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BSE: 500124ISIN: INE089A01023INDUSTRY: Pharmaceuticals

BSE   ` 6155.15   Open: 6096.35   Today's Range 6081.75
6211.45
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6505.50
Year End :2023-03 

Your Directors are pleased to present the 39th Annual Report of the Company for the year ended March 31,2023.

FINANCIAL HIGHLIGHTS AND COMPANY AFFAIRS

Table 1 gives the consolidated and standalone financial highlights of the Company based on Indian Accounting Standards (Ind AS) for FY2023 (i.e. from April 1, 2022 to March 31,2023) compared to the previous financial year.

The Company’s consolidated total income for the year was C257.3 billion, which was up by 17% over the previous year. Profit before tax (PBT) was C60.5 billion, representing an increase of 98% over the previous year.

The Company’s standalone total income for the year was C175.5 billion, which was

up by 18% over the previous year. PBT was C38.7 billion, which was higher by 74% over the previous year.

Revenues from lines of business and geographies given below are from the Company’s IFRS results.

Revenues from Global Generics were up by 19% and stood at C213.8 billion. There was growth across businesses of North America Generics, Europe and India.

Revenues from North America stood at C101.7 billion, registering a strong year on year growth of 36%. This was largely on account of revenue contribution from new products launched, increase in volumes for some of our base products and favorable forex rates movement, partly offset by high price erosions in some of our products. During the year, the Company filed 12 Abbreviated New Drug Applications (ANDAs) in the USA. As of March 31, 2023, there were 86

generic filings awaiting approval with the US Food and Drug Administration (USFDA), comprising 81 ANDAs and 5 NDAs filed under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act.

Revenues from India stood at C48.9 billion, showing a year-on-year growth of 17%.

Revenues from Emerging Markets were C45.5 billion, which remained flat year-on-year.

Revenues from Europe were C17.6 billion, a year-on-year growth of 6%.

Revenues from Pharmaceutical Services and Active Ingredients (PSAI) stood at C29.1 billion, which was lower by 5% compared to previous year. During the year, the Company filed 134 Drug Master Files (DMFs) worldwide, including 12 filings in the US.

TABLE 1 FINANCIAL HIGHLIGHTS

(H MILLION)

PARTICULARS

CONSOLIDATED FY2023 FY2022

STANDALONE FY2023 FY2022

Total income

2,57,252

2,20,296

175,538

1,48,872

Profit before depreciation, amortization, impairment and tax

73,316

50,867

47,943

30,479

Depreciation and amortization

12,502

11,652

9,232

8,143

Impairment of non-current assets

699

9,304

51

98

Profit before tax and before share of equity accounted investees

60,115

29,911

38,660

22,238

Share of profit of equity accounted investees, net of tax

370

703

-

-

Profit before tax

60,485

30,614

38,660

22,238

Tax expense

15,412

8,789

12,532

6,006

Net profit for the year

45,073

21,825

26,128

16,232

Opening balance of retained earnings

1,60,341

1,42,395

154,030

1,41,373

Net profit for the year

45,073

21,825

26,128

16,232

Other comprehensive income/(loss)

-

-

-

Dividend paid during the year

(4,979)

(4,146)

(4,979)

(4,146)

Transfer to SEZ re-investment Reserve, net

(131)

571

(131)

571

Transfer to Debenture Redemption Reserve

(76)

(304)

-

-

Closing balance of retained earnings

2,00,228

1,60,341

175,048

1,54,030

Note: FY2023 represents fiscal year 2022-23, from April 1, 2022 to March 31, 2023, and analogously for FY2022 and other such labelled years.

DIVIDEND

Your Directors are pleased to recommend a dividend of C40 (800%) for FY2023, on every equity share of C5/-. As per the Dividend Distribution Policy of the Company, the amount of maximum dividend payout (including interim dividend) can be up to 20% of the cash profit under consolidated financial statement prepared under Indian

Accounting Standards (IND-AS). The recommended dividend is in line with the provision of the said policy.

The dividend, if approved at the 39th 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 11,2023. The total dividend pay-out will be approximately C666 crores, resulting

in a pay-out of 11.4% of the consolidated cash profit for the financial year ended March 31, 2023. Such dividend will be taxable in the hands of the members, in terms of the provisions of the Income Tax Act, 1961.

In terms of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulations”), the Dividend

Hence, the consolidated financial statements of the Company and all its subsidiaries and associates, prepared in accordance with Ind AS 110 and 111 as specified in the Companies (Indian Accounting Standards) Rules, 2015, forms part of the Integrated Annual Report. Moreover, a statement containing the salient features of the financial statements of the Company’s subsidiaries and joint ventures in the prescribed Form AOC-1, is attached as Annexure I to this Board’s Report. This statement also provides details of the performance and financial position of each subsidiary and joint venture.

In accordance with Section 136 of the Act, the audited financial statements and related information of the Company and its subsidiaries, wherever applicable, are available on the Company’s website: www.drreddys.com. These are also available for inspection during regular business hours at our registered office in Hyderabad, India and/or in electronic mode.

MATERIAL SUBSIDIARIES

In terms of Regulation 16(1)(c) of the SEBI Listing Regulations, Material Subsidiary shall mean a subsidiary, whose income or net worth exceeds ten percent of the consolidated income or net worth, respectively, of the Company and its subsidiaries in the immediately preceding accounting year. Accordingly, the Company has four material overseas subsidiary companies as on March 31, 2023, namely, Dr. Reddy’s Laboratories Inc. (USA), Dr. Reddy’s Laboratories SA (Switzerland), Dr. Reddy’s Laboratories LLC (Russia) and Reddy Holding GmbH (Germany).

Further, in terms of Regulation 24(1) of the SEBI Listing Regulations, at least one Independent Director on the Board of the Company shall be a Director on the Board of an unlisted material subsidiary, i.e. a subsidiary, whose income or net worth exceeds twenty percent of the consolidated income or net worth respectively, of the Company and its subsidiaries in the immediately preceding accounting year. In compliance with the said provisions, Mr. Arun M Kumar (DIN: 09665138), Independent Director of the Company, was appointed as a Director on the Board of Dr. Reddy’s Laboratories Inc. (USA) w.e.f. September 21,2022,

Distribution Policy, is available on the Company’s website on https://www. drreddys.com/cms/cms/sites/default/ files/2021-12/htmlCode%20%284%29.pdf

TRANSFER TO RESERVES

The Company has not proposed to transfer any amount to the general reserve for the year ended March 31, 2023.

SHARE CAPITAL

The paid-up share capital of your Company increased by C0.51 million from C832.13 million to C832.64 million in FY2023 due to allotment of 102,027 equity shares of C5 each, 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’. The equity shares issued pursuant to the above Employee Stock Option Schemes rank pari- passu with the existing equity shares of the Company

SCHEME OF AMALGAMATION

The Hon’ble National Company Law Tribunal (the “NCLT”), Hyderabad Bench, vide order dated April 5, 2022, has approved the Scheme of Amalgamation and Arrangement (the “Scheme”) for the merger of Dr. Reddy’s Holdings Limited (the “DRHL/ Amalgamating Company”) with the Company (the “Amalgamated Company”). The order of the Hon’ble NCLT was filed by both the companies with the Registrar of Companies, Hyderabad, on April 8, 2022. Therefore, the merger became effective on April 8, 2022. The appointed date of the Scheme was April 1, 2019.

Pursuant to the Scheme, 41,325,300 equity shares held by the Amalgamating Company in the Company stands cancelled and the equal number of shares were issued and allotted by the Company, on April 22, 2022, to the shareholders of Amalgamating Company, in aggregate, in proportion to their shareholding in the Amalgamating Company. Effectively, there is no change in the total issued and paid-up share capital of the Company pursuant to the said Scheme, as equal number of shares were cancelled, as well as issued and allotted by the Company.

PUBLIC DEPOSITS

The Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013 (the “Act”).

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 significant change in the nature of business carried on by its subsidiaries.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION BETWEEN THE END OF THE FINANCIAL YEAR AND DATE OF THE REPORT There have been no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this report.

SUBSIDIARIES AND ASSOCIATES

The Company has 40 overseas subsidiary companies (including step-down subsidiaries), nine subsidiary companies (including step-down subsidiary) in India and one joint venture company as on March 31, 2023.

DRS LLC in Russia ceased to be a step-down subsidiary of the Company with effect from July 1,2022, consequent to its merger with Dr. Reddy's Laboratories LLC, Russia.

Dr. Reddy’s Laboratories B.V. in Netherlands, ceased to be a step-down subsidiary of the Company with effect from January 25, 2023, consequent to its merger with Reddy Netherlands B.V., Netherlands.

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 financial statements, prepare a consolidated financial 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 financial statements, a separate statement containing the salient features of the financial statements of its subsidiaries and associates.

subsequent to the resignation of Dr. Bruce L A Carter (DIN:02331774).

Mr. Sridar Iyengar (DIN: 00278512), Independent Director of the Company, is a Director on the Board of Dr. Reddy’s Laboratories SA (Switzerland).

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The Company makes investments or extends loans/ guarantees to its wholly-owned subsidiaries for their business purposes.

Details of loans, guarantees and investments covered under Section 186 of the Act, along with the purpose for which such loan or guarantee was proposed to be utilized by the recipient, form part of the notes to the financial statements provided in this Integrated Annual Report.

CORPORATE GOVERNANCE AND ADDITIONAL SHAREHOLDERS’ INFORMATION

A detailed report on the Corporate Governance systems and practices of the Company is given in a separate chapter of this Integrated Annual Report. Similarly, other information for shareholders is provided in the chapter on Additional Shareholders’ Information. The Company has also formulated a Group Governance Policy to monitor governance of its unlisted subsidiaries across the globe.

A certificate from M/s. S.R. Batliboi & Associates LLP, Statutory Auditors of the Company, confirming compliance with the conditions of corporate governance is attached to the chapter on Corporate Governance.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the Management Discussion and Analysis in terms of Regulation 34 of the SEBI Listing Regulations is provided as a separate chapter in the Integrated Annual Report.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

APPOINTMENTS

During the year, the members of the Company approved the appointment of

Mr. Arun M Kumar (DIN: 09665138), as an Independent Director of the Company through Postal Ballot, with effect from August 1, 2022. The Board opined that the above Independent Director possessed requisite experience and expertise (including the proficiency).

RETIREMENT AND RESIGNATION

Dr. Bruce L A Carter (DIN: 02331774) and Mr. Prasad R Menon (DIN:

00005078) completed their terms as Independent Directors of the Company on July 30, 2022, and October 29,

2022, respectively.

Mr. Allan Grant Oberman (DIN: 08393837) tendered his resignation as an Independent Director of the Company with effect from close of business hours on January 6, 2023, as he was moving to a commitment outside the Company that will not allow him to be able to devote sufficient time for his responsibilities as an Independent Director of the Company.

The Board placed on record its sense of deep appreciation for the services rendered by the above Independent Directors to the Company.

RETIREMENT BY ROTATION

Mr. G V Prasad (DIN:00057433) is liable to retire by rotation at the forthcoming 39th AGM and being eligible, seeks re-appointment. For reference of members, a brief profile of Mr. G V Prasad (DIN:00057433) is given in the Chapter on Corporate Governance and in the Notice convening the 39th AGM.

RE-APPOINTMENT OF WHOLETIME DIRECTOR

During the year, the members of the Company at its AGM held on July 29, 2022, approved the re-appointment of Mr. K Satish Reddy (DIN: 00129701) as a Whole-time Director of the Company, designated as the Chairman, for a period of five years, with effect from October 1,2022.

None of the Directors is disqualified under Section 164 of the Act. They are not debarred from holding the office of Director pursuant to any order of SEBI or any other authority. Further

details are provided in the chapter on Corporate Governance.

CHANGES IN KEY MANAGERIAL PERSONNEL (KMP)

During the year under review, there were no changes in the Key Managerial Personnel of the Company. As on the date of this report, the Company has the following Key Managerial Personnel as per Sections 2(51) and 203 of the Act:

S. NO. NAME OF KMP

DESIGNATION

i

Mr. G V Prasad

Co-Chairman and Managing Director

2

Mr. Erez Israeli

Chief Executive Officer

3

Mr. Parag Agarwal

Chief Financial Officer

4

Mr. K Randhir Singh Company Secretary, Compliance Officer & Head-CSR

DECLARATION BY INDEPENDENT DIRECTORS

In accordance with Section 149(7) of the Act, each Independent Director has confirmed 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 Qualifications of Directors) Rules, 2014 and Regulation 16(1 )(b) of the SEBI Listing Regulations. Further, each Independent Director has affirmed compliance to the Code of Conduct for Independent Directors as prescribed in Schedule IV of the Act. The Board has taken on record such declarations after due assessment of their veracity.

BOARD EVALUATION

Pursuant to the provisions of the Act, and the SEBI Listing Regulations, the Board has carried out performance evaluation of its own performance, the Directors (including the Chairman) individually, as well as the evaluation of the working of the Committees. An independent external agency, EgonZehnder, a leadership advisory firm on board matters, was engaged to conduct the Board evaluation for FY2023. The recommendations were discussed with the Board and individual feedback was provided.

provided by comparable companies are considered.

Pay practices at companies with which Dr. Reddy’s competes for talent, including those engaged in similar activities are reviewed from time to time.

We believe that information regarding pay practices at other companies is useful to assess the reasonableness and competitiveness of our own. Our approach is to be market aware on pay levels and not entirely market driven.

We generally position target executive pay at the top quartile of pay packages for executives in similar positions, responsibilities and/or experience in similar companies of comparable size.

We identify certain roles that are fungible across multiple industries and our comparative pool may not be limited to peer generic pharmaceutical organisations. In such cases - a wider sample is selected comprising of non-pharma marquee organisations operating in the country with whom Dr. Reddy’s competes for talent.

Executive compensation is reviewed annually. In general executive increment percentages are lesser than the average with the frontline receiving the highest increase. A higher increase may be made in the event of a role change, promotion, or in exceptional circumstances. The Company’s performance, affordability and individual performance are other considerations, while deciding on compensation.

Our current performance management follows a balanced scorecard approach comprising of current business performance, future business performance, ESG, digital, people, compliance and safety related metrics.

Each parameter is devised into a metric, financial or otherwise and is measured throughout the performance year. Nonfinancial parameters have a cap of 100% achievement while financial parameters are scored based on a predetermined grid. Additional considerations such as wind-falls, impairments and one-offs are measured separately.

Our performance management process is specifically adapted to different employee cohorts based on their specific

The Board evaluation process was completed for FY2023. Further details of Board evaluation are given in 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 criteria that includes ethics, personal and professional stature, domain expertise, gender diversity and specific qualifications required for the position. For appointment of an Independent Director, the independence criteria defined in Section 149(6) of the Act, and Regulation 16(1 )(b) of the SEBI Listing Regulations are also considered.

In accordance with Section 178(3) of the Act, Regulation 19(4) of the SEBI 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 that outlines the guidelines related to performance evaluation of Directors, remuneration principles and Board diversity. The Policy forms part of the chapter on Corporate Governance.

Our executive compensation program supports attracting, motivating, and encouraging continuity of experienced and well-qualified executive officers who advance our critical business objectives and promote the creation of shareholders’ value over the long-term. The key tenets of our philosophy are designed to:

a) Attract highly talented individuals from within and across industries drawing from a diverse pool of global talent.

b) Provide long term and short-term incentives that advance the interests of shareholders and deliver levels of pay commensurate with performance.

The three principal components of the compensation package include, base salary, annual variable pay, and equity-based long-term incentives. In making decisions with respect to each element of compensation, the competitive market for executives and compensation levels

needs, the overall principles remain the same across all the models.

Performance evaluation of Management Council (“MC”) member’s focuses on achievement of MC Scorecard. Individual MC evaluation focusses on achievement of:

• the BU (Business Unit) scorecard for the year that contributes

to the delivery of the overall Company’s strategy.

• demonstration of desired behaviours which measures the commitment to sustainable growth by focussing on performance on non-financial parameters centered around the Company’s leadership behaviours. Also considered is the contribution of the individual to the wider enterprise agenda.

NUMBER OF BOARD MEETINGS

The Board of Directors met eight times during the year. In addition, an annual Board retreat was held to discuss strategic matters. The intervening gap between the meetings was within the period prescribed under the Act and the SEBI Listing Regulations. Details of Board meetings and the Board retreat are given in the chapter on Corporate Governance.

SEPARATE MEETING OF INDEPENDENT DIRECTORS

In terms of requirements under Schedule IV of the Act and Regulation 25(3) of the SEBI Listing Regulations, four separate meetings of the Independent Directors were held during FY2023. Further details are mentioned in the chapter on Corporate Governance.

COMMITTEES OF THE BOARD

As on March 31, 2023, the Board has the following Committees:

i) Audit Committee;

ii) Stakeholders’

Relationship Committee;

iii) Nomination, Governance and Compensation Committee;

iv) Sustainability and Corporate Social Responsibility Committee;

v) Risk Management Committee;

vi) Science, Technology and Operations Committee; and

vii) Banking and Authorisations Committee

All the recommendations made by the Board committees, including the Audit Committee, were accepted by the Board. The details of the above Committees are given in the Chapter on Corporate Governance.

DIRECTORS’ RESPONSIBILITY STATEMENT

In terms of Section 134(5) of the Act, your Directors state that:

1. Applicable accounting standards have been followed in the preparation of the annual accounts and that no material departures have been made from the same;

2. Accounting policies have been selected and applied consistently. Judgments and estimates made are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the FY2023 and of the profit of the Company for that period;

3. Proper and sufficient 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;

4. Annual accounts have been prepared on a going concern basis;

5. Adequate internal financial controls for the Company to follow have been laid down and these are operating effectively; and

6. Proper and adequate systems have been devised to ensure compliance with the provisions of all applicable laws and these systems are operating effectively.

ADEQUACY OF INTERNAL FINANCIAL CONTROL SYSTEMS

The Company has in place adequate internal financial controls with reference to its financial statements. These controls ensure the accuracy and completeness of the accounting

records and the preparation of reliable financial statements.

ENTERPRISE RISK MANAGEMENT (“ERM”)

The Company has a Risk Management Committee of the Board, consisting entirely of Independent Directors.

Details of the Committee and its terms of reference are set out in the chapter on Corporate Governance.

The Audit Committee and Risk Management Committee review key risk elements of the Company’s business, finance, operations and compliance, and their respective mitigation strategies.

The Risk Management Committee reviews strategic, business, compliance and operational risks whereas the Audit Committee reviews issues around ethics and fraud, internal control over financial reporting (ICOFR), as well as process risks and their mitigation

The Company’s Executive Risk Management Committee operates under the Company’s Risk Management Policy and focuses on risks associated with the Company’s business and compliance matters. This Committee periodically reviews matters pertaining to risk management. Additionally, the Enterprise wide Risk Management (ERM) function helps the Board and the Management to prioritize, review and measure business risks against a pre-determined risk appetite, and their suitable response, depending on whether such risks are internal, strategic or external.

During FY2023, focus areas of Risk Management Committee included review of risks and mitigations related to cyber security, data privacy, data governance, ethics and compliance risk, quality, supply chain management, geo-political risks and business continuity, foreign exchange risk, pharmacovigilance and environmental risk with focus on water risk.

RELATED PARTY TRANSACTIONS

In line with the requirements of the Act and the SEBI Listing Regulations, your Company has a Policy on Materiality of Related Party Transactions and Dealing with Related Party Transactions, which is also available on the Company’s website at https://www.drreddys.com/investors/ governance/#governance#policies-and-documents. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and related parties.

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 this Board’s Report. All related party transactions and subsequent modifications are placed before the Audit Committee for review and approval. Prior omnibus approval is obtained for related party transactions on a quarterly basis for transactions which are of repetitive nature and/ or entered in the ordinary course of business and are at arm’s length. 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 financial statements provided in the Integrated Annual Report.

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 Officer. 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: https://www.drreddys.com/ investor#governance#ombudsperson-policy.

STATUTORY AUDITORS

M/s. S.R. Batliboi & Associates LLP, Chartered Accountants (Firm Registration No. 101049W/E300004) were reappointed as Statutory Auditors of the Company at the 37th AGM held on July 28, 2021, for a period of five years till the conclusion of the 42nd AGM to be held in the year 2026.

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 (Certificate of Practice No. 3662), Mumbai, India, were appointed as Secretarial Auditors of the Company for FY2023. The Secretarial Audit Report for FY2023 is annexed as Annexure III to this Report.

Further, in compliance with Regulation 24A of the SEBI Listing Regulations, the Annual Secretarial Compliance Report issued by the Secretarial Auditor, will be submitted to the stock exchanges within the statutory timelines.

Based on the consent received from M/s. Makarand M. Joshi & Co., Practicing Company Secretaries (Certificate 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 FY2024. They have confirmed their eligibility for the said reappointment.

COST AUDITOR

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 (Firm Registration No. 000118) as Cost Auditor of the Company for FY2024 at a remuneration of C900,000 (Rupees Nine Lakhs only) plus reimbursement of out-of-pocket expenses at actuals and applicable taxes. M/s. Sagar & Associates have confirmed that they are free from disqualification specified under Section 141(3) and proviso to Section 148(3) read with Section 141(4) of the Act and that the appointment meets the requirements of the Act. They have further confirmed their independent status and an arm’s length relationship with the Company.

The provisions of the Act also require that the remuneration of the Cost Auditors be ratified by the members and therefore, the same is recommended for approval of the members at the forthcoming 39th AGM. As a matter of record, relevant Cost Audit Reports for FY2022 were filed with the Central Government on August 26, 2022, within the stipulated timeline. The Cost Audit Report for FY2023 will also be filed within the timeline.

AUDITORS’ QUALIFICATIONS, RESERVATIONS, ADVERSE REMARKS OR DISCLAIMERS

There are no qualifications, reservations, adverse remarks or disclaimers 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.

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 issued by the Institute of Company Secretaries of India (“ICSI”) and approved by the Central Government. The Company has also voluntarily adopted the recommendatory Secretarial Standards 3 on ‘Dividend’ and Secretarial Standards 4 on ‘Report of the Board of Directors’ issued by the ICSI.

SIGNIFICANT/MATERIAL ORDERS PASSED BY COURTS/ REGULATORS/TRIBUNALS

Settlement with the State of Texas: In

November 2014, the State of Texas commenced a formal inquiry into the Company’s marketing, sales, pricing and price reporting for its generic drugs dispensed in this State. The Company cooperated with this inquiry. On June 1,2022, the Company entered into a Settlement Agreement with the State of Texas. Pursuant to this settlement, on July 6, 2022, payment in the full amount of $12,900,000 was made to the State of Texas, with no admission of liability.

Veraring Litigation: A Complaint was filed on November 15, 2021, in the Supreme Court of the State of New York, County of New York (trial court level) by Teva Pharmaceutical Industries Ltd. (“Teva”) against Dr. Reddy’s Laboratories, S.A. (Case Index No. 656499/2021). This Complaint was subsequently amended by

Teva on January 26, 2022. In its amended Complaint, Teva alleges that the Company breached the supply agreements between the parties relating to Veraring, failed to pay carrying costs, and breached the implied covenant of good faith and fair dealing, seeking monetary damages and all other remedies available under law. On January 6, 2022, the Company asserted counterclaims against Teva, asserting that Teva breached its contractual obligations to the Company by, among other things, failing to adhere to cGMP and producing product unfit for human use, seeking monetary damages and all other remedies available under law. On March 15, 2023, Dr. Reddy’s Laboratories, S.A., on behalf of itself and affiliates, entered into a Settlement Agreement with Teva, on behalf of itself and affiliates, relating to the Veraring Litigation and Veraring. Pursuant to the Settlement Agreement, all claims between the parties have been dismissed with prejudice and without any admission of liability by any of the parties.

INFORMATION REQUIRED UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

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 in compliance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, which operate under a defined framework for complaints pertaining to sexual harassment at workplace. The details are available in the Principle 5 of the Business Responsibility and Sustainability Report as well as in the Corporate Governance Report forming part of this Integrated Annual Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES

As per Section 135 of the Act, the Company has a Board-level Committee, namely, Sustainability and Corporate Social Responsibility (SCSR) Committee. During the year, the name of the CSR Committee has been changed to SCSR Committee to act as nodal committee on overall sustainability goals and progress apart from CSR terms of reference. As on March 31, 2023, the Committee

consists of Dr. K P Krishnan (Chairman), Ms. Kalpana Morparia, Mr. G V Prasad and Mr. K Satish Reddy. Based on the recommendation of the said Committee, the Board has adopted a 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 CSR activities undertaken by the Company including the expenditure incurred thereon as well as implementation and adherence to the CSR policy. An impact assessment of the eligible projects has been carried by an independent agency and the report of such impact assessment was noted by the SCSR Committee and the Board. 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 as well as executive summary of the impact assessment report are attached as Annexure IV to this Board’s Report.

INTEGRATED REPORT

Your Company has voluntarily adopted the Integrated Annual Report for FY2023, which includes both financial and non-financial information. The reporting weaves together our purpose, values, strategy, governance, performance and future outlook, all of which influence the material aspects of our business.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT (BRSR)

The SEBI, vide its circular dated May 10, 2021, made Business Responsibility and Sustainability Report (BRSR) mandatory for the top 1,000 listed companies (by market capitalization) from FY2023, while disclosure was voluntary for FY2022.

The Company had voluntarily published its first BRSR for FY2022 to provide enhanced disclosures on ESG practices and priorities of the Company.

The Business Responsibility and Sustainability Report for FY2023 as mentioned under Regulation 34 of the SEBI Listing Regulations, is given as a separate chapter in this Integrated Annual Report.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)

Providing cures and reducing the disease burden are central to our purpose as a leading pharma company. We believe that society and the environment are interdependent, and truly being sustainable supports human health and well-being, a sustainable planet, and a well-integrated society. In 2022, building on our incremental work in sustainability, we launched our sustainability vision for 2030 and published our renewed ESG goals and targets. Our sustainability goals span across diverse areas we care about - from environmental and social sustainability to stronger governance, from greater access and affordability of medicines to public health issues, from greater economic equity and accountability to acceptance of greater social parity. They reveal our bold vision for the future and what we collectively strive to achieve every day.

The Company has a Board Committee, namely, Sustainability and Corporate Social Responsibility (SCSR) Committee, as the nodal committee to review the ESG and sustainability goals of the Company, its implementation, progress and other related matters as per its terms of reference.

The ESG details are available in the initial section and Business Responsibility and Sustainability Report of this Integrated Annual Report.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO THE INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Pursuant to the provisions of the Act, read with IEPF Authority (Accounting, Audit, Transfer and Refund) Rules,

2016, as amended, declared dividends which remained unpaid or unclaimed for a period of seven years have been transferred by the Company to the IEPF, which has been established by the Central Government.

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 dividend is unclaimed and unpaid and advising them to claim their dividend. The details of transfer of unpaid and unclaimed amounts to IEPF are given in the chapter on Additional Shareholders Information.

EMPLOYEES STOCK OPTION SCHEMES

The Company has three employee stock option schemes namely, ‘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’ (the “Schemes”). The term of Dr. Reddy’s Employees Stock Option Scheme, 2002, ended on January 28, 2022. However, the options already granted under the 2002 Scheme are eligible for exercise, in terms of the Scheme. There are no other changes in the said schemes during the year. The Schemes are in compliance with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

The details of Company’s stock option Schemes as required under Regulation 14 of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, are available on the Company’s website: https://www.drreddys.com/ investors/governance/policies-and-documents/#governance#policies-anddocuments

Your Company’s Secretarial Auditors,

M/s. Makarand M. Joshi & Co., Practising Company Secretaries, have certified that the Employee Stock Option Schemes of your Company have been implemented in accordance with the Regulations and the resolutions passed by the Members in this regard.

The details also form part of note 2.25 of the notes to accounts of the standalone financial 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 this Board’s 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 the said rules forms part of the Integrated Annual Report.

Considering the provisions of Section 136 of the Act, the Integrated 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 office of the Company or through electronic mode, during business hours on working days up to the date of the forthcoming 39th 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

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 this Board’s Report.

ANNUAL RETURN

The Annual Return of the Company as on March 31, 2023, in terms of the provisions of Section 134(3)(a) of the Act, is available on the Company’s website: https://www.drreddys.com/investors/ reports-and-filings/annual-reports/

ACKNOWLEDGMENT

Your Directors place on record their sincere appreciation for the significant contribution made by your Company’s employees through their dedication,

hard work and commitment, as also for the trust reposed in your Company by the medical fraternity and patients. The Board of Directors also acknowledges the support extended by the analysts, bankers, Government of India and various countries and other government agencies, media, customers, business partners, members and investors at large.

The Board looks forward to your continued support in the Company’s endeavor to accelerate access to innovative and affordable medicines, because Good Health Can’t Wait.

For and on behalf of the Board of Directors

K Satish Reddy

Chairman DIN: 00129701

Place: Hyderabad Date: May 10, 2023