Exhibit 99.3
S.R.Batliboi & Associates LLP Chartered Accountants | 6th Floor – “A” Block Tidel Park, No. 4, Rajiv Gandhi Salai Taramani, Chennai – 600 113, India
Tel: + 91 44 6117 900 |
Independent Auditor’s Report on the Quarterly and Year to Date Consolidated Financial Results of the Company Pursuant to the Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended
To
The Board of Directors of
Dr. Reddy’s Laboratories Limited
Report on the audit of the Consolidated Financial Results
Opinion
We have audited the accompanying statement of quarterly and year to date consolidated financial results of Dr. Reddy’s Laboratories Limited (“Holding Company”) and its subsidiaries (the Holding Company and its subsidiaries together referred to as “the Group”), and its joint ventures for the quarter and year ended March 31, 2020 (“Statement”), attached herewith, being submitted by the Holding Company pursuant to the requirement of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (“Listing Regulations”).
In our opinion and to the best of our information and according to the explanations given to us, the Statement:
i. | includes the results of the following entities: |
SL.No Name of the Company
Subsidiaries
1. | Aurigene Discovery Technologies Limited |
2. | Cheminor Investments Limited |
3. | Dr. Reddy’s Bio-Sciences Limited |
4. | Dr. Reddy’s Farmaceutica Do Brasil Ltda. |
5. | Dr. Reddy’s Laboratories SA |
6. | Idea2Enterprises (India) Private Limited |
7. | Imperial Credit Private Limited |
8. | Industrias Quimicas Falcon de Mexico, S.A.de C.V. |
9. | Reddy Antilles N.V. (Liquidated during the year) |
10. | Regkinetics Services Limited (formerly Dr. Reddy’s Pharma SEZ Limited) |
11. | Aurigene Discovery Technologies (Malaysia) SDN BHD |
12. | Aurigene Discovery Technologies Inc. |
13. | Aurigene Pharmaceuticals Services Limited (from 16 September 2019) |
14. | beta Institut gemeinnützige GmbH |
S.R.Batliboi & Associates LLP, a Limited Liability Partnership with LLP Identity No. AAB-4295
Regd. Office 22, Camac Street, Black ‘B’, 3rd floor, Kolkata 700 016
S.R.Batliboi & Associates LLP
Chartered Accountants
15. | betapharm Arzneimittel GmbH |
16. | Chirotech Technology Limited |
17. | DRL Impex Limited |
18. | Dr. Reddy’s Laboratories (Australia) Pty. Limited |
19. | Dr. Reddy’s Laboratories Canada, Inc. |
20. | Dr. Reddy’s Laboratories Chile SPA. |
21. | Dr. Reddy’s Laboratories (EU) Limited |
22. | Dr. Reddy’s Laboratories Inc. |
23. | Dr. Reddy’s Laboratories International SA (merged with Dr. Reddy’s Laboratories SA w.e.f 1 January 2019) |
24. | Dr. Reddy’s Laboratories Japan KK |
25. | Dr. Reddy’s Laboratories Kazakhstan LLP |
26. | Dr. Reddy’s Laboratories LLC |
27. | Dr. Reddy’s Laboratories Louisiana LLC |
28. | Dr. Reddy’s Laboratories Malaysia Sdn. Bhd. |
29. | Dr. Reddy’s Laboratories New York, Inc. |
30. | Dr. Reddy’s Laboratories Philippines Inc. (from 9 May 2018) |
31. | Dr. Reddy’s Laboratories (Proprietary) Limited |
32. | Dr. Reddy’s Laboratories Romania S.R.L. |
33. | Dr. Reddy’s Laboratories SAS |
34. | Dr. Reddy’s Laboratories Taiwan Limited |
35. | Dr. Reddy’s Laboratories Tennessee, LLC (till 1 October 2018) |
36. | Dr. Reddy’s Laboratories (Thailand) Limited (from 13 June 2018) |
37. | Dr. Reddy’s Laboratories (UK) Limited |
38. | Dr. Reddy’s Research and Development B.V. |
39. | Dr. Reddy’s Singapore PTE Limited (liquidated during the year) |
40. | Dr. Reddy’s Srl |
41. | Dr. Reddy’s New Zealand Limited |
42. | Dr. Reddy’s (WUXI) Pharmaceutical Co. Limited |
43. | Dr. Reddy’s Venezuela, C.A. |
44. | Eurobridge Consulting B.V. |
45. | Lacock Holdings Limited |
46. | OOO Dr. Reddy’s Laboratories Limited |
47. | OOO DRS LLC |
48. | Promius Pharma LLC |
49. | Reddy Holding GmbH |
50. | Reddy Netherlands B.V. |
51. | Reddy Pharma Iberia SA |
52. | Reddy Pharma Italia S.R.L |
53. | Reddy Pharma SAS |
Joint ventures
1 | DRANU LLC |
2 | DRES Energy Private Limited |
S.R.Batliboi & Associates LLP
Chartered Accountants
3 | Kunshan Rotam Reddy Pharmaceutical Company Limited |
Other consolidating entities
1 | Cheminor Employees Welfare Trust |
2 | Dr. Reddy’s Employees ESOS Trust (from 27 July 2018) |
3 | Dr. Reddy’s Research Foundation |
ii. | are presented in accordance with the requirements of the Listing Regulations in this regard; and |
iii. | gives a true and fair view in conformity with the applicable accounting standards, and other accounting principles generally accepted in India, of the consolidated net profit and other comprehensive loss and other financial information of the Group for the quarter and year ended March 31, 2020. |
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs), as specified under Section 143(10) of the Companies Act, 2013, as amended (“the Act”). Our responsibilities under those Standards are further described in the “Auditor’s Responsibilities for the Audit of the Consolidated Financial Results” section of our report. We are independent of the Group, and its joint ventures 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 financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our opinion.
Management’s Responsibilities for the Consolidated Financial Results
The Statement has been prepared on the basis of the consolidated annual financial statements. The Holding Company’s Board of Directors are responsible for the preparation and presentation of the Statement that give a true and fair view of the net profit and other comprehensive loss and other financial information of the Group including its joint ventures in accordance with the applicable accounting standards prescribed under section 133 of the Act read with relevant rules issued thereunder and other accounting principles generally accepted in India and in compliance with Regulation 33 of the Listing Regulations. 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 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 financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Statement 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 Statement by the Directors of the Holding Company, as aforesaid.
S.R.Batliboi & Associates LLP
Chartered Accountants
In preparing the Statement, the respective Board of Directors of the companies included in the Group and its joint ventures are responsible for assessing the ability of the Group and 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 the respective Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The respective Board of Directors of the companies included in the Group and its joint ventures are also responsible for overseeing the financial reporting process of the Group and its joint ventures.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Results
Our objectives are to obtain reasonable assurance about whether the Statement as a whole is 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 influence the economic decisions of users taken on the basis of the Statement.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
· | Identify and assess the risks of material misstatement of the Statement, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient 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 company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls. |
· | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors. |
· | Conclude on the appropriateness of the Board of Directors’ 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 significant 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 Statement 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. |
S.R.Batliboi & Associates LLP
Chartered Accountants
· | Evaluate the overall presentation, structure and content of the Statement, including the disclosures, and whether the Statement represent the underlying transactions and events in a manner that achieves fair presentation. |
· | Obtain sufficient appropriate audit evidence regarding the financial results/financial information of the entities within the Group of which we are the independent auditors and whose financial information we have audited, to express an opinion on the Statement. We are responsible for the direction, supervision and performance of the audit of the financial information of such entities included in the Statement of which we are the independent auditors. 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 Statement of which we are the independent auditors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies 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.
We also performed procedures in accordance with the Circular No. CIR/CFD/CMD1/44/2019 dated March 29, 2019 issued by the Securities Exchange Board of India under Regulation 33 (8) of the Listing Regulations, to the extent applicable.
Other Matter
The accompanying Statement includes the audited financial results/statements and other financial information, in respect of:
· | Two subsidiaries, whose financial results/statements include total assets of Rs 16,259 million as at March 31, 2020, total revenues of Rs 6,417 million and Rs 24,383 million, total net loss after tax of Rs. 486 million and Rs. 1,120 million, total comprehensive income of Rs. 480 million and Rs. 340 million, for the quarter and the year ended on that date respectively, and net cash (inflows) of Rs.158 million for the year ended March 31, 2020, as considered in the Statement which have been audited by their respective independent auditors. |
The independent auditor’s report on the financial statements/financial results/financial information of these entities have been furnished to us by the Management and our opinion on the Statement in so far as it relates to the amounts and disclosures included in respect of these subsidiaries is based solely on the reports of such auditors and the procedures performed by us as stated in paragraph above.
S.R.Batliboi & Associates LLP
Chartered Accountants
These subsidiaries are located outside India whose financial results/financial statements and other financial 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 financial results / financial 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 affairs 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.
The Statement includes the results for the quarter ended March 31, 2020 being the balancing figures between the audited figures in respect of the full financial year ended March 31, 2020 and the published unaudited year-to-date figures up to the end of the third quarter of the current financial year, which were subjected to a limited review by us, as required under the Listing Regulations.
For S.R. BATLIBOI & ASSOCIATES LLP
Chartered Accountants
ICAI Firm Registration Number:101049W/E300004
per S Balasubrahmanyam
Partner
Membership No.: 053315
UDIN: 20053315AAAAAZ6754
Chennai
May 20, 2020
Dr. Reddy’s Laboratories Ltd. 8-2-337, Road No. 3, Banjara Hills, Hyderabad - 500 034, Telangana, India. CIN : L85195TG1984PLC004507
Tel :+91 40 4900 2900 Fax :+91 40 4900 2999 Email :mail@drreddys.com www.drreddys.com |
DR. REDDY’S LABORATORIES LIMITED
STATEMENT OF AUDITED CONSOLIDATED FINANCIAL RESULTS FOR THE QUARTER AND YEAR ENDED 31 MARCH 2020
All amounts in Indian Rupees millions | ||||||||||||||||||||||
Sl. | Quarter ended | Year ended | ||||||||||||||||||||
No. | Particulars | 31.03.2020 | 31.12.2019 | 31.03.2019 | 31.03.2020 | 31.03.2019 | ||||||||||||||||
(Audited) | (Unaudited) | (Audited) | (Audited) | (Audited) | ||||||||||||||||||
1 | Revenue from operations | |||||||||||||||||||||
a) Net sales / income from operations | 43,361 | 42,607 | 37,472 | 163,574 | 148,706 | |||||||||||||||||
b) License fees and service income | 957 | 1,231 | 2,694 | 11,026 | 5,145 | |||||||||||||||||
c) Other operating income | 171 | 133 | 130 | 570 | 631 | |||||||||||||||||
Total revenue from operations | 44,489 | 43,971 | 40,296 | 175,170 | 154,482 | |||||||||||||||||
2 | Other income | 736 | 673 | 833 | 6,206 | 3,375 | ||||||||||||||||
3 | Total income (1 + 2) | 45,225 | 44,644 | 41,129 | 181,376 | 157,857 | ||||||||||||||||
4 | Expenses | |||||||||||||||||||||
a) Cost of materials consumed | 7,453 | 7,528 | 7,360 | 29,848 | 28,894 | |||||||||||||||||
b) Purchase of stock-in-trade | 5,875 | 8,426 | 4,393 | 25,459 | 18,808 | |||||||||||||||||
c) Changes in inventories of finished goods, work-in-progress and stock-in-trade | 1,983 | (1,801 | ) | 871 | 237 | (2,754 | ) | |||||||||||||||
d) Employee benefits expense | 8,555 | 8,377 | 8,415 | 33,802 | 33,562 | |||||||||||||||||
e) Depreciation and amortisation expense | 2,741 | 2,869 | 2,872 | 11,631 | 11,348 | |||||||||||||||||
f) Impairment of non-current assets | 7 | 13,200 | 82 | 16,767 | 116 | |||||||||||||||||
g) Finance costs | 230 | 152 | 245 | 983 | 889 | |||||||||||||||||
h) Selling and other expenses | 11,124 | 11,128 | 10,986 | 44,353 | 44,074 | |||||||||||||||||
Total expenses | 37,968 | 49,879 | 35,224 | 163,080 | 134,937 | |||||||||||||||||
5 | Profit / (loss) before tax and before share of equity accounted investees(3 - 4) | 7,257 | (5,235 | ) | 5,905 | 18,296 | 22,920 | |||||||||||||||
6 | Share of profit of equity accounted investees, net of tax | 105 | 176 | 157 | 561 | 438 | ||||||||||||||||
7 | Profit / (loss) before tax (5+6) | 7,362 | (5,059 | ) | 6,062 | 18,857 | 23,358 | |||||||||||||||
8 | Tax expense / (benefit): | |||||||||||||||||||||
a) Current tax | 417 | 1,736 | 1,413 | 6,616 | 4,707 | |||||||||||||||||
b) Deferred tax | (866 | ) | (1,411 | ) | 95 | (8,019 | ) | (849 | ) | |||||||||||||
9 | Net profit / (loss) after taxes and share of profit of associates (7 - 8) | 7,811 | (5,384 | ) | 4,554 | 20,260 | 19,500 | |||||||||||||||
10 | Other comprehensive income | |||||||||||||||||||||
a) (i) Items that will not be reclassified subsequently to profit or loss | (326 | ) | (200 | ) | 507 | (412 | ) | (379 | ) | |||||||||||||
(ii) Income tax relating to items that will not be reclassified to profit or loss | (22 | ) | - | (900 | ) | (22 | ) | (673 | ) | |||||||||||||
b) (i) Items that will be reclassified subsequently to profit or loss | (1,011 | ) | 606 | 226 | (448 | ) | 19 | |||||||||||||||
(ii) Income tax relating to items that will be reclassified to profit or loss | 96 | 48 | (55 | ) | 232 | (54 | ) | |||||||||||||||
Total other comprehensive income | (1,263 | ) | 454 | (222 | ) | (650 | ) | (1,087 | ) | |||||||||||||
11 | Total comprehensive income (9 + 10) | 6,548 | (4,930 | ) | 4,332 | 19,610 | 18,413 | |||||||||||||||
12 | Paid-up equity share capital (face value Rs. 5/- each) | 831 | 831 | 830 | 831 | 830 | ||||||||||||||||
13 | Other equity | 155,157 | 139,406 | |||||||||||||||||||
14 | Earnings per equity share (face value Rs. 5/- each) | |||||||||||||||||||||
Basic | 47.12 | (32.48 | ) | 27.45 | 122.22 | 117.53 | ||||||||||||||||
Diluted | 47.03 | (32.48 | ) | 27.41 | 121.99 | 117.33 | ||||||||||||||||
(Not annualised) | (Not annualised) | (Not annualised) | ||||||||||||||||||||
See accompanying notes to the financial results |
DR. REDDY’S LABORATORIES LIMITED
Segment Information | All amounts in Indian Rupees millions | |||||||||||||||||||||
Quarter ended | Year ended | |||||||||||||||||||||
Sl. No. | Particulars | 31.03.2020 | 31.12.2019 | 31.03.2019 | 31.03.2020 | 31.03.2019 | ||||||||||||||||
(Audited) | (Unaudited) | (Audited) | (Audited) | (Audited) | ||||||||||||||||||
Segment wise revenue and results: | ||||||||||||||||||||||
1 | Segment revenue : | |||||||||||||||||||||
a) Pharmaceutical Services and Active Ingredients | 8,782 | 8,654 | 8,241 | 32,086 | 30,403 | |||||||||||||||||
b) Global Generics | 36,460 | 35,956 | 30,415 | 138,264 | 123,056 | |||||||||||||||||
c) Proprietary Products | 2 | 241 | 2,513 | 7,949 | 4,750 | |||||||||||||||||
d) Others | 723 | 763 | 503 | 2,781 | 2,058 | |||||||||||||||||
Total | 45,967 | 45,614 | 41,672 | 181,080 | 160,267 | |||||||||||||||||
Less: Inter-segment revenue | 1,478 | 1,643 | 1,376 | 5,910 | 5,785 | |||||||||||||||||
Total revenue from operations | 44,489 | 43,971 | 40,296 | 175,170 | 154,482 | |||||||||||||||||
2 | Segment results: | |||||||||||||||||||||
Gross profit from each segment | ||||||||||||||||||||||
a) Pharmaceutical Services and Active Ingredients | 2,050 | 2,079 | 1,428 | 6,219 | 6,158 | |||||||||||||||||
b) Global Generics | 20,332 | 20,910 | 17,008 | 78,449 | 71,924 | |||||||||||||||||
c) Proprietary Products | (7 | ) | 246 | 2,307 | 7,744 | 4,182 | ||||||||||||||||
d) Others | 442 | 492 | 318 | 1,626 | 1,196 | |||||||||||||||||
Total | 22,817 | 23,727 | 21,061 | 94,038 | 83,460 | |||||||||||||||||
Less: Selling and other un-allocable expenditure / (income), net | 15,455 | 28,786 | 14,999 | 75,181 | 60,102 | |||||||||||||||||
Total profit / (loss) before tax | 7,362 | (5,059 | ) | 6,062 | 18,857 | 23,358 |
Global Generics includes operations of Biologics business. Inter-segment revenue represents sale from Pharmaceutical Services and Active Ingredients to Global Generics at cost.
Segmental Capital employed
As certain assets of the Company including manufacturing facilities, development facilities and treasury assets and liabilities are often deployed interchangeably across segments, it is impractical to allocate these assets and liabilities to each segment. Hence, the details for capital employed have not been disclosed in the above table.
Notes:
1 | These results have been prepared in accordance with the Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013, read with the Companies (Indian Accounting Standards) Rules 2015 as amended. |
2 | Effective 1 April 2019, the Company adopted Ind AS 116,Leases, using the modified retrospective approach. Ind AS 116 brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Upon implementation of Ind AS 116, 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. Accordingly, on 1 April 2019, the Company recognised lease liabilities of Rs. 1,335 million and right-of-use assets of Rs. 1,153 million (after adjustments of Rs. 182 million towards lease incentives and other items related to the lease agreement as at 31 March 2019). |
3 | The Company received a warning letter, dated 5 November 2015 from the U.S. FDA, regarding deviations with current Good Manufacturing Practices at its API manufacturing facilities in Srikakulam, Andhra Pradesh and Miryalaguda, Telangana, as well as regarding violations at its oncology formulation manufacturing facility at Duvvada, Visakhapatnam, Andhra Pradesh. Of these three manufacturing facilities, two facilities (API manufacturing facility at Miryalaguda and Oncology manufacturing facility at Duvvada) received Establishment Inspection Reports (EIR) from the U.S. FDA in the months of June 2017 and February 2019, respectively which indicate that the audit is closed. With respect to API manufacturing facility at Srikakulam, in October 2018, the Company was asked to carry out certain detailed investigations and analysis. As part of the review of the response by the U.S. FDA, certain additional follow-on queries were received by the Company. The Company responded to all queries in January 2019 to the U.S. FDA. In February 2019, the Company received certain follow on questions from the U.S. FDA and the Company responded to these questions in March 2019. The U.S. FDA. has completed the audit on January 28, 2020. The Company has been issued a Form 483 with 5 observations and responded to the observations in February 2020. In May 2020, the Company has received the EIR from the U.S. FDA, for the API manufacturing facility at Srikakulam, indicating closure of the audit and the inspection classification of this facility is determined as “Voluntary Action Indicated” (VAI). With this, all facilities under warning letter are now determined as VAI. |
4 | “Revenue from operations” for the year ended 31 March 2020 includes an amount of Rs. 7,486 million (U.S.$108.7 million) towards license fee for selling US and select territory rights for ZEMBRACE® SYMTOUCH® (sumatriptan injection) 3 mg and TOSYMRATM (sumatriptan nasal spray) 10 mg, (formerly referred to as “DFN-02”) to Upsher-Smith Laboratories, LLC. The costs associated with this transaction are Rs. 328 million. |
5 | ��Other income” includes an amount of Rs. 3,457 millions received from Celgene during the quarter ended 30 June 2019, pursuant to a settlement agreement entered in April 2019. The agreement effectively settles any claim the Company or its affiliates may have had for damages under section 8 of the Canadian Patented Medicines (Notice of Compliance) Regulations in regard to the Company’s ANDS for a generic version of REVLIMID brand capsules, (Lenalidomide) pending before Health Canada. |
6 | Impairment of intangible assets: |
During the quarter ended 31 December 2019
Total impairment charge for the quarter ended 31 December 2019 is Rs. 13,200 million, of which Rs. 11,137 million is towards impairment of gNuvaring and the balance of Rs. 2,063 million is towards other product related intangibles.
Impairment of gNuvaring
There were significant changes to the generics market of Ethinyl estradiol / Ethenogestral vaginal ring (a generic equivalent to Nuvaring®), one of the 8 ANDAs acquired from Teva in June 2016, with the launch of a generic and authorised generic versions of the product in the month of December 2019. Due to these adverse market conditions, the Company recorded an impairment loss of Rs.11,137 million during the quarter ended 31 December 2019. The carrying value of the asset after the impairment was Rs. 3,084 million as at 31 December 2019. The said impairment pertains to the Company’s Global Generics segment.
Other intangible assets
In view of the specific triggers occurring in the quarter with respect to some of 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 Rs.2,063 million as an impairment loss for the quarter ended 31 December 2019.
During the quarter ended 30 Sepetmber 2019
Consequent to the adverse market conditions with respect to certain of the Company’s products forming part of the Global Generics segment, the Company assessed the recoverable amount of three product related intangibles (viz., ramelteon, tobramycin and imiquimod) and recognised an amount of Rs. 3,551 million as impairment charge during the quarter ended 30 September 2019. The said impairment charge is recognised under the head “impairment of non-current assets”.
7 | During the quarter ended 30 September 2019, the Government of India promulgated the Taxation Laws (Amendment) Ordinence 2019 (enacted into Taxation laws (Amendment) Act 2019), announcing key changes to corporate tax rates in the Income-tax Act, 1961. The key changes include, among others, reduction of MAT rate from 21.55% to 17.47% (including surcharge and cess). As a result of this, the Company reassessed the MAT recoverability and recognised an amount of Rs. 4,989 million as deferred tax asset during the quarter ended 30 September 2019. |
During the quarter ended 31 March 2020, the Company recognised deferred tax benefit of Rs. 1,264 million pursuant to a planned restructuring activity between the group companies. The restructuring activity is expected to be completed by the quarter ended 30 June 2020.
DR. REDDY’S LABORATORIES LIMITED
8 | On 15 May 2020, the Company entered into a Stipulation and Agreement of Settlement with Lead Plaintiff the Public Employees’ Retirement System of Mississippi in the putative securities class action filed against the Company 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 Rs.681 million (U.S.$9 million). 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 financial results for the year ended 31 March 2020. Amount payable to the plaintiff on account of the settlement and that receivable from the insurer have been presented under “other current financial assets” and “other current financial liabilities”, respectively in the consolidated balance sheet of the Company as at 31 March 2020. Please refer to the intimation made by the Company to the Stock exchanges on 16 May 2020 for full details of the settlement. |
9 | During the quarter ended 31 March 2019, the Company entered into agreement with Encore Dermatology, Inc. (“Encore”) for sale and assignment of U.S. rights relating to three of its dermatology brands. As all the performance obligations are satisfied by 31 March 2019, the Company recognised Rs.1,807 million as revenue and Rs. 159 million representing the profit on sale of intangible assets after adjusting the associated costs. |
10 | “Other income” for the year ended 31 March 2019 also includes gain of: |
- Rs. 423 million on sale of API manufacturing business unit located in Jeedimetla, Hyderabad to Therapiva Private Limited during the quarter ended 31 December 2018; and
- Rs. 423 million of profit on sale of intangible assets forming part of Company’s Proprietary Products Segment during the quarter ended 30 September 2018.
11 | The Company considered the uncertainty relating to the COVID-19 pandemic in assessing the recoverability of receivables, goodwill, intangible assets, and certain investments. For this purpose, the Company considered internal and external sources of information up to the date of approval of these financial results. The Company has also used the principles of prudence in applying judgements, estimates and assumptions including sensitivity analysis and based on the current estimates, the Company expects to fully recover the carrying amount of receivables, goodwill, intangible assets, investments and other assets. As the outbreak continues to evolve, the Company will continue to closely monitor any material changes to future economic conditions. |
12 | Consolidated Balance Sheet |
All amounts in Indian Rupees millions | ||||||||
Particulars | As at | As at | ||||||
31.03.2020 | 31.03.2019 | |||||||
(Audited) | (Audited) | |||||||
ASSETS | ||||||||
Non-current assets | ||||||||
Property, plant and equipment | 47,779 | 49,127 | ||||||
Capital work-in-progress | 4,364 | 4,725 | ||||||
Goodwill | 4,913 | 4,659 | ||||||
Other intangible assets | 15,811 | 18,124 | ||||||
Intangible assets under development | 10,987 | 24,610 | ||||||
Investment in equity accounted investees | 2,763 | 2,529 | ||||||
Financial assets | ||||||||
Investments | 328 | 813 | ||||||
Trade receivables | 1,737 | 113 | ||||||
Other financial assets | 793 | 731 | ||||||
Deferred tax assets, net | 12,199 | 4,317 | ||||||
Tax assets, net | 4,379 | 3,400 | ||||||
Other non-current assets | 209 | 407 | ||||||
Total non-current assets | 106,262 | 113,555 | ||||||
Current assets | ||||||||
Inventories | 35,067 | 33,579 | ||||||
Financial assets | ||||||||
Investments | 23,687 | 22,529 | ||||||
Trade receivables | 50,278 | 39,869 | ||||||
Derivative instruments | 1,105 | 360 | ||||||
Cash and cash equivalents | 2,053 | 2,228 | ||||||
Other financial assets | 3,377 | 2,112 | ||||||
Other current assets | 10,424 | 10,424 | ||||||
Total current assets | 125,991 | 111,101 | ||||||
TOTAL ASSETS | 232,253 | 224,656 | ||||||
EQUITY AND LIABILITIES | ||||||||
Equity | ||||||||
Equity share capital | 831 | 830 | ||||||
Other equity | 155,157 | 139,406 | ||||||
Total equity | 155,988 | 140,236 | ||||||
Liabilities | ||||||||
Non-current liabilities | ||||||||
Financial liabilities | ||||||||
Borrowings | 1,304 | 22,000 | ||||||
Other financial liabilities | - | 102 | ||||||
Provisions | 745 | 793 | ||||||
Deferred tax liabilities, net | 20 | 473 | ||||||
Other non-current liabilities | 2,055 | 2,079 | ||||||
Total non-current liabilities | 4,124 | 25,447 | ||||||
Current liabilities | ||||||||
Financial liabilities | ||||||||
Borrowings | 16,532 | 12,125 | ||||||
Trade payables | ||||||||
Total outstanding dues of micro enterprises and small enterprises | 55 | 77 | ||||||
Total outstanding dues of creditors other than micro enterprises and small enterprises | 15,193 | 13,594 | ||||||
Derivative instruments | 1,602 | 68 | ||||||
Other financial liabilities | 27,006 | 22,670 | ||||||
Liabilities for current tax, net | 572 | 181 | ||||||
Provisions | 4,669 | 4,789 | ||||||
Other current liabilities | 6,512 | 5,469 | ||||||
Total current liabilities | 72,141 | 58,973 | ||||||
TOTAL EQUITY AND LIABILITIES | 232,253 | 224,656 |
DR. REDDY’S LABORATORIES LIMITED
13 | Consolidated statement of cashflows |
All amounts in Indian Rupees millions | ||||||||
Particulars | Year ended | Year ended | ||||||
31.03.2020 | 31.03.2019 | |||||||
(Audited) | (Audited) | |||||||
Cash flows from / (used in) operating activities | ||||||||
Profit before tax | 18,857 | 23,358 | ||||||
Adjustments for: | ||||||||
Depreciation and amortisation expense | 11,631 | 11,348 | ||||||
Share of profit of equity accounted investees | (561 | ) | (438 | ) | ||||
Impairment loss on goodwill and other intangible assets | 16,767 | 116 | ||||||
Equity settled share-based payment expense | 521 | 389 | ||||||
Fair value changes and profit on sale of mutual funds, net | (929 | ) | (773 | ) | ||||
Foreign exchange loss / (gain), net | (2,152 | ) | (1,574 | ) | ||||
(Gain) / loss on sale or de-recognition of property , plant and equipment and other intangible assets, net | 68 | (1,257 | ) | |||||
Interest income | (888 | ) | (770 | ) | ||||
Finance costs | 983 | 889 | ||||||
Dividend income | (5 | ) | - | |||||
Allowance for credit loss and doubtful trade and other advances | 190 | 420 | ||||||
Changes in operating assets and liabilities: | ||||||||
Trade receivables | (12,446 | ) | 5,389 | |||||
Inventories | (1,487 | ) | (4,480 | ) | ||||
Trade payables | 1,576 | 398 | ||||||
Other assets and other liabilities, net | 4,821 | 530 | ||||||
Cash generated from operations | 36,946 | 33,545 | ||||||
Income tax paid, net | (7,105 | ) | (4,841 | ) | ||||
Net cash from operating activities | 29,841 | 28,704 | ||||||
Cash flows from / (used in) investing activities | ||||||||
Proceeds from sale of property, plant and equipment | 131 | 1,265 | ||||||
Proceeds from sale of other intangible assets | 259 | 885 | ||||||
Expenditures on property, plant and equipment | (4,846 | ) | (6,955 | ) | ||||
Expenditures on other intangible assets | (1,269 | ) | (1,421 | ) | ||||
Purchase of other investments | (111,918 | ) | (78,573 | ) | ||||
Proceeds from sale of other investments | 111,704 | 76,291 | ||||||
Dividends received from equity accounted investees | 392 | - | ||||||
Interest and dividend received | 624 | 781 | ||||||
Net cash used in investing activities | (4,923 | ) | (7,727 | ) | ||||
Cash flows from / (used in) financing activities | ||||||||
Proceeds from issuance of equity shares (including treasury shares) | 4 | - | * | |||||
Purchase of treasury shares | (474 | ) | (535 | ) | ||||
Proceeds from / (repayment of ) short-term loans and borrowings, net | 4,235 | (15,126 | ) | |||||
Repayment of long-term loans and borrowings, net | (22,918 | ) | (56 | ) | ||||
Payment of principal portion of lease liabilities | (482 | ) | - | |||||
Dividends paid (including corporate dividend tax) | (3,916 | ) | (4,002 | ) | ||||
Interest paid | (1,608 | ) | (1,607 | ) | ||||
Net cash used in financing activities | (25,159 | ) | (21,326 | ) | ||||
Net increase / (decrease) in cash and cash equivalents | (241 | ) | (349 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (25 | ) | 35 | |||||
Cash and cash equivalents at the beginning of the year | 2,228 | 2,542 | ||||||
Cash and cash equivalents at the end of the year** | 1,962 | 2,228 |
*Rounded off to millions. | ||
**Adjusted for bank-overdraft of Rs. 91 million for the year ended 31 March 2020. | ||
14 | The audited results were reviewed by the Audit Committee of the Board on 19 May 2020 and approved by the Board of Directors of the Company at their meeting held on 20 May 2020. |
15 | The Board of Directors, at their meeting held on 20 May 2020, have recommended a final dividend of Rs. 25 per share subject to the approval of shareholders. |
16 | The figures of the fourth quarter are the balancing figures between audited figures in respect of the full financial year and published year to date figures upto the third quarter of the relevant financial year. Also the figures upto the end of third quarter were only reviewed and not subjected to audit. |
17 | The results for the quarter and year ended 31 March 2020 periods presented have been audited by the Statutory Auditors of the Company. An unqualified report has been issued by them thereon. |
Place: Hyderabad Date: 20 May 2020 | By order of the Board For Dr. Reddy’s Laboratories Limited
G V Prasad Co-Chairman & Managing Director |