, such dividends will be paid in Indian rupees to each holder of equity shares in proportion to the number of shares held to the total equity shares outstanding as on that date. Indian law on foreign exchange governs the remittance of dividends outside India.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.10 B. CURRENT BORROWINGS

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AS AT AS AT
PARTICULARS
31 MARCH 2021 31 MARCH 2020
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From Banks
*Unsecured*
Pre-shipment credit (e & f)	10,300	10,432
Other foreign currency borrowings (e & f)	12,836	6,009
Bank overdraft	9	91
	23,145	16,532

a) Summary of long-term borrowings is as follows:

PARTICULARS	AS AT 31 MARCH 2021 AS AT 31 MARCH 2020
	NON-CURRENT CURRENT NON-CURRENT CURRENT
Foreign currency borrowing(3)	- - - 3,783
Non-convertible debentures	3,800 - - -
Obligations under leases	2,499 864 1,304 483
	6,299 864 1,304 4,266

(1) “APSL subsidiary” refers to Aurigene Pharmaceutical Services Limited.

During the year 31 March 2021, the APSL subsidiary issued non-convertible debentures for ` 3,800. The aforesaid non-convertible debentures are repayable at par after 3 years following the date of issue.

(2) Additions year ended 31 March 2021 include lease liabilities of ` 1,878 relating to a warehousing services agreement in the United States.

(3) During the year ended 31 March 2021, the Company repaid both the long-term borrowings of US$ 50 million.

During the year ended 31 March 2020, the Company repaid both the long-term borrowings of US$ 250 million in the Swiss subsidiary and EUR 42 million in the German Subsidiary.

b) The interest rate pro�les of long-term borrowings (other than obligations under leases) as at 31 March 2021 and 31 March 2020 were as follows:

PARTICULARS	AS AT 31 MARCH 2021 AS AT 31 MARCH 2020
	CURRENCY(1) INTEREST RATE(2) CURRENCY(1) INTEREST RATE(2)
Foreign currency borrowings	- - US$ 1 Month LIBOR + 82.7 bps
	- - EUR 0.81%
Non-convertible debentures	INR 6.77% - -

(1) “US$” means United States dollars and “EUR” means Euros.

(2) “LIBOR” means the London Inter-ban� O�ered Rate.

c) The aggregate maturities of long-term loans and borrowings, based on contractual maturities, as of 31 March 2021:

PARTICULARS	AS AT 31 MARCH 2021
	NON-CONVERTIBLE DEBENTURES OBLIGATIONS UNDER LEASES TOTAL
Maturing in the year ending 31 March
2022	- 864 864
2023	- 802 802
2024	3,800 745 4,545
2025	- 734 734
2026	- 118 118
Thereafter	- 100 100
	3,800 3,363 7,163

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.10 A & B. BORROWINGS (CONTINUED)

d) The aggregate maturities of long-term loans and borrowings, based on contractual maturities, as of 31 March 2020:

PARTICULARS Maturing in the year ending 31 March(1)	FOREIGN CURRENCY LOAN	AS AT 31 MARCH 2020 OBLIGATIONS UNDER LEASES	TOTAL
2021	3,783	483	4,266
2022	-	359	359
2023	-	267	267
2024	-	249	249
2025	-	286	286
Thereafter	-	143	143
	3,783	1,787	5,570

(1)Long-term debt obligations disclosed in the above table do not re�ect any netting of transaction costs amounting to ` 0.

e) Short-term borrowings primarily consist of “pre-shipment credit” drawn by the parent company and other unsecured loans drawn by certain of its subsidiaries in Switzerland, the United States, Russia, Mexico, South Africa, Brazil and Ukraine which are repayable within 6 to 12 months from the date of drawdown.
f) The interest rate pro�le of short-term borrowings from banks is given below:

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AS AT AS AT
PARTICULARS 31 MARCH 2021 31 MARCH 2020
CURRENCY [(1)] INTEREST RATE [(2)] CURRENCY [(1)] INTEREST RATE [(2)]
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Pre-shipment credit	INR	3 Month T-Bill + 30 Bps	INR	1 Month T-Bill + 60 Bps
	INR	5.75%	-	-
	-	-	US$	1 Month LIBOR + 12.5 to 16 bps
Other working capital borrowings	US$	(2.20%) to (1.80%)	US$	1 Month/3 Month LIBOR + 55 to 78 bps
	MXN	TIIE + 1.2%	MXN	TIIE + 1.25%
	RUB	3.00% to 3.40% and 5.55%	RUB	7.05%
	BRL	4.00%	BRL	7.25%
	INR	4.00%	INR	7.75%
	UAH	4.75%	-	-
	-	-	ZAR	1 Month JIBAR + 120 Bps

(1)

“INR” means Indian rupees, “US$” means United States Dollars, “RUB” means Russian roubles, “MXN” means Mexican pesos, “UAH” means Ukrainian hryvnia, “ZAR” means South African rand and "BRL" means Brazilian reals

(2) “LIBOR” means the London Inter-bank O�ered Rate,"�-Bill" means India �reasury Bill, “�II�” means the ��uilibrium Inter-banking Interest Rate (�asa de Inter�s Interbancaria de ��uilibrio) and “JIBAR” means the Johannesburg Interbank Average Rate.

g) The Company had uncommitted lines of credit of 38,766 and 39,374 as of 31 March 2021 and 31 March 2020, respectively, from its banks for working capital requirements. The Company has the right to draw upon these lines of credit based on its working capital requirements. h) Reconciliation of liabilities arising from �nancing activities

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DURING THE YEAR ENDED 31 MARCH 2021
PARTICULARS NON-CURRENT CURRENT
TOTAL
BORROWINGS [(1)] BORROWINGS [(2)]
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Opening balance	5,570	16,441	22,011
Recognition of right-of-use liability during the year	2,393	-	2,393
Payment of principal portion of lease liabilities	(754)	-	(754)
Borrowings made during the year	3,800	44,469	48,269
Borrowings repaid during the year	(3,743)	(37,678)	(41,421)
E�ect of changes in foreign exchange rates	(103)	(96)	(199)
Closing balance	7,163	23,136	30,299

(1) Includes current portion

(2) Does not include movement in bank overdraft

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.10 A & B. BORROWINGS (CONTINUED)

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DURING THE YEAR ENDED 31 MARCH 2020
PARTICULARS NON-CURRENT CURRENT
TOTAL
BORROWINGS [(1)] BORROWINGS [(2)]
----- End of picture text -----

Opening balance	26,256	12,125	38,381
Recognition of right-of-use liability on initial application of Ind AS 116	1,335	-	1,335
Recognition of right-of-use liability during the year	238	-	238
Payment of principal portion of lease liabilities	(482)	-	(482)
Borrowings made during the year	-	29,855	29,855
Borrowings repaid during the year	(22,918)	(25,620)	(48,538)
E�ect of changes in foreign exchange rates	1,051	81	1,132
Others	90	-	90
Closing balance	5,570	16,441	22,011

(1) Includes current portion.

(2) Does not include movement in bank overdraft.

2.10 C. OTHER FINANCIAL LIABILITIES

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AS AT AS AT
PARTICULARS
31 MARCH 2021 31 MARCH 2020
C��
Current maturities of long-term debt - 3,783
Current maturities of lease liabilities 864 483
Due to capital creditors 3,807 1,411
Interest accrued but not due on loans 94 30
Accrued expenses 17,729 18,024
Trade and security deposits received 178 172
Unclaimed dividends, debentures and debenture interest [(1)] 106 111
Others 1,503 2,992
24,281 27,006
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(1) Unclaimed amounts are transferred to Investor Protection and Education Fund after seven years from the due date.

2.10 D. TRADE PAYABLES

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Due to micro, small and medium enterprises	158	55
Others	17,951	15,193
	18,109	15,248

For details regarding the Company’s exposure to currency and liquidity risks, see note no. 2.31 of these consolidated �nancial statements�under “Liquidity risk”.

Trade payables and other �nancial liabilities includes amount due to related party 93 and 91 as on 31 March 2021 and 31 March 2020, see note no. 2.24 of these consolidated �nancial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.11 PROVISIONS

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AS AT AS AT
PARTICULARS
31 MARCH 2021 31 MARCH 2020
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A. Non-currentprovisions
Provision for employee bene�ts(Refer note 2�27)
Longservice award bene�tplan	58	52
Pension,seniorityand severance indemnity plans	153	113
Compensated absences	239	526
Otherprovisions(a)	58	54
	508	745
B. Currentprovisions
Provision for employee bene�ts(Refer note 2�27)
Gratuity	656	197
Longservice award bene�tplan	16	14
Pension,seniorityand severance indemnity plans	17	23
Compensated absences	891	635
Otherprovisions(a)
Refund liability	2,824	3,252
Others	611	548
	5,015	4,669

a) Details of changes in other provisions during the year ended 31 March 2021 are as follows:

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REFUND ENVIRONMENTAL LEGAL AND
PARTICULARS TOTAL
LIABILITY [(1)] LIABILITY [(2)] OTHERS [(3)]
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Balance at the beginning of the year	3,252	54	548	3,854
Provision made during the year, net of reversals	2,934		63	2,997
Provision used during the year	(3,309)		-	(3,309)
��ect of changes in foreign exchange rates	(53)	4	-	(49)
Balance at end of the year	2,824	58	611	3,493

Current	2,824	-	611	3,435
Non- current	-	58	-	58
	2,824	58	611	3,493

(1) Refund liability is accounted for by recording a provision based on the Company’s estimate of expected sales returns. See note 1.3 (m) of these consolidated �nancial statements for the Company’s accounting policy on refund liability.

(2) As a result of the acquisition of a unit of The Dow Chemical Company in April 2008, the Company assumed a liability for contamination of the �ir�eld site acquired of _39 (carrying value_ 58). The seller is required to indemnify the Company for this liability. Accordingly, a corresponding asset has also been recorded in the consolidated balance sheet.

(3) Primarily consists of provision recorded towards the potential liability arising out of a litigation relating to cardiovascular and anti-diabetic formulations. Refer note 2.32 of these consolidated �nancial statements under �Product and patent related matters - �atters relating to �ational Pharmaceutical Pricing Authority - �itigation relating to Cardiovascular and Anti-diabetic formulations” for further details.

2.12 OTHER LIABILITIES

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AS AT AS AT
PARTICULARS
31 MARCH 2021 31 MARCH 2020
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A.	Non-current liabilities
	Deferred revenue(1)	1,531	1,956
	Other non-current liabilities	86	99
		1,617	2,055
B.	Current liabilities
	Salaryand bonuspayable	3,576	3,385
	Statutoryduespayable	2,968	980
	Deferred revenue(1)	1,052	1,242
	Advance from customers	981	668
	Others	197	237
		8,774	6,512

(1) Refer note 2.13 for details of deferred revenue.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.13 REVENUE FROM CONTRACTS WITH CUSTOMERS AND TRADE RECEIVABLES

Revenue from contracts with customers:

PARTICULARS FOR THE YEAR ENDED 31 MARCH 2021 FOR THE YEAR ENDED 31 MARCH 2020
Sales 184,202 163,574
Service income 4,105 2,409
License fees(1) 1,415 8,617
189,722 174,600

(1) During the year ended 31 March 2020, the Company entered into a de�niti�e agreement with Upsher-Smith La�oratories, LLC for the sale of its US and select territory rights for ZEMBRACE[®] SYMTOUCH[®] (sumatriptan injection) 3 mg and TOSYMRA[®] (sumatriptan nasal spray) 10 mg, (formerly referred to as “DFN-02”) which formed part of its Proprietary Products segment. License fees includes an amount of ` 7,486 (US$ 108.7 million) towards the aforesaid sale transaction.

Analysis of revenues by segments:

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.13 REVENUE FROM CONTRACTS WITH CUSTOMERS AND TRADE RECEIVABLES (CONTINUED)

Analysis of revenues by geography:

The following table shows the distribution of the Company’s revenues (excluding other operating income) by country, based on the location of the customers:

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FOR THE YEAR ENDED FOR THE YEAR ENDED
PARTICULARS
31 MARCH 2021 31 MARCH 2020
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India	36,252	32,089
United States	76,702	76,028
Russia	15,816	16,900
Others	60,952	49,583
	189,722	174,600

The following table shows the analysis of revenues (excluding other operating income) by segments:

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FOR THE YEAR ENDED FOR THE YEAR ENDED
PARTICULARS
31 MARCH 2021 31 MARCH 2020
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Global Generics	154,404	138,123
PSAI	31,982	25,747
Proprietary products	523	7,949
Others	2,813	2,781
	189,722	174,600

Analysis of revenues within the Global Generics segment:

An analysis of revenues (excluding other operating income) by therapeutic areas in the Company’s Global Generics segment is given below:

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FOR THE YEAR ENDED FOR THE YEAR ENDED
PARTICULARS
31 MARCH 2021 31 MARCH 2020
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Nervous System	29,040	26,825
Gastrointestinal	21,132	19,394
Oncology	16,842	18,245
Pain Management	15,531	13,808
Cardiovascular	15,460	14,729
Anti-Infective	12,906	9,402
Respiratory	11,089	10,433
Others	32,404	25,287
	154,404	138,123

Analysis of revenues within the PSAI segment:

An analysis of revenues (excluding other operating income) by therapeutic areas in the Company’s PSAI segment is given below:

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FOR THE YEAR ENDED FOR THE YEAR ENDED
PARTICULARS
31 MARCH 2021 31 MARCH 2020
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Cardiovascular	9,834	8,567
Pain Management	4,657	5,073
Anti-Infective	4,126	2,264
Nervous System	2,704	2,797
Oncology	2,385	1,798
Dermatology	768	1,370
Others	7,508	3,878
	31,982	25,747

Information about major customers

Revenues from two customers of the Company's Global Generics segment were 19,341 and 9,867, representing approximately 10% and 5% respectively, of the Company’s total revenues for the year ended 31 March 2021.

Revenues from two customers of the Company's Global Generics segment were 14,164 and 9,267, representing approximately 8% and 5% respectively, of the Company’s total revenues for the year ended 31 March 2020.

�etails of signi�cant gross to net a�justments relating to �ompany�s �orth America �enerics business �amounts in �� millions� A roll-forward for each major accrual for the Company’s North America Generics business for the �nancial years ended 31 March 2021 and 31 March 2020 is as follows:

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All values in US$ millions
PARTICULARS CHARGEBACKS REBATES MEDICAID REFUND LIABILITY
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Balance as at 1 April 2019	128	92	11	30
Current provisions relating to sales during the year(1)	1,468	319	20	21
Provisions and adjustments relating to sales in prior years	*	-	-	-
Credits and payments**	(1,440)	(331)	(20)	(27)
Balance as at 31 March 2020	156	80	11	24
Balance as at 1 April 2020	156	80	11	24
Current provisions relating to sales during the year(2)	1,702	245	21	15
Provisions and adjustments relating to sales in prior years	*	-	-	-
Credits and payments**	(1,656)	(247)	(19)	(20)
Balance as at 31 March 2021	202	78	13	19

Currently, the Company does not separately track provisions and adjustments, in each case to the extent relating to prior years for chargebacks. However, the adjustments are expected to be non-material. The volumes used to calculate the closing balance of chargebacks represent approximately 1.3 months equivalent of sales, which corresponds to the pending chargeback claims yet to be processed.

** Currently, the Company does not separately track the credits and payments, in each case to the extent relating to prior years for chargebacks, rebates, medicaid payments or refund liability.

(1) Chargebacks provisions for the year ended 31 March 2020 were higher compared to the year ended 31 March 2019, primarily as a result of higher sales volumes, which were partially o�set due to a lower pricing rates per unit for chargebacks. Such lower pricing was primarily on account of a reduction in the invoice price to wholesalers for certain of the Company’s products. The chargebacks payments for the year ended 31 March 2020 were lower compared to the year ended 31 March 2019, primarily as a result of higher pending chargebacks claims at 31 March 2020 as compared to 31 March 2019. The rebates provisions and the payments for the year ended 31 March 2020 were each lower as compared to the year ended 31 March 2019, primarily as a result of lower pricing rates per unit for rebates due to a reduction in the invoice price to wholesalers for certain of the Company’s products which were partially o�set by higher sales volumes during the year ended 31 March 2020 as compared to the year ended 31 March 2019.

(2) Charge backs provisions and payments for the year ended 31 March 2021 were each higher as compared to the year ended 31 March 2020, primarily as a result of higher sales volumes and also due to higher pricing rates per unit for chargebacks, due to reduction in the contract prices through which the product is resold in the retail part of the supply chain for certain of the Company’s products. The rebates provisions and payments for the year ended 31 March 2021 were each lower as compared to the year ended 31 March 2020, primarily as a result of lower pricing rates per unit for rebates, due to a reduction in the invoice price to wholesalers for certain of the Company’s products and also due to reduction in the contract prices through which the product is resold in the retail part of the supply chain for certain of the Company’s products, which were partially o�-set by higher sales volumes during the year ended 31 March 2021 as compared to the year ended 31 March 2020.

The Company’s overall refund liability as of 31 March 2021 relating to its North America Generics business was US$ 19 million, as compared to a liability of US$ 24 million as at 31 March 2020. This decrease in the Company's liability was primarily attributable to a lower refund liability allowance for the year ended 31 March 2021 as compared to the year ended 31 March 2020. Such allowance change was primarily due to certain product mix changes and recent trends in actual sales returns, together with the Company's historical experience, and also the price reduction for certain products resulting into lower refund liability to be carried.

The estimates of “gross-to-net” adjustments for the Company’s operations in India and other countries outside of the United States relate mainly to refund liability in all such operations, and certain rebates to healthcare insurance providers are speci�c to the Company’s German operations. The pattern of such refund liability is generally consistent with the Company’s gross sales. In Germany, the rebates to healthcare insurance providers mentioned above are contractually �xed in nature and do not involve signi�cant estimations by the Company.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.13 REVENUE FROM CONTRACTS WITH CUSTOMERS AND TRADE RECEIVABLES (CONTINUED)

Details of refund liabilities:

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FOR THE YEAR ENDED FOR THE YEAR ENDED
PARTICULARS
31 MARCH 2021 31 MARCH 2020
Balance at the beginning of the year 3,252 3,581
Provision made during the year, net of reversals 2,934 2,675
Provision used during the year (3,309) (3,224)
E�ect of changes in foreign exchange rates (53) 220
Balance at end of the year 2,824 3,252
Current 2,824 3,252
Non-current - -
2,824 3,252
----- End of picture text -----

Details of contract asset:

As mentioned in the accounting policies for refund liability set forth in note 1.3 (m) of these consolidated �nancial statements, the Company recognises an asset, (i.e., the right to the returned goods), which is included in inventories for the products expected to be returned. The Company initially measures this asset at the former carrying amount of the inventory, less any expected costs to recover the goods, including any potential decreases in the value of the returned goods. Along with re-measuring the refund liability at the end of each reporting period, the Company updates the measurement of the asset recorded for any revisions to its expected level of returns, as well as any additional decreases in the value of the returned products.

As on 31 March 2021 and 31 March 2020, the Company had 37 and 23, respectively, as contract assets representing the right to returned goods.

Details of deferred revenue:

Tabulated below is the reconciliation of deferred revenue for the years ended 31 March 2021 and 31 March 2020:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Balance at the beginning of the year	3,198	2,592
Revenue recognised during the year	(1,089)	(1,250)
Milestone payment received during the year	474	1,856
Balance at end of the year	2,583	3,198
Current	1,052	1,242
Non-current	1,531	1,956
	2,583	3,198
Details of contract liabilities:
PARTICULARS Advance from customers	AS AT 31 MARCH 2021 981	AS AT 31 MARCH 2020 668
	981	668

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2.14 OTHER OPERATING INCOME
----- End of picture text -----

PARTICULARS FOR THE YEAR ENDED 31 MARCH 2021 FOR THE YEAR ENDED 31 MARCH 2020
Sale of spent chemicals 270 306
Scrap sales 142 167
Miscellaneous income, net 341 97
753 570

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.15 OTHER INCOME

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FOR THE YEAR ENDED FOR THE YEAR ENDED
PARTICULARS
31 MARCH 2021 31 MARCH 2020
----- End of picture text -----

Interest income	826	888
Fair value gain on �nancial instruments measured at fair value through pro�t or loss	557	929
Foreign exchange gain, net	1,243	629
Miscellaneous income, net(1)	288	3,760
	2,914	6,206

(1) Miscellaneous income, net includes ` 3,457 (US$50 millions) received from Celgene pursuant to a settlement agreement entered into in April 2019. The agreement e�ectively settles any claim the Company or its a�liates may have had for damages under section � of the Canadian �atented Medicines (�otice of Compliance) Regulations in regard to the Company�s A�DS for a generic version of REVLIMID[®] brand capsules (Lenalidomide) pending before Health Canada.

2.16 CHANGES IN INVENTORIES OF FINISHED GOODS, WORK-IN-PROGRESS AND STOCK-IN-TRADE

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FOR THE YEAR ENDED FOR THE YEAR ENDED
PARTICULARS
31 MARCH 2021 31 MARCH 2020
Opening
Work-in-progress 6,806 7,201
Finished goods 8,254 7,127
Stock-in-trade 6,873 21,933 7,842 22,170
Closing
Work-in-progress 10,009 6,806
Finished goods 13,732 8,254
Stock-in-trade 6,097 29,838 6,873 21,933
(7,905) 237
2.17 EMPLOYEE BENEFITS EXPENSE
FOR THE YEAR ENDED FOR THE YEAR ENDED
PARTICULARS
31 MARCH 2021 31 MARCH 2020
Salaries, wages and bonus 30,407 28,563
Contribution to provident and other funds 2,599 2,504
Sta� welfare expenses 2,552 2,120
Share-based payment expenses 741 615
36,299 33,802
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2.18 DEPRECIATION AND AMORTISATION EXPENSE

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Depreciation of property, plant and equipment	8,510	8,624
Amortisation of other intangible assets	3,778	3,007
	12,288	11,631
2.19 FINANCE COSTS
PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Interest on long-term borrowings	94	282
Interest on other borrowings	876	701
	970	983

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.20 SELLING AND OTHER EXPENSES

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FOR THE YEAR ENDED FOR THE YEAR ENDED
PARTICULARS
31 MARCH 2021 31 MARCH 2020
----- End of picture text -----

Consumption of stores, spares and other materials	5,852	5,512
Clinical trials and other R&D expenses	6,561	5,837
Advertisements	1,637	1,386
Commission on sales	453	227
Carriage outward	5,871	3,849
Other selling expenses	7,716	8,621
Legal and professional	5,095	4,219
Power and fuel	3,205	3,148
Repairs and maintenance
Buildings	228	259
Plant and equipment	944	809
Others	2,159	2,037
Insurance	676	494
Travel and conveyance	995	1,648
Rent	271	260
Rates and taxes	1,160	1,012
Loss on sale / disposal of property, plant and equipment and other intangible assets, net	42	67
Corporate social responsibility and donations(1)	504	459
Allowance for credit losses, net (Refer note 2.6 B)	176	154
Allowance for doubtful advances, net	54	36
Non-Executive Directors’ remuneration	91	108
Auditors’ remuneration (Refer note 2.22)	18	18
Other general expenses	4,212	4,193
	47,920	44,353

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.22 AUDITORS' REMUNERATION

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Audit fees	��	��
Other charges- Certi�cation fee	�	�
Reimbursement of out of pocket expenses	�	�
	��	��

2.23 EARNINGS PER SHARE (EPS)

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Earnings	��	��
Pro�t attributable to equity shareholders of the Company
Shares
Number of equity shares at the beginning of the year (excluding treasury shares)	��	��
��ect of treasury shares held during the year	(��)	(��)
��ect of equity shares issued on exercise of stock options	��	��
Weighted average number of equity shares – Basic	��	��
(1) Dilutive e�ect of stock options outstanding	��	��
Weighted average number of equity shares – Diluted	��	��
Earnings per share of par value₹ 5/- – Basic (₹ )	��	��
Earnings per share of par value₹ 5/- – Diluted (₹ )	��	��

(1) As at 31 March 2021 and 31 March 2020, 235,460 and 475,575 options, respectively, were excluded from the diluted weighted average number of equity shares calculation because their e�ect would have been anti�dilutive. �he average mar�et value of the �ompany�s shares for the purpose of calculating the dilutive e�ect of stoc� options was based on quoted mar�et prices for the year during which the options were outstanding.

(1) Details of corporate social responsibility expenditure in accordance with section 135 of the Companies Act, 2013:

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PARTICULARS IN CASH YET TO BE PAID IN CASH TOTAL
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Gross amount required to be spent by the Company during the year			356
Amount spent during the year ending on 31 March 2021	377	-*	377
Amount spent during the year ending on 31 March 2020	285	-*	285

* Rounded o� to million�

2.21 RESEARCH AND DEVELOPMENT EXPENSES

Details of research and development expenses (excluding depreciation and amortisation expense) incurred during the year and included under various heads of expenditures are given below:

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FOR THE YEAR ENDED FOR THE YEAR ENDED
PARTICULARS
31 MARCH 2021 31 MARCH 2020
----- End of picture text -----

Employee bene�ts expense (included in note 2.17)	4,708	4,781
Other expenses (included in note 2.20)
Materials and consumables	4,199	4,078
Clinical trials and other R&D expenses	6,561	5,837
	15,468	14,696

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.24 RELATED PARTIES

a) In accordance with the provisions of Ind AS 24, Related Party Disclosures and the Companies Act, 2013, Company's Directors, members of the Company's Management Council and Company Secretary are considered as Key Managerial Personnel.

List of Key Managerial Personnel of the Company is as below:

1.	K Satish Reddy	Whole-time director (Chairman)
2.	G V Prasad	Whole-time director (Co-Chairman and Managing Director)
3.	Allan Oberman	Independent director
4.	Bharat Narotam Doshi	Independent director
5.	Dr. Bruce LA Carter	Independent director
6.	Kalpana Morparia	Independent director
7.	Leo Puri	Independent director
8.	Prasad R Menon	Independent director
9.	Shikha Sharma	Independent director
10.	Sridar Iyengar	Independent director
11.	Dr. Omkar Goswami(till 30 July2019)	Independent director
12.	Anupam Puri(till 26 July2019)	Independent director
13.	Anil Namboodiripad	Management council member
14.	Archana Bhaskar	Management council member
15.	Deepak Sapra	Management council member
16.	Erez Israeli	CEO and management council member
17.	M V Ramana	Management council member
18.	Marc Kikuchi	Management council member
19.	P Yugandhar	Management council member
20.	SanjaySharma	Management council member
21.	Saumen Chakraborty	Management council member
22.	Sauri Gudlavalleti	Management council member
23.	Patrick Aghanian(from 7 October 2019)	Management council member
24.	Mukesh Rathi(from 1 December 2020)	Management council member
25.	ParagAgarwal(from 1 December 2020)	Management council member
26.	Ganadhish Kamat(till 31 March 2021)	Management council member
27.	Dr. Raymond de Vre(till 31 March 2021)	Management council member
28.	SandeepPoddar	Company secretary

b) List of related parties with whom transactions have taken place during the current and/or previous year:

1.	K Samrajyam	Mother of Chairman
2.	K Deepti Reddy	Spouse of Chairman
3.	G Anuradha	Spouse of Co-chairman
4.	G Mallika Reddy	Daughter of Co-chairman
5.	G V Sanjana Reddy	Daughter of Co-chairman
6.	Akhil Ravi	Son-in-law of Co-chairman
7.	Kunshan Rotam Reddy Pharmaceuticals	Enterprise over which the Company exercises joint control with other
	Company Limited	joint venture partners and holds 51.33% of equity shares
8.	DRES Energy Private Limited	Enterprise over which the Company exercises joint control with other
		joint venture partners and holds 26% of equity shares
9.	Araku Originals Private Limited	Enterprise over which whole-time directors have signi�cant in�uence
10.	AverQ Inc.,USA	Enterprise over which KeyManagerial Personnel have signi�cant in�uence
11.	Cancelled Plans LLP	Enterprise over which relatives of whole-time directors have signi�cant in�uence
12.	CERG AdvisoryPrivate Limited	Enterprise controlled by (erstwhile)KeyManagerial Personnel(till 30 July2019)
13.	Dr. Reddy’s Foundation	Enterprise over which whole-time directors and their relatives have signi�cant in�uence
14.	Dr. Reddy's Institute of Life Sciences	Enterprise over which whole-time directors have signi�cant in�uence
15.	Green Park HospitalityServices Private Limited	Enterprise controlled byrelative of a whole-time director
16.	Green Park Hotels and Resorts Limited	Enterprise controlled byrelative of a whole-time director
17.	Indus Projects Private Limited	Enterprise over which relatives of whole-time directors have signi�cant in�uence
18.	Pudami Educational Society	Enterprise over which whole-time directors and their relatives have signi�cant in�uence
19.	Samarjita Management ConsultancyPrivate Limited	Enterprise controlled byKeyManagerial Personnel
20.	Shravya Publications Pvt. Ltd.	Enterprise over which whole-time directors and their relatives have signi�cant in�uence
21.	Stamlo Industries Limited	Enterprise controlled bywhole-time directors

Further, the Company contributes to the Dr. Reddy's Laboratories Gratuity Fund, which maintains the plan assets of the Company's Gratuity Plan for the bene�t of its employees. Refer note 2.27 of these consolidated �nancial statements for information on transactions between the Company and the Gratuity Fund.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.24 RELATED PARTIES (CONTINUED)

c) The following is a summary of signi�can� rela�e� �ar�y �ransac�ions�

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Research and developmentservices received
Dr.Reddy’sInstitute of Life Sciences	��	��

Research and developmentservices provided
Kunshan Rotam ReddyPharmaceuticals CompanyLimited	��	��

Contributions towards social development
Dr.Reddy’sFoundation	��	��
Pudami EducationalSociety	��	��
Total	��	��

Catering services
Green Park Hospitality ServicesPrivateLimited	��	��

Facility managementservices
Green Park Hospitality ServicesPrivateLimited	��	��

Hotel expenses
Green Park Hoteland ResortsLimited	�	��
StamloIndustriesLimited	�	�
Total	�	��

Civil works
IndusProjectsPrivateLimited	��	��

Professional consulting services
Samarjita Management ConsultancyPrivate Limited	��	-
AverQInc.	�	�
Others	-*	�
	��	�
*Rounded o� to millions.

Sales ofgoods
Kunshan Rotam ReddyPharmaceuticals CompanyLimited	��	��

Lease rentalspaid to
Key Managerial Personnel
K Satish Reddy	��	��
Relatives of Key Managerial Personnel	��	��
Total	��	��

Lease rentals received
DRES EnergyPrivate Limited	�	�

Purchase of Solarpower
DRES EnergyPrivate Limited	��	��

Salaries to relatives of Key Managerial Personnel	�	�

Other services received (Rounded o� to millions)	-*	-*

Remuneration to Key Managerial Personnel
(1) Salaries and other bene�ts	��	��
Contributions to de�ned contributionplans	��	��
Commission to directors	��	��
Share-basedpayments expense	��	��
Total	��	��

(1)

Some of the Key Managerial Personnel of the Company are also covered under the Company's Gratuity Plan along with the other employees of the Company. Proportionate amounts of gratuity accrued under the Company's Gratuity Plan have not been separately computed or included in the above disclosure.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.24 RELATED PARTIES (CONTINUED)

d) The Company has the following amounts due from/ to related parties:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Due from related parties
Key Managerial Personnel (towards rent deposits)	�	�
Kunshan Rotam Reddy Pharmaceuticals Company Limited	��	�
Green Park Hospitality Services Private Limited	��	��
DRES Energy Private Limited	�	��
Others	-	�
Total	��	��

Due to related parties
Green Park Hospitality Services Private Limited	��	��
Dr. Reddy's Institute of Life Sciences	��	-
Indus Projects Private Limited	��	��
DRES Energy Private Limited	�	��
Others	�	-*
Total	��	��

*R��

2.25 SEGMENT REPORTING

The Chief Operating Decision Maker (“CODM”) evaluates the Company’s performance and allocates resources based on an analysis of various performance indicators by operating segments. The CODM reviews revenue and gross pro�t as the performance indicator for all of the operating segments, and does not review the total assets and liabilities of an operating segment. The Co-Chairman and Managing Director was previously the CODM of the Company. Pursuant to certain organisational changes, e�ective � December ��, the o�ce of Chief Executive O�cer (“CEO”) assumed the authority and responsibility for making decisions about resources to be allocated to various segments and assessing their performance. Consequently, the CEO is currently the CODM of the Company.

The Company’s reportable operating segments are as follows:

Ÿ Global Generics;

Ÿ Pharmaceutical Services and Active Ingredients (“PSAI”);

Ÿ Proprietary Products; and

Ÿ Others

Global Generics: This segment consists of the Company’s business of manufacturing and marketing prescription and over-the-counter �nished pharmaceutical products ready for consumption by the patient, marketed under a brand name (branded formulations) or as generic �nished dosages with therapeutic equivalence to branded formulations (generics). This segment includes the operations of the Company’s biologics business.

Pharmaceutical Services and Active Ingredients: This segment primarily consists of the Company’s business of manufacturing and marketing active pharmaceutical ingredients and intermediates, also known as “API”, which are the principal ingredients for �nished pharmaceutical products. Active pharmaceutical ingredients and intermediates become �nished pharmaceutical products when the dosages are �xed in a form ready for human consumption such as a tablet, capsule or liquid using additional inactive ingredients. This segment also includes the Company’s contract research services business and the manufacture and sale of active pharmaceutical ingredients and steroids in accordance with the speci�c customer requirements.

Proprietary Products: This segment consists of the Company’s business that focuses on the research and development of di�erentiated formulations. The segment is expected to earn revenues arising out of monetisation of such assets and subsequent royalties, if any.

Others: This segment consists of the operations of the Company’s wholly-owned subsidiary, Aurigene Discovery Technologies Limited (“ADTL”), a discovery stage biotechnology company developing novel and best-in-class therapies in the �elds of oncology and in�ammation ADTL works with established pharmaceutical and biotechnology companies through customised models of drug-discovery collaborations.

The measurement of each segment’s revenues, expenses and assets is consistent with the accounting policies that are used in preparation of the Company’s consolidated �nancial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.25 SEGMENT REPORTING (CONTINUED)

Segment information:

REPORTABLE SEGMENTS	TOTAL PSAI PROPRIETARY PRODUCTS OTHERS GLOBAL GENERICS FOR THE YEAR ENDED 31 MARCH 2021
Revenue from operations	�� �� �� �� ��
(1) _Less:_Inter-segment revenue	(��) - - (��) -
Revenue from operations	�� �� �� �� ��
Grosspro�t	�� �� �� �� ��
_Less:_Sellingand other unallocable expense/(income),net	��
Pro�t �efore ta� an� �efore s�are of e�uit� accounte� investees	��
_Add:_Share ofpro�t of e�uityaccounted investees	��
Pro�t �efore ta�	��
Tax expense	��
Pro�t for t�e�ear	��

REPORTABLE SEGMENTS	TOTAL PSAI PROPRIETARY PRODUCTS OTHERS GLOBAL GENERICS FOR THE YEAR ENDED 31 MARCH 2020
Revenue from operations	�� �� �� �� ��
(1) _Less:_Inter-segment revenue	(��) - - (��) -
Revenue from operations	�� �� �� �� ��
Grosspro�t	�� �� �� �� ��
_Less:_Sellingand other unallocable expense/(income),net	��
Pro�t �efore ta� an� �efore s�are of e�uit� accounte� investees	��
_Add:_Share ofpro�t of e�uityaccounted investees	��
Pro�t �efore ta�	��
Tax expense	(��)
Pro�t for t�e�ear	��
(1) Inter-segment revenue represents sale from PSAI to Global Generics at cost. Analysis of revenues within the Global Generics segment: An analysis of revenues (excluding other operating income) by therapeutic areas in the Company's Global Generics segment is given below:
PARTICULARS FOR THE YEAR ENDED 31 MARCH 2021 FOR THE YEAR ENDED 31 MARCH 2020
Nervous System �� ��
Gastrointestinal �� ��
Oncology �� ��
Pain Management �� ��
Cardiovascular �� ��
Anti-Infective �� ��
Respiratory �� ��
Others �� ��
Total �� ��

Analysis of revenues within the PSAI segment:

An analysis of revenues (excluding other operating income) by therapeutic areas in the Company's PSAI segment is given below:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Cardiovascular	��	��
Pain Management	��	��
Anti-Infective	��	��
Nervous System	��	��
Oncology	��	��
Dermatology	��	��
Others	��	��
Total	��	��

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.25 SEGMENT REPORTING (CONTINUED)

Analysis of revenues by geography:

The following table shows the distribution of the Company's revenues (excluding other operating income) by country, based on the location of the customers:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
India	��	��
United States	��	��
Russia	��	��
(1) Others	��	��
Total	��	��

(1) Others include Germany, the United Kingdom, Ukraine, China, Canada and other countries across the world.

Analysis of assets by geography:

The following table shows the distribution of the Company's non-current assets (other than �nancial instruments and deferred tax assets) by country, based on the location of assets:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
India	��	��
Switzerland	��	��
United States	��	��
Germany	��	��
Others	��	��
Total	��	��

The following table shows the distribution of the Company's property, plant and equipment including capital work in progress and intangible assets acquired during the year (other than goodwill arising on business combination) by country, based on the location of assets:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
India	��	��
Switzerland	��	��
United States	��	��
Others	��	��
Total	��	��

Analysis of depreciation and amortisation, for arri�in� �ross pro�t by reportable se�ments�

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Global Generics	��	��
PSAI	��	��
Others	��	��
Total	��	��

Information about major customers

Revenues from two customers of the Company's Global Generics segment were 19,341 and 9,867, representing approximately 10% and 5%, respectively, of the Company’s total revenues for the year ended 31 March 2021.

Revenues from two customers of the Company's Global Generics segment were 14,164 and 9,267, representing approximately 8% and 5%, respectively, of the Company’s total revenues for the year ended 31 March 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.26 DESCRIPTION OF THE GROUP

A. Subsidiaries, step-down subsidiaries, joint ventures and other consolidating entities of the parent company are listed below:

ENTITY	COUNTRY OF INCORPORATION	% OF DIRECT/INDIRECT OWNERSHIP INTEREST
Subsidiaries
Aurigene DiscoveryTechnologies Limited	India	100
Cheminor Investments Limited	India	100
Dr. Reddy’s Bio-Sciences Limited	India	100
Dr. Reddy’s Formulations Limited(incorporated e�ective 11 March 2021)	India	100
Dr. Reddy’s Farmaceutica Do Brasil Ltda.	Brazil	100
Dr. Reddy's Laboratories SA	Switzerland	100
Idea2Enterprises(India)Private Limited	India	100
Imperial Credit Private Limited	India	100
Industrias Quimicas Falcon de Mexico,S.A.de C.V.	Mexico	100
ReddyAntilles N.V.(Liquidated duringtheyear ended 31 March 2020)	Netherlands	100
Svaas Wellness Limited(Formerlyknown as Regkinetics Services Limited)	India	100

Step-down subsidiaries
Aurigene DiscoveryTechnologies(Malaysia)SDN BHD	Malaysia	(3) 100
Aurigene DiscoveryTechnologies Inc.	USA	(3) 100
Aurigene Pharmaceutical Services Limited,India(from 16 September 2019)	India	(3) 100
beta Institutgemeinnützige GmbH	Germany	(8) 100
betapharm Arzneimittel GmbH	Germany	(8) 100
Chirotech TechnologyLimited	United Kingdom	(2) (5) 100
DRL Impex Limited	India	(15) 100
Dr. Reddy’s Laboratories(Australia)Pty. Limited	Australia	(10) 100
Dr. Reddy’s(Beijing)Pharmaceutical Co. Limited(incorporated e�ective 19 August 2020)	China	(10) 100
Dr. Reddy’s Laboratories B.V.(FormerlyEurobridge ConsultingB.V.)	Netherlands	(12) 100
Dr. Reddy’s Laboratories Canada,Inc.	Canada	(10) 100
Dr. Reddy's Laboratories Chile SPA.	Chile	(10) 100
Dr. Reddy’s Laboratories(EU)Limited	United Kingdom	(10) 100
Dr. Reddy’s Laboratories Inc.	USA	(10) 100
Dr. Reddy’s Laboratories International SA	Switzerland	(10) 100
(merged with Dr. Reddy's Laboratories SA w.e.f 24 June 2019)
Dr. Reddy's Laboratories Japan KK	Japan	(10) 100
Dr. Reddy’s Laboratories Kazakhstan LLP	Kazakhstan	(10) 100
Dr. Reddy’s Laboratories LLC	Ukraine	(10) 100
Dr. Reddy's Laboratories Louisiana LLC	USA	(6) 100
Dr. Reddy’s Laboratories Malaysia Sdn. Bhd.	Malaysia	(10) 100
Dr. Reddy’s Laboratories New York, Inc. (transfer of ownership from DRL Swiss to DRL Inc.	USA	(6) 100
e�ective 29 October 2020 and conversion from Inc. to LLC e�ective 30 October 2020
Dr. Reddy's Laboratories Philippines Inc.	Philippines	(10) 100
Dr. Reddy’s Laboratories(Proprietary)Limited	South Africa	(10) 100
Dr. Reddy's Laboratories Romania S.R.L.	Romania	(10) 100
Dr. Reddy's Laboratories SAS	Colombia	(10) 100
Dr. Reddy's Laboratories Taiwan Limited	Taiwan	(10) 100
Dr. Reddy's Laboratories(Thailand)Limited	Thailand	(10) 100
Dr. Reddy’s Laboratories(UK)Limited	United Kingdom	(5) 100
Dr. Reddy’s New Zealand Limited	New Zealand	(10) 100
Dr. Reddy's Research and Development B.V.	Netherlands	(12) 100
Dr. Reddy’s Singapore PTE Limited(liquidated duringtheyear ended 31 March 2020)	Singapore	(10) 100
Dr. Reddy’s Srl	Italy	(11) 100
Dr. Reddy’s(WUXI)Pharmaceutical Co. Limited	China	(10) 100
Dr. Reddy's Venezuela,C.A.	Venezuela	(10) 100
Lacock Holdings Limited	Cyprus	(10) 100
OOO Dr. Reddy’s Laboratories Limited	Russia	(10) 100
OOO DRS LLC	Russia	(9) 100
Promius Pharma LLC	USA	(6) 100
ReddyHoldingGmbH	Germany	(10) 100
ReddyNetherlands B.V.	Netherlands	(10) 100
ReddyPharma Iberia SAU	Spain	(10) 100
ReddyPharma Italia S.R.L	Italy	(7) 100
ReddyPharma SAS	France	(10) 100

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.26 DESCRIPTION OF THE GROUP (CONTINUED)

ENTITY	COUNTRY OF INCORPORATION	% OF DIRECT/INDIRECT OWNERSHIP INTEREST
Joint ventures
DRANU LLC	USA	(2) (13) 50
DRES EnergyPrivate Limited	India	(14) 26
Kunshan Rotam ReddyPharmaceutical CompanyLimited	China	(4) 51.33

Other consolidating entities
Cheminor Employees Welfare Trust	India	Refer to footnote 16
Dr. Reddy's Employees ESOS Trust	India	Refer to footnote 16
Dr. Reddy's Research Foundation	India	Refer to footnote 16

(1) Indirectly owned through Dr. Reddy's Research and Development B.V.

(2) Entities under liquidation.

(3) Indirectly owned through Aurigene Discovery Technologies Limited.

(4) Kunshan Rotam Reddy Pharmaceutical Co. Limited is a subsidiary as per Indian Companies Act, 2013, as the Company holds a 51.33% stake. However, the Company accounts for this investment by the equity method and does not consolidate it in the Company's consolidated �nancial statements.

(5) Indirectly owned through Dr. Reddy's Laboratories (EU) Limited.

(6) Indirectly owned through Dr. Reddy's Laboratories Inc.

(7) Indirectly owned through Lacock Holdings Limited.

(8) Indirectly owned through Reddy Holding GmbH.

(9) Indirectly owned through OOO Dr. Reddy's Laboratories Limited (from January 2019), formerly subsidiary of Dr. Reddy's Laboratories B.V (Formerly Eurobridge consulting B.V.)

(10) Indirectly owned through Dr. Reddy's Laboratories SA.

(11) Indirectly owned through Reddy Pharma Italia S.R.L.

(12) Indirectly owned through Reddy Netherlands B.V.

(13) DRANU LLC is consolidated in accordance with guidance available in Ind AS 110.

(14) Accounted in accordance with Ind AS 111, Joint Arrangements.

(15) Indirectly owned through Idea2Enterprises (India) Private Limited.

(16) The Company does not have any equity interests in this entity, but has signi�cant in�uence or control over it.

B. Additional information pursuant to para 2 of general instructions for the preparation of consolidated �nancial statements�

NAME OF THE ENTITY SL. NO.	AS AT 31 MARCH 2021	SHARE IN PROFIT OR LOSS SHARE IN OCI SHARE IN TOTAL COMPREHENSIVE INCOME (TCI) FOR THE YEAR ENDED 31 MARCH 2021 AMOUNT AS % OF CONSOLIDATED PROFIT OR LOSS AMOUNT AS % OF CONSOLIDATED OCI AMOUNT AS % OF CONSOLIDATED TCI
	NET ASSETS, i.e., TOTAL ASSETS MINUS TOTAL LIABILITIES
	AMOUNT AS % OF CONSOLIDATED NET ASSETS
Parent
Dr. Reddy's Laboratories Limited	�� ��	�� �� �� �� �� ��

Subsidiaries
India
Aurigene Discovery Technologies Limited 1	�� ��	�� �� �� �� �� ��
Cheminor Investments Limited 2	- �	- - - - - -
Dr. Reddy’s Bio-Sciences Limited 3	�� ��	(��) (��) - - (��) (��)
DRL Impex Limited 4	- (�)	- - - - - -
Idea2Enterprises (India) Private Limited Imperial Credit Private Limited Svaas Wellness Limited (formerly Regkinetics Services Limited) Aurigene Pharmaceutical Services Limited Dr. Reddy’s Formulations Limited 6 7 5 8 9	�� ��	- - - - - -
	�� ��	�� � - - �� �
	- �	(��) (�) - - (��) (�)
	(��) (��)	�� �� (��) (�) �� ��
	- -	- - - - -

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.26 DESCRIPTION OF THE GROUP (CONTINUED)	2.26 DESCRIPTION OF THE GROUP (CONTINUED)
NAME OF THE ENTITY SL. NO.	AS AT 31 MARCH 2021	SHARE IN PROFIT OR LOSS SHARE IN OCI SHARE IN TOTAL COMPREHENSIVE INCOME (TCI) FOR THE YEAR ENDED 31 MARCH 2021 AMOUNT AS % OF CONSOLIDATED PROFIT OR LOSS AMOUNT AS % OF CONSOLIDATED OCI AMOUNT AS % OF CONSOLIDATED TCI
	NET ASSETS, i.e., TOTAL ASSETS MINUS TOTAL LIABILITIES
	AMOUNT AS % OF CONSOLIDATED NET ASSETS
Foreign
Aurigene Discovery Technologies (Malaysia) SDN BHD 1 �� ��		�� � - - �� �
Aurigene Discovery Technologies Inc. 2 - -		(��) (�) - - (��) (�)
beta Institut gemeinnützige GmbH 3 - �		(��) (�) - - (��) (�)
betapharm Arzneimittel GmbH 4 �� ��		(��) (��) - - (��) (��)
Chirotech Technology Limited 5 �� ��		�� �� - - �� ��
Dr. Reddy's (Beijing) Pharmaceutical Co. Limited 6 �� ��		(��) (�) - - (��) (�)
Dr. Reddy’s Farmaceutica Do Brasil Ltda. 7 (��) (��)		�� �� - - �� ��
Dr. Reddy’s Laboratories (Australia) Pty. Limited 8 (��) (��)		�� �� - - �� ��
Dr. Reddy’s Laboratories (Canada) Inc. 9 �� ��		�� �� - - �� ��
Dr. Reddy's Laboratories Chile SPA. 10 �� ��		�� �� - - �� ��
Dr. Reddy’s Laboratories (EU) Limited 11 �� ��		�� �� - - �� ��
Dr. Reddy’s Laboratories Inc. 12 �� ��		�� �� - - �� ��
Dr. Reddy's Laboratories Japan KK 13 �� ��		�� � - - �� �
Dr. Reddy’s Laboratories Kazakhstan LLP 14 �� ��		�� �� - - �� ��
Dr. Reddy’s Laboratories LLC 15 �� ��		�� �� - - �� ��
Dr. Reddy’s Laboratories Louisiana LLC 16 (��) (��)		(��) (��) - - (��) (��)
Dr. Reddy’s Laboratories Malaysia Sdn. Bhd. 17 �� ��		�� �� - - �� ��
Dr. Reddy’s Laboratories New York, LLC 18 (��) (��)		(��) (��) - - (��) (��)
Dr. Reddy's Laboratories Philippines Inc. 19 - (�)		(��) (��) - - (��) (��)
Dr. Reddy’s Laboratories (Proprietary) Limited 20 �� ��		�� �� - - �� ��
Dr. Reddy’s Laboratories Romania S.R.L. 21 �� ��		�� �� - - �� ��
Dr. Reddy’s Laboratories SA 22 �� ��		(��) (��) �� �� (��) (��)
Dr. Reddy’s Laboratories SAS 23 �� ��		�� �� - - �� ��
Dr. Reddy's Laboratories Taiwan Ltd. 24 �� ��		�� � - - �� �
Dr. Reddy's Laboratories (Thailand) Limited 25 (��) (��)		�� �� - - �� ��
Dr. Reddy’s Laboratories (UK) Limited 26 �� ��		�� �� - - �� ��
Dr. Reddy's Research and Development B.V. 27 �� ��		�� �� - - �� ��
Dr. Reddy’s Srl 28 (��) (��)		(��) (��) - - (��) (��)
Dr. Reddy’s New Zealand Limited 29 �� ��		�� � - - �� �
Dr. Reddy’s (WUXI) Pharmaceutical Co. Ltd. 30 �� ��		(��) (�) - - (��) (�)
Dr. Reddy's Venezuela, C.A. 31 (��) (��)		�� �� - - �� ��
Euro Bridge Consulting B.V. 32 (��) (��)		(��) (��) - - (��) (��)
Industrias Quimicas Falcon de Mexico, S.A. de CV 33 �� ��		�� �� (��) (��) �� ��
Lacock Holdings Limited 34 �� ��		(��) (�) - - (��) (�)
OOO Dr. Reddy's Laboratories Limited 35 �� ��		�� �� - - �� ��
OOO DRS LLC 36 �� ��		(��) (�) - - (��) (�)
Promius Pharma LLC 37 �� ��		�� �� - - �� ��
Reddy Holding GmbH 38 �� ��		�� �� - - �� ��
Reddy Netherlands B.V. 39 �� ��		�� � - - �� �
Reddy Pharma Iberia SA 40 �� ��		�� �� - - �� ��
Reddy Pharma Italia S.R.L 41 �� ��		(��) (�) - - - (�)
Reddy Pharma SAS 42 �� ��		�� �� - - �� ��

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.26 DESCRIPTION OF THE GROUP (CONTINUED)	2.26 DESCRIPTION OF THE GROUP (CONTINUED)
NAME OF THE ENTITY SL. NO.	AS AT 31 MARCH 2021	SHARE IN PROFIT OR LOSS SHARE IN OCI SHARE IN TOTAL COMPREHENSIVE INCOME (TCI) FOR THE YEAR ENDED 31 MARCH 2021 AMOUNT AS % OF CONSOLIDATED PROFIT OR LOSS AMOUNT AS % OF CONSOLIDATED OCI AMOUNT AS % OF CONSOLIDATED TCI
	NET ASSETS, i.e., TOTAL ASSETS MINUS TOTAL LIABILITIES
	AMOUNT AS % OF CONSOLIDATED NET ASSETS
Joint ventures
India
DRES Energy Private Limited 1	- -	�� �� - - �� ��
Foreign
DRANU LLC 1	- -	- - - - - -
Kunshan Rotam Reddy Pharmaceutical Company Limited 2 - -		�� �� - - �� ��

Other consolidating entities
India
Cheminor Employees Welfare Trust 1 �� ��		�� � - - �� �
Dr. Reddy's Research Foundation 2 - �		- - - - - -
Sub total �� ��		�� �� �� �� �� ��

_Less:_E�ect of intercompany ad�ustments � eliminations (��) (��)		(��) (��) �� �� (��) (��)

Total �� ��		�� �� �� �� �� ��

Note: Net assets and share in pro�t or loss for the Parent Company, subsidiaries, �oint ventures and other consolidating entities are as per the standalone �nancial statements of the respective entities.

2.27 EMPLOYEE BENEFITS

Total employee bene�t expenses, including share-based payments, incurred during the years ended 31 �arch 2021 and 31 �arch 2020 amounted to 36,299 and 33,802, respectively.

Gratuity bene�ts �rovided by the �arent com�any

In accordance with applicable Indian laws, the Company has a de�ned bene�t plan which provides for gratuity payments (the �Gratuity Plan�) and covers certain categories of employees in India. The Gratuity Plan provides a lump sum gratuity payment to eligible employees at retirement or termination of their employment. The amount of the payment is based on the respective employee’s last drawn salary and the years of employment with the Company. E�ective 1 September 1999, the Company established the Dr. Reddy’s Laboratories Gratuity Fund (the �Gratuity Fund�) to fund the Gratuity Plan. 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 invested in bonds issued by the Government of India and in debt securities and equity securities of Indian companies.

The components of gratuity cost recognised in the consolidated statement of pro�t and loss for the years ended 31 �arch 2021 and 31 �arch 2020 consist of the following:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Current service cost	��	��
Interest on de�ned bene�t liability	�	(�)
Gratuity cost recognised in consolidated statement o� �ro�t and loss	��	��

Details of the employee bene�ts obligations and plan assets are provided below:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Present value of funded obligations	��	��
Fair value of plan assets	(��)	(��)
Net de�ned bene�t liability recognised	��	��

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.27 EMPLOYEE BENEFITS (CONTINUED)

Details of changes in the present value of de�ned bene�t obligations are as follows:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
De�ned bene�t obligations at the beginningof theyear	��	��
Current service cost	��	��
Interest on de�ned obligations	��	��
Re-measurements due to:
Actuarial loss/(gain) due to change in �nancial assumptions	��	(��)
Actuarial loss/(gain) due to demographic assumptions	(��)	(��)
Actuarial loss/(gain) due to experience changes	��	��
�ene�ts paid	(��)	(��)
Liabilities assumed/(transferred)*	��	-
De�ned �ene�t o�li�ations at the end of the year	��	��

Liabilities assumed/transferred of ` 25 comprise of:
a. ` 70 increase in liability on account of acquisition of employees pursuant to the Business Transfer Agreement with Wockhardt limited. Refer note 2.40 of these consolidated �nancial statements for further details.
- ` 45 transfer of liability on account of restructuring of the pharmaceutical services business between the parent company and its subsidiary.

Details of changes in the fair value of plan assets are as follows:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Fair value of plan assets at the beginning of the year	��	��
Employer contributions	��	��
Interest on plan assets	��	��
Re-measurements due to:
Return on plan assets excluding interest on plan assets	(�)	��
�ene�ts paid	(��)	(��)
Assets acquired / (transferred)*	��	-
Plan assets at the end of the year	��	��

Assets acquired/transferred of ` 26 comprise of:
a. ` 70 increase in liability on account of acquisition of employees pursuant to the Business Transfer Agreement with Wockhardt limited. Refer note 2.40 of these consolidated �nancial statements for further details.
b. ` 44 transfer of liability on account of restructuring of the pharmaceutical services business between the parent company and its subsidiary.

Sensitivity Analysis:

PARTICULARS	AS AT 31 MARCH 2021
De�ned bene�t obligation without e�ect of pro�ected salary growth	��
_Add:_E�ect of salary growth	��
De�ned bene�t obligation with pro�ected salary growth	��
De�ned bene�t obligation, usingdiscount rate minus �� basis points	��
De�ned bene�t obligation, using discount rate plus �� basis points	��
De�ned bene�t obligation, using salary growth rate plus �� basis points	��
De�ned bene�t obligation, using salary growth rate minus �� basis points	��

Summary of the actuarial assumptions: The actuarial assumptions used in accounting for the Gratuity plan are as follows:

The assumptions used to determine bene�t obligations:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Discount rate	��	��
Rate of compensation increase	��	��

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.27 EMPLOYEE BENEFITS (CONTINUED)

The assumptions used to determine gratuity cost:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Discount rate	6.65%	7.45%
		8% per annum for the
Rate of compensation increase	7.50%	�rst year and 9%
		per annum thereafter

Contributions: The Company expects to contribute ` 317 to the Gratuity Plan during the year ending 31 March 2022.

Disaggregation of plan assets: The Gratuity Plan’s weighted-average asset allocation as of 31 March 2021 and 31 March 2020, by asset category, was as follows:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Funds managed by insurers	100%	99%
Others	-	1%

The expected future cash �ows in respect of gratuity as at 31 March 2021 were as follows:

PARTICULARS	AMOUNT
Expected contributions
During the year ended 31 March 2022 (estimated)	��
Expected future bene�t payments
31 March 2022	��
31 March 2023	��
31 March 2024	��
31 March 2025	��
31 March 2026	��
Thereafter	��

Pension plan of the Company’s subsidiary, Industrias Quimicas Falcon de Mexico

All employees of the Company’s Mexican subsidiary, Industrias Quimicas Falcon de Mexico (“Falcon”), are entitled to a pension bene�t in the form of a de�ned bene�t pension plan. The Falcon pension plan provides for payment to vested employees at retirement or termination of employment. Liabilities in respect of the pension plan are determined by an actuarial valuation, based on which the Company makes contributions to the pension plan fund. This fund is administered by a third party, who is provided guidance by a technical committee formed by senior employees of Falcon.

The components of net pension cost recognised in the consolidated statement of pro�t and loss for the years ended 31 March 2021 and 31 March 2020 consist of the following:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Current service cost	��	��
Interest on de�ned bene�t liability	�	��
Total cost recognised in consolidated statement ofpro�t and loss	��	��

Details of the employee bene�ts obligations and plan assets are provided below:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Present value of funded obligations	��	��
Fair value of plan assets	(��)	(��)
Net de�ned bene�t liability recognised	��	��

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.27 EMPLOYEE BENEFITS (CONTINUED)

Details of changes in the present value of de�ned bene�t obligations are as follows:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
De�ned bene�t obligations at the beginning of the year	��	��
Current service cost	��	��
Interest on de�ned obligations	��	��
Re-measurements due to:
Actuarial loss/(gain) due to change in �nancial assumptions	��	��
Actuarial loss/(gain) due to experience changes	��	(�)
�ene�ts paid	(��)	(��)
Foreign exchanges di�erences	��	(��)
De�ned �ene�t o�li�ations at the end of the year	��	��

Details of changes in the fair value of plan assets are as follows:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Fair value of plan assets at the beginning of the year	��	��
Employer contributions	��	��
Interest on plan assets	��	�
Re-measurements due to:
Return on plan assets excluding interest on plan assets	��	(�)
�ene�ts paid	(��)	(��)
Foreign exchanges di�erences	��	(��)
Plan assets at the end of the year	��	��
Sensitivity Analysis:
PARTICULARS		AS AT 31 MARCH 2021
De�ned bene�t obligation without e�ect of pro�ected salary growth		��
_Add:_E�ect of salary growth		��
De�ned bene�t obligation with pro�ected salary growth		��
De�ned bene�t obligation, using discount rate minus �� basis points De�ned bene�t obligation, using discount rate plus �� basis points		�� ��
De�ned bene�t obligation, using salary growth rate plus �� basis points		��
De�ned bene�t obligation, using salary growth rate minus �� basis points		��

Summary of the actuarial assumptions: The actuarial assumptions used in accounting for the Falcon de�ned bene�t plans are as follows: The assumptions used to determine �ene�t o�ligations:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Discount rate	��	��
Rate of compensation increase	��	��

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.27 EMPLOYEE BENEFITS (CONTINUED)

The assumptions used to determine de�ned �ene�t �ost�

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Discount rate	8.75%	11.25%
Rate of compensation increase	4.50%	4.50%

Contributions: The Company expects to contribute ` 36 to Falcon de�ned bene�t plans during the year ending 31 March 2022.

Disaggregation of plan assets: The Falcon pension plan’s weighted-average asset allocation as of 31 March 2021 and 31 March 2020, by asset category was as follows:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Funds managed by insurers	51%	51%
Others	49%	49%

The expected future cash �ows in respect of post-employment bene�t plans in Mexico as at 31 March 2021 were as follows:

PARTICULARS	AMOUNT
Expected contributions
During the year ended 31 March 2022 (estimated)	��
Expected future bene�t payments
31 March 2022	�
31 March 2023	�
31 March 2024	��
31 March 2025	��
31 March 2026	��
Thereafter	��

Provident fund bene�ts

Certain categories of employees of the Company receive bene�ts from a provident fund, a de�ned contribution plan. �oth the employee and employer each make monthly contributions to a government administered fund equal to 12% of the covered employee’s qualifying salary. The Company has no further obligations under the plan beyond its monthly contributions. The Company contributed 906 and 812 to the provident fund plan during the years ended 31 March 2021 and 31 March 2020, respectively.

Superannuation bene�ts

Certain categories of employees of the Company participate in superannuation, a de�ned contribution plan administered by the �ife Insurance Corporation of India. The Company makes monthly contributions based on a speci�ed percentage of each covered employee’s salary. The Company has no further obligations under the plan beyond its monthly contributions. The Company contributed 84 and 82 to the superannuation plan during the years ended 31 March 2021 and 31 March 2020, respectively.

Other contribution plans

In the United States, the Company sponsors a de�ned contribution 401(k) retirement savings plan for all eligible employees who meet minimum age and service requirements. The Company contributed 139 and 177 to the 401(k) retirement savings plan during the years ended 31 March 2021 and 31 March 2020, respectively. The Company has no further obligations under the plan beyond its monthly matching contributions.

In the United Kingdom, certain social security bene�ts (such as pension, unemployment and disability) are funded by employers and employees through mandatory National Insurance contributions. The contribution amounts are determined based upon the employee’s salary. The Company has no further obligations under the plan beyond its monthly contributions. The Company contributed 143 and 135 to the National Insurance during the years ended 31 March 2021 and 31 March 2020, respectively.

Compensated absences

The Company provides for accumulation of compensated absences by certain categories of its employees. These employees can carry forward a portion of the unutilised compensated absences and utilise them in future periods or receive cash in lieu thereof as per the Company’s policy. The Company records a liability 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 obligation was 1,130 and 1,161 as at 31 March 2021 and 31 March 2020, respectively.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.28 EMPLOYEE STOCK INCENTIVE PLANS

Dr. Reddy’s Employees Stock Option Plan, 2002 (the “DRL 2002 Plan”):

The DRL 2002 Plan, as amended at annual general meetings of shareholders held on 28 July 2004 and on 27 July 2005, provides for stock option grants in two categories:

After the stock split e�ected in the form of a stock dividend issued by the Company in August 200�, the DRL 2002 Plan provides for stock option grants in the above two categories as follows:

	NUMBER OF OPTIONS	NUMBER OF OPTIONS
PARTICULARS	RESERVED UNDER	RESERVED UNDER	TOTAL
	CATEGORY A	CATEGORY B
Options reserved under original Plan	��	��	��
Options exercisedprior to stock dividend date(A)	��	��	��
Balance of shares that can be allotted on exercise of options(B)	��	��	��
Options arisingfrom stock dividend(C)	��	��	��
Options reserved after stock dividend(A+B+C)	��	��	��

The term of the DRL 2002 plan was extended for a period of 10 years e�ective as of 29 January 2012 by the shareholders at the Company�s Annual General Meeting held on 20 July 2012.

Stock option activity under the DRL 2002 Plan for the two categories of options during the years ended 31 March 2021 and 31 March 2020 is as follows:

Category A — Fair Market Value Options: There was no stock activity under this category during the years ended 31 March 2021 and

31 March 2020 and there were no stock options outstanding under this category as of 31 March 2021 and 31 March 2020.

Category B — Par Value Options: Stock options activity under this category during the years ended 31 March 2021 and 31 March 2020 was as set forth in the below table.

PARTICULARS	WEIGHTED AVERAGE REMAINING USEFUL LIFE (MONTHS) RANGE OF EXERCISE PRICES WEIGHTED AVERAGE EXERCISE PRICE SHARES ARISING OUT OF OPTIONS FOR THE YEAR ENDED 31 MARCH 2021
Outstandingat the beginningof theyear	�� �� �� ��
Granted duringtheyear	�� �� �� ��
Expired/forfeited duringtheyear	- �� �� (��)
Exercised duringtheyear	- �� �� (��)
Outstanding at the end of theyear	�� �� �� ��
Exercisable at the end of theyear	�� �� �� ��

PARTICULARS	WEIGHTED AVERAGE REMAINING USEFUL LIFE (MONTHS) RANGE OF EXERCISE PRICES WEIGHTED AVERAGE EXERCISE PRICE SHARES ARISING OUT OF OPTIONS FOR THE YEAR ENDED 31 MARCH 2020
Outstandingat the beginningof theyear	�� �� �� ��
Granted duringtheyear	�� �� �� ��
Expired/forfeited duringtheyear	- �� �� (��)
Exercised duringtheyear	- �� �� (��)
Outstanding at the end of theyear	�� �� �� ��
Exercisable at the end of theyear	�� �� �� ��

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.28 EMPLOYEE STOCK INCENTIVE PLANS (CONTINUED)

The weighted average grant date fair value of options granted during the years ended 31 March 2021 and 31 March 2020 was 3,677 and 2,746 per option, respectively. The weighted average share price on the date of exercise of options during the years ended 31 March 2021 and 31 March 2020 was 4,565 and 2,681 per share, respectively.

The aggregate intrinsic value of options exercised during the years ended 31 March 2021 and 31 March 2020 was 328 and 193, respectively. As of 31 March 2021, options outstanding had an aggregate intrinsic value of 980 and options exercisable had an aggregate intrinsic value of 208.

Dr. Reddy’s Employees ADR Stock Option Plan, 2007 (the “DRL 2007 Plan”)

The DRL 2007 Plan provides for option grants in two categories:

Category A: 382,695 stock options out of the total of 1,530,779 stock options reserved for grant having an exercise price equal to the fair market value of the underlying equity shares on the date of grant; and

Category B: 1,148,084 stock options out of the total of 1,530,779 stock options reserved for grant having an exercise price equal to the par value of the underlying equity shares (i.e., ` 5 per option).

Stock options activity under the DRL 2007 Plan for the above two categories of options during the years ended 31 March 2021 and 31 March 2020 was as follows:

	PARTICULARS WEIGHTED AVERAGE REMAINING USEFUL LIFE (MONTHS) RANGE OF EXERCISE PRICES WEIGHTED AVERAGE EXERCISE PRICE SHARES ARISING OUT OF OPTIONS FOR THE YEAR ENDED 31 MARCH 2021 CATEGORY A — FAIR MARKET VALUE OPTIONS
	Outstanding at the beginning of the year �� �� ��to �� ��
	Granted duringtheyear �� �� �� ��
	Expired/forfeited during the year - �� ��/ �� (��)
	Exercised during the year - �� ��/ �� (��)
	Outstanding at the end of the year �� �� ��to �� ��
	Exercisable at the end of the year �� �� ��to �� ��

	PARTICULARS WEIGHTED AVERAGE REMAINING USEFUL LIFE (MONTHS) RANGEOF EXERCISE PRICES WEIGHTED AVERAGE EXERCISEPRICE SHARES ARISING OUT OF OPTIONS FOR THE YEAR ENDED 31 MARCH 2020 CATEGORY A — FAIR MARKET VALUE OPTIONS
	Outstanding at the beginning of the year �� �� ��/ �� ��
	Granted duringtheyear �� �� �� ��
	Expired/forfeited duringtheyear - �� �� (��)
	Exercised duringtheyear - - - -
	Outstanding at the end of the year �� �� ��to �� ��
	Exercisable at the end of the year �� �� �� �� ��

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.28 EMPLOYEE STOCK INCENTIVE PLANS (CONTINUED)

The weighted average grant date fair value of options granted during the years ended 31 March 2021 and 31 March 2020 was 1,255 and 993 per option, respectively. The weighted average share price on the date of exercise of options during the years ended 31 March 2021 was ` 4,506 per share.

The aggregate intrinsic value of options exercised during the years ended 31 March 2021 was 28. As of 31 March 2021, options outstanding had an aggregate intrinsic value of 466 and options exercisable had an aggregate intrinsic value of ` 120.

	PARTICULARS WEIGHTED AVERAGE REMAINING USEFUL LIFE (MONTHS) RANGE OF EXERCISE PRICES WEIGHTED AVERAGE EXERCISE PRICE SHARES ARISING OUT OF OPTIONS FOR THE YEAR ENDED 31 MARCH 2021 CATEGORY B — PAR VALUE OPTIONS
	Outstandingat the beginningof theyear �� �� �� ��
	Granted duringtheyear �� �� �� ��
	Expired/forfeited duringtheyear - �� �� (��)
	Exercised duringtheyear - �� �� (��)
	Outstanding at the end of theyear �� �� �� ��
	Exercisable at the end of theyear �� �� �� ��

	PARTICULARS WEIGHTED AVERAGE REMAINING USEFUL LIFE (MONTHS) RANGE OF EXERCISE PRICES WEIGHTED AVERAGE EXERCISE PRICE SHARES ARISING OUT OF OPTIONS FOR THE YEAR ENDED 31 MARCH 2020 CATEGORY B — PAR VALUE OPTIONS
	Outstandingat the beginningof theyear �� �� �� ��
	Granted duringtheyear �� �� �� ��
	Expired/forfeited duringtheyear - �� �� (��)
	Exercised duringtheyear - �� �� (��)
	Outstanding at the end of theyear �� �� �� ��
	Exercisable at the end of theyear �� �� �� ��

The weighted average grant date fair value of options granted during the years ended 31 March 2021 and 31 March 2020 was 3,631 and 2,747, respectively. The weighted average share price on the date of exercise of options during the years ended 31 March 2021 and 31 March 2020 was 4,334 and 2,757, respectively.

The aggregate intrinsic value of options exercised during the years ended 31 March 2021 and 31 March 2020 was 182 and 93, respectively. As of 31 March 2021, options outstanding had an aggregate intrinsic value of 641 and options exercisable had an aggregate intrinsic value of 69.

Dr. Reddy’s Employees Stock Option Scheme, 2018 (the “DRL 2018 Plan”)

The DRL 2018 Plan provides for option grants having an exercise price equal to the fair market value of the underlying equity shares on the date of

	NUMBER OF SECURITIES	NUMBER OF
PARTICULARS	TO BE ACQUIRED FROM	SECURITIES TO BE	TOTAL
	SECONDARY MARKET	ISSUED BY THE COMPANY
Options reserved against equityshares	��	��	��
Options reserved against ADRs	-	��	��
Total	��	��	��

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.28 EMPLOYEE STOCK INCENTIVE PLANS (CONTINUED)

As at 31 March 2021, the outstanding shares purchased from secondary market are 575,201 shares for an aggregate consideration of ` 1,967. Stock option activity under the DRL 2018 Plan during the years ended 31 March 2021 and 31 March 2020 was as follows:

	PARTICULARS WEIGHTED AVERAGE REMAINING USEFUL LIFE (MONTHS) RANGE OF EXERCISE PRICES WEIGHTED AVERAGE EXERCISE PRICE SHARES ARISING OUT OF OPTIONS FOR THE YEAR ENDED 31 MARCH 2021 FAIR MARKET VALUE OPTIONS
	Outstanding at the beginning of the year �� �� ��/ �� ��
	Granted duringtheyear �� �� �� ��
	Expired/forfeited during the year - �� ��to �� (��)
	Exercised during the year - �� ��/ �� (��)
	Outstanding at the end of the year �� �� ��to �� ��
	Exercisable at the end of the year �� �� �� �� ��

	PARTICULARS WEIGHTED AVERAGE REMAINING USEFUL LIFE (MONTHS) RANGE OF EXERCISE PRICES WEIGHTED AVERAGE EXERCISE PRICE SHARES ARISING OUT OF OPTIONS FOR THE YEAR ENDED 31 MARCH 2020 FAIR MARKET VALUE OPTIONS
	Outstandingat the beginningof theyear �� �� �� ��
	Granted during the year �� �� ��/ �� ��
	Expired/forfeited during the year - �� ��to �� (��)
	Exercised duringtheyear - �� �� (��)
	Outstanding at the end of the year �� �� �� �� ��
	Exercisable at the end of theyear �� �� �� ��

The weighted average grant date fair value of options granted during the years ended 31 March 2021 and 31 March 2020 was 1,255 and 994 per option, respectively. The weighted average share price on the date of exercise of options during the years ended 31 March 2021 and 31 March 2020 was 4,609 and 2,914 per share, respectively.

The aggregate intrinsic value of options exercised during the years ended 31 March 2021 and 31 March 2020 was 165 and 0.35, respectively. As of 31 March 2021, options outstanding had an aggregate intrinsic value of 563 and options exercisable had an aggregate intrinsic value of 104.

Valuation of stock options:

Risk-free interest rates are based on the government securities yield in e�ect at the time of the grant. These assumptions re�ect management’s best estimates, but these assumptions involve inherent market uncertainties based on market conditions generally outside of the Company’s control. As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially impacted. Further, if management uses di�erent assumptions in future periods, stock-based compensation expense could be materially impacted in future years.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.28 EMPLOYEE STOCK INCENTIVE PLANS (CONTINUED)

The weighted average inputs used in computing the fair value of options granted were as follows:

PARTICULARS	19 MAY 2020 19 MAY 2020 27 OCTOBER 2020 GRANTS MADE ON
Expected volatility	�� �� ��
Exerciseprice	`��<br>`�� `��
Option life	��ears ��ears ��ears
Risk-free interest rate	�� �� ��
Expected dividends	�� �� ��
Grant date shareprice	`��<br>`�� `��

PARTICULARS	16 MAY 2019 16 MAY 2019 31 OCTOBER 2019 GRANTS MADE ON 26 JANUARY 2020
Expected volatility	�� �� �� ��
Exerciseprice	`��<br>`�� `��<br>`��
Option life	��ears ��ears ��ears ��ears
Risk-free interest rate	�� �� �� ��
Expected dividends	�� �� �� ��
Grant date shareprice	`��<br>`�� `��<br>`��

Share-based payment expense

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
(1) Equity settled share-based payment expense	��	��
(2) Cash settled share-based payment expense	��	��
	��	��

(1) As of 31 March 2021 and 31 March 2020, there was _612 and_ 515, respectively, of total unrecognised compensation cost related to unvested stock options. This cost is expected to be recognised over a weighted-average period of 1.95 years and 1.93 years, respectively.

(2) Certain of the Company’s employees are eligible for share-based payment awards that are settled in cash. These awards entitle the employees to a cash payment, on the exercise date, subject to vesting upon satisfaction of certain service conditions which range from 1 to 4 years. The amount of cash payment is determined based on the price of the Company’s ADSs at the time of vesting. As of 31 March 2021 and 31 March 2020, there was _126 and_ 97, respectively, of total unrecognised compensation cost related to unvested awards. This cost is expected to be recognised over a weighted-average period of 1.88 years and 1.93 years, respectively. This scheme does not involve dealing in or subscribing to or purchasing securities of the Company, directly or indirectly.

2.29 INCOME TAXES

a) Income tax expense/(bene�t) reco�n�sed �n the conso��dated statement o� pro�t and �oss

Income tax expense recognised in the consolidated statement of pro�t and loss consists of the following:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Current taxes
Domestic	��	��
Foreign	��	��
	��	��
Deferred taxes
Domestic	��	(��)
Foreign	(��)	(��)
	��	(��
Total income tax expense/(bene�t� reco�nised in t�e consolidated statement of pro�t and loss	��	(��

The estimated fair value of stock options is recognised in the consolidated statement of pro�t and loss on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.29 INCOME TAXES (CONTINUED)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.29 INCOME TAXES (CONTINUED)

b) Income tax expense/(bene�t) recognised directl� in e��it�

Income tax expense/(bene�t) recognised directly in e�uity consist of the following:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Tax e�ect on changes in fair value of investments	293	-
Tax e�ect on foreign currencytranslation di�erences	-	-
Tax e�ect on e�ectiveportion of change in fair value of cash �ow hedges	319	(232)
Tax e�ect on actuarialgains/losses on de�ned bene�t obligations	(73)	22
Total income tax expense�(bene�t) reco�nised in t�e e�uity	539	(210)

c) Reconciliation of e�ecti�e tax rate

The following is a reconciliation of the Company’s e�ective tax rates for the years ended 31 March 2021 and 31 March 2020:

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Pro�t be�ore income taxes	��	��
Enacted tax rate in India	��	��
Computed expected tax expense	��	��
��ect of�
Di�erences between Indian and foreign tax rates	��	��
Unrecognised deferred tax assets/(recognition of	��	(��)
previously unrecognised deferred tax assets), net
Expenses not deductible for taxpurposes	��	��
Reversal of earlieryears’ taxprovisions	-	-
Income exempt from income taxes	(��)	(��)
Foreign exchange di�erences	(��)	(��)
(1) Incremental deduction allowed for research and development costs	-	(��)
Tax expense on distributed/undistributed earnings of subsidiaryoutside India	-	��
Write o� of accounts receivables	-	-
E�ect of change in tax laws and rate in�urisdictions outside India	(��)	(��)
Income from sale of capital assets	-	(��)
Others	(��)	(��)
Income tax expense �(bene�t)	��	(��)
E�ecti�e tax rate	��	(��)�

(1) India’s Finance Act, 2016 incorporated an amendment that reduces the weighted deduction on eligible research and development expenditure in a phased manner from 200% to 150% commencing from 1 April 2017, and from 150% to 100% e�ective 1 April 2020�

The Company’s e�ective tax rate for the year ended 31 March 2021 was higher as compared to the year ended 31 March 2020 primarily on account of: Ÿ de-recognition of deferred tax asset during the year ended 31 March 2021 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;

Ÿ recognition of a deferred tax asset related to the Minimum Alternate Tax (“MAT”) credits and planned restructuring activity between companies of our group during the year ended 31 March 2020;

Ÿ weighted deduction on eligible research and development expenditure in Dr. Reddy’s Laboratories Limited, India for the year ended 31 March 2020; and

Ÿ income from sale of capital assets during the year ended 31 March 2020, which was set o� against the carried forward capital loss.

d) Unrecognised deferred tax assets and liabilities

The details of unrecognised deferred tax assets and liabilities are summarised below:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Deductible temporary di�erences, net	��	��
Operating tax loss carry-forward	��	��
	��	��

Dr. Reddy’s Laboratories New York, Inc. as the Company believes that it is probable that there will be available taxable pro�ts against which such tax losses can be utilised.

During the year ended 31 March 2021, the Company did not recognise deferred tax assets on operating tax losses and other deductible temporary di�erences pertaining primarily to Dr. Reddy’s Laboratories SA, Swit�erland and Dr. Reddy’s Research and Development B.�., Netherlands.

Deferred income taxes are not provided on undistributed earnings of 22,099 and 23,615 as at 31 March 2021 and 31 March 2020, respectively, of subsidiaries, where it is expected that earnings of the subsidiaries will not be distributed in the foreseeable future. Generally, the Company inde�nitely reinvests all of the accumulated undistributed earnings of subsidiaries, and accordingly, has not recorded any deferred taxes in relation to such undistributed earnings of its subsidiaries.

e) Deferred tax assets and liabilities

The tax e�ects of signi�cant temporary di�erences that resulted in deferred tax assets and liabilities and a description of the items that created these di�erences is given below:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Deferred tax assets/(liabilities):
Inventory	��	��
Minimum Alternate Tax*	��	��
Trade receivables	��	��
Operating tax loss and interest loss carry-forward	��	��
Current liabilities and provisions	��	��
Property, plant and equipment	(��)	(��)
Investments	(��)	��
Others	(��)	��
Net deferred tax assets	��	��

As per Indian tax laws, companies are liable for a Minimum Alternate Tax (“MAT” tax) when current tax, as computed under the provisions of the Income Tax Act, 1961 (“Tax Act”), is determined to be below the MAT tax computed under section 115JB of the Tax Act. If in any year the Company pays liability as per MAT, then it is entitled to claim credit of MAT paid over and above the normal tax liability in the subsequent years. The MAT credit is eligible to be carried forward and set�o� in the future against the current tax liabilities over a period of 15 years starting from the succeeding �scal year in which such credit was generated.

Operating loss carry forward consists of business losses, unabsorbed depreciation and unabsorbed interest carry-forwards. A portion of this total loss can be carried inde�nitely and the remaining amounts expire at various dates ranging from 2022 through 203�.

f) Movement in deferred tax assets and liabilities during the years ended 31 March 2021 and 31 March 2020

The details of movement in deferred tax assets and liabilities are summarised below:

		RECOGNISED IN
PARTICULARS	AS AT 1 APRIL 2020	THE CONSOLIDATED STATEMENT OF	RECOGNISED IN EQUITY	AS AT 31 MARCH 2021
		PROFIT AND LOSS
Deferred tax assets/(liabilities)
Inventory	��	��		��
Minimum Alternate Tax	��	(��)		��
Trade receivables	��	(��)		��
Operatingtax loss and interest loss carry-forward	��	(��)		��
Current liabilities andprovisions	��	��	�� (��)
Property, plant and equipment	(��)	(��)		(��)
Investments	��	��	(��)	(��)
Others	��	(��)		(��)
Net deferred tax assets/(liabilities)	��	(��)	(��)	��

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.29 INCOME TAXES (CONTINUED)

		RECOGNISED IN
PARTICULARS	AS AT 1 APRIL 2019	THE CONSOLIDATED STATEMENT OF	RECOGNISED IN EQUITY	AS AT 31 MARCH 2020
		PROFIT AND LOSS
Deferred tax assets/(liabilities)
Inventory	��	(��)	-	��
Minimum Alternate Tax	��	��	-	��
Trade receivables	��	��	-	��
Operatingtax loss and interest loss carry-forward	��	��	-	��
Current liabilities andprovisions	��	�� (��)		��
Property, plant and equipment	(��)	��	-	(��)
Investments	��	(��)	-	��
Others	(��)	��	-	��
Net deferred tax assets/(liabilities)	��	��	��	��

The amounts recognised in the consolidated statement of pro�t and loss for the years ended 31 March 2021 and 31 March 2020 include (96) and 106 respectively, which represent exchange di�erences arising due to foreign currency translations.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.30 FINANCIAL INSTRUMENTS (CONTINUED)

Fair value hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

The following table presents the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of 31 March 2021:

PARTICULARS	LEVEL 1	LEVEL 2	LEVEL 3	TOTAL
FVTPL - Financial asset - Investments in units of mutual funds	��	-	-	��
FVTPL - Financial asset - Investment in limited liability partnership�rm	-	-	��	��
FVTPL - Financial asset - Investment in equitysecurities	-	-	�	�
FVTOCI - Financial asset - Investment in equitysecurities	��	-	-	��
Derivative �nancial instruments � net gain/(loss) on outstanding foreign exchange	-	��	-	��
(1) forward, option and swap contracts and interest rate swap contracts
FVTPL - Contingent consideration pursuant to the Business Transfer Agreement	-	-	��	��
with Wockhardt Limited (Refer note 2.40 for details)

g) Uncertain tax positions

During the years ended 31 March 2014, 2015 and 2016, Industrias Quimicas Falcon de Mexico, S.A. de CV, a wholly-owned subsidiary of the Company in Mexico, received a notice from Mexico's Tax Administration Service, Servicio de Administracion Tributaria (“SAT”), with respect to disallowance on account of transfer pricing adjustments pertaining to the calendar years ended 31 December 2006, 31 December 2007 and 31 December 2008. The associated tax impact is 801 (MXN 224 million) and pro�t share impact is 89 (MXN 25 million). The Company �led administrative appeals with the SAT by challenging these disallowances and, during February and March 2017, the Company received orders of the SAT con�rming these disallowances by dismissing its administrative appeals. The Company disagrees with the SAT's disallowances and �led an appeal with the Tribunal Federal de �usticia Administrativa (Federal Tax and Administrative Court of Mexico) in March and April 2017. The Company believes that it is more likely than not that it would prevail over the SAT in this litigation. Accordingly, no provision has been made in these consolidated �nancial statements as of 31 March 2021.

The following table presents the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of 31 March 2020:

PARTICULARS	LEVEL 1	LEVEL 2	LEVEL 3	TOTAL
FVTPL - Financial asset - Investments in units of mutual funds	��	-	-	��
FVTPL - Financial asset - Investment in equitysecurities	-	-	�	�
FVTOCI - Financial asset - Investment in equitysecurities	��	-	-	��
FVTOCI - Financial asset - Investment in market linked debentures	��	-	-	��
Derivative �nancial instruments � net gain/(loss) on outstanding foreign exchange	-	(��)	-	(��)
(1) forward, option and swap contracts and interest rate swap contracts

(1) The Company enters into derivative �nancial instruments with various counterparties, principally �nancial institutions and banks. �erivatives valued using valuation techniques with market observable inputs are mainly interest rate swaps, foreign exchange forward option and swap contracts. The most frequently applied valuation techniques include forward pricing, swap models and Black-Scholes-Merton models (for option valuation), using present value calculations. The models incorporate various inputs including foreign exchange forward rates, interest rate curves and forward rate curves.

2.30 FINANCIAL INSTRUMENTS

Financial instruments by category

The carrying value and fair value of �nancial instruments as at 31 March 2021 and 31 March 2020 were as follows

PARTICULARS	AS AT 31 MARCH 2021 TOTAL FAIR VALUE/ AMORTISED COST TOTAL CARRYING VALUE	TOTAL FAIR VALUE/ AMORTISED COST TOTAL CARRYING VALUE AS AT 31 MARCH 2020
Financial assets
Cash and cash equivalents	�� ��	�� ��
(1) Investments	�� ��	�� ��
Trade receivables	�� ��	�� ��
Derivative instruments	�� ��	�� ��
Other �nancial assets	�� ��	�� ��
Total	�� ��	�� ��
Financial liabilities
Trade payables	�� ��	�� ��
Long-term borrowings	�� ��	�� ��
Short-term borrowings	�� ��	�� ��
Derivative instruments	�� ��	�� ��
Other �nancial liabilities	�� ��	�� ��
Total	�� ��	�� ��

Derivative �nancial instruments

The Company had a derivative �nancial asset and derivative �nancial liability of 1,218 and 326, respectively, as of 31 March 2021 as compared to derivative �nancial asset and derivative �nancial liability of 1,105 and 1,602, respectively, as of 31 March 2020 towards these derivative �nancial instruments.

Details of gain/(loss) recognised in respect of derivative contracts

The following table presents details in respect of the gain/(loss) recognised in respect of derivative contracts during the applicable year ended :

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020
Net gain/ (loss) recognised as a part of consolidated statement of pro�t
and loss in respect of foreign exchange derivative contracts and cross	��	��
currency interest rate swaps contracts
Net gain/(loss) recognised in equity in respect of hedges of highly
probable forecast transactions, net of amounts reclassi�ed from equity	��	(��)
and recognised as component of revenue
Net gain/(loss) reclassi�ed from equity and recognised as component of revenue occurrence of forecasted transaction	��	(��)

The net carrying amount of the Company’s “hedging reserve” as a component of equity before adjusting for tax impact was a gain of 401 as at 31 March 2021, as compared to a loss of 722 as at 31 March 2020.

(1) Interest accrued but not due on investments is included in ot�er �nancial assets�

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.30 FINANCIAL INSTRUMENTS (CONTINUED)

Outstanding foreign exchange derivative contracts

The following table gives details in respect of the notional amount of outstanding foreign exchange derivative contracts as of 31 March 2021:

CATEGORY	BUY/SELL AMOUNTS IN MILLIONS (1) CROSS CURRENCY (1) CURRENCY INSTRUMENT
Hedges of recognised assets and liabilities	INR AUD Sell AUD 7 Forward contract
	INR CHF Sell CHF 200 Forward contract
	INR GBP Sell GBP 8 Forward contract
	INR RUB Sell RUB 2,799 Forward contract
	INR US$ Sell US$ 353 Forward contract
	MXN US$ Buy US$ 10 Forward contract
	UAH US$ Buy US$ 14 Forward contract
	INR ZAR Sell ZAR 111 Forward contract
	RUB US$ Buy US$ 2 Forward contract
	RON US$ Buy US$ 12 Forward contract
	AUD US$ Buy US$ 3 Forward contract
	US$ GBP Buy GBP 48 Forward contract
	GBP EUR Sell EUR 1 Forward contract
	US$ EUR Buy EUR 16 Forward contract
	US$ CHF Buy CHF 200 Forward contract
	KZT US$ Buy US$ 4 Forward contract
	CLP US$ Buy US$ 3 Forward contract
	COP US$ Buy US$ 4 Forward contract
	BRL US$ Buy US$ 4 Forward contract
	KZT US$ Buy US$ 9 Forward contract
Hedges of highly probable forecast transactions	INR AUD Sell AUD 10 Forward contract
	INR RUB Sell RUB 6,850 Forward contract
	INR US$ Sell - Risk Reversal US$ 645 Option contract
	INR ZAR Sell ZAR 148 Forward contract

The following table gives details in respect of the notional amount of outstanding foreign exchange derivative contracts as of 31 March 2020.

CATEGORY	BUY/SELL AMOUNTS IN MILLIONS (1) CROSS CURRENCY (1) CURRENCY INSTRUMENT
Hedges of recognised assets and liabilities	INR US$ Sell US$ 148 Forward contract
	INR RUB Sell RUB 5,968 Forward contract
	INR GBP Sell GBP 9 Forward contract
	INR AUD Sell AUD 4 Forward contract
	INR CHF Sell CHF 200 Forward contract
	INR ZAR Sell ZAR 71 Forward contract
	US$ CHF Buy CHF 200 Forward contract
	GBP EUR Sell EUR 3 Forward contract
	US$ EUR Buy EUR 6 Forward contract
	US$ GBP Buy GBP 38 Forward contract
	AUD US$ Buy US$ 5 Forward contract
	BRL US$ Buy US$ 6 Forward contract
	CLP US$ Buy US$ 4 Forward contract
	COP US$ Buy US$ 4 Forward contract
	KZT US$ Buy US$ 11 Forward contract
	MXN US$ Buy US$ 2 Forward contract
	RON US$ Buy US$ 7 Forward contract
	RUB US$ Buy US$ 6 Forward contract
	UAH US$ Buy US$ 19 Forward contract
	INR US$ Sell US$ 140 Option contract
Hedges of highly probable forecast transactions	INR US$ Sell US$ 270 Option contract

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.30 FINANCIAL INSTRUMENTS (CONTINUED)

The table below summarises the periods when the cash �ows associated with highly probable forecast transactions that are classi�ed as cash �ow hedges are expected to occur:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Cash �ows in United States dollars
Not later than one month	��	��
Later than one month and not later than three months	��	��
Later than three months and not later than six months	��	��
Later than six months and not later than one year	��	��
	��	��
Cash �ows in Russian rou�les
Not later than one month	��	-
Later than one month and not later than three months	��	-
Later than three months and not later than six months	��	-
Later than six months and not later than one year	��	-
	��	-
Cash Flows in Australian Dollars
Not later than one month	��	-
Later than one month and not later than three months	��	-
Later than three months and not later than six months	��	-
Later than six months and not later than one year	��	-
	��	-
Cash �ows in South African Rands
Not later than one month	��	-
Later than one month and not later than three months	��	-
Later than three months and not later than six months	��	-
Later than six months and not later than one year	��	-
	��	-

Hedges of changes in the interest rates

A net gain/loss of Nil, representing the changes in the fair value of interest rate swaps used as hedging instrument in a cash �ow hedge is recognised in the statement of other comprehensive income. For balance interest rate swaps, the changes in fair value (including cross currency interest rate swaps) are recognised as part of the foreign exchange gains and losses and �nance costs. Accordingly the Company has recorded, as part of consolidated statement of pro�t and loss, a net gain of 164 and a net gain of ` 33 for the year ended 31 March 2021 and 31 March 2020 respectively.

The Company had outstanding cross currency swap against INR Borrowing of 7,240 as at 31 March 2021 and Nil as on 31st March 2020. The swap hedges the principal repayment of underlying INR liability and transforms it into USD Principal repayment liability.

2.31 FINANCIAL RISK MANAGEMENT

The Company’s activities expose it to a variety of �nancial risks, including market risk, credit risk and liquidity risk. The Company’s primary risk management focus is to minimise potential adverse e�ects of market risk on its �nancial performance. The Company’s risk management assessment and policies and processes are established to identify and analyse 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 re�ect changes in market conditions and the Company’s activities. The Board of Directors and the Audit Committee is responsible for overseeing the Company’s risk assessment and management policies and processes.

(1) “INR” means Indian Rupees, “US$” means United States dollars, “RON” means Romanian new leus, “GBP” means U.K. pounds sterling, “AUD” means Australian dollars, “CHF” means Swiss francs, “ZAR” means South African rands, “EUR” means Euros, “BRL” means Brazilian reals, “CLP” means Chilean pesos, “COP” means Colombian pesos, “KZT” means Kazakhstan tenges, “MXN” means Mexican pesos, “UAH” means Ukrainian hryvnias and “RUB” means Russian roubles.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.31 FINANCIAL RISK MANAGEMENT (CONTINUED)

a. Market risk

Foreign exchange risk

The Company’s foreign exchange risk arises from its foreign operations, foreign currency revenues and expenses, (U.K. pounds sterling, Russian roubles, Brazilian reals, Swiss francs, South African rands, Kazakhstan tenges, Romanian new leus, Austrailian dollars and Euros) and foreign currency borrowings (in United States dollars, Russian roubles, South African rands, Mexican pesos, Ukrainian hryvnias and Brazilian reals). A signi�cant portion of the Company’s revenues are in these foreign currencies, while a signi�cant 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 revenues measured in Indian rupees may decrease. The exchange rate between the Indian rupee and these foreign currencies has changed substantially in recent periods and may continue to �uctuate substantially in the future. Consequently, the Company uses both derivative and non-derivative �nancial instruments, such as foreign exchange forward contracts, option contracts, currency swap contracts and foreign currency �nancial liabilities, to mitigate the risk of changes in foreign currency exchange rates in respect of its highly probable forecast transactions and recognised assets and liabilities.

The details in respect of the outstanding foreign exchange forward and option contracts are given in note 2.30 to these consolidated �nancial statements.

In respect of the Company’s forward and option contracts, a 10% decrease/increase in the respective exchange rates of each of the currencies underlying such contracts would have resulted in:

Ÿ A 4,824/(4,195) increase/(decrease) in the Company’s hedging reserve and a 2,658/(2,658) increase/(decrease) in the Company’s pro�t from such contracts, as at 31 March 2021;
Ÿ A 1,203/(1,740) increase/(decrease) in the Company’s hedging reserve and a 2,070/(1,745) increase/(decrease) in the Company’s pro�t from such contracts, as at 31 March 2020.

The following table analyses foreign currency risk from non-derivative �nancial instruments as at 31 March 2021:

PARTICULARS	UNITED STATES DOLLARS	EUROS	RUSSIAN ROUBLES	(1) OTHERS	TOTAL
Assets
Cash and cash equivalents	��	��	��	��	��
Investments	��	-	-	-	��
Trade receivables	��	��	��	��	��
Other �nancial assets	��	��	�	��	��
Total	��	��	��	��	��
Liabilities
Tradepayables	��	��	-	��	��
Long-term borrowings	��	��	��	�	��
Short-term borrowings	��	-	��	-	��
Other �nancial liabilities	��	��	��	��	��
Total	��	��	��	��	��

(1) Others primarily consists of U.K. pounds sterling, Swiss francs, Romanian new leus Chinese Yuans (Renminbi), Canadian Dollars and Ukrainian hryvnia.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.31 FINANCIAL RISK MANAGEMENT (CONTINUED)

Interest rate risk

As of 31 March 2021, the Company had loans with �oating interest rates as follows: 8,800 of loans carrying a �oating interest rate of 3 Months India Treasury Bill plus 30 bps and 1,896 of loans carrying a �oating interest rate of TIIE�1.20%.

As of 31 March 2020, the Company had loans with �oating interest rates as follows: 10,971 of loans carrying a �oating interest rate ranging from 1 Month LIBOR plus 12.5 bps to 1 Month LIBOR plus 82.7 bps; 4,000 of loans carrying a �oating interest rate of 1 Month India Treasury Bill plus 60 bps; 1,627 of loans carrying a �oating interest rate of 3 Month LIBOR plus 55 bps; 1,579 of loans carrying a �oating interest rate of TIIE�1.25%, and ` 63 of loans carrying a �oating interest rate of 1 Month �IBAR plus 120 bps.

For details of the Company’s short-term and long-term loans and borrowings, including interest rate pro�les, refer note 2.10 A and B of these consolidated �nancial statements.

For the years ended 31 March 2021 and 31 March 2020, every 10% increase or decrease in the �oating interest rate component (i.e., LIBOR, �IBAR, Treasury Bill and TIIE) applicable to its loans and borrowings would a�ect the Company’s net pro�t by 37 and 41.

The carrying value of the Company’s borrowings, interest component of which was designated in a cash �ow hedge, was ` Nil as of 31 March 2021 and as on 31 March 2020.

The Company’s investments in term deposits (i.e., certi�cates of deposit) with banks and short-term liquid mutual funds are for short durations, and therefore do not expose the Company to signi�cant interest rates risk.

Commodity rate risk

b. Credit risk

Trade and other receivables

Investments

Details of �nan�ial assets � not d�e� �ast d�e and im�aired

The following table analyses foreign currency risk from non-derivative �nancial instruments as at 31 March 2020:

PARTICULARS	UNITED STATES DOLLARS	EUROS	RUSSIAN ROUBLES	(1) OTHERS	TOTAL
Assets
Cash and cash equivalents	��	��	�	��	��
Investments	��	-	-	-	��
Trade receivables	��	��	��	��	��
Other �nancial assets	��	��	�	��	��
Total	��	��	��	��	��
Liabilities
Tradepayables	��	��	-	��	��
Long-term borrowings	��	-	�	��	��
Short-term borrowings	��	-	-	-	��
Other �nancial liabilities	��	��	��	��	��
Total	��	��	��	��	��

The ageing of trade receivables is given below:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Neitherpast due nor impaired	��	��
Past due but not impaired
Less than 365 days	��	��
More than 365 days	��	��
	��	��
_Less :_Allowance for credit losses	(��)	(��)
Total	��	��

(1) Others primarily consists of U.K. pounds sterling, Swiss francs, Romanian new leus, Chinese Yuans (Renminbi), Canadian Dollars and Ukrainian hryvnia.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.31 FINANCIAL RISK MANAGEMENT (CONTINUED)

See Note 2.6 B of these consolidated �nancial statements for the activity in the allowance for credit losses.

Other than trade receivables, the Company has no signi�cant class of �nancial assets that is past due but not impaired.

c. Liquidity risk

As of 31 March 2021 and 31 March 2020, the Company had uncommitted lines of credit from banks of 38,766 and 39,374 respectively.

As of 31 March 2021, the Company had working capital of 64,314 (excluding assets held for sale of151), including cash and cash equivalents of 14,829, investments in term deposits with banks, bonds and commercial paper of6,481, and investments in mutual funds of ` 13,263.

As of 31 March 2020, the Company had working capital of 53,850, including cash and cash equivalents of 2,053, investments in term deposits with banks, bonds and commercial paper of 7,862, investments in marked linked debentures of 1,993 and investments in mutual funds of ` 13,832.

The table below provides details regarding the contractual maturities of signi�cant �nancial liabilities (other than long-term borrowings and obligations under leases, which have been disclosed in note 2.10 A to these consolidated �nancial statements) as at 31 March 2021:

PARTICULARS	2022	2023	2024	2025	THEREAFTER	TOTAL
Tradepayables	��	-	-	-	-	��
Short-term borrowings	��	-	-	-	-	��
Derivative instruments	��	-	-	-	-	��
Other �nancial liabilities	��	-	-	-	-	��

The table below provides details regarding the contractual maturities of signi�cant �nancial liabilities (other than long-term borrowings and obligations under �nance leases, which have been disclosed in note 2.10 A to these consolidated �nancial statements) as at 31 March 2020:

PARTICULARS	2021	2022	2023	2024	THEREAFTER	TOTAL
Tradepayables	��	-	-	-	-	��
Short-term borrowings	��	-	-	-	-	��
Derivative instruments	��	-	-	-	-	��
Other �nancial liabilities	��	-	-	-	-	��

2.32 CONTINGENT LIABILITIES AND COMMITMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.32 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

After the Delaware District Court’s decision, Indivior �led a second lawsuit against the Company alleging infringement of three additional U.S. patents (numbers 9,687,454, 9,855,221 and 9,931,305) in the U.S. District Court for the District of New Jersey (the “New Jersey District Court”), styled Indivior Inc. et al. v. Dr. Reddy’s Laboratories S.A., Civil Action No. 2:17-cv-07111 (D.N.J.). Following the launch, on 15 June 2018, Indivior �led an emergency application for a temporary restraining order and preliminary injunction against the Company in the New Jersey District Court. Indivior’s motion alleged that the Company’s generic sublingual �lm product infringed one of three U.S. patents (number 9,931,305) at issue in the New Jersey District Court. Pending a hearing and decision on the injunction application, the New Jersey District Court initially issued a temporary restraining order against the Company with respect to further sales, o�er for sales, and imports of its generic sublingual �lm product in the United States. Subsequently, on 14 July 2018, the New Jersey District Court granted a preliminary injunction in favour of Indivior. Under the order, Indivior was required to and did post a bond of US$72 to pay the costs and damages sustained by the Company if it was found to be wrongfully enjoined. The Company immediately appealed the decision, and the Court of Appeals agreed to expedite the appeal.

On 20 November 2018, the Court of Appeals issued a decision vacating the preliminary injunction. The Court of Appeals denied Indivior’s petition for rehearing on 4 February 2019.

Indivior subsequently �led two emergency motions in the Court of Appeals to stay issuance of the mandate and to keep the preliminary injunction in place, which the Court of Appeals denied. Indivior then petitioned the U.S. Supreme Court to stay issuance of the mandate.

Indivior’s petition was denied by the Chief Justice of the U.S. Supreme Court on 19 February 2019, and the mandate was issued on the same day. The Company resumed sales of its generic sublingual �lm product after the mandate was issued.

On 19 February 2019, the New Jersey District Court entered a stipulated order of dismissal of Indivior’s claims under U.S. patent number 9,855,221. On 5 November 2019, the New Jersey District Court issued its claim construction decision construing certain terms in U.S. patent numbers 9,931,305 and 9,687,454. After such claim construction decision, on 8 January 2020, the New Jersey District Court entered a stipulated order that the Company’s generic sublingual �lm product does not infringe the asserted claims in U.S. patent number 9,931,305. In the stipulated order, Indivior reserved the ability to appeal the New Jersey District Court’s claim construction order. The Company �led a motion requesting that the New Jersey District Court enter partial �nal judgement in the Company’s favour relating to the allegations of infringement of U.S. patent number 9,931,305, which the District Court denied without prejudice on 24 August 2020, pending resolution of Indivior’s allegations relating to U.S. patent number 9,687,454.

On 11 November 2019, a Magistrate Judge in the District of New Jersey granted the Company leave to �le a counterclaim against Indivior that alleges that Indivior engaged in anticompetitive conduct by making false or misleading statements to the New Jersey District Court during the preliminary injunction proceedings in violation of federal antitrust laws. Indivior appealed the Magistrate Judge’s ruling to the District Court Judge and, on 24 August 2020, the District Court Judge denied Indivior’s appeal. The District Court did grant Indivior’s motion to bifurcate the patent claims and the antitrust claims into two separate trials. Fact discovery closed on 29 January 2021. No trial date has been set and expert discovery on both the patent and antitrust claims is ongoing. Opening expert reports were submitted on 24 March 2021. Expert discovery is scheduled to close on or around 01 September 2021.

In addition to the District Court proceeding, on 13 November 2018, the Company �led two petitions for inter-partes review challenging the validity of certain claims of U.S. patent number 9,687,454 before the Patent Trial and Appeal Board (“PTAB”). On 13 June 2019, the PTAB agreed to institute inter-partes review on one of the two petitions �led by the Company. The PTAB heard oral argument in the pending inter-partes review challenge on 3 March 2020.

A. CONTINGENT LIABILITIES (CLAIMS AGAINST THE COMPANY NOT ACKNOWLEDGED AS DEBTS)

The Company also believes that disclosure of the amount sought by plainti�s, if that is known, would not be meaningful with respect to those legal proceedings.

(i) Product and patent related matters

Launch of product

On 14 June 2018, the U.S. FDA granted the Company �nal approval for buprenorphine and naloxone sublingual �lm, 2 mg/0.5 mg, 4 mg/1 mg, 8 mg/2 mg, and 12 mg/3 mg dosages, a therapeutic equivalent generic version of Suboxone® sublingual �lm. The U.S. FDA approval came after the conclusion of litigation in the U.S. District Court for the District of Delaware (the “Delaware District Court”), where the Delaware District Court held that patents covering Suboxone® sublingual �lm would not be infringed by the Company’s commercial launch of its generic sublingual �lm product. In light of the favourable decision from the Delaware District Court, the Company launched its generic sublingual �lm product in the United States immediately following the U.S. FDA approval on 14 June 2018. On July 12, 2019, the U.S. Court of Appeals for the Federal Circuit (“the Court of Appeals”) a�rmed the Delaware District Court’s ruling that the Company’s generic version of Suboxone® sublingual �lms did not infringe the two remaining patents at issue in the Delaware District Court’s case (U.S. patent numbers 8,603,514 and 8,015,150).

On 2 June 2020, the PTAB issued a �nal written decision in the Company’s favour �nding that the Company had demonstrated that claims 1–5, 7, and 9–14 of U.S. patent number 9,687,454 were unpatentable. The PTAB upheld the validity of only one of the challenged claims, claim 8. Additionally, claim 6 was not at issue in the inter-partes review and therefore not subject to the �nal written decision. Claims 6 and 8 remain asserted against the Company in the New Jersey District Court litigation. Indivior �led a timely notice of appeal of the PTAB’s Final Written Decision (“ FWD”) for claims 1-5, 7, and 9-14, and the Company cross appealed the PTAB’s FWD on claim 8. In the PTAB appeal, Indivior submitted its principal appeal brief on 9 December 2020. Indivior did not challenge the Board’s decision on claims 5 and 12 in its appeal brief. The Company submitted its opening and response brief on 18 February 2021 and Indivior submitted its response and reply brief on 30 March 2021. The Company's reply brief was submitted on 20 April 2021. The court of appeals has not yet scheduled oral arguments in the appeal.

The Company intends to vigorously defend its positions and pursue a claim for damages caused by the preliminary injunction. Any liability that may arise on account of this litigation is unascertainable. Accordingly, no provision was made in these consolidated �nancial statements of the Company.

Matters relating to National Pharmaceutical Pricing Authority

Nor�oxacin, India litigation

The Company manufactures and distributes Nor�oxacin, a formulations product, and in limited quantities, the active pharmaceutical ingredient nor�oxacin. Under the Drugs (Prices Control) Order (the “DPCO”), the National Pharmaceutical Pricing Authority (the “NPPA”) established by the Government of India had the authority to designate a pharmaceutical product as a “speci�ed product” and �x the maximum selling price for such product. In 1995, the NPPA issued a noti�cation and designated Nor�oxacin as a “speci�ed product” and �xed the maximum selling price. In 1996, the Company �led a statutory Form III before the NPPA for the upward revision of the maximum selling price and a writ petition in the Andhra Pradesh High Court (the “High Court”) challenging the validity of the designation on the grounds that the applicable rules of the DPCO were not complied with while �xing the maximum selling price. The High Court had previously granted an interim order in favour of the Company� however it subsequently dismissed the case in April 2004.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.32 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

The Company �led a writ petition in the High Court challenging this demand order. The High Court admitted the writ petition and granted an interim order, directing the Company to deposit 50% of the principal amount claimed by the NPPA, which was 77. The Company deposited this amount with the NPPA in November 2005. In February 2008, the High Court directed the Company to deposit an additional amount of 30, which was deposited by the Company in March 2008. In November 2010, the High Court allowed the Company’s application to include additional legal grounds that the Company believed strengthened its defense against the demand. For example, the Company added as grounds that trade margins should not be included in the computation of amounts overcharged, and that it was necessary for the NPPA to set the active pharmaceutical ingredient price before the process of determining the ceiling on the formulation price. In October 2013, the Company �led an additional writ petition before the Supreme Court challenging the inclusion of Nor�oxacin as a “speci�ed product” under the DPCO. In January 2015, the NPPA �led a counter a�davit stating that the inclusion of Nor�oxacin was based upon the recommendation of a committee consisting of experts in the �eld. On 20 July 2016, the Supreme Court remanded the matters concerning the inclusion of Nor�oxacin as a “speci�ed product” under the DPCO back to the High Court for further proceedings. During the three months ended 30 September 2016, the Supreme Court dismissed the Special Leave Petition pertaining to the �xing of prices for Nor�oxacin formulations.

Litigation relating to Cardiovascular and Anti-diabetic formulations

During the three months ended 31 March 2017, the NPPA issued notices to the Company demanding payments relating to the foregoing products for the allegedly overcharged amounts, along with interest. On 13 July 2017, in response to a writ petition which the Company had �led, the Delhi High Court set aside all the demand notices of the NPPA and directed the NPPA to provide a personal hearing to the Company and pass a speaking order. A personal hearing in this regard was held on 21 July 2017. On 27 July 2017, the NPPA passed a speaking order along with the demand notice directing the Company to pay an amount of 776. On 3 August 2017, the Company �led a writ petition challenging the speaking order and the demand notice. Upon hearing the matter on 8 August 2017, the Delhi High Court stayed the operation of the demand order and directed the Company to deposit 100 and furnish a bank guarantee for 676. Pursuant to the order, the Company deposited 100 on 13 September 2017 and submitted a bank guarantee of ` 676 dated 15 September 2017 to the Registrar General, Delhi High Court. On 22 November 2017, the Delhi High Court directed the Union of India to �le a �nal counter a�davit within six weeks, subsequent to which the Company could �le a rejoinder. On 10 May 2018, the counter a�davit was �led by the Union of India. The Company subsequently �led a rejoinder and both were taken on record by the Delhi High Court. The matter has been adjourned to 3 August 2021 for hearing.

Based on its best estimate, the Company has recorded a provision of ` 310 under “Selling, and other expenses” as a potential liability for sale proceeds in excess of the noti�ed selling prices, including the interest thereon, and believes that the likelihood of any further liability that may arise on account of penalties pursuant to this litigation is not probable.

Other product and patent related matters

Child resistant packaging matter complaint under the False Claims Act (“FCA”)

In May 2012, the Consumer Product Safety Commission (the “CPSC”) requested that Dr. Reddy’s Laboratories Inc., a wholly-owned subsidiary of the Company in the United States, provide certain information with respect to compliance with requirements of special packaging for child resistant blister packs for 6 products sold by the Company in the United States during the period commencing in 2002 through 2011. The Company provided the requested information. The CPSC subsequently alleged in a letter dated 30 April 2014 that the Company had violated the Consumer Product Safety Act (the “CPSA”) and the Poison Prevention Packaging Act (the “PPPA”) and that the CPSC intended to seek civil penalties. Speci�cally, the CPSC asserted, among other things, that from or about 14 August 2008 through 1 June 2012, the Company sold prescription drugs having unit dose packaging that failed to comply with the CPSC's special child resistant packaging regulations under the PPPA and failed to issue general certi�cates of conformance. In addition, the CPSC asserted that the Company violated the CPSA by failing to immediately advise the CPSC of the alleged violations. The Company disagrees with the CPSC’s allegations.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.32 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

Simultaneously, the U.S. Department of Justice (the “DOJ”) began to investigate a sealed complaint which was �led in the United States District Court for the Eastern District of Pennsylvania under the Federal False Claims Act (“FCA”) related to these same issues (the “FCA Complaint”). The Company cooperated with the DOJ in its investigation. The DOJ and all States involved in the investigation declined to intervene in the FCA Complaint. On 10 November 2015, the FCA Complaint was unsealed and the plainti� whistleblowers, who are two former employees of the Company, proceeded without the DOJ’s and applicable States’ involvement. The unsealed FCA Complaint relates to the 6 blister pack products originally subject to the investigation and also 38 of the Company’s generic prescription products sold in the U.S. in various bottle and cap packaging.

The Company �led its response to the FCA Complaint on 23 February 2016 in the form of a motion to dismiss for failure to state a claim upon which relief can be granted. On 26 March 2017, the Court granted the Company’s motion to dismiss, dismissing the FCA Complaint and allowing the plainti�s one more chance to re�le this complaint in an attempt to plead sustainable allegations.

On 29 March 2017, the plainti�s �led their �nal amended FCA Complaint, which the Company opposed and during the three months ended 31 March 2018, the Company obtained dismissal of the FCA Complaint with prejudice. The plainti�s �led a petition with the Court requesting that the Court reconsider its decision to dismiss the FCA Complaint with prejudice, and that request was denied.

The parallel investigation by the CPSC under the CPSA and the PPPA was referred by the CPSC to the DOJ’s o�ce in Washington, D.C. in April 2016, with the recommendation that the DOJ initiate a civil penalty action against the Company. The CPSC matter referred to the DOJ relates to �ve of the blister pack products.

On 18 January 2018, the Company and the DOJ entered into a settlement of the action and agreed to a consent decree providing for a civil penalty of US$5 million (` 319), and injunctive relief. The settlement was without adjudication of any issue of fact or law, and the Company has not admitted any violations of law pursuant to this settlement.

During the three months ended 31 March 2018, the Company obtained dismissal of the FCA Complaint with prejudice. The plainti�s subsequently �led a petition with the Court requesting that the Court reconsider its decision to dismiss the FCA Complaint with prejudice, and that request was denied.

In June 2018, the plainti�s �led their Notice of Appeal to the Third Circuit Court of Appeals. During the three months ended September 2018, the plainti�s and the DOJ settled and thus this appeal was dismissed. The plainti�s then �led an application for recovery of attorneys� fees from the Company under the "alternative remedy doctrine." The Company made opposing �lings to this and in response the plainti�s withdrew their application.

The Company believes that the likelihood of any liability that may arise on account of the FCA Complaint is not probable. Accordingly, no provision has been made in these consolidated �nancial statements.

Namenda Litigation

In August 2015, Sergeants Benevolent Assoc. Health & Welfare Fund (“Sergeants”) �led suit against the Company in the United States District Court for the Southern District of New York. Sergeants alleged that certain parties, including the Company, violated federal antitrust laws as a consequence of having settled patent litigation related to the Alzheimer’s drug Namenda® (memantine) tablets during a period from about 2009 until 2010. Sergeants seeks to represent a class of “end payor” purchasers of Namenda® tablets (i.e., insurers, other third-party payors and consumers). Sergeants seeks damages based upon an allegation made in the complaint that the defendants entered into patent settlements regarding Namenda® tablets for the purpose of delaying generic competition and facilitating the brand innovator’s attempt to shift sales from the original immediate release product to the more recently introduced extended release product.

On 23 August 2020, the Company and certain other defendants entered into a settlement agreement. The settlement agreement calls for the dismissal with prejudice of the claims brought by the plainti� on behalf of the putative class, in exchange for the payment of US$0.4 million. The Company paid that amount into escrow. The Court preliminarily approved the settlement on 5 October 2020. The settlement agreement is contingent upon �nal court approval. The settlement agreement explicitly disclaims any liability or wrongdoing.

Following the settlement agreement, the Company recognised such amount in the statement of pro�t and loss for the three months ended

30 September 2020.

On 5 November 2019 plainti�s MSP Recovery Claims, Series LLC and MSPA Claims 1, LLC �led suit against the Company and other drug manufacturers in the United States District Court for the Southern District of New York. The claims in this complaint were similar in nature to the claims in the Sergeants lawsuit, and those cases were coordinated for discovery purposes. On 14 April 2020, with the consent of the Company and the other defendants, plainti�s MSP Recovery Claims, Series LLC and MSPA Claims 1, LLC voluntarily dismissed their claims without prejudice.

Other class action complaints containing similar allegations to the Sergeants complaint have also been �led in the U.S. District Court for the Southern District of New York. However, apart from the Sergeants case described above, there are no such class actions that are pending and that name the Company as a defendant.

In addition, the State of New York �led an antitrust case in the U.S. District Court for the Southern District of New York. The case brought by the State of New York contained some (but not all) of the allegations set forth in the class action complaints, but the Company was not named as a party. The case brought by the State of New York was dismissed by stipulation on 30 November 2015.

The Company believes that the likelihood of any liability, apart from the settlement payment described above, that may arise on account of alleged violation of federal antitrust laws is not probable. Accordingly, no provision has been made in these consolidated �nancial statements.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.32 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

Ranitidine recall and Litigation

On 1 October 2019, the Company initiated a voluntary nationwide retail (at the retail level for over-the-counter products and at the consumer level for prescription products) of its ranitidine medications sold in the United States due to the presence of N-Nitrosodimethylamine (“NDMA”) above levels established by the U.S. FDA. On 1 November 2019, the U.S. FDA issued a statement indicating that it had found levels of NDMA in ranitidine from its testing generally that were “similar to the levels you would expect to be exposed to if you ate common foods like grilled or smoked meats.” See https://www.fda.gov/news-events/press-announcements/statement-new-testing-results-including-low-levels-impurities-ranitidine-drugs. On 1 April 2020, the U.S. FDA issued a press release announcing that it was requesting manufacturers to withdraw all prescription and over-the-counter ranitidine drugs from the market immediately.

Individual federal court personal injury lawsuits, as well as various class actions, have been transferred to the In re Zantac (Ranitidine) Products Liability Litigation Multidistrict Litigation in the Southern District of Florida, MDL-2924 (“MDL-2924”). The Company and/or one or more of its U.S. subsidiaries have been named as a defendant in over 250 lawsuits pending in the MDL-2924. A census registry established in the MDL-2924 includes tens of thousands of claimants who have not �led complaints but are presenting claims for consideration in the MDL-2924 against the many pharmaceutical manufacturers, distributors and retailers which are defendants in the MDL-2924. The MDL-2924 also involves a proposed nationwide consumer class action and a proposed nationwide class action for medical monitoring. A third-party payor class action was dismissed without prejudice and has been appealed by plainti�s to the U.S. Court of Appeals for the Eleventh Circuit.

On 31 December 2020, the MDL-2924 Court ruled on multiple motions to dismiss in the MDL-2924 and granted the generic manufacturers’ (the Company is a generic manufacturer) motion to dismiss based on federal preemption. The plainti�s’ failure-to-warn and design defect claims against the Company were dismissed with prejudice, but the Court permitted plainti�s to attempt to replead several claims/theories. Plainti�s have �led their amended complaints and the defendants, including the Company, �led motions to dismiss seeking dismissal of all claims against them on 24 March 2021. The brie�ngs and arguments as to the latest round of motions to dismiss were completed and the parties are continue to engage in discovery consistent with orders from the MDL-2924 Court.

There are three ranitidine-related actions currently pending against the Company in state courts. The New Mexico State Attorney General �led suit against the Company’s U.S. subsidiary, and multiple other manufacturers and retailers. The State of New Mexico asserted claims of statutory and common law public nuisance and negligence claims against the Company. The Company joined in an e�ort to transfer the case from the Santa Fe County Court to the MDL-2924, but the case was remanded by the MDL-2924 Court to the Santa Fe County Court. Plainti� �led an amended complaint on 16 April 2021, and a brie�ng schedule has been entered pursuant to which the defendants will move to dismiss the case.

In November 2020, the City of Baltimore �led a similar action against the Company’s U.S. subsidiary, and multiple other manufacturers and retailers. The City of Baltimore asserts public nuisance and negligence claims against the Company. The City of Baltimore action also was transferred to the MDL and subsequently was remanded to the Circuit Court of Maryland by the MDL Court. The City of Baltimore intends to �le an amended complaint and the defendants will then move to dismiss the case.

In January 2021, the Company was served in a Proposition 65 case �led by the Center for Environmental Health in the Superior Court of Alameda County, California. The plainti� purports to bring the case on behalf of the people of California and alleges that the Company violated Proposition 65, a California law requiring manufacturers to disclose the presence of carcinogens in consumer products. The Company and other defendants have �led demurrers (motions to dismiss) in the case, and on 7 May 2021 the Court granted all such demurrers without leave to amend the pleadings. The People of California have the right to appeal this decision.

The Company believes that all of the aforesaid complaints and asserted claims are without merit and it denies any wrongdoing and intends to vigorously defend itself against the allegations. Any liability that may arise on account of these claims is unascertainable at this time. Accordingly, no provision was made in these consolidated �nancial statements of the Company.

Class Action and Other Civil Litigation on Pricing/Reimbursement Matters

On 30 December 2015 and on 4 February 2016, respectively, a class action complaint (the “First Pricing Complaint”) and another complaint (not a class action) (the “Second Pricing Complaint”) were �led against the Company and eighteen other pharmaceutical defendants in State Court in the Commonwealth of Pennsylvania. In these actions, the class action plainti�s allege that the Company and other defendants, individually or in some cases in concert with one another, have engaged in pricing and price reporting practices in violation of various Pennsylvania state laws. More speci�cally, the plainti�s allege that: (1) the Company provided false and misleading pricing information to third party drug compendia companies for the Company’s generic drugs, and such information was relied upon by private third party payers that reimbursed for drugs sold by the Company in the United States, and (2) the Company acted in concert with certain other defendants to unfairly raise the prices of generic divalproex sodium ER (bottle of 80, 500 mg tablets ER 24H) and generic pravastatin sodium (bottle of 500, 10 mg tablets).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.32 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

United States Antitrust Multi-District Litigation:

The following cases against the Company’s U.S. subsidiary, Dr. Reddy’s Laboratories, Inc., have been �led and are pending and consolidated in In re Generic Pharmaceutical Pricing Antitrust Litigation, MDL 2724, 14-MD-2724 (Eastern District of Pennsylvania), Multi District Litigation (“MDL”) in the Eastern District of Pennsylvania (“MDL-2724”):

a) U.S. States Attorneys General Antitrust Complaints:

On 30 October 2017, the Attorneys General of forty-nine U.S. States, the Commonwealth of Puerto Rico and the District of Columbia, �led an Amended Complaint in the United States District Court for the Eastern District of Pennsylvania, against eighteen generic pharmaceutical companies (including the Company’s U.S. subsidiary) with respect to �fteen generic drugs, alleging that the Company’s U.S. subsidiary and the other named defendants engaged in a conspiracy to �x prices and to allocate bids and customers in the United States in the sale of the �fteen named drugs. The Company’s U.S. subsidiary is speci�cally named as a defendant with respect to two generic drugs (meprobamate and zoledronic acid), and is named as an alleged co-conspirator on an alleged “overarching conspiracy” with respect to the other thirteen generic drugs named. The Amended Complaint alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1, and the consumer protection and antitrust laws of each of the jurisdictions that are plainti�s.

The Amended Complaint seeks injunctive relief, statutory penalties, punitive damages, and recovery of treble damages, plus attorney’s fees and costs, against all named defendants on a joint and several basis, on behalf of the plainti� jurisdictions and their citizens and inhabitants. The Company denies any wrongdoing and intends to vigorously defend against the claims asserted.

On 10 May 2019, the Attorneys General of forty-nine U.S. States, the Commonwealth of Puerto Rico and the District of Columbia, �led a Complaint in the United States District Court for the District of Connecticut against twenty-one generic pharmaceutical companies (including the Company’s U.S. subsidiary) and �fteen individual defendants, with respect to 116 generic drugs, alleging that the Company’s U.S. subsidiary and the other named defendants engaged in a conspiracy to �x prices and to allocate bids and customers in the United States in the sale of the 116 named drugs. Under the MDL rules, this action will be designated a related “tag along” action and will be transferred to and become a part of the MDL-2724. The Company’s U.S. subsidiary is speci�cally named as a defendant with respect to �ve generic drugs (cipro�oxacin �CL tablets, glimepiride tablets, oxaprozin tablets, paricalcitol and tizanidine), and is named as an alleged co-conspirator on an alleged “overarching conspiracy” with respect to the other thirteen generic drugs named. The Complaint alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1, and the consumer protection and antitrust laws of each of the jurisdictions that are plainti�s. The Complaint seeks injunctive relief, statutory penalties, punitive damages, and recovery of treble damages, plus attorney’s fees and costs, against all named defendants on a joint and several basis, on behalf of the plainti� jurisdictions and their citizens and inhabitants. The Company denies any wrongdoing and intends to vigorously defend against the claims asserted.

b) Divalproex Antitrust Class Action Cases Filed by Direct Payor Plainti�s, End Payor Plainti�s and Indirect Reseller Plainti�s Classes: Since 17 November 2016, certain class action complaints on behalf of Direct Purchaser Plainti�s, Indirect Reseller Plainti�s and End Payor Plainti�s classes were �led against the Company’s U.S. subsidiary, Dr. Reddy’s Laboratories, Inc., and a number of other pharmaceutical defendants in the United States District Court for the District of Pennsylvania alleging that the Company’s U.S. subsidiary and the other named defendants have engaged in a conspiracy to �x prices and to allocate bids and customers in the sale of divalproex ER tablets in the United States.

The actions allege violations of Section 1 of the Sherman Act, 15 U.S.C. §1, and of state consumer protection and antitrust laws, and asserts claims of unjust enrichment, under a total of thirty-one States and the District of Columbia. The actions seek injunctive relief and recovery of treble damages, punitive damages, plus attorney’s fees and costs, on a joint and several basis, on behalf of the plainti� classes. The Company denies any wrongdoing and intends to vigorously defend against these class action claims.

c) Pravastatin Antitrust Class Action Cases Filed by Direct Payor Plainti�s, End Payor Plainti�s and Indirect Reseller Plainti�s Classes: Since 17 November 2016, certain class action complaints on behalf of Direct Purchaser Plainti�s, Indirect Reseller Plainti�s and End Payor Plainti�s classes were �led against the Company and a number of other pharmaceutical defendants in the United States District Court for the District of Pennsylvania, alleging that the Company’s U.S. subsidiary and the other named defendants engaged in a conspiracy to �x prices and to allocate bids and customers in the sale of pravastatin sodium tablets in the United States. The Company’s U.S. subsidiary has been dismissed from these actions, without prejudice, in exchange for a tolling agreement with the plainti�s suspending the statute of limitations as to the claims asserted. The Company denies any wrongdoing and intends to vigorously defend against these claims.

d) Antitrust “Overarching Conspiracy” Cases Filed by Direct Payor Plainti�s, End Payor Plainti�s and Indirect Reseller Plainti�s Classes:

In June 2018, three class action complaints were �led in the MDL-2724 by Direct Purchaser Plainti�s, Indirect Resellers Plainti�s and End Payor Plainti�s classes. All three complaints allege conspiracies in restraint of trade in violation of Sections 1 of the Sherman Act, and violations of thirty-one State antitrust statutes and consumer protection statutes, and asserts claims of unjust enrichment seeking injunctive relief, recovery of treble damages, punitive damages, attorney's fees and costs against all named defendants on a joint and several basis. They allege an “overarching conspiracy” among the named defendants involving �fteen drugs and, with slight variations, name approximately twenty-�ve generic pharmaceutical manufacturers including the Company’s U.S. subsidiary, Dr. Reddy’s Laboratories, Inc.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.32 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

The drug-speci�c allegations against the Company’s U.S. subsidiary involve two of the �fteen drugs, meprobamate and zoledronic acid. Plainti�s also allege that the Company’s U.S. subsidiary (as well as all other manufacturers named) were part of a larger “overarching conspiracy” as to all of the drugs named in the complaints. The complaint alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1, and violations of thirty-one States’ antitrust statutes and consumer protection statutes, and asserts claims of unjust enrichment. The complaint seeks injunctive relief, recovery of treble damages, punitive damages, attorney's fees and costs against all named defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.

e) Antitrust Case Filed by The Kroger Co., Albertsons Companies, LLC, and H.E. Butt Grocery Company, L.P.:

On 22 January 2018, each of the Kroger Co., Albertsons Companies, LLC, and H.E. Butt Grocery Company, L.P., �led a complaint against the Company’s U.S. subsidiary and thirty-one other companies alleging that they had engaged in a conspiracy to �x prices and to allocate bids and customers in the United States in the sale of the thirty named generic drugs. The Company’s U.S. subsidiary is speci�cally named as a defendant with respect to three generic drugs (divalproex ER, meprobamate and zoledronic acid), and is named as an alleged co-conspirator on an alleged “overarching conspiracy” claim with respect to the other generic drugs named.

This action alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1, and seeks injunctive relief and recovery of treble damages, punitive damages, plus attorney’s fees and costs, against all named defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these class action claims.

f) Antitrust Case Filed by Humana Inc.: On 3 August 2018, Humana, Inc., �led a complaint against the Company’s U.S. subsidiary and thirty-nine other companies alleging that they had engaged in a conspiracy to �x prices and to allocate bids and customers in the United States in the sale of twenty-nine named generic drugs. On 15 December 2020, Humana, Inc., �led an Amended Complaint encompassing �fty-one defendants and a total of one hundred forty nine drugs. In the Amended Complaint, the Company’s U.S. subsidiary is speci�cally named as a defendant with respect to eighteen generic drugs: allopurinol, cipro�oxacin ER, eszopiclone, �uconazole, glimepiride, isotretinoin, lamotrigine ER, meprobamate, metroprolol succinate ER, montelukast, omeprazole sodium bicarbonate, oxaprozin, paricalcitol, ranitidine, sumatriptan, tizanidine, valganciclovir, and zoledronic acid. The Company’s subsidiary is also named as a co-conspirator on an alleged “overarching conspiracy” claim with respect to the other generic drugs named. The complaint also alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1, and violations of thirty-one States’ antitrust statutes and consumer protection statutes, and asserts claims of unjust enrichment. The complaint seeks injunctive relief, recovery of treble damages, punitive damages, attorney's fees and costs against all named defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.

g) Antitrust Case Filed by Marion Diagnostic Center, LLC, and Marion Healthcare, LLC:

On 25 September 2018, Marion Diagnostic Center, LLC, and Marion Healthcare, LLC, �led a complaint in the MDL-2724, on behalf of themselves and a class of all direct purchasers from distributors, against the Company’s U.S. subsidiary and twenty-two other defendants, including a major distributor of pharmaceutical products, involving a total of sixteen generic drugs, alleging an “overarching conspiracy” to �x prices and to rig bids and allocate customers with respect to sixteen generic drugs. The Company’s U.S. subsidiary is speci�cally named with respect to two drugs: meprobamate and zoledronic acid. Plainti�s also allege that the Company’s U.S. subsidiary (as well as all other manufacturers named) were part of a larger “overarching conspiracy” as to all of the drugs named in the complaints. The complaint alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1, and violations of twenty-four States’ antitrust statutes and consumer protection statutes, and asserts claims of unjust enrichment. The complaint seeks injunctive relief, recovery of treble damages, punitive damages, attorney's fees and costs against all named defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.

h) Antitrust Case Filed by United Healthcare Services, Inc.:

On 16 January 2019, United Healthcare Services, Inc., �led a complaint against the Company’s U.S. subsidiary and forty-two other defendants, involving a total of thirty generic drugs, alleging an “overarching conspiracy” to �x prices and to rig bids and allocate customers with respect to the thirty drugs. The Company’s U.S. subsidiary is speci�cally named with respect to four drugs: divalproex ER, meprobamate, pravastatin and zoledronic acid. Plainti�s also allege that the Company’s U.S. subsidiary (as well as all other manufacturers named) were part of a larger “overarching conspiracy” as to all of the drugs named in the complaints. The complaint alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1, and violations of the thirty States’ antitrust laws and consumer protection statutes, and asserts claims of unjust enrichment. The complaint seeks injunctive relief, recovery of treble damages, punitive damages, and attorney's fees and cost against all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.

i) Pennsylvania Court of Common Pleas Praecipe For a Writ of Summons Filed by 87 End Payor Entities consisting of Blue Cross Blue Shield entities and other health insurance companies and HMO entities:

On 19 July 2019, a Praecipe For a Writ of Summons for a tort action was �led in the Pennsylvania Court of Common Pleas of Philadelphia County, First Judicial District of Pennsylvania, Civil Trial Division, by 87 Blue Cross Blue Shield entities, and other health insurance companies and HMO entities, against the Company’s U.S. subsidiary and 69 other defendants (consisting of 51 other pharmaceutical companies and 17 individuals). These 87 plainti�s had been previously encompassed by the End Payor Plainti� class actions in the MDL-2724. Only a Praecipe of Writ of Summons has been �led. No complaint has been �led and, therefore, the potential claims have not been asserted or delineated in any manner, including what drugs any such claims may relate to. A complaint may, at some point, be �led encompassing the claims asserted by the End Payor Plainti�s in the MDL-2724 actions. On 12 December 2019, an Order of the Court of Common Pleas placed the matter “in Deferred Status Pending Further Developments in Related Federal Multidistrict Litigation.” Because no Complaint has been �led setting forth any claims, and because the action has been placed into Deferred Status, no response is required by the Company’s subsidiary at this time.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.32 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

j) Antitrust Case Filed by United Healthcare Services, Inc.: On 11 October 2019, United Healthcare Services, Inc. �led a second complaint (which substantially tracks the second complaint �led by the State Attorneys General on 10 May 2019) against the Company’s U.S. subsidiary and twenty-four other defendants in the United States District Court for the District of Minnesota with respect to 116 generic drugs, alleging that the Company’s U.S. subsidiary and the other named defendants engaged in a conspiracy to �x prices and to allocate bids and customers in the United States in the sale of the 116 named drugs. Under the MDL rules, this action will be designated a related “tag along” action and will be transferred to and become a part of the MDL-2724. The Company’s U.S. subsidiary is speci�cally named as a defendant with respect to �ve generic drugs (cipro�oxacin HCL tablets, glimepiride tablets, oxaprozin tablets, paricalcitol and tizanidine), and is named as an alleged co-conspirator on an alleged “overarching conspiracy” with respect to the other generic drugs named. The complaint alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1, and violations of the Minnesota antitrust laws and various other state antitrust and consumer protection laws, and asserts claims for unjust enrichment.

The complaint seeks injunctive relief, statutory penalties, punitive damages, and recovery of treble damages, plus attorney’s fees and costs, against all named defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.

k) Antitrust “Overarching Conspiracy” Cases Filed by Direct Payor Plainti�s, End Payor Plainti�s and Indirect Reseller Plainti�s Classes: On 19 December 2019, a new class action complaint was �led by the End Payor Plainti�s. The complaint alleges a conspiracy in restraint of trade in violation of Section 1 of the Sherman Act, 15 U.S.C. §1, and violations of twenty-eight States’ antitrust statutes and twenty-nine States’ consumer protection statutes, and asserts claims of unjust enrichment. The complaint seeks injunctive relief, recovery of treble damages, punitive damages, attorney’s fees and costs. The complaint alleges an “overarching conspiracy” among the named defendants involving one hundred and thirty-�ve drugs and, with slight variations, names approximately thirty-six generic pharmaceutical manufacturers, including the Company’s U.S. subsidiary.

The drug-speci�c allegations against the Company’s U.S. subsidiary involve eight of the one hundred thirty-�ve drugs, including allopurinol, cipro�oxacin HCL, �uconazone, glimepiride, oxaprozine, paricalcitol, ranitidine HCL and tizanidine. The Company denies any wrongdoing and intends to vigorously defend against these claims.

On 19 December 2019, a new class action complaint was �led by certain pharmacy and hospital indirect purchaser plainti�s. The complaint alleges a conspiracy in restraint of trade in violation of Sections 1 and 3 of the Sherman Act, 15 U.S.C. §1 and §3, and violations of forty-three States’ antitrust statutes and consumer protection statutes, and asserts claims of unjust enrichment. The complaint seeks injunctive relief, recovery of treble damages, punitive damages, attorney’s fees and costs against all named defendants on a joint and several basis. The complaint alleges an “overarching conspiracy” among the named defendants involving one hundred and sixty-two drugs and, with slight variations, names approximately twenty-eight generic pharmaceutical manufacturers, including the Company’s U.S. subsidiary, as well as seven pharmaceutical distributor defendants and sixteen individual defendants.

The drug-speci�c allegations against the Company’s U.S. subsidiary involve nineteen drugs: allopurinol, capecitabine, cipro�oxacin HCL, divalproex ER, eszopiclone, feno�brate, glimepiride, isotretinoin, lamotrigine ER, meprobamate, metoprolol ER, montelukast granules, omeprazole sodium bicarbonate, oxaprozine, paricalcitol, sumatriptan, tizanidine HCL, valganciclovir and zoledronic acid. The Company denies any wrongdoing and intends to vigorously defend against these claims.

l) Antitrust Case Filed by Fourteen New York State Counties; On 19 December 2019, a new class action complaint was �led by certain pharmacy and hospital indirect purchaser plainti�s. The complaint alleges a conspiracy in restraint of trade in violation of Sections 1 and 3 of the Sherman Act, 15 U.S.C. §1 and §3, and violations of forty-three States’ antitrust statutes and consumer protection statutes, and asserts claims of unjust enrichment. The complaint seeks injunctive relief, recovery of treble damages, punitive damages, attorney’s fees and costs against all named defendants on a joint and several basis. The complaint alleges an “overarching conspiracy” among the named defendants involving one hundred and sixty-two drugs and, with slight variations, names approximately twenty-eight generic pharmaceutical manufacturers, including the Company’s U.S. subsidiary as well as seven pharmaceutical distributor defendants and sixteen individual defendants. The drug-speci�c allegations against the Company’s U.S. subsidiary involve nineteen drugs: allopurinol, capecitabine, cipro�oxacin HCL, divalproex ER, eszopiclone, feno�brate, glimepiride, isotretinoin, lamotrigine ER, meprobamate, metoprolol ER, montelukast granules, omeprazole sodium bicarbonate, oxaprozine, paricalcitol, sumatriptan, tizanidine HCL, valganciclovir and zoledronic acid. The Company denies any wrongdoing and intends to vigorously defend against these claims.

m) Antitrust Case Filed by Health Care Services, Inc.:

On 11 December 2019, Health Care Services, Inc. �led a complaint against the Company’s U.S. subsidiary and thirty-eight other defendants, involving a total of one hundred twenty-eight generic drugs, alleging an “overarching conspiracy” to �x prices and to rig bids and allocate customers with respect to these drugs. On 15 December 2020, Health Care Services �led an Amended Complaint naming a total of one hundred seventy drugs. In the Amended Complaint, the Company’s U.S. subsidiary is speci�cally named with respect to nineteen drugs: allopurinol, cipro�oxacin HCL, divalproex ER, eszopiclone, �uconazole, glimepiride, isotretinoin, lamotrigine ER, meprobamate, metroprolol succinate ER, montelukast, omeprazole sodium bicarbonate, oxaprozine, paricalcitol, ranitidine, sumatriptan, tizanidine, valganciclovir and zoledronic acid. Plainti�s allege that the Company’s U.S. subsidiary (as well as all other manufacturers named) were part of a larger “overarching conspiracy” as to all of the drugs named in the complaint. The complaint also alleges violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §1 and §2, and violations of thirty-one States’ antitrust laws and twenty-seven States’ consumer protection statutes, and asserts claims of unjust enrichment. The complaint seeks injunctive relief, recovery of treble damages, punitive damages, and attorney’s fees and costs against all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.32 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

n) Antitrust Case Filed by MSP Recovery Claims, Series LLC, MAO-MSO Recovery II, LLC, and MSPA Claims I, LLC (collectively “MSP Recovery”), as Assignees of certain Medicare Advantage Plans:

On 16 December 2019, MSP Recovery �led a complaint against the Company’s U.S. subsidiary and twenty-�ve other defendants, involving a total of sixteen generic drugs, alleging an “overarching conspiracy” to �x prices and to rig bids and allocate customers with respect to the sixteen drugs. The Company’s U.S. subsidiary is speci�cally named with respect to one drug: Divalproex ER. Plainti�s also allege that the Company’s U.S. subsidiary (as well as all other manufacturers named) were part of a larger “overarching conspiracy” as to all of the drugs named in the complaint.

The complaint alleges violations of Sections 1 and 3 of the Sherman Act, 15 U.S.C. §1 and §3, and violations of twenty-eight States’ antitrust laws and twenty-three States’ consumer protection statutes, and asserts claims of unjust enrichment. The complaint seeks injunctive relief, recovery of treble damages, punitive damages, and attorney’s fees and costs against all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.

o) Antitrust Case Filed by Molina Healthcare Inc.:

On 27 December 2019, Molina Healthcare Inc. �led a complaint against the Company’s U.S. subsidiary and forty-one other defendants, involving a total of one hundred twenty-eight generic drugs, alleging an “overarching conspiracy” to �x prices and to rig bids and allocate customers with respect to these drugs. On 15 December 2020, Molina Healthcare �led an Amended Complaint against a total of �fty-eight defendants involving one hundred eighty four drugs. In the Amended Complaint, the Company’s U.S. subsidiary is speci�cally named with respect to nineteen drugs: allopurinol, cipro�oxacin, divalproex ER, eszopiclone, �uconazole, glimepiride, isotretinoin, lamotrigine ER, meprobamate, metroprolol succinate ER, montelukast, omeprazole sodium bicarbonate, oxaprozine, paricalcitol, ranitidine, sumatriptan, tizanidine, valganciclovir and zoledronic acid. Plainti�s allege that the Company’s U.S. subsidiary (as well as all other manufacturers named) were part of a larger “overarching conspiracy” as to all of the drugs named in the complaint. The complaint also alleges violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §1 and §2, and violations of eleven States’ antitrust laws and consumer protection statutes, and asserts claims of unjust enrichment. The complaint seeks injunctive relief, recovery of treble damages, punitive damages, and attorney’s fees and costs against all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.

p) Antitrust Case Filed by Harris Countv, Texas:

On 1 March 2020, Harris County, Texas �led a Complaint against the Company's U.S. Subsidiary and forty-two other defendants, involving a total of one hundred twenty-eight generic drugs, alleging an "overarching conspiracy" to �x prices and to rig bids and allocate customers with respect to the one hundred eighty-seven drugs. The case is in the process of being transferred to the MDL proceeding. The Company's U.S. subsidiary is speci�cally named with respect to twenty drugs: allopurinol, amoxicillin, cipro�oxacin HCL, divalproex ER, famotidine, feno�brate, �uconazole, �uoxetine, glimepiride, glycopyrrolate, levalbuterol meprobamate, naproxen, ondansetron, oxaprozine, pravastatin sodium, raloxifene HCL, ranitidine, tizanidine and zoledronic acid. Plainti�s also allege that the Company's U.S. subsidiary (as well as all other manufacturers named) were part of a larger "overarching conspiracy" as to all the drugs named in the complaints. The Complaint alleges violations of Sections 1 of the Sherman Act, 15 U.S.C. §1, violations of twenty-eight State's antitrust laws, violations of the Texas Deceptive Trade Practices Act and Texas Free Enterprise and Antitrust Act and asserts claims of unjust enrichment and civil conspiracy. The Complaint seeks injunctive relief, recovery of treble damages, punitive damages, disgorgement, and attorney's fees and costs against all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.

q) Pennsylvania Court of Common Pleas Praecipe For a Writ of Summons Filed by 7 End Payor Entities consisting of Blue Cross Blue Shield entities and other health insurance companies:

On 6 May 2020, a Praecipe For a Writ of Summons for a tort action was �led in the Pennsylvania Court of Common Pleas of Philadelphia County, First Judicial District of Pennsylvania, Civil Trial Division, by 7 Blue Cross Blue Shield entities and other health insurance companies, against the Company’s U.S. subsidiary and 69 other defendants (consisting of 51 other pharmaceutical companies and 17 individuals). These 7 plainti�s had been previously encompassed by the End Payor Plainti� class actions in the MDL-2724. Only a Praecipe of Writ of Summons has been �led. No complaint has been �led and, therefore, the potential claims have not been asserted or delineated in any manner, including what drugs any such claims may relate to. A complaint may, at some point, be �led encompassing the claims asserted by the End Payor Plainti� class actions in the MDL-2724 actions. It is anticipated that this action will be placed in Deferred Status Pending Further Developments in the related MDL-2724 case. Because no Complaint has been �led setting forth any claims, and because it is expected that the action will be placed into Deferred Status, no response is required by the Company’s subsidiary at this time.

r) Antitrust Case Filed by Cigna Corp.:

On 9 June 2020, Cigna Corp. �led a complaint against the Company’s U.S. subsidiary and forty-one other defendants, involving a total of one hundred forty generic drugs, alleging an “overarching conspiracy” to �x prices and to rig bids and allocate customers with respect to these drugs. On 15 December 2020, Cigna Corp. �led an Amended Complaint against a total of forty-two defendants encompassing a total of two hundred and thirty-nine drugs. In the Amended Complaint, the Company’s U.S. subsidiary is speci�cally named with respect to twelve drugs: allopurinol, cipro�oxacin HCL, divalproex ER, �uconazole, glimepiride, meprobamate, oxaprozine, paricalcitol, pravastatin, ranitidine, tizanidine and zoledronic acid. Plainti�s allege that the Company’s U.S. subsidiary (as well as all other manufacturers named) were part of a larger “overarching conspiracy” as to all of the drugs named in the complaint. The complaint also alleges violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §1 and §2, and violations of thirty-one States’ antitrust laws and twenty-nine States’ consumer protection statutes, and asserts claims of unjust enrichment. The complaint seeks injunctive relief, recovery of treble damages, punitive damages, and attorney’s fees and costs against all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.32 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

s) Antitrust Case Filed by Rite Aid Corporation and Rite Aid Hdqtrs. Corp.:

On 9 July 2020, Rite Aid Corporation and Rite Aid Hdqtrs Corp. �led a complaint on their own behalf, and as assignee of McKesson Corporation with regard to drugs sold by McKesson to Rite Aid, against the Company’s U.S. subsidiary and forty-six other defendants, involving a total of one hundred thirty-�ve generic drugs, alleging an “overarching conspiracy” to �x prices and to rig bids and allocate customers with respect to these drugs. On 15 December 2020, Rite Aid �led an Amended Complaint against a total of �fty-�ve defendants involving a total of one hundred eighty eight drugs. In the Amended Complaint, the Company’s U.S. subsidiary is speci�cally named with respect to eleven drugs: allopurinol, cipro�oxacin ER, divalproex ER, �uconazole, glimepiride, meprobamate, oxaprozine, paricalcitol, ranitidine, tizanidine and zoledronic acid. Plainti� alleges that the Company’s U.S. subsidiary was part of a larger “overarching conspiracy” with all other manufacturers named as to all of the drugs named in the complaint; and, alternatively, was part of an overarching conspiracy with eighteen of the defendants named with regard to forty-�ve of the drugs named. The complaint also alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1. The complaint seeks injunctive relief, recovery of treble damages, and attorney’s fees and costs against all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.

t) Antitrust Complaint Filed by Su�olk County, New York:

On 27 August 2020, Su�olk County, New York, �led a complaint against the Company’s U.S. subsidiary and forty-six other defendants, involving a total of one hundred thirty generic drugs, alleging an “overarching conspiracy” to �x prices and to rig bids and allocate customers with respect to these drugs. The Company’s U.S. subsidiary is speci�cally named with respect to twelve drugs: cipro�oxacin ER, divalproex ER, feno�brate, �uconazole, glimepiride, glyburide, metformin, oxaprozin, pravastatin, ranitidine, tizanidine and zoledronic acid. Plainti�s allege that the Company’s U.S. subsidiary was part of a larger “overarching conspiracy” with all other manufacturers named as to all of the drugs named in the complaint. The complaint also alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1. The complaint seeks injunctive relief, recovery of treble damages, and attorney’s fees and costs against all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.

u) Antitrust Complaint Filed by J M Smith:

On 4 September 2020, J M Smith Corporation, as assignee of Burlington Drug Company, �led a complaint against the Company’s U.S. subsidiary and �fty other defendants, involving a total of one hundred thirty generic drugs, alleging an “overarching conspiracy” to �x prices and to rig bids and allocate customers with respect to these drugs. The Company’s U.S. subsidiary is speci�cally named with respect to eleven drugs: allopurinol, cipro�oxacin ER, divalproex ER, �uconazole, glimepiride, meprobamate, oxaprozin, paricalcitol ranitidine, tizanidine and zoledronic acid. Plainti�s allege that the Company’s U.S. subsidiary was part of a larger “overarching conspiracy” with all other manufacturers named as to all of the drugs named in the complaint; The complaint also alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1. The complaint seeks injunctive relief, recovery of treble damages, and attorney’s fees and costs against all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.

v) Antitrust Complaint Filed by Walgreen Company:

On 11 December 2020, Walgreen Company �led a complaint against the Company’s U.S. subsidiary and �fty-four other defendants, involving a total of one hundred eighty-eight generic drugs, alleging an “overarching conspiracy” to �x prices and to rig bids and allocate customers with respect to these drugs. Walgreen asserts claims on its own behalf and as assignee of Amerisource Bergen for drugs that Amerisource Bergen sold to Walgreen. The Company’s U.S. subsidiary is speci�cally named with respect to eleven drugs: allopurinol, cipro�oxacin ER, divalproex ER, �uconazole, glimepiride, meprobamate, oxaprozin, paricalcitol, ranitidine, tizanidine and zoledronic acid. Plainti� alleges that the Company’s U.S. subsidiary was part of a larger “overarching conspiracy” with all other manufacturers named as to all of the drugs named in the complaint. The complaint also alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1. The complaint seeks injunctive relief, recovery of treble damages, and attorney’s fees and costs against all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.

w) Antitrust Complaint Filed by CVS Pharmacy Inc.:

On 15 December 2020, CVS Pharmacy, Inc., �led a complaint against the Company’s U.S. subsidiary and �fty-seven other defendants, involving a total of four hundred four generic drugs, alleging an “overarching conspiracy” to �x prices and to rig bids and allocate customers with respect to these drugs. CVS Pharmacy asserts claims on its own behalf and as assignee of Cardinal Health and McKesson for drugs that Cardinal Health and McKesson sold to CVS Pharmacy, Inc. The Company’s U.S. subsidiary is speci�cally named with respect to seven drugs: cipro�oxacin ER, glimepiride, meprobamate, oxaprozin, pravastatin, tizanidine and zoledronic acid. Plainti� alleges that the Company’s U.S. subsidiary was part of a larger “overarching conspiracy” with all other manufacturers named as to all of the drugs named in the complaint. The complaint also alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1. The complaint seeks injunctive relief, recovery of treble damages, and attorney’s fees and costs against all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.

x) Antitrust Complaint Filed by Various Counties, Cities and Insurance Companies:

On 15 December 2020, a Complaint was �led in the Supreme Court of the State of New York, Su�olk County, by a group of 22 plainti�s against the Company and 55 other defendants. Plainti�s include 14 New York Counties (Albany, Cattaraugus, Chemung, Chenango, Columbia, Erie, Essex, Livingston, Monroe, Oneida, Onondaga, Otsego and Schuyler), the Town of Amherst, New York, the City of Poughkeepsie, New York, the City of Mobile, Alabama, the Counties of Osceola, Florida, and Shelby, Tennessee, and three insurance companies (Magnacare Insurance, Mebco and WCA Group Health Trust). The case has been removed to the United States District Court for the Eastern District of New York and is in the process of being transferred to, and consolidated with, the MDL-2724 litigation. The Complaint alleges an overarching conspiracy to �x prices and allocate markets for 294 generic drugs. Of the 294 drugs, DRL is speci�cally named with respect to 14 drugs: Allopurinol, Cipro�oxacin, Divalproex, Glimepiride, Glyburide Metformin, Isotretinoin, Lamotrigine, Meprobamate, Metoprolol Succinate, Oxaprozin, Paricalcitol, Tizanidine, Valganciclovir and Zoledronic Acid. The Complaint alleges violations of Sections 1 and 2 of the Sherman Act, as well as violations of the Antitrust Statutes of Alabama, Florida, New York and Tennessee and Unjust Enrichment claims under the laws of Alabama, Florida, New York and Tennessee. The complaint seeks injunctive relief, recovery of treble damages, and attorney’s fees and costs against all defendants on a joint and several basis. The Company denies any wrongdoing and intends to vigorously defend against these claims.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.32 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

Note on Antitrust Complaints

The Company believes that the aforesaid asserted claims in subsections a) though x) above are without merit and intends to vigorously defend itself against the allegations. Also, any liability that may arise on account of these claims is unascertainable. Accordingly, no provision was made in these consolidated �nancial statements of the Company.

Class Action under the Canadian Competition Act �led in Federal Court in Toronto, Canada

On 3 June 2020, a Class Action Statement of Claim was �led by an individual consumer in Federal Court in Toronto, Canada, against the Company’s U.S. and Canadian subsidiaries and 52 other generic drug companies. The Statement of Claim alleges an industry-wide, overarching conspiracy to violate Sections 45 and 46 of the Canadian Competition Act by conspiring to allocate the market, �x prices, and maintain the supply of generic drugs in Canada. The action is brought on behalf of a class of all persons, from 1 January 2012 to the present, who purchased generic drugs in the private sector. The Statement of Claim states that it seeks damages against all defendants on a joint and several basis, attorney’s fees and costs of investigation and prosecution. An Amended Statement of Claim was served on the Company’s U.S. and Canadian subsidiaries on 15 January 2021 and adds an additional 20 generic drug companies.

The Amended Statement of Claim also removes the identi�cation of defendant companies with conspiracy allegations regarding speci�c generic drugs and alleges a conspiracy to allocate the North America Market as to all generic drugs in Canada.

The Company believes that the asserted claims are without merit and intends to vigorously defend itself against the allegations. Any liability that may arise on account of this claim is unascertainable. Accordingly, no provision was made in these consolidated �nancial statements of the Company.

(ii) Civil litigation with Mezzion

(iii) Civil Litigation and Arbitration with Hatchtech Pty Limited

On 7 September 2015, the Company’s Swiss subsidiary, Dr. Reddy’s Laboratories, S.A., entered into an Asset Purchase Agreement (“APA”) with Hatchtech Pty Limited (“Hatchtech”). Pursuant to the APA, the Company’s subsidiary acquired from Hatchtech the patented product Xeglyze®, a topical lousicidal lotion for the treatment of head lice, and all rights in the product. The APA provides that the Company would seek to obtain New Drug Application (“NDA”) approval from the U.S. FDA, and would then commercialize the product in the United States. The APA speci�es certain milestone payments to be paid by the Company’s Swiss subsidiary to Hatchtech, including a US$ 20 million NDA approval milestone payment, a US$ 25 million ovicidal label approval milestone payment, and certain net sales milestone payments.

On 24 July 2020, the Company received the NDA approval from the US FDA for the Xeglyze product.

On 25 September 2020, the Company’s Swiss subsidiary �led an action in Delaware Chancery Court against Hatchtech to rescind the APA based upon claims of fraud, negligent misrepresentations and mutual mistake in connection with the acquisition of the product Xeglyze®, which was dismissed as being untimely under the Delaware statute of limitations.

On 8 October 2020, Hatchtech �led an arbitration demand against the Swiss Subsidiary before the American Arbitration Association (“AAA”), International Center for Dispute Resolution (“ICDR”), in New York City, claiming that it was owed US$ 20 million for the NDA approval milestone and US$ 25 million for the ovicidal label approval milestone.

On 25 January 2021, the Company’s Swiss subsidiary �led a �rit of Summons and Statement of Claim in �ictoria at Melbourne, Australia, against Hatchtech (as a nominal party), certain of its o�cers and a principal shareholder, alleging misrepresentations in connection with the acquisition of the Xeglyze® product and seeking damages and other relief.

Based on its best estimate, the Company had recorded a provision for potential liability of US$ 20 million relating to the AAA-ICDR arbitration �led by Hatchtech and believed that the likelihood of any further liability that may arise pursuant to that arbitration to be not probable.

On 14 June 2021, the Company received the arbitration decision and award issued by the AAA-ICDR in favour of Hatchtech in an amount of

US$ 46.25 million towards milestone payments, interest and fees.

As this constitutes an adjusting subsequent event, the consolidated �nancial statements for the year ended 31 March 2021 were adjusted to re�ect the impact of this event by recognising the balance amount of US$ 26.25 million in the consolidated statement of pro�t and loss.

Of the total amount of US$ 46.25 million awarded to Hatchtech, the amount of US$ 45 million (3,291) was recognised in the consolidated statement of pro�t and loss under the heading “Impairment of non-current assets” and the balance of US$ 1.25 million ( 91) was recognised under the heading, “Selling and general expenses”.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.32 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

(iv) Securities Class Action Litigation

On 15 May 2020, Dr. Reddy’s Laboratories Limited, Dr. Reddy’s Laboratories, Inc., and certain of the Company’s current or former directors and o�cers have entered into a Stipulation and Agreement of Settlement (the “Stipulation”) with lead plainti� the Public Employees’ Retirement System of Mississippi in the putative securities class action �led against the defendants in the United States District Court for the District of New Jersey. As consideration for the settlement of the class action, the Company has agreed to pay US$9 million.

In entering into the settlement, the defendants do not admit, and explicitly deny, any liability or wrongdoing of any kind.

Subject to the terms of the Stipulation, the settlement resolves the remainder of the litigation.

As the Company is adequately insured with respect to the aforesaid liability, the settlement did not have any impact on the Company’s consolidated statement of pro�t and loss for the year ended 31 March 2020.

The amount payable to the plainti�s on account of the settlement and the corresponding receivable from the insurer have been presented under “other current �nancial assets” and “other current �nancial liabilities”, respectively, in the consolidated balance sheet of the Company as at 31 March 2020.

On 23 December 2020, the court issued a �nal order and judgement approving the settlement. Pursuant to the settlement/court order, the escrow was funded on 4 January 2021. The e�ective date of the settlement occurred on 1 February 2021, upon transfer of the settlement fund balance into the �nal escrow account. As the transfer of funds to the �nal escrow account constitutes settlement of liability, the amount of liability has been derecognised during the three months ended 31 March 2021.

(v) Internal Investigation

The Company has commenced a detailed investigation into an anonymous complaint. The complaint alleges 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, speci�cally the US Foreign Corrupt Practices Act. A U.S. Law firm is conducting the investigation at the instruction of a committee of the Company’s Board of Directors. The investigation is ongoing. The Company has disclosed the matter to the US Department of Justice, Securities and Exchange Commission and Securities Exchange Board of India. While the matter may result in government enforcement actions against the Company in the United States and/or foreign jurisdictions, which could lead to civil and criminal sanctions under relevant laws, the probability of such action and the outcome are not reasonably ascertainable at this time.

(vi) Other matters

Civil Investigative Demand from the O�ce of the Attorne� �eneral� State of �e�as

On or about 10 November 2014, Dr. Reddy’s Laboratories, Inc., one of the Company’s subsidiaries in the United States, received a Civil Investigative Demand (“CID”) from the O�ce of the Attorney General, State of Texas (the “Texas AG”) requesting certain information, documents and data regarding sales and price reporting in the U.S. marketplace of certain products for the period of time between 1 January 1995 and the date of the CID. The Company responded to all of the Texas AG’s requests to date.

Subpoena duces tecum from the O�ce of the Attorne� �eneral� California

On 3 November 2014, Dr. Reddy’s Laboratories, Inc. received a subpoena duces tecum to appear before the O�ce of the Attorney General, California (the “California AG”) and produce records and documents relating to the pricing of certain products. A set of �ve interrogatories related to pricing practices was served as well. On 18 July 2016, the California AG sent a letter to inform Dr. Reddy’s Laboratories, Inc. that, in light of the information which had been provided, no further information would be requested at such time in response to this subpoena.

Subpoenas from the Antitrust Division of the U.S. Department of Justice (“DOJ”) and the o�ce of the Attorne� �eneral for the State of Connecticut On 6 July 2016 and 7 August 2016, Dr. Reddy’s Laboratories, Inc. received subpoenas from the DOJ (Anti-trust Division) and the o�ce of the Attorney General for the State of Connecticut, respectively, seeking information relating to the marketing, pricing and sale of certain of our generic products and any communications with competitors about such products. On 15 May 2018, another subpoena was served on Dr. Reddy’s Laboratories, Inc. by the DOJ (False Claims Division) seeking similar information. The Company has been cooperating, and intends to continue to fully cooperate, with these inquiries.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.32 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

Civil Investigative Demand from the Civil Division of the DOJ

On 15 May 2018, Dr. Reddy’s Laboratories, Inc. received a Civil Investigative Demand from the Civil Division of the DOJ, enquiring whether there have been any violations of the U.S. False Claims Act. This query arose from allegations that generic pharmaceutical manufacturers, including us, have engaged in market allocation or price �xing agreements, or paid illegal remuneration, and caused false claims to be submitted in violation of the U.S. False Claims Act. The Company has been cooperating, and intends to continue to fully cooperate with the DOJ in responding to the demand and cooperate with the investigation.

(vii) Environmental matters

Land pollution

The NGT has also permitted the alleged polluting industries to appoint a person on their behalf in the Fact Finding Committee. However, the Company, along with the alleged polluting industries, has challenged the constitution and composition of the Fact Finding Committee. The NGT has directed that until all the applications challenging the constitution and composition of the Fact Finding Committee are disposed of, the Fact Finding Committee shall not commence its operation.

The appeal came up for hearing before the High Court of Hyderabad on 25 October 2018 and has been adjourned for further hearing.

On 24 April 2019, based upon the judgement of the NGT, Chennai dated 24 October 2017, the Government of Telangana has issued GO.Ms. No. 24 of 2019 that allows for expansion of production of all kinds of existing industrial units located within the stretch of Patancheru – Bollaram upon depositing an amount equivalent to 1% of the annual turnover of the respective unit for the concluded �scal year i.e., 31 March 2019. Accordingly, the Company made a provision of ` 29.4, representing the probable cost of expansion, during the year ended 31 March 2019.

During the three months ended 30 September 2019, the Telangana State Pollution Control Board (“TSPCB”) has issued Operational Guidelines basis the NGT, Chennai Order dated 24 October 2017, G.O.Ms. No. 24 dated 24 April 2019 and G.O.Ms. No. 31 dated 24 May 2019 and sought to recover retrospectively an amount of 0.5% of the annual turnover from the �scal years 2016-2017 to 2018-2019 for all the industrial units situated in Patancheru and Bollaram for the purposes of restoration of the said e�ected area. The Company has four industrial units situated in Patancheru and Bollaram. The Consent For Operation (“CFO”) for change of product mix application �led by one of the industrial unit of the Company has been recommended for issuance of CFO with change of product mix only upon payment of 0.5% of the annual turnover from the �scal years 2016-2017 to 2018-2019 to the TSPCB. The Company intends to vigorously defend itself against the Operational Guidelines.

In November 2019, demand notices were issued by the TSPCB for collection of Corpus Fund of 0.5 % as remediation fee on the previous year turnover as per Operational Guidelines dated 3 August 2019 issued by TSPCB under the guise of G.O.Ms No. 24 dated 24 April 2019 and G.O.Ms No. 31 dated 24 May 2019 and basis the judgement of NGT, Chennai dated 24 October 2017 for the �scal years 2015-2016 to 2018-2019 received by CTO-1, CTO-2 and CTO-3 of the Company.

On 22 November 2019, The Hon’ble High Court of Judicature at Hyderabad issued an Interim Order which stayed the demand on the condition that the Company deposit 60 as the remediation fee for the �scal year 2018-2019 payable in the �scal year 2019-2020. The deposit of 60 was made and the Interim Order is continuing. The matter was adjourned to 22 April 2020 but has been delayed as a result of the closure of the Court due to the COVID-19 lockdown, and a new date has not yet been rescheduled.

The Company believes that any additional liability that might arise in this regard is not probable. Accordingly, no provision relating to these claims has been made in the �nancial statements.

Water pollution and air pollution

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.32 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

The APP Appellate Board’s decision was challenged by one of the petitioners that was pending in the National Green Tribunal, (the “NGT”), Delhi.

The appeals �led by Mr. �. Chidambaram against the Orders of the Appellate Authority, Andhra Pradesh are disposed o� as the same do not survive for consideration as the G.O. based on which the then APPCB had passed its order which was subject matter of appeal before the Appellate Authority has itself been amended vide order 25 July 2013. However, the NGT, Delhi has passed a direction for the issue of pollution to be considered by the Joint Committee of Central Pollution Control Board, National Environmental Engineering Institute (“NEERI”), and the Telangana State Pollution Control Board to ascertain the present status of pollution issues in the Medak, Ranga Reddy, Mahaboobnagar and Nalagonda districts in the State of Telangana particularly in the Patancheru and Bollaram industrial clusters and �le a report within three months before the NGT, Delhi.

(viii) Fuel Surcharge Adjustments

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 March 2013 is 482. After taking into account all of the available information and legal provisions, the Company has recorded 219 as the potential liability towards FSA charges. However, the Company has paid, under protest, an amount of ` 354 as demanded by the power distribution companies as part of monthly electricity bills. The Company remains exposed to additional �nancial liability should the orders passed by the APERC be upheld by the Courts.

During the three months ended 30 June 2016, the Supreme Court of India dismissed the Special Leave Petition �led by the Company in this regard for the period from 1 April 2012 to 31 March 2013. As a result, for the quarter ended 30 June 2016, the Company recognised an expenditure of ` 55 (by de-recognising the payments under protest) representing the FSA charges for the period from 1 April 2012 to 31 March 2013.

(ix) Indirect taxes related matters

Value Added Tax (“VAT”) matter

PERIOD COVERED UNDER THE NOTICE AMOUNT DEMANDED

STATUS

			The State VAT Appellate Tribunal has remanded the matter to
April	2006 to March 2009	`66 plus 10% penalty	the assessing authority to re-compute the eligibility and
			penalty orders are set-aside. The Company �led appeal
			against the same with the High Court, Telangana.
			The Company has �led an appeal before the Sales Tax
April	2009 to March 2011	`59 plus 10% penalty	Appellate Tribunal - The matter was remanded to the original adjudicating authority with a direction to re-calculate the
			eligibility for the year ended 31 March 2010.
April	2011 to March 2014	`27 plus 10% penalty	The Appellate Deputy Commissioner issued an order partially in favour of the Company.

The Company has recorded a provision of ` 51 as on 31 March 2021, and believes that the likelihood of any further liability that may arise on account of the ongoing litigation is not probable.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.32 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

Notices from Commissioner of Goods and Services Tax, India

In the months of November 2019 and January 2020, the Commissioner of Goods and Services Tax, India issued notices to the Company alleging that the Company has irregularly availed input tax credit of ` 307. The Company has received order dropping the demand.

The Company has recorded a provision of ` 31 as on 31 March 2021 and believes that the likelihood of any further liability that may arise on account of the allegedly inappropriate claims to credits is not probable. Accordingly, no further provision was made in these consolidated �nancial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.34 CAPITAL MANAGEMENT

For the purposes of the Company's capital management, capital includes issued capital and all other equity reserves. The primary objective of the Company's capital management is to maximise shareholder value. The Company manages it's capital structure and makes adjustments in the light of changes in economic environment and the requirements of the �nancial covenants. The Company monitors capital using gearing ratio, which is total debt divided by total capital plus debt. The capital gearing ratio as on 31 March 2021 and 31 March 2020 was 15 % and 12%, respectively.

2.35 IMPACT OF COVID – 19

Others

Additionally, the Company is in receipt of various demand notices from the Indian Sales and Service Tax authorities. The disputed amount is ` 474. The Company has responded to such demand notices and believes that the chances of any liability arising from such notices are less than probable. Accordingly, no provision is made in these consolidated �nancial statements as of 31 March 2021.

(x) Others

B. COMMITMENTS:

PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Estimated amounts of contracts remaining to be executed on capital account and not provided for (net of advances)	9,841	4,888

The Company considered the uncertainty relating to the COVID-19 pandemic 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 consolidated �nancial statements. The Company based on its judgements, estimates and assumptions including sensitivity analysis, 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.

2.36 OTHER UPDATES

A. Update on Cyber Incident

B. Update on the warning letter from the U.S. FDA

2.33 COLLABORATION LICENSE AND OPTION AGREEMENT WITH CURIS, INC

On 18 January 2015, Aurigene Discovery Technologies Limited ("ADTL"), a wholly-owned subsidiary of the parent company, entered into a Collaboration, License and Option Agreement (as amended, the "Collaboration Agreement") with Curis, Inc. ("Curis") to discover, develop and commercialise small molecule antagonists for immuno-oncology and precision oncology targets.

Under the Collaboration Agreement, ADTL has the responsibility for conducting all discovery and preclinical activities, including Investigational New Drug ("IND") enabling studies and providing Phase 1 clinical trial supply, and Curis is responsible for all clinical development, regulatory and commercialisation e�orts worldwide, excluding India and Russia. The Collaboration Agreement provides that the parties will collaborate exclusively in immuno-oncology for an initial period of approximately two years, with the option for Curis to extend the broad immuno-oncology exclusivity.

Revenues under the Collaboration Agreement consist of upfront consideration (including shares of Curis common stock) and the development and commercial milestone payments (including royalties) which are deferred and recognised as revenue over the period for which ADTL has continuing performance obligations.

As a partial consideration for the collaboration, the following shares of common stock of Curis were issued to ADTL:

PARTICULARS	NUMBER	OF SHARES	FAIR VALUE
Pursuant to the collaboration agreement dated 18 January 2015		�� million	�� US$ 23.5 million)
Pursuant to an amendment to collaboration agreement dated 7 September 2015 (Common stock in lieu of receiving up to US$ 24.5 million of milestone and other	payments)	�� million	�� (US$ 18.8 million)

The Company has classi�ed all of the shares of Curis common stock received, as a partial consideration for the collaboration, as an investment in equity instruments measured at FVTOCI. In May 2018, Curis completed a 1-for-5 reverse stock split of its common stock. After giving e�ect to such stock split, the total number of Curis equity shares held by the Company is 5.47 million.

PARTICULARS	FAIR VALUE UNREALISED GAIN COST AS OF 31 MARCH 2021
Received on 18 January 2015	�� �� ��
Received on 7 September 2015	�� �� ��
	�� �� ��

The Company received a warning letter dated 5 November 2015 from the U.S. FDA relating to current Good Manufacturing Practices (“cGMPs”) deviations at its active pharmaceutical ingredient (“API”) manufacturing facilities at Srikakulam, Andhra Pradesh and Miryalaguda, Telangana, as well as violations at its oncology formulation manufacturing facility at Duvvada, Visakhapatnam, Andhra Pradesh. The contents of the warning letter emanated from Form 483 observations that followed inspections of these sites by the U.S. FDA in November 2014, January 2015 and February-March 2015.

Tabulated below are the further updates with respect to the aforementioned sites:

MONTH AND YEAR	UPDATE
	The U.S. FDA completed the re-inspection of the aforementioned manufacturing facilities. During the
February, March	re-inspections, the U.S. FDA issued three observations with respect to the API manufacturing facility at
and April 2017	Miryalaguda, two observations with respect to the API manufacturing facility at Srikakulam and thirteen
	observations with respect to the Company’s oncology formulation manufacturing facility at Duvvada.
June 2017	The U.S. FDA issued an Establishment Inspection Report (“EIR”) which indicated that the inspection of the Company's API manufacturing facility at Miryalaguda was successfully closed.
November 2017	The Company received EIRs from the U.S. FDA for the oncology manufacturing facility at Duvvada which indicated that the inspection status of this facility remained unchanged.
February 2018	The Company received EIRs from the U.S. FDA for API manufacturing facility at Srikakulam which indicated that the inspection status of this facility remained unchanged.
June 2018	The Company requested the U.S. FDA to schedule a re-inspection of the oncology formulation manufacturing facility at Duvvada.
October 2018	The re-inspection was completed for the oncology formulation manufacturing facility at Duvvada and the U.S. FDA issued a Form 483 with eight observations.
November 2018	The Company responded to the observations identi�ed by the U.S. FDA for the oncology formulation manufacturing facility at Duvvada in October 2018.
February 2019	The U.S. FDA issued an EIR indicating successful closure of the audit of the oncology formulation manufacturing facility at Duvvada.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.36 OTHER UPDATES (CONTINUED)

In February 2019, the Company received certain other follow on questions from the U.S. FDA and the Company responded to these questions in March 2019. The U.S. FDA completed the audit on 28 January 2020. The Company was issued a Form 483 with 5 observations and responded to the observations in February 2020. In May 2020, the Company received an EIR from the U.S. FDA, for the above-referred facility, indicating closure of the audit and classifying the inspection of this facility as Voluntary Action Indicated (“VAI”). With this, all facilities under warning letter are now determined as VAI.

Inspection of other facilities

Tabulated below are the details of the U.S. FDA inspections carried out at other facilities of the Company:

Located in India

MONTH AND YEAR	UNIT	DETAILS OF OBSERVATIONS
June 2018	API Srikakulam Plant (SEZ)	No observations were noted. An EIR indicating the closure of audit for this facility was issued bythe U.S. FDA in August 2018.
November 2018	Formulations Srikakulam	No observations were noted. An EIR indicating the closure of audit for this facility
	Plant (SEZ) Unit II	was issued bythe U.S. FDA in February2019.
January 2019	Formulations Srikakulam Plant (SEZ) Unit I	Four observations were noted. The Company responded to the observations and an EIR indicating the closure of audit for this facility was issued by the U.S. FDA in April 2019.
January 2019	API manufacturing Plant at Miryalaguda, Nalgonda	One observation was noted. The Company responded to the observation. In May 2019, an EIR was issued by the U.S. FDA indicating the closure of audit and the inspection classi�cation of the facilitywas determined as VAI.
January 2019	Formulations manufacturing facility at Bachupally, Hyderabad	Eleven observations were noted. The Company responded to the observations in January 2019. In April 2019, an EIR was issued by the U.S. FDA indicating the closure of audit and the inspection classi�cation of the facilitywas determined as VAI.
March 2019	Aurigene Discovery	No observations noted.
	Technologies Limited,	In June 2019, the Company received an EIR from the U.S. FDA indicating the closure
	Hyderabad	of audit for this facility.
June 2019	Formulations manufacturing plants, Duvvada {Vizag SEZ plant 1 (FTO VII) and Vizag SEZ plant 2(FTO IX)}	In September 2019, an EIR was issued by the U.S. FDA indicating the closure of audit of these facilities. Two observations were noted. The Company responded to the observations.
		Five observations were noted during U.S. FDA inspection. The Company responded
July 2019	API Hyderabad plant 2, Bollaram, Hyderabad	In October 2019, an EIR was issued by the U.S. FDA indicating the closure of audit to the observations in August 2019.
		and the inspection classi�cation of the facilitywas determined as VAI.
August 2019	Formulations manufacturing plants, (Vizag SEZ plant 1), Duvvada, Visakhapatnam (FTO VII)	In February 2020, an EIR was issued by the U.S. FDA indicating the closure of audit and the inspection classi�cation of the facilitywas determined as VAI. Eight observations were noted. The Company responded to the observations in September 2019.
		No observations were noted.
August 2019	Formulations manufacturing facility at Shreveport, Louisiana, U.S.A	In October 2019, an EIR was issued by the U.S. FDA indicating the closure of the audit and the inspection classi�cation of the facility was determined as No Action
		Initiated(“NAI”).
October 2019	API Srikakulam plant (SEZ), Andhra Pradesh	Four observations were noted. The Company responded to the observations in November 2019. In May 2020, an EIR was issued by the U.S. FDA indicating the closure of the audit.
February 2020	Formulations Srikakulam Plant (SEZ) Unit I	In May 2020, an EIR was issued by the U.S. FDA indicating the closure of the audit and the inspection classi�cation of the facilitywas determined as NAI. No observations were noted.
February 2020	Formulations manufacturing facility at Bachupally, Hyderabad (FTO Unit III)	One observation was noted. The Company responded to the observation in March 2020. In May 2020, an EIR was issued by the U.S. FDA indicating the closure of the audit and the inspection classi�cation of the facility was determined as VAI.
	Integrated Product Development	No observation was noted.
February 2020	Organization (IPDO) at Bachupally,	In May 2020, an EIR was issued by the U.S. FDA indicating the closure of the audit
	Hyderabad	and the inspection classi�cation of the facility was determined as NAI.
		Three observations were noted. The Company responded to the observations in
March 2020	API manufacturing Plant at Miryalaguda, Nalgonda	March 2020. In April 2020, an EIR was issued by the U.S. FDA indicating the closure of the audit
		and the inspection classi�cation of the facility was determined as VAI.

No U.S. FDA audits were conducted during the year ended 31 March 2021.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.37 THE CODE ON SOCIAL SECURITY, 2020

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 �nal rules have not yet been issued and the date on which this Code will come into e�ect has not been announced. The Company will assess the impact of this Code and the rules thereunder when they come into e�ect.

2.38 SECONDARY LISTING OF THE COMPANY'S ADR ON NSE IFSC LIMITED

The Company completed the secondary listing of its American Depository Receipts (“ADRs”) on NSE IFSC Limited under the symbol 'DRREDDY' on 9 December 2020. NSE IFSC Limited is a recognised international stock exchange established in the International Financial Services Centre (“IFSC”) at Gujarat International Finance Tec (“GIFT”) City in Gujarat, India. IFSC is one of the permissible jurisdictions where Depository Receipts can be listed. This listing will provide a secondary platform (other than NYSE Inc.) to overseas investors for trading in the Company's ADRs. This is a secondary listing of ADRs that are currently issued by J.P. Morgan Chase Bank N.A. under its ADR Deposit Agreement with the Company, and no further capital raising or issuance of new securities is involved.

2.39 MERGER OF DR. REDDY'S HOLDINGS LIMITED INTO DR. REDDY'S LABORATORIES LIMITED

The Board of Directors, at its meeting held on 29 July 2019, has approved the amalgamation (the “Scheme”) of Dr. Reddy's Holdings Limited (“DRHL”), an entity held by the Promoter Group, which holds 24.88% of Dr. Reddy's Laboratories Limited (the “Company”) into the Company. This is subject to the approval of shareholders, stock exchanges, the National Company Law Tribunal and other relevant regulators.

The Scheme will lead to simpli�cation of the shareholding structure and reduction of shareholding tiers.

During year ended 31 March 2020, the scheme of amalgamation of Dr. Reddy's Holdings Limited with the Company was approved by the board of directors, members and unsecured creditors of the Company. The no-observation letters from the BSE Limited and National Stock Exchange of India Limited were received on the basis of no comments received from Securities and Exchange Board of India (“SEBI”). The petition for approval of the said scheme was �led with the Hon'ble NCLT, Hyderabad Bench.

The hearings on the petition took place on 20 April 2021, and the Hon'ble NCLT reserved the issuance of an order pending its review and further analysis of the matter.

2.40 BUSINESS TRANSFER AGREEMENT WITH WOCKHARDT LIMITED

In February 2020, the Company signed a Business Transfer Agreement (“BTA”) with Wockhardt Limited (“Wockhardt”) to acquire select divisions of its branded generics business in India and the territories of Nepal, Sri Lanka, Bhutan and Maldives for a consideration of ` 18,500.

The business consists of a portfolio of 62 brands in multiple therapy areas, such as respiratory, neurology, venous malformations, dermatology, gastroenterology, pain and vaccines. This entire portfolio was to be transferred to the Company, along with related sales and marketing teams, the manufacturing plant located in Baddi, Himachal Pradesh and all plant employees (together the “Business Undertaking”). The transaction involved 2,051 employees engaged in operations of the acquired Business Undertaking.

a) an amount of ` 14,830 to be paid on the date of closing;
b) an amount of ` 670 to be deposited in an escrow account which shall be released subject to adjustments for, inter alia, net working capital, employee liabilities and certain other contractual and statutory liabilities;
c) an amount of ` 3,000 (the “Holdback Amount”) which shall be released as follows:
Ÿ If the revenue from sales of the products forming part of the Business Undertaking during the twelve (12) months post-closing exceeds 4,800, the Company will be required to pay to Wockhardt an amount equal to two (2) times the amount by which the revenue exceeds 4,800, subject to the maximum of the Holdback Amount.

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

2.40 BUSINESS TRANSFER AGREEMENT WITH WOCKHARDT LIMITED (CONTINUED)

The transaction was completed on 10 June 2020.

The Company has accounted for the transaction under Ind AS 103, “Business Combinations”.

As of 30 June 2020, the purchase price allocation was preliminary.

PARTICULARS	AMOUNT
Cash	��
Payment through Escrow account	��
Contingent consideration(Holdback Amount)	��
Total consideration	��
Assets acquired
Goodwill	��
Property, plant and equipment	��
Product related intangibles	��
Inventories	��
Other assets	��
Liabilities assumed
Employee bene�ts(Gratuity-`70 and compensated absences-`75)	(��)
Refund liability	(��)
Total net assets	��

The total goodwill of 530 consists largely of the synergies and economies of scale expected from the acquired business, together with the value of the workforce acquired. The entire amount of goodwill is deductible for tax purposes. Acquisition related costs amounted to 60 and were excluded from the consideration transferred and were recognised as expense under “Selling and other expenses” in the Statement of pro�t or loss for the year ended 31 March 2021.

The fair value of the contingent consideration of 561 was estimated by applying the income approach. The fair value measurement is based on signi�cant inputs that are not observable in the market, which Ind AS 13, “Fair �alue Measurement” refers to as �evel 3 inputs. The signi�cant unobservable inputs in the valuation is the estimated sales forecast. During the three months ended 31 March 2021, the Company, after taking into account the revenue of the products until twelve months post-closing (9 June 2021), re-measured the contingent consideration to 420.

The amount of revenue included in the consolidated statement of pro�t and loss for the year ended 31 March 2021 pertaining to the acquired business since 10 June 2020 is ` 3,887.

The acquired business has been integrated into the Company’s existing activities and it is not practicable to identify the impact on the Company pro�t in the year.

2.41 S UBSEQUENT EVENTS

There are no signi�cant events that occurred after the balance sheet date.

for and on behalf of the Board of Directors of Dr. Reddy's Laboratories Limited

As per our report of even date attached

for S.R. Batliboi & Associates LLP Chartered Accountants ICAI Firm registration No.: 101049W/E300004 per S Balasubrahmanyam Partner Membership No.: 53315

Chartered Accountants K Satish Reddy Chairman DIN: 00129701 ICAI Firm registration No.: 101049W/E300004 G V Prasad Co-Chairman & Managing Director DIN: 00057433 per S Balasubrahmanyam Erez Israeli Chief Executive O�cer Partner Parag Agarwal Chief Financial O�cer Membership No.: 53315 Sandeep Poddar Company Secretary Place: Chennai Place: Hyderabad Date: 14 May 2021 Date: 14 May 2021

Company Overview Statutory Reports Financial Statements

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

EXTRACT OF IFRS CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in Indian Rupees millions, except share data and per share data)

CONSOLIDATED INCOME STATEMENTS

We have adopted IFRS as issued by the International Accounting Standards Board (IASB) for preparing our �nancial statements for the purpose of �lings with the S�C. We have furnished all our interim �nancial reports of �scal 202� with the S�C which were prepared under IFRS. The Annual Report in Form 20-F will also be made available at the Company’s website. A hard copy of such Annual Report in Form 20-F will be made available to the shareholders, free of charge, upon request. For details visit www.drreddys.com.

The extract of the consolidated �nancial statements prepared under IFRS has been provided hereunder

	(All amounts in Indian Rupees millions, except	share data and per share data)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
PARTICULARS	AS AT 31 MARCH 2021	AS AT 31 MARCH 2020
Assets
Current assets
Cash and cash equivalents	��	��
Other investments	��	��
Trade and other receivables	��	��
Inventories	��	��
Derivative �nancial instruments	��	��
Tax assets	��	��
Other current assets	��	��
Total current assets before assets held for sale	��	��
Assets held for sale	��	-
Total current assets	��	��
Non-current assets
Property, plant and equipment	��	��
Goodwill	��	��
Other intangible assets	��	��
Trade and other receivables	��	��
Investment in equityaccounted investees	��	��
Other investments	��	��
Deferred tax assets	��	��
Other non-current assets	��	��
Total non-current assets	��	��
Total assets	��	��

Liabilities and Equity
Current liabilities
Trade and otherpayables	��	��
Short-term borrowings	��	��
Long-term borrowings,currentportion	��	��
Provisions	��	��
Tax liabilities	��	��
Derivative �nancial instruments	��	��
Bank overdraft	�	��
Other current liabilities	��	��
Total current liabilities	��	��
Non-current liabilities
Long-term borrowings	��	��
Deferred tax liabilities	��	��
Provisions	��	��
Other non-current liabilities	��	��
Total non-current liabilities	��	��
Total liabilities	��	��
Equity
Share capital	��	��
Treasuryshares	(��)	(��)
Sharepremium	��	��
Share-basedpayment reserve	��	��
Capital redemption reserve	��	��
Special economic zone re-investment reserve	��	-
Retained earnings	��	��
Other components of equity	��	��
Total equity	��	��
Total liabilities and equity	��	��

PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020	FOR THE YEAR ENDED 31 MARCH 2019
Revenues	��	��	��
Cost of revenues	��	��	��
�rosspro�t	��	��	��
Selling, general and administrative expenses	��	��	��
Research and development expenses	��	��	��
Impairment of non-current assets	��	��	��
Other income,net	(��)	(��)	(��)
Total operatingexpenses	��	��	��
Results from operatingactivities(A)	��	��	��
Finance income	��	��	��
Finance expense	(��)	(��)	(��)
Finance income,net(B)	��	��	��
�hare ofpro�t of e�uit�accounte� investees,net of tax(�)	��	��	��
Pro�t �efore tax��A��C��	��	��	��
Tax expense/(bene�t),net	��	(��)	��
Pro�t for theyear	��	��	��

Earnings per share:
Basic earningsper share of`5/- each	��	��	��
Diluted earningsper share of`5/- each	��	��	��

(All amounts in Indian Rupees millions, except share data and per share data)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
PARTICULARS	FOR THE YEAR ENDED 31 MARCH 2021	FOR THE YEAR ENDED 31 MARCH 2020	FOR THE YEAR ENDED 31 MARCH 2019
Pro�t for theyear	��	��	��
Other comprehensive income/(loss)
Items that will not be reclassi�e� to the consoli�ate� income statement�
Changes in the fair value of �nancial instruments	��	(��)	(��)
Actuarialgains/(losses)onpost-employment bene�t obligations	(��)	��	��
Tax impact on above items	(��)	(��)	(��)
Total of items that will not be reclassi�e� to the consoli�ate� income statement	��	(��)	(��)
Items that will be reclassi�e� s�bse��entl� to the consoli�ate� income statement�
Changes in fair value of �nancial instruments	�	(�)	-
Foreign currencytranslation adjustments	��	��	(��)
Foreign currency translation reserve re-classi�ed to the income statement on disposal of foreign operation	-	-	(��)
E�ectiveportion of changes in fair value of cash �ow hedges,net	��	(��)	��
Tax impact on above items	(��)	��	(��)
Total of items that will be reclassi�e� subse�uentl� to the consoli�ate� income statement	��	(��)	(��)
Other comprehensive income for theyear, net of tax	��	��	��
Total comprehensive income for theyear	��	��	��

Notice

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

GLOSSARY

IGAAP Indian GenerallyAccepted AccountingPrinciples IOT Internet of Things ERM Enterprise-wide Risk Management IPDO Integrated Product Development Organisation IEPF Investor Education and Protection Fund IASB Indian AccountingStandard Board ICC Internal Complaints Committee HOC Heat of Compression IFRS International Financial ReportingStandards FY Financial Year GHG Green House Gas EM EmergingMarkets GDP Gross Domestic Product GDR Global DepositoryReceipt GMO Global ManufacturingOperations ICAI Institute of Chartered Accountants of India IEC Information,Education and Communication Ind AS Indian AccountingStandard ESOP Employees Stock Option Plan FO Fuel Oil EPS Earnings Per Share EUG Europe Generics FPL Friction Power Loss FTO Formulation Technical Operations HR Human Resources HVAC Heat,Ventilation and Air Conditioning GG Global Generics GMP Good ManufacturingPractices HPAPI High PotencyActive Pharmaceutical Ingredient INR Indian Rupees IP Intellectual Property ADR American DepositoryReceipt AGM Annual General Meeting AI Arti�cial Intelligence ANDA Abbreviated New DrugApplication API Active Pharmaceutical Ingredient AS AccountingStandards ASN Advanced Shipment Notice CDP Carbon Disclosure Project CEO Chief Executive O�cer ATV/ATN Atorvastatin calcium CDSL Central DepositoryServices (India) Limited CAGR Compound Annual Growth Rate CFO Chief Financial O�cer CPS Custom Pharmaceutical Services CPCB Central Pollution Control Board CTO Chemical Technical Operations BSE BombayStock Exchange DCGI DrugController General of India DRF Dr. Reddy’s Foundation DRFHE Dr. Reddy’s Foundation for Health and Education CUSIP Committee on Uniform SecurityIdenti�cation Procedures CRL Complete Response Letters DIN Director�s Identi�cation Number DMF DrugMaster File CSR Corporate Social Responsibility EBITDA Earnings Before Interest, Taxes, Depreciation And Amortization EC ElectronicallyCommutated COO Chief OperatingO�cer BR Business Responsibility DP DepositoryParticipant EGM ExtraordinaryGeneral Meeting AVF Arteriovenous Fistula CCO Chief Compliance O�cer CIN Corporate IdentityNumber COBE Code Of Business Conduct and Ethics	ISIN International Securities Identi�cation Number
	IT Information Technology
	JPY Japanese Yen
	JWG Joint WorkingGroup
	KARV Kallam Anji ReddyVidyalaya
	KAR-VJR Kallam Anji Reddy– Vocational Junior College
	KMP KeyManagerial Personnel
	KPI KeyPerformance Indicators
	LABS Livelihood Advancement Business School
	LSSSDC Life Sciences Sector Skill Development Council
	M&A Mergers and Acquisitions
	MC Management Council
	MD ManagingDirector
	MD&A Management Discussion & Analysis
	MT Metric Tonne
	NAG North America Generics
	NCEs New Chemical Entities
	NCLT National CompanyLaw Tribunal
	NDA New DrugApplication
	NGO Non-Governmental Organisation
	NLEM National List of Essential Medicines
	NPPA National Pharmaceutical PricingAuthority
	NSDL National Securities DepositoryLimited
	NSE The National Stock Exchange of India Limited
	NSE IFSC National Stock Exchange of India International Financial Service Centre
	NYSE New York Stock Exchange Inc.
	OP Out Patient
	OTC Over-the-counter
	OTIF On Time In Full
	PAN Permanent Account Number
	PAT Pro�t After Tax
	PBT Pro�t Before Tax
	PHC PrimaryHealth Centres
	PMI Process Mass Intensity
	PO Purchase Order
	PP ProprietaryProducts
	PPE Personal Protective Equipment
	PSAI Pharmaceuticals Services and Active Ingredients
	PwD People with Disablities
	P2P Procure to Pay
	RAT Rapid Antigen Tests
	RD Regional Director
	R&D Research and Development
	RDIF Russian Direct Investment Fund
	RMC Risk Management Committee
	RO Reverse Omission
	RoCE Return on Capital Employed
	RoW Rest of World
	RTA Registrar and Transfer Agent
	SEBI Securities and Exchange Board of India
	SEC Securities and Exchange Commission
	SEZ Special Economic Zone
	SHE Safety,Health and Environment
	SG&A Selling,General and Administrative
	SIP School Improvement Program
	SMP Senior Management Personnel
	SPCB State Pollution Control Board
	SS Secretarial Standards
	SOX Sarbanes OxleyAct,2002
	TCFD Task Force on Climate-Related Financial Disclosures
	UK United Kingdom
	US/USA/U.S. United States of America
	USD/US$ United States Dollar
	USFDA United States Food and Drugs Administration
	VFD Variable FrequencyDrive
	ZLD Zero Liquid Discharge

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the 37th annual general meeting (AGM)

Obligations and Disclosure Requirements) Regulations, 2015, (“Listing Regulations”) wherever applicable, is annexed hereto. The board of directors of the company at its meeting held on May 14, 2021, concluded that the special business under item number 5, is critical and considered unavoidable, and hence needs to be transacted at the 37th AGM of the company.

of the members of Dr. Reddy’s Laboratories Limited (CIN: L85195TG1984PLC004507) will be held on Wednesday, July 28, 2021, at 9.00 am (IST) through Video Conferencing (VC) /Other Audio Visual Means (OAVM), to transact the following business:

2) In view of the continuing COVID-19 pandemic, for maintaining social distancing norms and pursuant to General Circular nos. 14/2020, 17/2020, 20/2020, and 02/2021 dated April 8, 2020, April 13, 2020, May 5, 2020, and January 13, 2021, respectively, issued by the Ministry of Corporate A�airs (MCA) and Circular nos. SEBI/HO/CFD/CMD1/CIR/P/2020/79 and SEBI/HO/CFD/CMD2/ CIR/P/2021/11 dated May 12, 2020, and January 15, 2021, respectively issued by the Securities and Exchange Board of India (collectively referred to as “the Circulars”), companies are permitted to hold the AGM through VC/OAVM, without the physical presence of the members at a common venue. Accordingly, the 37th AGM of the company will be convened through VC/OAVM in compliance with the provisions of Act, and Rules made thereunder, Listing Regulations read with the Circulars. The deemed venue for the 37th AGM shall be the registered o�ce of the company i.e. 8-2-337, Road No. 3, Banjara Hills, Hyderabad – 500034, Telangana, India.

ORDINARY BUSINESS:

To receive, consider and adopt the �nancial statements (standalone and consolidated) of the company for the year ended March 31, 2021, together with the reports of the board of directors and auditors thereon.
To declare dividend on the equity shares for the �nancial year 2020-21.
To reappoint Mr. G V Prasad (DIN: 00057433), as a director, who retires by rotation, and being eligible o�ers himself for the reappointment.
To reappoint statutory auditors and �x their remuneration.
“RESOLVED THAT pursuant to the provisions of Section 139, 142 and other applicable provisions, if any, of the Companies Act, 2013, along with the relevant Rules made thereunder, and based on the recommendations of the audit committee and board of directors of the company, M/s. S.R. Batliboi & Associates LLP, chartered accountants (�rm registration no. 101049W/E300004), be and are hereby reappointed as statutory auditors of the company, to hold o�ce for a second term of �ve consecutive years from the conclusion of the 37th AGM until the conclusion of the 42nd AGM, at such remuneration and out of pocket expenses, as may be decided by the board of directors of the company.
3) In line with the Circulars, the company is providing VC/OAVM facility to its members to attend the AGM. The facility for attending the AGM virtually will be made available for 1,000 members on a �rst come �rst served basis. This will not include large members (i.e. members with 2% or more shareholding), promoters, institutional investors, directors, key managerial personnel, the chairpersons of the audit committee, nomination, governance and compensation committee and stakeholders’ relationship committee, auditors etc. who are allowed to attend the AGM without such restriction of �rst come �rst served basis.

RESOLVED FURTHER THAT the board of directors of the company be and are hereby authorized to decide and/or alter the terms and conditions of the appointment including the remuneration for subsequent �nancial years as it may deem �t. ”

4) The VC/OAVM facility for members to join the meeting, shall be kept open 30 minutes before the start of the AGM and shall be closed on expiry of 30 minutes after start of the AGM. Members can attend the AGM through VC/OAVM by following the instructions mentioned in this notice.

SPECIAL BUSINESS:

To ratify the remuneration payable to cost auditors, M/s. Sagar & Associates, cost accountants for the �nancial year ending March 31, 2022.
5) The facility for appointment of proxies by members is not available as the AGM will be held through VC/OAVM and physical attendance of the members is dispensed with pursuant to the Circulars. Hence, the proxy form and attendance slip are not annexed to this notice.

To consider and, if thought �t, to pass, with or without modi�cation(s), the following resolution as an ordinary resolution:

“RESOLVED THAT pursuant to the provisions of Section 148 and other applicable provisions, if any, of the Companies Act, 2013, and Companies (Cost Records and Audit) Rules, 2014, as amended from time to time, the members of the company ratify the remuneration of ` 700,000/- (Rupees seven lakhs only) plus out of pocket expenses, at actuals and applicable taxes, to M/s. Sagar & Associates, cost accountants (�rm registration no. 000118), appointed by the board of directors of the company as cost auditors for the �nancial year ending March 31, 2022.

6) Corporate members whose authorized representatives are intending to attend the meeting are requested to send a certi�ed copy of the board resolution authorizing such representative to attend the AGM through VC/OAVM, and cast their votes through e-voting. Such documents can be sent to [email protected].
7) Members attending the AGM through VC/OAVM shall be counted for the purpose of reckoning the quorum under Section 103 of the Act.

RESOLVED FURTHER THAT the board of directors of the company be and are hereby authorized to do all such acts, matters, deeds and things as may be necessary to give e�ect to the above resolution. ”

8) The statutory registers maintained under the Act, including register of directors and key managerial personnel and their shareholding, the register of contracts or arrangements in which directors are interested and all other documents referred to in the notice will be available for inspection in electronic mode. Members who wish to inspect such documents are requested to write to the company by sending an e-mail to [email protected].

NOTES:

1) The statement pursuant to Section 102(1) of the Companies Act, 2013 ("the Act"), and Rules made thereunder in respect of the special business set out in the notice, Secretarial Standard on General Meetings (SS-2), wherever applicable, and SEBI (Listing
9) In accordance with the Circulars, the notice of the 37th AGM along with the annual report for the �nancial year 2020-21 has been sent

Notice

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

only through electronic mode to the members who have registered their e-mail addresses with the company/depository participants. Members may note that the notice of the 37th AGM and the annual report are also available on the company’s website, www.drreddys.com, website of National Securities Depository Limited (NSDL) (www.evoting.nsdl.com) and on the website of Stock Exchanges (www.bseindia.com) and (www.nseindia.com).

10) In accordance with the Circulars, no physical copy of the notice of the 37th AGM and the annual report for the �nancial year 2020-21 has been sent to members who have not registered their e-mail addresses with the company/depository participants. The members will be entitled to a physical copy of the annual report for the �nancial year 2020-21 free of cost, upon sending a request to the company secretary at 8-2-337, Road No. 3, Banjara Hills, Hyderabad – 500 034.
11) In accordance with the Circulars, members who have not registered their e-mail address may register their e-mail address on www.drreddys.com/investors/investor-services/shareholderinformation or with their depository participant or send their consent at [email protected] along with their folio no./DP ID client ID and valid e-mail address for registration.
12) Pursuant to Section 108 of the Act, read with Rule 20 of the Companies (Management and Administration) Rules, 2014, as amended from time to time, Regulation 44 of the Listing Regulations and the Circulars, the company is pleased to o�er voting by electronic means to the members to cast their votes electronically on all resolutions set forth in this notice. The detailed instructions for e-voting and attending the AGM through VC/OAVM are given as a separate attachment to this notice.
13) Members, desiring any information relating to the �nancials from the management or the statutory auditors, are requested to write to the company at [email protected] at an early date.
14) A certi�cate from the auditors of the company certifying that the company’s ‘Dr. Reddy’s Employees Stock Option Scheme, 2002’, ‘Dr. Reddy’s Employees ADR Stock Option Scheme, 2007’, and ‘Dr. Reddy’s Employees Stock Option Scheme, 2018’, are being implemented in accordance with the SEBI Regulations and the resolutions passed by the members, is required to be placed at the AGM. Such certi�cate will be available for inspection by the members in electronic mode before and during the AGM. Members who wish to inspect the certi�cate are requested to write to the company by sending e-mail to [email protected].
15) Members are requested to immediately intimate, any change in their address to their depository participants with whom they are maintaining their demat accounts. If the shares are held in physical form, change in address has to be intimated to the company’s registrar and transfer agent (RTA), Bigshare Services Private Limited, 306, Right Wing, 3rd Floor, Amrutha Ville, Opp. Yashoda Hospital, Rajbhavan Road, Hyderabad 500 082, Telangana, India Tel: +91-40-2337 4967, Fax: +91-40-2337 0295, e-mail ID: [email protected].
16) SEBI has mandated the submission of permanent account number (PAN) by every participant in the securities market. Members holding shares in electronic form are, therefore, requested to submit their PAN to their depository participants with whom they are maintaining their demat accounts. Members holding shares in physical form should submit their PAN to the company or its RTA.
17) The register of members and share transfer books of the company will remain closed from Tuesday, July 13, 2021 to Thursday, July 15, 2021 (both days inclusive).
18) The board of directors of the company at its meeting held on May 14, 2021, have recommended a dividend of ₹ 25/- per equity share of face value of ₹ 5/- each as dividend for the �nancial year 2020-
Dividend, if declared, at the 37th AGM, will be paid on or after August 2, 2021, subject to deduction of tax at source, to those members whose names appear on the register of members of the company as of end of Monday, July 12, 2021.
19) In terms of Schedule I of the Listing Regulations, listed companies are required to use the Reserve Bank of India’s approved electronic mode of payment such as electronic clearance service (ECS), LECS (Local ECS)/RECS (Regional ECS)/NECS (National ECS), direct credit, real time gross settlement, national electronic fund transfer (NEFT), etc. for making payments like dividend etc. to the members.

Accordingly, members holding securities in demat mode are requested to update their bank details with their depository participants. Members holding securities in physical form should send a request to update their bank details, to the company’s RTA.

20) In compliance with the Circulars, the company shall dispatch by post the dividend warrants/demand drafts to those members who have not registered their bank mandate with company.
21) Pursuant to the changes introduced in the Income Tax Act, 1961 ("the IT Act") as amended by the Finance Act, 2020, dividend income will be taxable in the hands of the members and the company is required to deduct tax at source (TDS) at the time of making the payment of dividend to members at the prescribed rates:

For resident members, taxes shall be deducted at source under Section 194 of the IT Act, as follows:

Valid PAN of member available 10% or as noti�ed by the with the company Government of India

20% or as noti�ed by the Government of India

Members without PAN/invalid PAN available with the company*

Member who has not �led 20%** returns of tax for FY2019 and FY2020 before the due date and aggregate of tax deducted at source is 50,000/- or more in ₹ each of these two years

* Individual member needs to ensure that his/her PAN is linked with Aadhar number, on or before June 30, 2021, else his/her PAN will be considered invalid.

** TDS rate is applicable for dividend paid on or after July 1, 2021.

However, no tax shall be deducted on the dividend payable to a resident individual member, if the total dividend to be received by them during the �nancial year 2021-22 does not exceed ₹ 5,000/and also in cases where members provide form 15G (applicable to any person other than HUF or a company or a �rm)/form 15H (applicable to an individual who is 60 years and older) subject to conditions speci�ed in the IT Act. Members may also submit any other document as prescribed under the IT Act, to claim a lower/nil withholding tax. PAN is mandatory for members providing form 15G/form 15H or any other documents as mentioned above. The formats of form 15G/form 15H are available on the website of our registrar and transfer agent (RTA) Bigshare Services Private Limited at www.bigshareonline.com.

For resident mutual funds and insurance company members:

In order to provide exemption from TDS on the dividend payable to a mutual fund speci�ed under Clause (23D) of Section 10 of the IT Act, or an insurance company as speci�ed in Section 194 of the IT Act, members should submit the below document along with exemption noti�cation, if any, as per the relevant provisions of the IT Act:

a. Declaration by insurance company member qualifying as insurer as per Section 2(7A) of the Insurance Act, 1938.
satisfactory review by the company, of all the documents submitted by non-resident member.

Declaration by members under Rule 37BA(2) of the Income Tax

b. Declaration by mutual fund member eligible for exemption under Section 10(23D) of the IT Act.

Rules, 1962:

In order to enable the company to provide credit of tax deducted at source to bene�cial members in whose hands dividend paid by company is assessable, members are requested to provide declaration in format as prescribed under Rule 37BA(2) of the Income Tax Rules, 1962.

c. Declaration by Category I/II Alternate Investment Fund (AIF) registered with SEBI.

Declaration for exemption under Circular 18/2017 of the IT Act:

In case of any member whose income is subject to lower rate of TDS, or is exempt under the IT Act, such member is requested to submit the following documents as per the relevant provisions of the IT Act, duly signed by the authorized signatory:

Section 206AB of the IT Act:

Rate of TDS @10% under Section 194 of the IT Act, is subject to provisions of Section 206AB of IT Act; (e�ective from July 1, 2021), which introduces special provisions for TDS in respect of non-�lers of income tax return. As provided in Section 206AB, tax is required to be deducted at higher of following rates in case of payments to speci�ed persons:

a. Lower withholding tax certi�cate for the �nancial year 2021-22 if any, obtained from the Income Tax authorities.
b. In case the member has obtained tax exemption status under any provisions of the IT Act, the documentary evidence along with declaration for the same.
Ÿ at twice the rate speci�ed in the relevant provision of the IT Act; or

For non-resident members , taxes are required to be withheld in accordance with the provisions of Section 195 and other applicable Sections of the IT Act, at the rates in force. The withholding tax shall be at the rate of 20% (plus applicable surcharge and cess) or as noti�ed by Government of India on the amount of dividend payable. However, as per Section 90 of the IT Act, non-resident members may have an option to be governed by the provisions of the Double Tax Avoidance Agreement (DTAA) between India and the country of tax residence of the member, if they are more bene�cial to them. In order to avail the bene�ts of DTAA, the non-resident members will have to provide the following:

Ÿ at twice the rate or rates in force; or
Ÿ at the rate of 5%.

Where Sections 206AA and 206AB are applicable i.e. the speci�ed person has not submitted the PAN as well as not �led the return, the tax shall be deducted at the higher of the two rates prescribed in these two sections.

The term 'speci�ed person' is de�ned in sub-section (3) of Section 206AB as who satis�es the following conditions:

Ÿ A person who has not �led the income tax return for two previous years immediately prior to the previous year in which tax is required to be deducted, for which the time limit of �ling of return of income under Section 139(1) of the IT Act, has expired; and
Ÿ Self-attested tax residency certi�cate for the �nancial year 202122 obtained from the tax authorities of the country of which the member is a resident.
Ÿ The aggregate of TDS and TCS in his case is ₹ 50,000/- or more in each of these two previous years.
Ÿ Self-attested copy of PAN allotted by the Indian income tax authorities. In case of non-availability of PAN, information under sub-rule 2 of Rule 37BC to be submitted.
The non-resident who does not have the permanent establishment is excluded from the scope of a speci�ed person.
Ÿ Self-declaration in form 10F duly �lled and signed.

While the company is awaiting the guidelines from the Government of Self-declaration from non-resident member (format available on India prescribing the mechanism to determine who ful�ls the www.bigshareonline.com), primarily covering the following:, primarily covering the following: conditions of being a 'speci�ed person'. Therefore, in order to comply a. Non-resident is and will continue to remain a tax resident of the with the provisions of the IT Act, and unless any mechanism is country of residence during the �nancial year 2021-22; prescribed by the authorities in this regard, the company will proceed on the assumption that all members are in compliance with the b. Non-resident is eligible to claim the bene�t of respective tax provisions of Section 206AB of the IT Act. However, we request you to treaty; inform us well in advance and before the cut-o� date if you are covered c. Non-resident has no reason to believe that its claim for the under the de�nition of 'speci�ed person' as provided in Section 206AB bene�ts of the DTAA is impaired in any manner; of the IT Act. The company reserves its right to recover any demand raised subsequently on the company for not informing the company or d. Non-resident receiving the dividend income is the bene�cial providing wrong information about applicability of Section 206AB in owner of such income; your case.

Ÿ Self-declaration from non-resident member (format available on www.bigshareonline.com), primarily covering the following:, primarily covering the following:
e. Dividend income is not attributable/e�ectively connected to any permanent establishment or �xed base in India;
A separate communication was sent to all the members through email on June 8, 2021, and newspaper publication dated June 15, 2021, in this regard. A copy of the said communication is also available on the website of the company.
f. In case of Foreign Institutional Investors and Foreign Portfolio Investors, self-attested copy of SEBI registration certi�cate; and

In order to enable the company to determine and deduct appropriate

g. In case of a member being tax resident of Singapore, please furnish the letter issued by the competent authority or any other authority evidences demonstrating the non-applicability of Article 24 - Limitation of Relief under India-Singapore DTAA.

TDS/withholding tax, the company shall consider the documents received from the members within the stipulated time as mentioned in the aforesaid communication.

For all members:

Ÿ Any other documents as prescribed under the Act, for lower withholding tax if applicable, duly attested by the member.

Members are requested to update tax residential status, permanent account number (PAN), registered email address, mobile numbers and other details with their depository participants, in case the shares are held in dematerialized form. In case a member is holding shares in physical mode, he/she is requested to furnish details to the company's registrar and share transfer agent.

The company is not obligated to apply the bene�cial DTAA rates at the time of tax deduction/withholding on dividend amounts. Application of bene�cial DTAA rate shall depend upon the completeness and

Notice

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

The aforementioned documents for tax exemption can be downloaded from the website of the company's RTA -

form no. SH-13, to the RTA of the company. Further, members desirous of cancelling/varying nomination are requested to send their requests in form no. SH-14, to the RTA of the company. These forms will be made available on request.

https://www.bigshareonline.com/Resources.aspx.

The company will arrange to e-mail a soft copy of TDS certi�cate at the members' registered e-mail ID in due course, post payment of the said �nal dividend/furnishing of TDS returns for the second quarter of �nancial year 2021-22 with the authorities.

23) In terms of Regulation 40(1) of SEBI Listing Regulations, as amended from time to time, members may please note that shares can be transferred only in dematerialized form with e�ect from April 1, 2019, except in case of request received for transmission or transposition of shares. Further, SEBI has �xed March 31, 2021 as the cut-o� date for re-lodgement of transfer deeds and the shares that are re-lodged for transfer shall be issued only in demat mode. Although, the members can continue to hold shares in physical form, they are requested to consider dematerializing the shares held by them in the company, for their own bene�t.

All the documents submitted by the members will be veri�ed by the company and the company will consider the same while deducting the appropriate taxes if they are in accordance with the provisions of the IT Act.

Members may note that in case the tax on said dividend is deducted at a higher rate in absence of receipt of the aforementioned details/documents, option is available to the member to �le the return of income as per the IT Act, and claim an appropriate refund, if eligible.

24) Your company is pleased to provide the facility of live webcast of proceedings of AGM. Members who are entitled to participate in the AGM can view the live proceedings of AGM by logging on the NSDL e-voting system at www.evoting.nsdl.com using their secure login credentials. Members are encouraged to use this facility for the live webcast. The webcast facility will be available from 9.00 am (IST) onwards on July 28, 2021.

All communications/queries in this respect should be addressed to our RTA at their e-mail ID: [email protected].

Above communication on TDS only sets out the provisions of law in a summarized manner and does not purport to be a complete analysis or listing of all potential tax consequences. Members should consult their own tax advisors for the tax provisions applicable to their particular circumstances.

25) Since the AGM will be held through VC/OAVM, the route map is not annexed in this notice.

By order of the board

22) Pursuant to Section 72 of the Act, members are entitled to make a nomination in respect of shares held by them. Members desirous of making a nomination, are requested to send their requests in

Place: Hyderabad Sandeep Poddar Date: May 14, 2021 Company Secretary

ANNEXURE TO NOTICE OF AGM

Statement pursuant to Section 102(1) of the Companies Act, 2013 ("the Act"), and Rules made thereunder in respect of the special business set out in the notice, Secretarial Standard on General Meetings (SS-2), wherever applicable, and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as and wherever applicable.

ITEM NO. 3

Mr. G V Prasad (aged 60 years, DIN: 00057433) holds a bachelor’s degree in chemical engineering from Illinois Institute of Technology, Chicago in the USA, and an M.S. in Industrial Administration from Purdue University, Indiana in the USA.

remarkable work and contribution to pharmaceutical industry. He has also been named India Business Leader of the year by CNBC Asia in 2015, Regional Honoree for the 2020 YPO Global Impact Award, received the V. Krishnamurthy Award for Excellence by the Centre for Organizational Development in 2019, and was designated The Boundary Breaker at the CEO Awards in 2018.

Mr. Prasad is a member of the company’s board since 1986 and serves as co-chairman and managing director of the company.

Prior to May 2014, Mr. Prasad held titles of chairman and chief executive o�cer. He was reappointed as a whole-time director designated as co-chairman and managing director of the company at the 36th AGM held on July 30, 2020, for a period of �ve years commencing January 30, 2021, to January 29, 2026, liable to retire by rotation. He retires by rotation at the 37th AGM of the company and, being eligible, o�ers himself for the reappointment.

He leads the core team that drives the growth and performance at Dr. Reddy’s. He has played a key role in the evolution of Dr. Reddy’s from a mid-sized pharmaceutical company into a globally respected pharmaceutical major especially in developed markets. He is also passionate about sustainable manufacturing and business practices. He is widely credited as the architect of Dr. Reddy’s successful Global Generics (GG) and Active Pharmaceutical Ingredients (API) strategies, as well as the company’s foray into biosimilars, proprietary products, di�erentiated formulations and the company's sustainability initiatives including the adoption of green technologies and processes.

The company has received an intimation in form DIR-8 pursuant to Rule 14 of the Companies (Appointment and �uali�cation of Directors) Rules, 2014, from Mr. Prasad to the e�ect that he is not disquali�ed in accordance with Section 164(2) of the Act, and a declaration that he is not debarred or restrained from acting as a director by any SEBI order or by any other such authority.

Mr. Prasad has attended all meetings of the board held during FY2021. He does not hold any equity shares in the company as on March 31, 2021.

Mr. Prasad is also a director on the boards of: Greenpark Hotels and Resorts Limited, Stamlo Industries Limited, Dr. Reddy’s Holdings Limited, Dr. Reddy’s Trust Services Private Limited, Dr. Reddy’s Institute of Life Sciences, International Foundation for Research and Education, Indian School of Business in India, and company’s whollyowned subsidiaries – Aurigene Discovery Technologies Limited and Idea2Enterprises (India) Private Limited in India; Aurigene Discovery Technologies Inc., Dr. Reddy’s Laboratories, Inc., and Promius Pharma LLC in USA.

M/s. S.R. Batliboi & Associates LLP, have consented to the said reappointment, and con�rmed that their reappointment, if made, would be within the limits speci�ed under Section 141(3)(g) of the Act. They have further con�rmed that they are not disquali�ed to be reappointed as statutory auditor in terms of the provisions of the Sections 139(1), 141(2) and 141(3) of the Act, and the provisions of the Companies (Audit and Auditors) Rules, 2014, as amended from time to time. The proposed remuneration to be paid to M/s. S.R. Batliboi & Associates LLP, chartered accountants, for the �nancial year 2021-22 is ` 1.69 crores.

He is a member of the corporate social responsibility committee, stakeholders’ relationship committee and banking and authorizations committee of the company and a member of the nomination and remuneration committee and the corporate social responsibility committee of Aurigene Discovery Technologies Limited, a whollyowned subsidiary.

None of the directors/key managerial personnel of the company and their relatives are concerned or interested, �nancially or otherwise in the resolution set out at item no. 4 of the notice.

The board, on the recommendation of the audit committee, recommends the resolution set forth in item no. 4 of the notice for approval of the members.

Except Mr. G V Prasad, Mr. K Satish Reddy and their relatives, none of the other directors or key managerial personnel of the company and their relatives are concerned or interested, �nancially or otherwise, in the resolution set out at item no. 3 of the notice. Mr. G V Prasad and Mr. K Satish Reddy are not ‘relative’ as de�ned under the Act.

ITEM NO. 5

The board, on the recommendation of the audit committee, has approved the reappointment of M/s. Sagar & Associates, cost accountants, as cost auditors at a remuneration of ₹ 700,000/(Rupees seven Lakhs) per annum plus out of pocket expenses, at actuals and applicable taxes, to conduct the audit of the cost records of the company for the �nancial year ending March 31, 2022.

The board recommends the resolution set forth in item no. 3 of the notice for approval of the members.

ITEM NO. 4

M/s. S.R. Batliboi & Associates LLP, chartered accountants (�rm registration no. 101049W/E300004) were appointed as statutory auditors of the company at the 32nd AGM held on July 27, 2016, for a period of �ve years commencing from the conclusion of 32nd AGM till the conclusion of the 37th AGM, subject to rati�cation by members every year. However, MCA vide its noti�cation dated May 7, 2018, has omitted the requirement under the �rst proviso to Section 139 of the Act, and Rule 3(7) of the Companies (Audit and Auditors) Rules, 2014, regarding rati�cation of appointment of statutory auditors by members at every subsequent AGM.

In accordance with the provisions of the Section 148 of the Act, read with the Companies (Audit and Auditors) Rules, 2014, the remuneration payable to the cost auditors has to be rati�ed by the members of the company.

Accordingly, consent of the members is sought for passing an ordinary resolution as set out at item no. 5 of the notice for rati�cation of the remuneration payable to the cost auditors for the �nancial year ending March 31, 2022.

None of the directors, key managerial personnel and their relatives are, in any way, concerned or interested, �nancially or otherwise, in this resolution.

Consequently, M/s. S.R. Batliboi & Associates LLP, chartered accountants, will complete their �rst term of �ve consecutive years as the statutory auditors of the company at the conclusion of the 37th AGM of the company.

The board recommends the resolution set forth in item no. 5 of the notice for approval of the members.

Pursuant to Section 139(2) of the Act, the company can appoint an auditors �rm for a second term of �ve consecutive years. Accordingly, M/s. S.R. Batliboi & Associates LLP, chartered accountants, are By order of the board proposed to be reappointed as statutory auditors of the company for a second term of �ve consecutive years commencing from the Place: Hyderabad Sandeep Poddar conclusion of 37th AGM till the conclusion of the 42nd AGM. Date: May 14, 2021 Company Secretary

INSTRUCTIONS FOR E-VOTING

Dear Members,

In compliance with Regulation 44 of the Listing Regulations, SEBI circular no. SEBI/HO/CFD/CMD/CIR/P/2020/242 dated December 9, 2020, Sections 108, 110 and other applicable provisions of the Act, read with the relevant Rules thereunder, the company is pleased to provide remote e-voting facility to members to cast their vote on all resolutions set forth in the notice convening the 37th AGM to be held on Wednesday, July 28, 2021, at 9.00 am (IST). The company has engaged the services of NSDL for the purpose of providing remote e-voting facility to its members.

Commencement of End of remote EVEN remote e-voting e-voting Saturday, July 24, 2021 , Tuesday, July 27, 2021, 116146 at 9.00 am IST( ) at 5.00 pm IST( )

Please read the instructions printed below before exercising your vote. The details and instructions for e-voting and participation at the AGM through VC/OAVM form an integral part of this notice of the AGM to be held on July 28, 2021.

The remote e-voting facility is available at the following link: www.evoting.nsdl.com. The e-voting event number (EVEN) and period of remote e-voting are set out below:

Notice

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

Procedure to vote electronically using NSDL e-voting system

listed companies", e-voting process has been enabled to all the individual demat account holders, by way of single login credential, through their demat accounts/websites of depositories/DPs in order to increase the e�ciency of the voting process. Individual demat account holders would be able to cast their vote without having to register again with the e-voting service provider (ESP) thereby not only facilitating seamless authentication but also ease and convenience of participating in e-voting process. Members are advised to update their mobile number and e-mail ID in their demat accounts in order to access e-voting facility.

The way to vote electronically on NSDL e-voting system consists of “Two Steps” which are mentioned below:

Step 1: Access to the NSDL e-voting system.

Step 2: Cast your vote electronically and join ‘General Meeting’ on the NSDL e-voting system.

Step 1: Access to NSDL e-voting system A) Login method for e-voting and joining virtual meeting for individual members holding securities in demat mode.

Pursuant to SEBI circular no. SEBI/HO/CFD/CMD/CIR/P/2020/ 242 dated December 9, 2020 on "e-voting facility provided by

Type of members Login method

Individual members A. NSDL IDeAS facility holding securities in If you are already registered, follow the below steps: demat mode with NSDL.

Visit the e-services website of NSDL. Open web browser by typing the following URL: https://eservices.nsdl.com/ either on a personal computer or on a mobile.
Once the home page of e-services is launched, click on the “ Bene�cial �wner ” icon under “Login” which is available under “IDeAS” section.
A new screen will open. You will have to enter your User ID and Password. After successful authentication, you will be able to see e-voting services.
Click on “Access to e-voting” under e-voting services and you will be able to see e-voting page.
Click on options available against company name or e-voting service provider - NSDL and you will be re-directed to NSDL e-voting website for casting your vote during the remote e-voting period or joining virtual meeting and voting during the meeting.

If you are not registered, follow the below steps:

Option to register is available at https://eservices.nsdl.com.
Select “ Register Online for IDeAS ” portal or click at https://eservices.nsdl.com/SecureWeb/ IdeasDirectReg.jsp
Please follow steps given in points 1-5 above.

B. E-voting website of NSDL.

  1.  Open web browser by typing the following URL: https://www.evoting.nsdl.com/ either on a personal computer or on a mobile.

  2.  Once the home page of e-voting system is launched, click on the icon “Login” which is available under ‘Shareholder/Member’ section.

  3.  A new screen will open. You will have to enter your User ID (i.e. your sixteen digit demat account number held with NSDL), Password/OTP and a veri�cation code as shown on the screen.

  4.  After successful authentication, you will be redirected to NSDL depository site wherein you can see e-voting page. Click on options available against company name or e-voting service provider - NSDL and you will be redirected to e-voting website of NSDL for casting your vote during the remote e- voting period or joining virtual meeting and voting during the meeting.

Individual members 1. Existing users who have opted for Easi/Easiest, they can login through their ser U ID and assword. Option P holding securities in will be made available to reach e-voting page without any further authentication. The URL for users to demat mode with CDSL login to Easi/Easiest are https://web.cdslindia.com/myeasi/home/login or www.cdslindia.com and click on New System Myeasi.
After successful login of Easi/Easiest the user will be also able to see the e-voting menu. The menu will have links of e-voting service provider i.e. NSDL. Click on NSDL to cast your vote.
If the user is not registered for Easi/Easiest, option to register is available at the link given here: https://web.cdslindia.com/myeasi/Registration/EasiRegistration

Type of members	Login ethod m	Login ethod m
	4.	Alternatively, the user can directly access the e-voting page by providing demat account number and PAN
		no. from a link in home page. The system will authenticate the user by sending OTP on www.cdslindia.com
		registered mobile and e-mail as recorded in the demat account. After successful authentication, user will
		be provided links for the respective ESP i.e. NSDLwhere e-voting is in progress.
Individual embers m	1.	You can also login using the login credentials of your demat account through your depository articipant p
(holding securities in		registered with NSDL/CDSL for e- oting facility. v
demat mode) login through their depository participants	2.	Once logged in, you will be able to see the e- oting option. Once you click on the e- oting option, you will v v be redirected to the NSDL/CDSL epository site after successful authentication, wherein you can see e- d voting feature.
	3.	Click on options available against company name or and you will be e-voting service provider-NSDL
		redirected to e- oting website of NSDL for casting your vote during the remote e- oting period or joining v v
		virtual meeting and voting during the meeting.

Important note: Members who are unable to retrieve User ID/Password are advised to use forget User ID and forget Password option available at respective websites.

Important note:Members who are unable to retrieve User ID/Password are advised to use forget User ID and forget Password option available at respective websites.	Important note:Members who are unable to retrieve User ID/Password are advised to use forget User ID and forget Password option available at respective websites.
Helpdesk for ndividual holding securities in demat mode for any technical issues related to login through epository i.e. NSDL i members d and CDSL.
Helpdesk details Login type
Individual holding members securities in demat mode with NSDL Please contact NSDL helpdesk by sending a request at 1800 1020 990 and 1800 22 44 30	or call at toll free no.: [email protected]
Individual holding members securities in demat mode with CDSL Please [email protected] contact CDSL helpdesk by sending a request at or contact at 022- 23058738 or 022-23058542 43 /

B) Login method for e-voting and joining virtual meeting for members other than individual members holding securities in demat mode and members holding securities in physical mode.

How to login to the NSDL e-voting website?

1.
Visit the e-voting website of NSDL. Open a web browser by typing
the following URL:https://www.evoting.nsdl.com/either on a
personal computer or on a mobile.
2. Once the home page of e-voting system is launched, click on the
icon “Login” which is available under ‘Shareholder/Member’
section.
3. A new screen will open. You will have to enter your User ID, your
Password/OTP and a veri�cation code as shown on the screen.
Alternatively, if you are registered for NSDL eservices i.e. IDEAS,
you can login tohttps://eservices.nsdl.com/with your existing
IDEAS login. Once you log-in to NSDL eservices after using your
login credentials, click on e-voting and you can proceed to Step 2
i.e. Cast your vote electronically.
4. Your User ID details are given below :
Manner of holding shares
i.e. Demat (NSDL or
CDSL) or Physical
Your User ID is:
a) For
embers who
m
hold shares in a
8 Character DP ID followed by 8 Digit
Client ID.

5. Password details for members other than individual members are
given below:
a. If you are already registered for e-voting, then you can use
your existing password to login and cast your vote.
b. If you are using the NSDL e-voting system for the �rst time, you
will need to retrieve the ‘initial password’. Details of ‘initial
password’ is given in point c. Once you retrieve your ‘initial
password’, you need to enter the ‘initial password’ and the
system will force you to change your password.
b) For
embers who
m
hold shares in demat
account with CDSL.
c) For
embers holding
m
shares in hysical
p
form.
16 Digit �ene�ciary ID.
For example if your �ene�ciary ID is
12** then your User ID is
12**
For example if folio no. is 001 and
EVEN is 123456 then User ID is
123456001
EVEN umber followed by olio no.
n
f
registered with the company.

a) For members who 8 Character DP ID followed by 8 Digit hold shares in a Client ID. demat account with For example if your DP ID is IN300***
NSDL. and Client ID is 12** then your user ID is IN30012*.
c. How to retrieve your ‘initial password’?
I. If your e-mail ID is registered in your demat account or with the company, your ‘initial password’ is communicated to you on your e-mail ID. Trace the e-mail sent to you from NSDL from your mailbox. Open the email and open the attachment i.e. a .pdf �le. Open the .pdf �le.

Notice

Annual Report 2020-21

Dr. Reddy’s Laboratories Limited

  - ii.  The password to open the .pdf �le is your 8 digit client ID for NSDL account, last 8 digits of client ID for CDSL account or folio no. for shares held in physical form. The .pdf �le contains your ‘User ID’ and your ‘initial password’.

  - iii.  If your e-mail ID is not registered, please follow steps mentioned below in “process for those members whose e-mail IDs are not registered”.

If you are unable to retrieve or have not received the “initial password” or have forgotten your password:
a. Click on “Forgot User Details/Password?”(If you are holding shares in your demat account with NSDL or CDSL) option available on www.evoting.nsdl.com.
b. Physical User Reset Password? (If you are holding shares in physical mode) option available on www.evoting.nsdl.com.
c. If you are still unable to get the password by aforesaid two options, you can send a request at [email protected] mentioning your demat account number/folio no., your PAN, your name and your registered address etc.
d. Members can also use the OTP (One Time Password) based login for casting the votes on the e-voting system of NSDL.
After entering your password, tick on agree to “Terms and Conditions” by selecting on the check box.
Now, you will have to click on the “Login” button.
After you click on the “Login” button, home page of e-voting will open.

Step 2: How to cast your vote electronically on the NSDL e-voting system?

After successful login at Step 1, you will be able to see all the companies “EVEN” in which you are holding shares and whose voting cycle and general meeting is in active status.
Select “EVEN” of Dr. Reddy's Laboratories Limited to cast your vote during the remote e-voting period/during the general meeting. For joining a virtual meeting, you need to click on “VC/OAVM” link placed under “Join General Meeting”.
Now you are ready for e-voting as the voting page opens.
Cast your vote by selecting appropriate options i.e. assent or dissent, verify/modify the number of shares for which you wish to cast your vote and click on “Submit” and also “Con�rm” when prompted.
Upon con�rmation, the message “Vote cast successfully” will be displayed.
You can also take the printout of the votes cast by you by clicking on the print option on the con�rmation page.
Once you con�rm your vote on the resolution, you will not be allowed to modify your vote.

Process for those members whose e-mail IDs are not registered with the depositories/company for procuring User ID and Password and registration of e-mail IDs for e-voting for the resolutions set out in this notice:

a) In case shares are held in physical mode please provide folio no., name of member, scanned copy of the share certi�cate (front and back), PAN (self attested scanned copy of PAN card), Aadhar (self attested scanned copy of Aadhar card) by e-mail to [email protected] or [email protected]
b) In case shares are held in demat mode, please provide DP ID & Client ID (16 digit DP ID & Client ID or 16 digit bene�ciary ID), name, client master or copy of consolidated account statement, PAN (self attested scanned copy of PAN card), Aadhar (self

attested scanned copy of Aadhar card) to (company e-mail ID at [email protected]). If you are an individual member holding securities in demat mode, you are requested to refer to the login method explained at step 1 (A) i.e. login method for e-voting and joining virtual meeting for individual members holding securities in demat mode.

c) Alternatively members may send a request to [email protected] for procuring User ID and Password for e-voting by providing above mentioned documents.
d) In terms of SEBI circular dated December 9, 2020 on e-voting facility provided by listed companies, individual members holding securities in demat mode are allowed to vote through their demat account maintained with depositories and depository participants. Members are required to update their mobile number and e-mail ID correctly in their demat account in order to access e-voting facility.

General instructions

a) The remote e-voting period commences on Saturday, July 24, 2021, (9.00 am IST) and ends on Tuesday, July 27, 2021, (5.00 pm IST). During this period, members of the company, holding shares either in physical form or in dematerialized form, as on the cut-o� date of Tuesday, July 20, 2021, may cast their votes electronically. The remote e-voting module shall be disabled by NSDL for voting hereafter. Once the vote on a resolution is cast by the member, the member shall not be allowed to change it subsequently or cast the vote again.
b) Any person, who acquires shares of the company and becomes a member of the company after dispatch of the notice of AGM and holds shares as on the cut-o� date i.e. Tuesday, July 20, 2021, may obtain user ID and password by sending a request at [email protected]. However, if you are already registered with NSDL for e-voting, then you can use your existing User ID and Password for casting your vote. If you forget your password, you can reset the password by using ‘forgot User details/Password?’ or ‘physical user reset password?’ option available on
www.evoting.nsdl.com or contact NSDL at the following toll free nos.: 1800-1020-990/1800-224-430.
c) The members who have cast their vote by remote e-voting prior to the AGM may also attend the AGM but shall not be entitled to cast their vote again.
d) The facility for voting through electronic voting system shall be made available during the AGM and only those members, who will be present in the AGM through VC/OAVM facility and have not cast their vote on the resolutions through remote e-voting and are otherwise not barred from doing so, shall be eligible to vote through e-voting system in the AGM.
e) The voting rights of members shall be in proportion to the shares held by them, of the paid-up equity share capital of the company as on the cut-o� date of Tuesday, July 20, 2021.
f) Mr. G Raghu Babu, partner of M/s. R & A Associates, practicing company secretary, Hyderabad (membership no. 4448 & certi�cate of practice no. 2820) has been appointed by the board as the scrutinizer to scrutinize the voting through electronic means during AGM and remote e-voting process in a fair and transparent manner.
g) At the AGM, at the end of discussion on the resolutions on which voting is to be held, the chairman shall, with the assistance of scrutinizer, order voting through electronic means for all those members who are present at the AGM through VC/OAVM but have not cast their votes electronically using the remote e-voting facility.
h) Immediately after the conclusion of voting at the AGM, the scrutinizer shall �rst count the votes cast at the AGM and thereafter unblock the votes cast through remote e-voting in the presence of at least two witnesses not in the employment of the company. The scrutinizer shall prepare a consolidated scrutinizer’s report of the total votes cast in favor or against, if any, not later than forty eight hours after the conclusion of the AGM. This report shall be made to the chairman or any other person authorized by the chairman, who shall declare the result of the voting forthwith.

specimen signature of the duly authorized signatory(ies) who are authorized to vote, to the scrutinizer by e-mail to [email protected] with a copy marked to evoting @nsdl.co.in.

k) It is strongly recommended not to share your password with any other person and take utmost care to keep your password con�dential. Login to the e-voting website will be disabled upon
- �ve unsuccessful attempts to key in the correct password. In such an event, you will need to go through the ‘Forgot User Details/Password?’ or ‘Physical User Reset Password?’ option available on www.evoting.nsdl.com to reset the password.
I) The voting results declared along with the scrutinizer’s report shall be placed on the company’s website www.drreddys.com and the website of NSDL immediately after the declaration of the result by l)
the chairman or a person authorized by the chairman. The results shall also be immediately forwarded to the BSE Limited, National Stock Exchange of India Limited, the New York Stock Exchange Inc., and NSE IFSC Limited.
In case of any queries, you may refer to the frequently asked questions (FAQs) and e-voting user manual, available at downloads section of www.evoting.nsdl.com or call on toll free nos.: 1800-1020-990/1800-224-430. You can also refer your queries to NSDL through e-mail ID: [email protected].
j) Institutional members (i.e. other than individuals, HUF, NRI etc.) are required to send scanned copy (PDF/JPG format) of the relevant board resolution/authority letter etc. with attested

INSTRUCTIONS FOR MEMBERS ATTENDING THE AGM THROUGH VC/OAVM ARE AS UNDER:

Members who would like to express their views/ask questions during the meeting need to register themselves as a speaker by sending their request mentioning their name, demat account number/folio no., e-mail ID and mobile number at [email protected] on or before July 24, 2021, (6:00 pm IST).
Members will be provided with a facility to attend the AGM through VC/OAVM through the NSDL e-voting system. Members may access by following the steps mentioned above for access to NSDL e-voting system. After successful login, you can see link of “VC/OAVM link” placed under “Join General meeting” menu against company name. You are requested to click on VC/OAVM link placed under Join General Meeting menu. The link for VC/OAVM will be available in Shareholder/Member login where the EVEN of company will be displayed. Please note that the members who do not have the User ID and Password for e-voting or 7. have forgotten the User ID and Password may retrieve the same by following the remote e-voting instructions mentioned in this notice to avoid last minute rush.
Those members who have registered themselves as speakers in advance will only be allowed to express their views/ask questions during the meeting.
- The company reserves the right to limit the number of speakers depending on the availability of time at the AGM.
In case any assistance is needed, members may contact:
- a. Mr. Amit Vishal, Senior Manager, NSDL at [email protected] or at telephone number: 022-24994360.
Members are encouraged to join the meeting through laptops instead of mobiles for better experience.
b. Ms. Pallavi Mhatre, Manager, NSDL at [email protected] or at telephone number: 022-24994545.
Further members will be required to allow camera usage on their systems and use a good speed internet to avoid any disturbance during the meeting.
c. NSDL at [email protected] or at toll free nos.:
- 1800-1020-990/1800-224-430.
Please note that participants connecting through mobile devices or tablets or laptop, via mobile hotspot may experience audio/video loss due to �uctuation in their respective network. It is therefore recommended to use stable Wi-Fi or LAN connection to mitigate any kind of aforesaid glitches.

By order of the board

Place: Hyderabad Sandeep Poddar Date: May 14, 2021 Company Secretary

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Dr. Reddy’s Laboratories Limited
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NOTES
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“
I strongly believe
that the only way we
can grow and thrive,
not just survive, in
the future is by
pursuing the path
of innovation.
DR. K ANJI REDDY
“
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DR. REDDY’S LABORATORIES LIMITED CIN:L85195TG1984PLC004507 8-2-337, Road No.3, Banjara Hills, Hyderabad 500 034, India www.drreddys.com

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This report is published on 100% recycled paper and textile waste at zero cost, based on waste circularity principle.

AI assistant

DR REDDYS LABORATORIES LTD — Annual Report 2021

30528_rns_2021-07-02_8698caf9-eafd-4e49-b50a-ff9acd9a6194.pdf

•·· Dr. Reddy's �;•

FOR HEALTH. FOR LIFE.

CONTENTS

CORPORATE OVERVIEW

STATUTORY REPORTS

FINANCIAL STATEMENTS

FOR HEALTH. FOR LIFE.

Connecting science, technology and innovation

OUR GUIDING PHILOSOPHY

OUR OUR PURPOSE PROMISES

OUR PRINCIPLES

OUR LEADERSHIP BEHAVIOURS

Bringing

Helping

Working

Enabling

Empathy

We because Good Health Can't Wait. aspire

Dynamism

Aspirational Growth Mindset

People Leadership

Innovation

Driven

Focus

LETTER FROM THE CHAIRMAN AND CO-CHAIRMAN

Dear Member,

Sputnik V vaccine

K Satish Reddy

G V Prasad

GLOBAL PRESENCE

REVENUE

PROPRIETARY PRODUCTS

ACTIVE PHARMACEUTICALS INGREDIENTS

REVENUE BY GEOGRAPHY

GLOBAL GENERICS

AURIGENE DISCOVERY

AURIGENE PHARMACEUTICAL

SERVICES

BIOLOGICS

KEY PERFORMANCE INDICATORS

GROSS PROFIT[`][ MILLION]

REVENUE[`][ MILLION]

NET WORTH[`][ MILLION]

NET DEBT TO EQUITY RATIO*

EPS (DILUTED)[`]

ROCE[%]

FOR HEALTH. FOR LIFE.

VENTURING INTO AMAZON’S ® HEALTHCAREAISLE

An important milestone for the OTC team in the U.S.

LIVING OUR PURPOSE

How our teams kept medicine supplies to Europe moving during the pandemic

STRONGER TOGETHER

AIR, ROAD, SEA

FUTURE-READY WITH VIRTUAL REALITY

Training employees using VR in Hyderabad and Vizag

LIGHTHOUSE FACTORIES

Creating role models to lead the way to a smarter world

A COMPREHENSIVE COVID-19 PORTFOLIO

OUR COVID-19 PORTFOLIO

SPUTNIK V VACCINE

REMDESIVIR (REDYX™)

® FAVIPIRAVIR (AVIGAN )

2-DEOXY-D-GLUCOSE (2DG™)

MOLNUPIRAVIR

BARICITINIB

CONNECTING SCIENCE, TECHNOLOGY, INNOVATION AND PEOPLE IN THE FACE OF A PANDEMIC

ENSURING EMPLOYEE SAFETY AND WELL-BEING

SUPPORT TO THE COMMUNITY

PHASE I:

PHASE II:

WE ARE ALL IN THIS TOGETHER!

₹ 50 CRORE

(~US$ 7 MILLION)

COVID AID

BOARD OF DIRECTORS

OUR BOARD LEVEL COMMITTEES

MANAGEMENT COUNCILOUR PRODUCTS

DR REDDYS LABORATORIES LTD Annual Report 2021