Dr. Reddy's Laboratories Limited (RDY) 6-K Dr. Reddy’s Q1FY25 Financial Results

Exhibit 99.3

S.R. Batliboi & Associates LLP
Chartered Accountants  THE SKYVIEW 10
18th Floor, NORTH LOBBY
Survey No. 83/1, Raidurgam
Hyderabad - 500 032,  India   Tel : +91 40 6141 6000 

Independent Auditor’s Review Report on the Quarterly Unaudited Consolidated Financial Results of Dr. Reddy’s Laboratories Limited Pursuant to the Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended

Review Report to

The Board of Directors

Dr. Reddy’s Laboratories Limited

1. We have reviewed the accompanying “Statement of Unaudited Consolidated Financial Results for the Quarter Ended 30 June 2024” (the “Statement”) of Dr. Reddy’s Laboratories Limited (the “Holding Company”) and its subsidiaries (the Holding Company and its subsidiaries together referred to as “the Group”), its associates and joint ventures attached herewith, being submitted by the Holding Company pursuant to the requirements of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (the “Listing Regulations”).

2. The Holding Company’s Management is responsible for the preparation of the Statement in accordance with the recognition and measurement principles laid down in Indian Accounting Standard 34, (Ind AS 34) “Interim Financial Reporting” prescribed under Section 133 of the Companies Act, 2013 as amended, 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 Statement has been approved by the Holding Company’s Board of Directors . Our responsibility is to express a conclusion on the Statement based on our review.

3. We conducted our review of the Statement in accordance with the Standard on Review Engagements (SRE) 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Institute of Chartered Accountants of India. This standard requires that we plan and perform the review to obtain moderate assurance as to whether the Statement is free of material misstatement. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We also performed procedures in accordance with the circular issued by SEBI under Regulation 33(8) of the Listing Regulations, to the extent applicable.

4. The Statement includes the results of the following entities:

Holding Company

Dr. Reddy’s Laboratories Limited

Subsidiaries

1. Aurigene Oncology limited

2. Cheminor Investments Limited

3. Dr. Reddy’s Bio-Sciences Limited

4. Dr. Reddy’s Formulations Limited

5. Dr. Reddy’s Farmaceutica Do Brasil Ltda.

6. Dr. Reddy’s Laboratories SA

7. Idea2Enterprises (India) Private Limited

8. Imperial Owners and Land Possessions Private Limited

9. Industrias Quimicas Falcon de Mexico, S.A.de C.V.

10. Svaas Wellness Limited

11. Aurigene Discovery Technologies (Malaysia) Sdn. Bhd.

12. Aurigene Pharmaceutical Services Limited

13. Beta Institut gemeinmitzige GmbH

14. betapharm Arzneimittel GmbH

15. Chirotech Technology Limited

S.R. Batliboi & Associates LLP, a Limited Liability Partnership with LLP Identity No. AAB-4295 Regd. Office : 22, Camac Street, Block B, 3rd Floor, Kolkata-700 016

S.R. Batliboi & Associates LLP
Chartered Accountants 

16. DRL Impex Limited

17. Dr. Reddy’s Laboratories (Australia) Pty. Limited

18. Dr. Reddy’s (Beijing) Pharmaceutical Co. 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 Japan KK

24. Dr. Reddy’s Laboratories Kazakhstan LLP

25. Dr. Reddy’s Laboratories LLC, Ukraine

26. Dr. Reddy’s Laboratories Louisiana LLC

27. Dr. Reddy’s Laboratories Malaysia Sdn. Bhd.

28. Dr. Reddy’s Laboratories New York, LLC

29. Dr. Reddy’s Laboratories Philippines Inc.

30. Dr. Reddy’s Laboratories (Proprietary) Limited

31. Dr. Reddy’s Laboratories Romania S.R.L.

32. Dr. Reddy’s Laboratories SAS

33. Dr. Reddy’s Laboratories Taiwan Limited

34. Dr. Reddy's Laboratories (Thailand) Limited

35. Dr. Reddy’s Laboratories (UK) Limited

36. Dr. Reddy’s New Zealand Limited

37. Dr. Reddy’s Research and Development B.V.

38. Dr. Reddy’s Srl

39. Dr. Reddy’s Venezuela, C.A. (till April 17, 2024)

40. Dr. Reddy’s Laboratories LLC, Russia

41. Lacock Holdings Limited

42. Promius Pharma LLC

43. Reddy Holding GmbH

44. Reddy Netherlands B.V.

45. Reddy Pharma Iberia SAU

46. Reddy Pharma Italia S.R.L

47. Reddy Pharma SAS

48. Nimbus Health GmbH

49. Dr. Reddy’s Laboratories Jamaica Limited

50. Dr. Reddy’s and Nestle Health Science Limited (Formerly, Dr. Reddy’s Nutraceuticals Limited) India

Associates:

1. 02 Renewable Energy IX Private Limited

2. Clean Renewable Energy KK2A Private Limited (From 30 May 2024)

Joint Ventures:

1. DRES Energy Private Limited

2. Kunshan Rotam Reddy Pharmaceutical Company Limited

Other Consolidating Entities:

1. Cheminor Employees Welfare Trust

2. Dr. Reddy’s Research Foundation

3. Dr. Reddy’s Employees ESOS Trust

S.R. Batliboi & Associates LLP
Chartered Accountants 

5. Based on our review conducted and procedures performed as stated in paragraph 3 above, nothing has come to our attention that causes us to believe that the accompanying Statement, prepared in accordance with recognition and measurement principles laid down in the aforesaid Indian Accounting Standards (‘Ind AS’) specified under Section 133 of the Companies Act, 2013, as amended, read with relevant rules issued thereunder and other accounting principles generally accepted in India, has not disclosed the information required to be disclosed in terms of the Listing Regulations, including the manner in which it is to be disclosed, or that it contains any material misstatement.

For S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm registration number: 101049W/E300004

per Shankar Srinivasan

Partner

Membership No.: 213271

UDIN: 24213271BKELHF5941

Place: Hyderabad

Date: July 27, 2024

  Dr. Reddys 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 UNAUDITED CONSOLIDATED FINANCIAL RESULTS FOR THE QUARTER ENDED 30 JUNE 2024

		All amounts in Indian Rupees millions
		Quarter ended									Year ended
Sl. No.	Particulars	30.06.2024			31.03.2024			30.06.2023			31.03.2024
		(Unaudited)			(Audited)			(Unaudited)			(Audited)
1	Revenue from operations
	a) Sales		75,396			68,258			66,143			271,396
	b) License fees and service income		1,331			2,572			1,241			7,768
	c) Other operating income		234			308			195			947
	Total revenue from operations		76,961			71,138			67,579			280,111
2	Other income		1,872			1,975			1,740			8,943
3	Total income (1 + 2)		78,833			73,113			69,319			289,054
4	Expenses
	a) Cost of materials consumed		12,272			10,962			12,968			44,901
	b) Purchase of stock-in-trade		13,801			11,759			8,771			43,991
	c) Changes in inventories of finished goods, work-in-progress  and stock-in-trade		(4,256	)		(1,800	)		(2,363	)		(6,805	)
	d) Employee benefits expense		14,137			12,836			11,897			50,301
	e) Depreciation and amortisation expense		3,806			3,677			3,533			14,700
	f) Impairment of non-current assets, net		5			(173	)		11			3
	g) Finance costs		598			593			371			1,711
	h) Other expenses		19,703			19,242			15,674			68,389
	Total expenses		60,066			57,096			50,862			217,191
5	Profit before tax and before share of equity  accounted investees(3 - 4)		18,767			16,017			18,457			71,863
6	Share of profit of equity accounted investees, net of tax		59			35			43			147
7	Profit before tax (5+6)		18,826			16,052			18,500			72,010
8	Tax expense/(benefit):
	a) Current tax		5,215			2,823			7,197			19,459
	b) Deferred tax		(313	)		131			(2,747	)		(3,228	)
9	Net profit after taxes and share of profit of associates (7 - 8)		13,924			13,098			14,050			55,780
10	Other comprehensive income/(loss)
	a) (i) Items that will not be reclassified subsequently to profit or loss		(91	)		(44	)		106			(28	)
	(ii) Income tax relating to items that will not be reclassified to profit or loss		-			4			-			4
	b) (i) Items that will be reclassified subsequently to profit or loss		115			(565	)		147			(749	)
	(ii) Income tax relating to items that will be reclassified to profit or loss		(6	)		48			(210	)		117
	Total other comprehensive income/(loss)		18			(557	)		43			(656	)
11	Total comprehensive income (9 + 10)		13,942			12,541			14,093			55,124
12	Paid-up equity share capital (face value Rs. 5/- each)		834			834			833			834
13	Other equity		-			-			-			281,714
14	Earnings per equity share (face value Rs. 5/- each)
	Basic		83.61			78.66			84.55			335.22
	Diluted		83.48			78.53			84.36			334.59
			(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	30.06.2024		31.03.2024		30.06.2023		31.03.2024
		(Unaudited)		(Audited)		(Unaudited)		(Audited)
	Segment wise revenue and results:
1	Segment revenue :
	a) Pharmaceutical Services and Active Ingredients		10,472		11,725		9,365		41,295
	b) Global Generics		68,929		61,289		60,130		245,673
	c) Others		212		1,431		593		3,922
	Total		79,613		74,445		70,088		290,890
	Less: Inter-segment revenue		2,652		3,307		2,509		10,779
	Total revenue from operations		76,961		71,138		67,579		280,111
2	Segment results:
	Gross profit from each segment
	a) Pharmaceutical Services and Active Ingredients		1,772		2,349		1,013		6,929
	b) Global Generics		44,518		37,937		38,386		154,272
	c) Others		58		1,202		156		2,423
	Total		46,348		41,488		39,555		163,624
	Less: Selling and other un-allocable expenditure/(income), net		27,522		25,436		21,055		91,614
	Total profit before tax		18,826		16,052		18,500		72,010

Global Generics includes operations of Biologics business. Inter-segment revenue represents sale from Pharmaceutical Services and Active Ingredients to Global Generics and others 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 The above statement of unaudited consolidated financial results of Dr. Reddy's Laboratories Limited ("the Company"), which have been prepared in accordance with the Indian Accounting Standards ("Ind AS") prescribed under section 133 of Companies Act,2013 ("the Act") read with relevant rules issues thereunder, other accounting principles generally accepted in India and guidelines issues by the Securities and Exchange Board of India ("SEBI") were reviewed and recommended by Audit Committee and approved by the Board of Directors at their meetings held on 27 July 2024. The Statutory Auditors have carried out a limited review on the unaudited consolidated financial results and issued an unmodified report thereon.

2 “Other income” for the year ended 31 March 2024 includes :

a. Rs.540 million recognised in April 2023, pursuant to settlement agreement with Janssen Group, in settlement of the claim brought in the Federal Court of Canada by the Company and its affiliates 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 Zytiga^®(Abiraterone).This transaction pertains to the Company's Global Generics segment.

b. Rs.984 million recognised in September 2023, pursuant to settlement of product related litigation by the Company and its affiliates in the United Kingdom. This transaction pertains to the Company's Global Generics segment.

3 During the quarter ended 30 June 2024 and 31 March 2024, an amount of Rs. 809 million and Rs. 810 million respectively, representing government grants has been accounted as a reduction from cost of material consumed.

4 Agreement with Nestlé India:

On 25 April 2024, the Company entered into a definitive agreement with Nestlé India Limited (“Nestlé India”), for manufacturing, developing, promoting, marketing, selling, distributing, and commercializing nutraceutical products and supplements in India and other geographies as may be agreed by the parties. The aforesaid business activities shall be carried out through Dr. Reddy’s Nutraceuticals Limited (the “Nutraceuticals subsidiary”) which was incorporated on 14 March 2024. Subsequently, the Nutraceutical subsidiary’s name was changed to Dr. Reddy’s and Nestlé Health Science Limited on 13 June 2024.

The aforesaid definitive agreement is subject to certain closing conditions and is expected to become effective by the quarter ended 30 September 2024, upon infusion of funds and completion of other closing conditions.

As per terms agreed, the Company will hold 51% and the Nestlé India will hold 49% of the paid-up share capital in the Nutraceuticals subsidiary with shareholder rights to voting, dividend distribution and other economic rights as agreed in the aforesaid definitive agreement. As per agreed terms, the Company and Nestlé India will transfer license of its nutraceuticals brands to Nutraceuticals subsidiary.

Further, Nestlé India will have a call option to increase their shareholding up to 60% in the Nutraceuticals subsidiary after six years from subscription date for a payment at fair market value. However, the Company shall continue to hold at least 40% of the shareholding after Nestlé India exercises its call option.

DR. REDDY'S LABORATORIES LIMITED

5 Agreement with Haleon:

On 26 June 2024, the Company entered into a definitive agreement with Haleon UK Enterprises Limited (“Haleon”) to acquire Haleon’s Ex-US global portfolio of consumer healthcare brands in the Nicotine Replacement Therapy category (“NRT Business”).

The definitive agreement for the acquisition of this NRT Business from Haleon includes the transfer of intellectual property, employees, agreements with commercial manufacturing organization, marketing authorizations and other assets relating to the commercialization of four brands i.e., Nicotinell, Nicabate, Thrive, and Habitrol. The proposed acquisition will be inclusive of all formats such as lozenge, patch, spray and/or gum in all applicable global markets outside of the United States.

Completion of this transaction is subject to satisfying closing conditions, including the completion of certain reorganization by Haleon Group, and obtaining foreign direct investment approval in Sweden and merger control approvals in Brazil, Saudi Arabia and the United Arab Emirates. The transaction is expected to close during the early part of the quarter ended 31 December 2024.

Upon completion of closing conditions, the Company will acquire this NRT Business by purchasing the shares of Northstar Switzerland SARL (a Haleon Group Company) for a total consideration of up to GBP 500 (approximately Rs. 52,739 as translated based on forex rate as at 30th June 2024), consisting of an upfront cash payment GBP 458 (approximately Rs. 48,309) and performance-based contingent payments of up to GBP 42 (approximately Rs. 4,430), based on attainment of agreed-upon sales targets in calendar year 2024 and 2025, and meeting other parameters.

These NRT Business will transition gradually into the Company in a phased approach between April 2025 and February 2026. During the transition period, Haleon Group will provide distribution and related services in the markets, facilitating successful integration of the business across various geographies into the Company.

6 The Company considered the uncertainties relating to the escalation of conflict in the middle east, and duration of military conflict between Russia and Ukraine, in assessing the recoverability of receivables, goodwill, intangible assets, investments and other assets. For this purpose, the Company considered internal and external sources of information up to the date of approval of these financial results. Based on its judgments, estimates and assumptions, including sensitivity analysis, the Company expects to fully recover the carrying amount of receivables, goodwill, intangible assets, investments and other assets. The Company will continue to closely monitor any material changes to future economic conditions.

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

The Company has continued to make presentations to the SEC and the DOJ in relation to the ongoing investigation and in relation to its Global Compliance Framework, which includes enhancement initiatives undertaken by the Company. The Company continues to respond to requests made by the SEC and the DOJ and is complying with its listing obligations as it relates to updating the regulatory agencies. While the findings from the aforesaid investigations could result in government or regulatory enforcement actions against the Company in the United States and/or foreign jurisdictions which can lead to civil and criminal sanctions under relevant laws, the outcomes, including liabilities, are not reasonably ascertainable at this time.

8 The Board of Directors of the Company at their meeting held on 27 July 2024, have approved the sub-division/ split of each equity share of face value of Rs.5/- (Rupees five only) each, fully paid-up, into 5 (Five) equity shares having face value of Re.1/- (Rupee one only) each, fully paid-up, by alteration of the Capital Clause of the Memorandum of Association of the Company. Further, each American Depositary Share (ADS) of the Company will continue to represent 1 (One) underlying equity share as at present and therefore, the number of ADSs held by an American Depositary Receipt holder would consequently increase in proportion to the increase in number of equity shares. The sub-division/ split will be subject to approval of the shareholders of the Company through postal ballot process. The record date for the said sub-division/ split will be intimated in due course.

Pending approval of the shareholders, the basic and diluted EPS disclosed above have not been adjusted to give effect to such split in accordance with requirements under Ind AS 33, Earnings per share.

9 The figures for the quarter ended 31 March 2024 are the balancing figures between audited figures in respect of the full financial year and the published unaudited year to date figures up to the third quarter of the relevant financial year, which were subject to limited review.

By order of the Board

For Dr. Reddy’s Laboratories Limited

 

Place: Hyderabad	G V Prasad
Date: 27 July 2024	Co-Chairman & Managing Director