falseFY00011359510P1YP1YP1YCertain of the Company’s employees are eligible to receive share based payment awards that are settled in cash. These awards vest only upon satisfaction of certain service conditions which range from 1 to 4 years. A category of these awards are also linked to the overall performance of the company. These awards entitle the employees to a cash payment on the vesting date. The amount of the cash payment is determined based on the share price of the Company at the time of vesting. As of March 31, 2026 and 2025, there was Rs.396 and Rs.366, respectively, of total unrecognized compensation cost related to unvested awards. This cost is expected to be recognized over a weighted-average period of 1.87 years and 1.57 years , respectively. This scheme does not involve dealing in or subscribing to or purchasing securities of the Company, directly or indirectly.“CDI” means Brazilian interbank deposit rate (Certificado de Depósito Interbancário), “Key rate” means the key interest rate published by the Central Bank of Russia, “REPO” means the “Repurchasing option” rate published by the Reserve Bank of India, “SOFR” means Secured Overnight Financing Rate, “T-bill” means India Treasury bill interest rate and “TIIE” means the Equilibrium Inter-banking Interest Rate (Tasa de Interés Interbancaria de Equilibrio).This represents the impairment loss recognized on additions made during the year in respect of the Company’s subsidiary, Dr. Reddy’s Laboratories Louisiana, LLC, as the recoverable amount remained lower than the carrying amount. The subsidiary had been fully impaired during the previous year ended March 31, 2022.“BRL” means Brazilian reals, “INR” means Indian rupees, “MXN” means Mexican pesos, “RUB” means Russian rubles and “U.S.$” means U.S. dollars.The Rupee term loan obtained from a bank by the Company’s subsidiary, Aurigene Pharmaceutical Services Limited is subject to certain covenants that are required to be maintained on a consolidated basis during the period of the loan. The covenant is to be tested on an annual basis at the end of each financial year. As at March 31, 2026 and March 31, 2025, the Company is in compliance with the covenants and has no indication that it will have difficulty in complying with the same.As a result of the acquisition of a unit of The Dow Chemical Company in April 2008, the Company assumed a liability for contamination of the Mirfield site acquired of Rs.39 (carrying value Rs.64). The seller is required to indemnify the Company for this liability. Accordingly, a corresponding asset has also been recorded in the consolidated statements of financial position. During the year ended March 31, 2026, the Company was released from this obligation, resulting in the reversal of the environmental liability with a corresponding adjustment to the related indemnification asset.Primarily consists of provision recorded towards the potential liability arising out of a litigation relating to cardiovascular and anti-diabetic formulations. Refer to Note 31 (“Contingencies”) of these consolidated financial statements under “Product and patent related matters - Matters relating to National Pharmaceutical Pricing Authority and Litigation relating to Cardiovascular and Anti-diabetic formulations” for further details.Refer to Note 35 of these consolidated financial statements for details regarding goodwill arising on business combinations.Refer to Note 36 of these consolidated financial statements for details regarding goodwill arising on business combinations.Includes Rs.181 representing the goodwill on acquisition of investment.Includes current portion.Does not include movement in bank overdraft.Refund liability is accounted for by recording a provision based on the Company’s estimate of expected sales returns. See Note 3(m) of these consolidated financial statements for the Company’s accounting policy on refund liability.Refer to Note 21 (“Revenue from contracts with customers and trade receivables”) of these consolidated financial statements for details of deferred revenue.Other assets that are not financial assets (such as receivables from statutory authorities, government incentives receivable, prepaid expenses, advances paid and certain other receivables) of Rs.30,215 and Rs.27,162 as of March 31, 2026 and 2025, respectively, are not included.Other liabilities and provisions that are not financial liabilities (such as statutory dues payable, deferred revenue, advances from customers and certain other accruals) of Rs.17,239 and Rs.18,195 as of March 31, 2026 and 2025, respectively, are not included.Other liabilities and provisions includes amount measured at amortized cost of Rs.43,792 and Rs.34,001 as of March 31, 2026 and 2025, respectively, and contingent consideration measured at FVTPL of Rs.220 and Rs.2,916 as of March 31, 2026 and 2025, respectively.The Company enters into derivative financial instruments with various counterparties, principally financial institutions and banks. Derivatives which are valued using valuation techniques with market observable inputs are mainly interest rate swaps, foreign exchange forward option and swap contracts. The most frequently applied valuation techniques include forward pricing, swap models and Black-Scholes-Merton models (for option valuation), using present value calculations. The models incorporate various inputs, including foreign exchange forward rates, interest rate curves and forward rate curves.Others primarily consists of Swiss francs, U.K. pounds sterling, Chinese yuans (Renminbi) and Romanian leu.Others primarily consists of Romanian new leus, Chinese yuans (Renminbi), U.K. pounds sterling and Japanese yen.Represents mark to market gain or loss on financial assets classified as fair value through other comprehensive income (“FVTOCI”).  Depending on the category and type of the financial asset, the mark to market gain or loss is either reclassified to the income statement or to retained earnings upon disposal of the investment. Represents the 49% ownership stake held by Nestlé India Limited in Dr. Reddy’s and Nestlé Health Science Limited (which the Company sometimes refers to as its “Nutraceuticals subsidiary”). Refer to Note 35.A of these consolidated financial statements for details.Following the acquisition of a non-controlling interest (“NCI”) in the Nutraceuticals subsidiary by Nestle India, the difference between cash consideration received from such NCI and the proportionate share of net assets is recognized in “Other reserves” within equity.The Company had created a Debenture Redemption Reserve out of profits of its subsidiary Aurigene Pharmaceutical Services Limited that issued debentures in accordance with the terms of Sections 18(7)(iv) and 18(7)(v) AA(1) of the Companies (Share Capital and Debentures) Rules, 2014. During the year ended March 31, 2024, upon redemption of debentures the Company has transferred the balance from the Debenture Redemption Reserve to Retained earnings.The Company has created a Special Economic Zone (“SEZ”) reinvestment reserve out of profits of its eligible SEZ units in accordance with the terms of Section 10AA(1) of the Indian Income Tax Act, 1961. This reserve was utilized by the Company for acquiring plant and machinery in accordance with Section 10AA(2) of such Act.Indirectly owned through Aurigene Oncology Limited (Formerly, Aurigene Discovery Technologies Limited).Indirectly owned through Reddy Holding GmbH.Indirectly owned through Dr. Reddy’s Laboratories SA.Indirectly owned through Dr. Reddy’s Laboratories (EU) Limited.Indirectly owned through Dr. Reddy’s Laboratories Inc.Indirectly owned through Reddy Pharma Italia S.R.LIndirectly owned through Reddy Netherlands B.V.Accounted for using the equity method as per IAS 28, “Investments in Associates and Joint Ventures”.Indirectly owned through Idea2Enterprises (India) Pvt. Limited.Kunshan Rotam Reddy Pharmaceutical Co. Limited and Kunshan Rotam Reddy Medicine Company Limited are subsidiaries as per the Indian Companies Act, 2013, as the Company holds a 51.33% stake. However, the Company accounts for this investment in accordance with IFRS 11, “Joint Arrangements” using the equity method and does not consolidate it in the Company’s financial statements.45.19% held directly by Dr. Reddy’s Laboratories Limited.Indirectly owned through Lacock Holdings Limited.Indirectly owned through Northstar Switzerland SARL. Indirectly owned through Kunshan Rotam Reddy Pharmaceutical Co. Limited.Revenues for the year ended March 31, 2026 do not include inter-segment revenues from the PSAI segment to the Global Generics segment, of Rs.7,270 (as compared to Rs.9,389 and Rs.10,707 for the years ended March 31, 2025 and 2024, respectively) and from the PSAI segment to the Others segment of Rs.0 (as compared to Rs.0 and Rs.72 for the years ended March 31, 2025 and 2024, respectively)Others include Germany, the United Kingdom, Ukraine, Romania, Brazil and other countries across the world.Primarily represents the investment in shares of Curis, Inc. The cost of acquisition was Rs.2,699. As of March 31, 2026 and 2025, the Company has recognized an unrealized loss of Rs.2,685 and Rs.2,651, respectively, in the OCI for the fair value changes.Balances and receivables from statutory authorities primarily consist of amounts recoverable towards the goods and service tax (“GST”), value added tax, and from customs authorities of India.Primarily consist of amounts receivable from various government authorities of India towards incentives under various government programs.Others primarily include security deposits, claims and other receivables.Refer to Note 27 of these consolidated financial statements for further details regarding treasury shares and employee stock option plans.Effective as of the record date of October 28, 2024, the Company implemented a sub-division/ stock split of each equity share having a face value of Rupees Five each, fully paid-up, into five equity shares having a face value of Rupees One each, fully paid-up (the “stock split”), by alteration of the capital clause of the Memorandum of Association of the Company. Each American Depositary Share (“ADS”) of the Company continued to represent one underlying equity share and, therefore, the number of ADSs held by an American Depositary Receipt (“ADR”) holder consequently increased in proportion to the increase in number of equity shares.Earnings per share is computed after giving effect to 1:5 forward stock split effective October 28, 2024 for all periods presented. Refer to Note 19 of these consolidated financial statements for further details regarding such stock split.Miscellaneous income for the year ended March 31, 2026 includes:     · Rs.877 towards gain recognized from the write back of liabilities no longer required pursuant to the discontinuance of development of conjugated estrogen at the Company’s site in Middleburgh, New York. Refer note 11 of these consolidated financial statements for further details; and   · Rs. 1,400 recognised pursuant to settlement of product related litigations representing payment for avoided litigation costs by the Company and its affiliates in the United States and the United Kingdom during the year ended March 31, 2026.     Miscellaneous income for the year ended March 31, 2024 includes   · Rs.984 recognized pursuant to a settlement of product related litigation by the Company and its affiliates in the United Kingdom; and   · Rs.540 recognized pursuant to a 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).Includes reclassification of the cumulative amount of foreign exchange gain from foreign currency translation reserve to the income statement upon divestment of foreign operations during the year ended March 31, 2025. Refer to Note 22 of these consolidated financial statements for details.As of March 31,2026 and 2025, there was Rs.433 and Rs.430, respectively, of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of 1.72 years and 1.68 years, respectively.Fair value of these instruments is determined based on an independent valuation report, which uses the net asset value method.Rounded off to nearest million.Excluding dividend paid on treasury sharesRounded to the nearest million.The impairment loss of Rs.16,948 includes the following: · Rs.16,003 pertaining to the Company’s German subsidiary, betapharm Arzneimittel GmbH, which is part of the Company’s Global Generics segment. This impairment loss was recorded for the years ended March 31, 2009 and 2010; and · Rs.272 pertaining to the Company’s Nimbus Heath business, which is part of the Company’s Global Generics segment. This impairment loss was recorded for the year ended March 31, 2023.Adjusted for bank overdraft of Rs.61 for the year ended March 31, 2025.Refer to Note 11.B of these consolidated financial statements for further details.The Company’s overall provision for refund liability as of March 31, 2026 relating to the Company’s North America Generics business was U.S.$47, compared to a liability of U.S.$42 as of March 31, 2025. The refund liability created for new product launches and volume growth, were off-set by the reductions in the contract prices and by product mix changes.Currently, the Company does not separately track provisions and adjustments, in each case to the extent relating to prior years for chargebacks. However, the adjustments are expected to be non-material. The volumes used to calculate the closing balance of chargebacks represent approximately 1.0 to 1.4 months equivalent of sales, which corresponds to the pending chargeback claims yet to be processed.Currently, the Company does not separately track the credits and payments, in each case to the extent relating to prior years for chargebacks, rebates, Medicaid payments or refund liability.Chargebacks provisions and payments for the year ended March 31, 2025 and March 31, 2026 were each lower as compared to the years ended March 31, 2024 and March 31, 2025, primarily as a result of reduction in the invoice price to wholesalers for few of the Company’s major products. This was offset to some extent due to higher pricing rates per unit on chargebacks, on account of reductions in the contract prices through which the product is resold in the retail part of the supply chain for certain of the Company’s products.During the year ended March 31, 2026, the Company capitalized depreciation cost of Rs.150 with respect to qualifying assets under Property, plant and equipment.Impairment losses recorded for the year ended March 31, 2026 include the following:   a. Consequent to certain technical challenges in product development, the Company discontinued development of conjugated estrogen at its site in Middleburgh, New York and recorded an impairment loss of Rs.535 in the Company’s Global Generics segment representing the full carrying value of the property, plant and equipment at this site.   In addition, the Company recorded the following impacts in the consolidated income statements:   - Inventory related provisions of Rs.260; - Other development program related wind down costs of Rs.129; and - Gain recognized under Other Income, net from the write back of liabilities no longer required of Rs.877.   b. During the year ended March 31, 2026, the Company has decided to discontinue certain of its research and development programs associated with its Chimeric Antigen Receptor T-cell (CAR-T) therapy portfolio in light of the current development status and recent clinical trial outcomes. Consequent to this decision, the Company has recognized a net loss of Rs.885 relating to property, plant and equipment (including Capital-work-in-progress and Right-of-use assets) in the Company's Global Generic segment.   In addition, the Company recorded the following impacts in the consolidated income statements:   - Impairment of intangible assets Rs.406; and - Other development program related wind down costs under Selling, general and administrative expenses of Rs.59.“INR” means Indian rupees.“T-bill” means India Treasury bill interest rate.Represents the effective portion of the gain on the forward exchange contract executed in connection with the Company’s acquisition of Haleon’s nicotine replacement therapy business. Such forward exchange contract was intended to hedge the foreign currency exposure related to the consideration payable in GBP pursuant to Business Transfer Agreement with Haleon. Upon completion of the transaction, the hedge gains from this forward contract were reclassified from the cash flow hedge reserves and adjusted in the consideration paid. Refer to Note 35.B of these consolidated financial statements for details.Others include tender rebates payable, book overdraft and other liabilities linked to volume based arrangements.Dividend per share is computed after giving effect to 1:5 forward stock split effective October 28, 2024Earnings per share is computed after giving effect to 1:5 forward stock split effective October 28, 2024 for all periods presented. Refer to Note 20 of these consolidated financial statements for further details regarding such stock split.As of March 31, 2026, 2025, and 2024, 1,983,310, 941,080, and 1,227,725 options, respectively, were excluded from the diluted weighted average number of equity shares calculation because their effect would have been anti-dilutive. The average market value of the Company’s shares for the purpose of calculating the dilutive effect of stock options was based on quoted market prices for the year during which the options were outstanding.For the year ended March 31, 2026, consequent to resolution of a shelf stock adjustment claim arising from a reduction in the price of its generic product Lenalidomide in the United States, the Company recorded an amount of Rs. 4,530 (U.S.$ 50) as a reduction of “Revenue from sale of goods” in the Company's Global Generics Segment.For the year ended March 31, 2025, the license fees includes an amount of Rs.1,266 (U.S.$15) as a milestone payment receivable upon U.S. FDA approval of DFD 29, in accordance with the license and collaboration agreement dated June 29, 2021 with Journey Medical Corporation. This transaction pertains to the Company’s Others segment.Gain on sale/disposal of non-current assets, net for the year ended March 31, 2026 includes :   · Rs.1,890 towards divestment of certain product related intangibles i.e., trademarks during the year ended March 31, 2026.   Gain on sale/disposal of non-current assets, net for the year ended March 31, 2025 includes:   · A cumulative amount of foreign exchange gains of Rs.1,551, reclassified from the foreign currency translation reserve, and a loss of Rs.52 due to turn around fees paid upon divestment of the membership interest in the subsidiary “Dr. Reddy’s Laboratories Louisiana LLC”, including the manufacturing facility and related assets, to Jaguar Labs Holdings LLC.   In addition to the above, in connection with this divestment the Company also has recognized an amount of Rs.293, primarily comprising severance payments to employees in the consolidated income statement. 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 20-F

 

¨

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Fiscal Year Ended March 31, 2026

 

OR

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

¨

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 1-15182

 

DR. REDDY’S LABORATORIES LIMITED

(Exact name of Registrant as specified in its charter)

 

Not Applicable	Telangana, India
(Translation of Registrant’s name	(Jurisdiction of incorporation or
into English)	organization)

 

8-2-337, Road No. 3, Banjara Hills

Hyderabad, Telangana 500 034, India

+91-40-49002900

(Address of principal executive offices)

 

M.V. Narasimham,

Chief Financial Officer,

+91-40-66022564, narasimhammv@drreddys.com

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

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of Each Class		Trading Symbol		Name of Each Exchange on which Registered
American depositary shares, each		RDY		New York Stock Exchange
representing one equity share

 

Equity Shares*

 

*

Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission .

Securities registered or to be registered pursuant to Section 12(g) of the Act. None.

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None.

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

 

834,656,970 Equity Shares

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

Yes

þ

No

¨

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

 

Yes

¨

No

þ

 

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes

þ

No

¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Yes

þ

No

¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See the definitions of “accelerated filer”, “large accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer þ

Accelerated filer ¨

Non-accelerated filer ¨

Emerging growth company ¨

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.

¨

 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.    

þ

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

¨

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

¨

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP ¨	International Financial Reporting Standards as issued þ	Other ¨
	by the International Accounting Standards Board

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

 

Item 17

¨

Item 18

¨

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

 

Yes

¨

No

þ

 

 

 

 

Currency of Presentation and Certain Defined Terms

 

In this annual report on Form 20-F, references to “$” or “U.S.$” or “dollars” or “U.S. dollars” are to the legal currency of the United States and references to “Rs.” or “rupees” or “Indian rupees” or “INR” are to the legal currency of India, references to “MXN” are to the legal currency of Mexico, references to “ZAR” are to the legal currency of South Africa, references to “UAH” are to the legal currency of Ukraine, references to “GBP” are to the legal currency of the United Kingdom, references to “RUB” or “rouble” or “ruble” are to the legal currency of the Russian Federation, references to “EUR” or “euros” are to the legal currency of the European Union and references to “CAD” are to the legal currency of Canada. Our financial statements are prepared in accordance with International Financial Reporting Standards, or “IFRS”, as issued by the International Accounting Standards Board, or “IASB”. These standards include International Accounting Standards, or “IAS”, and their interpretations issued by the International Financial Reporting Interpretations Committee, or “IFRIC”, or its predecessor, the Standing Interpretations Committee, or “SIC”. References to a particular “fiscal” year are to our fiscal year ended March 31 of such year. References to our “ADSs” are to our American Depositary Shares. References to “OCI” are to other comprehensive income, to “FVTOCI” are to fair value through other comprehensive income, to “FVTPL” are to fair value through profit and loss and to “NCI” are to non-controlling interests.

 

References to “U.S. FDA” are to the United States Food and Drug Administration, to “ANDS” are to Abbreviated New Drug Submissions, to “NDAs” are to New Drug Applications, to “ANDAs” are to Abbreviated New Drug Applications,

to “BLAs” are to Biologics License Applications, to “INDs” are to Investigational New Drug Applications, to “MAAs” are to Marketing Authorization Applications and to “NDSs” are to New Drug Submissions. References to the “SEC” are to the U.S. Securities and Exchange Commission.

 

References to “U.S.” or “United States” are to the United States of America, its territories and its possessions. References to “India” are to the Republic of India. References to “EU” are to the European Union. All references to “we,” “us”, “our”, “DRL”, “Dr. Reddy’s” or the “Company” shall mean Dr. Reddy’s Laboratories Limited and its subsidiaries. “Dr. Reddy’s” is a registered trademark of Dr. Reddy’s Laboratories Limited in India. Other trademarks or trade names used in this annual report on Form 20-F are trademarks registered in the name of Dr. Reddy’s Laboratories Limited or are pending before the respective trademark registries, unless otherwise specified. Market share data is based on information provided by IQVIA Holdings Inc. (formerly Quintiles IMS Holdings Inc.) (“IQVIA”), a provider of market research to the pharmaceutical industry, unless otherwise stated. References to “HUF” are to a Hindu Undivided Family, a form of entity found in India among related family members.

 

Our financial statements are presented in Indian rupees and translated into U.S. dollars for the convenience of the reader. Except as otherwise stated in this report, all convenience translations from Indian rupees to U.S. dollars are at the certified foreign exchange rate of U.S.$1 = Rs.93.83, as published by Federal Reserve Board of Governors on March 31, 2026. No representation is made that the Indian rupee amounts have been, could have been or could be converted into U.S. dollars at such a rate or any other rate. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.

 

Our main corporate website address is

https://www.drreddys.com

. Information contained in our website,

www.drreddys.com

, is not part of this Annual Report and no portion of such information is incorporated herein.

 

 

2

 

 

Forward-Looking Statements and Risk Factor Summary

 

In addition to historical information, this annual report, and the reports and documents incorporated by reference in this annual report, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition to statements which are forward-looking by reason of context, the words “may”, “will”, “should”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue” and similar expressions identify forward-looking statements. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, risks relating to:

•

our business and operations in general, including: our ability to develop and commercialize additional pharmaceutical products; manufacturing, safety or quality control problems, which may damage our reputation for quality production and require costly remediation; interruptions in our supply chain; disruptions of our or third party information technology systems or breaches of our data security or other cyber-attacks; the failure to recruit or retain key personnel; significant sales to a limited number of customers in our U.S. market; and our ability to successfully undertake licensing opportunities;

•

current challenges associated with conducting business globally, including uncertainty related to ongoing geopolitical instability and armed conflict and hostilities (including between Russia and Ukraine and conflicts in the Middle East) and its adverse effects on the global supply chain, or economic instability, major hostilities or terrorism;

•

our generics medicines business, including: consolidation of our customer base and commercial alliances among our customers; the increase in the number of competitors targeting generic opportunities and seeking U.S. market exclusivity for generic versions of significant products; price erosion relating to our generic products, both from competing products and increased regulation; delays in launches of new generic products; efforts of pharmaceutical companies to limit the use of generics including through legislation and regulations; the difficulty and expense of obtaining licenses to proprietary technologies; and returns, allowances and chargebacks;

•

compliance, regulatory and litigation matters, including: uncertainties regarding actual or potential legal proceedings; costs and delays resulting from the extensive governmental regulation to which we are subject; the effects of reforms in healthcare regulation and reductions in pharmaceutical pricing, reimbursement and coverage; governmental investigations into selling and marketing practices; potential liability for patent infringement; product liability claims; increased government scrutiny of our patent settlement agreements; failure to comply with complex Medicare and Medicaid reporting and payment obligations; and environmental risk;

•

the effects of changes in U.S. tariffs or foreign trade laws (including laws designed to facilitate most-favored-nation (“MFN”) pricing requirements) or retaliatory measures by other countries in response, including increased business costs and impacts on supply chains; new operational challenges as we navigate a more complex business landscape; and business uncertainty that adversely affects macroeconomic conditions;

•

other financial and economic risks, including: our exposure to currency fluctuations and restrictions as well as credit risks; potential impairments of our intangible assets; potential significant increases in tax liabilities; and the effect on our overall effective tax rate of the termination or expiration of governmental programs or tax benefits, or of a change in our business;

•

compliance matters, including lapses by our U.S. or overseas employees, third-party distributors or marketing and distribution agents in complying with the U.S. Foreign Corrupt Practices Act and other worldwide anti-bribery laws,  which could result in adverse consequences to us, including without limitation causing us to be subject to injunctions or limitations on future conduct, be required to modify our business practices and compliance programs and/or have a compliance monitor imposed on us, or suffer other criminal or civil penalties or adverse impacts, including lawsuits by private litigants or investigations and fines imposed by local authorities;

•

risks of reputational damage and other adverse effects in the event of inadequate performance and management of sustainability and climate change topics; and

•

those discussed in the sections entitled “risk factors”, “business overview” and “operating and financial review and prospects” and elsewhere in this report.

 

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis and assumptions only as of the date hereof. In addition, readers should carefully review the other information in this annual report and in our periodic reports and other documents filed with and/or furnished to the

sec

from time to time.

 

 

3

 

 

TABLE OF CONTENTS

 

PART I	6
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	6
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE	6
ITEM 3. KEY INFORMATION	6
3.A. [Reserved]	6
3.B. Capitalization and indebtedness	6
3.C. Reasons for the offer and use of proceeds	6
3.D. Risk factors	6
ITEM 4. INFORMATION ON THE COMPANY	23
4.A. History and development of the Company	23
4.B. Business overview	24
4.C. Organizational structure	45
4.D. Property, plant and equipment	46
ITEM 4A. UNRESOLVED STAFF COMMENTS	47
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS	48
5.A. Operating results	53
5.B. Liquidity and capital resources	58
5.C. Research and development, patents and licenses, etc.	62
5.D. Trend Information	63
5.E. Critical Accounting Estimates	63
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	63
6.A. Directors and senior management	63
6.C. Board Practices	72
6.D. Employees	77
6.E. Share ownership	78
6.F. Disclosure of a registrant’s action to recover erroneously awarded compensation	8 0
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	80
7.A. Major shareholders	80
7.B. Related party transactions	82
7.C. Interests of experts and counsel	82
ITEM 8. FINANCIAL INFORMATION	82
8.A. Consolidated statements and other financial information	82
8.B. Significant changes	83
ITEM 9. THE OFFER AND LISTING	83
9.A. Offer and listing details	83
9.B. Plan of distribution	83
9.C. Markets	83
9.D. Selling shareholders	83
9.E. Dilution	83
9.F. Expenses of the issue	83
ITEM 10. ADDITIONAL INFORMATION	83
10.A. Share capital	83
10.B. Memorandum and articles of association	83

 

4

 

10.C. Material contracts	84
10.D. Exchange controls	85
10.E. Taxation	90
10.F. Dividends and paying agents	96
10.G. Statements by experts	96
10.H. Documents on display	96
10.I. Subsidiary information	97
10.J. Annual Report to Security Holders	97
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	97
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	99
12.A. Debt Securities.	99
12.B. Warrants and Rights.	99
12.C. Other Securities.	99
12.D. American Depositary Shares.	99
PART II	101
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	101
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	101
ITEM 15. CONTROLS AND PROCEDURES	101
ITEM 16. [RESERVED]	103
ITEM 16.A. AUDIT COMMITTEE FINANCIAL EXPERT	103
ITEM 16.B. CODE OF ETHICS	103
ITEM 16.C. PRINCIPAL ACCOUNTANT FEES AND SERVICES	103
ITEM 16.D. EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	103
ITEM 16.E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	103
ITEM 16.F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	104
ITEM 16.G. CORPORATE GOVERNANCE	104
ITEM 16.H. MINE SAFETY DISCLOSURE	106
ITEM 16.I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	106
ITEM 16.J. Insider Trading Policies	107
ITEM 16.K. CYBERSECURITY	107
PART III	108
ITEM 17. FINANCIAL STATEMENTS	108
ITEM 18. FINANCIAL STATEMENTS	108
ITEM 19. EXHIBITS	196

 

5

 

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not applicable.

ITEM 3. KEY INFORMATION

3.A. [Reserved]

3.B. Capitalization and indebtedness

Not applicable.

 

3.C. Reasons for the offer and use of proceeds

Not applicable.

 

3.D. Risk factors

 

You should carefully consider all of the information set forth in this Form 20-F and in other documents we file with or furnish to the SEC, including the following risk factors that we face and that are faced by our industry. The risks below are not the only ones we face. Additional risks not currently known to us or that we presently deem immaterial may also affect our business operations. Our business, financial condition, results of operations and/or cash flows could be materially or adversely affected by any of these risks. This Form 20-F also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face as described below and elsewhere in this report and our other SEC filings. For a summary of the risk factors included in this Item 3.D. and for further details on our forward-looking statements, see “Forward-Looking Statements and Risk Factors Summary” on page 3.

 

MATERIAL RISKS RELATING TO OUR COMPANY AND OUR BUSINESS

 

Our success depends on our ability to successfully develop and commercialize

new pharmaceutical products.

 

Our future results of operations depend, to a significant degree, upon our ability to successfully develop and commercialize additional products in our Global Generics and Pharmaceutical Services and Active Ingredients segments.

 

Our research and development efforts are also dependent on collaborating with third party partners and contract research organizations which have the capability to handle complex technologies and products. Lack of effective project management at our end, or any failure to manage collaboration arrangements among multiple partners, may pose significant risks to product development, to our ability to obtain requisite regulatory approvals in a timely manner, and to our ability to successfully and profitably produce and market such products.

 

The development process, including drug formulation, testing and

regulatory approvals

, often takes many years, and is informed by factors outside of our control, including but not limited to staffing and policy changes at the

U.S. FDA and other regulatory agencies

. 

 

 

Additionally, if we fail to adequately protect critical proprietary or confidential information or associated intellectual property rights or fail to manage third party partners and contract research organizations that our business depends on, it might have a material adverse impact on our product development execution.

 

From time to time, we also acquire in-process research and development assets, which require significant resources and expenditures to continue to develop, both through our own efforts and through collaborations. Because of the inherent risk associated with research and development efforts in our industry, including the high cost and uncertainty of conducting clinical trials (where required), such efforts may not result in the successful introduction of new pharmaceutical products approved by the relevant regulatory bodies.

 

Our results of operations may suffer if these products are not timely developed, approved or successfully commercialized. Refer to Note 11 (“Property, plant and equipment”), Note 12 (“Goodwill”) and Note 13 (“Other intangible assets”) of our consolidated financial statements for details of impairment of non-current assets.

 

We must develop, test and manufacture generic products as well as prove that our generic products are bio-equivalent or biosimilar to their branded counterparts, either directly or in partnership with contract research organizations. The development and commercialization process, particularly with respect to complex molecules and biosimilars, is both time consuming and costly and involves a high degree of business risk.

 

 

6

 

 

In addition, the competitive landscape includes a high level of uncertainty as numerous companies are working on or may be evaluating similar targets, and a product considered as promising at the beginning of its development may become less attractive if a competitor addressing the same unmet need reaches the market earlier.

 

Our products currently under development, if and when fully developed and tested, may not perform as we expect or meet our standards of safety and efficacy. Necessary regulatory approvals may not be obtained in a timely manner, if at all, and we may not be able to successfully and profitably produce and market such products. Our approved products may not achieve expected levels of market acceptance.

 

If we fail to comply fully with regulations or to maintain continuing regulatory oversight applicable to our research and development activities or if a regulatory agency delays or denies approvals for new products, it may affect realization of product revenues.

 

Our research and development activities are heavily regulated. If we fail to comply fully with applicable regulations, then there could be a delay in the submission or approval of potential new products for marketing approval. In addition, the submission of an application to a regulatory authority does not guarantee that approvals required to market the product will be granted. Each authority may impose its own requirements and/or delay or refuse to grant approval, even when a product has already been approved in another country. This approval process increases the cost of developing new products to us and increases the risk that we will not be able to successfully sell such new products.

 

Delays in the receipt of, or failure to obtain approvals for, future products, or new indications or life cycle management activities and uses, could result in delayed realization of product revenues, reduction in revenues and substantial additional costs.

 

We have operations in certain countries and geographies susceptible to political and economic instability that could lead to disruption or other adverse impact on such operations.

 

Countries and regions experiencing political and economic instability or

armed conflicts

can have adverse business, operational or financial impacts on us. For example,

geopolitical instability and armed conflict and hostilities in the Russia, Ukraine and the Middle East have disrupted and may continue to disrupt global supply chains, trade routes, energy markets, and transportation infrastructure.

 

Current instability in the region has contributed to volatility in crude oil, natural gas, and petrochemical markets, which directly and indirectly affect the cost and availability of key pharmaceutical inputs, including solvents, intermediates, excipients, and packaging materials. Increases in energy‑linked input costs and related supply interruptions could materially raise our cost of goods sold, compress margins, and adversely impact profitability, especially for products subject to fixed pricing, regulated pricing environments, or long‑term supply contracts.

 

In addition, the region is a critical corridor for international maritime and air cargo traffic, including key trans‑shipment hubs and shipping lanes used to procure raw materials and deliver pharmaceutical products worldwide.

 

The Middle East also represents an important distribution corridor for supplying customers in other regions, including the United States, Europe, Africa, and parts of Asia. Prolonged disruption could delay shipments, increase working capital requirements, and strain inventory and logistics planning. Evolving sanctions, trade restrictions, or compliance requirements arising from geopolitical developments could limit sourcing, logistics options, or market access, and increase regulatory and operational risks.

 

In February 2022, Russia initiated military operations against Ukraine. The armed conflict has continued since that time, with no comprehensive resolution, and has resulted in sustained geopolitical instability in Eastern Europe and beyond. In response, the United States, the European Union, the United Kingdom and other countries have imposed extensive and evolving sanctions, export controls and other restrictive trade and financial measures against Russia and certain Russian entities and individuals, many of which remain in effect and have been expanded or tightened over time.

 

For details on the impacts of this conflict on our business, see the discussion in Section 4.B. of this report under “Our Principal Areas of Operations - Global Generics Segment - Russia and other Countries of the former Soviet Union and Romania.”

 

We continue to monitor the effects of these geopolitical instability and armed conflict and hostilities, as well as to monitor significant political, legal, regulatory and other susceptible economic developments in these regions and attempt to mitigate our exposure where possible. Adverse macroeconomic conditions, including persistent inflationary pressures, elevated interest rates, currency volatility, and disruptions to energy and commodity markets, driven in part by ongoing unresolved geopolitical and regional conflicts, could materially affect our supply chain, financial condition, and results of operations. These conditions may increase input, manufacturing, logistics and financing costs, disrupt supply chains, and reduce demand across key markets. In addition, prolonged uncertainty may lead to tighter credit environments, reduced healthcare spending, delays in tendering and procurement cycles, and heightened pricing pressure from payers and customers. Our ability to offset these impacts through pricing actions, cost efficiencies or supply chain adjustments may be limited, particularly in regulated or highly competitive markets, which could adversely affect our margins and operational performance.

 

 

7

 

 

 

If we fail to meet all the quality and regulatory requirements of biologic drugs and fail to successfully challenge third party patents as allowed by national patent offices, it may impact production and revenues.

 

A portion of our portfolio are “biologic” products. Unlike traditional “small-molecule” drugs, biologic drugs cannot be manufactured synthetically, but typically must be produced from living animal cells or micro-organisms. As a result, the production of biologic drugs that meet all quality and regulatory requirements are especially complex Failures in clinical trials or delays in the complex and costly R&D processes for biologic drugs can be a significant setback.

 

Typically, biological therapeutics are extensively protected by innovators and biologic therapeutics have to work around third party intellectual property rights, otherwise known as freedom to operate (“FTO”) aspects. Further, our ability to successfully challenge third party patent rights is dependent on the laws of applicable countries.

 

The regulatory requirements are still evolving and are dynamic in many emerging markets where we sell or manufacture products, including our biologic drugs, and regulatory requirements may be unclear due to lack of precedents, among other reasons, which may lead to delays in product approvals, reapproval or re-licensure process, or other sanctions and, in turn, additional cost to operations. In the United States, the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”) created a statutory pathway and abbreviated approval processes for the approval of biosimilar versions of branded biological products. Further, several legal challenges concerning the requirements of the abbreviated biosimilar pathway, patent exchange and other provisions of BPCIA have been adjudicated in U.S. courts, legal challenges concerning FTO, patent exchange and trade matters, among others, continue.

 

For example, in October 2023 the U.S. FDA inspected our Biologics facility in Hyderabad, India. In November 2024, the U.S. FDA issued a complete response letter (“CRL”) with additional queries in reference to the ongoing resolution of observations arising from the October 2023 inspection, as well as certain aspects pertaining to our biologics license application (“BLA”) for a biosimilar rituximab. We submitted a deficiency response letter for the CRL in April 2025 and an additional CRL response in February 2026. The BLA is under review, and there is no certainty on timelines as to when the U.S. FDA will ultimately approve our resubmitted BLA, or guarantee of such approval, and we could experience further delays relating to the development of this biosimilar product.

 

If we fail to comply with the regulatory standards of various regulatory agencies in manufacturing of quality products, it may have potential impact on our business, financials and operations

.

 

Governmental authorities, including among others the U.S. Food and Drug Administration (“U.S. FDA”) and the U.K. Medicines and Healthcare Products Regulatory Agency (“MHRA”), heavily regulate the manufacturing of our products, including manufacturing quality standards. Periodic inspections are conducted on our manufacturing sites, and if the regulatory and quality standards and systems are not found adequate, it could result in an inspection observation (on Form 483, if from the U.S. FDA), or a subsequent investigative letter which may require further corrective actions. In recent years, a number of Indian generic pharmaceutical companies have been issued Official Action Indicated (“OAI”) status notices and warning letters by the U.S. FDA. A significant proportion of our manufacturing base of active pharmaceutical ingredients and formulations plants servicing the United States and other markets of our Global Generics business is based out of India. While our quality practices and quality management systems are designed and maintained in a manner to comply with the highest regulatory and quality standards, the inspections may often lead to non-conformity observations requiring corrective actions. Based on the criticality of the observations and the circumstances, the U.S. FDA may classify the inspection as Voluntary Action Indicated (“VAI”) status or OAI status, may issue warning letters and/or place our products on import alert detention lists.

More generally,

unless and until an issue,

raised in

a warning letter from the U.S. FDA is resolved to the agency’s satisfaction, they may withhold approvals of new products and new drug applications, issue import alert notices and/or take additional regulatory or legal action. The delay in approvals due to moving to an alternate site or alternate vendor, or the cost incurred in connection with remedial actions, can have significant adverse impacts on ongoing business, financial results and operations. Refer to Note 34 (“Regulatory inspection of facilities”) of our consolidated financial statements for the status of our U.S. FDA inspections. We deal with numerous third-party manufacturers and, despite our oversight, any lapse in their quality practices and quality management systems could lead to similar adverse outcomes in the event of an inspection by the U.S. FDA. or other regulators.

 

 

8

 

 

 

 

Significant disruptions of information technology systems, breaches of data security or other cyber-attacks could

adversely affect our business.

 

Our business depends on increasingly complex and interconnected information technology (“IT”) systems, including internet-based and cloud platforms, as well as third-party service providers, to support our operations, communications, and data exchange. The size, complexity, and interconnectivity of these systems, combined with our growing reliance on outsourcing and collaboration, increase our exposure to system failures, cybersecurity incidents, and other disruptions. Increased reliance on outsourcing arrangements and cloud-based services requires robust and continuously enhanced security controls to protect against threats to data availability, integrity, confidentiality, and privacy, including the risk of sabotage or unauthorized access. Regulators are increasingly focused on data integrity, cybersecurity, and data privacy requirements, and such requirements are reflected in applicable laws, regulations, and contractual obligations. While we have made significant investments in information security controls and data protection measures, there can be no assurance that our controls, or those of our third-party service providers, will be sufficient to prevent data loss, corruption, or unauthorized access in the event of a cybersecurity incident.

 

Despite implementing measures designed to assess, monitor, and mitigate such risks, including cybersecurity safeguards, risk assessments, and disaster recovery planning, these measures may not be effective in preventing or detecting all vulnerabilities, particularly as cyber threats continue to evolve and increase in sophistication. Any compromise, disruption, or failure of our IT systems or those of our third-party providers could result in unauthorized access to, loss, theft, or corruption of confidential or sensitive data, including personal data, intellectual property, and material non-public information. Furthermore, in circumstances where our personnel work remotely, reliance on secure remote access technologies may elevate the risk of cybersecurity incidents.

 

While we maintain cybersecurity insurance as part of our risk mitigation strategy,

but there can be no assurance that a policy exclusion will not apply or that our insurance coverage limits will be sufficient to fully recompense us for losses

. Such events could also disrupt critical business processes, including research and development activities, clinical trials, regulatory submissions, manufacturing, supply chain operations, financial reporting, and compliance with legal and regulatory obligations. Additionally, our increasing use of automation and ongoing change management initiatives across key functions, and our reliance on outsourced IT infrastructure and cloud-based services, heighten the risk of operational disruption if such initiatives are not effectively implemented or governed, or if third-party providers fail to deliver services in a timely and secure manner.

 

Any of the foregoing events could have a material adverse effect on our business, financial condition, results of operations, or cash flows.

 

If there is delay and/or failure in supplies of materials, services and

finished goods from third parties or failure of finished goods from our key

manufacturing sites, it may adversely affect our business and results of

operations.

 

In some of our businesses, we rely on third parties for the timely supply of active pharmaceutical ingredients, specified raw materials, equipment, formulation or packaging services and maintenance services, and in some cases, there could be a single source of supply.

 

Although we actively manage these third-party relationships to ensure continuity of supplies and services on time and to our required specifications, events beyond our control could result in the complete or partial failure of supplies and services or in supplies and services not being delivered on time.

 

 

9

 

 

We collaborate with several third-party contract research organizations and contract manufacturing organizations to facilitate the development and commercialization of certain drugs. However, any financial limitations or compliance challenges encountered by these external partners may lead to delays in product launches or cancellation of planned launches. If we experience a shortage in our supply of raw materials, we might be unable to fulfill all of active pharmaceutical ingredients and other raw material needs of our Global Generics segment, which could result in a loss of production capacity for this segment. Moreover, we may continue to be dependent on vendors, strategic partners and alliance partners for supplies of some of our existing products and new generic launches.

 

Any unanticipated capacity or supply related constraints affecting such vendors, strategic partners or alliance partners can adversely affect our business or results of operations. Our key generics manufacturing sites also may have capacity constraints, and, at times, we may not be able to generate sufficient supplies of finished goods.

 

Disruption in global trade routes and transportation infrastructure arising from

ongoing

conflicts between Russia, Ukraine and in the Middle East

could lead to challenges in supply fulfillment from our contract manufacturing organizations and other key suppliers of API and raw materials. That could impact our operations and delay our ability to manufacture finished dosages.

 

If we fail to maintain adequate supply of and quality products

,

it

may adversely affect our reputation and business

.

 

We may experience difficulties, delays and interruptions in the manufacturing and supply of our products for various reasons, including among other reasons:

·

demand that significantly exceeds the forecasted demand, which may lead to supply shortages (this is particularly challenging before the launch of a new product);

 

·

supply chain disruptions, including those due to natural or man-made disasters at one of our facilities or at a critical supplier or vendor.

 

·

delays in construction of new facilities or the expansion of existing facilities, including those intended to support future demand for our products (the complexities associated with biosimilar facilities, especially for drug substances, increase the probability of delays).

 

·

the inability to supply products due to a product quality failure or regulatory agency compliance action such as license withdrawal, product recall or product seizure. For example, during the year ended March 31, 2025, we had a Class I recall of Sapropterin Dihydrochloride (Javygtor) Powder for Oral Solution and Levetiracetam Injection in the United States;

 

·

other manufacturing or distribution problems, including changes in manufacturing production sites, limits to manufacturing capacity due to regulatory requirements, changes in the types of products produced, or physical limitations or other business interruptions that could impact continuous supply; and

 

·

the difficulties inherent in the manufacture and sale of sterile products, including oncology products, which are technically complex to manufacture, and require sophisticated environmental controls. Because the production process for such products is so complex and sensitive, any production failures may lead to lengthy supply interruptions.

 

Impairment charges or write downs in our books could have a significant adverse effect on our results of operations and financial results.

 

A substantial portion of the value of our assets pertains to various intangible assets and goodwill. The proportion of the intangible assets and goodwill to our total assets could increase significantly as we pursue various growth strategies. The value of these intangible assets and goodwill could be substantially impaired upon indications of impairment, with adverse effects on our financial condition and the value of our assets.

 

Our results of operations may suffer if our products are not timely developed, approved or successfully commercialized. Certain of our products were impaired during the years ended March 31, 2026, 2025 and 2024. Refer to Note 11 (“Property, plant and equipment”), Note 12 (“Goodwill”) and Note 13 (“Other intangible assets”) of our consolidated financial statements for further details.

 

We are subject to the U.S. Foreign Corrupt Practices Act, similar anti-bribery laws and other worldwide laws regarding marketing practices, which impose restrictions and may carry substantial penalties.

 

The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to public officials or otherwise for the purpose of obtaining or retaining business. These laws may also require us to maintain accurate books and records, as well as to establish and monitor adequate controls, policies and processes to ensure business is conducted without the influence of bribery and corruption.

 

 

10

 

 

Ethics and compliance is core to our values and, in this pursuit, we have established a strong compliance framework program. Our policies mandate compliance with these anti-bribery laws, which if not complied, often carry substantial penalties including fines, criminal prosecution and potential debarment from public procurement contracts. Failure to comply may also result in reputational damages.

 

We operate in certain jurisdictions that experience governmental corruption to some degree or, are found to be low on the Transparency International Corruption Perceptions Index and, in some circumstances, anti-bribery and anti-corruption (“ABAC”) laws may conflict with some local customs and practices. Business activities in many of these markets have historically been more susceptible to corruption. In many less-developed markets, we work with third party distributors and other agents for the marketing and distribution of our products. Our third party risk management (“TPRM”) policy sets forth the ABAC policy standards required for all of our vendors and third party agents. In addition to requiring initial due diligence screenings and ABAC training and certification, our TPRM policy mandates that contracts with these third parties include ABAC compliance obligations. Nonetheless, any lapses in complying with ABAC laws by these third parties despite our TPRM policy may adversely impact us.

 

Refer to Note 31 (“Contingencies - Internal Investigation”) of our consolidated financial statements for current internal investigation details.

 

From time to time

, any change in regulatory requirements in the key geographies in which we operate might require us, along with the rest of the industry, to make necessary corresponding changes in our approach.

 

We need to constantly review and update our compliance program to keep it current and active. If we fail to do so, our vulnerabilities may increase and our controls may be found to be inadequate.

 

Actions by our employees, or third-party intermediaries acting on our behalf, in violation of such laws, whether carried out in the United States or elsewhere, may expose us to liability for violations of such anti-bribery laws and accordingly may have a material adverse effect on our reputation and our business, financial condition, results of operations and/or cash flows.

 

Our success depends on our ability to retain and attract qualified

personnel and, if we are not able to retain them or recruit additional

qualified personnel, we may be unable to successfully develop our business.

 

We are highly dependent on the principal members of our management and scientific staff, the loss of whose services might significantly delay or prevent the achievement of our business or scientific objectives. In the United States, executive officers and key employees typically provide a very short termination notice period (usually two weeks or less) unless specified otherwise in their contracts. However, in India, employment agreements generally mandate a termination notice period of several months. Competition among pharmaceutical companies for qualified employees is intense, and the ability to retain and attract qualified individuals is critical to our success. Current or prospective employees may have changing expectations around workplace flexibility and diversity and inclusion, and a failure to meet these expectations may affect our ability to attract and retain top talent to support our business growth. There can be no assurance that we will be able to retain and attract such individuals currently or in the future on acceptable terms, or at all, and the failure to do so could have a material adverse effect on our business, financial condition, results of operations and/or cash flows.

 

Changes in tariffs and trade policies, and any retaliatory measures by other countries, could increase business costs, impact supply chains and cause business uncertainty, any of which may adversely impact our operations, supply chain, cash flows and profitability.

 

Escalating trade tensions have led to increased tariffs and trade restrictions. Since taking office in January 2025, the current U.S. presidential administration has issued numerous executive orders implementing or revising tariffs and international trade policies, seeking to prioritize U.S. domestic industry and rebalance global trade dynamics.

 

For example, the “Liberation Day” tariffs announced on April 2, 2025 included universal tariffs on imported goods, along with additional “reciprocal” tariffs on dozens of named countries. Although these tariffs include certain pharmaceutical product exemptions,

such exemptions were identified by the U.S. administration as potentially temporary and subject to further review.

 

Any trade policy change, through the implementation of tariffs or otherwise, or uncertainty regarding their implementation or final rates can create a volatile business environment, affecting strategic planning and investment decisions, and may have a material adverse effect on global trade, macroeconomic and geopolitical conditions and the stability of global financial markets.

 

Tariffs and related trade actions could increase our cost of goods sold, including through higher costs or reduced availability of active pharmaceutical ingredients, packaging components and other raw materials.

 

These factors, individually or collectively, could adversely affect our business, financial condition, results of operations and cash flows.

Changes in laws or policies related to pricing for prescription drugs, including most-favored-nation (“MFN”) requirements, could adversely affect our product prices and profit margins, and thereby our operations, revenues and profits.

 

The adoption in new jurisdictions of laws and policies that reduce, establish or mandate price controls or establish prices paid by government entities or programs for our products, or the implementation of more restrictive controls in existing jurisdictions, could adversely affect our product prices and profit margins, and thereby our operations, revenues and profits. The failure to establish or maintain timely or adequate pricing may also adversely impact operations, revenues and profits. We expect that pricing pressures will continue globally.

 

For example, On May 12, 2025, the U.S. President issued an executive order "Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients," directing executive agencies to take steps to facilitate most-favored-nation (“MFN”) pricing for prescription drugs in the United States. The executive order directs the Secretary of Health and Human Services (“HHS”) to communicate MFN pricing targets to pharmaceutical manufacturers by June 11, 2025. Manufacturers are expected to make “significant progress” toward meeting these targets. If they fail to do so, then other regulatory actions are to be pursued, including proposing rules to implement MFN pricing, working with Congress to allow for expanded drug importation, exploring U.S. FDA drug approval reforms, increased antitrust enforcement and review of drug export practices. The order does not specify which drugs would be subject to MFN pricing, which countries will be considered, how MFN targets will be set or enforced, or what qualifies as “significant progress.”

 

The May 12, 2025 executive order also calls on the Secretary of Commerce and the U.S. Trade Representative to address foreign pricing practices that may harm U.S. interests, including suppressing drug prices abroad and shifting the global research burden to American consumers. Additionally, the order directs HHS to support direct-to-consumer sales at MFN prices, seeking to bypass intermediaries in the current U.S. drug supply chain. We cannot predict the ultimate effect of this executive order on our business, but this could adversely affect our product prices and profit margins, and thereby our operations, revenues and profits. The executive order may also face lawsuits challenging the enforceability of certain of its terms, the outcome of which is inherently uncertain. As the implementation of this executive order evolves, we will continue to assess its impact on us.

 

Reforms in the health care industry and

the uncertainty associated with pharmaceutical pricing, reimbursement and related matters could adversely affect the marketing, pricing and demand for our products.

 

Our businesses are operating in an ever more challenging environment, with significant pressures on the pricing of our products and on our ability to obtain and maintain satisfactory rates of reimbursement for our products by governments, insurers and other payors.

 

For example, in the United States, Congress passed the Inflation Reduction Act of 2022 (the “IRA”), which makes significant changes to how drugs are covered and paid for under the Medicare program, including the creation of new rebates and financial penalties for drugs (including

single-source generics)

whose prices rise faster than the rate of inflation, redesign of the Medicare Part D program to require manufacturers to bear more of the liability for certain drug benefits, and government price-setting for certain Medicare Part D drugs, starting in 2025, and Medicare Part B drugs starting in 2028. The long-term implications of the IRA remain uncertain and we are continuing to evaluate this law and its impact on our business.

 

The U.S. Congress also continues to consider other drug pricing legislation that, if passed and signed into law, could impact companies’ ability to increase prices for prescription drugs, even in case of increase in our input costs, to maintain our margins. The FDA's Safe Importation Action Plan has been implemented, allowing states to import certain prescription drugs from Canada under specific conditions. In January 2024, Florida became the first state authorized to implement a Section 804 Importation Program to import drugs from Canada. Although the U.S. FDA has authorized Florida to import specific drugs from Canada, the plan is still in its early stages and requires further steps before it can be fully implemented. It is unclear how this program will be implemented, including which drugs will be chosen, and whether it will be subject to legal challenges in the United States or Canada. Other states have also submitted importation program proposals that are pending review by the U.S. FDA. Any such importation plans, when approved and implemented, may result in lower drug prices for products covered by those programs. Certain states have also proposed other measures that are designed to control the costs of pharmaceuticals for which they provide reimbursement.

 

The growth of overall healthcare costs as a percentage of gross domestic product in many countries means that governments and payors are under intense pressure to control healthcare spending even more tightly than in the past.

 

 

11

 

 

These pressures are particularly strong given the persistently weak economic and financial environment in many countries and the increasing demand for healthcare resulting from the aging of the global population and associated increases in non-communicable diseases. These pressures are further compounded by consolidation among distributors, retailers, private insurers, managed care organizations and other private payors, which can increase their negotiating power. For example, there are three large Group Purchasing Organizations that account for a substantial majority of generics purchases in the United States in 2025. In addition, these pressures are augmented by intense publicity regarding the pricing of pharmaceuticals by our competitors, as well as government investigations and legal proceedings regarding pharmaceutical pricing practices. Refer to Note 31 (“Contingencies”) of our consolidated financial statements for current investigations and legal proceedings. In many countries in which we currently operate, pharmaceutical prices are increasingly subject to regulation.

 

Our products continue to be subject to increasing price and reimbursement pressure that can limit the revenues we earn from our products in many countries due to, among other things:

·

the existence of government-imposed price controls, tender systems, mandatory discounts and rebates, pricing transparency mandates and drug importation program;

 

·

more governments using international reference pricing to set the price of drugs based on international comparisons (Refer to “Our Principal areas of Operations - Global Generic segment” in Item 4.B. of this report);

 

·

increased difficulty in obtaining and maintaining satisfactory drug reimbursement rates;

 

·

increase in cost containment policies related to health expenses in the context of economic slowdown;

 

·

more demanding evaluation criteria applied by health technology assessment agencies when considering whether to cover new drugs at a certain price level; and

 

·

the ongoing macroeconomic environment and tariffs (i.e., tariffs imposed by the United States and retaliatory tariffs from other countries in response) or any escalation thereof could force us to evaluate our product pricing.

 

We expect these efforts to continue as healthcare payors around the globe, in particular government-controlled health authorities, insurance companies and managed care organizations, step up initiatives to reduce the overall cost of healthcare.

A limited number of products may account for a significant portion of our revenues, and declines in demand, pricing or related inventory adjustments for such products could adversely affect our results.

 

Sales of a relatively small number of products may at times represent a significant portion of our net revenues, gross profit and/or net earnings in certain markets. Any reduction in the volume or pricing of these products, delays in regulatory approvals for new or replacement products, or increased competition could have a material adverse effect on our business, financial position and results of operations. In addition, consistent with industry practice, we may provide shelf stock or other inventory-related adjustments to customers in connection with product price reductions. The magnitude and timing of such adjustments are inherently uncertain and depend on factors beyond our control, including competitive pricing dynamics, new product launches and customer inventory levels. If actual adjustments differ from our estimates, or if significant price erosion occurs, our revenues, margins, profits and cash flows may be adversely affected.

 

We operate in a highly competitive and rapidly consolidating industry which may adversely affect our revenues and

profits.

 

O

u

r products face intense competition from products commercialized or under development by competitors in all of our business segments based and geographies in which we operate. Many of our competitors have greater financial resources and marketing capabilities than we do.

 

Our competitors may succeed in developing technologies and products that are more effective, more popular or cheaper than any we may develop or license, thus rendering our technologies and products obsolete or uncompetitive, which would harm our business and financial results. It is also possible that alternate therapies or substitutable products that we developed for the same indication would lead to cannibalization of revenues from our products.

 

The U.S. FDA’s efforts to increase the pace at which generics enter the market has also resulted in higher competition and in a trend of many first-time generic manufacturers entering the market, which is further increasing competition in the market and increasing pressure on pricing.

 

In recent years, there has also been an increase in the number of generic manufacturers targeting significant new generic opportunities with exclusivity under the Hatch-Waxman Act, or which are complex to develop. Many of the smaller generic manufacturers have increased their capabilities, level of sophistication and development resources in recent years.

 

Our generics business is also facing increasing competition from brand-name manufacturers who do not face any significant regulatory approvals or barriers to enter into the generics market. These brand name manufacturers have devised numerous strategies to do so including, for example, by selling generic versions of their products directly, by forming strategic alliances with our competitor generic pharmaceutical companies or by granting them rights to sell “authorized generics”. Moreover, brand companies continually seek new ways to delay the introduction of generic products and decrease the impact of generic competition, such as by: filing new patents on drugs whose original patent protection is about to expire, developing patented controlled-release products, changing the dosage form or dosing regimen of the brand product prior to generic introduction while the generic applicant seeks to amends its ANDA dossier to match the changes in the brand product; changing product claims and product labeling; developing and marketing as over-the-counter products those branded products that are about to face generic competition; or pricing the branded product at a discount equivalent to generic pricing.

 

 

12

 

 

 

 

We are subject to data protection laws and regulations in many different jurisdictions and countries where we do business, and a failure to comply by us or by our third parties acting on our behalf could result in fines, administrative and criminal penalties, reputational damage, and could adversely

impact the way we operate our business.

 

We are

subject to laws and regulations governing the collection, use, transfer and retention of personal data, including health information. As the legislative and regulatory landscape continues to evolve around the world, there has been an increasing focus on data privacy and protection issues that may affect our business. The European Union’s (EU) General Data Protection Regulation (“GDPR”), which became fully effective in May 2018, implemented stringent requirements on how a company may gather, retain, use and manage personal and sensitive personal data, as well as mandatory data breach notification requirements. The GDPR grants national authorities the power to apply fines of up to EUR 20 million or 4% of the previous financial year’s global turnover (whichever is greater).

 

Additionally, the California Consumer Privacy Act (“CCPA”) of 2018, as amended by California Privacy Rights Act (“CPRA”) of 2020, created new individual privacy rights for California consumers and increased the privacy and security obligations on business entities handling personal data of consumers or households. These laws require businesses to provide new disclosures to California consumers, provide such consumers with new ways to opt-out of certain sales of personal information, and allow for a new cause of action for data breaches. Similarly, several other U.S. states have recently enacted privacy laws which are either currently in effect or are in process of being implemented.

 

More recently, in India, the Digital Personal Data Protection Act of India (the “DPDP Act”) and the related Digital Personal Data Protection Rules, 2025 (“DPDP Rules”) puts several obligations on ‘data fiduciaries’ which process digital personal data collected in India or processed in connection with offering goods and services to individuals in India. As per the DPDP Act, penalties levied for data breaches can be up to INR 2.5 billion. Under the DPDP Rules, ‘data fiduciaries’ have been given a timeline of up to 18 months (i.e., until May 2027) to comply.

 

Other countries in which we do business have, or are developing, or strengthening data protection laws that may affect our business or require us to adapt our technologies and organizational measures.

 

Also, data localization requirements and enforcement in certain countries (including Russia, some countries of the former soviet union, and China), as well as the European Union’s restrictions related to cross-border transfer of personal data to third countries, further limits the ease of transfer of personal data from such countries to the rest of the world.

 

Evolving third-party relationships beyond the traditional vendor/supplier model and the increased use of digital solutions and medical devices, including those utilizing emerging technologies such as artificial intelligence (“AI”), pose new privacy, and security challenges. These will require constant monitoring of new guidelines and regulations (e.g. the EU AI act) around the world, such as the EU AI Act

(Regulation (EU) 2024/1689 laying down harmonized rules on artificial intelligence), as well as a need for us to assess and upgrade our capabilities in these areas.

 

The burdensome and often conflicting requirements under these various Data Protection laws as well as emerging AI laws and guidelines, require us to allocate increasingly greater resources towards ensuring compliance with them. Among other things, there is significant additional cost associated with the development, implementation and maintenance of upgrades to our information technology systems, as well as ongoing monitoring and governance efforts.

 

If we fail to comply with environmental laws and regulations, or face environmental litigation, our costs may increase, or our revenues may decrease.

 

We may incur substantial costs complying with requirements of environmental laws and regulations. In addition, we may discover currently unknown environmental problems or conditions. In all countries where we have production facilities, we are subject to significant environmental laws and regulations that govern the discharge, emission, storage, handling and disposal of a variety of substances that may be used in or result from our operations. In the normal course of our business, we are exposed to risks relating to possible releases of hazardous substances into the environment, which could cause environmental or property damage or personal injuries, and that could require remediation of contaminated soil and groundwater, which could cause us to incur substantial remediation costs that could adversely affect our consolidated financial position, results of operations or liquidity. Refer to Note 31 (“Contingencies - Environmental matters”) of our consolidated financial statements for further details on current environmental matters.

 

 

13

 

 

If any of our plants or the operations of such plants are shut down, it may severely hamper our ability to supply our customers and we may continue to incur costs in complying with regulations, appealing any decision to close our facilities, maintaining production at our existing facilities and continuing to pay labor and other costs, which may continue even if the facility is closed.

 

Environmental regulatory requirements in different countries where we operate continue to evolve and may require us to incur additional costs to comply with such requirements.

 

If we elect to sell a generic product prior to the final resolution of

outstanding patent litigation, we could be subject to liabilities for damages.

 

At times we seek approval to market generic products before the expiration of patents for those products, based upon our belief that such patents are invalid, unenforceable, or would not be infringed by our products. As a result, we might be involved in patent litigation, the outcome of which could materially adversely affect our business. Based upon a complex analysis of a variety of legal and commercial factors, we may elect to market a generic product even though litigation is still pending. This could be before any court decision is rendered or while an appeal of a lower court decision is pending. To the extent we elect to proceed in this manner, if the final court decision is adverse to us, we could be required to cease the sale of the infringing products and face substantial liability for patent infringement. These damages may be significant as they may be measured by lost profits of the patent holder, a royalty on our sales or by such damages as may be awarded by the court as a result of final litigation outcome. Because of the discount pricing typically involved with generic pharmaceutical products, patented brand products generally realize a significantly higher profit margin than generic pharmaceutical products and, as a result, a lost profits damages award may exceed the profits we earned on a generic product. Refer to Note 31 (“Contingencies”) for further details on our current product and patent related litigations.

 

Furthermore, there may be risks involved in entering into in-licensing arrangements for products, which are often conditioned upon the licensee’s sharing in the patent-related risks.

 

For business reasons, we continue to examine such product opportunities (i.e., involving non-expired patents) going forward and this could result in patent litigation, the outcomes of which may have a material adverse effect on our results of operations, financial condition and/or cash flows.

 

If we are unable to defend ourselves in patent challenges, we could be subject

to injunctions preventing us from selling our products, or we could be subject to substantial liabilities that could adversely affect

our profits and cash flows. Further, our patent settlement agreements with the innovators may face government scrutiny, exposing us to significant damages.

 

There has been substantial patent related litigation in the pharmaceutical industry concerning the manufacture, use and sale of various products. In the normal course of business, we are regularly subject to lawsuits and the ultimate outcome of litigation could adversely affect our results of operations, financial condition, and cash flow. Regardless of regulatory approval, lawsuits are periodically commenced against us with respect to alleged patent infringements by us, such suits often being triggered by our filing of an application for governmental approval, such as an ANDA or NDA.

 

The expense of any such litigation and the resulting disruption to our business, whether or not we are successful, could harm our business. The uncertainties inherent in patent litigation make it difficult for us to predict the outcome of any such litigation.

 

If we are unsuccessful in defending ourselves against these suits, we could be subject to injunctions preventing us from selling our products, resulting in a decrease in revenues, or to damages, which may be substantial. An injunction or substantial damages resulting from these suits could adversely affect our consolidated financial position, results of operations or liquidity.

 

Further, we have been involved in various litigations involving challenges to the validity or enforceability of registered patents and therefore settling such patent litigations has been and is likely to continue to be an important part of our business.

 

Parties to patent litigation settlement agreements in the United States, including us, are required by law to file them with the Federal Trade Commission (“FTC”) and the Antitrust Division of the Department of Justice for review. The FTC has publicly stated that, in its view, some of the brand-generic settlement agreements violate the antitrust laws and has brought actions against some brand and generic companies that have entered into such agreements. Accordingly, such settlement agreements may expose us to antitrust violation claims.

 

California passed the Preserving Access to Affordable Drugs (AB-824), legislation that could adversely impact our ability to settle patent litigations. The law, which took effect on January 1, 2020, creates a presumption that a patent settlement has anti-competitive effects, and thus violates California's state antitrust law, if it provides for the generic pharmaceutical company to receive “anything of value” from the branded pharmaceutical company and if the generic pharmaceutical company agrees to delay the launch of a generic product for any period of time. The law specifically identifies exclusive licenses and agreements by the branded pharmaceutical company “not to launch an authorized generic version” of its branded product as things of value that would trigger the presumption. Such presumption may make it more difficult to negotiate settlement agreements which are subject to this law.

 

 

14

 

 

 

Class action lawsuits could expose us to significant liabilities, result in negative publicity, harm our

reputation and have a material adverse effect on the price of our ADSs.

 

Shareholders of a public company sometimes bring securities class action lawsuits against the company following periods of instability in the market price of that company’s securities. As a public company grows in size, the risk of such litigations may increase. If we were to be sued in any such class action suit, irrespective of the merits of the underlying case, it could have adverse effects on us, including among other things: (a) a diversion of management’s time and attention and other resources from our business and operations, which could harm our results of operations; (b) negative publicity, which could harm our reputation and restrict our ability to raise capital in the future; (c) require us to incur significant expenses to defend the suit; and (d) if a claim against us is successful, we may be required to pay significant damages and, in certain circumstances, to indemnify our directors and officers if they are named as defendants in the class action suit. Any of the foregoing could, individually or in the aggregate, have a material adverse effect on our financial condition, results of operations, cash flows and/or the price of our ADSs.

 

OTHER RISKS GENERALLY APPLICABLE TO OUR INDUSTRY OR THE GEOGRAPHIES IN WHICH WE OPERATE

 

With an increased focus from key stakeholders on climate-related and other sustainability disclosures, an inadequate performance and management of sustainability topics could adversely affect our business.

 

As sustainability continues to gain significance with governments, companies and investors, there have been multiple shifts in the global sustainability regulatory and reporting landscape, along with changing stakeholder expectations. Disclosure requirements are becoming more complex with constantly evolving and newly emerging sustainability reporting regulations, and mandatory and voluntary frameworks such as the Corporate Sustainability Reporting Directive (CSRD) and International Sustainability Standards Board (ISSB) sustainability disclosure standards. There is little or no standardization across methodologies and a shift in compliance timelines. Many voluntary disclosures on human rights-related or climate-related issues and topics are expected due to their growing global significance and need for urgent solutions. As we engage in voluntary reporting and prepare for compliance with mandatory standards, we face greater pressure to ensure the accuracy, reliability, and verifiability of our sustainability data, requiring strong internal controls and processes to internally and externally assure, and deliver timely reporting to our stakeholders.

 

Climate change has the potential to increase the frequency and severity of natural disasters and extreme weather events. Even if we take precautions to provide back-up support in the event of such a natural disaster, the disaster may nonetheless affect our facilities, harming production and ultimately our business. And, even if our manufacturing facilities are not directly damaged, a large natural disaster may result in disruptions in distribution channels or supply chains.

 

We are an integrated pharmaceutical company operating in multiple geographies such as India, Mexico, and the United Kingdom. Several of our operations can be exposed to different climate-related regulations. In addition, current or emerging laws or regulations intended to limit greenhouse gas emissions or water usage, such as carbon pricing, taxes on emissions, fuel and energy, or to mitigate the impacts of climate change may become more prevalent, which could increase our operating costs and the costs charged by suppliers. These events could have a material adverse effect on our business. Our customers conduct audits on a continual basis on matters related to sustainability including climate change adaptation and mitigation. Inadequate management of environmental resources could lead to loss of revenue, higher operational costs, and incidents that could harm our communities and the environment, leading to financial and reputational implications. Moving to new, more sustainable solutions for resource conservation may require increased capital expenditure.

 

We are subject to various laws and regulations concerning, among other things: employee safety; product safety; the handling, transportation, storage, use and disposal of chemicals; and the discharge of regulated materials and pollutants into the environment. Failure to adapt to or comply with existing or new regulatory requirements, or investor or stakeholder expectations and standards, on these sustainability matters could negatively impact our reputation or harm our business.

Our suppliers, business partners, or other stakeholders are subject to similar expectations, which may augment or create additional risks.

 

We have set ambitious strategic sustainability goals in line with our vision, and our targets, stated strategy, and the ability to achieve our goals are based on assumptions that are subject to change in the future. Meeting our access to medicines goals involves navigating complex factors such as government regulations, socioeconomic factors, the availability, quality, and increasing costs of medicines, healthcare expenditures etc., and may impact our ability to deliver affordable and innovative treatment to patients. This year we have set an ambitious goal of achieving net zero emissions by fiscal year 2045, in addition to our targets on carbon neutrality and renewable energy. Achieving these goals is dependent on multiple external factors, including the pace of deployment of renewable energy, intermittency and variability, storage capacity and infrastructure challenges, technical challenges and the cost of carbon offsets. These factors may impact our ability to meet our goals or meet them within our stated timelines, including heightened stakeholder expectations, and our reputation may be harmed.

 

In recent years, in addition to financial results, companies are increasingly being judged by their sustainability practices. Several global and national organizations including sustainability rating agencies, research analysts, and disclosure and standards organizations evaluate our work through in-depth analyses of our sustainability efforts. These include reviews of our publicly available documents, and independent quantitative and qualitative assessments, often involving discussions with our management and employees. The results of these ratings are publicly and widely available.

 

Investor sentiment is also driven by global shifts, the political climate, and international policies.

Considering the fast pace of change of external expectations and regulations, there can be no certainty that we will manage such issues successfully, that the

sustainability

standards we currently use to measure our performance against will remain the same, or that we will successfully meet society or investors’ expectations.

An inability to manage investor sentiment or conflicting stakeholder expectations may lead to audits, other enforcement action or liabilities and reputational damage.

If we improperly handle any of the dangerous materials used in our business and

accidents result, we could face significant liabilities that would adversely affect our business, reputation and result of operations.

 

We handle dangerous materials, including explosive, toxic and combustible materials. If improperly handled or subjected to the wrong conditions, these materials could cause accidents resulting in injury, property and environment damage, and business disruptions. Changes in business and operations in our plants from the introduction of new products, or increased demand for existing products, can also pose increased safety hazards. Such hazards can be addressed and mitigated through project risk assessment, employee and contractor training, proper governance systems and other safety measures, and the failure to carry these out can lead to industrial accidents.

 

Any of the foregoing could subject us to significant litigation, which could lower our profits in the event we were found liable and could also adversely impact our reputation.

 

In a worst case scenario, this could also result in a government forced shutdown of our manufacturing plants, which in turn could lead to product shortages that delay or prevent us from fulfilling our obligations to customers and would adversely affect our business and results of operations.

 

We may be susceptible to significant product liability claims that are not covered by insurance.

 

Our business inherently exposes us to potential product liability claims, and the severity and timing of such claims are unpredictable. Notwithstanding pre-clinical and clinical trials conducted during the development of potential products to determine the safety and efficacy of products for use by humans following approval by regulatory authorities, unanticipated side effects may become evident only when drugs are introduced into the marketplace. Due to this fact, our customers and participants in clinical trials may bring lawsuits against us for alleged product defects. In other instances, third parties may perform analyses of published clinical trial results which raise questions regarding the safety of pharmaceutical products, and which may be publicized by the media. Even if such reports are inaccurate or misleading, in whole or in part, they may nonetheless result in claims against us for alleged product defects.

 

Under the current regulatory scheme in the United States, branded drug manufacturers can independently update product labeling through the “changes being effected” (“CBE”) supplement process, but a generic manufacturer is only permitted to use the CBE process to update its label if the branded drug manufacturer changes its label first. This can prevent generic manufacturers from complying with state law warning requirements and, as a result, state product liability suits based on failure-to-warn and design defect claims against generics manufacturers have generally been determined to be preempted by Federal law.

 

However, emerging developments in various countries laws relating to the liability of generic pharmaceutical manufacturers for certain product liability claims could increase our exposure to litigation costs and damages. This potential exposure to lawsuits would also have increased the risk that, in the future, we would not be able to obtain the type and amount of insurance coverage we desire at an acceptable price The risk of exposure to lawsuits is likely to increase as we develop limited competition/complex products, such as injectable vaccines or biosimilar products, in addition to making generic versions of drugs that have been in the market for some time. In addition, the existence or even threat of a major product liability claim could also damage our reputation and affect consumers’ views of our other products, thereby negatively affecting our business, financial condition, results of operations and cash flows.

 

 

 

15

 

The off-label use of our products may result in costly investigations, fines or sanctions by regulatory bodies if we or our distributors are deemed to have engaged in the promotion of these uses.

While physicians may prescribe products for uses that are not described in the product labeling and that differ from those approved by the U.S. FDA or other similar regulatory authorities (an “off label” use), we and our distributors are permitted to market our products only for the indications for which they have been approved. The U.S. FDA and other regulatory agencies actively enforce regulations prohibiting promotion of off-label uses, and significant liability can be imposed on manufacturers found to be engaged in off-label marketing violations, including substantial civil penalties and fines, as well as criminal sanctions or exclusion from participation in government healthcare programs. If some of our products are prescribed off label, regulatory authorities such as the U.S. FDA could take enforcement actions if they conclude that we or our distributors have engaged in off label marketing.

 

Fluctuations in exchange rates and interest rate movements may adversely affect

our business and results of operations.

 

A significant portion of our revenues are in currencies other than the Indian rupee, especially in the U.S. dollar, the Euro, the Russian rouble, the U.K. pound sterling, and the Brazilian reals, while a significant portion of our costs are in Indian rupees. As a result, if the value of the Indian rupee appreciates relative to these other currencies, our revenues measured in Indian rupees may decrease and our financial performance may be adversely impacted.

 

Further, we may also be exposed to credit risks in some of the emerging markets from our customers on account of adverse economic conditions.

 

We use derivative financial instruments to manage interest rate fluctuations and some of our net exposure to currency exchange rate fluctuations in certain key foreign currencies.

 

Current economic conditions may adversely affect our industry, financial

position, results of operations and cash flows.

 

In recent years, the global economy has experienced volatility and an unfavorable economic environment, and these trends may continue in the future. The growth of our business may be negatively affected by high unemployment levels and increases in co-pays, which may lead some patients to delay treatments, skip doses or use less effective treatments to reduce their costs.

 

We have exposure to many different industries and counterparties, including our partners under our alliance, research and promotional services agreements, suppliers of raw materials, drug wholesalers and other customers, who may be unstable or may become unstable in the current economic environment. We run the risk of delayed payments or even non-payment by our customers, which consist principally of wholesalers, distributors, pharmacies, hospitals, clinics and government agencies.

 

Significant changes and volatility in the consumer environment and in the competitive landscape may make it increasingly difficult for us to predict our future revenues and earnings.

 

In addition, there has recently been an accelerated rate of inflation (a trend which is expected to continue in the near future) that has resulted, and may continue to result, in increased costs of labor, raw materials, other supplies and commodity prices and freight and distribution costs, among others. For the pharmaceutical industry, the pricing dynamics of our products generally does not provide the opportunity to pass on such costs to customers. Inflation may also result in higher interest rates and increased costs of capital.

 

Stringent labor laws may adversely affect our ability to have flexible human

resource policies; labor union problems could negatively affect our production

capacity and overall profitability.

 

Labor laws may restrict our human resource policies and impact our ability to react swiftly to the needs of our business. As of March 31, 2026, approximately 1.6% of our employees belonged to various labor unions. If we experience problems with our labor unions, that may adversely affect our production capacity and our overall results and operations.  

 

The Code on Social Security, 2020 and other new labor codes have been recently enacted in India, and the corresponding rules have been issued; however, the implementation of these codes remains subject to evolving regulatory guidance, including state-level rulemaking, interpretational uncertainties, and phased enforcement mechanisms. As a result, the full impact of these changes on our operations, compliance obligations, employee costs and administrative processes remains uncertain.

 

Refer to Note 26 (“Employee benefits”) of our consolidated financial statements for a discussion of the impacts of these new labor codes in India.

 

If we have difficulty in identifying candidates for or consummating acquisitions and strategic alliances, our competitiveness and our growth prospects may be harmed.

 

In order to enhance our business, we frequently seek to acquire or make strategic investments in complementary businesses or products, or to enter into strategic partnerships or alliances with third parties. It is possible that we may not identify suitable acquisition, strategic investment or strategic partnership candidates, or if we do identify suitable candidates, we may not complete those transactions on terms commercially acceptable to us. We compete with others to acquire companies, and we believe that this competition has intensified and may result in decreased availability or increased prices for suitable acquisition candidates. Even after we identify acquisition candidates and/or announce that we plan to acquire a company, we may ultimately fail to consummate the acquisition. For example, we may be unable to obtain necessary regulatory approvals, including the approval of antitrust regulatory bodies.

 

 

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All acquisitions involve known and unknown risks that could adversely affect our future revenues and operating results. For example:

·

We may fail to successfully integrate our acquisitions in accordance with our business strategy.

 

·

The initial rationale for the acquisition may not remain viable due to a variety of factors, including unforeseen regulatory changes and market dynamics after the acquisition, and this may result in a significant delay and/or reduction in the profitability of the acquisition.

 

·

We may not be able to retain the skilled employees and experienced management that may be necessary to operate the businesses we acquire. If we cannot retain such personnel, we may not be able to locate or hire new skilled employees and experienced management to replace them.

 

·

We may purchase a company that has contingent liabilities that include, among others, known or unknown patent or product liability claims or environmental liability claims.

 

·

We may purchase companies located in jurisdictions where we do not have operations and as a result we may not be able to anticipate local regulations and the impact such regulations have on our business.

 

Changes in tax regulations of the countries we operate in may increase our tax liabilities and thus adversely affect our financial results.

 

Currently we are entitled to concessional tax rate under Indian tax laws for one of our subsidiaries in India. Concessional tax rates are reduced rates applicable to companies engaged in manufacturing activities which have been set-up and registered in India on or after October 1, 2019 and which commenced manufacturing or production on or before March 31, 2024. Any changes in these laws may increase our tax liability and thus affect our financial results accordingly.

 

India’s Finance Act, 2016 amended the test of residence for foreign companies. While a non-resident company is generally taxed only on its Indian sourced income, a resident company is taxed on its global income. Under the amended rule, a company not formed under the laws of India would be considered a resident in India if its place of effective management in the previous year was in India.

 

The term “place of effective management” (or “PoEM”) has been defined to mean a place where key management operates and commercial decisions that are necessary for the conduct of the business of an entity as a whole are in substance made.

 

We operate in various countries, and changes in tax rate or tax laws of countries in which we have significant operations could result in a material impact on our tax liabilities and tax charges, resulting in either an increase or a reduction in financial results depending upon the nature of the change. There may be changes in tax rates in a few countries due to initiatives such as the Pillar Two Inclusive Framework on the Base Erosion and Profit Shifting (“BEPS”) project undertaken by the Organization for Economic Cooperation and Development (“OECD”), which seeks to establish a global minimum tax rate of 15%. Currently, numerous countries are drafting or have enacted legislation to implement Pillar Two rules with some effective dates as early as January 1, 2024. Tax and compliance costs are expected to be increased by the adoption of Pillar Two regulations in these countries. We continue to monitor developments in OECD guidance and the enactment and implementation of Pillar Two legislation across various jurisdictions and its impact.

 

In July 2025, the

One Big Beautiful Bill Act (“OBBBA”) was signed into law in the United States, introducing significant changes to U.S. corporate tax rules. The OBBBA includes provisions affecting the deductibility of interest expense for U.S. federal tax purposes, the treatment of research and development costs and other depreciable property, among other changes to U.S. corporate tax law. Although the OBBBA did not have a material effect on our consolidated financial statements for the year ended March 31, 2026, future interpretations, regulatory guidance, or changes in our business operations could result in increased tax liabilities, reduced deductions, or other adverse effects on our effective tax rate and financial condition.

 

We operate in jurisdictions that impose transfer pricing and other tax-related regulations on our intercompany arrangements, and any failure to comply could materially and adversely affect our profitability.

 

We are required to comply with various transfer pricing regulations in India and other countries. Failure to comply with such regulations may impact our effective tax rates and consequently affect our net margins. Additionally, we operate in numerous countries and our failure to comply with the local and municipal tax regimes may result in additional taxes, penalties and enforcement actions from such authorities.

 

Although our intercompany arrangements are based on accepted tax standards, tax authorities in various jurisdictions may disagree with and subsequently challenge the amount of profits taxed in such jurisdictions, which may increase our tax liabilities and could have a material adverse effect on the results of our operations and cash flows. Further, the BEPS project undertaken by the OECD contemplates changes to numerous international tax principles. Various countries have incorporated such tax principles into their domestic legislations by way of enactment. These enactments are significant in nature and require compliance on a regular basis. Although we will continue to adhere to such compliance, significant uncertainties remain as to the outcome of these efforts.

 

 

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From time to time we enter new markets, and face risks arising out of our limited knowledge of the market and the customs, laws and regulatory systems that may apply.

 

From time to time, we enter new markets in which we have limited knowledge of the market and the customs, laws, regulatory, political and social systems that may apply. Our success in these new markets is dependent upon the acceptability of our product and brand, the ease of doing business in such market and various other social and economic factors that may be specific to such market. Further, limitations by the local authorities of repatriation of generated funds may pose a risk to our success in these new markets. Our sales and profit margins may be adversely affected if we fail to provide competitive options in the market or our brands fail to gain acceptability in the market.

 

EMERGING RISKS

 

We analyze reports and insights issued by the World Economic Forum, audit and consulting firms, banks and insurance companies, and investigations on the internet from selected reliable sources, regarding trends for the coming years and main threats and opportunities to be anticipated by pharmaceutical industry.

 

The increasing adoption of AI and generative AI technologies subjects us to evolving operational, regulatory, and competitive risks.

 

Given the relatively recent development of

artificial intelligence

(“

AI

”)

and generative AI and its rapidly evolving nature, new risks and opportunities continue to emerge. AI and generative AI present opportunities to analy

z

e data, improve performance and productivity and generate business growth, but also pose inherent risks. These include, among others:

 

·

AI systems may produce inaccurate, biased, or fabricated outputs that may not be readily detectable, potentially leading to flawed decisions or adverse outcomes in operational or regulatory contexts

 

·

AI technologies are increasingly being leveraged to conduct more sophisticated cyber-attacks, and AI systems themselves may be vulnerable to adversarial manipulation or unauthorized data extraction

 

·

The use of AI tools could inadvertently lead to disclosure of confidential or proprietary information or raise concerns regarding infringement of third-party intellectual property rights. AI applications involving personal data may implicate data protection laws across multiple jurisdictions in which we operate.

 

·

The legal and regulatory landscape governing AI is rapidly evolving. Compliance with new or changing AI-related laws and regulations may impose significant costs, require modifications to our AI applications, or limit our ability to deploy certain AI technologies. The use of AI in GxP-regulated environments may attract additional scrutiny related to validation, explainability, and change control; and

 

·

If we are unable to develop or scale AI capabilities as effectively as our competitors, or if competitors secure superior AI models or technology partnerships, we could face a loss of competitive advantage.

We have adopted internal governance standards for the responsible use of AI, including evaluation of use cases and their risk-benefit profiles prior to deployment. However, no assurance can be provided that such measures will identify or mitigate all risks associated with AI technologies.

 

 

 

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RISKS RELATING TO INVESTMENTS IN INDIAN COMPANIES

 

We are an Indian company. Our headquarters are located in India, a substantial part of our operations are conducted in India, and a significant part of our infrastructure and other assets are located in India. In addition, a portion of our total revenues for the year ended March 31, 2026 continued to be derived from sales in India. As a result, the following additional risk factors apply that are not specific to our company or industry.

 

We may be subjected to additional compliance and litigation risks as a result of periodic amendments in certain key Indian regulations, including The Indian Companies Act, 2013, SEBI (Listing Obligations and Disclosure

Requirements) Regulations, 2015, the Foreign Exchange Management Act, 1999 and other laws, regulations, as applicable to our company.

 

As a company

that is incorporated in India, we are governed by certain key Indian rules and regulations, including The Companies Act, 2013. Some of the significant changes from The Companies Act, 2013 were in the areas of board and governance processes, boardroom responsibilities, disclosures, corporate social responsibility, audit matters, initiation of class action suits by shareholders or depositors, fraud reporting and whistle-blower mechanisms.

 

In addition, the Securities and Exchange Board of India (“SEBI”) issued the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the “Listing Regulations”) which replaced the former Listing Agreement, that must be followed by all listed Indian public companies. The Listing Regulations were intended to consolidate and streamline the provisions of the then existing listing agreements for different segments of the capital markets (e.g., equity securities, debt securities, Indian depository receipts, etc.). The Listing Regulations have thus been structured to provide ease of reference by consolidating into one single document across various types of securities listed on the stock exchanges.

 

Key features of the Listing Regulations include:

·

A framework has been prescribed for disclosure of material events and information by listed entities to the Indian stock exchanges. Certain events mentioned in the regulations are deemed material and disclosure is mandatory. Subject companies are also required to make adequate disclosure of events or information which may have material effect. Certain events are to be disclosed based on application of the guidelines for materiality as prescribed. The Board of Directors is required to frame a policy for determination of materiality and disclose the same on the website of the company.

 

·

Entities are required to frame policies on preservation of documents, determination of material subsidiaries, risk management, code of conduct, remuneration of directors, key managerial personnel and other employees, board diversity, materiality of related party transactions and dealing with related party transactions, criteria for evaluation of directors, and certain other matters.

 

However, certain provisions of the Companies Act, 2013 and the SEBI Listing Regulations provisions are subject to varying interpretations and their application in practice may evolve over time as additional guidance is provided by regulatory and governing bodies. Further, the Companies Act, 2013, the rules made thereunder and the SEBI Listing Regulations have been and are being amended from time to time.

 

These amendments relate to, among other things, governance, related party transactions, financial reporting, audits and auditors, disclosures and other board and shareholders related matters. All of the foregoing may collectively result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions.

 

 

19

 

 

 

Risks Relating to our ADSS

THAT ARE NOT SPECIFIC TO OUR COMPANY OR INDUSTRY

 

Our principal shareholders have significant influence over us and, if they take

actions that are not in the best interests of our minority shareholders, the value of their investment in

our ADSs may be harmed.

 

Our full time executive directors and members of their immediate families, in the aggregate, beneficially owned 26.63% of our issued shares as of

March 31, 2026

. As a result, these people, acting in concert, are likely to have the ability to exercise significant influence over most matters requiring approval by our shareholders, including the election and removal of directors and significant corporate transactions. This significant influence by these directors and their family members could delay, defer or prevent a change in control, impede a merger, consolidation, takeover or other business combination involving us, or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us. As a result, the value of the equity shares and/or ADSs of our minority shareholders may be adversely affected or our minority shareholders might be deprived of a potential opportunity to sell their equity shares and/or ADSs at a premium.

 

Fluctuations in our quarterly revenues, operating results and cash flows may

adversely affect the trading price of our shares and ADSs.

 

Our quarterly revenues, operating results and cash flows have fluctuated significantly in the past and may fluctuate substantially from quarter to quarter in the future. Such fluctuations result from a variety of factors, including but not limited to changes in demand for our products, timing of regulatory approvals and of launches of new products by us and our competitors (particularly where we obtain the 180-day period of market exclusivity in the United States provided under the Hatch-Waxman Act of 1984), timing of our retailers’ promotional programs and successful development and commercialization of limited competition and complex products. Such fluctuations may result in volatility in the price of our equity shares and our ADSs. In such an event, the trading price of our shares and ADSs may be adversely affected.

 

Negative media coverage and public scrutiny may adversely affect the prices of our equity shares and ADSs.

 

Media coverage, including social media coverage such as blogs, of us has increased dramatically over the past several years. Any negative media coverage, regardless of the accuracy of such reporting, may have an adverse impact on our reputation and investor confidence, resulting in a decline in the share price of our equity shares and our ADSs.

 

Indian law imposes certain restrictions that limit a holder’s ability to

transfer the equity shares obtained upon conversion of ADSs and repatriate the

proceeds of such transfer, which may cause our ADSs to trade at a premium or

discount to the market price of our equity shares.

 

Under certain circumstances, the Reserve Bank of India must approve the sale of equity shares underlying ADSs by a non-resident of India to a resident of India. The Reserve Bank of India has given general permission to effect sales of existing shares or convertible debentures of an Indian company by a resident to a non-resident, subject to certain conditions, including the price at which the shares must be sold. Additionally, except under certain limited circumstances, if an investor seeks to convert the Indian rupee proceeds from sale of equity shares in India into foreign currency and then repatriate that foreign currency from India, he or she will have to obtain an additional approval from the Reserve Bank of India for each such transaction. Required approval from the Reserve Bank of India or any other government agency may not be obtained on terms favorable to a non-resident investor or at all.

 

Investors who exchange our ADSs for our underlying equity shares may be subject to the provisions of the Companies Act, 2013 and to the disclosure obligations that may be necessary pursuant to the deposit agreement with our applicable depositary. The Companies Act, 2013 requires that, where the registered owner of shares does not hold the beneficial interest in such shares, both the registered owner and the beneficial owner of such equity shares are required to disclose to the company the nature of their interest, particulars of the registered owner and certain other details.

 

There are limits and conditions to the deposit of shares into the ADS facility.

 

Indian legal restrictions may limit the supply of our ADSs. The only way to add to the supply of our ADSs will be through a primary issuance because the depositary is not permitted to accept deposits of our outstanding shares and issue ADSs representing those shares. However, an investor in our ADSs who surrenders an ADS and withdraws our shares will be permitted to redeposit those shares in the depositary facility in exchange for our ADSs. In addition, an investor who has purchased our shares in the Indian market will be able to deposit them in the ADS program, but only in a number that does not exceed the number of underlying shares that have been withdrawn from and not re-deposited into the depositary facility. Moreover, there are restrictions on foreign institutional ownership of our equity shares as opposed to our ADSs.

 

The global pandemic, geo-political conflicts, persistently weak global economic and financial environment in many

other countries, particularly emerging market

countries, and increasing political and social instability could have a material adverse effect on our business and the price and liquidity of our

shares and our ADSs.

 

It is uncertain how long the effects of global pandemic, geo-political conflicts, persistently weak global economic and financial environment, and increasing political and social instability in many other countries, particularly emerging market countries will last, or whether economic and financial trends will worsen or improve. These effects could have a material adverse effect on our business and the price and liquidity of our shares and our ADSs.

 

 

20

 

 

 

If U.S. investors in our ADSs are unable to exercise preemptive rights available to our non-U.S.

shareholders due to the registration requirements of U.S. securities laws, the investment of such U.S. investors in our ADSs may be diluted.

 

A company incorporated in India must offer its holders of shares preemptive rights to subscribe and pay for a proportionate number of shares to maintain their existing ownership percentages prior to the issuance of any shares, unless these rights have been waived by at least 75% of its shareholders present and voting at a shareholders’ general meeting.

 

U.S. investors in our ADSs may be unable to exercise preemptive rights for the shares underlying our ADSs unless a registration statement under the Securities Act of 1933 is effective with respect to the rights or an exemption from the registration requirements of the Securities Act is available. Our decision to file a registration statement will depend on the costs and potential liabilities associated with a registration statement as well as the perceived benefits of enabling U.S. investors in our ADSs to exercise their preemptive rights and any other factors we consider appropriate at the time. We might choose not to file a registration statement under these circumstances. If we issue any of these securities in the future, such securities may be issued to the depositary, which may sell them in the securities markets in India for the benefit of the investors in our ADSs.

 

There can be no assurances as to the value, if any, the depositary would receive upon the sale of these securities. To the extent that U.S. investors in our ADSs are unable to exercise preemptive rights, their proportional interests in us would be reduced.

 

Our equity shares and our ADSs may be subject to market price volatility, and

the market price of our equity shares and ADSs may decline disproportionately

in response to adverse developments that are unrelated to our operating

performance.

 

Market prices for the securities of Indian pharmaceutical companies, including our own, have historically been highly volatile, and the market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies.

 

Factors such as the following can have an adverse effect on the market price of our ADSs and equity shares:

·

general market conditions,

 

·

speculative trading in our shares and ADSs, and

 

·

developments relating to our peer companies in the pharmaceutical industry.

 

Investors who hold our ADSs may not be able to sell their ADSs at or above the price at which they purchased such ADSs. The price of our ADSs fluctuate from time to time, and we cannot predict the price of our ADSs at any given time. The risk factors described herein could also cause the price of our ADSs to fluctuate materially.

 

These broad market and industry factors may materially harm the market price of our ADSs, regardless of our operating performance. In addition, the price of our ADSs may be affected by the valuations and recommendations of the analysts who cover us, and if our results do not meet the analysts’ forecasts and expectations, the price of our ADSs could decline as a result of analysts lowering their valuations and recommendations or otherwise.

 

There may be less company information available in Indian securities markets

than securities markets in developed countries.

 

We are incorporated in India, and there are certain differences in the rights and protections of shareholders under the laws of India as compared to the laws of the United States and other developed economies.

 

For example, there is a difference between the level of regulation and monitoring of the Indian securities markets over the activities of investors, brokers and other participants, as compared to the level of regulation and monitoring of markets in such other countries. The Securities and Exchange Board of India is responsible for improving disclosure and other regulatory standards for the Indian securities markets. The Securities and Exchange Board of India has issued regulations and guidelines on disclosure requirements, insider trading and other matters. There may, however, be less publicly available information about Indian companies than is regularly made available by public companies in developed countries, which could affect the market for our equity shares and ADSs.

 

Indian stock exchange closures, broker defaults, settlement delays, and Indian

Government regulations on stock market operations could affect the market price

and liquidity of our equity shares.

 

The Indian securities markets are smaller than the securities markets in the United States and Europe and have experienced volatility from time to time. The regulation and monitoring of the Indian securities market and the activities of investors, brokers and other participants differ, in some cases significantly, from those in the United States and some European countries. Indian stock exchanges have at times experienced problems, including temporary exchange closures, broker defaults and settlement delays and if similar problems were to recur, they could affect the market price and liquidity of the securities of Indian companies, including our shares. Furthermore, any change in Indian Government regulations of stock markets could affect the market price and liquidity of our equity shares and ADSs.

 

 

21

 

 

 

Sale of our equity shares may adversely affect the prices of our equity shares and ADSs.

 

The Government of India’s Depository Receipts Scheme, 2014, permits liberalized rules for sponsored and unsponsored secondary market issue of depository receipts, subject to the existing sectorial cap on foreign investment. Under the regulations implemented, an Indian company’s equity shares can be freely issued to a depository for the purpose of issuing depository receipts through any mode permissible for the issue of such securities to other investors. This enables us to more readily issue shares to the depositary for our ADSs and conduct U.S. securities issuances of our ADSs, which may impact the share price and available float in Indian stock exchanges as well as the price and availability of our ADSs on the NYSE. Refer to Item 10.D. of this report under “Exchange controls – ADS guidelines” for further details.

 

Further, the SEBI introduced a detailed framework for issuance of Depository Receipts (“DRs”) by a company incorporated and listed on a recognized stock exchange in India pursuant to its circular dated October 10, 2019. The framework inter alia sets out eligibility requirements, permissible jurisdictions, international exchanges, and permissible holder of DRs, as well as certain other obligations to be complied with by issuers of DRs, the Indian depository, the foreign depository and the domestic custodian. Further, pursuant to its circular dated November 28, 2019 and December 18, 2020, the SEBI gave notice of the permissible jurisdictions for listing of DRs and amended the scope and process for permissible holders of DRs, respectively.

 

The price of our ADSs and the U.S. dollar value of any dividends we declare may be negatively affected by fluctuations in the U.S. dollar to Indian rupee exchange rate.

 

Our ADSs trade on the NYSE in U.S. Dollars. Since the equity shares underlying the ADSs are listed in India on the BSE and the NSE and trade in Indian Rupees, the value of our ADSs may be affected by exchange rate fluctuations between the U.S. dollar and the Indian Rupee. In addition, dividends declared, if any, are denominated in Indian Rupees, and therefore the value of the dividends received by the holders of ADSs in U.S. Dollars will be affected by exchange rate fluctuations.

 

 

22

 

 

 

ITEM 4. INFORMATION ON THE COMPANY

 

​

​​​​​​

4.A.

History and development of the Company

Dr. Reddy’s Laboratories Limited was incorporated in India under the Companies Act, 1956, by its promoter and our former Chairman, the late Dr. K. Anji Reddy, as a Private Limited Company on February 24, 1984, with the objective of developing and supplying high‑quality pharmaceutical products at affordable prices. Our equity shares have been listed on the BSE Limited and the National Stock Exchange of India Limited since December 6, 1985. Our American Depositary Shares have been listed on the New York Stock Exchange since April 11, 2001 and have a secondary listing on NSE International Exchange (NSE IFSC) in GIFT City, India, since December 9, 2020. We are registered with the Registrar of Companies, Hyderabad, Telangana, India as Company Identification No. L85195TG1984PLC004507. Our registered office is situated at 8-2-337, Road No. 3, Banjara Hills, Hyderabad, Telangana 500 034, India and the telephone number of our registered office is +91-40-49002900. Our registered agent in the United States is Dr. Reddy’s Laboratories, Inc., 600 College Road East, Princeton, New Jersey 08540.  Our corporate website is

https://www.drreddys.com

.

 

Over the last few years, we have strengthened our core generics business while expanding into consumer healthcare and biosimilars through a mix of internal development, partnerships and selective acquisitions. We have continued to invest in scientific, manufacturing and regulatory capabilities to support a portfolio that includes generics, biosimilars, branded formulations, over‑the‑counter products and consumer healthcare. We have focused on strengthening its core business while selectively expanding into adjacent growth platforms.

 

The global generics business has remained the largest contributor to revenues, with increased focus on complex products, injectables and specialty molecules, particularly in regulated markets such as the United States and Europe. At the same time, we have expanded our presence in biosimilars, primarily through development and commercialization partnerships.

The SEC maintains an Internet website (at www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. This annual report on Form 20-F and other information filed by us with or furnished by us to the SEC can be accessed via such website. Certain (but not all) of such materials are also available on our website, at

www.drreddys.com

, as soon as reasonably practicable after having been electronically filed with or furnished to the SEC. Information contained in our website,

www.drreddys.co

m, is not part of this annual report on Form 20-F and no portion of such information is incorporated herein or any other materials filed with or furnished to the SEC.

Key business developments:

·

We completed the acquisition of Haleon UK Enterprises Limited ’s global nicotine replacement therapy (“NRT”) business outside the United States through the purchase of Northstar Switzerland SARL in September 2024. The acquired portfolio includes established consumer healthcare brands such as Nicotinell, Nicabate and related products across multiple geographies. This transaction represents a key step in building a global consumer healthcare and OTC platform, with integration planned in a phased manner. Refer to Note 35.B to the Consolidated Financial Statements for additional details on this acquisition.

 

·

We entered into an agreement with Nestlé Health Science India to commercialize nutritional and wellness products in India. This partnership provides access to complementary capabilities and supports our strategy to expand in consumer‑oriented health and nutrition categories. Refer to Note 35.A to the Consolidated Financial Statements for additional details on this partnership.

 

·

We have expanded our participation in biosimilars primarily through development and commercialization partnerships, , such as our 2024 partnership with Alvotech for the commercialization of a biosimilar candidate to Prolia® and Xgeva® (denosumab) in the United States and Europe, and our 2025 partnership with Shanghai Henlius Biotech, Inc. for the commercialization of the biosimilar product, ‘daratumumab biosimilar HLX15' in the United States and Europe. This approach allows us to enter complex and higher‑value categories while managing development risk and capital intensity.

 

Principal capital expenditures

 

We made capital expenditures of Rs. 36,715 million, Rs. 33,154 million and Rs. 26,350 million during the years ended March 31, 2026, 2025 and 2024, respectively. These expenditures are intended primarily for manufacturing facilities, research and development facilities and other fixed assets.

 

As of March 31, 2026, we had contractual capital commitments of Rs. 9,716 million, primarily relating to capacity

creation in support of our business strategy

which is expected to be incurred over the next twelve months

. We expect to fund these commitments and our planned capital expenditures through internal operating cash flows and existing investments.

Actual capital expenditures may vary based on business conditions and execution timelines.

 

 

23

 

 

 

4.B.

Business overview

 

Established in 1984, we are an integrated global pharmaceutical company committed

to accelerating access to

affordable and innovative medicines. Our reportable operating segments are as follows:

·

Global Generics;

 

·

Pharmaceutical Services and Active Ingredients (“PSAI”); and

 

·

Others.

 

Global Generics.

This segment consists of our business of manufacturing and marketing prescription and over-the-counter finished pharmaceutical products ready for consumption by the patient, marketed under a brand name (branded formulations) or as generic finished dosages with therapeutic equivalence to branded formulations (generics). This segment includes the operations of our biologics business,

and the portfolio outside of the United States of consumer brands in the Nicotine Replacement Therapy acquired from Haleon UK Enterprises Limited (the “NRT Business”).

 

Pharmaceutical Services and Active Ingredients

. This segment primarily consists of our business of manufacturing and marketing active pharmaceutical ingredients and intermediates, also known as “API”, which are the principal ingredients for finished pharmaceutical products. Active pharmaceutical ingredients and intermediates become finished pharmaceutical products when the dosages are fixed in a form ready for human consumption such as a tablet, capsule or liquid using additional inactive ingredients. We also serve our customers with incremental value added products including semi-finished and finished formulations, which are included in this segment. This segment also includes our pharmaceutical services business, which provides contract research services and manufactures and sells active pharmaceutical ingredients in accordance with the specific customer requirements.

 

Others.

This segment consists of our other business operations which includes our wholly-owned subsidiaries, Aurigene Oncology Limited (“AOL”) (formerly Aurigene Discovery Technologies Limited) and our Proprietary Products business. AOL is a discovery stage biotechnology company developing novel and best-in-class therapies in the fields of oncology and inflammation. AOL works with established pharmaceutical and biotechnology companies through customized models of drug-discovery collaborations. Our Proprietary Products business is focused on the research, development and commercialization of differentiated formulations and we derive revenues from such assets through event specific milestones and subsequent royalties, if any.

 

Our key markets include the United States, India, Russia and other countries of the former Soviet Union, and Europe.

 

OUR STRATEGY

 

Our strategy is anchored in our purpose of “Good Health

Can’t Wait” which guides our efforts to accelerate access to affordable and innovative medicines. Rising health care costs globally have placed many medicines beyond the reach of millions of patients. As a global generic pharmaceutical company, we consider it our responsibility to help address this challenge by providing cost‑effective alternatives to high‑priced medicines and enabling patients worldwide to better manage their health outcomes.

 

Our Promises and Core Tenets:

 

We deliver on our purpose through the following commitments to customers and partners:

 

·

to bring expensive medicines within reach;

 

·

to address unmet patient needs;

 

·

to help patients manage disease better;

 

·

to work with partners to help them succeed; and

 

·

to enable our partners to ensure that our products are available where needed.

 

Our Product and Service Offerings

Global Generics

: We seek to improve access to affordable medicines through a broad portfolio of small‑ and large‑molecule generics, complemented by consumer healthcare and selected innovative products.

 

·

Branded and Unbranded Generics: We develop, manufacture, and market high‑quality generic medicines at affordable prices, with a focus on credible brands, first‑to‑market launches, and differentiated offerings. Our vertically integrated operations support quality and supply reliability, supplemented by strategic partnerships in markets where we do not have direct commercial presence.

 

·

Biosimilars: We aim to expand global access to biosimilars through our integrated capabilities across development, manufacturing, and commercialization, supported by strategic collaborations. Following launches in India and other emerging markets, we have expanded into highly regulated markets .

 

 

24

 

 

·

Consumer Healthcare: We offer differentiated, science‑based and clinically supported consumer healthcare products to improve health outcomes and quality of life.

 

·

Innovation: We focus on unserved, underserved, or unarticulated patient needs by leveraging our capabilities across new chemical entities (“NCEs”)/ new biological entities (“NBEs”) as well as cell and gene therapies (“CGT”).

Pharmaceutical Services and Active Ingredients (“PSAI”)

: Our PSAI segment includes our

active pharmaceutical ingredients (“API”) business and our pharmaceutical services business. Through both these businesses, we aim to offer technologically advanced products and integrated customized services, for internal consumption as well as external customers.

·

API: Our API portfolio comprises complex, differentiated, high‑quality and cost‑competitive products backed by strong chemistry and synthesis capabilities.

 

·

Pharmaceutical Services: We provide niche service capabilities, technology platforms, and competitive cost structures to innovator and biotechnology companies.

Others

: This segment includes other businesses, including our wholly owned subsidiary Aurigene Oncology Limited (“AOL”) and our Proprietary Products business. AOL focuses on discovery and early‑stage clinical development of novel therapies for cancer and inflammatory diseases. The Proprietary Products business commercializes differentiated formulations through partnerships.

 

We continue to strengthen our core generics businesses while building future growth drivers to address unmet patient needs across the illness‑to‑wellness spectrum.

 

Operating priorities

 

To drive value across operations, we continue to focus on:

·

Safety: We integrate safety practices across our operations and are committed to maintaining safe work environments through ongoing improvements in infrastructure, work practices, and behaviors.

 

·

Quality: We maintain robust quality systems across our development and manufacturing operations and embed Quality by Design principles to ensure the highest standards of safety, quality, and efficacy while minimizing process risks.

 

·

Productivity: We pursue continuous improvement to enhance efficiency, cost competitiveness, and responsiveness, supported by a culture of innovation and disciplined waste elimination.

 

·

Leadership Development: We build leadership capability through structured development programs, maintain a strong culture of integrity and transparency, and leverage our global expertise to create value for stakeholders.

 

Pillars of our growth Strategy

 

Our growth strategy is designed to expand our reach and impact and is built on three pillars:

·

Market leadership in our chosen spaces: We seek to increase first‑to‑market launches, develop complex and differentiated products, enhance access to innovative offerings, and deepen market presence through new go‑to‑market channels. Our value proposition is supported by cost leadership, backward integration, reliable customer service, and a strong compliance track record.

 

·

Operational excellence and continuous improvement: We aim to continuously optimize productivity and resource utilization to accelerate product launches, improve cost competitiveness, and respond more effectively to customer needs.

 

·

Patient focused innovation: We strive to build a portfolio of innovative and differentiated products in selected areas to address unmet patient needs and to while strengthening our consumer health focus to broaden the continuum from treatment to prevention and overall well‑being.

 

These pillars are underpinned by our sustainability agenda, focused on environmental stewardship, access and affordability, social inclusion, and strengthening stakeholder trust.

 

Refer to our Sustainability disclosures available on our website for more detailed information regarding our environmental goals and activities. Nothing on our website or any section thereof shall be deemed incorporated by reference into this Annual Report on Form 20-F or any other filing with the U.S. Securities and Exchange Commission.

 

 

25

 

 

 

OUR PRINCIPAL AREAS OF OPERATIONS

 

The following table shows our revenues and the percentage of total revenues of our business segments for the years ended March 31, 2026, 2025 and 2024, respectively:

 

		For the year ended March 31,
Segment		2026											2025									2024
		(Rs. in million, U.S.$ in million)
Global Generics		U.S.$	3,189			Rs.	299,033				89	%		Rs.	289,552				89	%		Rs.	245,453				88	%
PSAI			368				34,773				10	%			33,846				10	%			29,801				11	%
Others			23				2,127				1	%			2,137				1	%			3,910				1	%
Total Revenue		U.S.$	3,580			Rs.	335,933				100	%		Rs.	325,535				100	%		Rs.	279,164				100	%

Revenues by country and by therapeutic area for the years ended March 31, 2026, 2025 and 2024 are discussed in Note 5 (“Segment Reporting”) to our consolidated financial statements.

Global Generics Segment

 

Revenues from our Global Generics segment were Rs.299,033 million for the year ended March 31, 2026, an increase of 3% as compared to Rs.289,552 million for the year ended March 31, 2025. The increase was in three of four business geographies of this segment: Europe (which also includes the “NRT Business”), “Emerging Markets” (which is comprised of Russia, other countries of the former Soviet Union, Romania and certain other countries from our “Rest of the World” markets, including Brazil, South Africa, Vietnam, China, and Colombia), and India. The foregoing were partially offset by a decline in revenues from North America (the United States and Canada).

 

The production processes for finished dosages of generics are similar, to a certain extent, regardless of whether the finished dosages are to be marketed to highly regulated or less regulated markets. In many cases, the processes share common and interchangeable facilities and employee bases, and use similar raw materials. However, differences remain between highly regulated and less regulated markets in terms of manufacturing, packaging and labeling requirements and the intensity of regulatory oversight, as well as the complexity of patent regimes.

 

While the degree of regulation in certain markets may impact product development, we are observing increasing convergence of development needs throughout both highly regulated and less regulated markets. As a result, when we begin the development of a product, we may not necessarily target it at a particular market, but will instead target the product towards a cluster of markets that will include both highly regulated and less regulated markets.

 

Today, we are one of the leading generic pharmaceutical companies in the world. With the integration of all the markets where we are selling generic pharmaceuticals into our Global Generics segment, our front-end business strategies in various markets and our support services in India are increasingly being developed with a view to leverage our global infrastructure.

 

The following is a discussion of the key markets in our Global Generics segment.

 

India

 

During the year ended March 31, 2026, India accounted for 21% of our total Global Generics segment sales. In India, our key therapeutic categories include gastro-intestinal, cardiovascular and anti-diabetic, dermatology, oncology, respiratory, stomatology, urology, nephrology, vaccines, vitamins & minerals and pain management.

 

As of March 31, 2026, we had a total of 530 branded products in India. Our top ten branded products together accounted for 22% of our revenues in India in the year ended March 31, 2026. According to IQVIA, a provider of market research to the pharmaceutical industry, in its moving annual total report for the twelve-month period ended March 31, 2026, our secondary sales in India grew by 12.1%. In comparison, the Indian pharmaceutical market experienced growth of 9.9% during such period. Strategic Marketing Solutions and Research Center Private Limited (“SMSRC”), a prescription market research firm, in its report measuring pharmaceutical prescriptions in India for the twelve-month period ended February 2026, ranked us 9

th

in terms of the number of prescriptions generated in India during such period.

Sales, marketing and distribution network

 

We generate demand for our products through our ~10,000 sales representatives (which include representatives engaged by us on a contract basis through a service provider) and frontline managers, who frequently visit doctors to detail our related product portfolio. They also visit various pharmacies to ensure that our brands are adequately stocked.

 

We sell our products primarily through clearing and forwarding agents to approximately 6,500 wholesalers who decide which brands to buy based on demand. The wholesalers pay for our products within an agreed credit period and in turn sell these products to retailers. Our clearing and forwarding agents are responsible for transporting our products to the wholesalers. We pay our clearing and forwarding agents on a commission basis. We have insurance policies that cover our products during shipment and storage at clearing and forwarding locations.

 

 

26

 

 

Competition

 

We compete with different companies in the Indian formulations market, depending upon therapeutic and product categories and, within each category, upon dosage strengths and drug delivery. On the basis of sales, we were the 10

th

largest pharmaceutical company in India, with a market share of 3.2%, according to IQVIA in its moving annual total report for the twelve-month period ended March 31, 2026.

 

Our competitors in the Indian market include Cipla Limited, GlaxoSmithKline Pharmaceuticals Limited, Zydus Lifesciences Limited, Sun Pharmaceutical Industries Limited, Alkem Limited, Abbott India Limited, Lupin Limited, Aristo Pharma Limited, Intas Pharmaceuticals Limited, Glenmark Pharmaceuticals Limited, Mankind Pharma Limited, Torrent Pharmaceuticals Limited, Macleods Pharma and Emcure Pharmaceuticals Limited.

 

Government regulations

 

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T he D rugs a nd Co s m e t i c s A c t , 1940 a nd t he D ru g s a nd C o s m e t i c s R u l e s , 1945;

·

T he D rugs a nd M a g i c R e m e d i e s ( O b j e ct i on a b l e A d v e r t i s e me n t s ) A ct , 1954;

·

T he N a r c o t i c D rugs a nd Ps y c h o t ro p i c S ub s t a n c e s A c t , 1985;

·

T he D rugs ( P r i c e Con t ro l ) O rd e r, 19 9 5 and 2013, r e a d i n c o n j un c t i on w it h t he E ss e n t i a l Co mm od i t i e s A c t , 19 5 5;

·

T he National Pharmaceuticals Pricing Policy, 2012; and

·

Uniform Code for Pharmaceutical Marketing Practices, 2024.

From time to time, any change in regulatory requirements in the key geographies in which we operate might require us, along with the rest of the industry, to make necessary corresponding changes in our approach. For example, compliance with India’s Uniform Code for Pharmaceutical Marketing Practices (“UCPMP”) was changed from voluntary to mandatory in March 2024.

 

Our code of conduct in all areas of work, including ethical marketing practices, our transparent guidelines for interaction with healthcare professionals, and our culture of adherence to all applicable laws help us in being compliant and adapt to any changes in the future.

 

Pharmaceutical industry associations such as the Organization of Pharmaceutical Producers of India (“OPPI”) have made presentations to the government on the difficulties of implementation of the UCPMP as it stands today. As a company, we continue to work with industry associations such as the Indian Pharmaceutical Alliance (“IPA”) and the Federation of Indian Chambers of Commerce and Industry (“FICCI”) on such matters of policy. 

These statutes, regulations and guidelines govern the manufacturing, testing, packaging, labeling, storing, record‑keeping, safety, approval, pricing, advertising, promotion, sale and distribution of pharmaceutical products.

 

An approval is required from the Ministry of Health before a generic equivalent of an existing or referenced brand drug can be marketed. When processing a generics application, the Ministry of Health usually waives the requirement of conducting complete clinical studies, although it generally requires bio-availability and/or bio-equivalence studies. “Bio-availability” indicates the rate and extent of absorption and levels of concentration of a drug product in the blood stream needed to produce a therapeutic effect. “Bio-equivalence” compares the bioavailability of one drug product with another, and when established, indicates that the rate of absorption and levels of concentration of the active drug substance in the body are equivalent for the generic drug with the previously approved drug. A generic application may be submitted for a drug on the basis that it is the equivalent of a previously approved drug. Before approving our generic products, the Ministry of Health also requires that our procedures and operations conform to current Good Manufacturing Practice (“cGMP”) regulations, relating to good manufacturing practices as defined by various countries. We must follow the cGMP regulations at all times during the manufacture of our products. We continue to spend significant time, money and effort in the areas of production and quality testing to help ensure full compliance with cGMP regulations. The timing of final Ministry of Health approval of a generic application depends on various factors, including patent expiration dates, sufficiency of data and regulatory approvals.

 

Pursuant to the amendments in May 2005 to Schedule Y of the Drugs and Cosmetics Act, 1940, manufacturers of finished dosages are required to submit additional technical data to the Drugs Controller General of India in order to obtain a no-objection certificate for conducting clinical trials as well as to manufacture new drugs for marketing.

 

On March 22, 2005, the Government of India passed the Patents (Amendment) Bill, 2005 (the “2005 Amendment”), introducing a product patent regime for food, chemicals and pharmaceuticals in India. The 2005 Amendment specifically provides that new medicines (patentability of which is not specifically excluded) for which a patent has been applied for in India on or after January 1, 1995 and for which a patent is granted cannot be manufactured or sold in India by anyone other than the patent holder and its assignees and licensees. T

his has reduced new product introductions by Indian pharmaceutical companies engaged in generic formulations and APIs.

Processes for the manufacture of APIs and formulations were patentable in India even prior to the 2005 Amendment, so no additional impact results from patenting of such processes.

 

 

27

 

 

 

Under the present drug policy of the Government of India, certain drugs have been specified under the Drugs (Prices Control) Order, 2013

(the “

DPCO”) as subject to price control. The Government of India established the National Pharmaceutical Pricing Authority, 2012 (“NPPA”), to control pharmaceutical prices. Under the DPCO, the NPPA has the authority to fix the maximum selling price for specified products.

 

During the year ended March 31, 2013, the Department of Pharmaceuticals under the Ministry of Chemicals and Fertilizers of the Government of India proposed the National Pharmaceuticals Pricing Policy, 2012, a revised National Pharmaceutical Pricing Policy to apply price controls to 348 drugs listed in National List of Essential Medicines. Some of our formulation products were subject to these price controls. The National List of Essential Medicines, as revised in 2016, now contains 376 drugs.

 

On March 12, 2016, the Department of Health and Family Welfare under the Ministry of Health and Family Welfare of Government of India banned 344 fixed dose combination drugs (i.e., two or more active drugs combined in a fixed ratio into a single dosage). Subsequent reviews resulted in a ban of 328 fixed dose combination drugs in September 2018. The impact of this ban was negligible on our revenues.

 

On February 27, 2019, the NPPA brought 42 non-scheduled anti-cancer medications under price control by capping their trade margin (the difference between the price at which the manufacturers sell the medicines to distributors and the price paid by the end user) at 30%. This had no material financial impact on our revenues.

 

In November 2022, the Government of India issued the Drug (Prices Control) Amendment Order 2013, revising ceiling prices which reduced the maximum retail prices for various formulations listed in the DPCO.

 

From time to time (most recently on March 31, 2026), the NPPA has announced an upward revision in the maximum prices of various drugs, as a result of positive inflation as measured by India’s Wholesale Price Index.

 

Such ongoing price control changes, product bans and other changes can disrupt the Indian branded pharmaceutical market and negatively impact the revenues and profitability of our Indian business and our company.

 

Russia and other Countries of the former Soviet Union and Romania

Russia

 

Russia accounted for 12% of our Global Generics segment’s revenues in the year ended March 31, 2026. IQVIA ranked us 14

th

in retail sales in Russia, with a market share of 1.8% for the twelve months ended March 31, 2026.

 

According to IQVIA, as per its moving annual total report for the twelve months ended March 31, 2026, our sales value increased by 11.1% and our sales volume increased by 4.4% for such period, as compared to the Russian pharmaceutical market value growth of 13.1% for such period. The Russian pharmaceutical market’s volume also increased by 0.7% for such period. We were the top ranked Indian pharmaceutical company in Russia for such period.

 

Our top five brands, Nise

®

, Omez

®

, Femibion

®

, Ibuclin

®

and Nasivin

®

accounted for 48.3% of our retail sales in Russia for the 12 months ended March 31, 2026, according to IQVIA data. Nise

®

(pain management product, including systemic and topical form), Omez

®

(an anti-ulcerant product), Femibion

®

(vitamins for pregnant women), Ibuclin

®

(for cold and flu) and Nasivin

®

(for cold and flu) were ranked as the 35

th

, 58

th

, 145

h

, 72

rd

and 106

th

best-selling formulation brands, respectively, in the Russian market by IQVIA in its retail segment report for the moving twelve months ended March 31, 2026. (Note that Nasivin

®

and Femibion

®

are distributed and promoted by us under a licensing agreement and the brand is owned by the licensor). Our strategy in Russia is to focus on the gastro-intestinal, pain management, cough and cold, allergy and oncology therapeutic areas. Our focus is on building leading brands in these therapeutic areas in prescription, over-the-counter and hospital sales.

 

Our Global Generics segment’s revenues measured in Indian rupees, in Russia increased by 34% during the year ended March 31, 2026 as compared to the year ended March 31, 2025.

In Russian rouble absolute currency terms (i.e., Russian roubles without taking into account the effect of currency exchange rates), such revenues

in

creased by

15

% for the year ended March 31, 2026 as compared to the year ended March 31, 202

5

.

This

revenue increase

was supported by higher volumes (4%), new products (4%) and higher prices (7%).

All significantly promoted brands (excluding certain products with production delay issues) showed double-digit growth.

Impact on our operations due to the military conflict between Russia and Ukraine

 

We operate in Russia through our subsidiary Dr. Reddy’s Laboratories LLC, Russia with an employee headcount of 937.

 

Since the beginning of the military conflict between Russia and Ukraine, we are continuously monitoring emerging risks in the areas of safety of employees, supply chain disruption, repatriation of funds and information technology, including cyber security related risks.

 

 

28

 

 

Other Countries of the former Soviet Union and Romania

 

We operate in other countries of the former Soviet Union, including Ukraine, Kazakhstan, Belarus, Uzbekistan and Romania. For the year ended March 31, 2026, revenues from these countries accounted for 2% of our total Global Generics segment’s revenues. Due to the military conflict between Russia and Ukraine, there has been an imposition of martial law in Ukraine. Our business in Ukraine has been marginally impacted and currently the operations are being continued with flexible schedules. All employees have been relocated to safer locations and continue to fulfill their responsibilities in hybrid format depending on local safety consideration. We continue to ensure availability of our products in these markets. Management continues to monitor the current evolving situation and respond accordingly.

Sales, marketing and distribution network

 

Our marketing and promotion efforts in our Russia market is driven by a team of 583 medical representatives and 71 managers to detail our products to doctors in 70 cities in Russia. Our commercial team consists of 17 key account managers  and is focused on establishing a network of relationships with key pharmacy chains. Our Russia hospital division has 19 hospital specialists focused on expanding our presence in hospitals.

 

In Russia, we generally extend credit only to customers after they have established a satisfactory history of payment with us. The credit terms offered to these customers are based on turnover, payment record and the number of the customers’ branches or pharmacies, and are reviewed on a periodic basis. We review the credit terms offered to our key customers on a periodic basis and modify them to take into account the macro-economic scenario in Russia.

Competition

 

Our principal competitors in the Russian market include Berlin-Chemie/Menarini Pharma GmbH, KRKA Pharma Limited, Teva Pharmaceutical Industries Limited, Lek-Sandoz Pharmaceuticals and Zao Ranbaxy (an affiliate of Sun Pharmaceutical Industries Limited).

 

Government regulations

Russia

Government Policies on Healthcare and Pharmaceutical Industry Development

 

The Russian healthcare and pharmaceutical sectors are subject to extensive government regulation, including significant state involvement through industrial policy, price controls and market access restrictions.

 

The Russian government has implemented policies and programs aimed at supporting the domestic pharmaceutical industry and reducing reliance on imported medicines. These initiatives emphasize localization of production, expansion of domestic manufacturing capacity, and increased availability of medicines produced within the Russian Federation.

 

Current policy priorities continue to support local pharmaceutical manufacturing, including development of full-cycle production of strategically important medicines and expansion of export capabilities. Broader industrial development programs further promote technological advancement, financial support measures for domestic manufacturers, and modernization of infrastructure, including laboratory and research facilities.

 

In addition, national healthcare programs establish priorities for improving access to medical care, increasing life expectancy, and expanding preventive healthcare measures. In this context, the government has adopted strategies to strengthen certain therapeutic areas, including immunization, through measures such as localization of vaccine production, expansion of vaccination coverage, and enhancement of pharmacovigilance systems.

 

These regulatory frameworks form the overall operating environment for pharmaceutical companies in Russia and may influence strategic decisions related to manufacturing footprint, supply chain structure, and participation in the healthcare system.

 

 

29

 

State price regulation of Medicines

 

Prices for certain drugs categorized as “essential”, based on a list of “Essential and Vital Drugs” (also known as the “ZhNVLP”) are subject to state regulation. A reference pricing regime has been in force since 2010, under which maximum ex

‑

factory prices must be registered with, and approved by, the federal authorities.

 

Federal Law No. 134

‑

FZ requires registration and periodic re

‑

registration of maximum prices for reference medicines, with automatic price reductions applied to generics and biosimilars through established coefficients. In April 2025, the Russian Government adopted Resolution No. 462, introducing procedural updates including electronic submissions and revised administrative timelines. The resolution will apply from September 1, 2025 through September 1, 2031.

 

The ZhNVLP list is updated annually by the Government and plays a critical role in price regulation, reimbursement eligibility and access to public procurement.

Restrictions on foreign medicines and Public Procurement

 

Russian public procurement policy favors domestically manufactured medicines. Measures supporting import substitution have been implemented since 2015, including restrictions on access of foreign medicines to state tenders where sufficient local alternatives exist.

 

Since January 1, 2025, a strengthened procurement rule (“second excessive participant” rule) applies under Government Decree No. 1875. Under this rule, if at least one Russian

‑

origin product is admitted to a procurement tender, bids offering foreign

‑

origin products are excluded regardless of price or technical characteristics. These measures may limit market access for foreign manufacturers and adversely affect competitive dynamics.

Interactions with healthcare professionals

 

Interactions between pharmaceutical companies and healthcare professionals are strictly regulated under Federal Law No. 323

‑

FZ and Federal Law No. 61

‑

FZ. The regulatory framework prohibits, among other things, improper inducements, gifts, promotional payments, misleading information and individual promotional contacts outside permitted formats.

 

Healthcare professionals are required to disclose conflicts of interest, and pharmaceutical companies must comply with transparency and reporting obligations related to sponsored scientific and educational events. Violations may result in administrative or other liability, including under anti

‑

corruption provisions.

 

Prescribing of medicines is generally required to be performed by international non

‑

proprietary name (“INN”), subject to limited exceptions.

Eurasian Economic Union (EAEU) Regulation

 

Russia is a member of the Eurasian Economic Union (“EAEU”), which has established a common regulatory framework for the circulation of medicinal products. Since 2021, registration of new medicinal products in Russia must generally be conducted under EAEU procedures.

 

National registrations remain valid until expiration but no later than December 31, 2025. Legislative amendments adopted in 2024 further harmonized Russian law with EAEU rules, including data exclusivity protection for reference products and restrictions on the timing of generic and biosimilar applications.

Serialization and Product Traceability

 

Russia operates a mandatory track

‑

and

‑

trace system for medicines (“MDLP” or “Chestny ZNAK”), requiring serialization and reporting across the supply chain. Mandatory labeling applies to prescription and over

‑

the

‑

counter medicines, as well as to selected categories of food supplements (from October 2023) and cosmetics (from October 2025). Non

‑

compliance may result in administrative sanctions and restrictions on circulation.

30

Antimonopoly compliance in Russia

 

Russian antimonopoly law provides for voluntary internal antimonopoly compliance systems. Adoption and proper implementation of such systems may serve as a mitigating factor in enforcement proceedings. While voluntary, antimonopoly compliance has become an important component of regulatory risk management for companies operating in Russia.

E-Commerce for Medical Products

 

Online retail sale of over

‑

the

‑

counter medicines is permitted in Russia. Remote sale of prescription medicines is allowed only in limited circumstances and subject to regulatory approvals. E

‑

commerce activities remain subject to licensing, pharmacovigilance and reporting requirements, and the regulatory framework continues to evolve.

Personal data protection

 

Businesses operating in Russia or targeting Russian individuals are subject to Russian data protection laws, including Federal Law No. 152-FZ “On Personal Data,” which regulates the collection, processing, storage, and transfer of personal data. Recent legislative amendments and regulatory developments have significantly expanded and tightened these requirements.

 

In particular, amendments effective in 2025 strengthen existing data localization obligations by requiring that the collection and initial recording of personal data of individuals located in Russia be conducted using databases located within Russia. These requirements may effectively prohibit the use of foreign-based infrastructure for the primary collection of such data and extend to third-party service providers and data processors engaged by the data controllers. As a result, the businesses may be required to restructure its information technology systems, localize data storage, or engage local service providers.

 

In addition, updated legal requirements impose more stringent conditions on obtaining consent from data subjects, including requirements that consent be presented separately from other contractual documentation and include detailed, specific disclosures.

 

Furthermore, recent legal developments require organizations, in certain circumstances, to provide anonymized datasets to Russian state information systems upon request.

 

Russian authorities have also increased administrative penalties for violations of personal data laws, and enforcement activity has intensified in recent periods. Non-compliance could result in substantial fines, restrictions on our ability to process personal data, blocking of our online services, or other regulatory measures.

 

Recent regulatory trends in Russia include proactive enforcement, higher penalties, and an emphasis on data sovereignty and localization, reflecting a stronger regulatory approach to privacy.

 

North America (the United States and Canada)

 

During the year ended March 31, 2026, North America (the United States and Canada) accounted for 38% of our total Global Generics segment sales. In the United States, we sell generic drugs that are the chemical and therapeutic equivalents of reference branded drugs, typically sold under their generic chemical names at prices below those of their brand drug equivalents. Generic drugs are finished pharmaceutical products ready for consumption by the patient. These drugs are required to meet the U.S. FDA or Health Canada, as applicable, standards that are similar to those applicable to their brand-name equivalents and must receive regulatory approval prior to their sale.

 

Generic drugs may be manufactured and marketed only if relevant patents on their brand name equivalents and any additional government-mandated market exclusivity periods have expired, been challenged and invalidated, or otherwise validly circumvented. Generic pharmaceutical companies sometimes conduct “at-risk launches”, in which the product is launched prior to resolution of a patent challenge.

 

Generic pharmaceutical sales increased significantly in the last decade, primarily due to an increased awareness and acceptance among consumers, physicians and pharmacists that generic drugs are the equivalent of brand name drugs, and have resulted in substantial cost savings to U.S. healthcare and further due to support by governments through passage of legislation permitting generic drug alternatives.

 

However, the generic pharmaceutical business has been negatively impacted by consolidation among wholesalers and retailers and the formation of group purchasing organizations (“GPOs”), which has led to increased pricing pressures in the market. In addition, accelerated approval from the U.S. FDA under the timelines of the Generic Drug User Fee Act, as amended, has led to more competition and resulted in a decline in the growth of the generic companies in North America. We intend to continue building our presence in the region by leveraging our product development capabilities and alliance management, manufacturing capacities inspected by various international regulatory agencies and access to our own APIs, which offer significant supply chain efficiencies.

 

 

31

 

 

Through coordinated efforts of our teams in the United States and India, we constantly seek to expand our pipeline of generic products. During the year ended March 31, 2026, we filed 15 new Abbreviated New Drug Applications (“ANDAs”) with the U.S. FDA. As of March 31, 2026, 77 generic filings were pending approval from the U.S. FDA. These are comprised of 75 ANDAs and 2 New Drug Applications (“NDAs”) filed under Section 505(b)(2) of the U.S. Federal Food, Drug, and Cosmetic Act. Of the 75 ANDAs, 43 are Paragraph IV applications, and we believe that 22 of these have the ‘First to File’ status.

 

As of March 31, 2026, we have three ongoing Biologics License Applications (“BLA”) pending approval with the U.S. FDA for our proposed biosimilar-Abatacept (for intravenous presentation), Rituximab and Denosumab.

 

For Rituximab, all clinical trials have been successfully completed, and our BLA is under active review with the U.S. FDA. We received marketing authorizations for our Rituximab product (DRL_RI) in Health Canada as of February 2026. In addition, the product (DRL_RI) was approved in the European Union in September 2024, the United Kingdom since 2024, and in Switzerland as of January 2026. 

 

We received a “complete response” from the U.S. FDA in December 2025 for our Denosumab BLA. Resubmission is targeted during 2026. The Denosumab Marketing Authorization Application (MAA) was approved by the European Medicines Agency (“EMA”) in November 2025 and subsequently by the United Kingdom authority in December 2025.

 

We also have active pre-IND applications for three other early-stage molecules.

 

Our Canada business generated revenues of Rs.3,035

million during the year ended March 31, 2026. This business includes revenues from certain profit sharing arrangements with distributors who market certain of our generic products. As of March 31, 2026 we have filed a cumulative total of six

New Drug Submissions (“NDS”), one Drug Identification Number (“DIN-A”) Application, 73 Abbreviated New Drug Submissions (“ANDS”) and one Class III Natural Health Product (NHP) in Canada, out of which 48 were approved, three tentatively approved (with Intellectual Property Hold status), 13 were withdrawn or cancelled and 16 are pending approval. This portfolio includes the approval of the first biosimilar submission for Rituximab for Injection, granted on February 13, 2026, marking a significant milestone for our Canadian business. Additionally, Dr. Reddy’s Canada has expanded its presence in the Natural Health Products landscape, adding 22 in-licensed Natural Health Products to its portfolio in the year ended March 31, 2026.

We are the first company to receive marketing authorization for our generic Semaglutide Injection in Canada covering the strengths of 2 mg / pen (1.34 mg / mL) and 4 mg / pen (1.34 mg / mL). The product is launched in May 2026.

Sales, Marketing and Distribution Network

 

Dr. Reddy’s Laboratories, Inc., our wholly-owned subsidiary headquartered in Princeton, New Jersey, United States, is primarily engaged in the marketing of our generic products in the United States. In early 2003, we commenced sales of generic products under our own label. We have our own sales and marketing team to market these generic products. Our key account representatives for generic products call on procurement buyers for chain drug stores, drug wholesalers and distributors, mass merchandisers, GPOs for hospitals, specialty distributors and pharmacy buying groups.

 

The majority of revenue from our North America Generics business is derived from sales of various products to retail chains, wholesalers and private labels, as well as sales of oral solids to other categories of customers. The product portfolio includes a wide range of therapeutic areas.

 

A portion of our revenues are derived from the sale of injectable products in the therapeutic areas of oncology and critical care. We have also expanded our presence from drug wholesalers to specialty distributors, integrated distribution networks, clinics, and hospitals to market these products. We also supply products for private label customers for injectable prescription products.

 

Our over-the-counter (“OTC”) division primarily markets and distributes store brand OTC products, but expanded into the branded OTC segment in May 2016, developing a new channel for our growth. This division has successfully launched over 26 products. OTC products include store brand generic equivalents of products that approved to be sold Over-the-counter in the U.S. market. Many of the products may also originally have had prescription drug status and are switched to OTC drug status by the innovator upon U.S. FDA approval (sometimes called “Rx-to-OTC switch” products). Our OTC division services a broad range of customers, including drug retailers, mass merchandisers, food chains, drug wholesalers, distributors, GPOs, and more recently, e-commerce or online retailers as well. Over last few years, we have substantially expanded our portfolio offering. We launched four new products in the market during the year ended March 31, 2026.

 

During the year ended March 31, 2026, we continued to strengthen our presence in the Self‑Care and Wellness space, with a focus on building and scaling our consumer health brands through targeted innovation initiatives. A key priority was accelerating the growth of our e‑commerce–only brand, HealthCareAisle®, driven by share expansion in core products and the launch of multiple new offerings on the Amazon marketplace.

 

We also continued to revive and invest in our established brands, Doan’s® and Habitrol®, with a focus on channel expansion and product innovation. For Habitrol®, we expanded retail distribution of Habitrol Patch products to all Walmart stores nationwide in September 2025 and, during the same period, launched Habitrol Gum in select Walmart locations. For Doan’s®, we broadened the portfolio with the introduction of Doan’s 100‑count tablets, now available at multiple retailers, with additional retail expansion planned in the coming months.

32

Competition

 

Revenues and gross profit derived from the sales of generic pharmaceutical products are affected by certain regulatory and competitive factors. As patents and regulatory exclusivity for brand name products expire, the first manufacturer to receive regulatory approval for generic equivalents of such products is generally able to achieve significant market penetration. As competing manufacturers receive regulatory approvals on similar products, market share, revenues and gross profit typically decline, in some cases significantly. Accordingly, the level of market share, revenues and gross profit attributable to a particular generic product is normally dependent upon the number of competitors and the timing of that product’s regulatory approval and launch, in relation to competing approvals and launches. Consequently, we must continue to develop and introduce new products in a timely and cost-effective manner to maintain our revenues and gross margins.

 

In addition, the other competitive factors critical to this business include price, product quality, consistent and reliable product supplies, customer service and reputation. Our major competitors in the United States include Teva, Viatris Inc., Sandoz, Sun Pharmaceuticals Limited and Hikma Pharmaceuticals plc.

 

Consolidation of customer purchasing power through acquisitions, alliances and joint ventures impacts pricing. New manufacturers continue to enter the generic market in the United States, which may further lower our pricing power and adversely affect our revenues in that market.

 

Brand name manufacturers have devised numerous strategies to delay competition by introducing lower-cost generic versions of their products. One of these strategies is to change the dosage form or dosing regimen of the brand product prior to generic introduction, which may reduce the demand for the original dosage form as sought by a generic ANDA dossier applicant or create regulatory delays, sometimes significant, while the generic applicant, to the extent possible, amends its ANDA dossier to match the changes in the brand product. In many of these instances, the changes to the brand product may be protected by patent or exclusivities, further delaying generic introduction. Another strategy is the launch by the innovator or its licensee of an “authorized generic” during the 180-day generic exclusivity period, resulting in two generic products competing in the market rather than just the product that obtained the generic exclusivity. This may result in reduced revenues for the generic company which has been awarded the generic exclusivity period.

 

The U.S. market for OTC pharmaceutical products is highly competitive. Competition is based on a variety of factors, including price, quality, product mix, customer service, marketing support, and the reliability and flexibility of the supply chain for products. Our competition in store brand and innovator branded products in the United States consists of several publicly traded and privately owned companies, including large brand-name pharmaceutical companies.

 

The competition is highly fragmented in terms of both geographic market coverage and product categories, such that a competitor generally does not compete across all product lines. In the store brand market, we compete directly with companies, such as Perrigo, Apotex, Aurobindo, Sun Pharma and Granules that sell store brand OTC products. In the branded market, we compete directly with companies, such as Bayer and GSK, which sell branded OTC products.

 

The competitive landscape and market dynamics of the OTC market are rapidly evolving. Large brand-name pharmaceutical companies have begun to pursue Rx-to-OTC switches more aggressively in new categories, which could present opportunities for us and other companies that sell store brand products. At the same time, pricing pressures continue to increase with the entry of new competitors in the market. On key select molecules, the expectation is that competition in this area will continue to grow as newer categories experience Rx-to-OTC switches.

Government regulations

U.S. Regulatory Environment

 

Pharmaceutical companies operating in the United States are subject to extensive regulation by the U.S. Food and Drug Administration (the “U.S. FDA”) and other federal agencies under statutes such as the Federal Food, Drug, and Cosmetic Act Act (“FD&C Act”), the Hatch-Waxman Act, and the Generic Drug Enforcement Act. These regulations govern all aspects of product development and commercialization, including testing, manufacturing, labeling, storage, distribution, and marketing.

 

Our facilities and products are routinely inspected by the U.S. FDA to ensure compliance with current Good Manufacturing Practices (“cGMP”). Non-compliance may result in significant enforcement actions, including warning letters, product recalls, import alerts, suspension of manufacturing or distribution, and civil or criminal penalties. The U.S. FDA also has the authority to deny or revoke product approvals and halt operations of non-compliant facilities.

 

We invest substantial resources in quality systems, regulatory compliance, and manufacturing excellence to maintain high standards and ensure uninterrupted market access for our generic products in the United States.

 

 

33

 

 

U.S. FDA approval timelines for ANDAs are influenced by patent challenges and statutory exclusivity periods, including “Pediatric Exclusivity” that adds six months to existing exclusivity if pediatric studies are conducted for eligible products, “Orphan Drug Exclusivity” that grants seven years of market exclusivity for drugs treating rare diseases and “180-Day Exclusivity” that is available to first Paragraph IV filers, subject to forfeiture under certain conditions per the Medicare Modernization Act of 2003. These regulatory frameworks significantly impact the timing and ability to bring generic products to market in the United States.

 

Section 505(b)(2) of the FD&C Act provides a regulatory pathway to U.S. FDA approval for new or improved formulations or new uses of previously approved drug products. Specifically, Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference, or use from the person by or for whom the investigations were conducted. The applicant may rely upon the FDA’s prior findings of safety and efficacy for an approved product that acts as the reference listed drug for purposes of a 505(b)(2) NDA. The FDA may also require 505(b)(2) applicants to perform additional studies or measurements to support any changes from the reference listed drug. The FDA may then approve the new product candidate for all or some of the labeled indications for which the referenced product has been approved, as well as for any new indication sought by the 505(b)(2) applicant.  The FDA Reauthorization Act of 2017 also established the Competitive Generic Therapy designation to promote competition in markets with limited generic options, offering potential 180-day exclusivity.

 

The U.S. Controlled Substances Act (“CSA”) establishes a closed system for the distribution of controlled substances, overseen by the Drug Enforcement Administration (“DEA”). Entities involved in the manufacture, distribution, import, or export of controlled substances must register annually and comply with stringent requirements related to security, recordkeeping, and reporting. The DEA categorizes substances into five schedules based on potential for abuse and medical use.

 

Non-compliance can result in civil penalties, registration revocation, or criminal prosecution. In early 2025, the DEA introduced new regulations for prescribing controlled substances via telehealth, aiming to balance access to care with safeguards against misuse.

FDA Safety and Innovation Act and User Fee Programs

 

The U.S. FDA is authorized to collect user fees under a number of laws and subsequent reauthorizations, including among others The Food and Drug Administration Safety and Innovation Act, the Generic Drug User Fee Act, the Biosimilar User Fee Act, the Prescription Drug User Fee Act, and the FDA Reauthorization Act of 2017 (“FDARA”). These fees support the review of generic and biosimilar applications, enhance regulatory efficiency, improve communication between the FDA and industry and help address emerging issues such as complex product development.

Prescription Drug Marketing Act and Laws Regulating Payments to Healthcare Professionals

 

The U.S. FDA also enforces the requirements of the Prescription Drug Marketing Act, which, among other things, imposes various requirements in connection with the distribution of product samples to physicians. Sales, marketing and scientific/educational grant programs must comply with the federal anti-kickback statute, the Medicare-Medicaid Anti-Fraud and Abuse Act, as amended, the False Claims Act, as amended, and similar state laws. Pricing and rebate programs must comply with the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990, as amended.

 

We are also subject to Section 6002 of the Patient Protection and Affordable Care Act, commonly known as the Physician Payment Sunshine Act, which regulates disclosure of payments to certain healthcare professionals and providers.

Patient Protection and Affordable Care Act and Medicaid Drug Rebate Program

 

The Patient Protection and Affordable Care Act (“ACA”) of 2010 requires individuals to have health insurance and to control the rate of growth in healthcare spending through, among other things, stronger prevention and wellness measures, increased access to primary care, changes in healthcare delivery systems and the creation of health insurance exchanges.

 

The ACA requires the pharmaceutical industry to share in the costs of reform by increasing Medicaid rebates, expanding Medicaid rebates to Medicaid managed care programs and funding of pharmaceutical costs for Medicare patients in excess of the prescription drug coverage limit and below the catastrophic coverage threshold. Additionally, the ACA established a branded prescription drug fee that pharmaceutical manufacturers of certain branded prescription drugs must pay to the federal government.

 

The Centers for Medicare & Medicaid Services (“CMS”) administers the Medicaid drug rebate program, in which pharmaceutical manufacturers pay quarterly rebates to each state Medicaid agency. Rebate calculations and price reporting rules are complex, but are generally based on the average manufacturer price and/or commercial best price for the product.

 

Various state Medicaid programs have implemented voluntary supplemental drug rebate programs that may provide states with additional manufacturer rebates in exchange for preferred status on a state’s formulary or for patient populations that are not included in the traditional Medicaid drug benefit coverage. There have been extensive judicial, Congressional and executive branch challenges to certain aspects of the ACA, as well as efforts and proposals to revise or repeal the law and its application,. For example, on July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law, which narrowed access to ACA marketplace exchange enrollment and declined to extend the ACA enhanced advanced premium tax credits that expired at the end of 2025, which, among other provisions in the law, are anticipated to reduce the number of Americans with health insurance. The OBBBA also is expected to reduce Medicaid spending and enrollment by implementing work requirements for some beneficiaries, capping state-directed payments, reducing federal funding, and limiting provider taxes used to fund the program. Congress is considering proposed legislation intended to further reduce healthcare costs with alternatives to replace the expired ACA subsidies.

 

 

34

 

 

Drug Quality and Security Act and Drug Supply Chain Security Act

 

The Drug Supply Chain Security Act (DSCSA), enacted in 2013, established a federal system for tracking prescription drugs through the U.S. supply chain. It mandates serialization of drug packages and electronic traceability to enhance drug distribution security and prevent counterfeit products. As of November 27, 2023, all trading partners are required to use secure, interoperable electronic systems to exchange and verify transaction data at the package level.

 

The law also strengthened licensing requirements for wholesale distributors and third-party logistics providers. In October 2024, the U.S. FDA granted temporary exemptions from certain DSCSA requirements to allow additional time for trading partners to implement necessary data connections.

Biologics Pathway

 

The Biologics Price Competition and Innovation Act of 2009 (“BPCIA”) created a statutory pathway and abbreviated approval processes for the approval of biosimilar versions of branded biological products.

Under the BPCIA, a biosimilar must be highly similar with no clinically meaningful differences compared to the reference medicine. Approval of a biosimilar in the United States requires the submission of a BLA to the U.S. FDA, including an assessment of immunogenicity, and pharmacokinetics or pharmacodynamics. The BLA for a biosimilar can be submitted as soon as four years after the initial approval of the reference biologic, but can only be approved 12 years after the initial approval of the reference biologic.    This pathway is still relatively new and some aspects remain untried, controversial and subject to ongoing litigation.

 

Though the U.S. FDA has issued and updated various technical guidance documents addressing quality considerations, scientific considerations and questions and answers regarding commonly posed issues to assist the biopharmaceutical industry in developing biosimilar products in compliance with the BPCIA, there remains some uncertainty regarding the abbreviated pathway. On December 11, 2018, the U.S. FDA released final guidance defining biologics, transitioning biological products approved under an NDA to a deemed BLA, and outlining an abbreviated pathway for biosimilar licensure. As part of the publication of the final guidance, the U.S. FDA is allowing for ongoing comments from the public, which may result in further changes or revisions to such guidance. On May 10, 2019, the U.S. FDA issued final guidance on “Considerations in Demonstrating Interchangeability with a Reference Product,” which is intended to provide guidance as to how to demonstrate that a proposed therapeutic protein product is interchangeable with a reference product for the purposes of submitting a marketing application or supplement under section 351(k) of the Public Health Service Act (PHS Act) (42 U.S.C. 262(k)). In October 2025, the U.S. FDA published a major draft guidance impacting filing pathways for biosimilars, in which it highlighted that comparative clinical efficacy studies may no longer be a requirement. FDA’s view is that modern analytical technologies should be able to detect differences between the branded and proposed biosimilar and have more sensitivity than clinical trials.

Blueprint to Lower Drug Prices and Safe Importation Action Plan

 

In May 2018, U.S. President Trump released “American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs,” which outlined actions that his administration proposed to take to lower prescription drug prices, including certain actions that would be taken immediately by the U.S. Department of Health and Human Services (“HHS”) and issues on which HHS would solicit public feedback before determining any additional reform proposals. This blueprint sought to increase competition, improve negotiation, and incentivize lower list prices and lower out-of-pocket costs while calling for, among other things, greater transparency of drug prices, better informing consumers about prescription drugs, increased promotion of generic drugs and experimenting with value-based payment.

 

Since July 2019, CMS rules have required direct-to-consumer television advertisements for prescription pharmaceuticals covered by Medicare or Medicaid to include the list price if such price is equal to or greater than $35 for a month’s supply or the usual course of therapy.

 

The U.S. Department of Health and Human Services and U.S. FDA’s Safe Importation Action Plan and rules finalized in 2020 allow importation of certain lower-cost prescription drugs from Canada, although its implementation has been delayed and its impact is uncertain, in part because lawsuits have been filed challenging the government’s authority to promulgate it.

State Efforts to Lower Drug Prices

 

A number of states have passed legislation intended to impact pricing or requiring price transparency reporting, including among others California, Colorado, Connecticut, Louisiana, Maine, Maryland, Nevada, Oregon, Texas, Vermont, and Washington, and a number of other states have proposed such legislation is recent years. While the disclosure requirements vary by state, these laws typically require manufacturers to report certain product price information or other financial data to the state, and, in some cases, provide advance notification of price increases. It is expected that states will continue their focus on pharmaceutical price transparency and that this focus will continue to exert pressure on product pricing. 

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The Inflation Reduction Act and Certain Government Programs

 

The Inflation Reduction Act (“IRA”) of 2022  restructured Medicare’s benefit design and requires manufacturers of certain drugs to engage in price negotiations with Medicare, imposes rebates and discount requirements under Medicare Part B and Medicare Part D, and replaced the Part D coverage gap discount program with a new discounting program. In particular, the U.S. Department of Health and Human Services (“HHS”) was directed to negotiate a subset of medicines with the highest annual expenditures to Medicare Parts B and D that have been on the market for 9 years (or 13 years for biologics) without an available generic (or biosimilar) on the market. Exemptions from the direct negotiation requirement are available for any drugs with an available generic or biosimilar, certain drugs that represent a limited portion of Medicare program spending, drugs with an orphan designation as their only U.S. FDA approved indication, and all plasma-derived products. The law allows HHS to levy an excise tax and civil monetary penalties against non-compliant manufacturers or those who refuse to negotiate.

 

The IRA also imposes rebate requirements on manufacturers of single-source generics and other drugs covered under Medicare Part B and Part D if the price increases of the drug outpaces inflation. Multisource generics are excluded from Medicare inflation rebate requirements. Additionally, certain low-spend drugs, defined as those with average annual Medicare spending of $100 or less, per beneficiary, are also exempt. The Centers for Medicare and Medicaid Services (“CMS”) will monitor for products with price increases higher than the rate of inflation on a quarterly basis. Rebates will be calculated as the total number of units sold multiplied by the amount the product exceeds the inflation-adjusted price, with 2021 as the base year to measure cumulative changes relative to inflation. Noncompliant manufacturers will be subject to a civil monetary penalty of at least 125% of the calculated rebate amount.

 

The CMS administers the Medicaid drug rebate program, in which pharmaceutical manufacturers pay quarterly rebates to each state Medicaid agency. Generally, for generic drugs marketed under ANDAs, manufacturers (including our company) are required to rebate 13% of the average manufacturer price, and for products marketed under NDAs or BLAs, manufacturers are required to rebate the greater of 23.1% of the average manufacturer price or the difference between such price and the commercial best price during a specified period. An additional rebate for products marketed under ANDAs, NDAs or BLAs is payable if the average manufacturer price increases at a rate higher than inflation and other methodologies apply to new formulations of existing drugs.

 

All state Medicaid programs have implemented voluntary supplemental drug rebate programs that may provide states with additional manufacturer rebates in exchange for preferred status on a state’s formulary or for patient populations that are not included in the traditional Medicaid drug benefit coverage. In addition, a number of states, including New York, have enacted legislation that requires entities to pay assessments or taxes on the sale or distribution of opioid medications in order to address the misuse of prescription opioid medications. Finally, a number of states have implemented IRA-like price controls on pharmaceutical manufacturers. These proposals create new authorities for state regulatory bodies to limit reimbursement for certain drugs. Such efforts may expand to additional states.

Other Recent Developments and Trends for the U.S. FDA

 

In recent years, the U.S. FDA has undertaken several initiatives to modernize and streamline regulatory processes. In October 2024, the agency began a reorganization aimed at improving operational efficiency. The U.S. FDA continues to prioritize accelerated approval pathways and is exploring the use of emerging technologies, such as artificial intelligence, in clinical trials and drug evaluations.

 

The agency expanded its authority over drug advertising through the implementation of a final rule aimed at improving the clarity and transparency of direct-to-consumer (“DTC”) prescription drug advertisements on television and radio. It also issued final guidance in August 2023 on acceptable intake limits for nitrosamine impurities and draft guidance in February 2024 on reporting manufacturing disruptions under section 506C of the FD&C Act.

 

Staffing at the U.S. FDA was significantly reduced in 2025, potentially impacting drug review timelines. These developments reflect the U.S. FDA’s evolving regulatory landscape and may influence the timing and approval of generic drug applications.

Other matters

 

Refer to Note 31 (“Contingencies”) of our consolidated financial statements for discussions of the following lawsuits, investigations and proceedings:

·

Ranitidine recall and litigation;

·

United States Antitrust Multi-District Litigations; and

·

Revlimid ® Antitrust Litigation.

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CANADA REGULATORY ENVIRONMENT

 

In Canada, we are required to file product dossiers with the Health Canada for permission to market a generic pharmaceutical product. The regulatory authorities may inspect our manufacturing facility before approval of the dossier. As of March 31, 2026 we have filed a cumulative total of six New Drug Submission (“NDS”), one Drug Identification Number (“DIN-A”) Application, 73 Abbreviated New Drug Submissions (“ANDS”) and one Class III Natural Health Product (NHP) in Canada, out of which 48 were approved, 3 tentatively approved (IP Hold), 14 were withdrawn or cancelled and 16 are pending approval. This portfolio includes the approval of the first biosimilar submission for Rituximab for Injection, granted on February 13, 2026, marking a significant milestone for our Canadian business. Additionally, Dr. Reddy’s Canada has expanded its presence in the Natural Health Products landscape, adding 22 in-licensed Natural Health Products to its portfolio in the year ended March 31, 2026.

 

Prime Minister Mark Carney has positioned regulatory streamlining (“red tape reduction”) as a cornerstone of his economic agenda. In December 2025, Health Canada pre-published the Ministerial Reliance Order (“MRO”) proposing a framework under the Food and Drugs Act that would allow the agency to rely on decisions, assessments, or documents produced by trusted foreign regulatory authorities when reviewing certain drug submissions. The MRO is intended to accelerate access to drugs in Canada, reduce duplicative regulatory work, and strengthen international regulatory collaboration, while maintaining Canadian standards for safety, efficacy, and quality.

 

In addition, on June 10, 2025, Health Canada published a draft update to its guidance, “Information and Submission Requirements for Biosimilar Biologic Drugs,” for public consultation. This new draft represents significant updates to the biosimilar regulatory approval process, shifting toward an analytics‑first, risk‑based model. Under this approach, biosimilarity would mainly be demonstrated through thorough comparative quality and functional assessments, along with pharmacokinetic and immunogenicity data. Routine phase III clinical efficacy trials would generally not be required; instead, clinical efficacy and safety studies would only be needed in rare cases where there is remaining uncertainty that must be scientifically justified. Approval for multiple indications would depend on the overall body of evidence, rather than separate clinical trials for each indication. These changes align Canada’s regulatory framework with evolving EMA and FDA requirements, reducing the development workload without compromising standards for safety, efficacy, or quality.

 

Europe

 

Our sales of generic medicines in Europe for the year ended March 31, 2026 were Rs.55,501 million, which accounted for 19% of our Global Generics segment’s sales. Our principal markets in Europe are Germany, France, Italy, Spain, and United Kingdom as well as the global portfolio outside of the United States of consumer brands in the Nicotine Replacement Therapy category which we acquired from Haleon UK Enterprises Limited (the “Acquired NRT Business”). In addition, through distribution partners we access our portfolio of hospital customers. These markets include Austria, Albania Belgium, Czech Republic, Denmark, Finland, Ireland, Kosovo, Netherlands, Poland, Portugal, Slovakia, Norway, and Sweden.

Consumer healthcare brands in the NRT business

During the year ended March 31, 2025, we acquired Haleon UK Enterprises Limited’s global portfolio of consumer healthcare brands outside of the United States, in the Nicotine Replacement Therapy category. We substantially completed the integration of this acquired business, with majority of markets transitioned and local marketing authorizations transferred in our name. We continue to manage this business, including contract manufacturing activities, from Switzerland. (Refer to Note 35.B (

“Business combination - Business transfer agreement with Haleon”) of our consolidated financial statements for further details).

 

Our NRT business generated revenues of Rs. 28,189 million for the year ended March 31, 2026, which accounted for 9% of our total Global Generics segment sales and

51% of the total Europe business sales of our Global Generics segment

. The NRT business operates across key developed markets including the United Kingdom, France, Finland, Sweden, Denmark, Australia, Canada, and New Zealand.

 

This business is focused on offering a diversified OTC portfolio of smoking cessation products across multiple formats, including gum, lozenges, mini-lozenges, patches and sprays. The NRT business leverages our strong portfolio of global brands led by Nicotinell, which accounts for approximately 80% of the total sales of our NRT business, alongside other brands such as Nicabate, Thrive and Habitrol.

 

Germany

– acquisition of medical Cannabis Business Nimbus Health

 

In February 2022, we acquired Nimbus Health GmbH (“Nimbus Health”), marking our entry into the medical cannabis sector in Germany. In April 2024, Germany legalized the possession and consumption of limited quantities of cannabis, marking another shift in the legal treatment and cultural acceptance of cannabis.

Sales, Marketing and Distribution Network

Germany

In Germany, we sell a broad range of generic pharmaceutical products under the “betapharm” brand. The German generics market continues to be centered on affordability and significantly contributes to controlling the country’s healthcare system’s costs. Since the healthcare reform by the government in 2007, Germany has largely operated a tender-like system for generic procurement. Statutory health insurance funds have enacted tender (i.e., competitive bidding) processes to determine which pharmaceutical companies they will enter into rebate contracts with. This has resulted in more than 90% of generic products currently sold in German retail outlets being supplied through contracts procured in competitive bidding tenders, thereby causing significant pressure on product margins.

 

Consumer healthcare brands in the NRT business

 

We

operate our NRT business primarily through pharmacy and retail channels, with approximately 60% of sales generated through pharmacy channels, complemented by mass market retail and e-commerce. In key markets such as the United Kingdom and Nordic countries, distribution is supported through large retail chains and pharmacy networks, while markets such as Australia, France, and Canada are more focused on pharmacy channels.

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United Kingdom and other Countries within Europe

 

We market our pharmaceutical products in the United Kingdom through our U.K. subsidiary, Dr. Reddy’s Laboratories (U.K.) Limited, which was formed in 2003.We currently sell more than 65 products in the United Kingdom, covering both International Nonproprietary Name generics, branded generics, biosimilars and over-the-counter medicines. Our portfolio is sold via wholesale, retail and hospital channels, OTC products are available in mass channels and via e-commerce channels. While the retail business covers a broad range of therapeutic areas, the hospital business focuses on key areas such as oncology, anti-invective and HIV. During the year ended March 31, 2025, we launched our first private label product to leading pharmacy chain continuing our efforts in OTC segment. We have successfully started distribution of the biosimilars in UK, launching bevacizumab with brand name Versavo.

Through our subsidiaries in France, Italy and Spain we have established ourselves as a trusted partner for the countries hospitals segment.

 

Our product mix in these markets focuses on a limited number of key therapy areas such as pulmonary hypertension, oncology, anti-infective and HIV, leveraging our portfolio. We are also introducing biosimilars across these countries, leveraging on our hospital relationships and entering the retail market with new capabilities established in France and Spain.

 

We work with partners who make our products available in Austria, Albania Belgium, Czech Republic, Denmark, Finland, Ireland, Kosovo, Netherlands, Poland, Portugal, Slovakia, Norway, and Sweden. This strategy allows us to scale our operations across Europe.

Competition

 

Germany

The German market is highly competitive as a result of a large number of generic companies and the predominance of a tender system which drives competition. Our key competitors within the German generics market include Sandoz International GmbH, Teva Pharmaceutical Industries Limited (“Teva”), Zentiva Pharma GmbH and Stada Arzneimittel AG.

Consumer healthcare brands in the NRT business

The NRT category is relatively concentrated, with key competitors including Kenvue’s Nicorette product and Perrigo’s NiQuitin product, alongside private label offerings. On the basis of NRT product sales, we were the 2nd largest company in the NRT category worldwide (excluding the United States), with a market share of 22% for the twelve-month period ended March 31, 2026, according to Euromonitor, a global market research firm.

United Kingdom and other Countries within Europe

According to the Medicines UK Association, the United Kingdom is one of the largest markets for generic pharmaceuticals in Europe, with generic penetration of around 85%, and is also one of the most price competitive markets due to a high degree of vertical integration and consolidation of buyers. In our estimate, 50% of the U.K. pharmacies are independent and community pharmacies. In addition, the market has relatively low barriers of entry. The generic market is dominated by global pharmaceutical companies such as Teva, Viatris, Accord, Sandoz and Thornton & Ross (an affiliate of Stada).

 

In Italy, Spain and France, we compete with companies such as, Zentiva, Ever Pharma, Medac, Teva and Accord Healthcare Limited (an affiliate of Intas Pharmaceuticals Ltd.), each of which has a well-established presence in the hospital segment of these countries.

Government regulations

 

In the EU, the manufacture and sale of pharmaceutical products is regulated in a manner substantially similar to that in the United States. Legal requirements generally prohibit the handling, manufacture, marketing and importation of any pharmaceutical product unless it is properly registered and manufactured in accordance with applicable law. The registration file relating to any particular product must contain scientific data related to product chemistry, efficacy and safety, including results of clinical testing and references to medical publications, as well as detailed information regarding production methods and quality control. Regulatory authorities are authorized to suspend, restrict or cancel the registration of a product if it is found to be harmful or ineffective, or manufactured and marketed other than in accordance with registration conditions. Additionally, a product registration can be cancelled, if the registration is not used for more than three years (under the regulation’s “sun-set clause”) or the renewal deadline is missed based on local regulations.

 

The activities of pharmaceutical companies within the EU are governed in particular by Directives 2001/83/EC and 2003/94/EC and Regulation 1234/2008, in each case as amended, and as implemented in national laws within the countries of the EU. The Directives outline the legislative framework, including the legal basis of marketing authorization procedures, and quality standards including manufacture, patient information and pharmacovigilance activities.

 

Prior approval of a marketing authorization is required to supply products within the EU. Such marketing authorizations may be restricted to one-member state, cover a selection of member states or can be for the whole of the EU, depending upon the type of registration procedure selected.

 

 

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An abridged application can be filed for obtaining EU marketing authorization for a generic/biosimilar drug. Generic or abridged applications contain limited non-clinical and clinical data, depending upon the legal basis of the application or to address a specific issue. However, the applicant is required to demonstrate that its generic product contains the same active pharmaceutical ingredients in an equivalent dosage form for the same indication as the innovator product.

 

Specific data is included in the application to demonstrate that the proposed generic product is interchangeable to the innovator product with respect to quality, safe usage and continued efficacy. EU laws prevent regulatory authorities from accepting applications for registration of generics that rely on the safety and efficacy data of an innovator of a branded product until the expiration of the innovator’s data exclusivity period (usually eight years from the first marketing authorization in the EU, depending on the circumstances). The applicant is also required to demonstrate bioequivalence or bioavailability, respectively, with the EU reference product. Once all these criteria are met, a marketing authorization may be considered for grant.

 

Unlike in the United States, there is no equivalent regulatory mechanism within the EU to incentivize challenge to any patent protection, nor is any period of market exclusivity conferred upon the first generic approval.

 

In situations where the period of data exclusivity given to the innovator of a branded product expires before their patent expires, the launch of our product would then be delayed until patent expiration.

 

Our U.K. facilities are licensed and periodically inspected by the U.K. Medicines and Healthcare Products Regulatory Agencies (“MHRA”) good manufacturing practice Inspectorate, which has extensive enforcement powers over the activities of pharmaceutical manufacturers. Non-compliance can result in product recall, plant closure or other penalties and restrictions. In addition, the MHRA Inspectorate has approved and periodically inspected our manufacturing facilities based in Hyderabad and Vishakhapatnam, India, for the manufacture of generic medicines for supply to the United Kingdom.

 

All pharmaceutical companies that manufacture and market human medicinal products in Germany are subject to the applicable rules and regulations executed by the Federal Institute for Drugs and Medical devices (“BfArM”) or the Paul-Ehrlich-Institut and the supervisory authorities of the respective federal state in Germany.

 

All pharmaceutical companies in Upper Bavaria, Germany are periodically inspected by the Regierung von Oberbayern (the district government of Upper Bavaria in Germany), which has extensive enforcement powers over the activities of pharmaceutical companies. Non-compliance can result in closure of the facility. The Regierung von Oberbayern has approved and periodically inspected our manufacturing facilities in Hyderabad and Visakhapatnam, for the manufacture of generic medicines for supply to Europe.

 

The German Social Code’s price freeze imposed on reimbursable drugs, which was due to expire at the end of 2017, was extended until December 31, 2026 for all patent free drugs launched before August 1, 2010, although the continued price freeze will not apply to medicines subject to internal reference pricing.

 

European pharmacovigilance was reinforced through adoption of Regulation (EU) No 1235/2010 and Regulation (EU) No 1027/2012, amending Regulation (EC) No 726/2004 and Directives 2010/84/EU) and Directive 2012/26/EU amending Directive 2001/83/EC, the operational aspects of implementing the new legislation being governed by Commission Implementing Regulation No 520/2012.

 

Regulation 205B (Guidance in respect of good pharmacovigilance practice and post authorization efficacy studies) of the U.K. Human Medicines Regulations 2012, as inserted by regulation 169 of SI 2019 No. 775, states that the guidance issued by the Commission under Article 108a of the 2001 Directive on good pharmacovigilance practices (“GVP”) continues to apply to both the MHRA and U.K. marketing authorization holders until the date on which the MHRA publishes guidance on GVP. It also states that while the Commission guidance on GVP continues to apply in the United Kingdom, the MHRA may determine that specific provisions of it no longer apply in the United Kingdom or are to be read subject to modification.

 

The International Standards for Identification of Medicinal Products (“IDMP”), comprising five International Organization for Standardization (“ISO”) standards, were approved in calendar year 2012. These standards are designed to allow unambiguous identification of medicinal products across companies and regions in order to support and improve pharmacovigilance and other activities.

 

For various reasons, the implementation of IDMP has experienced a series of delays. However, the EMA has now published the Product Management Service system publicly and transferred the authorized products data from its current SIAMED and xEVMPD systems. At present, marketing authorisation holders (“MAHs”) are required to submit the data through xEVMPD. Eventually, direct updates to the new system are expected to occur after 2025.

 

The EMA has adopted the Health Level 7 Fast Healthcare Interoperability Resources messaging standard for the EU wide implementation of IDMP, and the full implementation will happen through four domains: Substance, Product, Organization, and Reference Data.

 

 

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The submission of medicinal product data to support pharmacovigilance has been required since 2012 in the EU. The original European database for data regarding medicinal products, the Eudravigilance Medicinal Product Dictionary (“EVMPD”), was launched by the EMA at the end of 2001. It was designed to standardize the collection, reporting, coding, and evaluation of authorized and investigational medicinal product information. In 2012 it became mandatory for marketing-authorization holders to supply information to the extended version of the EVMPD (xEVMPD or Article 57 database). However, this currently contains only a fraction of the data that eventually will have to be submitted to the IDMP-compliant database for each authorized product in the EU. In order for us to support the maintenance of medicinal product data in the IDMP-compliant database, we will have to make significant changes to our processes and procedures.

 

To prevent counterfeit medicines from entering the supply chain, in October 2015, as part of the Falsified Medicines Directive (the “FMD”), the

European Commission

adopted regulations providing detailed rules for the safety features appearing on the packaging of medicinal products for human use.

Accordingly, all medicinal products generally subject to prescription must bear safety features that facilitate specifically the identification of individual packs and the verification of their authenticity. Effective as of February 9, 2019, we have successfully implemented the FMD and only those prescription drugs which have a unique serial number on the pack, and where the integrity of the pack can be seen, have been placed on the market ever since.

 

The decision for the United Kingdom to exit from the EU (the “Brexit”) and the related Windsor Framework agreement between the EU and the U.K. has impacted pharmacovigilance operations. The Brexit transition period ended as of December 31, 2020 and the MHRA issued guidance for the pharmaceutical industry to follow from January 1, 2021. The requirements include the appointment of a “Qualified Person” for pharmacovigilance for U.K. nationally authorized products. The MHRA will continue to support EU harmonized approaches for certain safety data, but require U.K. specific supplemental information to be provided. In addition, parallel, U.K. specific processes must be implemented for certain activities including adverse event reporting. These additional requirements are expected to result in increased costs for the marketing authorization holders (“MAHs”). Effective as of January 1, 2025, packaging of U.K. medicines is subject to new regulations under the Windsor Framework agreement.

 

In the EU, there must be at least a “Qualified Person” who is responsible for a medicinal product’s batch certification and release. Each batch of an imported medicinal product placed onto the market in the EU must be re-tested in a laboratory in the EU prior certification. The MAH’s Qualified Person, or a qualified partner, must then certify that the product is in accordance with the requirement of Annex 16 of the EU-GMP Guidelines (Certification by a Qualified Person and Batch Release) and can therefore be released to the market. As a consequence of the Brexit, this activity will no longer be able to be conducted in the United Kingdom for the EU. Following the Brexit vote, the EU moved the headquarters of the EMA from the United Kingdom to the Netherlands in March 2019.

 

In the European Union, the term of certain pharmaceutical patents may be extended by up to five years (subject to further patent term extension under certain conditions) through a Supplementary Patent Certificate (“SPC”). The purpose of this extension is to compensate for the patent term lost during regulatory review processes.

 

Effective July 2019, the European Union’s new SPC Manufacturing Waiver Regulation exempts businesses which satisfy its conditions from infringement of a pharmaceutical product protected by a SPC. The exemption covers the manufacture of a product for either the purpose of exporting it to countries outside the European Union, during the entire term of the SPC or for the purpose of manufacturing and stockpiling the product within six months before the SPC expires for launch in the European Union immediately upon SPC expiration.

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Consumer healthcare brands in the NRT business

 

Nicotine Replacement Therapy (“NRT”) products are subject to extensive and evolving regulatory requirements in the countries where we operate. National and regional health authorities oversee these rules to ensure product safety, quality, efficacy, and appropriate consumer use. These are generally regulated as OTC medicines. However classification varies by jurisdiction and in certain markets, NRT products may be subject to alternative regulatory frameworks.

 

Applicable regulations govern product approvals, registrations or marketing authorizations, product formulation and quality standards, labelling and patient information requirements, and conditions of sale and distribution.

 

The marketing and promotion of NRT products are subject to strict regulation, including requirements that all efficacy and safety claims are supported by appropriate scientific evidence. Regulations impose limitations on consumer-facing product claims, advertising content, and engagement with healthcare professionals.

 

Regulatory frameworks in several markets impose restrictions on the distribution and sale of NRT products, including requirements that certain products be dispensed only through pharmacies or under the supervision of healthcare professionals.

 

In certain jurisdictions, NRT products may be included in government-led smoking cessation programs or subject to public health initiatives. Regulatory authorities may influence pricing, reimbursement of eligibility, and procurement mechanisms.

 

NRT products are subject to pharmacovigilance and product safety requirements, including the monitoring and reporting of adverse events. NRT products may expose the Company to product liability claims in the event of alleged safety concerns.

 

The regulatory environment for NRT products continues to evolve, with increasing focus on consumer safety, transparency, and evidence-based claims. Changes in regulatory frameworks or public health policy may affect demand or commercialization of NRT products.

“Rest of the Worl

d

” markets of our Global Generics segment

 

We refer to all markets

of our Global Generics segment other than North America, Europe, Russia and other countries of the former Soviet Union and Romania and India as our “Rest of the World” markets. Our significant Rest of the World markets include Brazil, South Africa, China, Vietnam, Colombia, Australia and Myanmar.

 

We started our operations in China in the year 2000, by setting up a joint venture in the city of Kunshan, Jiangsu Province. Over the past several years, our joint venture called Kunshan Rotam Reddy Pharmaceuticals Company Limited (“KRRP”) has commercialized several products. Some of these products are manufactured by KRRP at its manufacturing plant in Kunshan while some others are imported in bulk packs, repackaged and sold in China. In calendar year 2020, KRRP started manufacturing capacity expansion at the Kunshan facility, and commercial operations started in the second half of the calendar year 2024.

 

Over the last few years, we have also increased our operations with respect to the filing of dossiers and obtaining new product registrations in China. Upon successful registration and approval by the China regulatory authorities, we intend to launch these products in the coming years.

 

 

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Our products Olanzapine, Clopidogrel and Abiraterone together with few other products which we had commercialized in China through a distribution and supply agreement with a Chinese company, were successfully listed in a volume based procurement program, which is a tender-style bidding system for centralized procurement of medicines in China.

 

For the year ended March 31, 2026, revenues from our “Rest of the World” markets accounted for 8% of our total Global Generics segment’s revenues. Our

revenues from our “Rest of the World” markets were Rs.23,749 million in the year ended March 31, 2026, growth of 19% as compared to the year ended March 31, 2025. This increase was largely due to new product launches and strong business performance in Brazil, Colombia and Africa.

Global Generics Manufacturing and Raw Materials

 

Manufacturing for our Global Generics segment entails converting API into finished dosages. As of March 31, 2026, we had 14 manufacturing facilities within this segment located in India, including four in a Special Economic Zone. All of the facilities are designed in accordance with and are compliant with current cGMP requirements and are used for the manufacture of tablets, hard gelatin capsules, injections, liquids and creams for sale in India as well as other markets. All of our manufacturing sites’ laboratories and facilities are designed and maintained to meet increasingly stringent requirements of safety and quality. Each of our sites outside of India is approved by the respective regulatory body in the jurisdiction it is located.

 

We manufacture most of our finished products at these facilities and also use contract manufacturing arrangements as we determine necessary. For each of our products, we continue to identify, upgrade and develop alternate vendors as part of risk mitigation and continual improvement.

 

The ingredients for the manufacture of the finished products are sourced from in-house API manufacturing facilities and from vendors, both local and non-local. Each of these vendors undergo a thorough assessment as part of the vendor qualification process before they qualify as an approved source. We attempt to identify more than one supplier in each drug application or make plans for alternate vendor development from time to time, considering the supplier’s history and future product requirements. Arrangements with international raw material suppliers are subject to, among other things, respective country regulations, various import duties and other government clearances. The prices of our raw materials generally fluctuate in line with commodity cycles. Raw material expense forms the largest portion of our cost of revenues. We evaluate and manage our commodity price risk exposure through our operating procedures and sourcing policies.

 

The logistics services for storage and distribution in the United States, the European Union, Russia, Brazil, South Africa, Australia and other emerging markets are outsourced to third party service providers.

 

We manufacture formulations in various dosage forms including tablets, capsules, injections, liquids and creams. These dosage forms are then packaged, quarantined and subject to stringent quality tests, to assure product quality before release into the market.

 

All pharmaceutical manufacturers that sell products in any country are subject to regulations issued by the Ministry of Health (or its equivalent) of the respective country. These regulations govern, or influence the testing, manufacturing, packaging, labeling, storing, record-keeping, safety, approval, advertising, promotion, sale and distribution of products.

 

Our facilities and products are periodically inspected by various regulatory authorities such as the U.S. FDA, the U.K. MHRA, the German BfARM, the South African Medicines Control Council, the Brazilian ANVISA, the Romanian National Medicines Agency, Ukrainian State Pharmacological Center, the local World Health Organization and Drug Control Authority of India, all of which have extensive enforcement powers over the activities of pharmaceutical manufacturers operating within their jurisdiction.

 

In July 2025 and December 2025, the U.S. FDA completed a routine GMP inspection at our formulations manufacturing facilities (Formulations Srikakulam plant 1 (SEZ) and Formulations Srikakulam plant 11) in Srikakulam, Andhra Pradesh respectively. We were issued a Form 483 with seven and five observations. We responded to the observations within stipulated timelines. Accordingly, an Establishment Inspection Report (“EIR”) was issued by the U.S. FDA and the inspection of the facilities were classified as Voluntary Action Indicated (“VAI”).

 

In August 2024, the China National Medical Products Administration (“NMPA”) conducted a remote inspection of our formulations manufacturing facility (FTO-3) for Atomoxetine Hydrochloride Capsules, and concluded that the production quality management of Atomoxetine Hydrochloride Capsules does not meet the requirements of China's "Good Manufacturing Practice for Drugs (Revised in 2010)". The NMPA has suspended the import, sale, and use of our Atomoxetine Hydrochloride Capsules effective August 30, 2024. Further, the National Drug Joint Procurement Office, China (“NDJPO”), having considered the said order of the NMPA, has decided to cancel Atomoxetine Hydrochloride Capsules “won” status and list our company on the "Violation List", suspending our eligibility to participate in national centralized drug procurement activities from August 30, 2024 to February 28, 2026. We have already submitted the Corrective and Preventive Action plan to the NMPA and undertaken corrective action. However, our import of Atomoxetine Hydrochloride Capsules into China is subject to a successful on-site audit completion which is scheduled in November 2026 by the NMPA.

 

 

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Pharmaceutical Services and Active Ingredients (“PSAI”) segment

 

Our

P

SAI segment primarily includes our business of manufacturing and marketing active pharmaceutical ingredients (“APIs”) including intermediates, as well as our pharmaceutical services business.

 

Active Pharmaceutical Ingredients

 

With more than 150 APIs supported by regulatory approvals in numerous global markets, we enable our generic manufacturing partners to supply high-quality finished dosage forms—such as tablets, capsules, and injectables—to patients across the world. Our backward-integrated capabilities also allow us to supply intermediates—the precursor stages of final APIs—to our customers. In addition to serving external partners, our API business supports our own generics portfolio.

 

Our PSAI segment’s revenues for the year ended March 31, 2026 were Rs.34,773 million, as compared to Rs. 33,846 million for the year ended March 31, 2025. Our PSAI segment accounted for 10% of our total revenues for the year ended March 31, 2026.

 

During, the year ended March 31, 2026, we filed 128 Drug Master Files (“DMFs”) worldwide, of which 16 were filed in the United States, 3 were filed in Canada, 16 were filed in Europe and 92 were filed in other countries.

Cumulatively, our total active DMFs filed worldwide as of March 31, 2026 were 1,748, including 280 active DMFs filed in the United States.

 

We export APIs to more than 70 countries, and our main markets include North America (the United States and Canada), Europe and Southeast Asia, Middle East and Africa. The research and development group within our API business contributes to our business by creating intellectual properties, principally by developing novel and non-infringing manufacturing processes and polymorphs. Besides the development of new products, the research also focuses on further optimizing our manufacturing processes, which allows us to produce our APIs at a competitive price.

 

Pharmaceutical Services business – Aurigene Pharmaceutical Services Limited

 

Our PSAI segment also includes our pharmaceutical services business, which provides contract discovery (research), development, and manufacturing to global pharmaceutical companies. As a contract development and manufacturing organization (“CDMO”), the business is operated independently under its own entity Aurigene Pharmaceutical Services Limited and works on new chemical entities (“NCEs”) and new biological entities (“NBEs”) for global pharmaceutical and biotechnology companies. The pharmaceutical services (contract research, development and manufacturing) arm of our PSAI segment was established in 2001, leveraging our strength in research and development to serve the niche segment of the innovator pharmaceutical and biotechnology companies. Our objective is to be the preferred partner for innovator pharmaceutical companies, providing a complete range of services that are necessary to support their innovations to bring a new drug to the market quickly and efficiently.

 

The focus is to leverage our skills in discovery, CDMO (process and analytical development for drug substance and formulation), and large scale commercial manufacturing to serve outsourcing needs of global pharmaceutical and biotechnology companies. We have positioned our PSAI segment’s Pharmaceutical Services business to be the partner of choice for large, medium and emerging innovator companies across the globe, with service offerings spanning the entire value chain of pharmaceutical services.

 

Effective June 1, 2020, we carved out our discovery service business from Aurigene Oncology Limited (“AOL”) (formerly Aurigene Discovery Technologies Limited) and our contract development and manufacturing services business from Dr. Reddy’s Limited and the integrated business model was commenced under Aurigene Pharmaceutical Services Limited (“APSL”). APSL is a subsidiary of AOL within our group.

Sales, Marketing and Distribution

 

We support our local customers through our commercial offices in various markets, including Brazil, China, Europe, India, Japan, Mexico, the United States, United Arab Emirates and Russia with colleagues from regulatory affairs and commercial.

Developed Markets:

Our PSAI segment’s principal overseas markets are the United States and Europe, which contributed Rs.16,143 million and accounted for 46% of our PSAI segment’s revenue for the year ended March 31, 2026.

 

In the United States and Europe, while a significant wave of patent expirations for high‑value branded pharmaceutical products has occurred and is expected to continue, the nature of resulting opportunities has evolved. As growth is shifting towards  complex, development-linked and speciality APIs, the addressable opportunities set becomes narrower. At the same time, intense price competition, rapid post patent commoditization and rising regulatory and compliance costs are increasingly compressing margins for customers in the PSAI value chain.

Our subsidiaries in the United States and Europe manage the full spectrum of our marketing activities in these territories and support customers’ in their regulatory approval process, with a strong focus on building long-term relationships through service excellence.

43

India:

India is an important market for our PSAI segment, with total sales of Rs.2,352 million, and it accounted for 7% of the PSAI segment’s revenues in the year ended March 31, 2026. The market in India is highly competitive, with severe pricing pressure and competition from lower cost foreign imports.

Other Key Markets:

Our PSAI segment’s sales to all of the other markets (excluding the United States, Europe and India) was Rs.16,279 million for the year ended March 31, 2026 and accounted for 47% of our PSAI segment’s revenues for the year.

 

China is a strategically important market where our local presence and regulatory expertise offer a structural advantage. Exports nonetheless face severe price pressure from scale-led, subsidized Chinese companies, making margin‑accretive growth selective.

 

Other key markets include Brazil, Mexico Korea and Japan. In select markets we work through our agents supported by local marketing and regulatory teams who act as a key interface to understand and serve customers.

 

For our contract development and manufacturing services line of business, we have focused business development teams dedicated to our key geographies of North America (the United States and Canada), the European Union and the Asia Pacific region. These teams target large, medium and emerging innovator companies to build long-term business relationships focused on catering to their outsourcing needs from discovery to commercialization.

 

Going forward, we expect our PSAI segment to show growth supported by investments in technologies and platforms such as peptides. We are further pursuing a partnership-led model to help customers access global markets faster by leveraging our cost leadership and global footprint. These efforts are complemented by continued investments in digital solutions to enhance customer engagement and transparency building on a strong foundational base.

 

We are committed to enhancing the accessibility and affordability of medicines for vulnerable populations, promoting greater equity in healthcare. Our mission aligns with the World Health Organization Sustainable Development Goals of 2030, as we strive to create a sustainable future for all. To achieve this, we have identified crucial areas of focus and continue to establish partnerships with multilateral agencies and pharmaceutical organizations. Together, we aim to develop an enduring pipeline of ground-breaking medicines that are affordable to people worldwide.

PSAI Manufacturing

 

The infrastructure for our PSAI segment consists of eight U.S. FDA-inspected plants (six in India, including one in a Special Economic Zone, one in Mexico, and one in Mirfield, United Kingdom) and two technology development centers (one in Hyderabad, India and one in Cambridge, United Kingdom).

India

: All of our facilities in India are located in the states of Andhra Pradesh and Telangana. We have the flexibility to produce quantities that range from a few kilograms to several metric tons. The manufacturing process consumes a wide variety of raw materials that we obtain from various sources that comply with the requirements of regulatory authorities in the markets to which we supply our products. We procure raw materials on the basis of our requirement planning cycles. We utilize a broad base of suppliers in order to minimize risk arising from dependence on a single supplier.

Mexico

: Our manufacturing plant in Cuernavaca, Mexico (the “Mexico facility”) was acquired from Roche during the year ended March 31, 2006. In addition to active pharmaceutical ingredients, naproxen and naproxen sodium and a range of intermediates, the Mexico facility manufactures steroids as active ingredients for use in human and veterinary pharmaceutical products.

United Kingdom:

The small molecules business continues to supply complex APIs to customers at a range of scales. This business is also able to provide cost effective contract development and manufacturing organization solutions to innovators developing new pharmaceutical products, tapping into the expertise of our parent company as required.

 

We have invested in this business to update equipment and implement modern data acquisition systems to meet today’s stringent regulatory requirements.

 

For our contract development and manufacturing services, we have well-resourced synthetic organic chemistry laboratories, medicinal chemistry analytical laboratories and kilo laboratories at our research and development centers at Hyderabad and Bengaluru in India. Our chemists and process engineers are experts in discovery, development and manufacturing services, from the pre-clinical stage to commercialization. To complete the full value chain in development services, we also provide formulation development services. We have facilities for pre-formulation and formulation development, analytical development, clinical trial supplies, pilot scale and product regulatory support. This facility also follows rigorous Safety and Information Security practices and is certified against ISO 27001:2013 standards for information security. Larger quantities of APIs can be manufactured from our API plants in India, the United Kingdom and Mexico. We also offer end to end project management support for effective deliveries.

 

Our contract development and manufacturing services are uniquely positioned in the market where it utilizes assets (both in terms of physical assets and technical know-how) of a vertically integrated pharmaceutical company and combines this with the service model which we have built over the years.

44

Raw Materials

 

Raw material expense forms the largest portion of our cost of revenues in our PSAI segment. Raw materials consist of fine and specialty chemicals, bulk chemicals, solvents, catalysts, and basic and advanced intermediates. The prices of these raw materials generally fluctuate in line with commodity cycles, demand supply situations, changes to government policies and geo-political conflicts.

The recent geopolitical tension is expected to increase raw material prices and shipping delays, which could lead to longer lead times and selective shortages. Rising energy costs and freight disruptions is expected to push up input prices, with suppliers initiating price increases. Our endeavour would be to ensure continuity of serviceability to our customers demand to ensure serviceability to the patients.

Competition

The global API market can broadly be divided into regulated and less regulated markets. The less regulated markets offer low entry barriers in terms of regulatory requirements and intellectual property rights. The regulated markets, like the United States and Europe, have high entry barriers in terms of intellectual property rights and regulatory requirements, including facility approvals. As a result, there is a premium for quality and regulatory compliance along with relatively greater stability for both volumes and prices. As an API supplier, we compete with a number of manufacturers within and outside India, which vary in size. Our main competitors in this segment are Divis Laboratories Limited, Aurobindo Pharma Limited, Cipla Limited, Mylan Laboratories Limited, Sun Pharmaceutical Industries Limited and MSN Laboratories Limited, all based or operating in India. In addition, we experience competition from European and Chinese manufacturers such as Zhejiang Huahai, Tianyu, as well as from Teva Pharmaceuticals Industries Limited, based in Israel. Our service excellence, sustainable manufacturing and robust supplies helped us to build a strong positioning in the market.

 

With respect to our contract development and manufacturing organization (“CDMO”) services, we believe that contract research and manufacturing is a significant opportunity for Indian pharmaceutical companies, based on their strengths of a skilled workforce and low-cost manufacturing infrastructure. Key competitors in India include Syngene International Ltd., Aragen Life Sciences, Sai Life Sciences and Piramal Pharma Ltd. Key competitors from outside India include Lonza Group, Patheon Inc., Catalent Inc., Cambrex Inc., and WuXi Apptec. We offer a wide range of services spanning the entire value chain from discovery to commercial manufacturing (drug substances and drug products). Growth in contract research and manufacturing services is likely to be driven by increased outsourcing by large and medium size pharmaceutical companies. We distinguish ourselves from Indian competitors by offering a wider range of services spanning the entire pharmaceutical value chain from early discovery to final manufacturing.

Government regulations

 

All pharmaceutical companies that manufacture and market drugs, medical devices and cosmetics in India are subject to various national and state laws and regulations, which principally include the Drugs and Cosmetics Act, 1940 and the Drugs and Cosmetics Rules 1945, the New Drugs and Clinical Trials. Rules, 2019, the Cosmetics Rules, 2020, the Medical Devices Rules 2017, the Drugs (Prices Control) Order, 2013, as well as various environmental laws and other government statutes and regulations. These regulations govern the manufacturing, testing, packaging, labeling, storing, recordkeeping, safety, approval, sale and distribution of pharmaceutical products.

 

In India, manufacturing licenses for drugs, cosmetics and medical devices are generally issued by state licensing authorities. Under the Drugs and Cosmetics Act, 1940, the state licensing authorities are empowered to issue manufacturing licenses for drugs if they are approved for marketing in India by the Drug Controller General of India (“DCGI”). Prior to granting licenses for any new drugs or combinations of new drugs, the DCGI clearance has to be obtained in accordance with the Drugs and Cosmetics Act, 1940 and the New Drugs and Clinical Trials Rules, 2019.

 

We submit a DMF for active pharmaceutical ingredients to be commercialized in the United States. Any drug product for which an ANDA is being filed must have a DMF in place with respect to a particular supplier supplying the underlying API.

 

The manufacturing facilities are inspected by the U.S. FDA to assess compliance with cGMP. The manufacturing facilities and production procedures must meet U.S. FDA standards. For European markets, we submit a European DMF and, wherever applicable, obtain a certificate of suitability from European Directorate for the Quality of Medicines.

Others Segment

 

Our Others segment consists of business operations of our wholly-owned subsidiary, Aurigene Oncology Limited (“AOL”) (formerly Aurigene Discovery Technologies Limited) and our Proprietary Products business.

AOL:

AOL is a clinical stage biotech company committed to developing innovative and effective cancer therapeutics. AOL has successfully discovered 22 novel chemical entities for clinical development. Some of these molecules were developed in collaboration with global pharmaceutical and biotechnology companies while others were developed independently. We have out-licensed several first-in-class and best-in-class assets to pharmaceutical and biotechnology companies for global clinical development, while undertaking clinical proof of concept studies for a few programs on our own. Over the years, AOL has developed multiple discovery platforms, including kinase inhibitors, targeted protein degraders, antibody engineering and cell and gene therapy, resulting in a pipeline of first-in-class and best-in-class assets.

Proprietary Products:

Our Proprietary Products business, over the years, focused on the development of differentiated pharmaceutical products across multiple therapeutic areas including dermatology and central nervous system. Initially the commercialization of these products was carried out through launching in the U.S. market and subsequently through product divestiture and out-licensing to various partners in the United States and Europe. The products licensed out included not only the approved and marketed products but also the ones in the development stages. We derive revenues from these products through event specific milestones and royalties.

 

4.C.

Organizational structure

 

Dr. Reddy’s Laboratories Limited is the parent company in our group. Refer to Note 37 (“Organizational Structure”) of our consolidated financial statements for a list of our subsidiaries, joint ventures and associates.

45

4.D.

Property, plant and equipment

 

Our principal executive offices are located in Hyderabad, Telangana, India. Our business operates through a number of subsidiaries having offices, research facilities and production sites throughout the world. The following table sets forth current information relating to our principal facilities:

 

Sl No.	Name/Location		Approximate		Segments Which Primarily Use
		Area
		(Square feet)
	Within India
1	API Hyderabad Plant 1, Telangana, India	729,630	Global Generics and PSAI
2	API Hyderabad Plant 2, Telangana, India	781,379	Global Generics and PSAI
3	API Hyderabad Plant 3, Telangana, India	644,805	Global Generics and PSAI
4	API Nalgonda Plant, Telangana, India	3,397,680	Global Generics and PSAI
5	API Srikakulam Plant, Andhra Pradesh, India	4,047,595	Global Generics and PSAI
6	API Srikakulam Plant (SEZ), Andhra Pradesh, India	9,917,739	Global Generics and PSAI
7	Aurigene Pharmaceutical Services Limited, Hyderabad, Telangana, India	260,547	PSAI
8	Technology Development Centre (FTDC2) Hyderabad, Telangana, India	86,261	Global Generics and PSAI
9	Integrated Product Development Center (Pilot Plant), Telangana, India	151,997	Global Generics
10	Formulations Hyderabad Plant 2, Telangana, India	3,688,396	Global Generics
11	Formulations Baddi Plant 1, Himachal Pradesh, India	728,234	Global Generics
12	Formulations Baddi Plant 2, Himachal Pradesh, India	381,342	Global Generics
13	Formulations Baddi Plant 3, Himachal Pradesh, India	377,098	Global Generics
14	Biologics, Bachupally, Hyderabad, Telangana, India	1,026,055	Global Generics
15	Formulations Hyderabad Plant 3, Telangana, India	1,872,397	Global Generics
16	Formulations Srikakulam Plant 1 (SEZ), Andhra Pradesh, India	879,041	Global Generics
17	Formulations Srikakulam Plant 2 (SEZ), Andhra Pradesh, India	385,298	Global Generics
18	Formulations Srikakulam Plant 11, Andhra Pradesh, India	1,554,513	Global Generics
19	Formulations Visakhapatnam Plant 1 (SEZ), Andhra Pradesh, India	582,413	Global Generics
20	Formulations Visakhapatnam Plant 2 (SEZ), Andhra Pradesh, India	561,876	Global Generics
21	Aurigene Pharmaceutical Services Limited, Bengaluru, Karnataka, India	67,414	PSAI
22	Aurigene Oncology Limited, Bengaluru, Karnataka, India	630,462	Others
23	Integrated Product Development Center, Telangana, India	271,379	Global Generics, PSAI and Others
24	Aurigene Pharmaceutical Services Limited, Hyderabad, Telangana, India (CDMO)	50,480	PSAI
25	CAR-T (Biologics), Bengaluru, Karnataka, India	19,100	Global Generics
26	Dr. Reddy’s Formulations Limited -1, Srikakulam, Andhra Pradesh, India	43,560	Global Generics
27	Dr. Reddy’s Formulations Limited -2, Srikakulam, Andhra Pradesh, India	740,520	Global Generics
28	Biologics, Genome Valley, Hyderabad, India	72,834	Global Generics

 

 

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Sl No.	Name/Location		Approximate				Segments Which Primarily Use
		Area
		(Square feet)
	Outside India
28	API Cuernavaca Plant, Mexico		2,361,840	Global Generics and PSAI
29	API Mirfield Plant, United Kingdom		1,785,960	Global Generics and PSAI
30	API Middleburgh Plant, New York, United States		292,000	Global Generics
31	Technology Development Centre, Cambridge, United Kingdom		32,966	Global Generics and PSAI
32	Aurigene Discovery Technologies, Malaysia		5,672	Others

 

We generally own our facilities. However, some of our sites (primarily office space) are leased. All properties identified above, including leased properties, are either used for manufacturing and packaging of pharmaceutical products or for research and development activities. In addition to the above, we have sales, marketing and administrative offices, some of which are owned and some others are leased properties.

 

Material plans to construct, expand and improve facilities

 

During the year ended March 31, 2026, we expanded the production capacity for multiple products in our

“

Formulations Srikakulam Plant 11” and “API Srikakulam Plant”,

each located at Andhra Pradesh, India, and added a new leased premises for Biologics at Hyderabad, Telangana, India.

 

During the year ended March 31, 2025, we expanded the production capacity for multiple products in our

“

Formulations Srikakulam Plant 11” and “API Srikakulam Plant”,

each located at Andhra Pradesh, India, and created new infrastructure at our Biologics facility at Hyderabad and added new leased premises for Biologics at Bengaluru, Karnataka, India.

 

During the year ended March 31, 2024, we enhanced the capacity for multiple products in our API Srikakulam Plants located in Andhra Pradesh, India. We also incurred substantial capital expenditures to enhance the capacity of both our “Formulations Visakhapatnam Plant 2” and our “Formulations Srikakulam Plant 11”, each located in Andhra Pradesh, India.

 

As of March 31, 2026, we had capital work-in-progress of Rs.15,409 million and capital commitments of Rs.9,716 million for expansion of our manufacturing and research facilities, primarily relating to facilities located in India. Our current capital work-in-progress and capital commitments primarily consists of projects to enhance the capacity of our “

Formulations Srikakulam Plant 11”, Formulations Visakhapatnam Plant 2 (SEZ)” and “API Srikakulam Plant”,

each located at Andhra Pradesh, India and new infrastructure at our Biologics facility at Hyderabad, Telangana, India. We currently intend to finance our additional expansion plans entirely through our operating cash flows, cash and cash equivalents, other investments and

the cash flows from borrowings as required.

A majority of these projects are expected to be completed during the fiscal year ending March 31, 2027.

 

Environmental laws and regulations

 

We are subject to significant national and state environmental laws and regulations which govern the discharge, emission, storage, handling and disposal of a variety of substances that may be used in or result from our operations at the above facilities. Non-compliance with the applicable laws and regulations may subject us to penalties and may also result in the closure of our facilities. Refer to Note 17 (“Provisions”) and Note 31 (“Contingencies - Environmental matters”) of our consolidated financial statements for details as to environmental matters and liabilities.

 

ITEM 4A. UNRESOLVED STAFF COMMENTS

 

None.

 

 

47

 

 

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

Overview

 

We are an integrated global pharmaceutical company committed to accelerating access to affordable and innovative medicines. We derive our revenues from the sale of finished dosage forms, active pharmaceutical ingredients and intermediates, development and manufacturing services provided to innovator pharmaceutical and biotechnology companies, and license fees from marketing authorizations for our products.

 

The Chief Operating Decision Maker (“CODM”) evaluates our performance and allocates resources based on an analysis of various performance indicators by operating segments. The CODM reviews revenues and gross profit as the performance indicator for all of the operating segments, and does not review the total assets and liabilities of an operating segment. Our Chief Executive Officer (“CEO”) is the CODM of our company.

 

Our reportable operating segments are as follows:

·

Global Generics;

·

Pharmaceutical Services and Active Ingredients; and

·

Others.

 

Global Generics.

This segment consists of our business of manufacturing and marketing prescription and over-the-counter finished pharmaceutical products ready for consumption by the patient, marketed under a brand name (branded formulations) or as generic finished dosages with therapeutic equivalence to branded formulations (generics). This segment includes the operations of our biologics business,

and the portfolio of consumer healthcare brands in the Nicotine Replacement Therapy category (the “NRT Business”).

 

Pharmaceutical Services and Active Ingredients.

This segment primarily consists of our business of manufacturing and marketing active pharmaceutical ingredients and intermediates, also known as “API”, which are the principal ingredients for finished pharmaceutical products. Active pharmaceutical ingredients and intermediates become finished pharmaceutical products when the dosages are fixed in a form ready for human consumption such as a tablet, capsule or liquid using additional inactive ingredients. We also serve our customers with incremental value added products including semi-finished and finished formulations, which are included in this segment. This segment also includes our pharmaceutical services business, which provides contract research services and manufactures and sells active pharmaceutical ingredients in accordance with the specific customer requirements.

 

Others.

This segment consists of our other business operations which includes our wholly-owned subsidiaries, Aurigene Oncology Limited (“AOL”) (formerly Aurigene Discovery Technologies Limited) and our Proprietary Products business. AOL is a discovery stage biotechnology company developing novel and best-in-class therapies in the fields of oncology and inflammation. AOL works with established pharmaceutical and biotechnology companies through customized models of drug-discovery collaborations. Our Proprietary Products business is focused on the research, development and commercialization of differentiated formulations and we derive revenues from such assets through event specific milestones and subsequent royalties, if any.

 

The measurement of each segment’s revenues, expenses and assets is consistent with the accounting policies that are used in preparation of our consolidated financial statements.

 

 

48

 

 

Critical Accounting Policies

 

Critical accounting policies are defined as those that in our view are the most important to the portrayal of our financial condition and results and that require the most exercise of management’s judgment. We consider the policies discussed under the following paragraphs to be critical for an understanding of our financial statements. The basis for preparation of our financial statements, accounting policies and application of these are discussed in detail in Notes 2, 3 and 4 to our consolidated financial statements.

 

Accounting estimates and judgments

 

While preparing financial statements in conformity with IFRS, we make certain estimates and assumptions that require difficult, subjective and complex judgments. These judgments affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses, the accompanying disclosures, and the disclosure of contingent liabilities at the statement of financial position date and the reported amount of income and expenses for the reporting period. Financial reporting results rely on our estimate of the effect of certain matters that are inherently uncertain.

 

Future events rarely develop exactly as forecast and the best estimates require adjustments, as actual results may differ from these estimates under different assumptions or conditions. We continually evaluate these estimates and assumptions based on the most recently available information.

 

Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Refer to Note 2(d) (“Use of judgements, estimates and assumptions”) in our consolidated financial statements for information about significant areas of estimation uncertainty and critical judgments.

 

Accounting policy relating to Revenue from contracts with customers

 

Our revenue is derived from sales of goods, service income and income from licensing arrangements. Most of such revenue is generated from the sale of goods. We have generally concluded that we are the principal in our revenue arrangements.

 

Accounting policies relating to revenues are as follows:

Sale of goods

 

Revenue is recognized when the control of the goods has been transferred to a third party. This is usually when the title passes to the customer, either upon shipment or upon receipt of goods by the customer, as per the terms agreed upon with the customer. At that point, the customer has full discretion over the channel and price to sell the products, and there are no unfulfilled obligations that could affect the customer’s acceptance of the product. 

 

Revenue from the sale of goods is measured at the transaction price which is the consideration received or receivable, net of expected returns, taxes and applicable trade discounts and allowances. Revenue includes shipping and handling costs billed to the customer, since we act as a principal in rendering those services.

 

In arriving at the transaction price, we consider the terms of the contract with the customers and our customary business practices. The transaction price is the amount of consideration we are entitled to receive in exchange for transferring promised goods or services, excluding amounts collected on behalf of third parties. The amount of consideration varies because of estimated rebates, returns and chargebacks, which are considered to be key estimates. Any amount of variable consideration is recognized as revenue only to the extent that it is highly probable that a significant reversal will not occur. We estimate the amount of variable consideration using the expected value method.

Presented below are the points of recognition of revenue with respect to our sales of goods:

 

Particulars		Point of recognition of revenue
Sales of generic products in India		Control is transferred upon delivery of products to distributors by clearing and forwarding agents.
Sales of active pharmaceutical ingredients and intermediates in India		Upon delivery of products to customers, unless the terms of the applicable contract provide for specific revenue generating activities to be completed, in which case revenue is recognized once all such activities are completed.
Export sales and other sales outside of India		Upon delivery or dispatch of products to customers, subject to the terms of the applicable contract.

49

Profit share revenues

 

From time to time, we enter into marketing arrangements with certain business partners for the sale of our products in certain markets. Under such arrangements, we sell our products to the business partners at a non-refundable base purchase price agreed upon in the arrangement and are also entitled to a profit share which is over and above the base purchase price. The profit share is typically dependent on the business partner’s ultimate net sale proceeds or net profits, subject to any reductions or adjustments that are required by the terms of the arrangement. Such arrangements typically require the business partner to provide confirmation of units sold and net sales or net profit computations for the products covered under the arrangement.

 

Revenue in an amount equal to the base sale price is recognized in these transactions upon delivery of products to the business partners. An additional amount representing the profit share component is recognized as revenue only to the extent that it is highly probable that a significant reversal will not occur.

 

At the end of each reporting period, we update the estimated transaction price (including updating our assessment of whether an estimate of variable consideration is constrained) to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period.

Out licensing arrangements, milestone payments and royalties

 

Our revenues include amounts derived from product out-licensing agreements. These arrangements typically consist of an initial up-front payment received on inception of the license and subsequent payments dependent on achieving certain milestones in accordance with the terms prescribed in the agreement. In cases where the transaction has two or more

performance obligations, we account for the completed obligation (for example the transfer of title) as a separate unit of accounting and record revenue upon delivery of that component, provided that we can make a reasonable estimate of the fair value of the undelivered component. Otherwise, non-refundable up-front license fees received in connection with product out-licensing agreements are deferred and recognized over the balance period in which we have pending performance obligations. Milestone payments which are contingent on achieving certain clinical milestones are recognized as revenues on achievement of such milestones, or over the performance period depending on the terms of the contract. If milestone payments are creditable against future royalty payments, the milestones are deferred and released over the period in which the royalties are anticipated to be paid.

 

Royalty income earned through a license is recognized when the underlying sales have occurred

.

Provision for chargeback, rebates, sales returns and discounts

 

In our North America Generics business, our gross revenues are significantly reduced by chargebacks, rebates, sales returns, discounts, shelf stock adjustments, Medicaid payments and similar “gross-to-net” adjustments. Each of such adjustments are discussed in detail below.

·

Chargebacks : Chargebacks are issued to wholesalers for the difference between our invoice price to the wholesaler and the contract price through which the product is resold in the retail part of the supply chain. The information that we consider for establishing a chargeback accrual includes the historical average chargeback rate over a period of time, current contract prices with wholesalers and other customers, and estimated inventory holding by the wholesaler. With this methodology, we believe that the results are more realistic and closest to the potential chargeback claims that may be received in the future period relating to inventory on which a claim is yet to be received as at the end of the reporting period. In addition, as part of our book closure process, a chargeback validation is performed in which we track and reconcile the volume of inventory for which we should carry an appropriate provision for chargeback. We procure the inventory holding statements and data from our wholesalers (representing approximately 99% of the total value of chargebacks outstanding at every year end reporting date) as part of this reconciliation. On the basis of this volume reconciliation, chargeback accrual is validated. For the chargeback rate computation, we consider different contract prices for each product across our customer base. This chargeback rate is adjusted (if necessary) on a periodic basis for expected future price reductions.

 

·

Shelf Stock Adjustments: Shelf stock adjustments are credits issued to customers to reflect decreases in the selling price of products sold by us, and accruals for shelf stock adjustments depend on future events upon material right obtained by customer when the prices of certain products decline as a result of price competition, new competitive launches or otherwise. These credits are customary in the pharmaceutical industry, and are intended to reduce the customer inventory cost to better reflect the current market prices. The determination to grant a shelf stock adjustment to a customer is based on the terms of the applicable contract, which may or may not specifically limit the age of the stock on which a credit would be offered.

 

·

Rebates : Rebates (direct and indirect) are generally provided to customers as an incentive to stock and sell our products. Rebate amounts are based on a customer’s purchases made during an applicable period. Rebates are deductions based on contractual obligations, and include direct rebates, indirect rebates and other pricing adjustments paid to wholesalers, chain drug stores, health maintenance organizations or pharmacy buying groups under a contract with us. We determine our estimates of rebate accruals primarily based on the contracts entered into with our wholesalers and other direct customers and the information received from them for secondary sales made by them. For direct rebates, liability is accrued whenever we invoice to direct customers. For indirect rebates, the accruals are based on a representative weighted average percentage of the contracted rebate amount applied to inventory sold and delivered by us to wholesalers or other direct customers.

 

50

 

·

Refund Liability: We account for sales returns accrual by recording refund liability concurrent with the recognition of revenue at the time of a product sale. This liability is based on our estimate of expected sales returns. We deal in various products and operate in various markets. Accordingly, our estimate of sales returns is determined primarily by our historical experience in the applicable market in which we operate.

With respect to established products, we determine an estimate of sales returns provision primarily based on historical experience of the actual sales returns. Additionally, other factors that we consider in determining the estimate include levels of inventory in the distribution channel, estimated shelf life, any revision in the shelf life of the product, product discontinuances, price changes of competitive products, and introduction of competitive new products, to the extent each of these factors impact our business and markets.

We consider all of these factors and adjust the sales return provision to reflect our actual experience. With respect to new products introduced by us, those have historically been either extensions of an existing product line where we have historical experience or in a general therapeutic category where established products exist and are sold either by us or our competitors. We have not yet introduced products in a new therapeutic category where the sales returns experience of such products by us or our competitors (as we understand based on industry publications) is not known. The amount of sales returns for our newly launched products has not historically differed significantly from the sales returns experience of the then current products marketed by us or our competitors (as we understand based on industry publications). Accordingly, we do not expect sales returns for new products to be significantly different from expected sales returns of current products. We evaluate sales returns of all our products at the end of each reporting period and record necessary re-measurements to the refund liability and related asset, if any.

·

Medicaid: We estimate the portion of our sales that may get dispensed to customers covered under Medicaid programs based on the proportion of units sold in the previous two quarters for which a Medicaid claim could be received as compared to the total number of units sold in the previous two quarters. The proportion is based on an analysis of the actual Medicaid claims received for the preceding four quarters. In addition, we also apply the same percentage on the derived estimated inventory sold and delivered by us to our wholesalers and other direct customers to arrive at the potential volume of products on which a Medicaid claim could be received. We use this approach because we believe that it corresponds to the approximate six-month time period it takes for us to receive claims from the various Medicaid programs. After estimating the number of units on which a Medicaid claim is to be paid, we use the latest available Medicaid reimbursement rate per unit to calculate the Medicaid accrual. In the case of new products, accruals are done based on specific inputs from our marketing team or data from the publications of IQVIA.

 

·

Cash Discounts: We offer cash discounts to our customers, on a selective basis and in line with industry practice, to encourage prompt payment. Accruals for such cash discounts do not involve any significant variables. These are accrued for at the time of invoicing and adjusted subsequently to reflect the actual experience.

 

We believe our estimation processes are reasonable methods of determining accruals for the “gross-to-net” adjustments. Chargeback accrual accounts for the highest element among the “gross-to-net” adjustments, and constituted approximately 86% of such “gross-to-net” adjustments for our North America Generics business for the year ended March 31, 2026. For the purpose of the following discussion, we are therefore restricting our explanations to this specific element. While chargeback accruals depend on multiple variables, the most pertinent variables are our estimates of inventories on which a chargeback claim is yet to be received and the unit price at which the chargeback will be processed. To determine the chargeback accrual applicable for a reporting period, we perform the following procedures to calculate these two variables:

a)

Estimated inventory —Inventory volumes on which a chargeback claim that is expected to be received in the future are determined using the validation process and methodology described above (see “Chargebacks” above). When such a validation process is performed, we note that the difference represents an immaterial variation. Therefore, we believe that our estimation process regarding this variable is reasonable.

 

b)

Unit pricing rate —At any point in time, inventory volumes on which we carry our chargeback accrual represents approximately 1.0 to 1.4 month of sales volumes. Therefore, the sensitivity of price changes on our chargeback accrual only relates to such volumes. Assuming that the chargebacks were processed within such period , we analyzed the impact of changes of prices for the periods beginning April 1, 2025, 2024 and 2023, respectively, and ended March 31, 2026, 2025 and 2024, respectively, on our estimated inventory levels computed based on the methodology described above (see “Chargebacks” above). The impact on net sales on account of such price variation may not be significant.

51

 

A roll-forward for each major accrual for our North America Generics business is presented below for our fiscal years ended March 31, 2024, 2025 and 2026:

 

Particulars		Chargebacks				Rebates				Medicaid				Refund Liability (3)
		(All amounts in U.S.$ million)
Beginning Balance: April 1, 2023			247				87				13				35
Current provisions relating to sales during the year			2,844				322				31				21
Provisions and adjustments relating to sales in prior years			*				-				-				-
Credits and payments**			(2,803	)			(307	)			(25	)			(21	)
Ending Balance: March 31, 2024			288				102				19				35
Beginning Balance: April 1, 2024			288				102				19				35
Current provisions relating to sales during the year (1)			2,720				253				23				34
Provisions and adjustments relating to sales in prior years			-*				-*				-*				-*
Credits and payments**			(2,665	)			(252	)			(29	)			(27	)
Ending Balance: March 31, 2025			343				103				13				42
Beginning Balance: April 1, 2025			343				103				13				42
Current provisions relating to sales during the year (2)			2,439				226				24				38
Provisions and adjustments relating to sales in prior years			-*				-*				-*				-*
Credits and payments**			(2,506	)			(237	)			(27	)			(33	)
Ending Balance: March 31, 2026			276				92				10				47

 

*

Currently, we do not separately track provisions and adjustments, in each case to the extent relating to prior years for chargebacks. However, the adjustments are expected to be non-material. The volumes used to calculate the closing balance of chargebacks represent approximately 1.0 to 1.4 months equivalent of sales, which corresponds to the pending chargeback claims yet to be processed.

 

**

Currently, we do not separately track the credits and payments, in each case to the extent relating to prior years for chargebacks, rebates, Medicaid payments or refund liability.

 

(1)

Chargebacks provisions and payments for the year ended March 31, 2025 were each lower as compared to the year ended March 31, 2024, primarily as a result of reduction in the invoice price to wholesalers for few of our major products. This was offset to some extent due to higher pricing rates per unit on chargebacks, on account of reductions in the contract prices through which the product is resold in the retail part of the supply chain for certain of our products.

 

(2)

Chargebacks provisions and payments for the year ended March 31, 2026 were each lower as compared to the year ended March 31, 2025, primarily as a result of reduction in the invoice price to wholesalers for few of our major products. This was offset to some extent due to higher pricing rates per unit on chargebacks, on account of reductions in the contract prices through which the product is resold in the retail part of the supply chain for certain of our products.

 

(3)

Our overall provision for refund liability as of March 31, 2026 relating to our North America Generics business was U.S.$47, compared to a liability of U.S.$42 as of March 31, 2025. The refund liability created for new product launches and volume growth, were off-set by the reductions in the contract prices and by product mix changes.

 

The estimates of “gross-to-net” adjustments for our operations in India and other countries outside of the United States relate mainly to refund liability in all such operations, and certain rebates to healthcare insurance providers are specific to our German operations. The pattern of such refund liability is generally consistent with our gross sales. In Germany, the rebates to healthcare insurance providers mentioned above are contractually fixed in nature and do not involve significant estimations by us.

Services

 

Revenue from services rendered, which primarily relate to contract research, is recognized in the consolidated income statement as the underlying services are performed. Upfront non-refundable payments received under these arrangements are deferred and recognized as revenue over the expected period over which the related services are expected to be performed.

 

 

52

License fees

 

License fees primarily consist of income from the out-licensing of intellectual property, and other licensing and supply arrangements with various parties. Revenue from license fees is recognized when control transfers to the third party and our performance obligations are satisfied. Some of these arrangements include certain performance obligations by us. Revenue from such arrangements is recognized in the period in which we complete all of our performance obligations.

 

For other details on our material accounting policies, please refer to Note 3 of our consolidated financial statements.

 

5.A.

Operating results

 

Income Statement Data

			For the year ended March 31,
			2026		2026				2025				2024
			(Rs. in millions, U.S.$ in millions)
			Convenience translation into U.S.$
Revenues		U.S.$	3,580		Rs.	335,933			Rs.	325,535			Rs.	279,164
Cost of revenues			1,691			158,669				135,107				115,557
Gross profit			1,889			177,264				190,428				163,607
Selling, general and administrative expenses			1,137			106,763				93,870				77,201
Research and development expenses			256			24,058				27,380				22,873
Impairment of non-current assets, net			38			3,519				1,693				3
Other income, net			(81)			(7,627	)			(4,358	)			(4,199	)
Results from operating activities			539			50,551				71,843				67,729
Finance income, net			44			4,132				4,724				3,994
Share of profit of equity accounted investees, net of tax			1			134				217				147
Profit before tax			584			54,817				76,784				71,870
Tax expense, net			132			12,351				19,539				16,186
Profit for the year		U.S.$	452		Rs.	42,466			Rs.	57,245			Rs.	55,684
Attributable to:
Equity holders of the parent company		U.S.$	457		Rs.	42,850			Rs.	56,544			Rs.	55,684
Non-controlling interests			(4)			(384	)			701				-

 

The following table sets forth, for the periods indicated, financial data as percentages of total revenues and the increase (or decrease) by item as a percentage of the amount over the comparable period in the previous years.

 

		Percentage of Sales												Percentage
		For the year ended March 31,												Increase/(Decrease)
		2026				2025				2024				2025 to 2026				2024 to 2025
Revenues			100.0	%			100.0	%			100.0	%			3.2	%			16.6	%
Gross profit			52.8	%			58.5	%			58.6	%			(6.9	%)			16.4	%
Selling, general and administrative expenses			31.8	%			28.8	%			27.7	%			13.7	%			21.6	%
Research and development expenses			7.2	%			8.4	%			8.2	%			(12.1	%)			19.7	%
Impairment of non-current assets			1.0	%			0.6	%			0.0	%			107.9				56,333.3	%
Other income, net			(2.3	%)			(1.3	%)			(1.5	%)			75.0				3.8	%
Results from operating activities			15.0	%			22.0	%			24.3	%			(29.6	)			6.1	%
Finance income, net			1.2	%			1.5	%			1.4	%			(12.5	)			18.3	%
Share of profit of equity accounted investees, net of tax			0.0	%			0.1	%			0.1	%			(38.2	)			47.6	%
Profit before tax			16.3	%			23.6	%			25.7	%			(28.6	)			6.8	%
Tax expense, net			3.7	%			6.0	%			5.8	%			(36.8	)			20.7	%
Profit for the year			12.6	%			17.6	%			19.9	%			(25.8	)			2.8	%
Attributable to:
Equity holders of the parent company			12.8	%			17.4	%			19.9	%			(24.2	%)			1.5	%
Non-controlling interests			(0.1	%)			0.2	%			-				(154.8	%)			-

 

 

53

 

 

The following table sets forth, for the periods indicated, our consolidated revenues by segment:

 

			For the year ended March 31,
			2026						2025								2024
			(Rs. in millions)
			Revenues		% of Segment revenue				Revenues				% of Segment revenue				Revenues				% of Segment revenue
Global Generics		Rs.	299,033			89	%		Rs.	289,552				89	%		Rs.	245,453				88	%
PSAI			34,773			10	%			33,846				10	%			29,801				11	%
Others			2,127			1	%			2,137				1	%			3,910				1	%
Total		Rs.	335,933			100	%		Rs.	325,535				100	%		Rs.	279,164				100	%

 

Fiscal Year Ended March 31, 2026 compared to Fiscal Year Ended March 31, 2025

 

Revenues

 

Our overall consolidated revenues were Rs.335,933 million for the year ended March 31, 2026, an increase of 3%, as compared to Rs.325,535 million for the year ended March 31, 2025. Excluding the impact of exchange rate fluctuations of the Indian rupee against the currencies in the markets in which we operate, such revenues declined by 2% during the year ended March 31, 2026. This decrease was primarily on account of net decrease in sales prices of certain of our existing products including Lenalidomide in the United States.

 

The following table sets forth, for the periods indicated, our consolidated revenues by geography:

 

		For the year ended March 31,
		2026								2025								2024
		Revenues				% of Total Revenue*				Revenues				% of Total Revenue*				Revenues				% of Total Revenue*
		(Rs. in millions)
Global Generics		Rs.	299,033				89	%		Rs.	289,552				89	%		Rs.	245,453				88	%
North America (the United States and Canada)			113,737				38	%			145,164				50	%			129,895				53	%
Europe			55,501	^			19	%			35,882	^			12	%			20,511				8	%
India			62,186				21	%			53,734				19	%			46,407				19	%
Russia			34,786				12	%			25,958				9	%			22,301				9	%
Other countries of the former Soviet Union and Romania			9,074				3	%			8,920				3	%			8,626				4	%
Rest of the World			23,749				8	%			19,894				7	%			17,713				7	%
PSAI			34,773				10	%			33,846				10	%			29,801				11	%
Others			2,127				1	%			2,137				1	%			3,910				1	%
Total		Rs.	335,933				100	%		Rs.	325,535				100	%		Rs.	279,164				100	%

 

*

Percentages mentioned against the segments are with reference to the total revenue of our company; and percentages mentioned against geographies represent the sales in the respective geography as a percentage of the total revenue from that segment.

^

Includes revenues of Rs.28,189 million for the year ended March 31, 2026 and Rs.12,020 million for the year ended March 31, 2025 from the global portfolio outside of the United States of consumer brands in the Nicotine Replacement Therapy category acquired from Haleon UK Enterprises Limited (the “NRT Business”).

 

For the year ended March 31, 2026, the average exchange rate of the U.S. dollar appreciated by 4.5%, that of the Euro appreciated by 12.8%, and that of the Russian rouble appreciated by 21.8%, against the Indian rupee compared to the year ended March 31, 2025. These changes in exchange rates on an overall basis increased our reported revenues.

 

 

54

 

 

Segment analysis

 

Global Generics

 

Revenues from our Global Generics segment were Rs.299,033 million for the year ended March 31, 2026, an increase of 3% compared to Rs.289,552 million for the year ended March 31, 2025. The increase was in three of four business geographies of this segment: Europe (which also includes the “NRT business”), “Emerging Markets” (which is comprised of Russia, other countries of the former Soviet Union, Romania and certain other countries from our “Rest of the World” markets, including Brazil, South Africa, Vietnam, China, and Colombia), and India. The foregoing were partially offset by a decline in revenues from North America (the United States and Canada).

 

Excluding the impact of exchange rate fluctuations of the Indian rupee against the currencies in the markets in which we operate, such revenues declined by 2% during the year ended March 31, 2026, primarily on account of the following factors:

 

·

a decrease of approximately 10% resulting from the net impact of changes in sales prices of certain of our existing products in this segment, including the impact of the shelf stock adjustment claim (“SSA Claim”) following a reduction in the price of our generic product Lenalidomide in the United States;

 

the foregoing was partially offset by

·

an increase of approximately 5% resulting from a net increase in the sales volumes of certain of our existing products in this segment; and

·

an increase of approximately 3% resulting from additional revenues from new products launched between April 1, 2025 and March 31, 2026.

 

        

North America (the United States and Canada):

Our Global Generics segment’s revenues from North America were Rs.113,737 million for the year ended March 31, 2026, a decrease of 22% compared to Rs.145,164 million for the year ended March 31, 2025. In U.S. dollar absolute currency terms (i.e., U.S. dollars without taking into account the effect of currency exchange rates), such revenues decreased by 24% for the year ended March 31, 2026, compared to the year ended March 31, 2025.

This

revenue

decrease was largely attributable to

a net decrease in the sales prices of certain of our existing products, including the impact of the SSA Claim.

During the year ended March 31, 2026, we launched 25 new products in North America and made 15 new ANDA filings with the U.S. FDA. As of March 31, 2026, our cumulative ANDA filings

were 339. As of March 31, 2026, we had 77 filings pending approval with the U.S. FDA (75 ANDAs and two NDAs under the 505(b)(2) route), including 21 tentative approvals. Of the 77 filings which are pending approval, 44 are Para

graph

IV filings, and we believe that we are the first to file with respect to 22 of these filings.

Europe:

Our Global Generics segment’s revenues from Europe are primarily derived from Germany, the United Kingdom, Italy, Spain and France as well as the NRT Business. Such revenues from Europe were Rs.55,501 million for the year ended March 31, 2026, an increase of 55% compared to Rs.35,882 million for the year ended March 31, 2025. Excluding the impact of exchange rate fluctuations of the Indian rupee against the currencies in the markets in which we operate, the foregoing increase was primarily on account of inclusion of revenues from the NRT Business for the full year ended March 31, 2026 as compared to revenues for the period subsequent to the acquisition during the year ended March 31, 2025, a net increase in sales volumes of certain of our existing products and additional revenues from new products launched between April 1, 2025 and March 31, 2026, all of which were partially offset by price erosion in certain of our existing products.

 

During the year ended March 31, 2026, we launched 38 new products in Europe (excluding the NRT Business).

India:

Our Global Generics segment’s revenues from India were Rs.62,186 million

for the year ended March 31, 2026, an increase of 16% compared to

Rs.53,734

million for the year ended March 31, 2025. This increase in revenues was largely attributable to a net increase in the sales prices and volumes of certain of our existing products

.

 

According to IQVIA in its Moving Annual Total report for the year ended March 31, 2026, our secondary sales in India grew by 12.1% during such period, compared to the India pharmaceutical market’s growth of 9.9% during the same period.

 

During the year ended March 31, 2026, we launched 28 new brands in India

.

Emerging Markets

:

Our Global Generics segment’s

re

venues from “Emerging Markets” (which is comprised of Russia, other countries of the former Soviet Union, Romania and certain other countries from our “Rest of the World” markets,

including Brazil, South Africa, Colombia, Vietnam, and China)

were Rs.67,608 million for the year ended March 31, 2025,

an increase of 23% compared to compared to Rs.54,772 million for the year ended March 31, 2025.

Excluding

the impact of exchange rate fluctuations of the Indian rupee against multiple currencies in the markets in which we operate, the foregoing increase was largely attributable to a net increase in sales volumes of certain of our existing products and additional revenues from new products launched between April 1, 2025 and March 31, 2026.

During the year ended March 31, 2026, we launched 179 new products across geographies in Emerging Markets.

55

Russia:

Our Global Generics segment’s

re

venues from Russia were Rs.34,786 million for the year ended March 31, 2026

, an increase of 34%

compared to

Rs.25,958

million for the year ended

March 31, 2025

.

In Russian rouble absolute currency terms (i.e., Russian roubles without taking into account the effect of currency exchange rates), such revenues increased by 15% for the year ended March 31, 2026, compared to the year ended March 31, 2025.

This

increase in absolute currency terms

was largely attributable to a net increase in sales prices and volumes of certain of our existing products and to additional revenues from new products launched

between April 1, 2025 and March 31, 2026

.

Our over-the-counter (“OTC”) division’s revenues from Russia for the year ended March 31, 2025 were approximately 54% of our total revenues from Russia in this segment.

 

According to IQVIA, as per its report

for the year ended March 31, 2026

, our sales value (in Russian roubles) growth and volume growth from Russia for such period, as compared to the Russian pharmaceutical market was as follows:

 

			Year ended March 31, 2026
			Increase /(Decrease)
			Dr. Reddy's						Russian pharmaceutical market
			Sales value		Volume				Sales value				Volume
Prescription (Rx)			11.0	%		3.0	%			17.0	%			2.1	%
Over-the-counter (OTC)			8.8	%		2.3	%			6.6	%			(4.5	)%
Total (Rx + OTC)			10.0	%		2.7	%			12.1	%			(2.0	)%

 

As per the above referenced IQVIA report, our market shares in Russia for the

years

ended March 31, 2026 and March 31, 2025 were as follows:

 

		Year ended March 31,
		Volume based								Value based
		2026				2025				2026				2025
Prescription (Rx)			3.8	%			3.8	%			1.8	%			1.9	%
Over-the-counter (OTC)			1.7	%			1.6	%			1.9	%			1.8	%
Total (Rx + OTC)			2.5	%			2.4	%			1.8	%			1.8	%

 

Other countries of the former Soviet Union and Romania:

Our Global Generics segment’s revenues from other countries of the former Soviet Union and Romania were Rs.9,074 million for the year ended March 31, 2026

, an increase of 2%

compared to Rs.8,920 million for

the year ended

March 31, 2025. Excluding the impact of exchange rate fluctuations of the Indian rupee against the currencies in the markets in which we operate, the foregoing revenues declined for the year ended March 31, 2026, primarily on account of a net

decrease in the sales volumes of certain of our existing products

.

“Rest of the World” Markets

:

We refer to all markets of this segment, other than North America, Europe, Russia and other countries of the former Soviet Union, Romania and India, as our “Rest of the World” markets.

Our Global Generics segment’s revenues from our “Rest of the World” markets were Rs.23,749 million for the year ended March 31, 2026, an increase of 19% compared to Rs.19,894 million for the year ended March 31, 2025. Excluding the impact of exchange rate fluctuations of the Indian rupee against the currencies in the markets in which we operate, the foregoing increase is largely attributable to a net increase in the sales volumes of certain of our existing products and additional revenues from new products launched

between April 1, 2025 and March 31, 2026

, both of which were partially offset by a net decrease in the sales prices of certain of our existing products.

 

Pharmaceutical Services and Active Ingredients (“PSAI”)

 

Our PSAI segment’s revenues were Rs.34,773 million for the year ended March 31, 2026, an increase of 3% compared to Rs.33,846 million for the year ended March 31, 2025. Excluding the impact of exchange rate fluctuations of the Indian rupee against the currencies in the markets in which we operate, the forgoing revenues declined by 1% for the year ended March 31, 2026, largely on account of a net decrease in sales prices of certain of our existing products.

 

During the year ended March 31, 2026, we filed 128 Drug Master Files (“DMFs”) worldwide. Cumulatively, our total active worldwide DMFs as of March 31, 2026, were 1,748, including 280 active DMFs in the United States.

 

Gross Profit

 

Our total gross profit was Rs.177,264 million for the year ended March 31, 2026, representing 52.8% of our revenues for that period, compared to Rs.190,428 million for the year

ended

March 31, 2025

, representing 58.5% of

our

revenues

for that period.

56

The following table sets forth, for the period indicated, our gross profit by segment:

 

			For the year ended March 31,
			2026						2025								2024
			(Rs. in millions)
			Gross Profit		% of Segment Revenue				Gross Profit				% of Segment Revenue				Gross Profit				% of Segment Revenue
Global Generics		Rs.	169,698			56.7	%			179,606				62.0	%		Rs.	154,268				62.9	%
PSAI			5,984			17.2	%			9,157				27.1	%			6,919				23.2	%
Others			1,582			74.4	%			1,665				77.9	%			2,420				61.9	%
Total		Rs.	177,264			52.8	%		Rs.	190,428				58.5	%		Rs.	163,607				58.6	%

 

The gross profit as a percentage of revenue from our Global Generics segment decreased to 56.7% for the year ended March 31, 2026, from 62.0% for the year ended March 31, 2025. This decrease was largely on account of price erosion in certain of our existing products, including the impact of the SSA Claim.

 

The gross profit as a percentage of revenue from our PSAI segment decreased to 17.2% for the year ended March 31, 2026, from 27.1% for the year ended March 31, 2025. This decrease was primarily on account of lower operating leverage during the year ended March 31, 2026, as compared to the year ended March 31, 2025, unfavorable changes in our product mix (i.e., a decrease in the proportion of our profits from products with higher profit margins and an increase in the proportion from products with lower profit margins) and price erosion in certain of our existing products.

 

Selling, general and administrative expenses

 

Our selling, general and administrative expenses were Rs.106,763 million for the year ended March 31, 2026, an increase of 14% compared to Rs.93,870 million for the year

ended

March 31, 2025. This increase was largely attributable to the following:

 

·

an increase of 8% on account of higher sales and marketing expenses, including a provision related to a field tax audit report from the Federal Tax Service authority in respect of one of our foreign subsidiaries (as described in Note 31 of these consolidated financial statements);

·

an increase of 5% on account of increased personnel costs including incremental cost towards employee benefits arising from the implementation of New Labour Codes in India (as described in Note 26 of these consolidated financial statements) as well as on account of annual raises and new hires;

·

an increase of 3% due to higher spending on other costs, including travel expenses, depreciation and amortization; and

·

the foregoing were partially offset by a decrease of 2% on account of lower legal and professional fees and freight outward expenses.

 

As a proportion of our total revenues, our selling, general and administrative expenses were higher at 31.8% for the year ended March 31, 2026, compared to 28.8% for the year ended March 31, 2025.

 

Research and development expenses

 

Our research and development expenses were Rs.24,058 million for the year ended March 31, 2026, a decrease of 12% compared to Rs.27,380 million for the year ended March 31, 2025. This decrease was primarily on account of lower development expenditures on certain products in our Global Generics segment, including our biosimilars business as well as in our PSAI segment.

 

As a proportion of our total revenues, our research and development expense were lower at 7.2% for the year ended March 31, 2026, compared to 8.4% for the year ended March 31, 2025.

 

Impairment of non-current assets

 

Impairment of non-current assets were Rs.3,519 million for the year ended March 31, 2026, compared to Rs.1,693 million for the year ended March 31, 2025. The impairment charge for the year ended March 31, 2026 was higher on account of

 

·

discontinuation of certain of the research and development programs associated with our Chimeric Antigen Receptor T cell (CAR T) therapy portfolio resulting in an impairment of Rs.1,291 million; and

·

impairment of intangible related to Eftilagimod Alfa pursuant to discontinuation of the Phase III study in first line non‑small cell lung cancer following the results of a futility analysis, resulting in an impairment of Rs.914 million.

 

Please refer to Note 11 (“Property, plant and equipment”) and Note 13 (“Other intangible assets”) of our

consolidated financial statements

for further details.

 

Other income, net

 

Our other income, net was Rs.7,627 million for the year ended March 31, 2026, an increase of 75% compared to Rs.4,358 million for the year ended March 31, 2025. Our other income for the year ended March 31, 2026 was higher largely on account of gain on sale of non-current assets of Rs.1,890 million towards divestment of certain product related intangibles (i.e., trademarks). Please refer to Note 22 (“Other income, net”) of our

consolidated financial statements

for further details.

 

Finance income, net

 

Our finance income, net was lower at Rs.4,132 million for the year ended March 31, 2026, as compared to Rs.4,724 million for the year ended March 31, 2025.

 

This decrease in net finance income was largely attributable to:

 

·

a decrease in fair value changes and profit on sale of financial instruments measured at FVTPL, net of Rs. 2,359 million for the year ended March 31, 2026, compared to fair value changes and profit on sale of financial instruments measured at FVTPL, net of Rs.3,544 million for the year ended March 31, 2025;

 

partially offset by

 

·

higher net foreign exchange gains of Rs.1,785 million for the year ended March 31, 2026, compared to Rs.1,322 million for the year ended March 31, 2025; and

·

lower net interest expense of Rs.12 million for the year ended March 31, 2025, compared to Rs.152 million for the year ended March 31, 2025.

 

 

57

 

 

Profit before tax

 

As a result of the above, our profit before taxes was Rs.54,817 million for the year ended March 31, 2026, a decrease of 29% compared to Rs.76,784 million for the year ended March 31, 2025.

 

Tax expense

 

Our consolidated weighted average tax rate was 22.5% for the year ended March 31, 2026, compared to 25.4% for the year ended March 31, 2025.

 

Our tax expense was Rs.12,351 million for the year ended March 31, 2026, compared to Rs.19,539 million for the year ended March 31, 2025.

 

Please refer to Note 24 (“Income taxes”) of our

consolidated financial statements

for further details.

 

Profit for the year

 

As a result of the above, our net profit was Rs.42,466 million for the year ended March 31, 2026, representing 12.6% of our total revenues for such year, compared to Rs.57,245 million for the year ended March 31, 2025, representing 17.6% of our total revenues for such year.

 

Profit after tax attributable to the equity holders of the parent company was Rs.42,850 million for the year ending March 31, 2026, representing 12.8% of our total revenues for such period, compared to Rs.56,544 million for the year ending March 31, 2025, representing 17.4% of our total revenues for such period.

 

Fiscal Year Ended March 31, 2025 compared to Fiscal Year Ended March 31, 2024

 

Refer to Item 5.A. of our Annual Report on Form 20-F for the fiscal year ended March 31, 2025.

 

Fiscal Year Ended March 31, 2024 compared to Fiscal Year Ended March 31, 2023

 

Refer to Item 5.A. of our Annual Report on Form 20-F for the fiscal year ended March 31, 2024.

 

5.B.

Liquidity and capital resources

 

Liquidity and working capital

We manage our liquidity by ensuring, to the extent possible, that we will always have sufficient liquidity to meet our liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to our reputation.

 

We have primarily financed our operations through cash flows generated from operations and a mix of long-term and short-term borrowings. Our principal liquidity and capital needs are for the purchase of property, plant and equipment, regular business operations and research and development. Our principal sources of short-term liquidity are internally generated funds and short-term borrowings, which we believe are sufficient to meet our working capital requirements, in both the short term (i.e., the 12 months following the year ended March 31, 2026) and the long term (i.e., beyond such additional 12-month period).

 

As of March 31, 2026, we had working capital of Rs.134,409 million, including cash and cash equivalents of Rs.15,368 million, investments in term deposits with banks, bonds and commercial papers of Rs.36,534 million and investments in units of mutual funds of Rs.35,912 million. As of March 31, 2025, we had working capital of Rs.119,720 million, including cash and cash equivalents of Rs.14,654 million, investments in term deposits with banks, bonds and commercial papers of Rs.9,948 million and investments in units of mutual funds of Rs.33,186 million.

 

Our cash and cash equivalents are comprised of deposits with banks and financial institutions with high credit-ratings assigned by international and domestic credit-rating agencies which can be withdrawn at any point of time without prior notice or penalty on principal. These cash and cash equivalents included a restricted cash balance of Rs.369 million and Rs.544 million as of March 31, 2026 and 2025, respectively. These restrictions are primarily on account of balances held in unclaimed dividend accounts and other bank balances earmarked for specific purposes. Cash and cash equivalents are primarily held in U.S. dollars, Euros, Indian rupees, Russian rubles, Canadian Dollar, Australian Dollar, Chinese yuans (Renminbi), Romanian new leus and U.K. pounds sterling.

 

Summary of statements of cash flows

 

The following table summarizes our statements of cash flows for the years presented:

 

		For the year ended March 31,
		2026				2025				2024
		( Rs. in millions)
Net cash from/(used in):
Operating activities		Rs.	56,755			Rs.	46,428			Rs.	45,433
Investing activities			(65,513	)			(58,077	)			(40,283	)
Financing activities			8,290				18,911				(3,763	)
Net increase/(decrease) in cash and cash equivalents		Rs.	(468	)		Rs.	7,262			Rs.	1,387

 

 

58

 

 

In addition to cash, inventory and accounts receivable, we had uncommitted lines of credit of Rs.49,109 million as of March 31, 2026 from our banks for working capital requirements. We draw upon these lines of credit based on our working capital requirements.

 

Cash Flow from Operating Activities

Year ended March 31, 2026 compared to year ended March 31, 2025

Our operating activities resulted in net cash inflows of Rs.56,755 million and Rs.46,428 million for the years ended March 31, 2026 and 2025, respectively.

 

The increase in net cash inflow of Rs.10,327 million was primarily due to a decrease in our working capital requirements, largely on account of:

 

·

a decrease in other assets and other liabilities, net by Rs.897 million for year ended March 31, 2026, as compared to an increase in other assets and other liabilities, net of Rs.7,293 million for the year ended March 31, 2025. Such decrease was primarily due to a decrease in our balances in government incentives receivable and an increase in other current liabilities during the year ended March 31, 2026; and

·

an increase in inventories by Rs.8,601 million for the year ended March 31, 2026, as compared to Rs.12,753 million for the year ended March 31, 2025.

Our average days’ sales outstanding (“DSO”) as of March 31, 2026 and March 31, 2025 were 108 days and 95 days, respectively. The increase in our DSO was primarily on account of (a) changes in the mix of our receivables, due to an increase in the proportion of our receivables having longer credit periods in the United States during the year ended March 31, 2026, (b) a decrease in the proportion of our trade receivables being de-recognized pursuant to a factoring arrangement with certain banks in Russia during the year ended March 31, 2026, as compared to the de-recognition for the year ended March 31, 2025, and (c) an increase in trade receivables from customers in our NRT business during the year ended March 31, 2026.

 

59

Year ended March 31, 2025 compared to year ended March 31, 2024

Our operating activities resulted in net cash inflows of Rs.46,428 million and Rs.45,433 million for the years ended March 31, 2025 and 2024, respectively.

 

The increase in net cash inflow of Rs.995 million was primarily due to a decrease in our working capital requirements.

 

Our average days’ sales outstanding (“DSO”) as of March 31, 2025 and March 31, 2024 were 95 days and 103 days, respectively.

 

Cash Flow from Investing Activities

 

Year ended March 31, 2026 compared to year ended March 31, 2025

Our investing activities resulted in net cash outflows of Rs.65,513 million and Rs.58,077 million for the years ended March 31, 2026 and 2025, respectively, the increase was primarily on account of the following:

 

·

net purchases of other investments of Rs.27,116 million for the year ended March 31, 2026, as compared to net proceeds from sale of other investments of Rs.25,118 million for the year ended March 31, 2025; and

·

acquisition of property, plant and equipment, and other intangible assets, net of disposals, of Rs.36,715 million for the year ended March 31, 2026, as compared to Rs.33,154 million for the year ended March 31, 2025. The amount spent during the year ended March 31, 2026 includes:

o

Rs.23,017 million towards property, plant and equipment to expand our production capacity for multiple products in various manufacturing and research and development facilities, primarily in our “Formulations Srikakulam Plant 11” and “API Srikakulam Plant”; and

o

Rs.7,478 million for the acquisition of STUGERON® and Progynova® trademarks in India.

(Refer to Note 13 of these consolidated financial statements for further details).

·

the above increases in cash outflow towards investing activities during the year ended March 31, 2026 were partially offset due to the payment of Rs.53,096 million to Haleon UK Enterprises Limited for the acquisition of consumer healthcare brands in NRT category during the year ended March 31, 2025, as compared to Rs.3,152 million during the year ended March 31, 2026. (Refer to Note 35.B of these consolidated financial statements for further details)

Year ended March 31, 2025 compared to year ended March 31, 2024

Our investing activities resulted in net cash outflows of Rs.58,077 million and Rs.40,283 million for the years ended March 31, 2025 and 2024, respectively, the increase was primarily on account of the following

:

 

·

net proceeds from sale of other investments of Rs.25,118 million for the year ended March 31, 2025, as compared to net purchases of other investments of Rs.15,704 million for the year ended March 31, 2024;

·

acquisition of property, plant and equipment, and other intangible assets, net of disposals, of Rs.33,154 million for the year ended March 31, 2025, as compared to Rs.26,350 million for the year ended March 31, 2024; and

·

business acquisitions made of Rs.53,096 million for the year ended March 31, 2025, as compared to the business acquisitions made of Rs.0 million for the year ended March 31, 2024.

 

Cash Flow from Financing Activities

 

Year ended March 31, 2026 compared to year ended March 31, 2025

Our financing activities resulted in net cash inflows of Rs.8,290 million as compared to net cash outflows of Rs.18,911 million for the years ended March 31, 2026 and 2025, respectively, the increase was primarily on account of the following:

·

net proceeds from short-term borrowings of Rs.20,257 million for the year ended March 31, 2026, as compared to net proceeds from short-term borrowings of Rs.24,490 million for the year ended March 31, 2025;

 

 

60

 

 

·

payments of dividends of Rs.6,659 million for the year ended March 31, 2026, as compared to payments of dividends of Rs.6,662 million for the year ended March 31, 2025;

·

interest payments of Rs.4,441 million for the year ended March 31, 2026, as compared to interest payments of Rs.3,483 million for the year ended March 31, 2025;

·

payments of the principal portion of lease liabilities of Rs.1,263 million for the year ended March 31, 2026, as compared to payments of the principal portion of lease liabilities of Rs.1,294 million for the year ended March 31, 2025;

·

payments made for the purchase of treasury shares of Rs.0 million for the year ended March 31, 2026, as compared to payments made for the purchase of treasury shares of Rs.1,389 million for the year ended March 31, 2025; and

·

proceeds from the issuance of non-controlling interest (“NCI”) equity shares in a subsidiary of Rs.0 million for the year ended March 31, 2026, as compared to proceeds from issuance of NCI equity shares in a subsidiary of Rs.7,056 million for the year ended March 31, 2025.

 

Year ended March 31, 2025 compared to year ended March 31, 2024

Our financing activities resulted in net cash inflows of Rs.18,911 million as compared to net cash outflows of Rs.3,763 million for the years ended March 31, 2025 and 2024, respectively, the increase was primarily on account of the following:

 

·

net proceeds from short-term borrowings of Rs.24,490 million for the year ended March 31, 2025, as compared to net proceeds from short-term borrowings of Rs.5,493 million for the year ended March 31, 2024;

·

payments of dividends of Rs.6,662 million for the year ended March 31, 2025, as compared to payments of dividends of Rs.6,648 million for the year ended March 31, 2024;

·

interest payments of Rs.3,483 million for the year ended March 31, 2025, as compared to interest payments of Rs.2,266 million for the year ended March 31, 2024;

·

payments of the principal portion of lease liabilities of Rs.1,294 million for the year ended March 31, 2025, as compared to payments of the principal portion of lease liabilities of Rs.1,147 million for the year ended March 31, 2024;

·

payments made for the purchase of treasury shares of Rs.1,389 million for the year ended March 31, 2025, as compared to payments made for the purchase of treasury shares of Rs.0 million for the year ended March 31, 2024; and

·

proceeds from the issuance of non-controlling interest (“NCI”) equity shares in a subsidiary of Rs.7,056 million for the year ended March 31, 2025, as compared to proceeds from issuance of NCI equity shares in a subsidiary of Rs.0 million for the year ended March 31, 2024.

 

Principal debt obligations

The following table summarizes our principal debt obligations (excluding obligations under leases) outstanding as of March 31, 2026:

 

Payments due by period

Principal debt obligations

Total

Less than 1 year

1-5 years

More than 5 years

(Rs. in millions)

Short-term borrowings (includes bank overdraft)

Rs.

59,135

Rs.

59,135

Rs.

-

Rs.

-

Long-term borrowings

Rs.

3,799

Rs.

3,799

Rs.

-

Rs.

-

Total obligations

Rs.

62,934

Rs.

62,934

Rs.

-

Rs.

-

Annual rate of interest

The following table provides details of annual rates of interest for our principal debt obligations (excluding obligations under leases) outstanding as of March 31, 2026:

 

Debt

Amounts in Millions

Currency (1)

Interest Rate (2)

Working capital borrowings And Pre-shipment credit

59,135

RUB

Key rate + 348 bps to 398 bps

MXN

TIIE + 1.35%

INR

T-bill + 35 bps to 55 bps

REPO + 75 bps

BRL

CDI+1.55%

Long term borrowings

3,799

INR

3 Months T-bill + 84 bps

 

(1)

“BRL” means Brazilian reals, “INR” means Indian rupees, “MXN” means Mexican pesos and “RUB” means Russian rubles.

(2)

“CDI” means Brazilian interbank deposit rate (Certificado de Depósito Interbancário), “Key rate” means the key interest rate published by the Central Bank of Russia, “REPO” means the “Repurchasing option” rate published by the Reserve Bank of India , “SOFR” means Secured Overnight Financing Rate, “T-bill” means India Treasury bill interest rate, “TIIE” means the Equilibrium Inter-Banking Interest Rate (Tasa de Interés Interbancaria de Equilibrio).

 

 

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Our short-term borrowings from banks are repayable within 6 to 12 months from the date of drawdown. Our objective in determining the borrowing maturity is to ensure a balance between flexibility, cost and continuing availability of funds.

 

Subject to obtaining certain regulatory approvals, there are no legal or economic restrictions on the transfer of funds between us and our subsidiaries or for the transfer of funds in the form of cash dividends, loans or advances.

 

Consistent with our risk management policy, we use interest rate swaps to mitigate the risk of changes in interest rates.

 

Material cash requirements

During the year ended March 31, 2026 our principal cash requirements were utilized for the purchase of property, plant and equipment of Rs.23,017 million, other intangible assets of Rs.13,698 million and investments of Rs.27,116 million.

 

As of March 31, 2026, we had committed to spend Rs.9,716 million in capital expenditures under agreements to purchase property, plant and equipment. These amounts are net of capital advances paid in respect of such purchase commitments.

 

These commitments will be funded through the cash flows generated from operations, cash and cash equivalents, other investments and the cash flows from borrowings as required.

 

As of March 31, 2026 and 2025, we had uncommitted lines of credit from banks of Rs.49,109 million and Rs.50,904 million, respectively.

 

5.C.

Research and development, patents and licenses, etc.

 

Research and Development

 

Our research and development activities can be classified into several categories, which run parallel to the activities in our principal areas of operations:

 

·

Global Generics , where our research and development activities are directed at the development of product formulations, process validation, bioequivalence testing and other data needed to prepare a growing list of drugs that are equivalent to numerous brand name products for sale in the highly regulated markets of the United States and Europe as well as emerging markets. Global Generics also includes our biologics business, where research and development activities are directed at the development of biologics products for the emerging as well as highly regulated markets. Our biologics research and development facility caters to the highest development standards, including cGMP, Good Laboratory Practices and bio-safety level IIA. Global Generics also include the products where we focus on the research, development, and commercialization of differentiated formulations.

 

·

Pharmaceutical Services and Active Ingredients , where our research and development activities concentrate on development of chemical processes for the synthesis of API for use in our Global Generics segment and for sales in the emerging and developed markets to third parties. Our research and development activities also support our pharmaceutical services business, where we continue to leverage the strength of our process chemistry and finished dosage development expertise to target innovator as well as emerging pharmaceutical companies. The research and development is directed toward providing services to support the entire pharmaceutical value chain, from discovery all the way to the market.

 

In the years ended March 31, 2026, 2025 and 2024, we expended Rs.24,058 million, Rs.27,380 million and Rs.22,873 million, respectively, on research and development activities. These increases were primarily on account of higher developmental expenditures in our Global Generics business and PSAI business. Each of these business segments has its own research and development and patent policies, and has numerous products in various stages of development. For further information on these policies and these products, see “Item 4. Information on the Company - Item 4.B Business overview.”

 

Patents, Trademarks and Licenses

 

We have filed and been issued num

e

rous patents in our principal areas of operations: Global Generics and Pharmaceutical Services and Active Ingredients. We expect to continue to file patent applications seeking to protect our innovations and novel processes in several countries, including the United States. Any existing or future patents issued to or licensed by us may not provide us with any competitive advantages for our products or may even be challenged, invalidated or circumvented by our competitors. In addition, such patent rights may not prevent our competitors from developing, using or commercializing products that are similar or functionally equivalent to our products. As of March 31, 2026, we have more than 2,676 trademarks filed with the Registrar of Trademarks in India which are either registered or are pending registration. We have also filed registration applications for non-U.S. trademarks in other countries in which we do business. We market several products under licenses in several countries where we operate.

 

 

62

 

 

5.D.

Trend Information

 

Inflation

 

In recent years, there has been an accelerated rate of global inflation (a trend which might continue in the near future) that has resulted, and may continue to result, in increased costs of labor, raw materials, other supplies and freight and distribution costs, among others. For the pharmaceutical industry, the pricing dynamics of our products generally does not provide the opportunity to pass on such costs to customers. Inflation may also result in higher interest rates and increased costs of capital. For additional details, see the discussion in Item 3.D. of this report under “Risk factors - Current economic conditions may adversely affect our industry, financial position, results of operations and cash flows.”

 

Military conflicts

 

Countries and regions experiencing political and economic instability or armed conflicts (including Russia, Ukraine and the Middle East) can have adverse business, operational or financial impacts on us. For example, geopolitical instability and armed conflict and hostilities have disrupted and may continue to disrupt global supply chains, trade routes, energy markets, and transportation infrastructure. Current instability in the region has contributed to volatility in crude oil, natural gas, and petrochemical markets, which directly and indirectly affect the cost and availability of key pharmaceutical inputs, including solvents, intermediates, excipients, and packaging materials. Increases in energy linked input costs and related supply interruptions could raise our cost of goods sold, compress margins, and adversely impact profitability coverage, especially for products subject to fixed pricing, regulated pricing environments, or long term supply contracts.

 

We are exploring several strategies to strengthen our business continuity safeguards, including diversified supply procurement and alternative coverage solutions.

 

For additional details, see the discussion in Item 4.B. of this report under “Our Principal Areas of Operations - Global Generics Segment - Russia and other Countries of the former Soviet Union and Romania - Impact on our Operations due to the military conflict between Russia and Ukraine” and Item 3.D. of this report under “Risk Factors - We have operations in certain countries  and geographies susceptible to political and economic instability that could lead to disruption or other adverse impact on such operations”.

 

Others

 

For additional trend information, please see “Item 5.A - Fiscal Year Ended March 31, 2026 compared to Fiscal Year Ended March 31, 2025” and “Item 4. - Information on the Company”. 

5.E.

Critical Accounting Estimates

 

Not Applicable.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6.A.

Directors and senior management

 

The list of our directors and executive officers and their respective age and position as of March 31, 2026 was as follows:

 

Directors Name (1)	Age (in yrs.)	Position
Mr. K. Satish Reddy (2)(3)	58	Chairman
Mr. G.V. Prasad (2)(4)	65	Co-Chairman and Managing Director
Mr. Leo Puri	65	Director
Ms. Shikha Sharma	67	Director
Dr. K.P. Krishnan	66	Director
Ms. Penny Wan	60	Director
Mr. Arun M. Kumar	73	Director
Dr. Claudio Albrecht	66	Director
Dr. Alpna Seth	62	Director
Mr. Sanjiv Mehta	65	Director

 

(1)

Except for Mr. K. Satish Reddy and Mr. G.V. Prasad, all of the directors are independent directors under the corporate governance rules of the New York Stock Exchange.

(2)

Full-time director.

(3)

Brother-in-law of Mr. G.V. Prasad.

(4)

Brother-in-law of Mr. K. Satish Reddy.

 

The Board of Directors at its meeting held on May 12, 2026, approved the appointment of Mr. Srikanth Velamakanni as an Additional Director, categorized as an Independent Director. Such appointment is for a term of five consecutive years, from July 1, 2026 to June 30, 2031, not liable to retire by rotation. Such appointment is subject to the approval of the shareholders at the ensuing annual general meeting.

Executive Officers

 

We classify our officers as “executive officers” if they have membership on our Management Council. Our Management Council consists of various business and functional heads and is also referred to as our senior management. The list of our executive officers and their details as of March 31, 2026 was as follows:

 

Name and Designation	Education/Degrees Held	Age	Experience in years	Date of commencement of employment	Particulars of last employment
Mr. K. Satish Reddy Chairman	B. Tech., M.S. (Medicinal Chemistry)	58	34	January 18, 1993	Promoter Director, Globe Organics Limited
Mr. G.V. Prasad Co-Chairman and Managing Director	B. E. (Chem. Eng.), M.S. (Indl. Admn.)	65	42	June 30, 1990	Promoter Director, Benzex Labs Private Limited
Mr. Erez Israeli Chief Executive Officer	Graduate Bar Ilan University MBA in Finance and Marketing Bar Ilan University	59	32	April 2, 2018	Executive Officer, Enzymotec
Mr. M.V. Narasimham Chief Financial Officer	Chartered Accountant	57	34	June 12, 2000	Executive, Sanmar Group
Mr. M.V. Ramana Chief Executive Officer, Global Generics (1)	MBA	57	34	October 15, 1992	-
Mr. Sanjay Sharma Chief Operating Officer (2)	B. Tech (IIT), Business Leader’s program (IIM) and General Management program (IIM)	57	35	August 1, 2017	Integrated Supply Chain Operations (Coca Cola) for India and South Asia
Mr. Deepak Sapra Chief Executive Officer – API and Services	B.E., PGDM, MBA	51	26	January 23, 2003	Asst. Divisional Engineer, Indian Railways
Mr. Patrick Aghanian Head - Consumer Health Organization (3 )	MBA, BA	61	38	October 7, 2019	Global Head of Zentiva
Mr. Phanimitra B Chief Digital and Information Officer	Bachelors in Engineering From BITS Pilani and an MBA from IIM Bangalore	46	22	July 14, 2014	Senior Manager- Hewlett Packard
Mr. Krishna Venkatesh Global Head  – Integrated Product Development Organisation (4)	MS degree in Pharmaceutics from University of Mississippi and a B. Pharm degree from BITS Pilani	52	30	March 18, 2010	Director - Teva Pharmaceuticals
Mr. Sushrut Kulkarni Global Head – Integrated Product Development Organisation (5)	Masters in Pharmacy	56	29	May 4, 2022	Executive Vice President and Head - Global Pharmaceutical Development, Glenmark
Mr. Milan Kalawadia Chief Executive Officer, North America	Bachelor of Science degree in Management Science and Information Systems from Rutgers University, School of Business; and an MBA from Carnegie Mellon University, Tepper School of Business	50	20	April 10, 2006	-
Ms. Archana Bhaskar Chief Human Resource Officer (6)	MBA (IIM)	58	36	June 15, 2017	Human Resources head (Global commercial business) Royal Dutch Shell
Dr. Jayanth Sridhar Global Head of Biologics (7)	BE, M Sc, M.Sc - Technology, PhD	55	26	May 17, 2021	Senior Vice President, Biological E. Limited
Mr. M.S. Madhu Sundar Global Head - Quality and Pharmacovigilance (8)	M. Tech (IIT)	52	28	October 23, 2017	Proprietor, Quest Consulting
Mr. Sandeep Khandelwal, Global Generics India Head (9)	MBA (NMIMS)	51	28	October 3, 2018	Commercial Director (Women’s Health, Gastroenterology, Hepatic Care & OTC) Abbott India Limited

 

 

63

 

 

(1)

The designation of Mr. M.V. Ramana has changed from Chief Executive Officer, Branded Markets (India and Emerging Countries) to Chief Executive Officer, Global Generics, effective from April 1, 2026.

(2)

The designation of Mr. Sanjay Sharma has changed from Global Head Operations and Chief Human Resources Officer (CHRO) to Chief Operating Officer, effective from April 1, 2026.

(3)

The designation of Mr. Patrick Aghanian has changed from Chief Executive Officer, Europe Generics to Head - Consumer Health Organization, effective from April 1, 2026.

(4)

The designation of Mr. Krishna Venkatesh has changed from Global Head of Quality & Pharmacovigilance to Global Head - Integrated Product Development Organisation , effective from April 1, 2026.

(5)

Mr. Sushrut Kulkarni resigned from the position of Global Head of Integrated Product Development Organsiation effective as of close of business hours on May 8, 2026.

(6)

Ms. Archana Bhaskar resigned from the position of Chief Human Resource Officer effective as of close of business hours on November 30, 2025.

(7)

Dr. Jayanth Sridhar resigned from the position of Global Head of Biologics effective as of close of business hours on January 31, 2026.

(8)

Mr. M.S. Madhu Sundar was elevated as Global Head of Quality and Pharmacovigilance and was also inducted as a member of our Management Council, effective from April 1, 2026.

(9)

Mr. Sandeep Khandelwal, our Global Generics India Head, was inducted as a member of our Management Council, effective as of May 12, 2026.

 

There was no arrangement or understanding with major shareholders, customers, suppliers or others pursuant to which any director or executive officer referred to above was selected as a director or member of our Management Council.

 

Mr. K. Satish Reddy

is the Chairman of our company. He joined us in 1993 and since then has held positions of increasing responsibility. He led the organization’s transition from a uni-focused manufacturer of active pharmaceutical ingredients (API) to a company that moved up the value-chain with a diverse product portfolio of Finished Dosage Formulations. He oversaw the expansion and establishing of a strong footprint for finished dosage products in Russia, China and other emerging markets.

 

As an active member of various major pharmaceutical industry associations and governmental panels, Mr. K. Satish Reddy plays a key role in shaping policies concerning the pharmaceutical sector that include India’s patent law, drug pricing and important amendments to India’s Drugs & Cosmetics Act. He is the Member of the Confederation of Indian Industry (“CII”) Governing Council and a Member of the International Generic and Biosimilar Medicines Association (“IGBA”) CEO Advisory Committee. He also plays a key role in shaping skill development in India. Mr. K. Satish Reddy is the governing board member of the Young India Skill University and in the past, he was the Chairman of the Life Sciences Skill Development Council under The National Skill Development Corporation (“NSDC”), an organization, working in partnership with various stakeholder groups, to serve and address the skill shortfalls in the life sciences sector across India. He has also led various National Committees on the India G20 Presidency for 2023. He was the President of the Indian Pharmaceutical Alliance, a premier industry association of leading research based Indian companies from 2019-2021 and 2013-2015. He was the Chairman of the Board of Governors of the National Institute of Pharmaceutical Education and Research (“NIPER”) Hyderabad. He was a member of the Drugs Technical Advisory Board of India, the Chairman of the Andhra Pradesh Chapter of the CII and head of its National Committee on Pharmaceuticals. In May 2015, the Ministry of Labour and Employment, Government of India, nominated him as Chairman of the Board of Governors of the National Safety Council.

 

Keeping true to the legacy of the founder of our company, Dr. Anji Reddy, he drives our Corporate Social Responsibility initiatives. The Dr. Reddy’s Foundation, of which Mr. K. Satish Reddy is Chairman, works to help the less privileged create sustainable livelihoods through appropriate vocational education. He is a Trustee of the Naandi Foundation, which works in the areas of child rights and education, safe drinking water, agriculture export marketing support and other much needed empowerment initiatives that India need. He is also one of the Directors of Dr. Reddy’s Institute of Life Sciences, the not-for-profit institute engaged in pioneering and innovative research in unifying areas of chemistry, biology and chemical biology. Mr. K. Satish Reddy was identified as a “Young Global Leader for 2007” by the World Economic Forum, and was presented with the “IBLA - India Corporate Citizen of the Year” award by CNBC in 2005 for his contributions to Corporate Social Responsibility. He holds a degree in Chemical Engineering from Osmania University, India, and an M.S. in Medicinal Chemistry from Purdue University, USA, where he received the 2009 Distinguished Alumnus Award from the School of Pharmacy and Pharmaceutical Sciences.

 

Mr. G.V.

Prasad

holds a graduate degree in Industrial Administration from Purdue University and an undergraduate degree in Chemical Engineering from the Illinois Institute of Technology, Chicago.

 

He has been associated with Dr. Reddy’s since 1986 as a Board Member and has been in a full-time executive role since 1990. Under his leadership, Dr. Reddy’s has evolved from a midsized domestic enterprise into a diversified and trusted global pharmaceutical company, with revenues of nearly U.S.$3.6 billion in the year ended March 31, 2026. Mr. Prasad strongly emphasizes Deep Science, Good Governance, Progressive People Practices, and Sustainability, and actively mentors leaders to help them realize their full potential while contributing meaningfully to society.

 

He is deeply engaged in social and environmental initiatives and is actively involved with non-governmental organizations such as Aakar Asha Trust, which operates a free hospital providing corrective surgeries for children with deformities, and the World Wide Fund for Nature (“WWF”), Telangana Chapter. He also serves as a Board Member of the Indian School of Business (“ISB”).

 

 

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Mr. Prasad has been serving as the Honorary Consul of the Kingdom of Belgium in Hyderabad since April 2019, contributing to the strengthening of bilateral economic, academic, and cultural ties between Belgium and India.

 

Outside of his professional commitments, he is a photography enthusiast, avid birdwatcher, and keen traveller, with a particular interest in wilderness destinations.

 

In recognition of his leadership and impact, Mr. Prasad was named among the “Top 50 CEOs India Has Ever Had” by Outlook magazine in 2017 and was recognized as one of the “Top 5 Most Valuable CEOs of India” by Businessworld in 2016. He was also featured in the Medicine Maker 2018 Power List of influential professionals shaping the future of drug development and was named India Business Leader of the Year by CNBC Asia in 2014 and 2015.

 

Mr. Leo Puri

has been a member of our Board of Directors since October 2018, and serves as the lead independent director. Mr. Puri was the Managing Director of UTI Asset Management Co. Ltd. from August 2013 to August 2018. Mr. Puri served as the Chairman of JP Morgan Chase for South and South East Asia in 2020-2024.

In his career of

nearly four decades, he worked as Director with McKinsey and Company and as Managing Director with Warburg Pincus. Mr. Puri has worked in the United Kingdom, the United States and Asia. Since 1994, he has primarily worked in India. At McKinsey, he has advised leading financial institutions, conglomerates and investment institutions in strategy and operational issues. He has contributed to the development of knowledge and public policy through advice to regulators and government officials. At Warburg Pincus, he was responsible for leading and managing investments across industries in India. He also contributed to financial services investments in the international portfolio as a member of the global partnership. Mr. Puri is an independent director on the Board of Amadeus IT group based in Madrid, and is the independent chairman of Fortis Healthcare Ltd. He has served as an independent director on the boards of Tata Sons, Hindustan Unilever, and Infosys in the past. Mr. Puri has a Master’s degree in P.P.E. from University of Oxford, and a Master’s degree in Law from University of Cambridge.

 

Ms. Shikha Sharma

has been a member of our Board of Directors since January 2019. Ms. Sharma was the Managing Director and CEO of Axis Bank, India’s third largest private sector bank from June 2009 until December 2018. As a leader adept at managing change, she led the Bank on a transformation journey from being primarily a corporate lender to a bank with a strong retail deposit franchise and a balanced lending book. Ms. Sharma has more than three decades of experience in the financial sector, having begun her career with ICICI Bank Ltd in 1980. During her tenure with the ICICI group, she was instrumental in setting up ICICI Securities. As Managing Director and CEO of ICICI Prudential Life Insurance Company Ltd., she led that company to become the No. 1 private sector life insurance company in India.

 

Ms. Sharma was a member of the Reserve Bank of India (“RBI”) Technical Advisory Committee, the RBI’s panel on Financial Inclusion, and the RBI’s Committee on Comprehensive Financial Services for Small Businesses and Low-Income Household. She chaired CII’s National Committee on Banking from 2015-2017. Ms. Sharma holds an MBA from the Indian Institute of Management, Ahmedabad, B.A. (Hons.) in Economics and a Post Graduate Diploma in Software Technology from National Centre for Software Technology (“NCST”), Mumbai. Ms. Sharma is also a director on the Boards of Mahindra and Mahindra Ltd, Mahindra Electric Automobile Ltd, Piramal Finance Limited, Tata Consumer Products Ltd, Tata Digital Private Ltd and Tech Mahindra Ltd. She is also an advisor to Piramal Finance Ltd

.

Dr. K.P. Krishnan

served in the Indian Administrative Service (“IAS”) for 37 years and retired on 12/31/2019. In his IAS career, he served in various positions in the Government of Karnataka, in the Government of India and at the World Bank. Besides field positions like District Collector Mangalore, he served in Government of Karnataka departments dealing with agriculture, co-operatives and marketing, urban development and infrastructure, commercial taxes and finance.

 

His key roles in the Government of India include:

 

1.

Secretary, Ministry of Skill Development and Entrepreneurship (2/1/2017 to 12/31/2019);

 

2.

Special/Additional Secretary, Department of Land Resources, Ministry of Rural Development (2014-2017);

 

3.

Additional Secretary, Department of Economic Affairs, Ministry of Finance (2013- 2014);

 

4.

Secretary, Prime Minister’s Economic Advisory Council (2010- 2012); and

 

5.

Joint Secretary, Department of Economic Affairs, Ministry of Finance (2005-2010).

 

In these positions, he served on the boards of corporations, banks as well as boards of statutory regulatory authorities.

 

 

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In parallel with his government career, Dr. Krishnan has been a strong researcher and academic. Besides being visiting faculty at IIM Bangalore, ISB and Ashoka University, he held the prestigious Bok Visiting Professorship of Regulation at the University of Pennsylvania Law School in 2012-13. From 8/7/2020 until 12/31/2021, he served as the IEPF Chair Professor of Economics at the National Council of Applied Economic Research (NAER) New Delhi. From Feb, 2022 to Feb., 2024, he also served as Honorary Research Professor at the Centre for Policy Research (CPR) New Delhi and at present he is Distinguished Fellow at the Isaac Centre for Public Policy, Ashoka University.

 

At present, he is an independent Director/advisory board member of both for-profit companies and non-profit organizations, including Tata Consumer Products Ltd., Dr. Reddy’s Laboratories Ltd., Shriram Capital Pvt. Limited, ASREC India Ltd, Helios Trustee Private Ltd., CUPDF, IIHS, Razorpay Advisory Board and Sanmar Group Corporate Board.  Dr. Krishnan was educated in Economics at St. Stephens College and Law at the Campus Law Centre University of Delhi. He joined IIM Bangalore in 1999 and was awarded FPM (Ph.D) in Economics in the 2003 graduation ceremony.

Ms. Penny Wan

has been a member of our Board of Directors since January 2022. She previously served as Amgen’s Vice President of the Japan and Asia Pacific region. With over 20 years of experience in the biopharmaceuticals industry, she led Amgen’s geographic expansion efforts in the region. Since joining Amgen in 2014, she has been instrumental in building its commercial presence across the region, ensuring that innovative medicines reach patients, payers and physicians in these markets. Prior to Amgen, Ms. Wan was General Manager of Roche Pharma China, which became one of the fastest growing multinational corporations in that country. She spearheaded innovative partnership solutions with government, professional and patient groups to improve access and outcomes for patients. Ms. Wan also worked in the pharmaceuticals division of Wyeth, where she held various management, marketing and commercial positions in the United States, Hong Kong, and Taiwan. During her time in China, Ms. Wan served as an executive committee member of RDPAC (R&D based Pharmaceutical Association Committee), where she led the industry-shaping efforts in biologics and served as Vice President of the Shanghai Association of Enterprises with Foreign Investments. She received the 2013 White Magnolia Memorial Award from the Shanghai municipality in recognition of her contributions to the city. Ms. Wan brings deep experience across healthcare. She has comprehensive management experience and strategic skills in leading sales and marketing, manufacturing, business development, start-up, country and regional operations in global markets, including China and Japan in world class pharma and healthcare companies. Additionally, Ms. Wan has worked across multiple sectors in pharmaceuticals, infant formula, nutrition, vaccines, immunology, oncology, cardiovascular, bone and mental health, among others. Ms Wan co-founded and is the chairwoman of Heranova Life Sciences Holding. Ms. Wan holds a Graduate Diploma in business administration from Monash University and Chinese University of Hong Kong and a Bachelor of Science in Biochemistry and Pharmacology from Monash University of Australia.

 

Mr. Arun M. Kumar

has been a member of our Board of Directors since August 2022. He is a Managing Partner at Celesta Capital, a leading deep technology venture capital firm that leverages synergies between leading centres of innovation in the United States and India to create globally impactful enterprises. In February 2022, Mr. Arun completed his five-year term as the Chairman and CEO of KPMG in India. In this role, he led a large organization of thousands of talented professionals engaged in providing assurance, tax, and advisory services, through a period of extraordinary organizational transformation and growth. He was a member of the global board of directors of KPMG as well as its Europe, Middle East and Africa (“EMA”) board. Mr. Arun previously served in President Obama’s Administration as Assistant Secretary of Commerce for Global Markets and as Director General of the U.S. & Foreign Commercial Service (“USFCS”), under the leadership of Commerce Secretary Penny Pritzker. As the Administration’s lead official to promote U.S. exports, foreign direct investment, and enhanced market access around the world, he led a team of 1,700 professionals in 78 countries and all 50 states of the United States. The Global Markets unit and USFCS saw substantial growth in coverage and impact during his tenure.

 

During that time, Mr. Arun also had a special focus on the U.S.-India economic relationship, helping establish high level bilateral dialogues in areas ranging from innovation to infrastructure and working closely with the U.S. India CEO Forum. Prior to his nomination by President Obama, Mr. Arun was a partner at KPMG LLP in the United States and was a member of the Board of the firm. Based in Silicon Valley, he led KPMG’s Management Consulting practice in the West. Before joining KPMG, he was a co-founder, CEO, and CFO of three technology companies in Silicon Valley; over the years, Mr. Arun has been a mentor to entrepreneurs in Silicon Valley and India. Mr. Arun is a member of the Council on Foreign Relations. Mr. Arun is an advisor to the Board of Directors of the U.S.-India Business Council. He serves on the board of Indiaspora, an organization that links accomplished and influential people of Indian origin in many countries to enhance the relationships between their country of residence and India. Mr. Arun serves as a director on the Board of our wholly owned U.S. subsidiary Dr. Reddy’s Laboratories Inc. and serves as a Nominee Director on the Board of Agnikul Cosmos Private Limited. He is the author of “The Global Trade Paradigm,” published by HarperCollins in 2023. Mr. Arun received his master’s degree from the MIT Sloan School of Management. He earned his undergraduate degree, in physics, as a National Science Talent Scholar, from the University of Kerala.

 

Dr. Claudio Albrecht

most recently is a co-founder and managing partner of Albrecht, Prock & Partners and, until August 31, 2018, was the CEO of the publicly listed STADA AG. Before this assignment Dr. Albrecht worked in and with the Generic industry for more than 30 years. Dr. Albrecht started his pharmaceutical career at Sandoz in 1987 in Austria and became General Manager of its generic businesses in the Netherlands, in Germany and the USA, before leaving to become CEO of the Ratiopharm Group in 2000. In his time as CEO of the Ratiopharm Group, he was driving the internationalization process of the German drug maker beyond Europe and was material in the initiation of the development, manufacturing and commercialization project of Ratiopharm’s Biosimilars program. Ratiopharm was first to market with the Biosimilar Filgrastim in Europe. In 2007, Dr. Albrecht founded together with Peter Prock the strategy consulting firm CoMeth in Slovakia before he was asked to assume the role of CEO and Chairman of the Board of the Actavis Group. Actavis was operating in over 50 countries worldwide with standalone 2012 revenues in excess of € 2 billion. Under his leadership, Actavis was sold to Watson for U.S.$ 6 billion, which represented an above average industry multiple. As CEO of Actavis, Dr. Albrecht initiated a total turn around process and started a joint venture for the development and commercialization of recombinant Insulin and its analogues with the objective to build the first Generic “one stop shop” in Diabetes. After the divestiture of Actavis, Dr. Albrecht founded with Peter Prock the Zug/Switzerland based Albrecht, Prock & Partners AG (“AP&P”). Together with private equity and strategic investors, AP&P worked on numerous acquisition projects amongst which, the Take Private initiative for STADA AG was the most significant. STADA AG was the largest leveraged buyout of a German listed company ever. Dr. Albrecht agreed to manage the company for an interim period of one year and led all the necessary changes and strategic initiatives. In September 2018, Dr. Albrecht returned to AP&P. Claudio holds a PhD in law.

 

 

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Dr. Alpna Seth

served as the President and Chief Executive Officer of Nura Bio Inc., a neurology pharmaceutical company for three years, until she retired starting October 2022. Prior to this, Dr. Seth was the Chief Operating Officer of Vir Bio Inc., a biopharma pioneer for treating infectious diseases. Before that, for nearly two decades from 1998 to 2017, Dr. Seth was a senior executive at Biogen Inc., a leading global biopharmaceutical company. Here, over the years she undertook several leadership roles with increasing profit and loss responsibility, spanning research and development to commercialization of new drugs, globally. She was instrumental in establishing Biogen’s strategic expansion in Asia as a founding Managing Director in India with its HQ in Gurgaon and then returning to Biogen’s global HQ in the U.S to lead the launch of its largest multibillion-dollar neurology drug franchise world-wide. In 2014 as Senior Vice President, she moved to Europe to spearhead Biogen’s foray into biosimilars with the creation of one of the fastest growing biosimilars businesses in the industry. Along with deep and broad industry expertise in biopharma, Dr. Seth’s experience includes health care and life sciences tools, industrial biotechnology, diagnostics, and management consulting. In addition to North America, she has lived and worked in Asia and in Europe. Dr. Seth has a track-record of creating and leading new businesses across therapeutic areas and modalities including biologics, small molecules, gene therapy and RNA-based therapeutics. In addition, Dr. Seth brings extensive corporate governance and strategic oversight experience as a member of the Board of Directors of large publicly listed multinationals and VC-funded private biotech companies. Dr. Seth previously served on the board of directors of Seagen Inc. from 2018 until its acquisition by Pfizer Inc. in December 2023. Dr. Seth currently serves as an independent Director on the boards of two public (NASDAQ listed) companies- Bio-Techne and Keros Therapeutics. Dr. Seth received a Ph.D. in biochemistry and molecular biology from University of Massachusetts Medical School and conducted her post-doctoral research at Harvard University in immunology and structural biology, both as a Howard Hughes Medical Institute Fellow. She is also a graduate of Harvard Business School’s Advanced Management Program.

 

Mr. Sanjiv Mehta

is the Executive Chairman of

L

Catterton India, a private equity enterprise, Board Member (Non-Executive) of Air India Ltd & Danone S.A., France and is the President Commissioner (Non-Executive Chairman) of PT Unilever TbK, Indonesia. Mr Mehta has been the Chairman/ CEO and Managing Director (2013-23) of Hindustan Unilever Limited (“HUL”) which is India’s foremost fast-moving consumer goods company. During his 10 years at the helm of HUL, its market capitalization increased from $17 billion to $76 billion, making it the fifth most valuable company in India and the most valuable business for Unilever. Mr. Mehta was also the President of Unilever South Asia, having a combined turnover of $9 billion, and a member of ‘Unilever Leadership Executive’, the global executive board of the consumer goods giant. Mr. Mehta has been the CEO / Executive Chairman of Unilever Businesses in different parts of the world for 21 years from 2002-23. He was Chairman and Managing Director of Unilever Bangladesh Limited (2002-06), Chairman and CEO of Unilever Philippines Inc. (2007-08), Chairman of Unilever - North Africa and Middle East (2008-13) and took over India and South Asia responsibilities from 2013. In each of these roles he left his imprint by turning around businesses in trouble, winning major competitive battles and accelerating growth and margins.

 

Mr. Mehta has done his Bachelor’s in Commerce, Chartered Accountancy and has also completed his Advanced Management Program (Harvard Business School). Mr. Mehta has been the President of India’s oldest and largest trade body FICCI (Federation of Indian Chambers of Commerce and Industry) during 2021-22, is a member of the South Asia Advisory Board of Harvard Business School and is Chairman Emeritus of ‘Vikaasa’, a coalition of top Indian and multi-national companies.

 

During the period when Mr. Mehta was heading HUL it won several recognitions, including the prestigious The Economic Times ‘Company of the Year’ & ‘Corporate Citizen of the Year’ awards, Business Standard’s ‘Company of the year’ award, the ‘Best Governed Company’ award by the Asian Centre for Corporate Governance and Sustainability and the 'Outstanding Company of the Year' award at CNBC-TV18’s India Business Leader Awards (“IBLA”). Forbes rated HUL as the most innovative company in India and the 8th most innovative company in the world. Aon Hewitt in a global study rated HUL as the 3rd best company globally for building leaders. Mr. Mehta was conferred the honorary degree of ‘Doctor of Philosophy in Business Management’ by Xavier University (Xavier Institute of Management) in 2019. He has received several personal recognitions including the ‘Best CEO Multinational’ by Forbes, the ‘Management Man of the Year’ by Bombay Management Association, the ‘CA Business Leader’ by The Institute of Chartered Accountants of India, the ‘Best Transformational Leader’ by the Asian Centre for Corporate Governance and Sustainability, the ‘Business Leader of the Year’ by The Economic Times, ‘Best CEO’ Award from Business Today, Pralhad P. Chhabria Memorial Global Award, the ‘JRD Tata Corporate Leadership award’ by the All India Management Association, the ‘Sir Jehangir Ghandy Medal’ by Xavier School of Management (XLRI), Jamshedpur, ‘IMPACT Person of the Year’ by exchange4media group (Business World), ‘Lifetime Achievement Award’ by CEO’s Association for Inclusive India -SKOCH Group, ‘CEO of the year’ by Business Standard and ‘Best of the Best CEO’s’ by Fortune. He has also been inducted into the ‘Hall of Fame’ by The Institute of Chartered Accountants of India.

 

 

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Biographies - Executive Officers

 

Mr. Erez Israeli

is Chief Executive Officer of our company and prior to that he was our Chief Operating Officer and the Global Head of Generics and PSAI business. He joined us in 2018. With over 32 years of experience in the pharmaceutical industry, Mr. Israeli is an accomplished leader with a proven track record of achievement. Prior to joining us, Mr. Israeli was President and Chief Executive Officer of Enzymotec. Prior to that, he spent 23 years working at Teva Pharmaceutical Industries Limited (“Teva”), where he held several leadership positions in the API and pharmaceutical (Generics, Specialty and OTC) businesses. His positions of responsibility included Vice President Marketing & Sales for North America, Vice President Asia Operations, President of Teva API, Group Executive Vice President, Head of Global Quality, and President & CEO of Growth Markets. He was also the Head of the Global Quality function for Teva and has held Board positions at subsidiaries of Teva. He graduated from Bar Ilan University in Israel, majoring in art, economics and business administration, and received an MBA in Finance and Marketing from Bar Ilan University. Under Mr. Israeli leadership, our company has seen significant growth in both revenue and profitability. Our company has concluded acquisitions of key assets in India and internationally as well as launched several first-to-market products. Mr. Israeli has also steered us through our pandemic response, ensuring that commitments to supply medicines to patients and to employees’ safety are met. Under Mr. Israeli’s guidance, we have also broken new ground on digitalization across Research & Development, Manufacturing and Sales – along with our focus on innovation, this will yield significant dividends in the years to come.

 

Mr. M.V. Ramana

is our Chief Executive Officer, Global Generics and leads innovation for our company. In this role, he leads a multicultural team in 45 countries. A passionate believer in the organization’s purpose of accelerating access to innovative and affordable healthcare, Mr. Ramana has spearheaded our company’s foray into several new markets and spaces and has secured its position as an established generics leader in them. He is also a member of the Management Council of our company. As the CEO of Branded Markets, Mr. Ramana is responsible for dealing with complex, ambiguous business environments which present a huge growth potential. In doing so, Mr. Ramana has been able to think ahead and build robust strategies which have delivered market beating growth in their respective spaces. Not only has he been able to push the envelope on new therapy areas, but has also built new age skills in the space of sales, marketing and portfolio building. Mr. Ramana has demonstrated ambidexterity and an appetite for risk as he spearheads disruptive spaces, navigating new business models and leveraging both deep science and technology platforms. Leading multiple workstreams across business units and geographies, he is currently engaged in building the Innovative Products side of the business across our company. Mr. Ramana joined us as a Management Trainee in 1992 in the International Marketing division of our Branded Formulations business. Since then, he has handled various critical assignments such as setting up the business in several countries across Asia, Latin America, Africa Russia, and the Middle East, as well as our joint venture in China. He holds an MBA from Osmania University, Hyderabad and is a graduate of the ISB-Kellogg management development program.

 

Mr. Sanjay Sharma

is our Chief Operations Officer.  He is a transformational leader with close to 35 years in the fast moving consumer goods and pharmaceuticals industries, handling a diverse set of roles spanning across Manufacturing, Supply Chain, Procurement, Sales, Portfolio Management and E

nvironmental, Social and Governance

(“ESG”) functions in both emerging and developed markets. In his present role, he is our head of Global Manufacturing Operations and leads our Product Selection to Commercialization, end-to-end Operations and ESG .  He also handles the responsibility of Chief Human Resources Officer (“CHRO”).

 

Prior to joining our company, he worked with Hindustan Coca-Cola as a Whole Time Director, where he led their Integrated Supply Chain Operations for India and South Asia.

 

Sanjay holds a bachelor’s degree in Chemical Engineering from IIT Delhi, and General Management from IIM Ahmedabad. He recently completed the Advanced Management Program (AMP) at Harvard Business School.

 

Mr. Deepak Sapra

is the Chief Executive Officer of API and Services. As part of his role, he heads our API business, the Aurigene Pharmaceutical Services Limited (“APSL”) business, public health initiatives and business-to-business collaborations for our company.

 

 

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Mr. Sapra joined our company in 2003 from the Indian Institute of Management (“IIM”), Bangalore and has since then undertaken various roles in Marketing, Sales, Business Development and Portfolio covering most markets around the world. He also led our COVID initiatives on therapeutics as well as on vaccines. Mr. Sapra’s education is in engineering and management.

 

Prior to joining our company, he worked in the Indian Railway Services, Government of India. He has also been a Fulbright fellow and a Chevening scholar. He is a published author and his first book was published in 2018. He is also the co-founder of a charitable trust that works for people with disabilities in eastern India.

 

Mr. Patrick Aghanian

serves as Head of Generics, Europe, and Head of Consumer Health.  He has been with us since 2019, and has worked in pharmaceuticals for 30 years.  He started his career with Glaxo SmithKline Consumer Health, where he held various General Management positions for 8 years.  He then moved to the prescription business, when he joined Novartis Pharma.  After 5 years with Novartis, he joined Sanofi, where he held various senior General Management and regional head roles for 10 years. His last assignment with Sanofi was to divest the European generic business in October 2018, now known as Zentiva. Mr. Aghanian has experience spanning originator, consumer health and generic pharmaceuticals, including specialist fields such as Oncology, Diabetes and rare diseases.  Patrick earned his Master of Business Administration (MBA) from the UCLA Anderson School of Management/University of California, Los Angeles and holds a Bachelor of Arts from the University of California, Los Angeles.

 

Mr. Phanimitra B.

serves as the Chief Digital and Information Officer of our company. In this role, he has global responsibility for Digital Transformation, Process Excellence and Information Technology Management of our company. Mr. Phanimitra joined our company in 2014 and played various roles – setting up the Analytics Centre of Excellence, leading corporate strategy and digital transformation for Dr. Reddy’s India and our Emerging Markets businesses. Before joining our company, he worked with Hewlett Packard for over 11 years with roles in strategy, analytics & transformation consulting for customers across industries in the United States, India and Asia-Pacific region. In 2021, he was listed in the Analytics India Magazine’s 50 Most Influential AI Leaders in India. He holds a Bachelors in Engineering from BITS Pilani and an MBA from IIM Bangalore.

Mr. Sushrut Kulkarni

serves as the Global Head of the Integrated Product Development Organization (“IPDO”). With more than 28 years of experience in the pharmaceutical industry, he specializes in product research and Development. He brings extensive expertise in diverse dosage forms, including oral solids, dermatological formulations, injectables, respiratory treatments, and transdermal systems. Mr. Kulkarni has played a pivotal role in leading technical, regulatory, and project management teams in product development, ensuring regulatory approvals, commercial launches, and subsequent life cycle management activities across various geographies. He is passionate about driving management teams to achieve new business heights. Throughout his career, Mr. Kulkarni has worked with esteemed pharmaceutical companies such as Glenmark, Zydus, Torrent, Sandoz, and Rhone Poulenc. He holds a master’s degree in pharmacy from Bombay College of Pharmacy, Mumbai University, and remains dedicated to leading management teams toward continued success.

 

Mr. M.V. Narasimham

serves as the Chief Financial Officer of our company. With a distinguished career spanning over three decades, he brings a wealth of expertise and strategic insights to the role. He is a Chartered Accountant by qualification and has held various pivotal positions within our company since joining in 2000. In his previous capacity as Deputy Chief Financial Officer of the company, he was responsible for global commercial business finance and global taxation, overseeing critical financial functions that spanned across geographies. His leadership was instrumental in steering the financial operations of our Pharmaceutical Services and Active Ingredients (PSAI) and Global Generics segments from 2006 to 2012. Under his stewardship, these businesses experienced significant growth and operational efficiencies. Since 2012, Mr. Narasimham has been at the helm of Corporate Finance, managing crucial areas such as Direct and Indirect Taxation, Consolidation, and Corporate Analytics. His role extended beyond traditional finance, encompassing the comprehensive management of our Global Business finance, including both India and international operations. His deep understanding of complex financial landscapes and his commitment to excellence have consistently driven our company’s financial strategy and performance.

 

Mr. Krishna Venkatesh

serves as our Global Head of the Integrated Product Development Organization (“IPDO”). With over 29 years of experience in the pharmaceutical industry, he brings deep expertise across product development, process engineering, technology transfer, quality, and manufacturing operations.

 

Mr. Venkatesh is passionate about building and enabling high‑performing management teams to drive sustainable business growth and operational excellence. He remains strongly committed to delivering long‑term value through innovation, collaboration, and disciplined execution.

 

Over the course of his distinguished career, he has worked with leading global pharmaceutical organizations, including Barr Pharmaceuticals and Teva Pharmaceuticals in the United States.

 

Mr. Venkatesh is a graduate of the General Management Program at Harvard Business School. He holds a Master’s degree in Pharmaceutical Sciences from the University of Mississippi and a Bachelor of Pharmacy (B.Pharm) from BITS Pilani.

 

 

Mr. Milan Kalawadia

serves as Chief Executive Officer, North America, and is based out of our Princeton, New Jersey office. He is responsible for leading our North America business and serves as a member of the Board of Dr. Reddy’s Laboratories, Inc. Mr. Kalawadia is an accomplished senior executive, having served our company in various positions of increasing responsibility for more than 20 years. Prior to his appointment as CEO-North America, Mr. Kalawadia served as Chief Commercial Officer-North America, responsible for the customer-facing and commercialization operations for the three main verticals of the core North America business: retail Rx, hospital/institutional injectable, and private label OTC. Mr. Kalawadia’s efforts as Chief Commercial Officer-North America were instrumental in driving our North America business to three consecutive years of growth over the $1 billion revenue threshold. He led the early efforts to develop strategies for our Biosimilars and Self-care & Wellness business units in the United States. He also played a critical role in driving various new growth initiatives, including the acquisition of over-the-counter brands; the development of our e-commerce presence on Amazon; and engaging with alternate channel partners.  Mr. Kalawadia holds a Bachelor of Science degree in Management Science and Information Systems from Rutgers University, School of Business; and a Master of Business Administration degree from Carnegie Mellon University, Tepper School of Business.

 

 

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Mr. Madhu Sundar

joined the company in October 2017 as the site head of the Pydibimavaram oral solid dose (“OSD”) cluster and has assumed responsibilities of increasing significance since. His last role was Head of Manufacturing for its OSD sites of the manufacturing network. His professional experience of 28 years span across manufacturing, Research & Development, Quality and Regulatory affairs between API and dosage forms. Among his professional interests are exploring the latest trends of digital in manufacturing, process analytical technologies and Lean. Mr. Madhu is a post graduate in Chemistry and a M. Tech in Chemical Analysis from IIT Delhi.

Mr. Sandeep Khandelwal

serves as our

Global Generics India Head

and leads the company’s business across Asia-Pacific, Australia, Africa, Ukraine, Romania and

other countries of the former soviet union (other than Russia). Sandeep brings 28 years of leadership experience across General Management, Sales, Marketing and functional roles, with deep sectoral expertise spanning pharmaceuticals, OTC products, fast moving consumer goods (FMCG) and consumer durables.

Prior to joining our company, Mr. Khandelwal held leadership positions at Abbott India, Marico Limited & Godrej-GE Appliances. He represents the organization at leading industry forums such as The Federation of Indian Chambers of Commerce and Industry (FICCI) and the Indian Pharmaceutical Alliance (IPA). He holds a Bachelors in Engineering from Mumbai University and an MBA from the Narsee Monjee Institute of Management Studies (NMIMS)

.

 

6.B.

Compensation

 

Directors’ compensation

Full-Time Directors

: The compensation of our Chairman and our Co-Chairman and Managing Director (who we refer to as our “full-time directors”) is divided into salary, commission and benefits. They are not eligible to participate in our stock option plans. The Nomination, Governance and Compensation Committee of the Board of Directors recommends the compensation for full-time directors. The compensation of the full-time directors is then approved by the Board. Appointment/re-appointment/compensation of the full-time directors is placed for approval of shareholders along with the proposal for their appointment or re-appointment. The salary, commission and benefits of the full-time directors for year ended March 31, 2026 were within the limits approved by our shareholders in line with the provisions of the Indian Companies Act, 2013.

 

The Chairman of our Board and our Co-Chairman and Managing Director are each entitled to receive a maximum commission of up to 0.75% of our net profit (as defined under the Indian Companies Act, 2013) for the fiscal year. The Nomination, Governance and Compensation Committee, which is entirely composed of independent directors, recommends the commission for the Chairman of our Board and our Co-Chairman and Managing Director within the limits of 0.75% each, of our net profits (as defined under the Indian Companies Act, 2013) for each fiscal year. The Board, based on the recommendation of the Nomination, Governance and Compensation Committee, approves the commission of the Chairman and Co-Chairman and Managing Director.

Non-Full Time Directors:

In the year ended March 31, 2026, none of our non-full time directors were paid any sum as attendance fees. Non-full time directors are eligible to receive a commission on our net profit (as defined under the Indian Companies Act) for each fiscal year. Our shareholders have approved a maximum commission of up to 1% of the net profits (as defined under the Indian Companies Act, 2013) for each fiscal year for all non-full time directors in a year. The Board determines the entitlement of each of the non-full time directors to commission within the overall limit. The non-full time directors were not granted stock options under the Dr. Reddy’s Employees Stock Option Scheme, 2002, the Dr. Reddy’s Employees ADR Stock Option Scheme, 2007 or the Dr. Reddy’s Employees Stock Option Scheme, 2018 in the year ended March 31, 2026.

 

 

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For the year ended March 31, 2026, the directors were entitled to the following amounts as compensation:

 

(

Amounts Rs. in millions)

Name of Directors		Commission				Overseas Travel Compensation				Salary				Perquisites				Total
Mr. K. Satish Reddy			73.80				-				22.02				4.84				100.66
Mr. G.V. Prasad			131.20				-				22.02				4.95				158.17
Mr. Leo Puri (1)			19.77				2.85.				-				-				22.62
Ms. Shikha Sharma			16.45				-				-				-				16.45
Dr. K.P. Krishnan			17.40				-				-				-				17.40
Ms. Penny Wan (1)			15.98				4.74				-				-				20.72
Mr. Arun M. Kumar   (1)			17.40				4.74				-				-				22.14
Dr. Claudio Albrecht (1)			16.45				3.79				-				-				20.24
Dr. Alpna Seth (1)			15.98				3.79				-				-				19.77
Mr. Sanjiv Mehta			17.40				-				-				-				17.40

(1)

Non Full Time Directors who are resident outside India are entitled to get overseas travel compensation for travelling for Board Meetings within the overall commission approved by the shareholders.

 

Executive officers’ compensation

 

The initial compensation to all our executive officers is determined through appointment letters issued at the time of employment. The appointment letter provides the initial amount of salary and benefits the executive officer will receive as well as a confidentiality provision and a non-compete provision applicable during the course of the executive officer’s employment with us. We provide salary, certain perquisites, retirement benefits, stock options and variable pay to our executive officers. The Nomination, Governance and Compensation Committee of the Board reviews the compensation of executive officers on a periodic basis.

 

All of our employees at the managerial and staff levels are eligible to participate in a variable pay program, which consists of performance bonuses based on the performance of their function or business unit, and a profit sharing plan through which part of our profits can be shared with our employees. Our variable pay program is aimed at rewarding the individual based on performance of such individual, their business unit/function and our company as a whole, with significantly higher rewards for superior performances.

 

We also have three employee stock option schemes: The Dr. Reddy’s Employees Stock Option Scheme, 2002, the Dr. Reddy’s Employees ADR Stock Option Scheme, 2007 and the Dr. Reddy’s Employees Stock Option Scheme, 2018. The Dr. Reddy’s Employees Stock Option Scheme, 2002 ended in January 2022, however the options already granted under this scheme to eligible employees can be exercised for allotment of equity shares, until the expiration of such options. The stock option schemes are applicable to all of our employees including directors, and employees and directors of our subsidiaries.

 

The stock option schemes are not applicable to promoter directors, promoter employees, non-full time directors (independent directors) and persons holding 2% or more of our outstanding share capital. The Nomination, Governance and Compensation Committee of the Board of Directors awards options pursuant to the stock option schemes based on the employee’s performance appraisal. Some employees have also been granted options upon joining us.

 

Compensation for executive officers who are full time directors is summarized in the table under “Directors’ compensation” above.

 

The following table presents the annual compensation paid or payable to other executive officers for services rendered to us for the year ended March 31, 2026 and stock options granted to all of our other executive officers during the year ended March 31, 2026:

 

Compensation for Executive Officers

						FMV Value								Par Value
Name		Compensation (1) (2) (Rs. in millions)				Exercise Price				No. of options  (3)				Exercise Price				No. of options (3)
Mr. Erez Israeli (4)			230.33				1,162				259,793				-				-
Mr. M.V. Narasimham			72.48				1,162				27,030				-				-
Mr. M.V. Ramana			89.25				1,162				43,461				-				-
Mr. Sanjay Sharma			71.07				1,162				35,334				-				-
Mr. Deepak Sapra			50.89				1,162				21,554				-				-
Mr. Patrick Aghanian (4)			107.54				1,162				29,294				-				-
Mr. Sushrut Kulkarni			56.46				1,162				19,610				-				-
Mr. Krishna Venkatesh			41.18				1,162				13,250				-				-
Mr. Phanimitra B			37.54				1,162				11,307				-				-
Mr. Milan Kalawadia			86.78				1,162				46,304				-				-
Ms. Archana Bhaskar (5)			54.15				1,162				26,854				-				-
Dr. Jayanth Sridhar (6)			38.03				1,162				12,544				-				-

 

 

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(1)

These compensation amounts do not include share based payment expense arising from stock options. However, the number of options granted during the year are mentioned separately in the above table.

 

(2)

These compensation amounts include superannuation benefits and provident fund benefits. The executive officers are also covered under our Gratuity and Compensated Absences Plans along with the other employees. Proportionate amounts of the cost for gratuity and compensated absences accrued under the plans have not been separately computed or included in the above disclosure, as the amount payable to the officer is inherently variable and our annual contributions to funds established to furnish such payments are lump sums based on actuarial projections for the fund as a whole. Refer to Note 26 (“Employee benefits”) of our consolidated financial statements for further details on the foregoing benefits.

 

(3)

The options granted during the year ended March 31, 2026 vest 100% at the end of the third year from the date of grant, subject to the employee being in continued service on the date of vesting. The options expire after five years from the date of vesting. The options are granted under the Dr. Reddy’s Employees ADR Stock Option Scheme, 2007 and the Dr. Reddy’s Employees Stock Option Scheme, 2018. For each of the foregoing options, one equity share or ADR (as applicable) will be issued upon its exercise.

 

(4)

These grants were in the form of options to acquire our ADRs.

 

(5)

Ms. Archana Bhaskar ceased to be Chief Human Resource Officer of our company effective as of the close of business on November 30, 2025.

 

(6)

Dr. Jayanth Sridhar ceased to be Global Head of Biologics of our company effective as of the close of business on January 31, 2026.

 

Compensation details on executive officers Mr. K Satish Reddy and Mr. G.V. Prasad are discussed under “Directors’ Compensation” above.

 

6.C. Board Practices

 

Our Articles of Association require us to have a minimum of three and a maximum of fifteen directors. As of March 31, 2026, we had ten directors on our Board, of which eight were non-full time independent directors.

 

The Indian Companies Act, 2013 and our Articles of Association require that at least two-thirds of our directors be subject to re-election by our shareholders in rotation and that, at every annual general meeting, one-third of the directors who are subject to re-election must retire from the Board. However, if eligible for re-election, they may be re-elected by our shareholders at the annual general meeting.

 

Due to India’s adoption of the Companies Act, 2013, effective as of April 1, 2014, and amended from time to time, non-full time independent directors are no longer required to retire from the Board by rotation. As a result, at annual general meetings held after April 1, 2014, our non-full time independent directors are excluded from the calculation of the two-thirds directors who are subject to re-election by our shareholders in rotation.

 

Our non-full time independent directors hold office for a term of up to five consecutive years from the date of initial appointment under the provisions of the Companies Act, 2013. The appointment of any non-full time independent director requires approval of our shareholders through a special resolution within a period of three months from the date of appointment or at our next shareholders meeting, whichever is earlier.

 

Each such non-full time independent director shall be eligible for re-appointment for a second term of up to five consecutive years if determined by a special resolution passed by our shareholders.

 

The terms of each of our directors and their current expected expiration dates are provided in the table below:

 

Name

Expiration of Current Term of Office

Term of Office

Period of Service (3)

Mr. G.V. Prasad (1)(4)

January 29, 2031

5 years

40.0 years

Mr. K. Satish Reddy (1)

September 30, 2027

5 years

33.2 years

Mr. Leo Puri (2)

October 24, 2028

5 years

7.4 years

Ms. Shikha Sharma (2)

January 30, 2029

5 years

7.2 years

Dr. K.P. Krishnan (2)

January 6, 2027

5 years

4.3 years

Ms. Penny Wan (2)

January 27, 2027

5 years

4.2 years

Mr. Arun M. Kumar (2)

July 31, 2027

5 years

3.7 years

Dr. Claudio Albrecht (2)

May 9, 2028

5 years

2.9 years

Dr. Alpna Seth (2)

September 18, 2028

5 years

2.6 years

Mr. Sanjiv Mehta (2)

December 28, 2028

5 years

2.3 years

 

(1)

Full time director.

(2)

Non-full time independent director.

(3)

Reflects service through Ma rch 31, 2026.

(4)

At the 41 st Annual General Meeting of Shareholders held on July 24, 2025, Mr. G V Prasad was re-elected as a full-time director and designated as Co-Chairman and Managing Director of our company for a further period of five years, with effect from January 30, 2026, until January 29, 2031, subject to retirement by rotation.

 

 

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The directors are not eligible for any termination benefit on the termination of their tenure with us. Our full-time directors are subject to retirement by rotation. As a result, Mr. K. Satish Reddy is scheduled to retire by rotation and the proposal to reappoint him will be placed before our shareholders at our upcoming Annual General meeting scheduled on July 23, 2026. At the same Annual General meeting, a proposal will also be placed before our shareholders to reappoint Dr. K.P. Krishnan as an Independent Director, for a second term of five years from January 7, 2027 until January 6, 2032, not subject to retirement by rotation.

 

Committees of the Board

 

Committees constituted by the Board focus on specific areas and take decisions within the authority delegated to them.

 

The Committees also make specific recommendations to the Board on various matters from time-to-time. All decisions and recommendations of the Committees are placed before the Board for information, review and/or approval. We had seven Board-level Committees as of March 31, 2026:

 

•

Audit Committee.

•

Nomination, Governance and Compensation Committee.

•

Science, Technology and Operations Committee.

•

Risk Management Committee.

•

Stakeholders’ Relationship Committee.

•

Sustainability and Corporate Social Responsibility Committee.

•

Banking, Authorisations and Allotment Committee.

 

We have adopted charters for our Audit Committee, Nomination, Governance and Compensation Committee, Science, Technology and Operations Committee, Risk Management Committee, Stakeholders’ Relationship Committee and Sustainability and Corporate Social Responsibility Committee, formalizing the applicable committee’s procedures and duties. Each of these charters is available on our website at

https://www.drreddys.com/investor#governance#committees-of-the-board

. The Board has also approved the Charter of the Banking, Authorizations and Allotment Committee.

 

Audit Committee

.

 

Our management is primarily responsible for our internal controls and financial reporting process. Our independent registered public accounting firm is responsible for performing independent audits of our financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and for issuing reports based on such audits. The Board of Directors has entrusted the Audit Committee to supervise these processes and thus ensure accurate and timely disclosures that maintain the transparency, integrity and quality of financial controls and reporting.

 

The Audit Committee consisted of the following four non-full time, independent directors as of March 31, 2026:

 

•

Mr. Arun M. Kumar (Chairman);

•

Ms. Shikha Sharma;

•

Dr. K.P. Krishnan; and

•

Ms. Penny Wan

 

 

73

 

 

Our Company Secretary is the Secretary of the Audit Committee. This Committee met six times during the year ended March 31, 2026. Our independent registered public accounting firm was present at all Audit Committee meetings during the year.

 

The primary responsibilities of the Audit Committee are inter alia to:

 

•

Supervise our financial reporting process;

•

Review our consolidated financial statements, including among other things the investments made by them;

•

Review of the consolidated financial statements of our subsidiary companies, including among other things the investments, if any, made by them;

•

Review our quarterly and annual financial results, along with related public disclosures and filings, before providing them to the Board;

•

Review the adequacy of our internal controls, including the plan, scope and performance of our internal audit function;

•

Discuss with management our major policies with respect to risk assessment and risk management;

•

Hold discussions with external auditors on the nature, scope and process of audits and any views that they have about our financial control and reporting processes;

•

Ensure compliance with accounting standards and with listing requirements with respect to the consolidated financial statements;

•

Recommend the appointment and removal of external auditors and their remuneration;

•

Recommend the appointment of cost auditors;

•

Review the independence of auditors;

•

Ensure that adequate safeguards have been taken for legal compliance both for us and for our subsidiaries;

•

Review and approve related party transactions;

•

Review the rationale, cost-benefits and impact of mergers, demergers, amalgamations and other reorganizations on our company and its shareholders;

•

Review the functioning of our whistle blower mechanism;

•

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

•

Scrutinize our inter-company loans and investments;

•

Examine the valuation of our undertakings or assets, wherever it is necessary;

•

Review compliances undertaken under insider trading laws;

•

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

•

Suggest revisions to our insider trading policies to the Board and ensure the effective implementation of insider trading laws;

•

Evaluate internal financial controls; and

•

Review suspected fraud, if any, committed against our company.

 

Nomination, Governance and Compensation Committee.

 

The primary functions of the Nomination, Governance and Compensation Committee are inter alia to:

 

•

Examine the structure, composition and functioning of the Board, and recommend changes, as necessary, to improve the Board’s effectiveness;

•

Formulate policies on remuneration of Directors, key managerial personnel and other employees, and on Board diversity;

•

Formulate criteria for evaluation of Directors and the Board as a whole and the Committees;

•

Assess our policies and processes in key areas of corporate governance, other than those explicitly assigned to other Board Committees, with a view to ensuring that we are at the forefront of good governance practices; and

•

Regularly examine ways to strengthen our organizational health, by improving the hiring, retention, motivation, development, deployment and behavior of management and other employees. In this context, the Committee also reviews the framework and processes for motivating and rewarding performance at all levels of the organization, reviews the resulting compensation awards, and makes appropriate proposals for Board approval. In particular, it recommends all forms of compensation to be granted to our Directors, executive officers and key managerial personnel.

 

 

74

 

 

The Nomination, Governance and Compensation Committee also administers our Employee Stock Option Schemes.

 

The Nomination, Governance and Compensation Committee consisted of the following non-full time, independent directors as of March 31, 2026:

 

•

Mr. Sanjiv Mehta (Chairman);

•

Dr. K.P. Krishnan;

•

Mr. Arun M. Kumar; and

•

Mr. Leo Puri.

 

The corporate officer heading our Human Resources function serves as the Secretary of the Committee. The Nomination, Governance and Compensation Committee met three times during the year ended March 31, 2026.

 

Science, Technology and Operations Committee.

 

The primary functions of the Science, Technology and Operations Committee are inter alia to:

 

•

Review scientific, medical and technical matters and operations involving our development and discovery programs (generic and proprietary), including major internal projects, business development opportunities, interaction with academic and other outside research organizations;

•

Review and monitor management’s actions in creating valuable intellectual property;

•

Review safety and quality of our operations;

•

Review the status of non-infringement patent challenges; and

•

Review and monitor management’s actions and plans in building and nurturing science in our organization in line with our business strategy.

 

The Science, Technology and Operations Committee consisted of the following non-full time, independent directors as of March 31, 2026:

 

•

Dr. Claudio Albrecht (Chairman)

•

Mr. Leo Puri;

•

Dr. Alpna Seth; and

•

Mr. Sanjiv Mehta.

 

The corporate officers heading our Integrated Product Development Operations, Global Manufacturing Organization, Quality and Biologics functions serve as Secretaries of the Committee with regard to their respective businesses. The Science, Technology and Operations Committee met four times during the year ended March 31, 2026.

 

Risk Management Committee.

 

The primary functions of the Risk Management Committee are inter alia to:

 

•

Formulate a detailed Risk Management Policy which shall include:

•

A framework for identification of internal and external risks specifically faced by our company, including financial, operational, sectoral, sustainability (particularly, ESG related risks), information, cyber security risks or any other risk as may be determined by the Committee;

•

Measures for risk mitigation including systems and processes for internal control of identified risks; and

•

A business continuity plan.

•

Discuss with senior management our enterprise risk management and provide oversight as may be needed;

•

Review and recommend changes to the Risk Management Policy and its implementation, including evaluating the adequacy of risk management systems, and associated frameworks, processes, practices and measures for risk mitigation and compliance with the risk management requirements of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015;

 

 

75

 

 

 

•

To ensure that appropriate methodology, processes and systems are in place to monitor and evaluate risks associated with our business;

•

Be aware of and approve our company’s risk appetite including risk levels, if any, set for financial and operational risk, disaster risk and legal risk;

•

Ensure that it is apprised of our more significant risks, including certain country risks and cyber security risks, along with the risk mitigation steps implemented to ensure effective enterprise risk management; and

•

Review risk disclosure statements in any public documents or disclosures, where applicable.

 

The Risk Management Committee consisted of the following non-full time, independent directors as of March 31, 2026:

 

•

Ms. Shikha Sharma (Chairperson);

•

Ms. Penny Wan;

•

Dr. Claudio Albrecht; and

•

Dr. Alpna Seth.

 

Our Chief Risk Officer or, in his/her absence, our Chief Financial Officer acts as the Secretary of the Risk Management Committee. This Committee met three times during the year ended March 31, 2026.

 

Sustainability and Corporate Social Responsibility (“SCSR”) Committee.

 

The primary responsibilities of the committee are divided as follows:

 

Sustainability –

 

•

To review our sustainability and other environment, social and governance related vision and goals on an ongoing basis;

•

To review and provide oversight over our programs, policies, practices, and strategies related to sustainability;

•

To review sustainability and environmental, social and governance (“ESG”) disclosures; and

•

To act as a nodal committee for guidance on sustainability and overall ESG goals and to review and monitor progress and all other matters incidental thereto.

 

CSR –

 

•

Formulate and recommend to the Board, a Corporate Social Responsibility Policy (“CSR Policy”) which shall indicate the activities to be undertaken by us as specified in Schedule VII of the Companies Act, 2013;

•

Provide guidance on our various CSR initiatives undertaken and monitor implementation and adherence to our CSR programs and policies from time to time;

•

Recommend to the Board an Annual CSR Action Plan delineating the CSR projects or programs to be undertaken during the financial year; and

•

Appoint an independent agency/firm to carry out impact assessment study, if any.

 

The Sustainability and Corporate Social Responsibility Committee consisted of the following directors as of March 31, 2026:

 

•

Dr. K.P. Krishnan (Chairman);

•

Mr. G.V. Prasad;

•

Mr. K. Satish Reddy; and

•

Mr. Sanjiv Mehta.

 

The Company Secretary serves as the Secretary of the Committee. This Committee met four times during the year ended March 31, 2026.

 

Stakeholders’ Relationship Committee

 

The primary functions of the Stakeholders’ Relationship Committee are inter alia to:

 

•

Review of investor complaints and how they were redressed;

•

Review of queries received from investors;

•

Review of work done by our share transfer agent; and

 

 

76

 

 

•

Review of corporate actions related to our security holders.

 

The Stakeholders Relationship Committee consisted of the following directors as of March 31, 2026:

 

•

Mrs. Leo Puri (Chairman);

•

Mr. G.V. Prasad; and

•

Mr. K. Satish Reddy.

 

Our Company Secretary is the Secretary of the Stakeholders’ Relationship Committee. This Committee met four times during the year ended March 31, 2026.

 

6.D.

Employees

 

The following table sets forth the number of our employees as of March 31, 2026, 2025 and 2024.

 

		As of March 31, 2026
		India				North America				Europe				Rest of World				Total
Manufacturing (1)			9,307				52				170				221				9,750
Sales and marketing (2)			10,417				68				161				1,625				12,271
Research and development (3)			3,028				13				53				74				3,168
Others (4)			1,898				74				78				288				2,338
Total			24,650				207				462				2,208				27,527

 

		As of March 31, 2025
		India				North America				Europe				Rest of World				Total
Manufacturing (1)			10,049				74				179				385				10,687
Sales and marketing (2)			9,796				80				130				1,606				11,612
Research and development (3)			3,090				17				58				77				3,242
Others (4)			1,798				86				75				311				2,270
Total			24,733				257				442				2,379				27,811

 

		As of March 31, 2024
		India				North America				Europe				Rest of World				Total
Manufacturing (1)			10,070				222				129				401				10,822
Sales and marketing (2)			9,106				75				52				1,514				10,747
Research and development (3)			3,362				18				40				78				3,498
Others (4)			1,542				100				26				313				1,981
Total			24,080				415				247				2,306				27,048

 

(1)

Includes quality, technical services and warehouse.

(2)

Includes business development.

(3)

Includes employees engaged in contract research services provided to other companies.

(4)

Includes shared services, corporate business development and the intellectual property management team.

 

We did not experience any significant work stoppages in the years ended March 31, 2026, 2025 and 2024, and we consider our relationship with our employees and labor unions to be good. Approximately 1.6% of our employees belonged to labor unions as of March 31, 2026.

 

 

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6.E.

Share ownership

 

The following table sets forth, as of March 31, 2026 for each of our directors and executive officers, the total number of our equity shares, ADRs and options owned by them:

 

										FMV Value																																																																Par Value
		No. of Shares Held (1)				% of Outstanding Capital				Exercise Price				No. of options held (5)				Exercise Price				No. of options held (5)				Exercise Price				No. of options held (5)				Exercise Price				No. of options held (5)				Exercise Price				No. of options held (5)				Exercise Price				No. of options held (5)				Exercise Price				No. of options held (5)				Exercise Price				No. of opti ons held (5)				Exercise Price				No. of options held (5)
Mr. G.V. Prasad (2)(6)			-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-
Mr. K. Satish Reddy (2)(6)			10,107,505				1.21				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-
Mr. Leo Puri (2)			-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-
Ms. Shikha Sharma (2)			-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-
Dr. K.P. Krishnan (2)			-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-
Mr. Arun M. Kumar (2)			-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-
Ms. Penny Wan (2)			-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-
Dr. Claudio Albrecht (2)			-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-
Dr. Alpna Seth (2)			-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-
Mr. Sanjiv Mehta (2)			-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-
Mr. Erez Israeli (3)(4)			-				-				-				-				-				-				-				-				781.2				295,435				981.4				263,460				1,060.2				4,225				1,162				259,793				1,270				213,940				1				28,150
Mr. M.V. Ramana			68,230				0.01				-				-				-				-				-				-				781.2				45,720				981.4				39,795				1,060.2				615				1,162				43,461				1,270				33,310				1				41,825
Ms. Archana Bhaskar			19,249				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-
Mr. Sanjay Sharma			-				-				-				-				-				-				-				-				-				-				981.4				29,945				1,060.2				440				1,162				35,334				1,270				27,130				-				-
Mr. Deepak Sapra			75,624				-				-				-				-				-				-				-				-				-				981.4				11,195				1,060.2				1,100				1,162				21,554				1,270				14,920				-				-
Mr. Patrick Aghanian (3)			8,450				-				-				-				-				-				735.8				9,300				781.2				26,005				981.4				22,975				1,060.2				1,500				1,162				29,294				1,270				20,100				1				41,870
Mr. Sushrut Kulkarni			70				-				-				-				-				-				-				-				781.2				28,280				981.4				14,350				-				-				1,162				19,610				1,270				15,675				-				-
Mr. M.V. Narasimham			61,245				0.01				521.40				9,750				562.8				10,875				735.8				11,600				781.2				12,825				981.4				11,960				1,060.2				620				1,162				27,030				1,270				9,945				1				13,325
Mr. Jayanth Sridhar			7,923				-												-				-				-				-				-				-				-				-				-				-				-				-				-				-				-				-
Mr. Krishna Venkatesh			-				-												-				-				735.8				2,900				781.2				8,160				981.4				8,610				1,060.2				480				1,162				13,250				1,270				9,420				1				6,600
Mr. Phanimitra B			8,712				-				521.40				6,750				562.8				4,750				735.8				6,825				781.2				10,495				981.4				8,610				1,060.2				620				1,162				11,307				1,270				9,045				1				11,840
Mr. Milan Kalawadia (3)			47,325				-				-				-				-				-				-				-				781.2				10,495				981.4				8,610				-				-				1,162				46,304				1,270				20,940				-				-

 

 

78

 

 

(1)

All shares have voting rights.

(2)

Not eligible for grant of stock options.

(3)

These grants were in the form of options to acquire ADRs.

(4)

“No. of shares held” represents the shares underlying ADRs.

(5)

These include both vested and unvested options. The options have vested on various dates between the year ending March 31, 2020 and the year ending March 31, 2026. The unvested options will vest on various dates between the year ending March 31, 2026 and the year ending March 31, 2029. Each option expires after five years from vesting and converts into one equity share or ADR upon its exercise.

(6)

According to an amendment No. 6 to Schedule 13D filed with the U.S. Securities and Exchange Commission on September 18, 2025:

 

i.

Mr. K. Satish Reddy transferred 75,630,620 equity shares to the VSD Family Trust on September 17, 2025, and

ii.

Mr. G.V. Prasad transferred 96,095,920 equity shares to the GVP Family Trust on September 17, 2025.

 

The foregoing shares have been transferred by these Promoters to the said trusts pursuant to an exemption provided by SEBI Order dated December 31, 2024, bearing reference number WTM/ASB/CFD/16/2024-25.

 

 

79

 

 

Employee Stock Incentive Plans

We have adopted a number of stock option incentive plans covering either our ordinary shares or our ADRs, and during the year ended March 31,

2026

we operated under the Dr. Reddy’s Employees Stock Option Scheme, 2002 (the “DRL 2002 Plan”), the Dr. Reddy’s Employees ADR Stock Option Scheme, 2007 (the “DRL 2007 Plan”) and the Dr. Reddy’s Employees Stock Option Scheme, 2018 (the “DRL 2018 Plan”). Each such option granted had an expiration date of five years from the vesting date. Dr. Reddy’s Employees Stock Option Scheme, 2002 ended in January 2022, however the options already granted under this scheme to eligible employees can be exercised for allotment of equity shares, until the end of the expiration of such options.

 

During the year ended March 31, 2026, options to purchase ordinary shares and ADRs were awarded to various of our executive officers and other employees under the DRL 2007 Plan and the DRL 2018 Plan as follows:

 

Plan		Number of options granted				Exercise Price (Rs.)
DRL 2007 Plan (1)			-				1
DRL 2007 Plan (2)			353,057				1,162.00
DRL 2018 Plan (2)			915,763				1,162.00
Total			1,268,820

 

(1)

No options were granted at an exercise price of Rs.1/-.

(2)

100% vesting at the end of third year.

 

The Dr. Reddy’s Employees ESOS Trust was formed to support the DRL 2018 Plan by acquiring, including through secondary market acquisitions, equity shares which are issued to eligible employees upon exercise of stock options thereunder. From the plan’s inception through March 31, 2026, we have granted an aggregate of 6,195,298 options, with a fair market value exercise price, under the DRL 2018 Plan. As of March 31, 2026, the Dr. Reddy’s Employees ESOS Trust has purchased an aggregate of 4,476,495 shares, at an average rate of Rs.802.20, for the purpose of issuing the shares to such employees upon exercise of these options under the DRL 2018 plan.

 

For the years ended March 31, 2026 and 2025, Rs.326 million and Rs.424 million, respectively, have been recorded as employee share-based payment expense under all of our employee stock incentive plans. As of March 31, 2026 and 2025, there was Rs.433 million and Rs.430 million, respectively of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of 1.72 years and 1.68 years, respectively. For further information regarding our options and stock option incentive plans, refer to Note 27 (“Share-based payments”) to our consolidated financial statements.

 

6.F.

Disclosure of a registrant’s action to recover erroneously awarded compensation

 

None.

 

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A.

Major shareholders

 

All of our equity shares have the same voting rights. As of March 31, 2026, a total of 26.63% of our equity shares were held by the following parties:

 

·

Mr. K. Satish Reddy (Chairman of the Board) (1) ;

·

Mrs. Deepti Reddy Kallam, wife of Mr. K. Satish Reddy, Mrs. G. Anuradha, wife of Mr. G.V. Prasad (Co-Chairman and Managing Director) , Mr. G. Sharathchandra Reddy, son of Mr. G.V. Prasad, and Ms. G. Vani Sanjana Reddy and Ms. G. Mallika Reddy, daughters of Mr. G.V. Prasad (hereafter collectively referred as the “Family Members”); and

·

Kallam Satish Reddy HUF, which is affiliated with Mr. K. Satish Reddy;

·

G.V. Prasad HUF, which is affiliated with Mr. G.V. Prasad;

·

VSD Family Trust, which is affiliated with Mr. K. Satish Reddy and Mrs. Deepti Reddy Kallam as Trustees (1) ; and

·

GVP Family Trust, which is affiliated with Mr. G. V. Prasad and Mrs. G. Anuradha as Trustees. (1)

 

(1)

Refer to Item 6.E. (Share Ownership) for further details of transfer of shares by Mr. K. Satish Reddy and Mr. G.V. Prasad to their respective family trusts.

 

 

80

 

 

The following table sets forth information regarding the beneficial ownership of our shares by the foregoing persons as of March 31, 2025 and as of March 31, 2026:

 

		Equity Shares Beneficially Owned (1)
		Status as on March 31, 2026								Status as on March 31, 2025
Name		Number of Shares				Percentage of Shares				Number of Shares				Percentage of Shares
Mr. G.V. Prasad			-				-				96,095,920				11.52	%
Mr. K. Satish Reddy (2)			10,107,505				1.21	%			85,738,125				10.27	%
K. Satish Reddy HUF			27,618,385				3.31	%			27,618,385				3.31	%
G.V. Prasad HUF			12,717,090				1.52	%			12,717,090				1.52	%
VSD Family Trust			75,630,620				9.06	%			-				-
GVP Family Trust			96,095,920				11.51	%			-				-
Family Members (2)			136,120				0.02	%			136,120				0.02	%
Subtotal promoter group			222,305,640				26.63	%			222,305,640				26.64	%
Others/public float			614,316,905				73.37	%			612,149,725				73.36	%
Total number of shares outstanding			834,656,970				100.00	%			834,455,365				100.00	%

(1)

Beneficial ownership is determined in accordance with rules of the U.S. Securities and Exchange Commission, which provides that shares are beneficially owned by any person who has voting or investment power with respect to the shares. All information with respect to the beneficial ownership of any principal shareholder has been furnished by that shareholder and, unless otherwise indicated below, we believe that persons named in the table have sole voting and sole investment power with respect to all shares shown as beneficially owned, subject to community property laws where applicable.

 

(2)

See above definition of “Family Members”. Family members include the late Mrs. K. Samrajyam Reddy (mother of Mr. K. Satish Reddy). She expired on February 19, 2025, and her shares were transmitted to Mr. K. Satish Reddy.

 

As otherwise stated above and to the best of our knowledge, we are not owned or controlled directly or indirectly by any government or by any other corporation or by any other natural or legal persons. We are not aware of any arrangement, the consummation of which may at a subsequent date result in a change in our control.

 

The following shareholders

had

beneficially owne

rship

of

more than 5% of our equity shares as of:

 

		March 31, 2026								March 31, 2025								March 31, 2024
Name		No. of equity shares held				% of equity shares held				No. of equity shares held (1)				% of equity shares held				No. of equity shares held				% of equity shares held
APS Trust (2)			-				-				-				-				34,345,308				20.59	%
Life Insurance Corporation of India and Associates			101 , 502,343				12.16	%			60,015,393				7.19	%			8,421,089				5.05	%
Mr. G.V. Prasad (2)			-				-				96,095,920				11.52	%			-				-
Mr. K. Satish Reddy (2)			10,107,505				1.21	%			85,738,125				10.27	%			-				-
VSD Family Trust (3)			75,630,620				9.06	%			-				-				-				-
GVP Family Trust (3)			96,095,920				11.51	%			-				-				-				-

 

(1)

Shares mentioned as on March 31, 2025 are after giving effect to the 1:5 forward stock split effective October 28, 2024, and represent face value of Rs.1 each.

(2)

Each of the APS Trust, Mr. G.V. Prasad and Mr. K. Satish Reddy may be deemed to have beneficially owned all of these equity shares on the applicable date.

On May 22, 2024, the APS Trust transferred 15,126,124 equity shares, representing 9.07% of our outstanding equity shares, to Mr. K. Satish Reddy and 19,219,184 equity shares, representing 11.52% of our outstanding equity shares, to Mr. G.V. Prasad. There was no change in the total promoter shareholding in our company. The APS no longer holds any shares in our company after May 22, 2024. Immediately after these transfers, the total shares directly held by Mr. K. Satish Reddy was 16,027,126 shares and by Mr. G.V. Prasad was 19,219,184 shares, representing 9.61% and 11.52% of our then outstanding equity shares, respectively.

(3)

According to an amendment No. 6 to Schedule 13D filed with the U.S. Securities and Exchange Commission on September 18, 2025:

 

 

81

 

 

i.

Mr. K. Satish Reddy transferred 75,630,620 equity shares to the VSD Family Trust on September 17, 2025, and

ii.

Mr. G.V. Prasad transferred 96,095,920 equity shares to the GVP Family Trust on September 17, 2025.

 

The foregoing shares have been transferred by the Promoters to the said trusts pursuant to an exemption provided by SEBI Order dated December 31, 2024, bearing reference number WTM/ASB/CFD/16/2024-25.

 

Further Mr. G.V. Prasad and Mr. K. Satish Reddy may be deemed to have beneficially owned all of the equity shares held by GVP Family Trust and VSD Family Trust, respectively.

 

As of March 31, 2026, we had

834,656,970

outstanding equity shares. As of March 31, 2026, there were

449,665

record holders of our equity shares listed and traded on the Indian stock exchanges. Our American Depositary Shares (“ADSs”), as evidenced by American Depositary Receipts (or “ADRs”), are listed on the New York Stock Exchange. Our ADSs are also listed on NSE IFSC Limited. One ADS represents one equity share of Rs.1 par value per share. As of March 31, 2026, 11.94% of our issued and outstanding equity shares were owned through ADSs, as evidenced by ADRs. On March 31, 2026 we had approximately 52  registered holders, 87,059 beneficial holders and 1,955 Small Bank and Brokers of record of our ADSs, as evidenced by ADRs, in the United States.

 

7.B.

Related party transactions

 

Refer to Note 28 (“Related parties”) of our consolidated financial statements.

 

7.C.

Interests of experts and counsel

 

Not applicable.

 

ITEM 8. FINANCIAL INFORMATION

 

8.A. Consolidated statements and other financial information

 

The following financial statements and auditors’ report appear under Item 18 of this Annual Report on Form 20-F and are incorporated herein by reference:

 

·

Report of Independent Registered Public Accounting Firm

·

Consolidated statements of financial position as of March 31, 2026 and 2025

·

Consolidated income statements for the years ended March 31, 2026, 2025 and 2024

·

Consolidated statements of comprehensive income for the years ended March 31, 2026, 2025 and 2024

·

Consolidated statements of changes in equity for the years ended March 31, 2026, 2025 and 2024

·

Consolidated statements of cash flows for the years ended March 31, 2026, 2025 and 2024

·

Notes to the consolidated financial statements

 

Our financial statements included in this Annual Report on Form 20-F have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. The consolidated financial statements included herein are for our three most recent fiscal years.

 

Amount of Export Sales

 

For the year ended March 31, 2026, our export revenues (i.e., revenues from all geographies other than India) were Rs.271,396 million and accounted for

81

% of our total revenues.

 

Legal Proceedings

 

Refer to Note 31 (“Contingencies”) of our consolidated financial statements.

 

Dividend Policy

 

In the years ended March 31, 2024, 2025 and 2026, we paid cash dividends of Rs.40 per equity share (prior to effect of stock split), Rs.40 per equity share (prior to effect of stock split) and Rs.8 per equity share, respectively.

 

Every year our Board of Directors recommends the amount of dividends to be paid to shareholders, if any, based upon conditions then existing, including our earnings, financial condition, capital requirements and other factors. At our Board of Directors’ meeting held on May 12, 2026, the Board of Directors proposed a dividend per share of Rs.8 for the year ended March 31, 2026 and aggregating to Rs.6,677 million, all of which is subject to the approval of our shareholders.

 

Holders of our ADSs are entitled to receive dividends payable on equity shares represented by such ADSs. Cash dividends on equity shares represented by our ADSs are paid to the depositary in Indian rupees and are converted by the depositary into U.S. dollars and distributed, net of depositary fees, taxes, if any, and expenses, to the holders of such ADSs.

 

 

82

 

 

8.B.

Significant changes

 

Refer to Note 36 (“Subsequent events”) of our consolidated financial statements.

 

ITEM 9. THE OFFER AND LISTING

 

9.A.

Offer and listing details

 

See Item 9.C “Markets” below. See also Exhibit 2.2 (“Description of the Securities”) to this Annual Report on Form 20-F.

 

9.B.

Plan of distribution

 

Not applicable.

 

9.C.

Markets

 

Markets on Which Our Shares Trade

 

Our equity shares are traded on the BSE Limited (formerly known as the Bombay Stock Exchange Limited) (“BSE”) and National Stock Exchange of India Limited (“NSE”), (collectively, the “Indian Stock Exchanges”) under the ticker symbols “500124” and “DRREDDY”, respectively. Our American Depositary Shares (or “ADSs”), as evidenced by American Depositary Receipts (or “ADRs”), are traded in the United States on the New York Stock Exchange (“NYSE”) under the ticker symbol “RDY” and on NSE IFSC Limited under the ticker symbol “DRREDDY”. Each ADS represents one equity share. Our ADSs, as evidenced by ADRs, began trading on the NYSE and NSE IFSC Limited on April 11, 2001 and December 9, 2020, respectively.

 

9.D.

Selling shareholders

 

Not applicable.

 

9.E.

Dilution

 

Not applicable.

 

9.F.

Expenses of the issue

 

Not applicable.

 

ITEM 10. ADDITIONAL INFORMATION

 

10.A.

Share capital

 

Not applicable.

 

10.B.

Memorandum and articles of association

 

Dr. Reddy’s Laboratories Limited was incorporated under the Indian Companies Act, 1956. We are registered with the Registrar of Companies, Hyderabad, Telangana, India, with Company Identification No. L85195AP1984PLC004507. Our company’s registration number changed to L85195TG1984PLC004507 effective as of June 2, 2014.

 

Our registered office is located at 8-2-337, Road No. 3, Banjara Hills, Hyderabad, Telangana 500 034, India and the telephone number of our registered office is +91-40-49002900. The summary of our Articles of Association and Memorandum of Association that is included in our registration statement on Form F-1 filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 11, 2001, together with copies of the Articles of Association and Memorandum of Association that are included in our registration statement on Form F-1, are incorporated herein by reference.

 

The Memorandum and Articles of Association were amended at the 17th Annual General Meeting held on September 24, 2001, 18th Annual General Meeting held on August 26, 2002, the 20th Annual General Meeting held on July 28, 2004 and the 22nd Annual General Meeting held on July 28, 2006. A full description of these amendments was given in the Form 20-F filed with the SEC on September 30, 2003, September 30, 2004 and October 2, 2006, which description is incorporated herein by reference. The Memorandum and Articles of Association were amended at the 22nd Annual General Meeting held on July 28, 2006 to increase the authorized share capital in connection with the stock split effected in the form of a stock dividend that occurred on August 30, 2006.

 

 

83

 

 

The Memorandum and Articles of Association were further amended in accordance with the terms of an Order of the High Court of Judicature, Andhra Pradesh, dated June 12, 2009 to effect an increase in our company’s authorized share capital pursuant to the amalgamation of Perlecan Pharma Private Limited into our company. In a related order dated June 12, 2009, the High Court concluded that there was no need to have a shareholders’ meeting in order to affect such amendment.

 

The Memorandum and Articles of Association were further amended in accordance with the terms of an Order of the High Court of Judicature, Andhra Pradesh, dated July 19, 2010 to provide for the capitalization or utilization of undistributed profit or retained earnings or security premium account or any other reserve or fund of ours with the approval of our shareholders in connection with our bonus debentures.

 

The Memorandum and Articles of Association were amended by adopting a new set of Articles of Association which replaced and superseded in its entirety our then existing Articles of Association. This was primarily done to align the Articles of Association with the new Companies Act, 2013 and the rules thereunder. This amendment was approved by our shareholders on September 17, 2015. The revised Articles of Association were furnished to the SEC on a Form 6-K on September 25, 2015.

 

The authorized share capital clause of the Memorandum and Articles of Association was altered and revised to Rs.1,450,000,000 divided into 290,000,000 equity shares of Rs.5 each. This alteration has taken place automatically due to approval of the Scheme of Amalgamation and Arrangement by the Hon’ble National Company Law Tribunal, Hyderabad Bench on April 5, 2022 and effective from April 8, 2022.

 

The Memorandum and Articles of Association were further amended in accordance with the terms of an Order of Hon’ble National Company Law Tribunal (“NCLT”), Hyderabad Bench, dated April 5, 2022 to effect an increase in our company’s authorized share capital pursuant to the amalgamation of Dr. Reddy’s Holdings Limited into our company. The amended Memorandum and Articles of Association reflecting the foregoing is attached as Exhibit 99.2 to our Form 6-K dated June 2, 2022.

 

Our Board of Directors at their meeting held on July 27, 2024 approved the sub-division/ split of each equity share having a face value of Rupees five each, fully paid-up, into five equity shares having a face value of Rupee One each, fully paid-up (the "stock split"), by alteration of the capital clause of our Memorandum of Association and consequently, the authorized share capital of Rs.1,450,000,000 divided into 1,450,000,000 equity shares of Rs.1/- each. Further, each of our American Depositary Shares (“ADSs”) continued to represent one underlying equity share and, therefore, the number of ADSs held by an American Depositary Receipt (“ADR”) holder consequently increased in proportion to the increase in number of equity shares. On September 12, 2024 the approval of our shareholders was obtained through a postal ballot process with a requisite majority. 

Consequently, stock split was implemented effective as of the record date of October 28, 2024. Said amendment to the Memorandum and Articles of Association is attached as Exhibit 1.8 to our Annual Report on Form 20-F for the year ended March 31, 2025.

 

10.C.

Material contracts

 

Agreement with Haleon UK Enterprises Limited for the Sale and Purchase of Northstar Switzerland SARL

 

In June 2024, we entered into an Agreement for the Sale and Purchase of all of the Quotas of Northstar Switzerland SARL (the “Northstar Purchase Agreement”) with Haleon UK Enterprises Limited (“Haleon”) to acquire Haleon’s global portfolio outside of the United States of consumer healthcare brands in the Nicotine Replacement Therapy category (the “NRT Business”) for a total consideration of up to Rs.56,121 million (GBP 500 million), including an upfront cash payment of Rs.51,407 million (GBP 458 million) and earn-out consideration of up to Rs.4,714 million (GBP 42 million). The acquisition was structured as a purchase of all of the shares in Northstar Switzerland SARL, a Haleon group company whose assets include intellectual property, employees, agreements with commercial manufacturing organization, marketing authorizations and other assets relating to the commercialization of brands including Nicotinell (with extensive presence in Europe, Asia including Japan, and Latin America), Nicabate (in Australia), and other brands in Canada and New Zealand. The acquisition was inclusive of all formats such as lozenge, patch, spray and/or gum in all applicable global markets outside of the United States.

 

The closing conditions were satisfied, and the transaction was completed on September 30, 2024. Upon completion, we purchased 100% of the shares of Northstar Switzerland SARL and paid an upfront cash payment of Rs.51,407 million (GBP 458 million) as per the terms of the Northstar Purchase Agreement.

 

We paid earn‑out milestones of GBP 15 million in March 2025 and GBP 27 million in March 2026 upon achievement of NRT Business sales targets for calendar years 2024 and 2025, respectively, and satisfaction of other specified conditions.

 

We have substantially completed the integration of the acquired NRT Business, with the majority of markets transitioned and local marketing authorizations transferred to us. For the limited markets still under transition, we continue to obtain distribution and related services under a Transitional Distribution Services Agreement with the Haleon Group until the remaining transfers are completed.

 

 

84

 

 

The NorthStar Purchase Agreement has been attached as Exhibits 4.2 to our annual report on Form 20-F for the year ended March 31, 2025.

 

Other than the foregoing and other than contracts entered into in the ordinary course of business, there are no material contracts to which we or any of our direct and indirect subsidiaries are a party for the two years immediately preceding the date of publication of this report.

 

10.D.

Exchange controls

 

Foreign investment in Indian securities, whether in the form of foreign direct investment or in the form of portfolio investment, is governed by the Foreign Exchange Management Act, 1999, as amended (“FEMA”), and the rules, regulations and notifications issued thereunder. Set forth below is a summary of the restrictions on transfers applicable to both foreign direct investments and portfolio investments, including the requirements under Indian law applicable to the issuance and transfer of ADSs.

 

Foreign Direct Investment

 

FEMA empowers the Reserve Bank of India (the “RBI”) to frame regulations to prohibit, restrict or regulate the transfer or issuance of any security by a person resident outside India. These regulations were published as the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017. The Government of India superseded these regulations on October 17, 2019 through its notification of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

 

As per these regulations, foreign direct investments can be made in India, other than in certain prohibited sectors, through the “automatic route” or, if the sectors or activities are not permitted under the automatic route, then under the “government route”. If the automatic route applies, then the non-resident investor or the Indian company does not require any approval from Government of India for the investment. If the government route applies, then prior approval of the Government of India is required. Proposals for foreign investment under the government route, are considered by the respective administrative ministry or department.

 

These regulations also contain provisions regarding sector specific guidelines for foreign direct investment and the levels of permitted equity participation. The total foreign investment shall not exceed the sectoral or statutory cap limit indicated for each sector. In sectors or activities for which no sectoral or statutory cap limit is indicated or not prohibited under these regulations, foreign investment is permitted up to 100% under the automatic route, subject to applicable laws/regulations, security and other conditions.

 

In May 1994, the Government of India announced that purchases by foreign investors of ADSs, as evidenced by ADRs, and foreign currency convertible bonds of Indian companies would be treated as foreign direct investment in the equity issued by Indian companies for such offerings. Therefore, offerings that involve the issuance of equity that results in Foreign Direct Investors holding more than the stipulated percentage of direct foreign investments (which depends on the category of industry) would require approval from the Foreign Investment Promotion Board.

 

For investments in the pharmaceutical sector, the Foreign Direct Investment limit is 100%. However, unlike Foreign Direct Investments in new pharmaceutical projects (sometimes called “greenfield” investments), Foreign Direct Investments in existing Indian pharmaceutical companies (sometimes called “brownfield” investments) are nonetheless subject to approval by the Foreign Investment Promotion Board in excess of 74% (which can incorporate conditions for its approval at the time of grant). Thus, foreign ownership of in excess of 74% of our equity shares would be allowed but would require certain approvals.

 

The Ministry of Finance abolished the Foreign Investment Promotion Board in May 2017 and the processing of applications for Foreign Direct Investment and approval of the Government thereon under the Policy and FEMA, was transferred to be handled by the concerned Ministries/Departments in consultation with the Department for Promotion of Industry and Internal Trade.

 

Portfolio Investment Scheme

 

Under Indian law, persons or entities residing outside of India cannot acquire securities of an Indian company listed on a stock exchange (“Portfolio Investments”) unless such non-residents are (a) persons of Indian nationality or origin residing outside of India (also known as Non-Resident Indians or “NRIs”) or (b) registered Foreign Institutional Investors (“FIIs”) or Foreign Portfolio Investors (“FPIs”).

85

Portfolio Investments by NRIs

 

A variety of methods for investing in shares of Indian companies are available to NRIs. These methods allow NRIs to make Portfolio Investments in existing shares and other securities of Indian companies on a basis not generally available to other foreign investors.

Portfolio Investments by FIIs

In September 1992, the Government of India issued guidelines that enable FIIs, including institutions such as pension funds, investment trusts, asset management companies, nominee companies and incorporated/institutional portfolio managers, to invest in all of the securities traded on the primary and secondary markets in India. Under the guidelines, FIIs are required to obtain an initial registration from the Securities and Exchange Board of India (“SEBI”), and a general permission from the RBI to engage in transactions regulated under the Foreign Exchange Management Act. FIIs must also comply with the provisions of the SEBI (Foreign Institutional Investors Regulations) 1995. When it receives the initial registration, the FII also obtains general permission from the RBI to engage in transactions regulated under the Foreign Exchange Management Act. Together, the initial registration and the RBI’s general permission enable the registered FII to: (i) buy (subject to the ownership restrictions discussed below) and sell unrestricted securities issued by Indian companies; (ii) realize capital gains on investments made through the initial amount invested in India; (iii) participate in rights offerings for shares; (iv) appoint a domestic custodian for custody of investments held; and (v) repatriate the capital, capital gains, dividends, interest income and any other compensation received pursuant to rights offerings of shares.

Portfolio Investments by FPIs

 

The regime permitting Portfolio Investments by FIIs was previously governed by the SEBI (Foreign Portfolio Investors) Regulations, 2014 (the “2014 FPI Regulations”). Further with a view to ease investments by FPIs, the 2014 FPI Regulations were amended through the SEBI (Foreign Portfolio Investors) Regulations, 2019, which was notified on September 23, 2019 (the “2019 FPI Regulations” and, together with the 2014 FPI Regulations, the “FPI Regulations”).

 

A person which has been registered as a FPI under chapter II of the 2019 FPI Regulations may purchase or sell capital instruments of an Indian company on a recognized stock exchange in India as well as purchase shares and convertible debentures offered to the public under the FPI Regulations.

 

A FPI is defined as any investment made by a person resident outside India in capital instruments where such investment is (a) less than 10% of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company or (b) less than 10% of the paid up value of each series of capital instruments of a listed Indian company. FPIs are subject to ownership limits in Portfolio Investments, as further described below, and only certain categories of FPIs may invest or deal in exchange traded derivative contracts approved by SEBI from time to time. FPIs are required to be registered with the designated depositary participant on behalf of SEBI subject to compliance with “Know Your Customer” rules.

 

The 2019 FPI Regulations have categorized FPIs based on regulatory status and country of residence — that is, whether the entity is from a Financial Action Task Force (“FATF”) member country. The operating guidelines have provided guidance on re-categorization of FPIs. While Category-I FPIs under the 2014 FPI Regulations would remain the same, the former Category-II FPIs have been re-characterized under the 2019 FPI Regulations as Category-I or –II, depending upon their eligibility.

 

A FPI may purchase or sell capital instruments of an Indian company on a recognized stock exchange in India as well as purchase shares and convertible debentures offered to the public under the FPI Regulations.

 

Further, a FPI may sell shares or convertible debentures so acquired (i) in an open offer in accordance with the Securities Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; or (ii) in an open offer in accordance with the Securities Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; or (iii) through buyback of shares by a listed Indian company in accordance with the Securities Exchange Board of India (Buy-back of Securities) Regulations, 2018. A FPI may also acquire shares or convertible debentures (i) in any bid for, or acquisition of securities in response to an offer for disinvestment of shares made by the central government or any state government of India; or (ii) in any transaction in securities pursuant to an agreement entered into with merchant banker in the process of market making or subscribing to unsubscribed portion of the issue in accordance with SEBI (ICDR) Regulations, 2018.

 

Ownership restrictions

 

The SEBI and the RBI regulations restrict portfolio investments in Indian companies by FIIs, NRIs and FPIs, all of which we refer to as “foreign portfolio investors.” Under current Indian law, FPIs may in the aggregate hold not more than 24.0% of the equity shares of an Indian company, and NRIs in the aggregate may hold not more than 10.0% of the shares of a publicly traded Indian company through portfolio investments.

 

The Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (the “NDI Rules”) has brought about a substantial change in the Schedule II to the NDI Rules, stating that effective as of April 1, 2020, the aggregate limit would be the sectoral cap applicable to such Indian company. An Indian company may, with the approval by resolution of its board of directors and by special resolution of its members: (i) decrease the aggregate limit before March 31, 2020 to a lower threshold of 24%, 49% or 74%, as it deems fit, or (ii) increase the aggregate limit to 49% or 74%, or the sectoral cap or statutory ceiling, as it deems fit. However, once the aggregate limit is increased, the limit cannot be reduced later.

 

 

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Our shareholders on September 24, 2001 had passed a resolution enhancing the limits of portfolio investment by FIIs in the aggregate to 49% and NRIs in the aggregate may hold not more than 10.0% of our equity shares through portfolio investments. However pursuant to the applicability of the NDI rules, the sectoral cap applicable to our company is 74%. Holders of ADSs are not subject to the rules governing FPIs unless they convert their ADSs into equity shares.

 

 If a FPI’s investments exceed the prescribed limits, the FPI will have the option to divest its excess holdings within five trading days, failing which the entire investment in the company will be considered a Foreign Direct Investment (“FDI”). If the investment falls under a category where FDI is prohibited, the aggregate FPI limit is capped at 24%.

 

No single FPI may hold more than 10.0% of the shares of an Indian company and no single NRI may hold more than 5.0% of the shares of an Indian company. If multiple entities have at least 50% overlap in their ownership (direct or ultimate beneficial owners), then such entities shall be treated as part of the same group and the above percentage of FPI investment limit shall apply to the entire group as if they were a single FPI.

 

As of March 31, 2026, FIIs and FPIs collectively held 21.14% of our equity shares, foreign nationals and companies held 0.01% of our equity shares and NRIs held 0.92% of our equity shares.

 

In September 2011, the Securities and Exchange Board of India (“SEBI”) enacted the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (the “2011 Takeover Code”), which replaces the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The 2011 Takeover Code was thereafter amended from time to time.

 

Under the 2011 Takeover Code, upon acquisition of shares or voting rights in a publicly listed Indian company (the “target company”) such that the aggregate shareholding of the acquirer (meaning a person who directly or indirectly, acquires or agrees to acquire shares or voting rights in the target company, or acquires or agrees to acquire control over the target company, either alone or together with any persons acting in concert), is 5% or more of the shares of the target company, the acquirer is required to, within two working days of such acquisition, disclose the aggregate shareholding and voting rights in the target company to the target company and to the stock exchanges in which the shares of the target company are listed.

 

Furthermore, an acquirer who, together with persons acting in concert with such acquirer, holds shares or voting rights entitling them to 5% or more of the shares or voting rights in a target company must disclose every sale or acquisition of shares representing 2% or more of the shares or voting rights of the target company to the target company and to the stock exchanges in which the shares of the target company are listed within two working days of such acquisition or sale or receipt of intimation of allotment of such shares.

 

Every acquirer, who together with persons acting in concert with such acquirer, holds shares or voting rights entitling such acquirer to exercise 25% or more of the voting rights in a target company, has to disclose to the target company and to stock exchanges in which the shares of the target company are listed, their aggregate shareholding and voting rights as of the thirty-first day of March, in such target company within seven working days from the end of the fiscal year of that company.

 

The acquisition of shares or voting rights that entitles the acquirer to exercise 25% or more of the voting rights in or control over the target company triggers a requirement for the acquirer to make an open offer to acquire additional shares representing at least 26% of the total shares of the target company for an offer price determined as per the provisions of the 2011 Takeover Code. The acquirer is required to make a public announcement for an open offer on the date on which it is agreed to acquire such shares or voting rights. Such open offer shall only be for such number of shares as is required to adhere to the maximum permitted non-public shareholding.

 

Since we are a listed company in India, the provisions of the 2011 Takeover Code will apply to us and to any person acquiring our ADSs, equity shares or voting rights in our company.

 

Pursuant to the 2011 Takeover Code, we must report to the Indian stock exchanges on which our equity shares are listed, any disclosures made to us under 2011 Takeover Code.

 

Holders of ADSs may be required to comply with such notification and disclosure obligations pursuant to the provisions of the Deposit Agreement entered into by such holders, our company and the depositary of our ADRs.

 

Subsequent transfer of shares

 

A person resident outside India holding the shares or debentures of an Indian company may transfer the equity instruments held by him, in compliance with the conditions specified in the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (“NDI Rules”), as follows:

 

i.

A person resident outside India who is not a NRI, an overseas citizen of India or a former Overseas Corporate Body (“OCB”), may transfer by way of sale or gift, the equity instruments held by him to any person resident outside India;

 

 

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ii.

A NRI may transfer by way of sale or gift, the equity instruments held by that person to another NRI or to any person resident outside India; or

 

iii.

A person resident outside India holding the equity instruments of an Indian company in accordance with the NDI Rules, (a) may transfer such equity instrument to a person resident in India by way of sale or gift; or (b) may sell such equity instrument on a recognized Stock Exchange in India through a registered broker.

 

In enacting the NDI Rules, the Central Government superseded the Foreign Exchange Management (Transfer or Issue of Securities by a person Resident Outside India) Regulations, 2017.

 

The NDI Rules give the readers a consolidated view of the transfer or issue of securities by a person resident outside India and also clarifies several aspects of FDI. These regulations aim towards further simplification and provide greater clarity on differentiation between FDI and FPI.

 

ADS guidelines

 

Shares of Indian companies represented by ADSs may be approved for issuance to foreign investors by the Government of India under the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993 (the “1993 Scheme”), as modified from time to time, promulgated by the Government of India. The 1993 Scheme is in addition but without prejudice to the other policies or facilities, as described below, relating to investments in Indian companies by foreign investors. The issuance of ADSs pursuant to the 1993 Scheme also affords to holders of the ADSs the benefits of Section 115AC of the Income Tax Act, 1961 for purpose of the application of Indian tax laws. In March 2001, the RBI issued a notification permitting, subject to certain conditions, two-way fungibility of ADSs. This notification provides that ADSs converted into Indian shares can be converted back into ADSs, subject to compliance with certain requirements and the limits of sectorial caps.

 

The Ministry of Finance, Government of India, enacted The Depository Receipts Scheme, 2014 (the “Depository Receipts Scheme”) effective as of December 15, 2014. In order to facilitate the issuance of depository receipts by Indian companies outside India, the Depository Receipts Scheme repeals the former provisions dealing with depository receipts in the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993. The Depository Receipts Scheme now governs the issue or transfer of permissible securities to a foreign depository by eligible persons and defines the rights and duties of a foreign depository and obligations of a domestic custodian.

 

There are certain relaxations provided under the Depository Receipts Scheme subject to prior approval of the Ministry of Finance. For example, a registered broker is permitted to purchase shares of an Indian company on behalf of a person resident outside of India for the purpose of converting those shares into ADSs. However, such conversion is subject to compliance with the provisions of the Depository Receipts Scheme and the periodic guidelines issued by the regulatory authorities. Therefore, depository receipts converted into Indian shares may be converted back into depository receipts, subject to certain limits of sectorial caps.

 

Under the Depository Receipts Scheme, a foreign depository may take instructions from depository receipts holders to exercise the voting rights with respect to the underlying equity securities. Additionally, a domestic custodian has been defined to include a custodian of securities, an Indian depository, a depository participant or a bank having permission from SEBI to provide services as custodian.

 

Further, the Depository Receipts Scheme provides that the aggregate of permissible securities which may be issued or transferred to foreign depositories for issue of depository receipts, along with permissible securities already held by persons resident outside India, shall not exceed the limit on foreign holding of such permissible securities under the Foreign Exchange Management Act, 1999.

 

The SEBI introduced a framework for the issuance of Depository Receipts (“DRs”) by companies listed on stock exchanges in India and for the “permissible securities” underlying any such DR issuance (“DR Framework”), pursuant to its circular dated October 10, 2019. Further, the SEBI issued circulars dated November 28, 2019 and December 18, 2020, on the framework for the issuance of DRs and amended the scope and process for permissible holder of DRs, respectively. The requirements for issuance of DRs set out in the DR Framework are in addition to the requirements under the Companies Act, 2013 and rules thereunder, the 2014 Scheme and the foreign exchange regulations. The key aspects provided under the DR Framework are:

 

·

Eligible Issuer – Only a company incorporated in India and listed on a recognized stock exchange in India is allowed to issue the underlying securities for issuance of DRs, which must be permissible securities (as discussed below), and only their holders may transfer such underlying securities.

·

Permissible Holders – Indian residents and NRIs are not allowed to be permissible holders or beneficial owners of DRs. However, this restriction is not applicable in case the DRs are issued to NRIs pursuant to any share-based employee benefit scheme(s), that are implemented by the listed company in line with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, or any bonus issue or any rights issue of shares.

 

 

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·

Obligations of Listed Company – The listed company must comply with applicable laws and regulations and ensure that only permissible securities are issued as the underlying securities for any DR issuance. Further, the listed company must issue such permissible securities only to the permissible holders. The listed company shall be responsible for identification of any holder (like NRI), who are issued DRs in terms of any share-based employee benefit scheme(s). Further, the listed company must provide the information of NRI DR holders to the designated depository in India, for the purpose of monitoring foreign investment limits.

·

Minimum Public Shareholding – In the case of issuance of new DRs, the listed company shall ensure that the limit on foreign holding of permissible securities as prescribed under applicable FEMA regulations is not exceeded and shall comply with the minimum public shareholding norms in India, after excluding the permissible securities held by the depository.

·

Minimum Price - The minimum price for the issuance or transfer of permissible securities is the price applicable to the corresponding mode of issue (i.e., public offer, preferential allotment or qualified institutions placement) to domestic investors in India under applicable laws.

 

The jurisdictions where DRs may be issued and exchanges where DRs may be listed pursuant to the DR Framework were set forth in a circular dated November 28, 2019. While the DR framework for listed entities has been operationalized, further amendments and requirements may be notified from time to time.

 

Under the DR Framework, “permissible securities” means equity shares and debt securities, which are in a dematerialized form and rank pari passu with the securities issued and listed on a recognized stock exchange. Previously, under the 2014 Depository Receipts Scheme, companies were only required to comply with eligibility requirements pertaining to prohibition from accessing capital markets or dealing in securities.

 

The Department of Economic Affairs, Ministry of Finance made amendments to certain provisions of the Securities Contracts (Regulation) Rules, 1957 pursuant to Securities Contracts (Regulation) (Amendment) Rules, 2015, on February 25, 2015. An amended, the “public shareholding” for our equity shares held by the public includes shares underlying depository receipts if the holder of such depository receipts has the right to issue voting instruction and such depository receipts are listed on an international stock exchange in accordance with the Depository Receipts Scheme.

 

Fungibility of ADSs

 

A registered broker in India can purchase shares of an Indian company that issued ADSs, on behalf of a person residing outside India, for the purposes of converting the shares into ADSs.

 

The Depository Receipts Scheme states that the aggregate of permissible securities which may be issued or transferred to foreign depositories for issue of depository receipts, along with permissible securities already held by persons resident outside India, shall not exceed the limit on foreign holding of such permissible securities under the Foreign Exchange Management Act, 1999.

 

Transfer of ADSs

 

A person resident outside India may transfer ADSs held in an Indian company to another person resident outside India without any permission. A person resident in India is not permitted to hold ADSs of an Indian company, except in connection with the exercise of stock options.

 

Shareholders resident outside India who intend to sell or otherwise transfer equity shares within India should seek the advice of Indian counsel to understand the requirements applicable at that time.

 

 

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10.E.

Taxation

 

Indian Taxation

 

General.

The following summary is based on the law and practice of the Income-tax Act, 1961 (the “Income-tax Act”), including the special tax regime contained in Sections 115AC and 115ACA of the Income-tax Act read with the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993 (collectively, the “Income-tax Act Scheme”), as amended on January 19, 2000. The Income-tax Act is amended every year by the Finance Act of the relevant year. Some or all of the tax consequences of Sections 115AC and 115ACA may be amended or changed by future amendments to the Income-tax Act.

 

We believe this information is materially complete as of the date hereof. This summary is not intended to constitute an authoritative analysis of the individual tax consequences to non-resident holders or employees under Indian law for the acquisition, ownership and sale of ADSs and equity shares.

 

The Income-tax Act, 2025 (“New Income Tax Act”) replaced the Income-tax Act, 1961 (“Previous Income Tax Act”) with effect from April 1, 2026. Accordingly, the provisions of the Income-tax Act, 1961 govern taxation up to March 31, 2026, while the provisions of the Income-tax Act, 2025 appl

ies thereafter

. The New Income Tax Act is considered substantially the same as the Previous Income

Tax

Act in terms of its underlying tax policy as

discussed in

this section, but it has undergone a material structural overhaul, including re‑casting and re‑grouping of provisions, aimed at simplifying and rationalizing the legislative framework.

 

EACH PROSPECTIVE INVESTOR SHOULD CONSULT TAX ADVISORS WITH RESPECT TO TAXATION IN INDIA OR THEIR RESPECTIVE LOCATIONS ON ACQUISITION, OWNERSHIP OR DISPOSING OF EQUITY SHARES OR ADSs.

Residence.

For purposes of the Income-tax Act, an individual is considered to be a resident of India during any tax year (i.e., April 1 to March 31) if he or she is in India in that year for:

 

•

a period or periods of at least 182 days; or

•

at least 60 days and, within the four preceding fiscal years has been in India for a period or periods amounting to at least 365 days.

 

The period of 60 days referred to above shall be 182 days in case of a citizen of India or a Person of Indian Origin living outside India for the purpose of employment outside India who is visiting India.

 

For Indian citizens or persons of Indian origin residing abroad who visit India, if their total income, excluding income from foreign sources, exceeds Rs.1.5 million, their required period of stay will be considered as 120 days instead of the above threshold of 182 days. Additionally, such individuals will be classified as Not Ordinarily Resident (“NOR”) if their stay in India is less than 182 days. In this context, foreign source income is defined as income that accrues or arises outside India, excluding income generated from a business controlled in or a profession set up in India, and income not deemed to accrue or arise in India. This provision does not apply to individuals classified as residents of India.

 

An Indian citizen will be deemed a resident of India if their income, excluding income from foreign sources, exceeds Rs.1.5 million during the previous year, and if they are not liable to pay income tax in any other country or territory due to domicile, residence, or similar criteria. Such individuals, deemed residents, will be classified as NOR.

 

A company is considered a resident of India if it is an Indian company or if its place of effective management during the relevant year is located in India. Individuals and companies that do not meet these criteria will be treated as non-residents under the provisions of the Income Tax Act.

Taxation of Distributions.

 

The Finance Act, 2020 made section 115-O and 115R of the Income-tax Act ineffective starting April 1, 2020. Pursuant to this amendment, the responsibility for paying taxes on dividends declared by domestic company and income distributed by equity oriented mutual funds has shifted from domestic companies/mutual funds to shareholders/unit holders. In summary, effective as of April 1, 2020, dividend distribution tax has been abolished and dividend received are now taxable in the hands of shareholder/unit holder at their applicable income tax slab rates.

 

Additionally, section 10(34) and section 10(35) of the Income-tax Act, which provide tax exemption to shareholders/unit holders for dividends received from domestic company/mutual funds, ceased to be effective as of April 1, 2020. Also, section 115BBDA of the Income-tax Act, which imposed tax on dividend exceeding Rs.1,000,000 received by specified assesses, also became inoperative effective as of April 1, 2020.

 

 

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As the Finance Act, 2020 has shifted taxation of dividends from the distributor of dividends to the recipient, companies are under an obligation to withhold taxes at specified rates while making dividend payments to shareholders.

 

Taxation of Capital Gains.

The following is a brief summary of capital gains taxation of non-resident holders and resident employees relating to the sale of ADSs and equity shares received upon redemption of ADSs. The relevant provisions are contained mainly in sections 2(42A), 45, 47(viia), 49(2ABB),111A, 115AC and 115ACA, of the Income-tax Act, in conjunction with the Income- tax Scheme.

You should consult your own tax advisor concerning the tax consequences of your particular situation.

 

Shares (including shares issuable on the conversion of the ADSs) held by the non-resident investor for a period of more than 12 months are treated as long term capital assets. If the shares are held for a period of less than 12 months from the date of conversion of the ADSs, the same are treated as short term capital assets.

 

Capital gains are taxed as follows:

 

•

gains from a sale of ADSs outside India by a non-resident to another non-resident are not taxable in India;

 

•

As per the Finance (No.2) Act, 2024 long-term capital gains realized by a resident from the transfer of the ADSs will be subject to tax at the rate of 12.5%, plus the applicable surcharges and the health and education cess. Short-term capital gains on such a transfer will be taxed at graduated rates with a maximum of 30%, plus the applicable surcharges and the Health and Education cess.

 

•

As per the Finance (No.2) Act, 2024 long-term capital gains realized by a non-resident upon the sale of equity shares obtained from the conversion of ADSs are subject to tax at a rate of 12.5%, plus applicable surcharges and the Health and Education Cess. Short-term capital gains on such a transfer will be taxed at the ordinary income tax rate applicable to the seller plus the applicable surcharges and the health and education cess, wherever applicable.

 

•

The Finance (No.2) Act, 2024 has amended the Income Tax Act to provide that Long Term Capital Gain exceeding Rs.125,000 arising from sale of equity shares in a company will be taxable at a rate of 12.5% without indexation benefits. This applies if the transaction takes place on a recognized stock exchange and the Securities Transaction Tax (“STT”) is paid.

 

However, gains from sale of equity shares acquired on or prior to January 31, 2018 are grandfathered. The short-term capital gains are taxed at 20%, plus applicable surcharges and the Health and Education Cess, provided the sale occurs on a recognized stock exchange and the STT is paid.

 

The applicable rate of surcharge on companies is as follows:

 

Total Taxable Income Range		For a Domestic Company				For a Foreign Company
More than Rs.10,000,000 but not more Rs.100,000,000		7 %				2 %
More than Rs.100,000,000		12 %				5 %

 

The maximum surcharge for domestic companies opting under section 115BAA is capped at 10%, regardless of their total income.

 

The applicable rate of surcharge on individuals is as follows:

 

Total Taxable Income Range		Surcharge
Rs.5,000,000 to Rs.10,000,000		10 %
Rs.10,000,000 to Rs.20,000,000		15 %
Rs.20,000,000 to Rs.50,000,000		25 %*
Above Rs.50,000,000		37 %*

 

*

The surcharge of 25% or 37% does not apply to capital gains arising from the sale of equity shares in a company or units of equity-oriented funds under sections 111A and 112A of the Income-tax Act, as well as to dividend income. Additionally, the surcharge of 25% or 37% is not levied on the income of foreign institutional investors (FIIs) from securities specified under section 115AD of the Income-tax Act.

 

The taxes and applicable surcharge will be increased by an incremental levy known as the ‘Health and Education Cess’ at a 4% rate.

 

 

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As per the Finance Act (No.2) 2024, the default tax regime for Individuals or HUF is the new tax regime under section 115BAC, which offers lower tax rates. However, taxpayers opting for this simplified regime will forfeit eligibility for certain specified deductions and exemptions.

 

As per Finance Act (No. 2) 2024, an Individual or HUF taxpayer may choose to be taxed under the old tax regime by filing their income tax return in the prescribed manner. For taxpayers with business income, once this option is exercised, it becomes mandatory for all subsequent assessment years. However, for taxpayers without business income, this option can be exercised annually while filing the income tax return under section 139(1).

 

All assesses, including individuals, whose advance tax payable is Rs.10,000 or more during the year are required to pay advance tax in four installments as follows:

 

Due Date of Installment	Amount Payable
On or before June 15	Not less than 15% of such advance tax.
On or before September 15	Not less than 45% of such advance tax, as reduced by the amounts (if any) paid in earlier installments.
On or before December 15	Not less than 75% of such advance tax, as reduced by the amounts (if any) paid in earlier installments.
On or before March 15	The whole amount of such advance tax, as reduced by the amounts (if any) paid in earlier installments.

 

As per the Finance Act, 2026, in a sale and purchase of securities entered into through a recognized stock exchange, a STT may be imposed upon one or both of the parties as follows:

 

·

With respect to a sale and purchase of equity shares (i) both the buyer and seller are required to pay a STT at the rate of 0.1% of the transaction value of the securities, if the transaction is a delivery based transaction (i.e., the transaction involves actual delivery or transfer of shares); or (ii) the seller of the shares is required to pay a STT at the rate of 0.025% of the transaction value of the securities, if the transaction is a non-delivery based transaction (i.e., the transaction is settled without taking delivery of the shares).

 

·

With respect to a sale and purchase of an option with respect to securities (i) upon the sale of the option, the seller is required to pay a STT at the rate of 0.15% of the option premium; and (ii) upon exercise of the option, the buyer is required to pay a STT at the rate of 0.15% of the settlement price.

 

·

With respect to a sale and purchase of futures with respect to securities, the seller is required to pay a STT at the rate of 0.05% of the transaction value.

 

Any resulting taxes on capital gains arising out of such transaction may be offset by the applicable credit mechanism allowed under double tax avoidance agreements. The capital gains tax is computed by applying the appropriate tax rates to the difference between the sale price and the purchase price of the ADSs or equity shares. Under the Income-tax Scheme, the purchase price of equity shares in an Indian listed company received in exchange for ADSs will be the market price of the underlying shares on the date that the Depositary gives notice to the custodian of the delivery of the equity shares in exchange for the corresponding ADSs, or the “stepped up” basis purchase price. The market price will be the price of the equity shares prevailing on the Stock Exchange, Bombay or the National Stock Exchange, as applicable.

 

There is no corresponding provision under the Income-tax Act in relation to the “stepped up” basis for the purchase price of equity shares. However, to the best of our knowledge, the tax department in India has not denied this benefit. In the event that the tax department denies this benefit, the original purchase price of ADSs would be considered the purchase price for computing the capital gains tax.

 

According to the Income-tax Scheme, a non-resident holder’s holding period for the purposes of determining the applicable Indian capital gains tax rate relating to equity shares received in exchange for ADSs commences on the date of the notice of the redemption by the Depositary to the custodian. However, the Income-tax Scheme does not address this issue in the case of resident employees, and it is therefore unclear as to when the holding period for the purposes of determining capital gains tax commences for such a resident employee.

 

It is unclear as to whether section 115AC of the Income Tax Act and the rest of the Income-tax Scheme are applicable to a non- resident who acquires equity shares outside India from a non-resident holder of equity shares after receipt of the equity shares upon redemption of the ADSs.

 

 

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Withholding Tax on Capital Gains.

Any gain realized by a non-resident or resident employee on the sale of equity shares is subject to Indian capital gains tax, which, in the case of a non-resident is to be withheld at the source by the buyer. However, as per the provisions of Section 196D(2) of the Income-tax Act, no withholding tax is required to be deducted from any income by way of capital gains arising to FIIs (as defined in Section 115AD of the Act) on the transfer of securities (as defined in Section 115AD of the Act).

 

Buy-back of Securities.

As per the Finance Act, 2026 (effective from April 1, 2026), the taxation framework applicable to

the

buy-back of shares has been revised. Under the revised regime, consideration received by shareholders on buy-back of shares undertaken by a company in accordance with Section 68 of the Companies Act, 2013 is taxable under the head “Capital Gains” and is no longer treated as dividend income.

 

Capital gains tax shall apply only on the gains (i.e., buy-back consideration minus the cost of acquisition of shares), consistent with general capital gains principles.

 

For non-promoter shareholders, capital gains arising on buy-back of listed equity shares shall be taxable in accordance with the applicable long-term capital gains (“LTCG”) or short-term capital gains (“STCG”) provisions, including the rates specified under sections 111A and 112A of the Income-tax Act or corresponding provisions of the Income-tax Act, 2025.

 

In the case of promoter shareholders, the Finance Act, 2026 provides as follow:

 

Promoter (Domestic company)

Promoter (Other than domestic company)

Particulars

LTCG

STCG

LTCG

STCG

Capital gains tax rate on buy back of listed shares

22.0 %*

30.0 %*

 

*Excluding applicable surcharge and education cess.

 

‘

Promoter’ means a “promoter” as defined in the SEBI (Buyback of Securities) Regulations (in case of listed shares), or as defined in the Companies Act/who holds (directly or indirectly) more than 10 percent shareholding in the company (in case of unlisted shares).

 

The additional tax on promoters is restricted to buy-backs undertaken in accordance with Section 68 of the Companies Act, 2013.

 

 

It is important to note that the non-resident shareholder's statutory obligation to pay tax dues on gains (if any) in the country of their tax residence remains separate and independent from the company's obligation for taxes on buyback. Shareholders are advised to consult their tax advisors regarding the tax treatment or obligations, if applicable.

 

Stamp Duty and Transfer Tax.

Upon issuance of the equity shares underlying our ADSs, we are required to pay a stamp duty of Rs.10 per share certificate evidencing such underlying equity shares. A transfer of ADSs is not subject to Indian stamp duty. A sale of equity shares in physical form by a non-resident holder is also subject to Indian stamp duty at the rate of 0.25% of the market value of the equity shares on the trade date, although customarily such duty is borne by the transferee. Shares must be traded in dematerialized form. Effective as of July 1, 2020, the issuance or transfer of shares in dematerialized form is also subject to stamp duty of 0.005% or 0.015%, respectively.

 

Wealth Tax.

Currently, there is no wealth tax.

 

Gift Tax and Estate Duty.

Currently, there are no gift taxes or estate duties. These taxes and duties could be restored in future. Non-resident holders are advised to consult their own tax advisors regarding this issue.

Goods and Service Tax

. Brokerage fees or commissions paid to stockbrokers in connection with the sale or purchase of shares are subject to a Goods and Service Tax (“GST”) of 18%. The stockbroker is responsible for collecting the GST from the shareholder and paying it to the relevant authority.

 

Material United States Federal Income and Estate Tax Consequences

 

The following is intended only as a descriptive summary of the material U.S. federal income and estate tax consequences that may be relevant with respect to the acquisition, ownership and disposition of our equity shares or ADSs and is for general information only and does not purport to be a complete analysis or listing of all potential tax effects relevant to the ownership or disposition of our equity shares or ADSs. This summary addresses the U.S. federal income and estate tax considerations of holders that are U.S. holders. “U.S. holders” are beneficial holders of our equity shares or ADSs who are (i) citizens or residents of the United States, (ii) corporations (or other entities treated as corporations for U.S. federal tax purposes) created in or organized in the United States or under the laws of the United States or any state thereof or any political subdivision thereof or therein, (iii) estates, the income of which is subject to U.S. federal income taxation regardless of its source, and (iv) trusts having a valid election to be treated as U.S. persons in effect under U.S. Treasury Regulations or for which a U.S. court exercises primary supervision and a U.S. person has the authority to control all substantial decisions.

 

 

93

 

 

This summary is limited to U.S. holders who will hold our equity shares or ADSs as capital assets (generally, property held for investment). In addition, this summary is limited to U.S. holders who are not residents in India for purposes of the Convention between the Government of the United States of America and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (the “Treaty”). If a partnership, including any entity treated as a partnership for U.S. federal income tax purposes, holds our equity shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. A partner in a partnership holding our equity shares or ADSs should consult his, her or its own tax advisor regarding the tax treatment of an investment in our equity shares or ADSs.

 

This summary does not address tax considerations applicable to holders that may be subject to special tax rules, such as banks, insurance companies, certain financial institutions, regulated investment companies, real estate investment trusts, broker dealers, traders in securities that elect to use the mark–to-market method of accounting, United States expatriates, persons liable for alternative minimum tax, persons holding our equity shares or ADSs through partnerships or other pass-through entities, persons that have a “functional currency” other than the U.S. dollars, tax-exempt entities, persons that will hold our equity shares or ADSs as a position in a “straddle” or as part of a “hedging” or “conversion” transaction for tax purposes and/or corporate holders of 10% or more, by voting power or value, of the shares of our company. This summary is based on the U.S. Internal Revenue Code of 1986, as amended and as in effect on the date of this Annual Report on Form 20-F and on United States Treasury Regulations in effect or, in some cases, proposed, as of the date of this Annual Report on Form 20-F, as well as judicial and administrative interpretations thereof available on or before such date, and is based in part on the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms. All of the foregoing is subject to change, which change could apply retroactively, or the Internal Revenue Service may interpret existing authorities differently, and a court may sustain such an interpretation, any of which could affect the tax consequences described below. This summary does not address the U.S. federal tax laws other than income or estate tax, and does not address U.S. state or local or non-U.S. tax laws.

 

EACH INVESTOR OR PROSPECTIVE INVESTOR SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF ACQUIRING, OWNING OR DISPOSING OF OUR EQUITY SHARES OR ADSs.

 

Ownership of ADSs

. For U.S. federal income tax purposes, holders of our ADSs will generally be treated as the holders of equity shares represented by such ADSs.

 

Dividends

. Subject to the passive foreign investment company rules described below, except for our equity shares or ADSs, if any, distributed pro rata to all of our shareholders, including holders of our ADSs, the gross amount of any distributions of cash or property with respect to our equity shares or ADSs (before reduction for any Indian withholding taxes) will generally be included in income by a U.S. holder as foreign source dividend income at the time of receipt, which in the case of a U.S. holder of ADSs generally should be the date of receipt by the Depositary, to the extent such distributions are made from our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Such dividends will not be eligible for the dividends received deduction generally allowed to corporate U.S. holders in respect of dividends received from United States corporations. To the extent, if any, that the amount of any distribution by us exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles) such excess will be treated first as a tax-free return of capital to the extent of the U.S. holder’s tax basis in our equity shares or ADSs, and thereafter as capital gain.

 

With respect to certain non-corporate U.S. holders, subject to certain limitations, including certain limitations based on taxable income and filing status, qualified dividends paid to non-corporate U.S. holders, including individuals, may be eligible for a reduced rate of taxation if we are deemed to be a “qualified foreign corporation” for United States federal income tax purposes and certain holding period requirements are met (including the requirement that the non-corporate U.S. holder holds the ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date). A qualified foreign corporation includes a foreign corporation if (1) its shares (or, according to legislative history, it’s ADSs) are readily tradable on an established securities market in the United States or (2) it is eligible for the benefits under a comprehensive income tax treaty with the United States. In addition, a corporation is not a qualified foreign corporation if it is a passive foreign investment company (as discussed below) for either its taxable year in which the dividend is paid or the preceding taxable year. Our ADSs are traded on the New York Stock Exchange, an established securities market in the United States as identified by Internal Revenue Service guidance. Due to the absence of specific statutory provisions addressing ADSs, however, there can be no assurance that we are a qualified foreign corporation solely as a result of our listing on the New York Stock Exchange. Nonetheless, we may be eligible for benefits under the Treaty.

 

 

94

 

 

Qualified dividends will generally be taxed at a maximum income tax rate of 15% except for U.S. individual holders with incomes exceeding $545,500 or, in the case of taxpayers filing joint tax returns (or as a qualifying widow or widower), with incomes exceeding $613,700 which will be subject to tax at the rate of 20% on such qualified dividends. Further, qualified dividends received by U.S. individual holders with incomes less than $49,450 or, in the case of taxpayers filing joint returns (or as a qualifying widow or widower), $98,900 will be subject to tax at the rate of 0% on such qualified dividends. Different amounts apply for estates and trusts. Each U.S. holder should consult his, her or its own tax advisor regarding the treatment of dividends and such holder’s eligibility for a reduced rate of taxation.

 

Subject to certain conditions and limitations, any Indian withholding tax imposed upon distributions paid to a U.S. holder with respect to our equity shares or ADSs should be eligible for credit against the U.S. holder’s federal income tax liability. Alternatively, a U.S. holder may claim a deduction for such amount, but only for a year in which a U.S. holder does not claim a credit with respect to any foreign income taxes. The overall limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, distributions on our equity shares or ADSs generally will be foreign source income, for purposes of computing the United States foreign tax credit allowable to a U.S. holder.

 

The rules governing the foreign tax credit are very complex and each U.S. holder should consult his, her or its own tax advisors regarding the availability of the foreign tax credit under such holder’s own particular circumstances.

 

If dividends are paid in Indian rupees, the amount of the dividend distribution included in the income of a U.S. holder will be in the U.S. dollar value of the payments made in Indian rupees, determined utilizing the spot exchange rate between Indian rupees and U.S. dollars applicable to the date such dividend is included in the income of the U.S. holder. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the dividend date to the date such payment is converted into U.S. dollars will be treated as U.S. source ordinary income or loss. Each U.S. holder is urged to consult his, her or its own tax advisors regarding the taxation of currency gain or loss.

 

EACH U.S. HOLDER SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR REGARDING THE TREATMENT OF DIVIDENDS AND SUCH HOLDER’S ELIGIBILITY FOR REDUCED RATE OF TAXATION UNDER THE LAW IN EFFECT FOR THE YEAR OF THE DIVIDEND.

Sale or exchange of our equity shares or ADSs

. Subject to the passive foreign investment company rules described below, a U.S. holder generally will recognize gain or loss on the sale or exchange of our equity shares or ADSs equal to the difference between the amount realized on such sale or exchange and the U.S. holder’s adjusted tax basis in such equity shares or ADSs, as the case may be. Such gain or loss will generally be capital gain or loss, and will be long-term capital gain or loss if such equity shares or ADSs, as the case may be, were held for more than one year. Currently, for individuals and certain other non-corporate holders, long-term capital gains are taxed at a maximum rate of 20%, plus potential net investment income tax discussed below. Gain or loss, if any, recognized by a U.S. holder generally will be treated as U.S. source passive category income or loss for U.S. foreign tax credit purposes. In the case of capital losses, a U.S. holder is eligible to claim a capital loss deduction subject to significant limitations. If a U.S. holder is unable to claim these losses on his, her or its U.S. federal income tax return, the U.S. holder may be eligible to carryover the amount of the unused capital loss to future years, subject to additional limitations provided under U.S. tax regulations. Capital gains realized by a U.S. holder upon the sale of our equity shares (but not ADSs) may be subject to certain tax in India. See “Taxation-Indian Taxation-Taxation of Capital Gains” set forth above in this Annual Report. Due to limitations on foreign tax credits, however, a U.S. holder may not be able to utilize any such taxes as a credit against the U.S. holder’s federal income tax liability.

 

Estate taxes

. An individual U.S. holder who is a citizen or resident of the United States for U.S. federal estate tax purposes will have the value of our equity shares or ADSs held by such holder included in his or her gross estate for U.S. federal estate tax purposes. An individual holder who actually pays Indian estate tax with respect to our equity shares will, however, be entitled to credit the amount of such tax against his or her U.S. federal estate tax liability, subject to a number of conditions and limitations.

 

Net Investment Income Tax

. U.S. holders that are individuals, estates or trusts and whose income exceeds certain thresholds (the lesser of the U.S holder’s net investment income or modified adjusted gross income, to that extent such amount in a taxable year exceeds $200,000 (a special rule applies to a married individual filing a separate return) or, in the case of taxpayers filing joint tax returns, $250,000) will be subject to a 3.8% net investment income tax on certain net investment income, including, among other things, dividends on, and capital gains from the sale or other taxable disposition of, our equity shares or ADSs, subject to certain limitations and exceptions.

 

Backup withholding tax and information reporting requirements

. Any dividends paid on, or proceeds from a sale of, our equity shares or ADSs to or by a U.S. holder may be subject to U.S. information reporting, and a backup withholding tax (currently at a rate of 24%) may apply unless the holder establishes that he, she or it is an exempt recipient or provides a U.S. taxpayer identification number and certifies under penalty of perjury that such number is correct and that such holder is not subject to backup withholding and otherwise complies with any applicable backup withholding requirements.

 

Any amount withheld under the backup withholding rules will be allowed as a credit against the holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the Internal Revenue Service. Certain U.S. holders are required to report information with respect to their investment in our equity shares or ADSs not held through a custodial account with a U.S. financial institution on Internal Revenue Service Form 8938, which must be attached to the U.S. holder’s annual income tax return. Investors who fail to report required information could become subject to substantial penalties.

In addition, a U.S. holder should consider the possible obligation to file online a FinCEN Form 114 – Foreign Bank and Financial Accounts Report as a result of holding ordinary shares or ADSs. Each U.S. holder should consult his, her or its tax advisor concerning his, her or its obligation to file Internal Revenue Service Form 8938 and/or FinCEN Form 114.

 

 

95

 

 

Passive foreign investment company

. A non-U.S. corporation will be classified as a passive foreign investment company for U.S. federal income tax purposes if either:

 

•

75% or more of its gross income for the taxable year is passive income; or

•

on average for the taxable year, 50% or more of the total value of its assets produce or are held for the production of passive income (generally measured as of the end of each quarter of its taxable year).

 

We do not believe that we satisfy either of the tests for passive foreign investment company status for the fiscal year ended March 31, 2026. Because this determination is made on an annual basis and depends on a variety of factors (including the value of our ADSs), no assurance can be given that we will not be considered a passive foreign investment company in future taxable years. If we were to be a passive foreign investment company for any taxable year, dividends would not be eligible for the preferential tax treatment applicable to qualified dividends income but would instead be taxable at rates applicable to ordinary income.

 

Further, if we were to be a passive foreign investment company for any taxable year, U.S. holders would be required to:

 

•

pay an interest charge together with tax calculated at ordinary income rates on “excess distributions” (as the term is defined in relevant provisions of the U.S. tax laws) and on any gain on a sale or other disposition of our equity shares or ADSs;

•

if an election is made to be a “qualified electing fund” (as the term is defined in relevant provisions of the U.S. tax laws), include in their taxable income their pro rata shares of undistributed amounts of our income; or

•

if the equity shares are “marketable” and a mark-to-market election is made, to mark-to-market the equity shares each taxable year and recognize ordinary gain and, to the extent of prior ordinary gain, recognize ordinary loss for the increase or decrease in market value for such taxable year.

 

If we are treated as a passive foreign investment company, we do not plan to provide information necessary for the U.S. holder to make a “qualified electing fund” election.

 

In addition, certain information reporting obligations (i.e., filing Internal Revenue Service Form 8621) may apply to U.S holders if we are determined to be a passive foreign investment company.

 

THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSEQUENCES RELATING TO THE OWNERSHIP, ACQUISITION OR DISPOSITION OF OUR EQUITY SHARES OR ADSs. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR CONCERNING THE TAX CONSEQUENCES TO YOU BASED ON YOUR PARTICULAR SITUATION.

 

10.F.

Dividends and paying agents

 

Not applicable.

 

10.G.

Statements by experts

 

Not applicable.

 

10.H.

Documents on display

 

This annual report on Form 20-F and other information filed or to be filed by us with or furnished by us to the SEC can be accessed via the SEC’s website at

www.sec.gov

.

Certain (but not all) of such materials

are also available on our website at

https://www.drreddys.com

, as soon as reasonably practicable after having been electronically filed or furnished to the SEC.

Information contained in our website, www.drreddys.com, is not part of this annual report on Form 20-F and no portion of such information is incorporated herein or any other materials filed with or furnished to the SEC.

 

 

96

 

 

Additionally, documents referred to in this Form 20-F may be inspected at our corporate office, which is located at 8-2-337, Road No. 3, Banjara Hills, Hyderabad, Telangana, 500 034, India.

 

10.I.

Subsidiary information

 

For details of our subsidiaries, please refer to Note 37 (“Organizational Structure”) of our consolidated financial statements.

 

10.J.

Annual Report to Security Holders

 

We intend to submit any annual report to security holders required to be furnished on Form 6-K in electronic format in accordance with the EDGAR Filer Manual.

 

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices (such as interest rates, foreign currency exchange rates and commodity prices) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all short-term and long-term debt. We are exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of its investments. Thus, our exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.

 

Our Board of Directors and its Audit Committee are responsible for overseeing our risk assessment and management policies. Our major market risks of foreign exchange, interest rate and counter-party risk are managed centrally by our group treasury department, which evaluates and exercises independent control over the entire process of market risk management.

 

We have a written treasury policy, and we do regular reconciliations of our positions with our counter-parties. In addition, internal audits of the treasury function are performed at regular intervals.

 

Components of Market Risk

 

Foreign Exchange Risk

Our foreign exchange risk arises from our foreign operations, foreign currency revenues and expenses (primarily in U.S. dollars, Russian roubles, U.K. pounds sterling, Brazilian reals, Swiss francs, Euros and Mexican pesos), foreign currency investments (primarily in U.S. dollars and Euros) and foreign currency borrowings (in Russian roubles, Mexican pesos and Brazilian reals). A significant portion of our revenues are in these foreign currencies, while a significant portion of our costs are in Indian rupees. As a result, if the value of the Indian rupee appreciates relative to these foreign currencies, our revenues measured in Indian rupees may decrease. The exchange rate between the Indian rupee and these foreign currencies has changed substantially in recent periods and may continue to fluctuate substantially in the future. Consequently, we use both derivative and non-derivative financial instruments, such as foreign exchange forward contracts, option contracts, currency swap contracts and foreign currency financial liabilities, to mitigate the risk of changes in foreign currency exchange rates in respect of our highly probable forecast transactions and recognized assets and liabilities. We do not use derivative financial instruments for trading or speculative purposes.

In respect of our forward option contracts and currency swaps, a 10% decrease/increase in the respective exchange rates of each of the currencies underlying such contracts would have resulted in an approximately Rs.4,059/(3,688) million increase/(decrease) in our hedging reserve and an approximately Rs.7,294/(7,192) million increase/(decrease) in our net profit from such contracts as of March 31, 2026.

 

For

details on derivative financial instruments

to hedge the foreign exchange rate risk and

a detailed analysis of our foreign exchange risk, please refer to Note

2

9

(“Financial instruments”) and Note

30

(“Financial risk management”) of our consolidated financial statements.

 

Commodity Rate Risk

 

Our exposure to market risk with respect to commodity prices primarily arises from our purchases and sales of active pharmaceutical ingredients, including the raw material components for such active pharmaceutical ingredients. These are commodity products whose prices may fluctuate significantly over short periods of time. The prices of our raw materials generally fluctuate in line with commodity cycles, although the prices of raw materials used in our active pharmaceutical ingredients business are generally more volatile. Costs of raw materials forms the largest portion of our cost of revenues. We evaluate and manage our commodity price risk exposure through our operating procedures and sourcing policies. As of March 31, 2026, we have not entered into any material derivative contracts to hedge our exposure to fluctuations in commodity prices.

 

 

97

 

Interest Rate Risk

 

As of March 31, 2026, we had outstanding Rs.

3,799 million of loans carrying a floating interest rate of 3 Months T-bill + 84 bps; Rs.

41

,500 million of loans carrying a floating interest rate of T-bill + 35

to 55

bps; Rs.12,690 million of loans carrying a floating interest rate of REPO + 75 bps; Rs.1,423 million of loans carrying a floating interest rate of Key rate + 3.48% to 3.98%; Rs.2,795 million of loans carrying a floating interest rate of TIIE + 1.35%; and Rs.727 million of loans carrying a floating interest rate of CDI + 1.55%

“CDI” means the Interbank Certificate of Deposit (Certificado de Depósito Interbancário), “Key rate” means the key interest rate published by the Central Bank of Russia, “REPO” means the “Repurchasing option” rate published by the Reserve Bank of India,  “SOFR” means Secured Overnight Financing Rate”, “T-bill” means India Treasury bill and “TIIE” means the Equilibrium Inter-banking Interest Rate (Tasa de Interés Interbancaria de Equilibrio).

 

These loans expose us to risks of changes in interest rates. Our treasury department monitors the interest rate movement and manages the interest rate risk based on its policies, which include entering into interest rate swaps as considered necessary.

Interest Rate Profile

.

 

The interest rate profile of our short-term borrowings from banks is as follows:

 

As of March 31,

2026

2025

Currency (1)

Interest Rate (2)

Currency (1)

Interest Rate (2)

RUB

Key rate + 348 bps to 398 bps

RUB

Key rate + 470 bps to 590 bps

MXN

TIIE + 1.35%

MXN

TIIE + 1.35%

INR

T-bill + 35 bps to 55 bps

INR

7.50%

REPO + 75 bps

T-bill + 35 bps to 70 bps

BRL

CDI+1.55%

BRL

CDI+1.55%

U.S.$

6 Month SOFR + 10 bps to 65 bps

 

The interest rate profile of our long-term borrowings (other than obligations under leases) is as follows:

 

As of March 31,

2026

2025

Currency (1)

Interest Rate (2)

Currency (1)

Interest Rate (2)

Rupee term loan from bank

INR

3 Months T-bill + 84 bps

INR

3 Months T-bill + 84 bps

 

(1)

“BRL” means Brazilian reals, “INR” means Indian rupees, “MXN” means Mexican pesos, “RUB” means Russian rubles and “U.S.$” means U.S. dollars.

(2)

“CDI” means Brazilian interbank deposit rate (Certificado de Depósito Interbancário), “Key rate” means the key interest rate published by the Central Bank of Russia, “REPO” means the “Repurchasing option” rate published by the Reserve Bank of India, “SOFR” means Secured Overnight Financing Rate, “T-bill” means India Treasury bill interest rate and “TIIE” means the Equilibrium Inter-Banking Interest Rate (Tasa de Interés Interbancaria de Equilibrio).

Maturity profile

.

 

The aggregate maturities of interest-bearing long-term borrowings (other than obligations under leases), based on contractual maturities, as of March 31, 2026 are as follows:

 

Maturing in the year ending March 31,		( All amounts in Rs. Millions)
2027		Rs.	3,799
		Rs.	3,799

 

Counter-party risk encompasses settlement risk on derivative contracts and credit risk on cash and term deposits (i.e., certificates of deposit). Exposure to these risks is closely monitored and kept within predetermined parameters. Our group treasury department does not expect any losses from non-performance by these counter-parties.

 

For the year ended March 31, 2026, every 10% increase or decrease in the floating interest rate component applicable to our loans and borrowings would affect our net profit by Rs.347 million.

 

 

98

 

 

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

 

12.A. Debt Securities.

 

Not applicable.

 

12.B. Warrants and Rights.

 

Not applicable.

 

12.C. Other Securities.

 

Not applicable.

 

12.D. American Depositary Shares.

 

Amended and Restated Deposit Agreement

 

In connection with the 1:5 forward stock split implemented in October 2024, we entered into an Amended and Restated Deposit Agreement with the Depositary (as defined below). For details on the Amended and Restated Deposit Agreement,

see Exhibit 2.1 (“Form of Amended and Restated Deposit Agreement”) to our annual report on Form 20-F for the year ended March 31, 2025 and Exhibit 2.2 (“Description of the Securities”) to this annual report on Form 20-F.

 

 

99

 

Fees and Charges for Holders of American Depositary Shares

 

J.P. Morgan Chase Bank, N.A., as the U.S. depositary for our ADSs (the “Depositary”), collects fees for the issuance and cancellation of ADSs from the holders of our ADSs, or intermediaries acting on their behalf, against the deposit or withdrawal of ordinary shares in the custodian account. The Depositary also collects the following fees from holders of ADRs or intermediaries acting in their behalf:

 

Category (as defined by SEC)	Depositary actions	Associated Fee
(a) Depositing or substituting the underlying shares	Issuing ADSs upon deposits of shares, including deposits and issuances in respect of share distributions, stock splits, rights, mergers, exchanges of securities or any other transaction or event or other distribution affecting the ADSs or the deposited shares.	U.S.$5.00 for each 100 ADSs (or portion thereof) evidenced by the new shares deposited.
(b) Receiving or distributing dividends	Distribution of dividends.	Up to U.S.$0.05 per ADS (U.S.$5.00 per 100 ADSs).
(c) Selling or exercising rights	Distribution of securities or sale of securities in connection with a distribution.	Up to U.S.$0.05 per ADS (U.S.$5.00 per 100 ADSs).
(d) Withdrawing an underlying security	Acceptance of ADSs surrendered for withdrawal of deposited shares.	U.S.$5.00 for each 100 ADSs (or portion thereof) evidenced by the shares withdrawn.
(e) General depositary services, particularly those charged on an annual basis.	Other services performed by the Depositary in administering the ADSs.	U.S.$0.05 per ADS (or portion thereof) not more than once each calendar year.
(f) Other	Expenses incurred on behalf of holders in connection with: ·       compliance with foreign exchange control regulations or any law or regulation relating to foreign investment; ·       the Depositary’s or its custodian’s compliance with applicable law, rule or regulation; ·       stock transfer or other taxes and other governmental charges; ·       SWIFT, facsimile transmission or any other method of communication and any applicable delivery charges; ·       transfer or registration fees in connection with the deposit or withdrawal of deposited securities; ·       expenses of the Depositary in connection with the conversion of foreign currency into U.S. dollars; or ·       transaction fees and applicable delivery expenses for any requested cancellation of ADSs; ·       any other charge payable by the Depositary or its agents.	The amount of such expenses incurred by the Depositary or its agents.

 

As provided in the Amended and Restated Deposit Agreement, the Depositary may charge fees for making cash and other distributions to holders by deduction from distributable amounts or by selling a portion of the distributable property. The Depositary may generally refuse to provide services until its fees for those services are paid.

 

Fees paid by Depositary

 

Direct Payments

 

During the year end

ed

March 31, 2026, the Depository has reimbursed us an amount of U.S $3,595,283 in accordance with the terms of the Amended and Restated Deposit Agreement. These reimbursements may be utilized for investor relations related activities in connection with the ADS program, including, inter alia, preparation and distribution of annual reports, Form 20‑F filings, stock exchange listing fees, and other communications with ADS holders, broker conferences, and analyst events

. Further, under certain circumstances, we may be required to repay to the Depositary amounts reimbursed in prior periods, in accordance with the terms of the Amended and Restated Deposit Agreement.

 

Indirect Payments

 

As part of its service to us, the Depositary has agreed to waive fees for the standard costs associated with the administration of our ADS program, associated operating expenses and investor relations advice. The Depository has not paid any expenses on our behalf.

 

 

100

 

 

PART II

 

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

 

None.

 

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

 

Modification in the rights of security holders

 

None.

 

Use of Proceeds

 

Not applicable.

 

ITEM 15. CONTROLS AND PROCEDURES

 

 (a)

Disclosure Controls and Procedures

 

As of the end of the period covered by this Annual Report on Form 20-F, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act).

 

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective, as of March 31, 2026, to provide reasonable assurance that the information required to be disclosed in filings and submissions under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions about required disclosure.

 

(b)

Management’s Annual Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. As defined by the SEC, internal control over financial reporting is a process designed under the supervision of our principal executive and principal financial officers, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board.

 

Our internal control over financial reporting is supported by written policies and procedures, that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of March 31, 2026 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”). Based on this assessment, our management has concluded that our internal control over financial reporting was effective as of March 31, 2026.

 

The effectiveness of our internal control over financial reporting as of March 31, 2026 has been audited by Ernst & Young Associates LLP (“EY”), the independent registered public accounting firm that audited our financial statements, as stated in their report, a copy of which is included in this annual report on Form 20-F.

 

 

 

/s/Erez Israeli		/s/ M.V. Narasimham
Chief Executive Officer		Chief Financial Officer

 

 

101

 

 

(c)

Attestation Report of the Registered Public Accounting Firm.

 

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and the Board of Directors of

Dr. Reddy’s Laboratories Limited

 

Opinion on Internal Control Over Financial Reporting

 

We have audited

Dr. Reddy’s Laboratories Limited

and subsidiaries’

internal control over financial reporting as of

March

31,

2026

, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission

(

2013 framework

),

(the COSO criteria). In our opinion,

Dr. Reddy’s Laboratories Limited

and

subsidiaries

(the Company) maintained, in all material respects, effective internal control over financial reporting as of

March

31,

2026

, based on the COSO criteria.

 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of

financial position of

the Company as of

March

31,

2026

and

2025

, the related consolidated

income statements,

statements of comprehensive income

,

changes in

equity and cash flows for each of the three years in the period ended

March

31

2026

, and the related notes

and our report dated

May 29, 2026

expressed an unqualified opinion thereon

.

 

Basis for Opinion

 

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying

Management’s Annual Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

 

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 

Definition and Limitations of Internal Control Over Financial Reporting

 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

 

/s/

Ernst & Young

Associates

LLP

 

Hyderabad, India

May 29, 2026

 

(d) Changes in internal control over financial reporting

There were no changes to our internal control over financial reporting that occurred during the period covered by this Form 20‑F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As part of ongoing improvement in our control environment, changes have been made to the design of controls which have been documented and tested for effectiveness.

 

 

102

 

 

ITEM 16. [RESERVED]

 

ITEM 16.A. AUDIT COMMITTEE FINANCIAL EXPERT

 

The Audit Committee of our Board of Directors is entirely composed of independent directors and brings in expertise in the fields of finance, economics, human resource development, strategy and management. Please see “Item 6. Directors, Senior Management and Employees” for the experience and qualifications of the members of the Audit Committee of our Board of Directors. Our Board of Directors has determined that Mr. Arun M. Kumar is an audit committee financial expert, as defined in Item 401(h) of Regulation S-K, and is independent pursuant to applicable NYSE rules.

 

ITEM 16.B. CODE OF ETHICS

 

We have a Code of Business Conduct and Ethics (the “COBE”), which applies to all Directors and employees of our company and its subsidiaries and affiliates. The COBE

is included as Exhibit 11.1 to our annual report on Form 20-F for the year ended March 31, 2024 and

is also available on our corporate website at

https://www.drreddys.com/cms/sites/default/files/media-library/docs/cobe-booklet-v40.pdf

. The COBE has provisions for employees and other stakeholders to raise concerns regarding possible violations of the COBE under the Ombudsperson Policy. Reporting channels under the Ombudsperson Policy include an independent hotline, a web based reporting site (drreddys.ethicspoint.com) and dedicated email addresses for our Chief Compliance Officer and our Chief Ombudsperson. Our Non-Retaliation Policy also safeguards against retaliation of those who raise concerns in good faith.

 

ITEM 16.C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Ernst & Young Associates LLP served as our independent registered public accounting firm for the years ended March 31, 202

6

and 202

5

for which audited statements appear in this Annual Report.

 

The following table sets forth the aggregate fees paid to Ernst & Young Associates LLP and the various member firms of Ernst & Young Associates LLP in the years ended March 31, 2026 and 2025.

 

		For the year ended March 31,
Type of Service		2026				2025				Description of Services
		(Rs. in millions)
Audit fees		Rs.	117.6			Rs.	119.8			Audit and review of financial statements
Audit related fees			2.4				2.7			Statutory certifications and other matters
Tax fees			21.4				23.3			Tax and transfer pricing related services
Total		Rs.	141.4			Rs.	145.8

 

In accordance with the requirement of the charter of the Audit Committee of our Board of Directors, we obtain the prior approval of the Audit Committee on every occasion we engage our principal accountants or their associated entities to provide us any services. We disclose to the Audit Committee of our Board of Directors the nature of services that are provided and the fees to be paid for the services. The fees listed in the above table were approved by the Audit Committee of our Board of Directors.

 

ITEM 16.D. EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

 

We have not sought any exemption from the listing standards for audit committees applicable to us as a foreign private issuer.

 

ITEM 16.E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

 

On July 27, 2018, pursuant to the special resolution approved by our shareholders at the Annual General Meeting, we formed the Dr. Reddy’s Employees ESOS Trust (the “ESOS Trust”) to support the Dr. Reddy’s Employees Stock Option Scheme, 2018 by acquiring, including through secondary market acquisitions, equity shares which are used for issuance to eligible employees upon exercise of stock options thereunder.

 

103

 

Tabulated below are the details of the equity shares acquired under such plan during the year ended March 31, 2026 

 

Period		Total Number of Equity Shares Purchased				Average Price Paid per Equity Share (Rs.)				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs				Maximum number of Equity Shares that may yet be purchased under the Plans or Programs
April 1, 2025 to March 31, 2026			-				-				4,476,495	(1)			8,023,505

 

(1)

The ESOS Trust has purchased an aggregate of 4,476,495 equity shares as of March 31, 2026. Out of these, an aggregate of 2,270,760 equity shares were transferred to employees (including 486,685 shares transferred during the year ended March 31, 2026 ) pursuant to exercises of stock options (cash and cashless exercises) granted under the Dr. Reddy’s Employees Stock Option Scheme, 2018.

 

Refer to Note 27 (“Share-based payments”) of our consolidated financial statements for further details on the Dr. Reddy’s Employees Stock Option Scheme, 2018.

 

ITEM 16.F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

 

Not applicable.

 

ITEM 16.G. CORPORATE GOVERNANCE

 

Companies listed on the New York Stock Exchange (“NYSE”) must comply with certain standards regarding corporate governance as codified in Section 303A of the NYSE’s Listed Company Manual. Listed companies that are foreign private issuers (as such term is defined in Rule 3b-4 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are permitted to follow home country practice in lieu of the provisions of Section 303A, except that such companies are required to comply with the requirements of Sections 303A.06, 303A.11 and 303A.12(b) and (c), which are as follows:

 

(i)

establish an independent audit committee that has specified responsibilities;

(ii)

provide prompt certification by its chief executive officer of any non-compliance with any corporate governance rules;

(iii)

provide periodic written affirmations to the NYSE with respect to its corporate governance practices; and

(iv)

provide a brief description of significant differences between its corporate governance practices and those followed by U.S. companies.

 

The following table compares our principal corporate governance practices to those required of U.S. NYSE listed companies.

 

Standard for U.S. NYSE Listed Companies		Our practice
Listed companies must have a majority of “independent directors,” as defined by the NYSE.		We comply with this standard. Eight of our ten directors are “independent directors,” as defined by the NYSE as on March 31, 2026.
The non-management directors of each listed company must meet at regularly scheduled executive sessions without management.		We comply with this standard. Our non-management directors meet quarterly  without management directors in scheduled executive sessions.
Listed companies must have a nominating/corporate governance committee composed entirely of independent directors. The nominating/corporate governance committee must have a written charter that is made available on the listed company’s website and that addresses the committee’s purpose and responsibilities, subject to the minimum purpose and responsibilities established by the NYSE, and an annual evaluation of the committee.		We have a Nomination, Governance and Compensation Committee composed entirely of independent directors which looks into nomination, governance and compensation matters. The committee has a written charter, which is available on our website. On an annual basis, the committee’s performance is evaluated.

 

 

104

 

 

Standard for U.S. NYSE Listed Companies		Our practice
Listed companies must have a compensation committee composed entirely of independent directors. The compensation committee must have a written charter that is made available on the listed company’s website and that addresses the committee’s purpose and responsibilities, subject to the minimum purpose and responsibilities established by the NYSE, and an annual evaluation of the committee.		We have a Nomination, Governance and Compensation Committee composed entirely of independent directors that meets these requirements. The committee has a written charter that meets these requirements and is available on our website. On an annual basis, the committee’s performance is evaluated.
Listed companies must have an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange Act.		Our Audit Committee satisfies the requirements of Rule 10A-3 under the Exchange Act.
The audit committee must have a minimum of three members all being independent directors. The audit committee must have a written charter that is made available on the listed company’s website and that addresses the committee’s purpose and responsibilities, subject to the minimum purpose and responsibilities established by the NYSE, and an annual evaluation of the committee.		We have an Audit Committee composed of four members, all being independent directors as on March 31, 2026. The committee has a written charter that meets these requirements. On an annual basis, the Committee’s performance is being evaluated.
Each listed company must have an internal audit function.		We have an Internal audit function in place. Our Audit Committee supervises the functioning of our internal audit department.
Shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereto, with limited exceptions.		We comply with this standard. Our Employee Stock Option Plans were approved by our shareholders.
Listed companies must adopt and disclose corporate governance guidelines.		We have not adopted corporate governance guidelines. But we adhere to the applicable corporate governance requirements under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Indian Companies Act, 2013. We disclose our corporate governance guidelines in the corporate governance report which forms part of our glossy annual report to shareholders..
All listed companies, U.S. and foreign, must adopt and disclose a code of business conduct and ethics for directors, officers and employees that is made available on the listed company’s website and, promptly disclose any waivers of the code for directors or executive officers.		We comply with this standard. More details on our Code of Business Conduct and Ethics are given under Item 16.B.
Listed companies must solicit proxies for all meetings of shareholders.		We do not solicit proxies because we are prohibited from doing so under Section 105 of the Indian Companies Act, 2013. However, we give each of our shareholders written notices of all of our shareholder meetings.
Listed foreign private issuers must disclose any significant ways in which their corporate governance practices differ from those followed by domestic companies under NYSE listing standards.		This requirement is being addressed by way of this table.
Each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards, qualifying the certification to the extent necessary.		This is not applicable to us  as a Foreign Private Issuer . But we adhere to the applicable corporate governance requirements under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Indian Companies Act, 2013.
Each listed company CEO must promptly notify the NYSE in writing after any executive officer of the listed company becomes aware of any non-compliance with any applicable provisions of this Section 303A.		There have been no such instances.

 

 

105

 

 

Standard for U.S. NYSE Listed Companies		Our practice
Each listed company's audit committee, or another independent body of the board of directors, shall conduct a reasonable prior review and oversight of all related party transactions that require disclosure pursuant to Item 7.B. of this Form 20-F  for potential conflicts of interest, and will prohibit such a transaction if it determines it to be inconsistent with the interests of the listed company and its shareholders.		Under the SEBI’s Listing Regulations and the Indian Companies Act, 2013, our Audit Committee’s prior approval is required for all transactions with related parties or any subsequent material modification of such transactions. These laws also empower our Audit Committee to grant omnibus approval for our proposed related party transactions, subject to certain prescribed conditions.   As a result, our Audit Committee reviews all transactions with related parties at the start of the year and on a quarterly basis.   In addition, the Indian Companies Act, 2013 also requires us to seek prior approval of our Board or shareholders (as the case may be) for any material related party transaction, unless such transaction is (i) in the ordinary course of business and on an arms’ length basis, or (ii) with our wholly owned subsidiaries, whose financial statements are consolidated with us.
Each listed company must submit an executed Written Affirmation annually to the NYSE. In addition, each listed company must submit an interim Written Affirmation each time that any of the following occurs:		We filed our most recent annual written affirmation, in the form specified by the NYSE, on July 4, 2025.
•      an audit committee member who was deemed independent is no longer independent; •      a member has been added to the audit committee; •     the listed company or a member of its audit committee is eligible to rely on and is choosing to rely on a Securities Exchange Act Rule 10A-3 (“Rule 10A-3”) exemption; •     the listed company or a member of its audit committee is no longer eligible to rely on or is choosing to no longer rely on a previously applicable Rule 10A-3 exemption; •      a member has been removed from the listed company’s audit committee resulting in the company no longer having a Rule 10A-3 compliant audit committee; or •      the listed company determined that it no longer qualifies as a foreign private issuer and will be considered a domestic company under Section 303A.
The annual and interim Written Affirmations must be in the form specified by the NYSE.		We have filed the annual and interim Written Affirmations in the form specified by the NYSE.
Each listed company must adopt a recovery policy for compensation erroneously paid to executive officers.		We have adopted a recovery policy for compensation erroneously paid to executive officers, a copy of which is included as Exhibit 97 to our annual report on Form 20-F for the year ended March 31, 2024.

 

ITEM 16.H. MINE SAFETY DISCLOSURE

 

Not Applicable.

 

ITEM 16.I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

 

Not Applicable.

 

 

106

 

 

ITEM 16.J. Insider Trading Policies

 

In addition to the insider trading policies included in our Code of Business Conduct and Ethics (see Item 16.

B

. above), we have adopted a Code of Conduct to Regulate, Monitor and Report Trading by Designated Persons.  These codes contain insider trading policies and procedures governing the purchase, sale and other dispositions of our securities by directors, senior management and employees that is reasonably designed to promote compliance with all applicable insider trading laws, rules and regulations, and all applicable listing standards.

Copies of these Codes are included as Exhibits 11.1 and 11.2, respectively to our annual report on Form 20-F for the year ended March 31, 2024.

 

ITEM 16.K. CYBERSECURITY

 

Risk Management and Strategy

 

Our Information Security Management System is designed in alignment with internationally recognized frameworks, including the ISO/IEC 27001 standard published by the International Organization for Standardization and the Cybersecurity Framework published by the U.S. National Institute of Standards and Technology (“NIST”). We deploy a comprehensive technology and control infrastructure to implement these frameworks and conduct periodic independent assessments to evaluate the design and effectiveness of our cybersecurity controls. Identified control gaps are assessed through an established enterprise risk management process and addressed in accordance with defined remediation plans.

 

Our cybersecurity risk management program is structured around three core pillars: (1) Cyber Risk, (2) Cyber Defense, and (3) Strategy and Governance. The Cyber Risk pillar focuses on identifying the evolving threat landscape and potential attack vectors. The Cyber Defense pillar is responsible for continuous monitoring of security systems, identifying anomalies, and coordinating timely response and containment activities in collaboration with relevant technology and business teams. The Strategy and Governance pillar oversees risk tracking, remediation progress, and the establishment of appropriate governance, policies, and oversight mechanisms.

 

These cybersecurity services are supported by external cybersecurity advisors, including a leading global consulting firm. Delivery and execution are overseen by the respective functional leaders under the direction of our Chief Information Security Officer (“CISO”). We also conduct regular internal and external penetration testing and simulated cyber‑attack exercises to assess readiness, validate incident response capabilities, and support continuous improvement.

 

 

Governance of Cybersecurity Risk

Cybersecurity risk governance is conducted at multiple organizational levels. The CISO is responsible for the day‑to‑day management and execution of the cybersecurity program. The CISO holds monthly governance meetings with technology leadership, including the Chief Information Officer (“CIO”), to review cybersecurity posture, incidents, and remediation activities. Both the CIO and CISO bring extensive experience from services, industry, and consulting organizations, with nearly two decades of domain‑specific expertise each.

 

Cybersecurity matters, including risk posture and mitigation activities, are reported to the Chief Executive Officer (“CEO”) on a quarterly basis. The Board of Directors oversees cybersecurity risk as part of its broader enterprise risk oversight responsibilities and has delegated primary oversight of cybersecurity and information technology risks to the Risk Management Committee of the Board.

The Risk Management Committee receives regular updates on key cybersecurity risks, incidents, and mitigation actions from the CISO and the Chief Risk Officer (“CRO”) to support effective enterprise‑wide risk management.

 

 

107

 

PART III

 

ITEM 17. FINANCIAL STATEMENTS

 

Not applicable.

 

ITEM 18. FINANCIAL STATEMENTS

 

The following financial statement and auditor’s report for the year ended March 31, 202

6

are incorporated herein by reference and are included in this Item 18 of this report on Form 20-F:

 

Report of Independent Registered Public Accounting Firm (PCAOB ID: 1712)	109
Consolidated statements of financial position as of March 31, 2026 and 2025	111
Consolidated income statements for the years ended March 31, 2026, 2025 and 2024	112
Consolidated statements of comprehensive income for the years ended March 31, 2026, 2025 and 2024	113
Consolidated statements of changes in equity for the years ended March 31, 2026, 2025 and 2024	114
Consolidated statements of cash flows for the years ended March 31, 2026, 2025 and 2024	118
Notes to the consolidated financial statements	119

 

108

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and the Board of Directors of Dr. Reddy’s Laboratories Limited

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of Dr. Reddy’s Laboratories Limited (and subsidiaries) (the Company) as of March 31, 2026 and 2025, the related consolidated income statements, statements of comprehensive income, changes in equity and cash flows for each of the three years in the period ended March 31, 2026, and the related notes  (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2026, and 2025, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2026, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated May 29, 2026, expressed an unqualified opinion thereon.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matters

 

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 

Contingencies, including litigations

 

Description of the matter		As described in Note 3( l ) and 3 1  to the consolidated financial statements, the Company is involved in disputes, lawsuits, claims, governmental and / or regulatory inspections, inquiries, investigations and proceedings, including patent and commercial matters that arise from time to time in the ordinary course of business. The Company recognizes a liability for those legal contingencies for which it has a possible or a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The Company based on internal and external legal advice, assesses the need to make provision or discloses information with respect to the nature and facts of the case.   Auditing management's determination of whether a loss for a contingency is probable and reasonably estimable, reasonably possible or remote, and the related disclosures, is highly subjective and requires significant judgment.
How we addressed the Matter in Our Audit		We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's internal controls related to the completeness, valuation, presentation and disclosure of legal contingencies. This included testing controls related to the Company's process for identification, recognition, valuation and disclosure of contingencies, including litigations.   To test the Company's contingencies, our substantive audit procedures included, among others, testing the completeness of the contingencies subject to evaluation by the Company through review of minutes of board meetings and evaluation of legal expenses. We also evaluated the Company's analysis of its assessment of the probability of outcome for each material contingency through inspection of responses to inquiry letters sent to external legal counsel, discussions with internal counsel, as well as external legal counsel, when deemed necessary, to confirm our understanding of the allegations and potential outcomes and obtaining written representations from executives of the Company.   We also evaluated the adequacy of Company’s disclosures in relation to these matters.

 

109

 

Chargebacks related to Revenue

 

Description of the matter		As described in Note 3(m) and 2 1  to the consolidated financial statements, revenues from product sales are recognized upon transfer of control to a customer, usually when the title passes to the customer, either upon shipment or upon receipt of goods by the customer, net of estimated chargeback accruals, which are estimated at the time of sale, to reflect the amount of consideration to which the Company expects to be entitled.   Auditing the estimation of chargeback accruals, which are netted against product sales, is complex and requires significant judgment. The estimated chargeback accruals are based on assumptions and inputs used in the estimate, such as current contractual terms, wholesaler inventory levels, and historical data.
How we addressed the Matter in Our Audit		We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the chargeback process. This included testing controls over management’s review of significant assumptions and inputs used in the estimate of chargeback accruals, including actual sales, contractual terms, and historical data such as actual customer inventory levels of the Company’s products, and estimated sales subject to chargeback. We also tested management’s controls relating to the accuracy and completeness of the estimates used to calculate chargeback accruals.   To test management’s estimated chargeback accruals, our audit procedures included, among others, evaluating the methodology used and the underlying data used by the Company. We tested management’s estimates over the determination of chargeback accruals by comparing the rates and pricing clauses used in management’s estimate to the underlying contracts and historical chargebacks data and where relevant to current payment trends. We also considered the historical accuracy of management’s estimates in prior years, and to assess the estimated amounts, we evaluated trends in actual sales and chargeback accrual balances. We also tested the underlying data used in management's calculations for accuracy and completeness, which included inspection of source data supporting product pricing, inventory levels and chargeback claims paid subsequent to period end and settled during the period. We also evaluated the adequacy of the Company’s disclosures in relation to these matters.

/s/ Ernst & Young Associates LLP

 

We have served as the Company’s auditor since 2018.

 

Hyderabad, India

May

29

, 202

6

 

110

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in millions, except share and per share data)

 

						As of
						March 31, 2026				March 31, 2026				March 31, 2025
Particulars		Note				Unaudited convenience translation into U.S.$ (See Note 2(c))
ASSETS
Current assets
Cash and cash equivalents			6			U.S.$	164			Rs.	15,368			Rs.	14,654
Other investments			7				772				72,446				43,254
Trade and other receivables			8				1,079				101,219				90,420
Inventories			9				816				76,531				71,085
Derivative financial instruments			29				2				155				557
Other current assets			10				386				36,256				30,142
Total current assets						U.S.$	3,219			Rs.	301,975			Rs.	250,112
Non-current assets
Property, plant and equipment			11			U.S.$	1,236			Rs.	115,930			Rs.	97,761
Goodwill			12				137				12,893				11,810
Other intangible assets			13				1,120				105,059				96,803
Investment in equity accounted investees			14				60				5,673				4,811
Other investments			7				114				10,695				10,391
Deferred tax assets			24				239				22,436				18,508
Tax assets							37				3,459				1,821
Other non-current assets			10				13				1,226				972
Total non-current assets						U.S.$	2,956			Rs.	277,371			Rs.	242,877
Total assets						U.S.$	6,175			Rs.	579,346			Rs.	492,989
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables			15			U.S.$	356			Rs.	33,411			Rs.	35,523
Short-term borrowings			16				630				59,135				38,045
Long-term borrowings, current portion			16				64				6,003				857
Provisions			17				80				7,550				6,168
Tax liabilities							46				4,310				3,028
Derivative financial instruments			29				74				6,898				1,286
Other current liabilities			18				537				50,259				45,485
Total current liabilities						U.S.$	1,787			Rs.	167,566			Rs.	130,392
Non-current liabilities
Long-term borrowings			16			U.S.$	130			Rs.	12,203			Rs.	7,864
Deferred tax liabilities			24				166				15,568				14,108
Provisions			17				1				109				156
Other non-current liabilities			18				37				3,443				3,303
Total non-current liabilities						U.S.$	334			Rs.	31,323			Rs.	25,431
Total liabilities						U.S.$	2,121			Rs.	198,889			Rs.	155,823
Equity
Share capital			19			U.S.$	9			Rs.	835			Rs.	834
Treasury shares							(19	)			(1,815	)			(2,264	)
Share premium							121				11,364				11,133
Share-based payment reserve							18				1,684				1,642
Capital redemption reserve							2				173				173
Retained earnings							3,751				351,984				315,793
Other reserves							42				3,979				3,979
Other components of equity							94				8,859				2,098
Equity attributable to equity holders of the parent company						U.S.$	4,018			Rs.	377,063			Rs.	333,388
Non-controlling interests			35				36				3,394				3,778
Total equity							4,054				380,457				337,166
Total liabilities and equity						U.S.$	6,175			Rs.	579,346			Rs.	492,989

 

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

111

 

 

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(in millions, except share and per share data)

 

						For the Years Ended March 31,
						2026				2026				2025				2024
Particulars		Note				Unaudited convenience translation into U.S.$ (See Note 2(c))
Revenues		21				U.S.$	3,580			Rs.	335,933			Rs.	325,535			Rs.	279,164
Cost of revenues							1,691				158,669				135,107				115,557
Gross profit							1,889				177,264				190,428				163,607
Selling, general and administrative expenses							1,137				106,763				93,870				77,201
Research and development expenses							256				24,058				27,380				22,873
Impairment of non-current assets, net							38				3,519				1,693				3
Other income, net		22					(81	)			(7,627	)			(4,358	)			(4,199	)
Total operating expenses							1,350				126,713				118,585				95,878
Results from operating activities (A)							539				50,551				71,843				67,729
Finance income							84				7,870				7,553				5,705
Finance expense							(40	)			(3,738	)			(2,829	)			(1,711	)
Finance income, net (B)		23					44				4,132				4,724				3,994
Share of profit of equity accounted investees, net of tax (C)		14					1				134				217				147
Profit before tax [(A)+(B)+(C)]							584				54,817				76,784				71,870
Tax expense, net		24					132				12,351				19,539				16,186
Profit for the year						U.S.$	452			Rs.	42,466			Rs.	57,245			Rs.	55,684
Attributable to:
Equity holders of the parent company						U.S.$	456			Rs.	42,850			Rs.	56,544			Rs.	55,684
Non-controlling interests							(4	)			(384	)			701				-
Earnings per share attributable to equity holders of the parent company*
Basic earnings per share of Rs.1/- each		20				U.S.$	0.55			Rs.	51.48			Rs.	67.88			Rs.	66.93
Diluted earnings per share of Rs.1/- each		20				U.S.$	0.55			Rs.	51.42			Rs.	67.78			Rs.	66.80

 

*

Earnings per share is computed after giving effect to 1:5 forward stock split effective October 28, 2024 for all periods presented. Refer to Note 19 of these consolidated financial statements for further details regarding such stock split.

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

112

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions, except share and per share data)

 

		For the Years Ended March 31,
		2026				2026				2025				2024
Particulars		Unaudited convenience translation into U.S.$ (See Note 2(c))
Profit for the year		U.S.$	452			Rs.	42,466			Rs.	57,245			Rs.	55,684
Other comprehensive income/(loss)
Items that will not be reclassified to the consolidated income statement:
Changes in the fair value of financial instruments		U.S.$	-	*		Rs.	(35	)		Rs.	(199	)		Rs.	(18	)
Actuarial gains/(losses) on post-employment benefit obligations			2				168				(94	)			(10	)
Tax impact on above items			-	*			(45	)			24				4
Total of items that will not be reclassified to the consolidated income statement		U.S.$	1			Rs.	88			Rs.	(269	)		Rs.	(24	)
Items that will be reclassified subsequently to the consolidated income statement:
Changes in fair value of financial instruments		U.S.$	-			Rs.	-			Rs.	-			Rs.	6
Foreign currency translation adjustments			85				7,943				1,353				(318	)
Foreign currency translation reserve re-classified to the income statement on divestment of foreign operation			-				-				(1,513	)			-
Effective portion of changes in fair value of cash flow hedges			(18	)			(1,699	)			2,432				(470	)
Tax impact on above items			5				428				(58	)			117
Total of items that will be reclassified subsequently to the consolidated income statement		U.S.$	72			Rs.	6,672			Rs.	2,214			Rs.	(665	)
Other comprehensive income / (loss) for the year, net of tax		U.S.$	73			Rs.	6,760			Rs.	1,945			Rs.	(689	)
Total comprehensive income / (loss) for the year, net of tax		U.S.$	525			Rs.	49,226			Rs.	59,190			Rs.	54,995
Attributable to:
Equity holders of the parent company		U.S.$	529			Rs.	49,610			Rs.	58,489			Rs.	54,995
Non-controlling interests			(4	)			(384	)			701				-

 

*

Rounded off to nearest million.

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

113

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in millions, except share and per share data)

 

		Share capital				Share premium				Treasury shares				Share-based payment reserve				Fair value reserve (1)				Foreign currency translation reserve				Hedging reserve				Capital redemption reserve				Actuarial gains /(losses)				Retained earnings				Other Reserves (5)				Total				Non- controlling interests (4)				Total Equity
Balance as of April 1, 2025 (A)		Rs.	834			Rs.	11,133			Rs.	(2,264	)		Rs.	1,642			Rs.	(2,651	)		Rs.	5,255			Rs.	108			Rs.	173			Rs.	(613	)		Rs.	315,793			Rs.	3,979			Rs.	333,388			Rs.	3,778			Rs.	337,166
Profit for the year			-				-				-				-				-				-				-				-				-				42,850				-				42,850				(384	)			42,466
Net change in fair value of equity instruments, net of tax benefit of Rs.0			-				-				-				-				(35	)			-				-				-				-				-				-				(35	)			-				(35	)
Foreign currency translation adjustments, net of tax expense of Rs.0			-				-				-				-				-				7,943				-				-				-				-				-				7,943				-				7,943
Effective portion of changes in fair value of cash flow hedges, net of tax benefit of Rs.428			-				-				-				-				-				-				(1,271	)			-				-				-				-				(1,271	)			-				(1,271	)
Actuarial gain/(loss) on post - employment benefit obligations, net of tax expense of Rs.45			-				-				-				-				-				-				-				-				123				-				-				123				-				123
Total comprehensive income (B)		Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	(35	)		Rs.	7,943			Rs.	(1,271	)		Rs.	-			Rs.	123			Rs.	42,850			Rs.	-			Rs.	49,610			Rs.	(384	)		Rs.	49,226
Issue of equity shares on exercise of options			1				231				449				(284	)			-				-				-				-				-				-				-				397				-				397
Share-based payment expense			-				-				-				326				-				-				-				-				-				-				-				326				-				326
Dividend paid #			-				-				-				-				-				-				-				-				-				(6,659	)			-				(6,659	)			-				(6,659	)
Total transactions (C)		Rs.	1			Rs.	231			Rs.	449			Rs.	42			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	(6,659	)		Rs.	-			Rs.	(5,936	)		Rs.	-			Rs.	(5,936	)
Balance as of March 31, 2026 [(A)+(B)+(C)]		Rs.	835			Rs.	11,364			Rs.	(1,815	)		Rs.	1,684			Rs.	(2,686	)		Rs.	13,198			Rs.	(1,163	)		Rs.	173			Rs.	(490	)		Rs.	351,984			Rs.	3,979			Rs.	377,063			Rs.	3,394			Rs.	380,457
Convenience translation (See note 2(e))		U.S.$	9			U.S.$	121			U.S.$	(19	)		U.S.$	18			U.S.$	(29	)		U.S.$	141			U.S.$	12			U.S.$	2			U.S.$	(5	)		U.S.$	3,751			U.S.$	42			U.S.$	4,019			U.S.$	36			U.S.$	4,054

 

 

114

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in millions, except share and per share data)

 

		Share capital				Share premium				Treasury shares				Share-based payment reserve				Fair value reserve (1)				Foreign currency translation reserve				Hedging reserve				Capital redemption reserve				Special economic zone reinvestment reserve				Actuarial gains /(losses)				Retained earnings				Other Reserves (5)				Total				Non- controlling interests (4)				Total Equity
Balance as of April 1, 2024 (A)		Rs.	834			Rs.	10,765			Rs.	(991	)		Rs.	1,508			Rs.	(2,452	)		Rs.	5,415			Rs.	(69	)		Rs.	173			Rs.	653			Rs.	(543	)		Rs.	265,257			Rs.	-			Rs.	280,550			Rs.	-			Rs.	280,550
Profit for the year			-				-				-				-				-				-				-				-				-				-				56,544				-				56,544				701				57,245
Net change in fair value of equity and debt instruments			-				-				-				-				(199	)			-				-				-				-				-				-				-				(199	)			-				(199	)
Foreign currency translation adjustments, net of tax expense of Rs. 0			-				-				-				-				-				1,353				-				-				-				-				-				-				1,353				-				1,353
Reclassification adjustment upon divestment, net of tax expense of Rs. 0 (6)			-				-				-				-				-				(1,513	)			-				-				-				-				-				-				(1,513	)			-				(1,513	)
Effective portion of changes in fair value of cash flow hedges, net of tax expense of Rs. 58			-				-				-				-				-				-				2,374				-				-				-				-				-				2,374				-				2,374
Actuarial gain/(loss) on post - employment benefit obligations, net of tax benefit of Rs. 24			-				-				-				-				-				-				-				-				-				(70	)			-				-				(70	)			-				(70	)
Total comprehensive income (B)		Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	(199	)		Rs.	(160	)		Rs.	2,374			Rs.	-			Rs.	-			Rs.	(70	)		Rs.	56,544			Rs.	-			Rs.	58,489			Rs.	701			Rs.	59,190
Issuance of shares comprising NCI (4)			-				-				-				-				-				-				-				-				-				-				-				3,979				3,979				3,077				7,056
Issue of equity shares on exercise of options			-				368				116				(290	)			-				-				-				-				-				-				-				-				194				-				194
Purchase of treasury shares			-				-				(1,389	)			-				-				-				-				-				-				-				-				-				(1,389	)							(1,389	)
Share-based payment expense			-				-				-				424				-				-				-				-				-				-				-				-				424				-				424
Dividend paid #			-				-				-				-				-				-				-				-				-				-				(6,662	)			-				(6,662	)			-				(6,662	)
Total transactions (C)		Rs.	-			Rs.	368			Rs.	(1,273	)		Rs.	134			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	(6,662	)		Rs.	3,979			Rs.	(3,454	)		Rs.	3,077			Rs.	(377	)
Adjustment of cash flow hedge gain to purchase consideration (3)			-				-				-				-				-				-				(2,197	)			-				-				-				-				-				(2,197	)			-				(2,197	)
Transfer from special economic zone re-investment reserve on utilization			-				-				-				-				-				-				-				-				(653	)			-				653				-				-				-				-
Total transfers (D)		Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	(2,197	)		Rs.	-			Rs.	-			Rs.	-			Rs.	653			Rs.	-			Rs.	(2,197	)		Rs.	-			Rs.	(2,197	)
Balance as of March 31, 2025 [(A)+(B)+(C)+(D)]		Rs.	834			Rs.	11,133			Rs.	(2,264	)		Rs.	1,642			Rs.	(2,651	)		Rs.	5,255			Rs.	108			Rs.	173							Rs.	(613	)		Rs.	315,793			Rs.	3,979			Rs.	333,388			Rs.	3,778			Rs.	337,166

 

115

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in millions, except share and per share data)

 

		Attributable to the equity holders of the parent company
Particulars		S hare capital (8)				Share premium (8)				Treasury Shares				Share based payment reserve				Fair value reserve (1)				Foreign currency translation reserve				Hedging reserve				Capital redemption reserve				Special economic zone re-investment reserve (2)				Debenture redemption reserve (7)				Actuarial gains/ (losses)				Retained earnings				Total
Balance as of April 1, 2023 (A)		Rs.	833			Rs.	9,688			Rs.	(1,269	)		Rs.	1,652			Rs.	(2,425	)		Rs.	5,733			Rs.	284			Rs.	173			Rs.	886			Rs.	380			Rs.	(537	)		Rs.	215,593			Rs.	230,991
Profit for the year		Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	55,684			Rs.	55,684
Net change in fair value of equity and debt instruments			-				-				-				-				(27	)			-				-				-				-				-				-				15	(7)			(12	)
Foreign currency translation adjustments, net of tax expense of Rs. 0			-				-				-				-				-				(318	)			-				-				-				-				-				-				(318	)
Effective portion of changes in fair value of cash flow hedges, net of tax benefit of Rs. 117			-				-				-				-				-				-				(353	)			-				-				-				-				-				(353	)
Actuarial loss on post-employment benefit obligations, net of tax benefit of Rs. 4			-				-				-				-				-				-				-				-				-				-				(6	)			-				(6	)
Total comprehensive income (B)		Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	(27	)		Rs.	(318	)		Rs.	(353	)		Rs.	-			Rs.	-			Rs.	-			Rs.	(6	)		Rs.	55,699			Rs.	54,995
Issue of equity shares on exercise of options			1				1,077				278				(551	)			-				-				-				-				-				-				-				-				805
Share-based payment expense			-				-				-				407				-				-				-				-				-				-				-				-				407
Dividend paid #			-				-				-				-				-				-				-				-				-				-				-				(6,648	)			(6,648	)
Total transactions with owners of the Company (C)		Rs.	1			Rs.	1,077			Rs.	278			Rs.	(144	)		Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	(6,648	)		Rs.	(5,436	)
Transfer from special economic zone re-investment reserve on utilization			-				-				-				-				-				-				-				-				(233	)			-				-				233				-
Transfer to/(from) debenture redemption reserve			-				-				-				-				-				-				-				-				-				(380	)			-				380				-
Total (D)		Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	(233	)		Rs.	(380	)		Rs.	-			Rs.	613			Rs.	-
Balance as of March 31, 2024 [(A)+(B)+(C)+(D)]		Rs.	834			Rs.	10,765			Rs.	(991	)		Rs.	1,508			Rs.	(2,452	)		Rs.	5,415			Rs.	(69	)		Rs.	173			Rs.	653			Rs.	-			Rs.	(543	)		Rs.	265,257			Rs.	280,550

#

Excluding dividend paid on treasury shares.

 

 

116

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in millions, except share and per share data)

 

(1)

Represents mark to market gain or loss on financial assets classified as fair value through other comprehensive income (“FVTOCI”). Depending on the category and type of the financial asset, the mark to market gain or loss is either reclassified to the income statement or to retained earnings upon disposal of the investment.

(2)

The Company has created a Special Economic Zone (“SEZ”) reinvestment reserve out of profits of its eligible SEZ units in accordance with the terms of Section 10AA(1) of the Indian Income Tax Act, 1961. This reserve was utilized by the Company for acquiring plant and machinery in accordance with Section 10AA(2) of such Act.

(3)

Represents the effective portion of the gain on the forward exchange contract executed in connection with the Company’s acquisition of Haleon’s nicotine replacement therapy business. Such forward exchange contract was intended to hedge the foreign currency exposure related to the consideration payable in GBP pursuant to Business Transfer Agreement with Haleon. Upon completion of the transaction, the hedge gains from this forward contract were reclassified from the cash flow hedge reserves and adjusted in the consideration paid. Refer to Note 35.B of these consolidate d financial statements for details.

(4)

Represents the 49% ownership stake held by Nestlé India Limited in Dr. Reddy’s and Nestlé Health Science Limited (which the Company sometimes refers to as its “Nutraceuticals subsidiary”). Refer to Note 35.A of these consolidated financial statements for details.

(5)

Following the acquisition of a non-controlling interest (“NCI”) in the Nutraceuticals subsidiary by Nestlé India, the difference between cash consideration received from such NCI and the proportionate share of net assets is recognized in “Other reserves” within equity.

(6)

Includes reclassification of the cumulative amount of foreign exchange gain from foreign currency translation reserve to the income statement upon divestment of foreign operations during the year ended March 31, 2025. Refer to Note 22 of these consolidated financial statements for details.

(7)

The Company had created a Debenture Redemption Reserve out of profits of its subsidiary Aurigene Pharmaceutical Services Limited that issued debentures in accordance with the terms of Sections 18(7)(iv) and 18(7)(v) AA(1) of the Companies (Share Capital and Debentures) Rules, 2014. During the year ended March 31, 2024, upon redemption of debentures the Company has transferred the balance from the Debenture Redemption Reserve to Retained earnings.

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

117

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions, except share and per share data)

 

		For the Years Ended March 31,
		2026				2026				2025				2024
Particulars		Unaudited convenience translation into U.S.$ (See Note 2(c))
Cash flows from/(used in) operating activities:
Profit for the year		U.S.$	452			Rs.	42,466			Rs.	57,245			Rs.	55,684
Adjustments for:
Tax expense, net			132				12,351				19,539				16,186
Fair value changes and profit on sale of financial instruments measured at FVTPL, net			(25	)			(2,359	)			(3,554	)			(3,149	)
Depreciation and amortization			220				20,605				17,058				14,841
Impairment of non-current assets, net			38				3,519				1,693				3
Allowance for credit losses (on trade receivables and other advances)			8				690				161				275
(Profit)/ Loss on sale/disposal of assets, net			(27	)			(2,547	)			(1,522	)			(900	)
Share of profit of equity accounted investees			(1	)			(134	)			(217	)			(147	)
Unrealized exchange (gain)/loss, net			(6	)			(529	)			211				(534	)
Interest (income)/expense, net			-*				12				152				(567	)
Inventories write-down			80				7,517				5,220				3,563
Equity settled share-based payment expense			3				326				424				407
Dividend income			-				-				-				-*
Changes in operating assets and liabilities:
Trade and other receivables			(72	)			(6,722	)			(10,283	)			(8,054	)
Inventories			(92	)			(8,601	)			(12,753	)			(18,445	)
Trade and other payables			30				2,790				340				3,460
Other assets and other liabilities, net			11				897				(7,293	)			2,857
Cash generated from operations			751				70,281				66,421				65,480
Income tax paid, net			(144	)			(13,526	)			(19,993	)			(20,047	)
Net cash from operating activities		U.S.$	607			Rs.	56,755			Rs.	46,428			Rs.	45,433
Cash flows from/(used in) investing activities:
Purchase of property, plant and equipment		U.S.$	(249)			Rs.	(23,326	)		Rs.	(27,504	)		Rs.	(16,403	)
Proceeds from sale of property, plant and equipment			3				309				512				1,064
Purchase of other intangible assets			(161	)			(15,099	)			(6,894	)			(11,032	)
Proceeds from sale of other intangible assets			15				1,401				732				21
Payment for acquisition of businesses (Refer to Note 35 for details)			(34	)			(3,152	)			(53,096	)			-
Investment in associates			(1	)			(51	)			(317	)			(12	)
Purchase of other investments (including bank deposits)			(498	)			(46,718	)			(28,492	)			(41,648	)
Proceeds from sale of other investments (including bank deposits)			209				19,602				53,610				25,944
Dividends received from equity accounted investees			-				-				-				445
Interest and dividend received			16				1,521				3,372				1,338
Net cash used in investing activities		U.S.$	(700)			Rs.	(65,513	)		Rs.	(58,077	)		Rs.	(40,283	)
Cash flows from/(used in) financing activities:
Proceeds from issuance of equity shares (including treasury shares)			U.S.$4			Rs.	397			Rs.	193				805
Purchase of treasury shares			-				-				(1,389	)			-
Proceeds from/(repayment of) short-term borrowings, net			215				20,257				24,490				5,493
Proceeds from long-term borrowings (Refer to Note 16 for details)			-				-				-				3,800
Repayment of long-term borrowings (Refer to Note 16 for details)			-*				(1	)			-				(3,800	)
Proceeds from issuance of equity shares in subsidiary comprising NCI (Refer to Note 35.A for details)			-				-				7,056				-
Payment of principal portion of lease liabilities (Refer to Note 16 for details)			(13	)			(1,263	)			(1,294	)			(1,147	)
Dividend paid			(71	)			(6,659	)			(6,662	)			(6,648	)
Interest paid			(47	)			(4,441	)			(3,483	)			(2,266	)
Net cash from/(used) in financing activities		U.S.$	88			Rs.	8,290			Rs.	18,911			Rs.	(3,763	)
Net increase/(decrease) in cash and cash equivalents			(5	)			(468	)			7,262				1,387
Effect of exchange rate changes on cash and cash equivalents			13				1,243				224				(59	)
Cash and cash equivalents at the beginning of the year			156				14,593				7,107				5,779
Cash and cash equivalents at the end of the year (Refer to Note 6 for details)**		U.S.$	164			Rs.	15,368			Rs.	14,593			Rs.	7,107

* Rounded to the nearest million.

** Adjusted for bank overdraft of Rs.61 for the year ended March 31, 2025.

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

118

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

1.

Reporting entity

 

Dr. Reddy’s Laboratories Limited (the “parent company”), together with its subsidiaries (collectively, the “Company”), joint ventures and associates is a leading India-based pharmaceutical company headquartered and having its registered office in Hyderabad, Telangana, India. The Company offers a portfolio of products and services including active pharmaceutical ingredients (“APIs”), generics, branded generics, biosimilars, over

-

the

-

counter (“OTC”) products and pharmaceutical services.

 

The Company’s principal research and development facilities are located in the states of Telangana and Andhra Pradesh in India, Cambridge in the United Kingdom; its principal manufacturing facilities are located in the states of Telangana, Andhra Pradesh and Himachal Pradesh in India, Cuernavaca-Cuautla in Mexico and Mirfield in the United Kingdom; and its principal markets are in India, Russia, the Unites States and Germany. The Company’s shares are listed on the Bombay Stock Exchange, the National Stock Exchange, the NSE IFSC Limited in India and on the New York Stock Exchange in the United States.

 

2.

Basis of preparation of financial statements

 

a. Statement of compliance

 

These consolidated financial statements as of and for the year ended March 31, 2026 comply in all material aspects with the International Financial Reporting Standards and its interpretations (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The consolidated financial statements provide comparative information in respect of the previous period.

 

These consolidated financial statements have been prepared by the Company as a going concern on the basis of relevant IFRS that are effective at the Company’s annual reporting date, March 31, 2026. These consolidated financial statements were authorized for issuance by the Company’s Board of Directors on

May

29

, 2026.

 

b. Basis of measurement

 

These consolidated financial statements have been prepared on the historical cost convention, except for the following material items in the statement of financial position which are measured on the basis stated below and in accordance with the respective accounting policies:

 

·

derivative financial instruments are measured at fair value;

·

financial assets and financial liabilities are measured either at fair value or at amortized cost, depending on the classification based on accounting policy;

·

long-term borrowings are measured at amortized cost using the effective interest rate method;

·

assets acquired and liabilities assumed as part of business combinations are measured at fair value on the acquisition date;

·

contingent consideration arising out of business combination are measured at fair value; and

·

equity-settled and cash-settled share-based payments are measured at fair value on the grant date and the reporting date, respectively.

 

c. Convenience translation (unaudited)

 

These consolidated financial statements have been prepared in Indian rupees. Solely for the convenience of the reader, these consolidated financial statements as of and for the year ended March 31, 2026 have been translated into U.S. dollars at the certified foreign exchange rate of U.S.$1.00 = Rs.93.83, as published by the Federal Reserve Board of Governors on March 31, 2026. No representation is made that the Indian rupee amounts have been, could have been or could be converted into U.S. dollars at such a rate or any other rate. Such convenience translation is not subject to audit by the Company’s Independent Registered Public Accounting Firm.

 

 

119

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

2.

Basis of preparation of financial statements (continued)

 

d. Use of judgments, estimates and assumptions

 

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses, the accompanying disclosures, and the disclosure of contingent liabilities.

Uncertainty about these assumptions and estimates implies that

actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in the following notes:

 

·

Notes 3(a) and 15 — Evaluation of joint arrangements;

·

Note 3(b) — Assessment of functional currency;

·

Notes 3(c), 29  and 3 0 — Financial instruments;

·

Notes 3(d) — Business combinations;

·

Notes 3(e) and (f) — Useful lives of property, plant and equipment and intangible assets;

·

Notes 3(h) and 9 — Valuation of inventories;

·

Notes 3(i), 1 1 , 1 2 and 1 3 — Measurement of recoverable amounts of cash-generating units;

·

Note 3(l) and 1 7 — Provisions and other accruals;

·

Note 3(m) — Measurement of transaction price in a revenue transaction (sales returns, rebates, medicaid and chargeback provisions);

·

Note 3(p) and 2 4 — Evaluation of recoverability of deferred tax assets, and estimation of income tax payable and income tax expense in relation to uncertain tax positions; and

·

Note 3(l) and 3 1 — Contingencies.

 

e. Current and non-current classification

 

The Company segregates assets and liabilities into current and non-current categories for presentation in the statement of financial position after considering its normal operating cycle and other criteria set out in International Accounting Standards (IAS) 1, “

Presentation of financial statements

”. For this purpose, current assets and liabilities include the current portion of non-current assets and liabilities respectively. Deferred tax assets and liabilities are always classified as non-current.

 

The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified period up to twelve months as its operating cycle.

 

 

120

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

3. 

Material accounting policies information

 

New Standards, interpretations and amendments adopted by the Company effective from April 1, 2025

 

The Company applied for the first time the below amendments, which are effective for annual periods beginning on or after January 1, 2025. The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

 

Amendments to IAS 21: Lack of exchangeability

 

In August 2023, the IASB issued amendments to IAS 21,

“The Effects of Changes in Foreign Exchange Rates”,

to specify how an entity should assess whether a currency is exchangeable and how it should determine a spot exchange rate when exchangeability is lacking.

 

The amendments also require disclosure of information that enables users of an entity’s financial statements to understand how the currency not being exchangeable into the other currency affects, or is expected to affect, the entity’s financial performance, financial position and cash flows.

 

This amendment had no material impact on the consolidated financial statements.

 

Standards and Amendments issued but not yet effective

 

Certain new standards and amendments to standards that are issued, but not yet effective up to the date of issuance of these consolidated financial statements are disclosed below. The Company intends to adopt these new and amended standards, if applicable, when they become effective.

 

IFRS 18, “

Presentation and Disclosure in Financial Statements”

 

In April 2024, the IASB issued IFRS 18, “

Presentation and Disclosure in Financial Statements

”, which replaces IAS 1

Presentation of Financial Statements

. IFRS 18 introduces new requirements for presentation within the statement of profit or loss, including specified totals and subtotals.

 

Furthermore, entities are required to classify all income and expenses within the statement of profit or loss into one of five categories: operating, investing, financing, income taxes and discontinued operations.

The first three categories are new.

 

The standard also requires disclosure of newly defined management-defined performance measures, subtotals of income and expenses, and includes new requirements for aggregation and disaggregation of financial information based on the identified ‘roles’ of the primary financial statements and the notes.

 

In addition, narrow-scope amendments have been made to IAS 7

Statement of Cash Flows

, which include changing the starting point for determining cash flows from operations under the indirect method, from ‘profit or loss’ to ‘operating profit or loss’ and removing the optionality around classification of cash flows from dividends and interest. In addition, there are consequential amendments to several other standards.

 

IFRS 18, and the amendments to the other standards, are effective retrospectively for annual reporting periods beginning on or after January 1, 2027. Earlier application is permitted, but will need to be disclosed.

 

The Company is currently assessing the impact of adopting IFRS 18 and other amendments on the consolidated financial statements.

 

121

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

3.

Material accounting policies information (continued)

 

Amendments to IFRS 9 and IFRS 7 for Classification and Measurement of financial instruments

 

On May 30, 2024, the IASB issued amendments to IFRS 9, “

Financial Instruments

”, and IFRS 7, “

Financial Instruments: Disclosures

”, relating to the classification and measurement of financial instruments, which:

 

·

clarify that a financial liability is derecognized on the 'settlement date' - i.e., the date when the related obligation is discharged or cancelled or expires or the liability otherwise qualifies for derecognition. They also introduce an accounting policy option to derecognize financial liabilities that are settled through an electronic payment system before the settlement date, if certain conditions are met;

·

clarify how to assess the contractual cash flow characteristics of financial assets that include environmental, social and governance (“ESG”) linked features and other similar contingent features;

·

clarify the treatment of non-recourse assets and contractually linked instruments; and

·

require additional disclosures in IFRS 7 for financial assets and liabilities with contractual terms that reference a contingent event (including those that are ESG-linked), and equity instruments classified at fair value through other comprehensive income (“FVTOCI”).

 

The amendments are effective for annual periods starting on or after January 1, 2026. Early adoption is permitted, with an option to early adopt the amendments for contingent features only. The Company does not anticipate that the amendments will have a material effect on the consolidated financial statements.

122

3.

Material accounting policies information (continued)

Amendments to IFRS 9 and IFRS 7: Contracts Referencing Nature-dependent Electricity

 

In December 2024, the IASB issued amendments to IFRS 9 “

Financial Instruments”

and IFRS 7 “

Financial Instruments: Disclosures”

, to help companies better report the financial effects of nature-dependent electricity contracts, which are often structured as power purchase agreements.

 

Nature-dependent electricity contracts help companies to secure their electricity supply from sources such as wind and solar power. The amount of electricity generated under these contracts can vary based on uncontrollable factors such as weather conditions.

 

The amendments include:

 

·

clarifying the application of the ‘own-use’ requirements for in-scope contracts;

·

permitting hedge accounting if these contracts are used as hedging instruments; and

·

adding new disclosure requirements to enable investors to understand the effect of these contracts on a company’s financial performance and cash flows.

 

The amendments will be effective for annual reporting periods beginning on or after January 1, 2026. Early adoption is permitted, but will need to be disclosed. The IFRS 7 disclosure amendments must be applied when the IFRS 9 amendments are applied. The Company is currently assessing the impact of adopting IFRS 9 and IFRS 7 and these amendments are not expected to have a material impact on the consolidated financial statements.

 

Annual Improvements to IFRS Accounting Standards - Volume 11

 

In July 2024, the IASB issued nine narrow scope amendments as part of its periodic maintenance of IFRS accounting standards. The amendments include clarifications, simplifications, corrections or changes to improve consistency in IFRS 1,

“First-time Adoption of International Financial Reporting Standards”

, IFRS 7,

“Financial Instruments: Disclosure”

and its accompanying Guidance on implementing IFRS 7, IFRS 9,

“Financial Instruments”

, IFRS 10,

“Consolidated Financial Statements”

and IAS 7

, “Statements of Cash Flows”.

 

The amendments will be effective for reporting periods beginning on or after January 1, 2026. Earlier application is permitted and must be disclosed. The amendments are not expected to have a material impact on the consolidated financial statements.

 

 

123

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

3.

Material accounting policies information (continued)

 

Summary of material accounting policies

 

a. Basis of consolidation

 

Subsidiaries

 

The consolidated financial statements comprise the consolidated financial statements of the parent company and its subsidiaries as at March 31, 2026. Subsidiaries are all entities that are controlled by the Company. Control exists when the Company

(i) has power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee), (ii)

is exposed to, or has rights to variable returns from its involvement with the entity and (iii) has the ability to affect those returns through power over the entity.

 

The Company re-assesses whether or not it controls a subsidiary if facts and circumstances indicate that there are changes to one or more of the elements of control. The financial statements of subsidiaries are included in these consolidated financial statements from the date when the Company obtains control and continues until the date that control ceases.

Joint arrangements (equity accounted investees)

 

Joint arrangements are those arrangements over which the parties have joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. The considerations made in determining whether significant influence or joint control are similar to those necessary to determine control over the subsidiaries. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

 

Investments in joint ventures are accounted for using the equity method and are initially recognized at cost. The carrying value of the Company’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The Company does not consolidate entities where the non-controlling interest (“NCI”) holders have certain significant participating rights that provide for effective involvement in significant decisions in the ordinary course of business of such entities.

 

Subsequent to initial recognition, the investment includes the Company’s share of the profit or loss and Other Comprehensive Income (“OCI”) of equity accounted investees, until the date on which joint control ceases.

Associates (equity accounted investees)

 

An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. Interests in Associates are accounted using the equity method. They are initially recognized at cost.

 

Profits and losses arising on transactions between the Company and its associates are recognized only to the extent of unrelated investors' interests in the associate. The investor's share in the associate's profits and losses resulting from these transactions is eliminated against the carrying value of the associate.

 

In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment, and any impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying value of the equity accounted investee.

 

124

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

3.

Material accounting policies information (continued)

 

a. Basis of consolidation (continued)

Changes in ownership interests:

 

Acquisition of some or all of the NCIs in an entity and changes in the interests in subsidiaries that do not result in a loss of control are accounted for as a transaction with equity holders in their capacity as equity holders. Consequently, the difference arising between the fair value of the purchase consideration received and the carrying value of the NCI is recorded as an adjustment to Other reserves that is attributable to the parent company. The associated cash flows are classified as financing activities. No goodwill is recognized as a result of such transactions.

 

Profit, loss, and equity attributed to NCIs in subsidiaries are shown separately in the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of financial position, respectively.

Consolidation procedure

 

Assets, liabilities, income and expenses of a subsidiary during the year are included in the consolidated financial statements. Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Company and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

 

All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Company are eliminated in full on consolidation.

 

For the purpose of preparing these consolidated financial statements, the accounting policies of subsidiaries, joint ventures and associates have been changed where necessary to align them with the policies adopted by the Company. Furthermore, the consolidated financial statements of subsidiaries, joint ventures and associates are prepared for the same reporting period as of the Company.

 

If the Company loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognized in profit or loss

.

 

b. Foreign currency

Functional and presentation currency

These consolidated financial statements are presented in Indian rupees, which is the functional currency of the parent company. All financial information presented, except information related to share and per share data, in Indian rupees has been rounded to the nearest million.

 

In respect of subsidiaries that operate as marketing arms of the parent company in their respective countries/regions, the functional currency has been determined to be the functional currency of the parent company (i.e., the Indian rupee). The operations of these entities are largely restricted to importing of finished goods from the parent company in India, sales of these products in the foreign country and making of import payments to the parent company. The cash flows realized from sales of goods are available for making import payments to the parent company and cash is paid to the parent company on a regular basis. The costs incurred by these entities are primarily the cost of goods imported from the parent company. The financing of these subsidiaries is done directly or indirectly by the parent company.

 

In respect of subsidiaries whose operations are self-contained and integrated within their respective countries/regions, the functional currency has been generally determined to be the local currency of those countries/regions, unless use of a different currency is considered appropriate.

Foreign currency transactions

 

Transactions in foreign currencies are translated to the respective functional currencies of entities within the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate at that date. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.

 

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognized in the consolidated income statement in the period in which they arise.

 

However, foreign currency differences arising from the translation of the following items are recognized in OCI:

 

·

certain equity instruments where the Company had made an irrevocable election to present subsequent changes in the fair value in OCI; and

·

qualifying cash flow hedges, to the extent that the hedges are effective.

 

 

125

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

3.

Material accounting policies information (continued)

 

b. Foreign currency (continued)

 

When several exchange rates are available, the rate used is that at which the future cash flows represented by the transaction or balance could have been settled if those cash flows had occurred at the measurement date.

Foreign operations

 

In case of foreign operations whose functional currency is different from the parent company’s functional currency, the assets and liabilities of such foreign operations, including goodwill and fair value adjustments arising upon acquisition, are translated to the reporting currency at exchange rates at the reporting date. The income and expenses of such foreign operations are translated to the reporting currency at the monthly average exchange rates prevailing during the year. Resulting foreign currency differences are recognized in OCI and presented within equity as part of FCTR. When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the relevant amount in the FCTR is reclassified to the consolidated income statement.

 

c. Financial instruments

 

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

 

Financial assets

Initial recognition and measurement

 

All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.

 

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (e.g., regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.

 

Trade receivables generally do not contain any significant financing component requiring separation and are therefore recognized initially at the transaction price determined as per IFRS 15,

“Revenue from Contracts with Customers”.

 

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in four categories:

 

·

Debt instruments at amortized cost;

·

Debt instruments at Fair Value Through OCI (“FVTOCI”);

·

Debt instruments, derivatives and equity instruments at Fair Value Through Profit or Loss (“FVTPL”); and

·

Equity instruments measured at FVTOCI.

Debt instruments at amortized cost

 

A “debt instrument” is measured at the amortized cost if both the following conditions are met:

 

a)

the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows; and

b)

contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (“SPPI”) on the principal amount outstanding.

 

After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate method and are subject to impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate.

 

Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on de-recognition is recognized directly in the consolidated income statement and presented in “other income, net”. The losses arising from impairment are recognized in the consolidated income statement. This category generally applies to trade and other receivables.

Debt instrument at FVTOCI

 

A “debt instrument” is classified as at the FVTOCI if both of the following criteria are met:

 

a)

the objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets; and

b)

the asset’s contractual cash flows represent SPPI.

 

Debt instruments included within the FVTOCI category are measured initially at fair value plus transaction cost and subsequently at each reporting date at the fair value. Fair value movements are recognized in the OCI. However, the Company recognizes interest income (calculated using the effective interest rate method), impairment losses and reversals and foreign exchange gain or loss in the consolidated income statement. On de-recognition of the asset, cumulative gain or loss previously recognized in OCI is reclassified to the consolidated income statement.

126

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

3.

Material accounting policies information (continued)

 

c. Financial instruments (continued)

Equity investments

 

All equity investments within the scope of IFRS 9 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognized by an acquirer in a business combination to which IFRS 3 applies, are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present subsequent changes in the fair value in OCI. The Company makes such election upon initial recognition on an instrument-by-instrument basis. The classification is made upon initial recognition and is irrevocable.

 

If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to the consolidated income statement, even on sale of investment.

 

However, on sale the Company may transfer the cumulative gain or loss within equity.

 

Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the consolidated income statement.

De-recognition

 

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized (i.e., removed from the Company’s consolidated statement of financial position) when:

 

·

the rights to receive cash flows from the asset have expired; or

 

·

both (1) the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement ; and (2) either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

 

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of the Company’s continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.

 

Impairment of trade receivables and other financial assets

 

In accordance with IFRS 9, the Company applies the expected credit loss (“ECL”) model for measurement and recognition of impairment loss on trade receivables and other financial assets, if any, representing a contractual right to receive cash or another financial asset.

 

For this purpose, the Company follows a “simplified approach” for recognition and measurement of impairment loss allowance on the contract asset and trade receivable balances. The application of this simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.

 

As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed.

 

Financial liabilities

Initial recognition and measurement

 

Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

 

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

 

The Company’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and derivative financial instruments.

 

 

127

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

3. Material accounting policies information (continued)

 

c. Financial instruments (continued)

Subsequent measurement

 

The measurement of financial liabilities depends on their classification, as described below:

 

Financial liabilities at FVTPL

 

Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVTPL. Financial liabilities at FVTPL primarily comprise derivative financial instruments entered into by the Company and not designated as hedging instruments in a hedge relationship as defined by IFRS 9.

 

Gains or losses on such financial liabilities are recognized in the consolidated income statement.

 

The Company has not designated any financial liability as FVTPL.

 

Loans and borrowings

 

Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost using the effective interest rate method and, thereby, any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in the consolidated income statement over the period of the borrowings.

 

The effective interest rate amortization is included under the head finance expense in the consolidated income statement.

De-recognition

 

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Gain or loss arising on de-recognition, measured as difference between, the carrying amount of financial liability and the settlement amount, is recognized under the head finance expense in the consolidated income statement.

 

Derivative financial instruments

 

The Company is exposed to exchange rate risk which arises from its foreign exchange revenues and expenses, primarily in U.S. dollars, U.K. pounds sterling, Russian roubles, Brazilian reals, Swiss francs, South African rands, Kazakhstan tenges, Romanian new leus, Australian dollars and Euros, and foreign currency debt in U.S. dollars, Russian roubles, Mexican pesos and Brazilian reals.

 

The Company uses derivative financial instruments such as foreign exchange forward contracts, option contracts and swap contracts to mitigate its risk of changes in foreign currency exchange rates. The Company also uses non-derivative financial instruments as part of its foreign currency exposure risk mitigation strategy. Derivatives are classified as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

 

Hedges of highly probable forecasted transactions

 

The Company classifies its derivative financial instruments that hedge foreign currency risk associated with highly probable forecasted transactions as cash flow hedges and measures them at fair value. The effective portion of such cash flow hedges is recorded in the OCI and accumulated in the hedging reserve as a component of equity. If the hedged transaction subsequently results in the recognition of a non-financial item, the amount accumulated in equity is removed from the hedging reserve and included in the initial cost or other carrying amount of the hedged asset or liability. In all other cases, the amount so accumulated is re-classified to the consolidated income statement and presented as part of the hedged item in the same period in which the forecasted transaction impacts the consolidated income statement. The ineffective portion of such cash flow hedges is recorded in the consolidated income statement as finance costs immediately.

 

The Company also designates certain non-derivative financial liabilities, such as foreign currency borrowings from banks, as hedging instruments for hedge of foreign currency risk associated with highly probable forecasted transactions. Accordingly, the Company applies cash flow hedge accounting to such relationships. Re-measurement gains or loss on such non-derivative financial liabilities are recorded in the same manner as stated above for derivative instruments designated as hedging instruments.

 

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in OCI remains there until the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in OCI is recognized immediately in the consolidated income statement.

 

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, demand deposits and short-term highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. For this purpose, “short-term” means investments having original maturities of three months or less from the date of investment. Bank overdrafts, which are repayable on demand and form an integral part of the Company’s cash management, are included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash flows.

 

 

128

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

3. Material accounting policies information (continued)

 

d. Business combinations and goodwill

 

Business combinations are accounted for using the acquisition method, regardless of whether equity instruments or other assets are acquired, unless the transaction is treated as an asset acquisition by applying the optional concentration test or otherwise. The optional concentration test permits the acquirer to make an election on a transaction-by-transaction basis, and apply a simplified assessment for determining whether an acquired set of activities and assets is a business. The optional concentration test is met, and the acquired set of activities and assets is not a business, if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. The acquisition date is the date on which control is transferred to the acquirer. Judgment is applied in determining the acquisition date and determining whether control is transferred from one party to another.

 

The Company determines that it has acquired a business when the acquired set of activities and assets include an input and a substantive process that together significantly contribute to the ability to create outputs. The acquired process is considered substantive if it is critical to the ability to continue producing outputs, and the inputs acquired include an organized workforce with the necessary skills, knowledge, or experience to perform that process or it significantly contributes to the ability to continue producing outputs and is considered unique or scarce or cannot be replaced without significant cost, effort, or delay in the ability to continue producing outputs.

 

The consideration transferred for the acquisition is comprised of:

 

·

fair values of the assets transferred;

·

fair values of liabilities incurred to the former owners of the acquired business;

·

equity interests issued by the Company;

·

fair value of any asset or liability resulting from a contingent consideration arrangement; and

·

fair value of any pre-existing equity interest.

 

At the acquisition date, identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values. For each business combination, the Company elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets.

 

Acquisition-related costs are expensed as incurred.

 

Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Contingent consideration is classified either as equity or a financial liability. Contingent consideration classified as equity is not re-measured and its subsequent settlement is accounted for within equity. Contingent consideration classified as a financial liability is subsequently re-measured to fair value, with changes in fair value recognized in the consolidated income statement.

 

Goodwill is initially measured at cost, being the excess of (i) the aggregate of the consideration transferred, the amount of non-controlling interest in the acquired entity, and the acquisition date fair value of any previous equity interest in the acquired entity, over (ii) the fair value of the Company’s share of net identifiable assets acquired.

 

If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference, after reassessment, is recognized in the consolidated income statement as a bargain purchase.

 

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Company’s cash-generating units or the group of cash generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units and is subjected to impairment testing at each reporting date.

 

e. Property, plant and equipment

Recognition and measurement

 

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and other costs directly attributable to bringing the asset to a working condition for its intended use.

 

Software for internal use which is acquired from third-party vendors and forms an integral part of a tangible asset, including consultancy charges for implementing the software, is capitalized as part of the related tangible asset. Subsequent costs associated with maintaining such software are recognized as expense as incurred.

 

Advances paid towards the acquisition of property, plant and equipment outstanding at each reporting date and the cost of property, plant and equipment not ready to use before such date are disclosed under capital work-in-progress. Assets not ready for use are not depreciated but are tested for impairment.

 

 

129

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

3. Material accounting policies information (continued)

 

e. Property, plant and equipment (continued)

 

Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur.

 

The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The costs of repairs and maintenance are recognized in the consolidated income statement as incurred.

 

Capital work in progress is stated at cost, net of accumulated impairment loss, if any.

 

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Gains and losses upon disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized net within “Other income, net” in the consolidated income statement.

 

Depreciation

 

Depreciation is recognized in the consolidated income statement on a straight-line basis over the estimated useful lives of property, plant and equipment. The depreciation expense is included in the costs of the functions using the asset. Land is not depreciated but subject to impairment.

 

When parts of an item of property, plant and equipment have different useful lives, they are depreciated separately based on their respective economic useful lives.

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date and any changes are considered prospectively. The estimated useful lives are as follows: 

 

Buildings
- Factory and administrative buildings			20 - 50 years
- Ancillary structures			3 - 15 years
Plant and equipment			3 - 15 years
Furniture, fixtures and office equipment			3 - 10 years
Vehicles			4 - 5 years

 

The capitalized costs of software are amortized over the estimated useful life or the remaining useful life of the related tangible fixed asset, whichever is lower.

 

f. Intangible assets other than goodwill

 

Expenditures on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding are recognized in the consolidated income statement when incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes.

 

Development expenditures are capitalized only if:

 

·

development costs can be measured reliably;

·

the product or process is technically and commercially feasible;

·

future economic benefits are probable; and

·

the Company intends to, and has sufficient resources, to complete development and to use or sell the asset.

 

The expenditures to be capitalized include the cost of materials and other costs directly attributable to preparing the asset for its intended use. Other development expenditures are recognized in the consolidated income statement as incurred.

 

As of March 31, 202

6

, none of the development expenditure amounts have met the aforesaid recognition criteria for capitalization.

 

Acquired research and development intangible assets that are under development are recognized as In-Process Research and Development (“IPR&D”) assets. Subsequent expenditures on an IPR&D project acquired separately or in a business combination are:

 

·

recognized as an expense when incurred, if it is a research expenditure;

·

recognized as an expense when incurred, if it is a development expenditure that does not satisfy the criteria for recognition as an intangible asset in paragraph 57 of IAS 38; or

·

added to the carrying amount of the acquired IPR&D project, if it is a development expenditure that satisfies the recognition criteria in paragraph 57 of IAS 38.

 

 

130

  

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

3. Material accounting policies information (continued)

 

f. Intangible assets other than goodwill (continued)

 

IPR&D assets are not amortized, but evaluated for potential impairment on an annual basis or when there are indications that the carrying value may not be recoverable. Any impairment charge on such IPR&D assets is recorded in the consolidated income statement under “Impairment of non-current assets”.

 

Payments for intangible assets that are acquired by the Company from third parties as in-licensed or purchased intellectual property rights, compounds and products are capitalized. If additional payments are made to the originator company to continue performing research and development (“R&D”) activities an evaluation is made as to the nature of the payments. Such additional payments will be expensed if they represent the compensation for subcontracted R&D services not resulting in an additional transfer of intellectual property rights to the Company. Such additional payments will be capitalized if they represent the compensation for the transfer to the Company of additional intellectual property developed at the risk of the originator company.

 

Intangible assets that have been acquired through a business combination are initially recorded at fair value at the date of acquisition.

 

Amortization

 

Intangible assets available for use with a definitive useful life are amortized on a straight-line basis and evaluated for potential impairment whenever facts and circumstances indicate that their carrying value may not be recoverable. Amortization is recognized in the consolidated income statement on a straight-line basis over the estimated useful lives of intangible assets. The amortization expense is recognized in the income statement in the expense category that is consistent with the function of the intangible asset.

 

The estimated useful lives are as follows:

 

Product related intangibles			3 – 25 years
Other intangibles			3 - 15 years

 

The amortization period and the amortization method for intangible assets with a finite useful life are reviewed at each reporting date. Changes in the expected useful lives or expected pattern of consumption of future economic benefits embodied in the assets are considered to modify the amortization period or method, as appropriate and are treated as change in accounting estimate.

 

I

ntangible assets relating to products in development, other intangible assets not available for use and intangible assets having indefinite useful life are subject to impairment testing at each reporting date. All other intangible assets are tested for impairment when there are indications that the carrying value may not be recoverable. All impairment losses are recognized immediately in the consolidated income statement under “Impairment of non-current assets”.

 

De-recognition of intangible assets

 

Intangible assets are de-recognized either on their disposal or where no future economic benefits are expected from their use. Losses arising on such de-recognition are recorded in the consolidated income statement, and are measured as the difference between the net disposal proceeds, if any, and the carrying amount of respective intangible assets as at the date of de-recognition.

 

g. Leases

 

The Company recognizes a right-of-use asset and a corresponding lease liability for all arrangements in which it is a lessee, except for leases with a term of 12 months or less (short-term leases) and low-value leases. For these short-term and low-value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease. In the case of arrangements involving lease and non-lease components, the Company allocates the consideration in the lease contract to the lease and non-lease components on the basis of the relative standalone price of each component.

 

Right-of-use assets are measured at cost less accumulated depreciation and accumulated impairment loss, if any. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received.

 

Right-of-use assets are depreciated on a straight-line basis from the commencement date of the lease over the shorter of the useful life of the right-of-use asset or the end of the lease term, and are assessed for impairment whenever there is an indication that the carrying amount may not be recoverable using cash flow projections for the useful life.

 

Lease liabilities include the net present value of the fixed and variable lease payments that depend on an index or a rate to be made over the lease term. The lease payments are discounted using the interest rate implicit in the lease or the Company’s incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable.

 

Lease payments are allocated between principal and interest cost. The interest cost is charged to consolidated income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

 

Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise information technology equipment and small items of office furniture.

 

131

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

3. Material accounting policies information (continued)

 

h. Inventories

 

Inventories are valued at the lower of cost or net realizable value.

 

Inventories consist of raw materials, stores and spares, work in progress and finished goods. The cost of all categories of inventories is determined based on the weighted average method. Cost includes purchase cost less refundable taxes, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of finished goods and work in progress, cost includes an appropriate share of overheads based on normal operating capacity. Stores and spares consists of packing materials, engineering spares (such as machinery spare parts) and consumables (such as lubricants, cotton waste and oils), which are used in operating machines or consumed as indirect materials in the manufacturing process.

 

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

 

The factors that the Company considers in determining the provision for slow moving, obsolete and other non-saleable inventory include estimated shelf life, planned product discontinuances, price changes, aging of inventory and introduction of competitive new products, to the extent each of these factors impact the Company’s business and markets. The Company considers all these factors and adjusts the inventory provision to reflect its actual experience on a periodic basis.

 

i. Impairment

Non-financial assets

 

The carrying amounts of the Company’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the recoverable amount is estimated for the asset or the cash generating unit to which the asset belongs. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, an impairment test is performed each year at March 31 or when circumstances indicate that carrying value may be impaired.

 

The recoverable amount of an asset or cash-generating unit (as defined below) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or the cash-generating unit. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).

 

An impairment loss is recognized in the consolidated income statement if the estimated recoverable amount of an asset or its cash-generating unit is lower than its carrying amount. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis.

 

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

 

Goodwill that forms part of the carrying amount of an investment in a joint venture is not recognized separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in a joint venture is tested for impairment as a single asset when there are indicators that the investment in a joint venture may be impaired.

 

An impairment loss in respect of equity accounted investee is measured by comparing the recoverable amount of investment with its carrying amount. An impairment loss is recognized in the consolidated income statement, and reversed if there has been a favorable change in the estimates used to determine the recoverable amount.

 

j. Employee benefits

 

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

 

The Company’s contributions to defined contribution plans are charged to the consolidated income statement as and when the services are received from the employees.

 

 

132

  

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

3. Material accounting policies information (continued)

 

j. Employee benefits (continued)

 

The liability in respect of defined benefit plans and other post-employment benefits is measured as the defined benefit obligation calculated annually by independent actuaries using the projected unit credit method. The current service cost of the defined benefit plan is recognized in the consolidated income statement. Past service costs are recognized immediately in the consolidated income statement.

 

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions for defined benefit obligation and plan assets are recognized in OCI in the period in which they arise

Other long-term employee benefits

 

The Company’s net obligation in respect of other long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and previous periods. That benefit is discounted to determine its present value by independent actuaries using the projected unit credit method. The current service cost, past service cost as well as re-measurements are recognized in the consolidated income statement in the period in which they arise.

Compensated absences

 

The Company’s current policies permit certain categories of its employees to accumulate and carry forward a portion of their unutilized compensated absences and utilize them in future periods or receive cash in lieu thereof in accordance with the terms of such policies. The Company measures the expected cost of accumulating compensated absences as the additional amount that the Company incurs as a result of the unused entitlement that has accumulated at the reporting date. Such measurement is based on actuarial valuation as at the reporting date carried out by a qualified actuary. The resultant expenses are recognized in the consolidated income statement.

 

k. Share based payments

Equity settled share-based payment transactions

 

The grant date fair value of options granted to employees is recognized as an expense in the consolidated income statement, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service at the vesting date. The expense is recorded for each separately vesting portion of the award if each portion of the award was, in substance, a separate award. The increase in equity recognized in connection with share-based payment transaction is presented as a separate component in equity under “share-based payment reserve”. The amount recognized as an expense is adjusted to reflect the actual number of stock options that vest.

 

The fair value of employee stock options is measured using the Black-Scholes-Merton valuation model. Measurement inputs include the share price on the grant date, the exercise price of the instrument, the expected volatility (based on weighted average historical volatility), the expected life of the instrument (based on historical experience), the expected dividends, and the risk free interest rate (based on government bonds).

Cash settled share-based payment transactions

 

The fair value of the amount payable to employees in respect of share-based payment transactions which are settled in cash is recognized as an expense, with a corresponding increase in liabilities, over the period during which the employees become unconditionally entitled to payment. The liability is re-measured at each reporting date and at the settlement date based on the fair value of the share-based payment transaction. Any changes in the liability are recognized in the consolidated income statement.

 

l. Provisions

 

A provision is recognized in the consolidated income statement if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

Onerous contracts

 

A provision for onerous contracts is recognized in the consolidated income statement when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognizes any impairment loss on the assets associated with that contract.

 

133

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

3. Material accounting policies information (continued)

 

l. Provisions (continued)

Contingent liabilities and contingent assets

 

A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

 

Contingent assets are not recognized in the consolidated financial statements. A contingent asset is disclosed where an inflow of economic benefits is probable. Contingent assets are assessed continually and, if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the change occurs.

 

m. Revenue

 

The Company’s revenue is derived from sales of goods, service income and income from licensing arrangements. Most of such revenue is generated from the sale of goods. The Company has generally concluded that it is the principal in its revenue arrangements.

Sale of goods

 

Revenue is recognized when the control of the goods has been transferred to a third party. This is usually when the title passes to the customer, either upon shipment or upon receipt of goods by the customer as per the terms agreed upon with the customer. Generally, at that point, the customer has full discretion over the channel and price to sell the products, and there are no unfulfilled obligations that could affect the customer’s acceptance of the product.

 

Revenue from the sale of goods is measured at the transaction price which is the consideration received or receivable, net of expected returns, taxes and applicable trade discounts and allowances. Revenue includes shipping and handling costs billed to the customer since the Company acts as a principal in rendering those services.

 

In arriving at the transaction price, the Company considers the terms of the contract with the customers and its customary business practices. The transaction price is the amount of consideration the Company is entitled to receive in exchange for transferring promised goods or services, excluding amounts collected on behalf of third parties. The amount of consideration varies because of estimated rebates, returns and chargebacks, which are considered to be key estimates. Any amount of variable consideration is recognized as revenue only to the extent that it is highly probable that a significant reversal will not occur. The Company estimates the amount of variable consideration using the expected value method.

 

Presented below are the points of recognition of revenue with respect to the Company’s sale of goods:

 

Particulars		Point of recognition of revenue
Sales of generic products in India		Control is transferred upon delivery   of products to distributors by clearing and forwarding agents of the Company.
Sales of active pharmaceutical ingredients and intermediates in India		Upon delivery of products to customers, unless the terms of the applicable contract provide for specific revenue generating activities to be completed, in which case revenue is recognized once all such activities are completed.
Export sales and other sales outside of India		Upon delivery or dispatch of products to customers, subject to the terms of the applicable contract.

Profit share revenues

 

The Company from time to time enters into marketing arrangements with certain business partners for the sale of its products in certain markets. Under such arrangements, the Company sells its products to the business partners at a non-refundable base purchase price agreed upon in the arrangement and is also entitled to a profit share which is over and above the base purchase price. The profit share is typically dependent on the business partner’s ultimate net sale proceeds or net profits, subject to any reductions or adjustments that are required by the terms of the arrangement. Such arrangements typically require the business partner to provide confirmation of units sold and net sales or net profit computations for the products covered under the arrangement.

 

Revenue in an amount equal to the base sale price is recognized in these transactions upon delivery of products to the business partners. An additional amount representing the profit share component is recognized as revenue only to the extent that it is highly probable that a significant reversal will not occur.

 

At the end of each reporting period, the Company updates the estimated transaction price (including updating its assessment of whether an estimate of variable consideration is constrained) to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period.

 

134

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

3. Material accounting policies information (continued)

 

m. Revenue (continued)

Out licensing arrangements, milestone payments and royalties

 

Revenues include amounts derived from product out-licensing agreements. These arrangements typically consist of an initial up-front payment received on inception of the license and subsequent payments dependent on achieving certain milestones in accordance with the terms prescribed in the agreement. In cases where the transaction has two or more performance obligations, the Company accounts for the completed obligation (for example the transfer of title) as a separate unit of accounting and record revenue upon delivery of that component, provided that the Company can make a reasonable estimate of the fair value of the undelivered component. Otherwise, non-refundable up-front license fees received in connection with product out-licensing agreements are deferred and recognized over the balance period in which the Company has pending performance obligations. Milestone payments which are contingent on achieving certain clinical milestones are recognized as revenues on achievement of such milestones, or over the performance period depending on the terms of the contract. If milestone payments are creditable against future royalty payments, the milestones are deferred and released over the period in which the royalties are anticipated to be paid.

 

Royalty income earned through a license is recognized when the underlying sales have occurred.

Provision for chargeback, rebates and discounts

 

Provisions for chargeback, rebates, discounts and Medicaid payments are estimated and provided for in the year of sales and recorded as reduction of revenue. A chargeback claim is a claim made by the wholesaler for the difference between the price at which the product is initially invoiced to the wholesaler and the net price at which it is agreed to be procured from the Company. Rebates are deductions based on contractual obligations and may include direct rebates, indirect rebates and other pricing adjustments. Provisions for such chargebacks, rebates and discounts are accrued and estimated based on the terms of the agreement with the wholesaler, historical average chargeback rate actually claimed over a period of time, current contract prices with wholesalers/other customers and estimated inventory holding by the wholesaler. The provision represents estimates of the related obligations, requiring the use of judgment when estimating the effect of these revenue deductions.

Shelf stock adjustments

 

Shelf stock adjustments are credits issued to customers to reflect decreases in the selling price of products sold by the Company, and accruals for shelf stock adjustments are recognized as a reduction from revenues when the customer has a material right to them under the terms of the applicable contract. Such right is often contingent upon future events such as a decline in the prices of certain products as a result of price competition or new competitive launches. These credits are customary in the pharmaceutical industry, and are intended to reduce the customer inventory cost to better reflect the current market prices. The determination to grant a shelf stock adjustment to a customer is based on the terms of the applicable contract, which may or may not specifically limit the age of the stock on which a credit would be offered.

Refund Liability

 

The Company accounts for sales returns accrual by recording refund liability concurrent with the recognition of revenue at the time of a product sale. This liability is based on the Company’s estimate of expected sales returns. The Company deals in various products and operates in various markets. Accordingly, the estimate of sales returns is determined primarily by the Company’s historical experience in the markets in which the Company operates. With respect to established products, the Company considers its historical experience of actual sales returns, levels of inventory in the distribution channel, estimated shelf life, any revision in the shelf life of the product, product discontinuances, price changes of competitive products, and the introduction of competitive new products, to the extent each of these factors impact the Company’s business and markets. With respect to new products introduced by the Company, such products have historically been either extensions of an existing line of product where the Company has historical experience or in therapeutic categories where established products exist and are sold either by the Company or the Company’s competitors. At the time of recognizing the refund liability, the Company also recognizes an asset, (i.e., the right to the returned goods) which is included in inventories for the products expected to be returned. The Company initially measures this asset at the former carrying amount of the inventory, less any expected costs to recover the goods, and any potential decreases in the value of the returned goods.

 

Along with re-measuring the refund liability at the end of each reporting period, the Company updates the measurement of the asset recorded for any revisions to its expected level of returns, as well as any additional decreases in the value of the returned products.

Services

 

Revenue from services rendered, which primarily relate to contract research, is recognized in the consolidated income statement as the underlying services are performed. Upfront non-refundable payments received under these arrangements are deferred and recognized as revenue over the expected period over which the related services are expected to be performed.

License fees

 

License fees primarily consist of income from the out-licensing of the intellectual property, and other licensing and supply arrangements with various parties. Revenue from license fees is recognized when control transfers to the third party and the Company’s performance obligations are satisfied. Some of these arrangements include certain performance obligations by the Company. Revenue from such arrangements is recognized in the period in which the Company completes all its performance obligations.

 

135

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

3. Material accounting policies information (continued)

 

n. Shipping and handling costs

 

Shipping and handling costs incurred to transport products to customers, and internal transfer costs incurred to transport the products from the Company’s factories to its various points of sale, are included in selling, general and administrative expenses.

 

o. Finance income and expense

 

Finance income include interest income on funds invested, dividend income and gains on the disposal of financial assets. Interest income is recognized in the consolidated income statement as it accrues, using the effective interest method. Dividend income is recognized in the consolidated income statement on the date that the Company’s right to receive payment is established. The associated cash flows are classified as investing activities in the statement of cash flows.

 

Finance expenses consist of interest expense on loans and borrowings.

 

Borrowing costs are recognized in the consolidated income statement using the effective interest method unless capitalization criteria are met as per the accounting policy on Property, plant and equipment. The associated cash flows are classified as financing activities in the statement of cash flows.

 

Foreign currency gains and losses are reported on a net basis within finance income and expense. These primarily include: exchange differences arising on the settlement or translation of monetary items; changes in the fair value of derivative contracts that economically hedge monetary assets and liabilities in foreign currencies and for which no hedge accounting is applied; and the ineffective portion of cash flow hedges.

 

p. Income tax

 

Income tax expense consists of current and deferred tax. Income tax expense is recognized in the consolidated income statement except to the extent that it relates to items recognized in OCI or directly in equity, in which case it is recognized in OCI or directly in equity, respectively. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

 

Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

 

Deferred tax is not recognized for:

 

·

temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination if at the time of the transaction, it

 

i.

affects neither accounting nor taxable profit or loss, and

ii.

does not give rise to equal taxable and deductible temporary differences;

 

·

temporary differences relating to investments in subsidiaries, joint ventures and associates if the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

·

taxable temporary differences arising upon the initial recognition of goodwill.

 

Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.

 

Any deferred tax asset or liability arising from deductible or taxable temporary differences in respect of unrealized inter-company profit or loss on inventories held by the Company in different tax jurisdictions is recognized using the tax rate of the jurisdiction in which such inventories are held. Withholding tax arising out of payment of dividends to shareholders under the Indian Income tax regulations is not considered a tax expense for the Company and all such taxes are recognized in the statement of changes in equity as part of the associated dividend payment.

 

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

 

136

  

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

3. Material accounting policies information (continued)

 

p. Income tax (continued)

 

Accruals for uncertain tax positions are measured using either the most likely amount or the expected value amount, depending on which method the entity expects to better predict the resolution of the uncertainty. Tax benefits are not recognized unless the tax positions will probably be accepted by the tax authorities. This is based upon management’s interpretation of applicable laws and regulations and the expectation of how the tax authority will resolve the matter. Once considered probable of not being accepted, management reviews each material tax benefit and reflects the effect of the uncertainty in determining the related taxable amounts.

 

The Company applies the exception to not recognize or disclose information about deferred tax assets and deferred tax liabilities related to countries that have enacted tax legislation that comply with the Organization for Economic Cooperation and Development (“OECD”) Pillar Two model rules.

 

q. Segment reporting

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Chief Executive Officer of the Company is responsible for allocating resources and assessing performance of the operating segments and accordingly is identified as the chief operating decision maker.

 

r. Government grants and incentives

 

The Company recognizes government grants only when there is reasonable assurance that the conditions attached to them will be complied with, and the grants will be received. Grants related to income and other incentives are deducted in reporting the related expense in the consolidated income statement.

 

s. Dividend

 

The Company recognizes a liability to pay a dividend when the distribution is authorized, and the distribution is no longer at the discretion of the Company.

 

In the case of interim dividends to equity shareholders, this is when declared by the Board of Directors. In the case of final dividends, this is when approved by the shareholders at the Annual General Meeting of the Company.

 

t. Rounding of amounts

 

All amounts disclosed in the consolidated financial statements and notes have been rounded off to the nearest million currency units unless otherwise stated.

 

137

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

4.

Determination of fair values

 

The Company’s accounting policies and disclosures require the determination of fair value, for all financial and certain non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

 

All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

 

·

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

·

Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

·

Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

 

For assets and liabilities that are recognized in the consolidated financial statements at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

 

External valuers are involved for valuation of significant assets, such as assets acquired in a business combination and significant liabilities, such as contingent consideration. Involvement of external valuers is determined by the management, based on market knowledge, reputation, independence and whether professional standards are maintained.

 

(i) Intangible assets

 

The fair value of brands, product related intangibles and other intangible assets acquired in business combinations are determined using the multi-period excess earnings method (i.e., a form of the income approach). Under this method, values are estimated as the present value of the benefits anticipated from ownership of the intangible assets in excess of the returns required or the investment in the contributory assets necessary to realize those benefits.

 

(ii) Inventories

 

The fair value of inventories acquired in a business combination is determined based on its estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.

 

(iii) Investment in equity and debt securities and units of mutual funds

 

The fair value of marketable equity and debt securities is determined by reference to their quoted market price at the reporting date. For debt securities where quoted market prices are not available, fair value is determined using pricing techniques such as discounted cash flow analysis.

 

In respect of investments in mutual funds, the fair values represent net asset value as stated by the issuers of these mutual fund units in the published statements. Net asset values represent the price at which the issuer will issue further units in the mutual fund and the price at which issuers will redeem such units from the investors.

 

Accordingly, such net asset values are analogous to fair market value with respect to these investments, as transactions of these mutual funds are carried out at such prices between investors and the issuers of these units of mutual funds.

 

(iv) Derivatives

 

The fair value of foreign exchange forward contracts is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds). The fair value of foreign currency option and swap contracts and interest rate swap contracts is determined based on the appropriate valuation techniques, considering the terms of the contract.

 

(v) Non-derivative financial liabilities

 

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. In respect of the Company’s borrowings that have floating rates of interest, their fair value approximates carrying value.

 

138

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

4. Determination of fair values (continued)

 

(vi) Contingent consideration

 

The fair value of the contingent consideration arising out of business combination is estimated by applying the income approach. The fair value measurement is based on significant inputs that are not observable in the market, which IFRS 13, “Fair Value Measurement” refers to as Level 3 inputs.

 

5.

Segment reporting

 

The Chief Operating Decision Maker (“CODM”) evaluates the Company’s performance and allocates resources based on an analysis of various performance indicators by operating segments. The CODM reviews revenue and gross profit as the performance indicator for all of the operating segments, and does not review the total assets and liabilities of an operating segment. The Company’s Chief Executive Officer (“CEO”) is currently the CODM of the Company.

 

The Company’s reportable operating segments are as follows:

 

·

Global Generics;

·

Pharmaceutical Services and Active Ingredients (“PSAI”); and

·

Others.

 

Global Generics.

This segment consists of the Company’s business of manufacturing and marketing prescription and over-the-counter finished pharmaceutical products ready for consumption by the patient, marketed under a brand name (branded formulations) or as generic finished dosages with therapeutic equivalence to branded formulations (generics). This segment includes the operations of the Company’s biologics business, and the portfolio outside of the United States of consumer brands in the Nicotine Replacement Therapy that the Company acquired from Haleon UK Enterprises Limited (the “NRT Business”).

 

Pharmaceutical Services and Active Ingredients

. This segment primarily consists of the Company’s business of manufacturing and marketing active pharmaceutical ingredients and intermediates, also known as “API”, which are the principal ingredients for finished pharmaceutical products. Active pharmaceutical ingredients and intermediates become finished pharmaceutical products when the dosages are fixed in a form ready for human consumption such as a tablet, capsule or liquid using additional inactive ingredients. The Company also serves its customers with incremental value added products, including semi-finished and finished formulations, which are included in this segment. This segment also includes the Company’s pharmaceutical services business, which provides contract research services and manufactures and sells active pharmaceutical ingredients in accordance with the specific customer requirements.

 

Others.

This segment consists of the Company’s other business operations, which includes the Company’s wholly-owned subsidiaries, Aurigene Oncology Limited (“AOL”) (formerly Aurigene Discovery Technologies Limited) and the Company’s Proprietary Products business. AOL is a discovery stage biotechnology company developing novel and best-in-class therapies in the fields of oncology and inflammation. AOL works with established pharmaceutical and biotechnology companies through customized models of drug-discovery collaborations. The Proprietary Products business focuses on the research and development of differentiated formulations and is expected to earn revenues arising out of monetization of such assets and subsequent royalties, if any.

 

The measurement of each segment’s revenues, expenses and assets is consistent with the accounting policies that are used in preparation of the Company’s consolidated financial statements.

 

139

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

5. Segment reporting (continued)

 

Segment information:		For the Year Ended March 31,
Reportable segments		Global Generics												PSAI												Others												Total
		2026				2025				2024				2026				2025				2024				2026				2025				2024				2026				2025				2024
Revenues (1)		Rs.	299,033			Rs.	289,552			Rs.	245,453			Rs.	34,773			Rs.	33,846			Rs.	29,801			Rs.	2,127			Rs.	2,137			Rs.	3,910			Rs.	335,933			Rs.	325,535			Rs.	279,164
Gross profit		Rs.	169,698			Rs.	179,606			Rs.	154,268			Rs.	5,984			Rs.	9,157			Rs.	6,919			Rs.	1,582			Rs.	1,665			Rs.	2,420			Rs.	177,264			Rs.	190,428			Rs.	163,607
Selling, general and administrative expenses																																							106,763				93,870				77,201
Research and development expenses																																							24,058				27,380				22,873
Impairment of non-current assets, net																																							3,519				1,693				3
Other income, net																																							(7,627	)			(4,358	)			(4,199	)
Results from operating activities																																						Rs.	50,551			Rs.	71,843			Rs.	67,729
Finance income, net																																							4,132				4,724				3,994
Share of profit of equity accounted investees, net of tax																																							134				217				147
Profit before tax																																						Rs.	54,817			Rs.	76,784			Rs.	71,870
Tax expense, net																																							12,351				19,539				16,186
Profit for the year																																						Rs.	42,466			Rs.	57,245			Rs.	55,684

 

(1)

Revenues for the year ended March 31, 2026 do not include inter-segment revenues from the PSAI segment to the Global Generics segment, of Rs.7,270 (as compared to Rs.9,389 and Rs.10,707 for the years ended March 31, 2025 and 2024, respectively) and from the PSAI segment to the Others segment of Rs.0 (as compared to Rs.0 and Rs.72 for the years ended March 31, 2025 and 2024, respectively)

 

140

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

5. Segment reporting (continued)

 

Revenues within the Global Generics segment:

 

Revenues by therapeutic areas in the Company’s Global Generics segment is given below:

 

		For the Year Ended March 31,
		2026				2025				2024
Oncology		Rs.	63,131			Rs.	85,798			Rs.	67,563
Nervous System			61,292				43,345				29,760
Pain Management			30,114				27,552				23,990
Gastrointestinal			27,620				25,315				23,368
Cardiovascular			21,868				17,034				16,326
Respiratory			21,204				18,551				17,291
Anti-Infective			13,196				12,774				15,896
Diabetology			12,432				7,452				5,336
Hematology			8,346				8,628				10,949
Nutraceuticals			8,132				6,427				5,680
Dermatology			8,020				9,130				7,691
Others			23,678				27,546				21,603
To t al		Rs.	299,033			Rs.	289,552			Rs.	245,453

 

Revenues within the PSAI segment:

 

Revenues by therapeutic areas in the Company’s PSAI segment is given below:

 

		For the Year Ended March 31,
		2026				2025				2024
Cardiovascular		Rs.	5,227			Rs.	7,060			Rs.	6,915
Oncology			5,176				3,398				3,558
Nervous System			4,087				3,722				2,907
Pain Management			3,930				3,668				4,221
Diabetology			1,808				2,039				1,609
Hematology			1,753				2,458				646
Anti-Infective			1,739				1,677				1,456
Gastrointestinal			919				1,220				1,108
Dermatology			561				742				862
Respiratory			541				667				899
Genitourinary			475				416				367
Others			8,557				6,779				5,253
Total			34,773				33,846				29,801

 

Revenues by geography:

 

The following table shows the distribution of the Company’s revenues by country, based on the location of the customers:

 

		For the Year Ended March 31,
Country		2026				2025				2024
United States		Rs.	117,892			Rs.	149,351			Rs	135,565
India			64,537				55,830				48,473
Russia			34,786				25,958				22,301
Others (1)			118,718				94,396				72,825
		Rs.	335,933			Rs.	325,535			Rs.	279,164

 

(1)

Others include Germany, the United Kingdom, Ukraine, Romania, Brazil and other countries across the world.

 

141

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

5. Segment reporting (continued)

 

Assets by geography:

 

The following table shows the distribution of the Company’s non-current assets (other than financial instruments and deferred tax assets) by country, based on the location of assets:

 

		As of March 31,
Country		2026				2025
Ind i a		Rs.	138,777			Rs.	120,850
Switzerland			76,961				73,624
United States			9,223				4,343
Russia			3,299				2,837
O t h e rs			11,616				9,628
		Rs.	239,876			Rs.	211,282

 

The following table shows the distribution of the Company’s property, plant and equipment including capital work in progress and intangible assets acquired during the year (other than goodwill arising on business combination) by country, based on the location of assets:

 

		For the Year Ended March 31,
Country		2026				2025
Ind i a		Rs.	32,150			Rs.	31,448
Switzerland			2,802				61,867
United States			6,695				2,118
Others			2,054				3,948
		Rs.	43,701			Rs.	99,381

 

Depreciation and amortization, included in cost of revenues, by reportable segments:

 

		For the Year Ended March 31,
		2026				2025				2024
Global Generics		Rs.	4,868			Rs.	4,155			Rs.	3,892
PSAI			3,735				2,956				2,813
Others			-				-				37
		Rs.	8,603			Rs.	7,111			Rs.	6,742

 

Information about major customers

 

There are no customers which individually accounted for more than 10% of the Company’s revenues for the years ended March 31, 2026 and 2025.

 

142

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

6. Cash and cash equivalents

 

Cash and cash equivalents consist of the following:

 

		As of March 31,
		2026				2025
Cash on hand		Rs.	1			Rs.	1
Balances with banks			14,249				12,142
Term deposits with banks (original maturities less than 3 months)			1,118				2,511
Cash and cash equivalents in the statement of financial position		Rs.	15,368			Rs.	14,654
Bank overdrafts used for cash management purposes			-				61
Cash and cash equivalents in the statement of cash flows		Rs.	15,368			Rs.	14,593
Restricted cash balances included above
Balance in unclaimed dividend account		Rs.	73			Rs.	80
Other restricted cash balances			296				464
Total restricted cash balances		Rs.	369			Rs.	544

 

7. Other investments

 

Other investments consist of investments in units of mutual funds, equity securities, bonds, commercial paper, limited liability partnership firm interests and term deposits with banks (i.e., certificates of deposit having an original maturity period exceeding three months). The details of such investments as of March 31, 2026 and 2025 are as follows:

 

						As of March 31, 2026												As of March 31, 2025
		Category				Cost/ Amortized Cost				Unrealized gain/(loss)				Fair value/ amortized cost				Cost/ Amortized Cost				Unrealized gain/(loss)				Fair value/ amortized cost
Current portion
In units of mutual funds			FVTPL			Rs.	31,462			Rs.	4,450			Rs.	35,912			Rs.	30,364			Rs.	2,822			Rs.	33,186
In term deposits with banks			Amortized cost				34,331				-				34,331				9,948				-				9,948
In bonds			Amortized cost				2,203				-				2,203				-				-				-
In equity securities			FVTPL				-				-				-				96				(9	)			87
Others			Amortized cost				-				-				-				33				-				33
						Rs.	68,176			Rs.	4,450			Rs.	72,446			Rs.	40,441			Rs.	2,813			Rs.	43,254
Non-current portion
In equity securities (1)			FVTOCI			Rs.	2,700			Rs.	(2,685	)		Rs.	15			Rs.	2,700			Rs.	(2,651	)		Rs.	49
In equity securities			FVTPL				920				(104	)			816				-				-				-
In limited liability partnership firms			FVTPL				1,116				333				1,449				989				133				1,122
In term deposits with banks and financial institution			Amortized cost				2,000				-				2,000				8,000				-				8,000
In bonds			Amortized cost				5,943				-				5,943				1,001				-				1,001
Others			FVTPL				480				(8	)			472				219				-				219
						Rs.	13,159			Rs.	(2,464	)		Rs.	10,695			Rs.	12,909			Rs.	(2,518	)		Rs.	10,391

 

(1)

Primarily represents the investment in shares of Curis, Inc. The cost of acquisition was Rs.2,699. As of March 31, 2026 and 2025, the Company has recognized an unrealized loss of Rs.2,685 and Rs.2,651, respectively, in the OCI for the fair value changes.

 

143

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

8. Trade and other receivables

 

		As of March 31,
		2026				2025
Current
Trade and other receivables, gross		Rs.	103,066			Rs.	91,898
Less: Allowance for credit losses			(1,847	)			(1,478	)
Trade and other receivables, net		Rs.	101,219			Rs.	90,420

 

Pursuant to certain arrangements with banks, the Company has periodically sold to these bank

s

certain of its trade receivables forming part of its Global Generics segment, on a non-recourse basis. The receivables sold were mutually agreed upon with the respective bank after considering the creditworthiness and contractual terms with the customer. The Company has transferred substantially all the risks and rewards of ownership of such receivables sold to the respective bank, and accordingly, the same were derecognized in the statements of financial position. As of March 31, 2026 and 2025, the amount of trade receivables de-recognized pursuant to the aforesaid arrangement was Rs.2,626 and Rs.4,092, respectively.

 

In accordance with IFRS 9, the Company uses the expected credit loss (“ECL”) model for measurement and recognition of impairment loss on its trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of IFRS 15. For this purpose, the Company uses a provision matrix to compute the expected credit loss amount for trade receivables. The provision matrix takes into account external and internal credit risk factors and historical data of credit losses from various customers.

 

The details of changes in allowance for credit losses during the years ended March 31, 2026 and 2025, are as follows:

 

		For the Year Ended March 31,
		2026				2025
Balance at the beginning of the year		Rs.	1,478			Rs.	1,451
Provision made during the year, net of reversals			346				159
Trade and other receivables written off & exchange differences			23				(132	)
Balance at the end of the year		Rs.	1,847			Rs.	1,478

 

9. Inventories

 

Inventories consist of the following:

 

		As of March 31,
		2026				2025
Raw materials		Rs.	19,337			Rs.	20,165
Work-in-progress			16,054				16,525
Finished goods (includes stock-in-trade)			33,100				28,395
Packing materials, stores and spares			8,040				6,000
		Rs.	76,531			Rs.	71,085

 

Details of inventories recognized in the consolidated income statement are as follows:

 

		For the Year Ended March 31,
		2026				2025				2024
Raw materials, consumables and changes in finished goods and work in progress		Rs.	114,875			Rs.	94,580			Rs.	78,526
Inventory write-downs			7,517				5,220				3,563

 

For the years ended March 31, 2026 and 2025, amounts of Rs.1,181 and Rs.3,331, respectively, representing government grants, has been accounted for as a reduction from cost of revenues.

 

144

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

10. Other assets

 

		As of March 31,
		2026				2025
Current
Balances and receivables from statutory authorities (1)		Rs.	21,509			Rs.	16,405
Government incentives receivables (2)			444				2,967
Prepaid expenses			2,075				1,883
Advances to vendors and employees			6,205				6,121
Others (3)			6,023				2,766
		Rs.	36,256			Rs.	30,142
Non-current
Security deposits		Rs.	904			Rs.	750
Others			322				222
		Rs.	1,226			Rs.	972

 

(1)

Balances and receivables from statutory authorities primarily consist of amounts recoverable towards the goods and service tax (“GST”), value added tax, and from customs authorities of India.

(2)

Primarily consist of amounts receivable from various government authorities of India towards incentives under various government programs.

(3)

Others primarily include security deposits , claims and other receivable s .

 

Refer to Note 29 for further details and a breakup of financial and non-financial assets.

 

11. Property, plant and equipment

 

A.

The following is a summary of the changes in carrying value of property, plant and equipment including right-of-use assets:

 

Particulars		Land				Buildings				Plant and equipment				Furniture, fixtures and office equipment				Vehicles				Total
Gross carrying value
Balance as of April 1, 2024		Rs.	4,309			Rs.	33,032			Rs.	107,701			Rs.	8,369			Rs.	2,268			Rs.	155,679
Additions			85				4,972				14,396				1,583				1,073				22,109
Disposals (2)			(133	)			(3,502	)			(6,092	)			(1,720	)			(598	)			(12,045	)
Effect of changes in foreign exchange rates			(18	)			151				(463	)			9				120				(201	)
Balance as of March 31, 2025		Rs.	4,243			Rs.	34,653			Rs.	115,542			Rs.	8,241			Rs.	2,863			Rs.	165,542
Balance as on April 1, 2025		Rs.	4,243			Rs.	34,653			Rs.	115,542			Rs.	8,241			Rs.	2,863			Rs.	165,542
Additions			-				12,499				26,270				1,289				1,185				41,243
Disposals			-				(2,960	)			(1,316	)			(264	)			(555	)			(5,095	)
Effect of changes in foreign exchange rates			103				648				1,493				209				243				2,696
Balance as of March 31, 2026		Rs.	4,346			Rs.	44,840			Rs.	141,989			Rs.	9,475			Rs.	3,736			Rs.	204,386
Accumulated Depreciation/Impairment loss
Balance as of April 1, 2024		Rs.	70			Rs.	15,654			Rs.	70,064			Rs.	6,456			Rs.	1,011			Rs.	93,255
Depreciation for the year			-				2,114				6,956				1,012				423				10,505
Impairment (2)			-				-				3				-				-				3
Disposals (2)			(73	)			(3,323	)			(6,000	)			(1,283	)			(345	)			(11,024	)
Effect of changes in foreign exchange rates			3				86				(244	)			8				26				(121	)
Balance as of March 31, 2025		Rs.	-			Rs.	14,531			Rs.	70,779			Rs.	6,193			Rs.	1,115			Rs.	92,618
Balance as of April 1, 2025		Rs.	-			Rs.	14,531			Rs.	70,779			Rs.	6,193			Rs.	1,115			Rs.	92,618
Depreciation for the year			-				2,619				8,446				1,090				615				12,770
Impairment (1)			35				375				716				85				-				1,211
Disposals (1.b)			-				(2,462	)			(1,312	)			(265	)			(474	)			(4,513	)
Effect of changes in foreign exchange rates			2				297				1,175				175				87				1,636
Balance as of March 31, 2026		Rs.	37			Rs.	15,360			Rs.	79,704			Rs.	7,278			Rs.	1,343			Rs.	103,722

 

145

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

11. Property, plant and equipment (continued)

 

Particulars		Land				Buildings				Plant and equipment				Furniture, fixtures and office equipment				Vehicles				Total
Net carrying value
As of March 31, 2024		Rs.	4,239			Rs.	17,378			Rs.	37,637			Rs.	1,913			Rs.	1,257			Rs.	62,424
As of March 31, 2025		Rs.	4,243			Rs.	20,122			Rs.	44,763			Rs.	2,048			Rs.	1,748			Rs.	72,924
Add: Capital-work-in-progress																						Rs.	24,838
Less: Impairment of Capital-work-in-progress (2)																							(1	)
Total as of March 31, 2025																						Rs.	97,761
As of March 31, 2026		Rs.	4,309			Rs.	29,480			Rs.	62,285			Rs.	2,197			Rs.	2,393			Rs.	100,664
Add: Capital-work-in-progress																						Rs.	15,409
Less: Impairment of Capital-work-in-progress (1.b)																							(144	)
Total as of March 31, 2026																						Rs.	115,930

 

(1)

Impairment losses recorded for the year ended March 31, 2026 include the following:

 

a.

Consequent to certain technical challenges in product development, the Company discontinued development of conjugated estrogen at its site in Middleburgh, New York and recorded an impairment loss of Rs.535 in the Company’s Global Generics segment representing the full carrying value of the property, plant and equipment at this site.

 

In addition, the Company recorded the following impacts in the consolidated income statements:

 

-

Inventory related provisions of Rs.260;

-

Other development program related wind down costs of Rs.129; and

-

Gain recognized under Other Income, net from the write back of liabilities no longer required of Rs.877.

 

b.

During the year ended March 31, 2026, the Company has decided to discontinue certain of its research and development programs associated with its Chimeric Antigen Receptor T-cell (CAR-T) therapy portfolio in light of the current development status and recent clinical trial outcomes. Consequent to this decision, the Company has recognized a net loss of Rs.885 relating to property, plant and equipment (including Capital-work-in-progress and Right - of - use assets) in the Company's Global Generic segment.

 

In addition, the Company recorded the following impacts in the consolidated income statements:

 

-

Impairment of intangible assets Rs.406; and

-

Other development program related wind down costs under Selling, general and administrative expenses of Rs.59.

 

(2)

This represents the impairment loss recognized on additions made during the year in respect of the Company’s subsidiary, Dr. Reddy’s Laboratories Louisiana, LLC, as the recoverable amount remained lower than the carrying amount. The subsidiary had been fully impaired during the previous year ended March 31, 2022.

 

During the year ended March 31, 2025, the Company divested its membership interest in this subsidiary and accordingly derecognized property, plant, and equipment that were fully depreciated and impaired. As a result, an amount of Rs.6,038 was reduced from both the gross carrying amount and accumulated depreciation.

 

(Refer to Note 22 of these consolidated financial statements for further details on the divestment of Dr. Reddy’s Laboratories Louisiana, LLC.)

 

146

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

11. Property, plant and equipment (continued)

 

B.

Right-of-use assets

 

Below are the carrying amounts of right-of-use assets recognized and the movements during the year included in the above property, plant and equipment.

 

Particulars		Land				Buildings				Plant and equipment				Furniture, fixtures and office equipment				Vehicles				Total
Gross carrying value
Balance as of April 1, 2024		Rs.	85			Rs.	5,040			Rs.	3				82				1,171			Rs.	6,381
Additions			-				2,353				-				-				614				2,967
Disposals			-				(1,215	)			(3	)			(82	)			(443	)			(1,743	)
Effect of changes in foreign exchange rates			2				140				-				-				1				143
Balance as of March 31, 2025		Rs.	87			Rs.	6,318			Rs.	-			Rs.	-			Rs.	1,343			Rs.	7,748
Balance as of April 1, 2025		Rs.	87			Rs.	6,318			Rs.	-			Rs.	-			Rs.	1,343			Rs.	7,748
Additions (1)			-				9,382				-				-				998				10,380
Disposals			-				(2,941	)			-				-				(468	)			(3,409	)
Effect of changes in foreign exchange rates			16				330				-				-				61				407
Balance as of March 31, 2026		Rs.	103			Rs.	13,089				-				-			Rs.	1,934			Rs.	15,126
Accumulated Depreciation
Balance as of April 1, 2024		Rs.	-				2,732			Rs.	3			Rs.	38			Rs.	601			Rs.	3,374
Depreciation for the year			-				944				-				-				305				1,249
Disposals			-				(1,061	)			(3	)			(38	)			(251	)			(1,353	)
Effect of changes in foreign exchange rates			-				52				-				-				(1	)			51
Balance as of March 31, 2025		Rs.	-			Rs.	2,667			Rs.	-			Rs.	-			Rs.	654			Rs.	3,321
Balance as of April 1, 2025		Rs.	-			Rs.	2,667			Rs.	-			Rs.	-			Rs.	654			Rs.	3,321
Depreciation for the year			-				1,278				-				-				424				1,702
Impairment (2)			-				95				-				-				-				95
Disposals			-				(2,445	)			-				-				(406	)			(2,851	)
Effect of changes in foreign exchange rates			-				80				-				-				36				116
Balance as of March 31, 2026			-			Rs.	1,702				-				-			Rs.	708			Rs.	2,410

 

Particulars

Land

Buildings

Plant and equipment

Furniture, fixtures and office equipment

Vehicles

Total

Net carrying value

As of April 1, 2024

Rs.

85

Rs.

2,308

Rs.

-

Rs.

44

Rs.

570

Rs.

3,007

As of March 31, 2025

Rs.

87

Rs.

3,651

Rs.

-

Rs.

-

Rs.

689

Rs.

4,427

As of March 31, 2026

Rs.

103

Rs.

11,414

Rs.

-

Rs.

-

Rs.

1,226

Rs.

12,743

 

The following are the amounts recognized in income statement:

 

		For the Year Ended March 31,
		2026				2025				2024
Depreciation expense of right-of-use assets		Rs.	1,702			Rs.	1,249			Rs.	1,143
Interest expense on lease liabilities			802				391				256

 

(1)

Additions to right-of-use assets for buildings during the year ended March 31, 2026 primarily consist of:

 

a.

the lease of an additional facility in India, amounting to Rs.1,825, with a lease term of 10 years, and

b.

the modification of an existing lease arrangement for a warehouse in the United States, which extended the lease term by an additional 10 years. The lease modification resulted in a re-measurement of the lease liability with a  corresponding  adjustment to right-of- use assets of Rs.5,436.

 

 

(2)

Refer to N ote 11   A ( Property, plant and equipment ) for further details on  impairment.

 

147

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

11. Property, plant and equipment (continued)

 

Capital commitments

 

As of March 31, 2026 and 2025, the Company was committed to spend Rs.9,716 and Rs.14,567, respectively, under agreements to purchase property, plant and equipment. This amount is net of capital advances paid in respect of such purchase commitments.

 

Interest capitalization

 

During the years ended March 31, 2026 and 2025, the Company capitalized interest cost of Rs.983 and Rs.729, respectively, with respect to qualifying assets. The rate for capitalization of interest cost for the years ended March 31, 2026 and 2025 was approximately 6.48% and 7.01%, respectively.

 

12.       Goodwill

 

Goodwill arising upon business combinations is not amortized but tested for impairment at least annually or more frequently if there is any indication that the cash generating unit to which goodwill is allocated is impaired.

 

The following table presents the changes in goodwill during the years ended March 31, 2026 and 2025:

 

		As of March 31,
		2026				2025
Opening balance, gross		Rs.	28,758			Rs.	21,201
Goodwill arising on business combinations (1)			-				7,377
Effect of changes in foreign exchange rates			1,083				180
Impairment loss (2)			(16,948	)			(16,948	)
Closing balance, net		Rs.	12,893			Rs.	11,810

 

The carrying amount of goodwill (other than those arising upon investment in a joint venture) was allocated to the cash generating units (each, a “CGU”) as follows:

 

		As of March 31,
		2026				2025
PSAI-Active Pharmaceutical Operations		Rs.	997			Rs.	997
Global Generics-Complex Injectables			1,806				1,526
Global Generics-North America Operations			631				631
Global Generics-Branded Formulations (1)			1,229				1,229
Global Generics-Consumer Healthcare Business (1)			8,114				7,313
Others			116				114
		Rs.	12,893			Rs.	11,810

 

(1)

Refer to Note 35 of these consolidated financial statements for details regarding goodwill arising on business combinations.

(2)

The impairment loss of Rs.16,948 includes the following:

 

·

Rs.16,003 pertaining to the Company’s German subsidiary, betapharm Arzneimittel GmbH, which is part of the Company’s Global Generics segment. This impairment loss was recorded for the years ended March 31, 2009 and 2010; and

·

Rs.272 pertaining to the Company’s Nimbus Heath business, which is part of the Company’s Global Generics segment. This impairment loss was recorded for the year ended March 31, 2023.

 

For the purpose of impairment testing, goodwill is allocated to a cash generating unit, representing the lowest level within the Company at which goodwill is monitored for internal management purposes and which is not higher than the Company’s operating segment.

 

The recoverable amounts of the above cash generating units have been assessed using a value-in-use model. Value in use is generally calculated as the net present value of the projected post-tax cash flows plus a terminal value of the cash generating unit to which the goodwill is allocated. Initially, a post-tax discount rate is applied to calculate the net present value of the post-tax cash flows. Key assumptions upon which the Company has based its determinations of value-in-use include:

a)

Estimated cash flows for five years, based on management’s projections.

b)

The post-tax discount rates used are based on the Company’s weighted average cost of capital.

148

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

12. Goodwill (continued)

 

c)

Terminal value is arrived at by extrapolating the last forecasted year cash flows to perpetuity, using constant long-term growth rate of 1.50% for the Consumer Healthcare Business CGU and 0% for other CGU’s. This long-term growth rate takes into consideration external macroeconomic sources of data. Such long-term growth rate considered does not exceed that of the relevant business and industry sector.

d)

The post-tax discount rates and pre-tax discount rates used for the Active Pharmaceutical Operations CGU and the Branded Formulations CGU are 10.51% and 14.05% , respectively.

e)

The post-tax discount rates and pre-tax discount rates used for the Complex Injectables CGU and the North America Operations CGU are 8.12% and 9.34% , respectively.

f)

The post-tax discount rates and pre-tax discount rates used for the Consumer Healthcare Business CGU are 10.59% and 12.53% , respectively.

 

The Company believes that any reasonably possible change in the key assumptions on which a recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash-generating unit.

149

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

13.

Other intangible assets

 

The following is a summary of changes in the carrying value of intangible assets:

 

		Product related intangibles				Customer related intangibles				Others				Total
Gross carrying value
Balance as of April 1, 2024		Rs.	124,013			Rs.	106			Rs.	6,667			Rs.	130,786
Additions (1)			9,081				-				908				9,989
Assets acquired through business combinations (2)			56,955				-				-				56,955
Disposals/De-recognitions			(380	)			-				(7	)			(387	)
Effect of changes in foreign exchange rates			3,013				3				-				3,016
Balance as of March 31, 2025		Rs.	192,682			Rs.	109			Rs.	7,568			Rs.	200,359
Balance as of April 1, 2025		Rs.	192,682			Rs.	109			Rs.	7,568			Rs.	200,359
Additions (1)			11,296				-				829				12,125
Assets acquired through business combinations (2)			-				-				-				-
Disposals/De-recognitions			(1,335	)			-				(178	)			(1,513	)
Effect of changes in foreign exchange rates			16,323				20				20				16,363
Balance as of March 31, 2026		Rs.	218,992			Rs.	129			Rs.	8,213			Rs.	227,334
Amortization/impairment loss
Balance as of April 1, 2024		Rs.	90,476			Rs.	106			Rs.	3,253			Rs.	93,835
Amortization for the year			6,146				-				407				6,553
Impairment loss, net (4)			1,689				-				-				1,689
Disposals/De-recognitions			(75	)			-				-				(75	)
Effect of changes in foreign exchange rates			1,544				3				7				1,554
Balance as of March 31, 2025		Rs.	99,780			Rs.	109			Rs.	3,667			Rs.	103,556
Balance as of April 1, 2025		Rs.	99,780			Rs.	109			Rs.	3,667			Rs.	103,556
Amortization for the year			7,448				-				537				7,985
Impairment loss, net (3)			2,164				-				-				2,164
Disposals/De-recognitions			(280	)			-				(22	)			(302	)
Effect of changes in foreign exchange rates			8,848				20				4				8,872
Balance as of March 31, 2026		Rs.	117,962			Rs.	129			Rs.	4,184			Rs.	122,275
Net carrying value
As of March 31, 2024		Rs.	33,537			Rs.	-			Rs.	3,414			Rs.	36,951
As of March 31, 2025		Rs.	92,902			Rs.	-			Rs.	3,901			Rs.	96,803
As of March 31, 2026		Rs.	101,030				-			Rs.	4,029			Rs.	105,059

 

In-process research and development assets (“IPR&D”)

 

Tabulated below is the reconciliation of amounts relating to in-process research and development assets as at the beginning and at the end of the year:

 

		As of March 31,
		2026				2025
Opening balance		Rs.	662			Rs.	683
Add: Additions during the year			-				85
Less: Capitalizations during the year			(267	)			(70	)
Less : Impairment (3)			(406	)			(43	)
Effect of changes in foreign exchange rates			11				7
Closing balance		Rs.	-			Rs.	662

 

 

150

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

13.

Other intangible assets (continued)

 

(1)

Additions during the year ended March 31, 2026, primarily consists of:

 

·

Rs.4,464 (U.S.$50.50) paid as consideration for the acquisition of STUGERON® and its locally recognized brands covering 18 markets in the Asia-Pacific and Europe, Middle East, and Africa regions, with India and Vietnam as the key markets.

·

Rs.3,014 (U.S.$.32.15) paid as consideration to acquire the trademarks and related assets for Progynova® and Cyclo-Progynova® in India.

·

Rs.1,781 (U.S.$20) pertaining to the upfront consideration pursuant to the acquisition of exclusive commercialization rights to eftilagimod alfa from Immutep Limited (“Immutep”) in all the territories outside North America, Europe, Japan and Greater China. Of this amount, U.S.$10 was refundable if the futility analysis performed by Immutep provides an unsatisfactory outcome.

(Refer to Impairment recorded during the year ended March 31, 2026 for further details).

 

Additions during the year ended March 31, 2025, primarily consists of:

 

·

Rs.5,025 (U.S.$58) pertaining to the upfront consideration and other additional milestone consideration paid pursuant to the acquisition of exclusive rights to commercialize daratumumab biosimilar HLX 15 in the United States and Europe from Shanghai Henlius Biotech, Inc. (“Henlius”). Under the terms of the agreement, Henlius is responsible for development, manufacturing and commercial supply, and is eligible to receive consideration upon achievement of commercial milestones, bringing the total potential consideration (including upfront consideration and milestone payments) of up to Rs.11,243 (U.S.$131.6). In addition, Henlius is eligible to receive royalties on annual net sales of the product upon commercialization.

·

Rs.1,764 (U.S.$ 20.70) paid as upfront consideration and additional milestone consideration for the acquisition of exclusive rights in the United States, and semi-exclusive rights in Europe and the United Kingdom, to commercialize AVT03 (denosumab), a biosimilar candidate to Prolia® and Xgeva®.

·

The acquisition of the rights to commercialize Helinorm, a food supplement product, in Russia and other countries, for a consideration of Rs.820 (RUB 970).

 

(2)

Refer to Note 35 of these consolidated financial statements for details regarding assets acquired through business combinations during the year ended March 31, 2025.

 

(3)

Impairment losses recorded for the year ended March 31, 2026

 

·

In March 2026, Immutep announced the discontinuation of the Phase III study in first line non-small cell lung cancer following the results of the futility analysis. As a result, the Company recorded an impairment loss of Rs.914 (U.S.$10) in the consolidated income statements   forming part of the Global Generics segment .

·

Consequent to a decision to discontinue the research and development programs relating to its CAR-T program, the Company recorded impairment loss of Rs. 406 pertaining to product related intangibles associated with CAR-T program. (Refer to Note 11 . A of these consolidated financial statements for further details).

·

Consequent to adverse market conditions affecting certain product  related intangible assets acquired from Mayne Pharma Group Limited (“Mayne”), the Company recognized an impairment loss of Rs.702 within its Global Generics segment.

 

(4)

Impairment losses recorded for the year ended March 31, 2025

 

Impairment of intangibles pertaining to the acquisition from Mayne consists of:

 

·

an amount of Rs.907 towards Haloette® (a generic equivalent to Nuvaring®), a product   related intangible, due to constraints on procurement of the underlying product from its contract manufacturer, resulting in a lower recoverable value compared to the carrying value; and

·

an amount of Rs.270 pertaining to impairment of certain product related intangibles, due to adverse market conditions resulting in lower recoverable value compared to the carrying value.

 

Other impairments:

 

During the year ended March 31, 2025, consequent to adverse market conditions with respect to certain product related intangibles, the company assessed the recoverable value of certain products and recognized impairment loss of Rs.512 primarily pertaining to business in India and Europe.

 

The above impairment charge pertains to the Company’s Global Generics segment.

 

The Company used the discounted cash flow approach to calculate the value-in-use which considered assumptions such as revenue projections, rate of generic penetration, estimated price erosion, and the useful life of the asset. The net cash flows have been discounted based on a post-tax discount rate.

 

151

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

13. Other intangible assets (continued)

 

Details of significant acquired intangible assets as of March 31, 2026 are as follows:

 

Particulars of the asset		Acquired from				Carrying net book value
Consumer Healthcare Portfolio of Nicotine Replacement Therapy		Haleon UK Enterprises Limited				Rs.	58,245
Select portfolio of branded generics business		Wockhardt Limited					10,022
daratamumab biosimilar HLX 15		Shanghai Henlius Biotechz,Inc					5,500
Antivertigo Brand Stugeron® in India		Janssen Pharmaceutica NV					4,350
Cardiovascular brand Cidmus ® in India		Novartis AG					4,005
Progynova® and Cyclo-Progynova® in India		Mercury Pharma Group Limited					3,014

 

14.

Investment in equity accounted investees

 

Details of Investment in equity accounted investees:

 

		As of March 31,
		2026				2025
Investment in unquoted equity shares
Equity shares held in Kunshan Rotam Reddy Pharmaceutical Company Limited, China		Rs.	5,263			Rs.	4,428
Equity shares held in DRES Energy Private Limited, India			57				58
Equity shares held in O2 Renewable Energy IX Private Limited, India			167				136
Equity shares held in Clean Renewable Energy KK2A Private Limited, India			14				17
		Rs.	5,501			Rs.	4,639
Investment in compulsory convertible debentures
Compulsory convertible debentures in O2 Renewable Energy IX Private Limited, India		Rs.	172			Rs.	172
		Rs.	172			Rs.	172
Total Investment in equity accounted investees		Rs.	5,673			Rs.	4,811

 

Details of the Company’s investment in Kunshan Rotam Reddy Pharmaceuticals Company Limited:

 

Kunshan Rotam Reddy Pharmaceuticals Company Limited (“Reddy Kunshan”) is engaged in manufacturing and marketing of finished dosages in China. The Company’s interest in Reddy Kunshan was 51.3% as of March 31, 2026 and 2025. Five directors of the Company are on the board of Reddy Kunshan, which consists of ten directors. Under the terms of the joint venture agreement, all major decisions with respect to operating activities, significant financing and other activities are taken by the approval of at least seven of the ten directors of Reddy Kunshan’s board. As the Company does not control Reddy Kunshan’s board and the other partners have significant participation rights, the Company’s interest in Reddy Kunshan has been accounted for under the equity method of accounting.

 

Summary financial information of Reddy Kunshan, as translated into the reporting currency of the Company and not adjusted for the percentage ownership held by the Company, is as follows:

 

		As of/for the Year Ended March 31,
		2026				2025				2024
Ownership			51.3	%			51.3	%			51.3	%
Current assets		Rs.	7,794			Rs.	6,551			Rs.	6,447
Non-current assets			5,448				4,514				3,799
Total assets		Rs.	13,242			Rs.	11,065			Rs.	10,246
Equity		Rs.	9,942			Rs.	8,273			Rs.	7,692
Liabilities			3,301				2,792				2,554
Total equity and liabilities		Rs.	13,242			Rs.	11,065			Rs.	10,246
Revenues		Rs.	8,339			Rs.	9,317			Rs.	9,688
Expenses			8,031				8,892				9,396
Profit for the year		Rs.	308			Rs.	425			Rs.	292
Company’s share of profits for the year		Rs.	158			Rs.	218			Rs.	150
Carrying value of the Company’s investment (1)		Rs.	5,263			Rs.	4,428			Rs.	4,130
Translation adjustment arising out of translation of foreign currency balances		Rs.	1,229			Rs.	552			Rs.	472

(1)

Includes Rs.181 representing the goodwill on acquisition of investment.

 

152

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

14. Investment in equity accounted investees (continued)

 

Details of the Company’s investment in DRES Energy Private Limited:

 

		As of/for the Year Ended March 31,
		2026				2025				2024
Carrying value of the Company’s investment		Rs.	57			Rs.	58			Rs.	55
Company’s share of profit/(loss) for the year			(1	)			3				(2	)

 

Details of the Company’s investment in O2 Renewable Energy IX Private Limited:

 

		As of/for the Year Ended March 31,
		2026				2025				2024
Carrying value of the Company’s investment		Rs.	339			Rs.	308			Rs.	11
Company’s share of loss for the year			(20	)			-	*			(1	)

 

*

Rounded to the nearest million

 

Details of the Company’s investment in Clean Renewable Energy KK2A Private Limited:

 

		As of/for the Year Ended March 31,
		2026				2025				2024
Carrying value of the Company’s investment		Rs.	14			Rs.	17			Rs.	-
Company’s share of loss for the year			(3	)			(4	)			-

 

15.

Trade and other payables

 

Trade and other payables consist of the following:

 

		As of March 31,
		2026				2025
Trade payables		Rs.	22,362			Rs.	20,053
Due to creditors for expenses			8,023				6,431
Due to capital creditors			3,026				9,039
		Rs.	33,411			Rs.	35,523

 

For details regarding the Company’s exposure to currency and liquidity risks, see Note 3

0

of these consolidated financial statements under “Liquidity risk”.

 

153

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

16.

Loans and borrowings

 

Short-term borrowings

 

Short-term borrowings primarily consist of “pre-shipment credit” drawn by the parent company and other unsecured loans drawn by parent company and certain of its subsidiaries in Russia, Brazil and Mexico which are repayable within 12 months from the date of drawdown.

 

Short-term borrowings consist of the following:

 

		As of March 31,
		2026				2025
Pre-shipment credit		Rs.	19,600			Rs.	32,855
Working capital borrowings			39,535				5,129
Bank overdraft			-				61
		Rs.	59,135			Rs.	38,045

 

The interest rate profile of short-term borrowings from banks is given below:

 

Currency (1)		Interest Rate (2)
		As of March 31, 2026		As of March 31, 2025
RUB		Key rate + 348 bps to 398 bps		Key rate + 470 bps to 590 bps
MXN		TIIE + 1.35%		TIIE + 1.35%
INR		T-bill + 35 bps to 55 bps		7.50%
		Repo + 75 bps		T-bill + 35 bps to 70 bps
BRL		CDI+1.55%		CDI+1.55%
U.S.$		-		6 Month SOFR + 10 bps to 65 bps

 

(1)

“BRL” means Brazilian reals, “INR” means Indian rupees, “MXN” means Mexican pesos, “RUB” means Russian rubles and “U.S.$” means U.S. dollars.

 

(2)

“CDI” means Brazilian interbank deposit rate (Certificado de Depósito Interbancário), “Key rate” means the key interest rate published by the Central Bank of Russia, “REPO” means the “Repurchasing option” rate published by the Reserve Bank of India, “SOFR” means Secured Overnight Financing Rate, “T-bill” means India Treasury bill interest rate and “TIIE” means the Equilibrium Inter-banking Interest Rate (Tasa de Interés Interbancaria de Equilibrio).

 

Long-term borrowings

 

Long-term borrowings consist of the following:

 

		As of March 31,
		2026								2025
		Non – current				Current				Non – current				Current
Rupee term loan from bank to subsidiary (1)		Rs.	-			Rs.	3,799			Rs.	3,800			Rs.	-
Obligations under leases (2)			12,203				2,204				4,064				857
		Rs.	12,203			Rs.	6,003			Rs.	7,864			Rs.	857

 

(1)

The Rupee term loan obtained from a bank by the Company’s subsidiary, Aurigene Pharmaceutical Services Limited is subject to certain covenants that are required to be maintained on a consolidated basis during the period of the loan. The covenant is to be tested on an annual basis at the end of each financial year. As at March 31, 2026 and March 31, 2025, the Company is in compliance with the covenants and has no indication that it will have difficulty in complying with the same.

( 2 )

Refer to N ote 11.B of these consolidated financial statements for further details.

 

The interest rate profiles of long-term borrowings (other than obligations under leases) as of March 31, 2026 and 2025 were as follows:

 

As of March 31,

2026

2025

Currency (1)

Interest Rate (2)

Interest rate ( 2 )

Rupee term loan from bank

INR

3 Months T-bill + 84 bps

3 Months T-bill + 84 bps

 

(1)

“INR” means Indian rupees.

(2)

“T-bill” means India Treasury bill interest rate.

 

 

154

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

16. Loans and borrowings (continued)

 

The aggregate maturities of long-term loans and borrowings, based on contractual maturities were as follows:

 

		As of March 31, 2026												As of March 31, 2025
Maturing in		Long term borrowings				Obligations under leases				Total				Long term borrowings				Obligations under leases				Total
Less than 1 year		Rs.	3,799			Rs.	2,582			Rs.	6,381			Rs.	-			Rs.	1,104			Rs.	1,104
1-2 years			-				2,272				2,272				3,800				911				4,711
2-3 years			-				2,131				2,131				-				840				840
3-4 years			-				1,977				1,977				-				594				594
4-5 years			-				1,861				1,861				-				539				539
Thereafter			-				8,214				8,214				-				2,736				2,736
		Rs.	3,799			Rs.	19,037			Rs.	22,836			Rs.	3,800			Rs.	6,724			Rs.	10,524
Less: Finance component			-				(4,630	)			(4,630	)			-				(1,803	)			(1,803	)
		Rs.	3,799			Rs.	14,407			Rs.	18,206			Rs.	3,800			Rs.	4,921			Rs.	8,721

 

Uncommitted lines of credit from banks

 

The Company has uncommitted lines of credit of Rs.49,109 and Rs.50,904 as of March 31, 2026 and 2025, respectively, from its banks for working capital requirements. The Company draw upon these lines of credit based on its working capital requirements.

 

Reconciliation of liabilities arising from financing activities during the year ended March 31, 2026:

 

Particulars		Long-term borrowings (1)				Short-term borrowings (2)				Total
Opening balance		Rs.	8,721			Rs.	37,984			Rs.	46,705
Recognition of  lease liabilit ies  during the year			9,709				-				9,709
Payment of principal portion of lease liabilities			(1,263	)			-				(1,263	)
Borrowings made during the year			-				119,829				119,829
Borrowings repaid during the year			(1	)			(99,572	)			(99,573	)
Effect of changes in foreign exchange rates			1,040				894				1,934
Closing balance		Rs.	18,206			Rs.	59,135			Rs.	77,341

 

Reconciliation of liabilities arising from financing activities during the year ended March 31, 2025:

 

Particulars		Long-term borrowings (1)				Short-term borrowings				Total
Opening balance		Rs.	7,297			Rs.	12,723			Rs.	20,020
Recognition of lease liabilit ies during the year			2,576				-				2,576
Payment of principal portion of lease liabilities			(1,294	)			-				(1,294	)
Borrowings made during the year			-				80,646				80,646
Borrowings repaid during the year			-				(56,156	)			(56,156	)
Effect of changes in foreign exchange rates			142				771				913
Closing balance		Rs.	8,721			Rs.	37,984			Rs.	46,705

 

(1)

Includes current portion.

(2)

Does not include movement in bank overdraft.

 

 

155

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

17.

Provisions

 

The details of changes in provisions during the year ended March 31, 2026 are as follows:

 

Particulars		Refund Liability (1)				Environmental liability (2)				Legal and others (3)				Total
Balance as at beginning of the year		Rs.	5,297			Rs.	64			Rs.	963			Rs.	6,324
Provision made during the year, net of reversals			5,666				(64	)			65				5,667
Provision used during the year			(4,816	)			-				-				(4,816	)
Effect of changes in foreign exchange rates			467				-				17				484
Balance as at end of the year		Rs.	6,614			Rs.	-			Rs.	1,045			Rs.	7,659
Current		Rs.	6,614			Rs.	-			Rs.	936			Rs.	7,550
Non-current			-				-				109				109
		Rs.	6,614			Rs.	-			Rs.	1,045			Rs.	7,659

 

(1)

Refund liability is accounted for by recording a provision based on the Company’s estimate of expected sales returns. See Note 3 ( m ) of these consolidated financial statements for the Company’s accounting policy on refund liability.

(2)

As a result of the acquisition of a unit of The Dow Chemical Company in April 2008, the Company assumed a liability for contamination of the Mirfield site acquired of Rs.39 (carrying value Rs.64). The seller is required to indemnify the Company for this liability. Accordingly, a corresponding asset has also been recorded in the consolidated statements of financial position.   During the year ended March 31, 2026, the Company was released from this obligation, resulting in the reversal of the environmental liability with a corresponding adjustment to the related indemnification asset.

(3)

Primarily consists of provision recorded towards the potential liability arising out of a litigation relating to cardiovascular and anti-diabetic formulations. Refer to Note 31 (“Contingencies”) of these consolidated financial statements under “Product and patent related matters - Matters relating to National Pharmaceutical Pricing Authority and Litigation relating to Cardiovascular and Anti-diabetic formulations” for further details.

 

18.

Other liabilities

 

Other liabilities consist of the following:

 

		As of March 31,
		2026				2025
Current
Accrued expenses		Rs.	27,920			Rs.	25,135
Employee benefits payable			6,102				7,352
Statutory dues payable			5,417				4,946
Deferred revenue (1)			260				421
Advance from customers			1,321				1,562
Others (2)			9,239				6,069
		Rs.	50,259			Rs.	45,485
Non-current
Deferred revenue (1)		Rs.	2,436			Rs.	1,162
Others			1,007				2,141
		Rs.	3,443			Rs.	3,303

 

(1)

Refer to Note 21 (“Revenue from contracts with customers and trade receivables”) of these consolidated financial statements for details of deferred revenue.

(2)

Others include tender rebates payable, book overdraft and other liabilities linked to volume based arrangements.

 

As of March 31, 2025, Others includes earn-out consideration payable to Haleon UK Enterprises Limited. Refer to Note 35.B of these consolidated financial statements for further details.

Refer to Note 29 for further details and a breakup of financial and non-financial liabilities.

 

 

156

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

19.

Share Capital

 

Particulars		No. of shares				Amount
Authorized share capital			1,450,000,000			Rs.	1,450
Opening number of outstanding equity shares/share capital (face value of Rs.5 each) as on April 1, 2024			166,818,266			Rs.	834
Add: Equity shares issued pursuant to employee stock option plans (1) prior to stock split			58,680				-*
Add: Increase in outstanding shares on account of stock split**			667,507,784				-
Add: Equity shares issued pursuant to employee stock option plans (1) after stock split			70,635				-*
Closing number of outstanding equity shares/share capital ** (face value of Rs.1 each) as on March 31, 2025			834,455,365			Rs.	834
Treasury shares (1) as on March 31, 2025			2,452,260			Rs.	2,264
Opening number of outstanding equity shares/share capital (face value of Rs.1 each) as on April 1, 2025			834,455,365			Rs.	834
Add: Equity shares issued pursuant to employee stock option plans (1)			201,605				1
Closing number of outstanding equity shares/share capital (face value of Rs.1 each) as on March 31, 2026			834,656,970			Rs.	835
Treasury shares ( 1 ) as on March 31, 2026			1,965,575			Rs.	1,815

 

*Rounded to the nearest million.

 

** Effective as of the record date of October 28, 2024, the Company implemented a sub-division/ stock split of each equity share having a face value of Rupees Five each, fully paid-up, into five equity shares having a face value of Rupees One each, fully paid-up (the “stock split”), by alteration of the capital clause of the Memorandum of Association of the Company. Each American Depositary Share (“ADS”) of the Company continued to represent one underlying equity share and, therefore, the number of ADSs held by an American Depositary Receipt (“ADR”) holder consequently increased in proportion to the increase in number of equity shares.

 

(1)

Refer to Note 27 of these consolidated financial statements for further details regarding treasury shares and employee stock option plans.

 

The Company has only one class of equity shares having a par value of Rs.1 per share after giving effect to the stock split (prior to such stock split, the par value was Rs.5 per share). For all matters submitted to vote in a shareholders meeting of the Company, every holder of an equity share, as reflected in the records of the Company as on the record date set for the shareholders meeting, shall have one vote in respect of each share held.

 

Should the Company declare and pay any dividends, such dividends will be paid in Indian rupees to each holder of equity shares in proportion to the number of shares held to the total equity shares outstanding as on that date. Indian law on foreign exchange governs the remittance of dividends outside India.

 

In the event of liquidation of the Company, all preferential amounts, if any, shall be discharged by the Company. The remaining assets of the Company shall be distributed to the holders of equity shares in proportion to the number of shares held to the total equity shares outstanding as on that date.

 

Final dividends on equity shares (including dividend tax on distribution of such dividends, if any) are recorded as a liability on the date of their approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company’s Board of Directors.

 

The details of dividends paid by the Company are as follows:

 

		During the Year Ended March 31,
		2026				2025				2024
Dividend per share (in absolute Rs.)*		Rs.	8			Rs.	8			Rs.	8
Dividend paid during the year (excluding dividend paid on treasury shares)			6,659				6,662				6,648
Towards the fiscal year			2025				2024				2023

 

* Dividend per share is computed after giving effect to 1:5 forward stock split effective October 28, 2024

 

Proposed dividend

 

At the Company’s Board of Directors’ meeting held on May 12, 2026, the Board proposed a dividend of Rs.8 per share and aggregating to Rs.6,677, which is subject to the approval of the Company’s shareholders.

 

 

157

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

20.

Earnings per share

 

The calculation of basic and diluted earnings per share for the years ended March 31, 2026, 2025 and 2024 was based on the profit attributable to equity shareholders of the Company, being Rs.42,850, Rs.56,544 and Rs.55,684, respectively.

 

The weighted average number of equity shares outstanding, used for calculating the basic earnings per share, are as follows:

 

		For the Year Ended March 31,
		2026				2025				2024*
Number of equity shares at the beginning of the year (excluding treasury shares)			832,003,105				832,642,375				830,783,660
Effect of equity shares issued on exercise of stock options			437,482				308,031				1,184,855
Weighted average number of equity shares – Basic			832,440,587				832,950,406				831,968,515
Earnings per share of par value Rs.1 – Basic			51.48				67.88				66.93

 

*Earnings per share is computed after giving effect to 1:5 forward stock split effective October 28, 2024 for all periods presented. Refer to Note 19 of these consolidated financial statements for further details regarding such stock split.

 

The weighted average number of equity shares outstanding, used for calculating the diluted earnings per share, are as follows:

 

		For the Year Ended March 31,
		2026				2025				2024
Weighted average number of equity shares – Basic			832,440,587				832,950,406				831,968,515
Dilutive effect of stock options outstanding (1)			891,102				1,228,728				1,569,165
Weighted average number of equity shares – Diluted			833,331,689				834,179,134				833,537,680
Earnings per share of par value Rs.1 – Diluted			51.42				67.78				66.80

 

(1)

As of March 31, 2026, 2025, and 2024, 1,983,310, 941,080, and 1,227,725 options, respectively, were excluded from the diluted weighted average number of equity shares calculation because their effect would have been anti-dilutive. The average market value of the Company’s shares for the purpose of calculating the dilutive effect of stock options was based on quoted market prices for the year during which the options were outstanding.

 

21.

Revenue from contracts with customers and trade receivables

 

Revenue from contracts with customers:

 

		For the Year Ended March 31,
		2026				2025				2024
Sales (1)		Rs.	326,213			Rs.	316,320			Rs.	271,396
Service income			5,217				5,426				5,655
License fees (2)			4,503				3,789				2,113
		Rs.	335,933			Rs.	325,535			Rs.	279,164

 

(1)

For the year ended March 31, 2026, consequent to resolution of a shelf stock adjustment claim arising from

a

reduction in

the

price of its generic product Lenalidomide in the United States, the Company recorded an amount of Rs.4,530 (U.S.$ 50) as a reduction of “Revenue from sale of goods” in the Company's Global Generics Segment.

 

(2)

For the year ended March 31, 2025, the license fees includes an amount of Rs.1,266 (U.S.$15) as a milestone payment receivable upon U.S. FDA approval of DFD 29, in accordance with the license and collaboration agreement dated June 29, 2021 with Journey Medical Corporation. This transaction pertains to the Company’s Others segment.

 

Refer to Note 5 (“Segment reporting”) of these consolidated financial statements for details on revenues by therapeutic area, and revenues by geography.

 

 

158

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

21. Revenue from contracts with customers and trade receivables (continued)

 

Deferred revenue:

 

Tabulated below is the reconciliation of deferred revenue for the years ended March 31, 2026 and 2025.

 

		For the Year Ended March 31,
		2026				2025
Balance as of April 1		Rs.	1,583			Rs.	1,567
Revenue recognized during the year			(653	)			(1,799	)
Milestone payment received during the year			1,766				1,815
Balance as of March 31		Rs.	2,696			Rs.	1,583
Current			260				421
Non-current			2,436				1,162

 

Significant gross to net adjustments relating to Company’s North America Generics business (amounts in U.S.$ millions):

 

A roll-forward for each major accrual for the Company’s North America Generics business for the fiscal years ended March 31, 2024, 2025 and 2026 is as follows:

 

Particulars		Chargebacks				Rebates				Medicaid				Refund Liability ( 2 )
		(All amounts in U.S.$)
Beginning Balance: April 1, 2023			247				87				13				35
Current provisions relating to sales during the year *			2,844				322				31				21
Provisions and adjustments relating to sales in prior years			-				-				-				-
Credits and payments**			(2,803	)			(307	)			(25	)			(21	)
Ending Balance: March 31, 2024			288				102				19				35
Beginning Balance: April 1, 2024			288				102				19				35
Current provisions relating to sales during the year (1)			2,720				253				23				34
Provisions and adjustments relating to sales in prior years *			-				-				-				-
Credits and payments**			(2,665	)			(252	)			(29	)			(27	)
Ending Balance: March 31, 2025			343				103				13				42
Beginning Balance: April 1, 2025			343				103				13				42
Current provisions relating to sales during the year (1)			2,439				226				24				38
Provisions and adjustments relating to sales in prior years *			-				-				-				-
Credits and payments**			(2,506	)			(237	)			(27	)			(33	)
Ending Balance: March 31, 2026			276				92				10				47

 

*

Currently, the Company does not separately track provisions and adjustments, in each case to the extent relating to prior years for chargebacks. However, the adjustments are expected to be non-material. The volumes used to calculate the closing balance of chargebacks represent approximately 1.0 to 1.4 months equivalent of sales, which corresponds to the pending chargeback claims yet to be processed.

**

Currently, the Company does not separately track the credits and payments, in each case to the extent relating to prior years for chargebacks, rebates, Medicaid payments or refund liability.

 

(1)

Chargebacks provisions and payments for the year ended March 31, 2025 and March 31, 2026 were each lower as compared to the years ended March 31, 2024 and March 31, 2025, primarily as a result of reduction in the invoice price to wholesalers for few of the Company’s major products. This was offset to some extent due to higher pricing rates per unit on chargebacks, on account of reductions in the contract prices through which the product is resold in the retail part of the supply chain for certain of the Company’s products.

 

159

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

21. Revenue from contracts with customers and trade receivables (continued)

 

(2)

The Company’s overall provision for refund liability as of March 31, 2026 relating to the Company’s North America Generics business was U.S.$47, compared to a liability of U.S.$42 as of March 31, 2025. The refund liability created for new product launches and volume growth, were off-set by the reductions in the contract prices and by product mix changes.

 

The estimates of “gross-to-net” adjustments for the Company’s operations in India and other countries outside of the United States relate mainly to refund liability in all such operations, and certain rebates to healthcare insurance providers are specific to the Company’s German operations. The pattern of such refund liability is generally consistent with the Company’s gross sales. In Germany, the rebates to healthcare insurance providers mentioned above are contractually fixed in nature and do not involve significant estimations by the Company.

 

Refund liabilities:

 

		For the Year Ended March 31,
		2026				2025
Balance at the beginning of the year		Rs.	5,297			Rs.	4,579
Provision made during the year, net of reversals			5,666				4,784
Provision used during the year			(4,816	)			(4,129	)
Effect of changes in foreign exchange rates			467				63
Balance at the closing of the year		Rs.	6,614			Rs.	5,297
Current		Rs.	6,614			Rs.	5,297
Non-current			-				-

 

Contract asset:

 

As mentioned in the accounting policies for refund liability set forth in Note 3

(

m

)

 of these consolidated financial statements, the Company recognizes an asset (i.e., the right to the returned goods), for the products expected to be returned. The Company initially measures this asset at the former carrying amount of the inventory, less any expected costs to recover the goods, including any potential decreases in the value of the returned goods. Along with re-measuring the refund liability at the end of each reporting period, the Company updates the measurement of the asset recorded for any revisions to its expected level of returns, as well as any additional decreases in the value of the returned products.

 

As of March 31, 2026 and 2025, the Company had Rs.64 and Rs.51, respectively, as contract assets representing the right to returned goods.

 

Contract liabilities:

 

		As of March 31,
		2026				2025
Advance from customers		Rs.	1,321			Rs.	1,562
		Rs.	1,321			Rs.	1,562

 

 

160

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

22. Other income, net

 

Other income, net consists of the following:

 

		For the Year Ended March 31,
		2026				2025				2024
Gain on sale/disposal of non-current assets, net (1)		Rs.	(2,547	)		Rs.	(1,522	)		Rs.	(900					)
Sale of spent chemicals			(385	)			(437	)			(489					)
Scrap sales			(362	)			(323	)			(338					)
Miscellaneous income, net (2)			(4,333	)			(2,076	)			(2,472					)
		Rs.	(7,627	)		Rs.	(4,358	)		Rs.	(4,199					)

 

(1)

Gain on sale/disposal of non-current assets, net for the year end ed March 31, 2026 includes :

 

·

Rs.1,890 towards divestment of certain product related intangibles i.e., trademarks during the year ended March 31, 2026.

 

Gain on sale/disposal of non-current assets, net for the year end

ed

March 31, 2025 includes:

 

·

A c umulative amount of foreign exchange gains of Rs.1,551, reclassified from the foreign currency translation reserve, and a loss of Rs.52 due to turn around fees paid upon divestment of the membership interest in the subsidiary “Dr. Reddy’s Laboratories Louisiana LLC”, including the manufacturing facility and related assets, to Jaguar Labs Holdings LLC.

 

In addition to the above, in connection with this divestment the Company also has recognized an amount of Rs.293, primarily comprising severance payments to employees in the consolidated income statement. This

divest

ment

transaction pertains to the Company’s Global Generics Segment.

 

(2)

Miscellaneous income for the year ended March 31, 2026 includes:

 

·

Rs.877 towards gain recognized from the write back of liabilities no longer required pursuant to the discontinuance of development of conjugated estrogen at the Company’s site in Middleburgh, New York. Refer  to N ote 11 of these consolidated financial statements for further details; and

·

Rs.1,400 recogni z ed pursuant to settlement of product related litigations representing payment for avoided litigation costs by the Company and its affiliates in the United States and the United Kingdom during the year ended March 31, 2026.

 

Miscellaneous income for the year ended March 31, 2024 includes

 

·

Rs.984 recognized pursuant to a settlement of product related litigation representing payment for avoided litigation costs by the Company and its affiliates in the United Kingdom; and

·

Rs.540 recognized pursuant to a 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).

 

23.

Finance income, net

 

Finance income, net consists of the following:

 

		For the Year Ended March 31,
		2026				2025				2024
Interest income		Rs.	3,726			Rs.	2,677			Rs.	2,278
Fair value changes and profit on sale of financial instruments measured at FVTPL, net			2,359				3,554				3,149
Foreign exchange gain/(loss), net			1,785				1,322				278
Finance income (A)		Rs.	7,870			Rs.	7,553			Rs.	5,705
Interest expense			(3,738	)			(2,829	)			(1,711	)
Finance expense (B)		Rs.	(3,738	)		Rs.	(2,829	)		Rs.	(1,711	)
Finance income, net [(A)+(B)]		Rs.	4,132			Rs.	4,724			Rs.	3,994

 

 

161

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

24.

Income taxes

 

a.

Income tax expense/(benefit) recognized in the consolidated income statement consists of the following:

		For the Year Ended March 31,
		2026				2025				2024
Current taxes
Domestic		Rs.	9,599			Rs.	17,909			Rs.	13,874
Foreign			4,347				4,672				5,584
		Rs.	13,946			Rs.	22,581			Rs.	19,458
Deferred taxes
Domestic		Rs.	945			Rs.	(1,074	)		Rs.	968
Foreign			(2,540	)			(1,968	)			(4,240	)
		Rs.	(1,595	)		Rs.	(3,042	)		Rs.	(3,272	)
Tax expense, net		Rs.	12,351			Rs.	19,539			Rs.	16,186

 

b.

Income tax expense/(benefit) recognized directly in other comprehensive (loss)/ income

 

Income tax expense/(benefit) recognized directly in other comprehensive (loss)/income consists of the following:

 

		For the Year Ended March 31,
		2026				2025				2024
Tax effect on changes in fair value of other investments		Rs.	-			Rs.	-			Rs.	-
Tax effect on effective portion of change in fair value of cash flow hedges			(428	)			58				(117	)
Tax effect on foreign currency translation differences			-				-				-
Tax effect on actuarial gains/losses on defined benefit obligations			45				(24	)			(4	)
		Rs.	(383	)		Rs.	34			Rs.	(121	)

 

c.

Reconciliation of effective tax rate

 

The following is a reconciliation of the Company’s effective tax rates for the years ended March 31, 2026, 2026 and 2025:

 

		For the Year Ended March 31,
		2026				2025				2024
Profit before income taxes		Rs.	54,817			Rs.	76,784			Rs.	71,870
Enacted tax rate in India			25.17	%			25.17	%			25.17	%
Computed expected tax expense		Rs.	13,797			Rs.	19,327			Rs.	18,090
Effect of:
Differences between Indian and foreign tax rates		Rs.	(577	)		Rs.	(241	)		Rs.	(749	)
Unrecognized deferred tax assets/(recognition of previously unrecognized deferred tax assets, net)			(267	)			2				(817	)
Expenses not deductible for tax purposes			921				860				612
Income exempt from income taxes			(199	)			(483	)			(39	)
Foreign exchange differences			(424	)			(124	)			(89	)
Reversal of deferred tax asset on Indexation of land			-				473				-
Income from sale of capital assets			(53	)			(242	)			(48	)
Others			(847	)			(33	)			(774	)
Income tax expense		Rs.	12,351			Rs.	19,539			Rs.	16,186
Effective tax rate			23	%			25	%			23	%

 

The Company’s effective tax rate for the year ended March 31, 2026, was lower as compared to the year ended March 31, 2025. This decrease was primarily on account of:

 

a)

an increase in the proportion of the Company’s profits coming from lower tax jurisdictions and a decrease in the proportion of profits from higher tax jurisdictions for the period ended March 31, 2026, as compared to the period ended March 31, 2025; and

b)

the reversal of deferred tax on Indexation of land during the year ended March 31, 2025; and

c)

the recognition of a previously unrecognized deferred tax asset on operating tax losses, during the year ended March 31, 2026.

 

 

162

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

24.

Income taxes (continued)

 

The Company’s effective tax rate for the year ended March 31, 2025, was higher as compared to the year ended March 31, 2024. This increase was primarily on account of:

 

a)

the reversal of a previously recognized deferred tax asset on indexation of land, consequent to amendments made pursuant to the Finance Act (No.2) 2024 to the Income Tax Act, 1961 in India;

b)

the recognition of a previously unrecognized deferred tax asset on operating tax losses, primarily pertaining to Dr. Reddy’s Laboratories SA, Switzerland during the year ended March 31, 2024; and

c)

an increase in the proportion of the Company’s profits coming from higher tax jurisdictions and a decrease in the proportion of profits from lower tax jurisdictions for the period ended March 31, 2025, as compared to the period ended March 31, 2024.

 

d.

Unrecognized deferred tax assets

 

The details of unrecognized deferred tax assets are summarized below:

 

		As of March 31,
		2026				2025
Deductible temporary differences, net		Rs.	328			Rs.	235
Operating tax loss carry-forward			1,457				1,587
		Rs.	1,785			Rs.	1,822

 

Deferred tax liability is not provided on undistributed earnings of Rs.48,978 and Rs.43,442 as of March 31, 2026 and 2025, respectively of subsidiaries and joint ventures, where it is expected that earnings of the subsidiaries will not be distributed in the foreseeable future. Generally, the Company indefinitely reinvests all of the accumulated undistributed earnings of subsidiaries, and accordingly, has not recorded any deferred taxes in relation to such undistributed earnings of its subsidiaries.

 

e.

Deferred tax assets and liabilities

 

The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities and a description of the items that created these differences is given below:

 

		As of March 31,								As of March 31,
		2026								2025
Deferred tax assets/(liabilities):		Asset				Liability				Asset				Liability
Inventories		Rs.	6,674			Rs.	(44	)		Rs.	4,650			Rs.	(24	)
Trade and other receivables			9,637				-				8,390				-
Operating/other tax loss carry-forward			3,191				-				2,844				-
Other current assets and other current liabilities, net			912				(79	)			733				(192	)
Lease liabilities			3,518				-				1,205				-
Property, plant and equipment			-				(6,090	)			-				(5,067	)
Right of use asset			-				(3,117	)			-				(1,102	)
Other intangible assets			1,098				(9,173	)			1,533				(8,583	)
Others			1,564				(1,223	)			878				(865	)
Tax assets/(liabilities)			26,594				(19,726	)			20,233				(15,833	)
Set-off of taxes			(4,158	)			4,158				(1,725	)			1,725
Net tax assets/(liabilities)			22,436				(15,568	)			18,508				(14,108	)

 

In assessing whether the deferred tax assets will be realized, management considers whether some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets and tax loss carry-forwards is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategy in making this assessment. Based on the level of historical taxable income and projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes that the Company will realize the benefits of those recognized deductible differences and tax loss carry-forwards. Recoverability of deferred tax assets is based on estimates of future taxable income. Any changes in such future taxable income would impact the recoverability of deferred tax assets.

 

Operating loss carry-forward consists of business losses, unabsorbed depreciation and unabsorbed interest carry-forwards. A portion of this total loss can be carried indefinitely and the remaining amounts expire at various dates ranging from 2027 through 2042.

 

 

163

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

24.

Income taxes (continued)

f.

Movement in deferred tax assets and liabilities during the years ended March 31, 2026 and 2025

.

		As of March 31, 2025				Recognized in income statement				Recognized in OCI				As of March 31, 2026
Deferred tax assets/(liabilities):
Inventories		Rs.	4,626			Rs.	2,004				-			Rs.	6,630
Trade and other receivables			8,390				1,247				-				9,637
Operating/other tax loss carry-forward			2,844				347				-				3,191
Other current assets and other current liabilities, net			541				292				-				833
Lease liabilities			1,205				2,313				-				3,518
Right of use asset			(1,102	)			(2,015	)			-				(3,117	)
Property, plant and equipment			(5,067	)			(1,023	)			-				(6,090	)
Other intangible assets			(7,050	)			(1,025	)			-				(8,075	)
Others			13				(55	)			383				341
Net deferred tax assets		Rs.	4,400			Rs.	2,085			Rs.	383			Rs.	6,868

 

The details of movement in deferred tax assets and liabilities are summarized below:

 

		As of March 31, 2024				Recognized in income statement				Recognized in OCI				Recognized on business combination				As of March 31, 2025
Deferred tax assets/(liabilities):
Inventories		Rs.	4,372			Rs.	254				-				-			Rs.	4,626
Trade and other receivables			5,815				2,575				-				-				8,390
Operating/other tax loss carry-forward			2,398				446				-				-				2,844
Other current assets and other current liabilities, net			645				(104	)			-				-				541
Lease liabilities			854				351				-				-				1,205
Right of use asset			(750	)			(352	)			-				-				(1,102	)
Property, plant and equipment			(3,621	)			(1,446	)			-				-				(5,067	)
Other intangible assets			102				1,331				-				(8,483	)			(7,050	)
Others			50				(3	)			(34	)			-				13
Net deferred tax assets		Rs.	9,865			Rs.	3,052			Rs.	(34	)			(8,483	)		Rs.	4,400

 

The amounts recognized in the consolidated income statement for the years ended March 31, 2026 and 2025 include Rs.490 and Rs.10, respectively, which represent exchange differences arising due to foreign currency translations.

 

g.

Uncertain tax positions – Tax litigations

 

The Company is contesting various disallowances by the Income Tax authorities. The associated tax impact for disallowances being more likely than not to be accepted by tax authorities is Rs.2,935 and Rs.2,875 as of March 31, 2026 and 2025, respectively. Accordingly, no provision is made in these consolidated financial statements as of March 31, 2026.

 

h.

Assessment of exposure to Pillar Two rules

 

Legislation to implement the Pillar Two model rules of the OECD has been enacted or substantively enacted in certain jurisdictions where the Company operates. The legislation is effective for the Company’s reporting year beginning April 1, 2024. The Company is within the scope of the enacted or substantively enacted legislation.

 

The Company’s assessment of the potential exposure to Pillar Two income taxes is based on the most recent country-by-country reporting, income tax returns and financial statements of the constituent entities within the Company.

 

Based on the assessment, the Pillar Two effective tax rates in most of the jurisdictions in which the Company operates are above

 15%,

and thus Pillar Two income taxes would not apply. However, there are a limited number of jurisdictions where the transitional safe harbour relief does not apply, and the Pillar Two effective tax rate is lower than

15%.

This amendment had no material impact on the

se

consolidated financial statements.

 

 

164

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

25. Nature of Expense

 

The following table shows supplemental information related to certain “nature of expense” items for the years ended March 31, 2026, 2025 and 2024:

 

		For the Year Ended March 31,
Employee benefits (1)		2026				2025				2024
Cost of revenues		Rs.	14,955			Rs.	15,662			Rs.	15,101
Selling, general and administrative expenses			38,495				33,805				29,235
Research and development expenses			6,459				6,333				5,964
		Rs.	59,909			Rs.	55,800			Rs.	50,300

 

		For the Year Ended March 31,
Depreciation		2026 (2)				2025				2024
Cost of revenues		Rs.	8,603			Rs.	7,111			Rs.	6,742
Selling, general and administrative expenses			2,650				2,099				1,707
Research and development expenses			1,367				1295				1127
		Rs.	12,620			Rs.	10,505			Rs.	9,576

 

		For the Year Ended March 31,
Amortization		2026				2025				2024
Cost of revenues		Rs.	-			Rs.	-			Rs.	-
Selling, general and administrative expenses			7,934				6,502				5,220
Research and development expenses			51				51				45
		Rs.	7,985			Rs.	6,553			Rs.	5,265

 

(1)

Refer to Note 26 regarding the impact of the New Labour Codes during the year ended March 31, 2026.

(2)

During the year ended March 31, 2026, the Company capitalized depreciation cost of Rs.150 with respect to qualifying assets under Property, plant and equipment.

 

In addition, for details relating to costs of material consumed, refer to Note 9 of these consolidated financial statements.

 

 

165

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

26.

Employee benefits

 

Total employee benefits expenses, including share-based payments, incurred during the years ended March 31, 2026, 2025 and 2024 amounted to Rs.59,909, Rs.55,800, and Rs.50,300, respectively.

 

A.

Impact of the New Labour Codes:

 

The Government of India has consolidated 29 existing labour legislations into a unified framework comprising four labour codes as follows: Code on Wages, 2019, Code on Social Security, 2020, Industrial Relations Code, 2020 and Occupational Safety, Health and Working Conditions Code 2020 (collectively referred to as the “New Labour Codes”). The New Labour Codes are effective from November 21, 2025 and introduce changes that include, among other things, setting a uniform definition of wages. The New Labour Codes have implications on employee benefits including gratuity, leave encashment, and other related obligations.

 

The Company has assessed the implications of the New Labour Codes and has recognized an incremental cost of Rs.1,170 towards employee benefits during the year ended March 31, 2026. The Company continues to monitor the developments pertaining to the implementation of the New Labour Codes, including related rules there to and the impact of these will be accounted in accordance with applicable accounting standards.

 

B.

Gratuity benefits provided by the parent company

 

In accordance with applicable Indian laws, the parent company has a defined benefit plan which provides for gratuity payments (the “Gratuity Plan”) and covers certain categories of employees in India. The Gratuity Plan provides a lump sum gratuity payment to eligible employees at retirement or termination of their employment. The amount of the payment is based on the respective employee’s last drawn salary and the years of employment with the Company. Effective September 1, 1999, the Company established the Dr. Reddy’s Laboratories Gratuity Fund (the “Gratuity Fund”) to fund the Gratuity Plan. Liabilities in respect of the Gratuity Plan are determined by an actuarial valuation, based upon which the Company makes contributions to the Gratuity Fund. Trustees administer the contributions made to the Gratuity Fund.

 

The components of gratuity cost recognized in the income statement for the years ended March 31, 2026, 2025 and 2024 consist of the following:

 

		For the Year Ended March 31,
		2026				2025				2024
Current service cost		Rs.	512			Rs.	432			Rs.	389
Interest on defined benefit liability			27				19				(7	)
Past service cost			901				-				-
Gratuity cost recognized in income statement		Rs.	1,440			Rs.	451			Rs.	382

 

Details of the employee benefits obligations and plan assets are provided below:

 

		As of March 31,
		2026				2025
P r e s e nt v a l ue of funded ob l i g a t i ons		Rs.	4,965			Rs.	3,863
F a i r v a l ue of p l a n a ss e t s			(4,981	)			(3,339	)
Net defined benefit liability r e c og n i z e d		Rs.	(16	)		Rs.	524

 

Details of changes in the present value of defined benefit obligations are as follows:

 

		As of March 31,
		2026				2025
D e f i n e d b e n e f i t o b l i g a t i ons a t t he b e g i nn i ng of t he y e a r		Rs.	3,863			Rs.	3,404
Current s e r v i c e c o s t			512				432
In t e r e s t on defined obligations			256				225
Past service cost			901				-
Re-measurements due to:
Actuarial loss/(gain) due to change in financial assumptions			(109	)			102
Actuarial loss/(gain) due to demographic assumptions			92				(35	)
Actuarial loss/(gain) due to experience changes			(63	)			72
B e n e f it s p a i d			(484	)			(330	)
Liabilities transferred (1)			(3	)			(7	)
D e f i n e d b e n e f i t o b l i g a t i ons a t t he e nd o f t he y e a r		Rs.	4,965			Rs.	3,863

 

(1)

Liabilities transferred:

·

During the year ended March 31, 2026, an amount of Rs.3 (rounded to the nearest million) represents the transfer of liabilities on account of transfer of employees between the parent company and its subsidiaries.

·

During the year ended March 31, 2025, an amount of Rs.7 (rounded to the nearest million) represents the transfer of liabilities on account of transfer of employees between the parent company and its subsidiaries.

 

166

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

26. Employee benefits (continued)

 

Details of changes in the fair value of plan assets are as follows:

 

		As of March 31,
		2 026				2 025
Fair value of plan assets at the beginning of the year		Rs.	3,339			Rs.	3,064
Employer contributions			1,844				362
Interest on plan assets			229				206
Re-measurements due to:
Return on plan assets excluding interest on plan assets			54				37
Benefits paid			(484	)			(330	)
Assets transferred (1)			(1	)			-
Plan assets at the end of the year		Rs.	4,981			Rs.	3,339

(1)

 Assets transferred:

·

During the year ended March 31, 2026, an amount of Rs.1 represents the transfer of plan assets on account of the transfer of employees between the parent company and its subsidiaries.

·

During the year ended March 31, 2025, an amount of Rs.0 represents the transfer of plan assets on account of the transfer of employees between the parent company and its subsidiaries.

 

Sensitivity Analysis:

 

		As of March 31, 2026
Defined benefit obligation without effect of projected salary growth			3,212
Add: Effect of salary growth			1,753
Defined benefit obligation with projected salary growth			4,965
Defined benefit obligation, using salary growth rate plus 50 basis points			5,121
Defined benefit obligation, using salary growth rate minus 50 basis points			4,816
Defined benefit obligation, using discount rate minus 50 basis points			5,123
Defined benefit obligation, using discount rate plus 50 basis points			4,815

 

 

Summary of the actuarial assumptions:

The actuarial assumptions used in accounting for the Gratuity plan are as follows:

 

		For the Year Ended March 31,
		2026				2025				2024
Discount rate			6.90	%			6.65	%			7.15	%
Rate of compensation increase			8.00	%			8.10	%			8.10	%

 

Disaggregation of plan assets:

The Gratuity Plan’s weighted-average asset allocation as of March 31, 2026 and 2025, by asset category, was as follows:

 

		As of March 31,
		2026				2025
Funds managed by insurers			100	%			100	%

 

The expected future cash flows in respect of gratuity as of March 31, 2026 were as follows:

 

Expected contribution		Amount
During the year ended March 31, 2027 (estimated)		Rs.	-
Expected future benefit payments
March 31, 2028			743
March 31, 2029			709
March 31, 2030			633
March 31, 2031			570
Thereafter			5,682

 

The weighted average duration to the payment of these cash flows at the year ended March 31, 2026 is 6.19 years (March 31, 2025 : 5.40 years)

 

 

167

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

 

26. Employee benefits (continued)

 

Provident fund benefits

 

Certain categories of employees of the Company receive benefits from a provident fund, a defined contribution plan. Both the employee and employer each make monthly contributions to a government administered fund equal to 12% of the covered employee’s qualifying salary. The Company has no further obligations under the plan beyond its monthly contributions. The Company contributed Rs.1,594, Rs.1,464 and Rs.1,316 to the provident fund plan during the years ended March 31, 2026, 2025 and 2024, respectively.

 

Superannuation benefits

 

Certain categories of employees of the Company participate in superannuation, a defined contribution plan administered by the Life Insurance Corporation of India. The Company makes monthly contributions based on a specified percentage of each covered employee’s salary. The Company has no further obligations under the plan beyond its monthly contributions. The Company contributed Rs.142, Rs.151, and Rs.133 to the superannuation plan during the years ended March 31, 2026, 2025 and 2024, respectively.

 

Other contribution plans

 

In the United States, the Company sponsors a defined contribution 401(k) retirement savings plan for all eligible employees who meet minimum age and service requirements. The Company contributed Rs.163, Rs.241 and Rs.225 to the 401(k) retirement savings plan during the years ended March 31, 2026, 2025 and 2024, respectively. The Company has no further obligations under the plan beyond its monthly matching contributions.

 

In the United Kingdom, certain social security benefits (such as pension, unemployment and disability) are funded by employers and employees through mandatory National Insurance contributions. The contribution amounts are determined based upon the employee’s salary. The Company has no further obligations under the plan beyond its monthly contributions. The Company contributed Rs.194, Rs.293 and Rs.251 to the National Insurance during the years ended March 31, 2026, 2025 and 2024, respectively.

 

Compensated absences

 

The Company provides for accumulation of compensated absences by certain categories of its employees. These employees can carry forward a portion of the unutilized compensated absences and utilize them in future periods or receive cash in lieu thereof as per the Company’s policy. The Company records a liability for compensated absences in the period in which the employee renders the services that increases this entitlement. The total liability recorded by the Company towards this obligation was Rs.1,018 and Rs.939 as of March 31, 2026 and 2025, respectively.

 

27. Share-based payments

 

Dr. Reddy’s Employees Stock Option Scheme, 2002 (the “DRL 2002 Plan”):

 

The Company instituted the DRL 2002 Plan for all eligible employees pursuant to the special resolution approved by the shareholders in the Annual General Meeting held on September 24, 2001. The DRL 2002 Plan covers all employees and directors (excluding promoter directors) of the parent company and its subsidiaries (collectively, “eligible employees”). The Nomination, Governance and Compensation Committee of the Board of the parent company (the “Committee”) administers the DRL 2002 Plan and grants stock options to eligible employees. The Committee determines which eligible employees will receive options, the number of options to be granted, the exercise price, the vesting period and the exercise period. The vesting period is determined for all options issued on the date of grant. The options issued under the DRL 2002 Plan vest in periods ranging between

one

and four years and generally have a maximum contractual term of five years from the vesting date.

 

The DRL 2002 Plan, as amended at annual general meetings of shareholders held on July 28, 2004 and on July 27, 2005, provides for stock option grants in two categories:

Category A

: 1,500,000 stock options out of the total of 11,477,390 options reserved for grant having an exercise price equal to the fair market value of the underlying equity shares on the date of grant; and

 

Category B

: 9,977,390 stock options out of the total of 11,477,390 options reserved for grant having an exercise price equal to the par value of the underlying equity shares (i.e., Rs.1 per option).

 

Under the DRL 2002 Plan, the exercise price of the fair market value options granted under Category A above is determined based on the average closing price for 30 days prior to the grant in the stock exchange where there is highest trading volume during that period. Notwithstanding the foregoing, the Committee may, after obtaining the approval of the shareholders in the annual general meeting, grant options with a per share exercise price other than fair market value and par value of the equity shares.

 

 

168

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

27. Share-based payments (continued)

 

After the stock split effected in the form of a stock dividend issued by the Company in August 2006 and October 2024, the DRL 2002 Plan provides for stock option grants in the above two categories as follows:

 

Particulars		Number of options reserved under category A				Number of options reserved under category B				Total
Options reserved under original Plan			1,500,000				9,977,390				11,477,390
Options exercised prior to stock dividend date (A)			470,305				738,965				1,209,270
Balance of shares that can be allotted on exercise of options (B)			1,029,695				9,238,425				10,268,120
Options arising from stock dividend (C)			1,029,695				9,238,425				10,268,120
Options reserved after stock dividend (A+B+C)			2,529,695				19,215,815				21,745,510

 

The term of the DRL 2002 plan was extended for a period of 10 years effective as of January 29, 2012 by the shareholders at the Company’s Annual General Meeting held on July 20, 2012.

 

Stock option activity under the DRL 2002 Plan for the two categories of options during the years ended March 31, 2025 and 2024 is as follows:

 

Category A — Fair Market Value Options:

There was no stock activity under this category during the years ended March 31, 2026 and 2025, and there were no stock options outstanding under this category as of March 31, 2026 and 2025.

 

Category B — Par Value Options:

Stock options activity under this category during the years ended March 31, 2026 and 2025 was as set forth in the below table after giving effect to the stock split in October 2024.

 

		For the Year Ended March 31, 2026
Category B — Par Value Options		Shares arising out of options				Range of exercise prices				Weighted average exercise price				Weighted average remaining useful life (months)
Outstanding at the beginning of the year			313,790			Rs.	1.00			Rs.	1.00				44
Expired/forfeited during the year			(3,910	)			1.00				1.00				-
Exercised during the year			(128,895	)			1.00				1.00				-
Outstanding at the end of the year			180,985			Rs.	1.00			Rs.	1.00				32
Exercisable at the end of the year			167,660			Rs.	1.00			Rs.	1.00				29

 

		For the Year Ended March 31, 2025
Category B — Par Value Options		Shares arising out of options				Range of exercise prices				Weighted average exercise price				Weighted average remaining useful life (months)
Outstanding at the beginning of the year			501,045			Rs.	1.00			Rs.	1.00				55
Expired/forfeited during the year			(21,435	)			1.00				1.00				-
Exercised during the year			(165,820	)			1.00				1.00				-
Outstanding at the end of the year			313,790			Rs.	1.00			Rs.	1.00				44
Exercisable at the end of the year			245,745			Rs.	1.00			Rs.	1.00				38

 

The weighted average share price on the date of allotment of options during the years ended March 31, 2026 and 2025 was Rs.1,283 and Rs.1,242 per share, respectively.

 

Dr. Reddy’s Employees ADR Stock Option Scheme, 2007 (the “DRL 2007 Plan”)

 

The Company instituted the DRL 2007 Plan for all eligible employees in pursuance of the special resolution approved by the shareholders in the Annual General Meeting held on July 27, 2005. The DRL 2007 Plan became effective upon its approval by the Board of Directors on January 22, 2007. The DRL 2007 Plan covers all employees and directors (excluding promoter directors) of DRL and its subsidiaries (collectively, “eligible employees”). The Committee administers the DRL 2007 Plan and grants stock options to eligible employees. The Committee determines which eligible employees will receive the options, the number of options to be granted, the exercise price, the vesting period and the exercise period. The vesting period is determined for all options issued on the date of grant. The options issued under the DRL 2007 Plan vest in periods ranging between

one

and four years and generally have a maximum contractual term of five years from vesting date.

 

 

169

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

27. Share-based payments (continued)

 

The DRL 2007 Plan provides for option grants in two categories:

Category A

: 1,913,475 stock options out of the total of 7,653,895 stock options reserved for grant having an exercise price equal to the fair market value of the underlying equity shares on the date of grant; and

Category B

: 5,740,420 stock options out of the total of 7,653,895 stock options reserved for grant having an exercise price equal to the par value of the underlying equity shares (i.e., Rs.1 per option).

 

Stock options activity under the DRL 2007 Plan for the above two categories of options during the years ended March 31, 2026 and 2025 was as follows after giving effect to the stock split in October 2024:

 

		For the Year Ended March 31, 2026
Category A — Fair Market Value Options		Shares arising out of options				Range of exercise prices				Weighted average exercise price				Weighted average remaining useful life (months)
Outstanding at the beginning of the year			1,015,295				Rs.521.40 to 1,270.00				971.50				70
Granted during the year			353,057				1,162.00				1,162.00				96
Expired/forfeited during the year			(7,055	)			981.40  & 1,060.20				985.42				-
Exercised during the year			(46,405	)			Rs.521.40 to Rs.1,060.20				694.26				-
Outstanding at the end of the year			1,314,892				Rs.562.80 to 1,270.00				1,032.36				66
Exercisable at the end of the year			388,360				Rs.562.80 to 1,171.20				789.96				48

 

		For the Year Ended March 31, 2025
Category A — Fair Market Value Options		Shares arising out of options				Range of exercise prices				Weighted average exercise price				Weighted average remaining useful life (months)
Outstanding at the beginning of the year			1,080,420				Rs.521.40 to Rs.1,171.20				845.25				72
Granted during the year			272,310				1,270.00				1,270.00				96
Expired/forfeited during the year			(232,970	)			562.80 to 1,270.00				828.05				-
Exercised during the year			(104,465	)			Rs.521.40 to Rs.1,060.20				763.78				-
Outstanding at the end of the year			1,015,295				Rs.521.40 to 1,270.00				971.50				70
Exercisable at the end of the year			57,945				Rs.521.40 to 1,171.20				728.47				33

 

The weighted average grant date fair value of options granted during the years ended March 31, 2026 and 2025 was Rs.388 and Rs.455 per option, respectively. The weighted average share prices on the date of allotment of options during the years ended March 31, 2026 and 2025 was Rs.1,306 and Rs.1,383 per share, respectively.

 

		For the Year Ended March 31, 2026
Category B — Par Value Options		Shares arising out of options				Range of exercise prices				Weighted average exercise price				Weighted average remaining useful life (months)
Outstanding at the beginning of the year			124,940			Rs.	1.00			Rs.	1.00				43
Expired/forfeited during the year			(9,725	)			1.00				1.00				-
Exercised during the year			(26,305	)			1.00				1.00				-
Outstanding at the end of the year			88,910				1.00				1.00				34
Exercisable at the end of the year			88,910				1.00				1.00				34

 

 

170

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

27. Share-based payments (continued)

 

		For the Year Ended March 31, 2025
Category B — Par Value Options		Shares arising out of options				Range of exercise prices				Weighted average exercise price				Weighted average remaining useful life (months)
Outstanding at the beginning of the year			302,575			Rs.	1.00			Rs.	1.00				61
Expired/forfeited during the year			(83,885	)			1.00				1.00				-
Exercised during the year			(93,750	)			1.00				1.00				-
Outstanding at the end of the year			124,940				1.00				1.00				43
Exercisable at the end of the year			71,130				1.00				1.00				29

 

The weighted average grant date fair value of options granted during the years ended March 31, 2026 and 2025 was Rs.0 and Rs.0, respectively. The weighted average share price on the date of allotment of options during the years ended March 31, 2026 and 2025 was Rs.1,329 and Rs.1,363 per share, respectively.

 

Dr. Reddy’s Employees Stock Option Scheme, 2018 (the “DRL 2018 Plan”)

 

The Company instituted the DRL 2018 Plan for all eligible employees pursuant to the special resolution approved by the shareholders at the Annual General Meeting held on July 27, 2018. The DRL 2018 Plan covers all employees and directors (excluding independent and promoter directors) of the parent company and its subsidiaries (collectively, “eligible employees”). Upon the exercise of options granted under the DRL 2018 Plan, the applicable equity shares may be issued directly by the Company to the eligible employee or may be transferred from the Dr. Reddy’s Employees ESOS Trust (the “ESOS Trust”) to the eligible employee. The ESOS Trust may acquire such equity shares through primary issuances by the Company and/or by way of secondary market acquisitions funded through loans from the Company. The Nomination, Governance and Compensation Committee of the Board of the parent company (the “Compensation Committee”) administers the DRL 2018 Plan and grants stock options to eligible employees, but may delegate functions and powers relating to the administration of the DRL 2018 Plan to the ESOS Trust. The Compensation Committee determines which eligible employees will receive the options, the number of options to be granted, the exercise price, the vesting period and the exercise period. The vesting period is determined for all options issued on the date of grant. The options issued under the DRL 2018 Plan vest in periods ranging between the end of

one

and five years, and generally have a maximum contractual term of five years from vesting date.

 

The DRL 2018 Plan provides for option grants having an exercise price equal to the fair market value of the underlying equity shares on the date of grant are as follows after giving effect of stock split in October 2024:

 

Particulars		Number of securities to be acquired from secondary market				Number of securities to be issued by the Company				Total
Options reserved against equity shares			12,500,000				7,500,000				20,000,000
Options reserved against ADRs			-				5,000,000				5,000,000
Total			12,500,000				12,500,000				25,000,000

 

The outstanding shares purchased from secondary market as of March 31,2026 and 2025, are 1,965,575 and 2,452,260 shares for an aggregate consideration of Rs.1,815 and Rs.2,264, respectively.

 

Stock option activity under the DRL 2018 Plan during the years ended March 31, 2026 and 2025 was as follows:

 

		For the Year Ended March 31, 2026
Fair Market Value Options		Shares arising out of options				Range of exercise prices				Weighted average exercise price				Weighted average remaining useful life (months)
Outstanding at the beginning of the year			2,399,070				Rs. 521.40 to 1,274.00				959.34				67
Granted during the year			915,763				1,162.00				1,162.00				96
Expired/forfeited during the year			(371,675	)			521.40 to 1,270.00				1,093.04				-
Exercised during the year			(486,685	)			521.40 to 1,060.20				750.23				-
Outstanding at the end of the year			2,456,473				Rs.521.40 to 1,274.00				1,056.09				67
Exercisable at the end of the year			536,635				Rs.521.40 to 1,274.00				757.05				38

 

 

171

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

27. Share-based payments (continued

)

 

		For the Year Ended March 31, 2025
Fair Market Value Options		Shares arising out of options				Range of exercise prices				Weighted average exercise price				Weighted average remaining useful life (months)
Outstanding at the beginning of the year			2,087,265				Rs.521.40 to 1,102.80				832.80				70
Granted during the year			706,670				1,270.00 and 1,274.00				1,270.00				96
Expired/forfeited during the year			(229,680	)			521.40 to 1,270.00				956.89				-
Exercised during the year			(165,185	)			521.40 to 1,060.20				692.69				-
Outstanding at the end of the year			2,399,070				Rs.521.40 to 1,274.00				959.34				67
Exercisable at the end of the year			366,420				Rs.521.40 to 1,102.80				671.61				31

 

The weighted average grant date fair value of options granted during the years ended March 31,2026 and 2025 was Rs.388 and Rs.454 per option, respectively. The weighted average share price on the date of allotment of options during the years ended March 31,2026 and 2025 was Rs.1,262 and Rs.1,290 per share, respectively.

 

Valuation of stock options:

 

The fair value of services received in return for stock options granted to employees is measured by reference to the fair value of stock options granted. The fair value of stock options granted under the DRL 2002 Plan, DRL 2007 Plan and the DRL 2018 Plan has been measured using the Black–Scholes-Merton model at the date of the grant.

 

The Black-Scholes-Merton model includes assumptions regarding dividend yields, expected volatility, expected terms and risk free interest rates. In respect of par value options granted, the expected term of an option (or “option life”) is estimated based on the vesting term and contractual term, as well as the expected exercise behavior of the employees receiving the option. In respect of fair market value options granted, the option life is estimated based on the simplified method. Expected volatility of the option is based on historical volatility, during a period equivalent to the option life, of the observed market prices of the Company’s publicly traded equity shares. Dividend yield of the options is based on recent dividend activity. Risk-free interest rates are based on the government securities yield in effect at the time of the grant. These assumptions reflect management’s best estimates, but these assumptions involve inherent market uncertainties based on market conditions generally outside of the Company’s control.

 

As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially impacted. Further, if management uses different assumptions in future periods, stock-based compensation expense could be materially impacted in future years.

 

The estimated fair value of stock options is recognized in the consolidated income statement on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.

 

The weighted average inputs used in computing the fair value of options granted were as follows:

 

		May 9, 2025				November 4, 2024				May 6, 2024				May 6, 2024
Expected volatility			24.99	%			23.89	%			24.65	%			25.47	%
Exercise price		Rs.	1,162.00			Rs.	1,274.00			Rs.	1,270.00			Rs.	1,270.00
Option life			5.5 years				5.0 Years				4.5 Years				5.5 Years
Risk-free interest rate			6.16	%			6.79	%			7.18	%			7.19	%
Expected dividends			0.69	%			0.63	%			0.64	%			0.64	%
Grant date share price		Rs.	1,155.90			Rs.	1,268.30			Rs.	1,258.69			Rs.	1,258.69

 

 

172

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

27.  Share-based payments (continued)

 

Share-based payment expense

 

		For the Year Ended March 31,
		2026				2025				2024
Equity settled share-based payment expense (1)		Rs.	326			Rs.	424			Rs.	407
Cash settled share-based payment expense (2)			297				372				414
		Rs.	623			Rs.	796			Rs.	821

 

(1)

As of March 31,2026 and 2025, there was Rs.433 and Rs.430, respectively, of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of 1.72 years and 1.68 years, respectively.

(2)

Certain of the Company’s employees are eligible to receive share based payment awards that are settled in cash. These awards vest only upon satisfaction of certain service conditions which range from 1 to 4 years. A category of these awards are also linked to the overall performance of the company. These awards entitle the employees to a cash payment on the vesting date. The amount of the cash payment is determined based on the share price of the Company at the time of vesting. As of March 31, 2026 and 2025, there was Rs.396 and Rs.366, respectively, of total unrecognized compensation cost related to unvested awards. This cost is expected to be recognized over a weighted-average period of 1.87 years and 1.57 years , respectively. This scheme does not involve dealing in or subscribing to or purchasing securities of the Company, directly or indirectly.

 

28.

  

Related parties

 

The Company has entered into transactions with the following related parties:

 

Enterprises over which key management personnel have control or significant influence

 

·

Green Park Hotel and Resorts Limited for hotel services;

·

Green Park Hospitality Services Private Limited for catering and other services availed;

·

Dr. Reddy’s Foundation towards contributions for social development;

·

Indus Projects Private Limited for engineering services relating to civil works;

·

Dr. Reddy’s Institute of Life Sciences for research and development services availed;

·

Stamlo Industries Limited for hotel services;

·

Iosynth Labs Private Limited for research and development services; and

·

AverQ Inc. for professional consulting services (ceased to be a related party effective as of July 30, 2024);

·

Araku Originals Private Limited for the purchase of coffee powder; and

·

Zenfold Sustainable Technology Private Limited for sale and purchase of goods (a related party effective as of July 27, 2024).

 

Joint Venture and Associates

 

·

Kunshan Rotam Reddy Pharmaceuticals Company Limited for sales of goods, for research and development services;

·

Kunshan Rotam Reddy Medicine Company Limited (a subsidiary of Kunshan Rotam Reddy Pharmaceuticals Company Limited) for sale of goods;

·

O2 Renewable Energy IX Private Limited for an investment;

·

Clean Renewable Energy KK2A Private Limited for purchase of solar power and for an investment; and

·

DRES Energy Private Limited for the purchase of solar power and lease rentals received.

 

“Key management personnel” consists of the Company’s Directors and members of the Company’s Management Council. The Company has also entered into cancellable operating lease transactions with key management personnel and close members of their families.

 

Further, the Company contributes to the Dr. Reddy’s Laboratories Gratuity Fund, which maintains the plan assets of the Company’s Gratuity Plan for the benefit of its employees. See Note 2

6

of these consolidated financial statements for information on transactions between the Company and the Gratuity Fund.

 

 

173

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

28. Related parties (continued)

 

The following is a summary of significant related party transactions:

 

		As of March 31,
		2026				2025				2024
Transactions with relatives of key management personnel or enterprises over which  key management personnel have control or significant influence
Catering expenses		Rs.	490			Rs.	481			Rs.	454
Civil works			262				380				13
Contributions towards social development			744				626				587
Research and development services received			164				277				214
Hotel expenses			61				53				67
Facility management services			46				46				46
Lease rentals paid			41				39				37
Salaries to relatives of key management personnel			28				21				15
Professional consultancy services paid			-				-				3
Procurement of goods			88				58				-
Sale of goods			8				8				-
Sale of assets			-				1				-

Transactions with Joint Ventures and Associates
Investment in O2 Renewable Energy IX Private Limited			51				296				12
Dividend income			-				-				445
Purchase of solar power			225				145				123
Investment in Clean Renewable Energy KK2A Private Limited			-				21				-
Sale of goods			190				67				21
Research and development services provided			-				-				83
Lease rentals received			1				1				1
Others			-				-				1

 

The Company had the following amounts due from related parties:

 

		As of March 31,
		2026				2025
Kunshan Rotam Reddy Pharmaceuticals Company Limited		Rs.	45			Rs.	41
Kunshan Rotam Reddy Medicine Company Limited			62				-
DRES Energy Private Limited			-				1
Key management personnel and close members of their families			8				8

 

The Company had the following amounts due to related parties:

 

		As of March 31,
		2026				2025
Zenfold Sustainable Technology Private Limited		Rs.	12			Rs.	22
Indus Projects Private Limited			19				20
Green Park Hospitality Services Private Limited			-	*			17
DRES Energy Private Limited			16				3
Green Park Hotels and Resorts Limited			-	*			-	*
Stamlo Industries Limited			-				-	*

 

* Rounded to the nearest million.

 

 

174

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

28. Related parties (continued)

 

The following table describes the components of compensation paid or payable to key management personnel for the services rendered during the applicable year ended:

 

		For the Year Ended March 31,
		2026				2025				2024
S a l a r i e s a nd o t h e r b e n e f it s		Rs.	843			Rs.	861			Rs.	891
Co n t r i bu t i ons t o d e f i n e d c on t r i bu t i on p l a ns			52				36				36
Co mm i ss i on t o d i r e c t o r s			399				379				416
S h a r e -b a s e d p a y m e n t s expense			173				179				182
		Rs.	1,467			Rs.	1,455			Rs.	1,525

 

Some of the key management personnel of the Company are also covered under the Company’s Gratuity Plan along with the other employees of the Company. Proportionate amounts of gratuity accrued under the Company’s Gratuity Plan have not been separately computed or included in the above disclosure.

 

29.

Financial instruments

 

Financial instruments by category

 

The carrying value and fair value of financial instruments as of March 31, 2026 and 2025, respectively were as follows:

 

						As of March 31, 2026								As of March 31, 2025
		Category				Total carrying value				Total fair value				Total carrying value				Total fair value
Assets:
Cash and cash equivalents			Amortized cost			Rs.	15,368			Rs.	15,368			Rs.	14,654			Rs.	14,654
Other investments			Refer to Note 7				83,141				83,141				53,645				53,645
Trade and other receivables			Amortized cost				101,219				101,219				90,420				90,420
Derivative financial instruments			FVTPL				155				155				557				557
Other assets (1)			Amortized cost				7,267				7,267				3,952				3,952
Total						Rs.	207,150			Rs.	207,150			Rs.	163,228			Rs.	163,228
Liabilities:
Trade and other payables			Amortized cost			Rs.	33,411			Rs.	33,411			Rs.	35,523			Rs.	35,523
Derivative financial instrument			FVTPL				6,898				6,898				1,286				1,286
Long-term borrowings			Amortized cost				18,206				18,206				8,721				8,721
Short-term borrowings			Amortized cost				59,135				59,135				38,045				38,045
Other liabilities and provisions (2)			See below discussion in this Note 30				44,012				44,012				36,917				36,917
Total						Rs.	161,662			Rs.	161,662			Rs.	120,492			Rs.	120,492

 

(1)

Other assets that are not financial assets (such as receivables from statutory authorities, government incentives receivable, prepaid expenses, advances paid and certain other receivables) of Rs.30,215 and Rs.27,162 as of March 31, 2026 and 2025, respectively, are not included.

(2)

Other liabilities and provisions that are not financial liabilities (such as statutory dues payable, deferred revenue, advances from customers and certain other accruals) of Rs.17,239 and Rs.18,195 as of March 31, 2026 and 2025, respectively, are not included.

Other liabilities and provisions includes amount measured at amortized cost of Rs.43,792 and Rs.34,001 as of March 31, 2026 and 2025, respectively, and contingent consideration measured at FVTPL of Rs.220 and Rs.2,916 as of March 31, 2026 and 2025, respectively.

 

For trade receivables, trade payables, other assets and payables maturing within one year from the reporting date, the carrying amounts approximate fair value due to the short maturity of these instruments.

 

Fair value hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

 

 

175

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

29. Financial instruments (continued)

 

The following table presents the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of March 31, 2026:

 

Particulars		Level 1				Level 2				Level 3				Total
FVTPL - Financial asset - Investments in units of mutual funds		Rs.	35,912			Rs.	-			Rs.	-			Rs.	35,912
FVTPL - Financial asset - Investment in limited liability partnership firm (2)			-				-				1,449				1,449
FVTPL - Financial asset - Investments in equity securities			816				-				-				816
FVTPL – Financial asset - Investments in others			-				-				472				472
FVTOCI - Financial asset - Investments in equity securities			14				-				1				15
Derivative financial instruments - net loss on outstanding foreign exchange forward, option, swap contracts and interest rate swap contracts (1)			-				(6,743	)			-				(6,743	)
FVTPL – Financial liability - Contingent consideration			-				-				(220	)			(220	)

 

The following table presents the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of March 31, 2025:

 

Particulars		Level 1				Level 2				Level 3				Total
FVTPL - Financial asset - Investments in units of mutual funds		Rs.	33,186			Rs.	-			Rs.	-			Rs.	33,186
FVTPL - Financial asset - Investment in limited liability partnership firm (2)			-				-				1,122				1,122
FVTPL - Financial asset - Investments in equity securities			86				-				1				87
FVTPL – Financial asset - Investments in others			-				-				219				219
FVTOCI - Financial asset - Investments in equity securities			49				-				-				49
Derivative financial instruments - net loss on outstanding foreign exchange forward, option, swap contracts and interest rate swap contracts (1)			-				(729	)			-				(729	)
FVTPL – Financial liability - Contingent consideration			-				-				(2,916	)			(2,916	)

(1)

The Company enters into derivative financial instruments with various counterparties, principally financial institutions and banks. Derivatives which are valued using valuation techniques with market observable inputs are mainly interest rate swaps, foreign exchange forward option and swap contracts. The most frequently applied valuation techniques include forward pricing, swap models and Black-Scholes-Merton models (for option valuation), using present value calculations. The models incorporate various inputs, including foreign exchange forward rates, interest rate curves and forward rate curves.

(2)

Fair value of these instruments is determined based on an independent valuation report, which uses the net asset value method.

 

As of March 31, 2026 and 2025, the changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognized at fair value.

 

Derivative financial instruments

 

The Company had a derivative financial asset and derivative financial liability of Rs.155  and Rs.6,898, respectively, as of March 31, 2026, as compared to a derivative financial asset and derivative financial liability of Rs.557 and Rs.1,286, respectively, as of March 31, 2025, attributable to these derivative financial instruments.

 

Details of gain/(loss) recognized in respect of derivative contracts

 

The following table presents details in

respect

of the gain/(loss) recognized in respect of derivative contracts to hedge highly probable forecast transactions during the applicable year ended:

 

		For the Year Ended March 31,
		2026				2025				2024
Net loss recognized in finance costs in respect of foreign exchange derivative contracts		Rs.	(249	)		Rs.	(64	)		Rs.	(9	)
Net (loss)/gain recognized in OCI in respect of hedges of highly probable forecast transactions			(1,699	)			2,432				(470	)
Net (loss)/gain reclassified from OCI and recognized as component of revenue upon occurrence of forecasted transaction			(2,973	)			(759	)			1,368

 

The net carrying amount of the Company’s “hedging reserve” as a component of equity before adjusting for tax impact is a loss of Rs.1,555 as of March 31, 2026, as compared to a gain of Rs.143 as of March 31, 2025.

 

 

176

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

29. Financial instruments (continued)

 

Outstanding foreign exchange derivative contracts

 

The following table gives details in respect of the notional amount of outstanding foreign exchange derivative contracts as of March 31, 2026.

 

Category

Instrument

Currency (1)

Cross Currency (1)

Amounts

Buy/Sell

Hedges of recognized assets and liabilities

Forward contract

CAD

INR

CAD 11

Sell

Forward contract

U.S.$

INR

U.S.$914

Sell

Forward contract

ZAR

INR

ZAR 231

Sell

Forward contract

GBP

INR

GBP 11

Sell

Forward contract

AUD

INR

AUD 4

Sell

Forward contract

EUR

INR

EUR 26

Sell

Forward contract

U.S.$

MXN

U.S.$13

Sell

Forward contract

U.S.$

BRL

U.S.$(17)

Buy

Forward contract

U.S.$

CLP

U.S.$(4)

Buy

Forward contract

U.S.$

COP

U.S.$(3)

Buy

Forward contract

U.S.$

KZT

U.S.$(12)

Buy

Forward contract

RUB

U.S.$

RUB 1,000

Sell

Forward contract

AUD

GBP

AUD 8

Sell

Forward contract

EUR

DKK

EUR 3

Sell

Forward contract

EUR

U.S.$

EUR (65)

Buy

Forward contract

U.S.$

DKK

U.S.$(28)

Buy

Forward contract

GBP

U.S.$

GBP ( 19 )

Buy

Forward contract

AUD

U.S.$

AUD 27

Sell

Forward contract

U.S.$

RON

U.S.$(23)

Buy

Forward contract

U.S.$

CAD

U.S.$(15)

Buy

Principle only swap

U.S.$

INR

U.S.$100

Swap

Hedges of highly probable forecast transactions

Forward contract

U.S.$

INR

U.S.$228

Sell

Forward contract

RUB

U.S.$

RUB 1,610

Sell

Forward contract

BRL

U.S.$

U.S.$5

Sell

Option contract

U.S.$

INR

U.S.$255

Sell

 

The following table gives details in respect of the notional amount of outstanding foreign exchange derivative contracts as of March 31, 2025.

 

Category

Instrument

Currency (1)

Cross Currency (1)

Amounts

Buy/Sell

Hedges of recognized assets and liabilities

Forward contract

CAD

INR

CAD 1

Sell

Forward contract

U.S.$

INR

U.S.$842

Sell

Forward contract

ZAR

INR

ZAR 216

Sell

Forward contract

GBP

INR

GBP 10

Sell

Forward contract

AUD

INR

AUD 8

Sell

Forward contract

EUR

INR

EUR 12

Sell

Forward contract

U.S.$

BRL

U.S.$(10)

Buy

Forward contract

U.S.$

CLP

U.S.$(4)

Buy

Forward contract

U.S.$

COP

U.S.$(9)

Buy

Forward contract

U.S.$

KZT

U.S.$(8)

Buy

Forward contract

RUB

U.S.$

RUB 3,700

Sell

Forward contract

EUR

U.S.$

EUR (78)

Buy

Forward contract

GBP

U.S.$

GBP (31)

Buy

Forward contract

U.S.$

AUD

U.S.$(4)

Buy

Forward contract

U.S.$

RON

U.S.$(15)

Buy

Principal only swap

U.S.$

INR

U.S.$100

Sell

Hedges of highly probable forecast transactions

Forward contract

U.S.$

INR

U.S.$30

Sell

Forward contract

RUB

U.S.$

RUB 2,500

Sell

Forward contract

U.S.$

BRL

U.S.$(18)

Buy

Option contract

U.S.$

INR

U.S.$771

Sell

 

·

“AUD” means Australian dollars, “BRL” means Brazilian reals, “CAD” means Canadian dollars, “COP” means Colombian pesos, “CLP” means Chilean pesos, “DKK” means Danish Krones, “EUR” means Euros, “GBP” means U.K. pounds sterling, “INR” means Indian rupees, “KZT” means Kazakhstan tenge, “MXN” means Mexican pesos, “RON” means Romanian new leus, “RUB” means Russian roubles, “U.S.$” means United States dollars and “ZAR” means South African rands.

 

 

177

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

29. Financial instruments (continued)

 

The table below summarizes the periods when the cash flows associated with highly probable forecast transactions that are classified as cash flow hedges are expected to occur:

 

		As of March 31,
		2026				2025
Cash flows in U.S dollars
Not later than one month		Rs.	4,770			Rs.	6,535
Later than one month and not later than three months			9,996				13,069
Later than three months and not later than six months			11,949				18,616
Later than six months and not later than one year			19,062				30,258
		Rs.	45,777			Rs.	68,478
Cash flows in Russian roubles
Not later than one month		Rs.	419			Rs.	716
Later than one month and not later than three months			1,455				1,841
Later than three months and not later than six months			-				-
Later than six months and not later than one year			-				-
		Rs.	1,874			Rs.	2,557
Cash flows in Brazilian reals
Not later than one month		Rs.	90			Rs.	(256	)
Later than one month and not later than three months			-				(513	)
Later than three months and not later than six months			-				(756	)
Later than six months and not later than one year			-				-
		Rs.	90			Rs.	(1,525	)

 

30.

Financial risk management

 

The Company’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company’s primary risk management focus is to minimize potential adverse effects of market risk on its financial performance. The Company’s risk management assessment and policies and processes are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Board of Directors and the Audit Committee is responsible for overseeing the Company’s risk assessment and management policies and processes.

 

a.

Market risk

 

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices (such as interest rates, foreign currency exchange rates and commodity prices) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all short-term and long-term debt. The Company is exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of its investments. Thus, the Company’s exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.

 

 

178

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

30. Financial risk management (continued)

 

Foreign exchange risk

 

The Company is exposed to exchange rate risk which arises from its foreign exchange revenues and expenses, primarily in U.S. dollars, U.K. pounds sterling, Russian roubles, Brazilian reals, Swiss francs, Euros and Mexican pesos, and foreign currency debt in Russian roubles, Mexican pesos and Brazilian reals. A significant portion of the Company’s revenues are in these foreign currencies, while a significant portion of its costs are in Indian rupees. As a result, if the value of the Indian rupee appreciates relative to these foreign currencies, the Company’s revenues measured in Indian rupees may decrease. The exchange rate between the Indian rupee and these foreign currencies has changed substantially in recent periods and may continue to fluctuate substantially in the future. Consequently, the Company uses both derivative and non-derivative financial instruments, such as foreign exchange forward contracts, option contracts, currency swap contracts and foreign currency financial liabilities, to mitigate the risk of changes in foreign currency exchange rates in respect of its highly probable forecast transactions and recognized assets and liabilities.

 

The details in respect of the outstanding foreign exchange forward contracts, option contracts and currency swaps are given in Note

29

of these consolidated financial statements.

 

In respect of the Company’s forward, option contracts and currency swaps, a 10% decrease/increase in the respective exchange rates of each of the currencies underlying such contracts would have resulted in:

 

·

a Rs.4,059/(3,688) increase/(decrease) in the Company’s hedging reserve and a Rs.7,294/(7,192) increase/(decrease) in the Company’s profit from such contracts, as of March 31, 2026; and

·

a Rs.6,053/(6,184) increase/(decrease) in the Company’s hedging reserve and a Rs.5,927/(5,927) increase/(decrease) in the Company’s profit from such contracts, as of March 31, 2025; and

·

a Rs.7,041/(7,269) increase/(decrease) in the Company’s hedging reserve and a Rs.2,203/(2,315) increase/(decrease) in the Company’s profit from such contracts, as of March 31, 2024.

 

The following table analyzes foreign currency risk from non-derivative financial instruments as of March 31, 2026:

 

		U.S. dollars				Euro				Russian roubles				Others (1)				Total
Assets:
Cash and cash equivalents		Rs.	4,566			Rs.	-			Rs.	88			Rs.	-			Rs.	4,654
Other investments			849				-				-				-				849
Trade and other receivables			52,042				1,174				2,680				2,176				58,072
Other assets			854				2				5				-				861
Total		Rs.	58,311			Rs.	1,176			Rs.	2,773			Rs.	2,176			Rs.	64,436
Liabilities:
Trade and other payables		Rs.	7,798			Rs.	1,241			Rs.	564			Rs.	1,512			Rs.	11,115
Long-term borrowings			8,562				147				3				181				8,893
Other liabilities and provisions			11,775				322				68				635				12,800
Total		Rs.	28,135			Rs.	1,710			Rs.	635			Rs.	2,328			Rs.	32,808

 

(1)

Other s primarily consists of Swiss francs, U.K. pounds sterling, Chinese yuans (Renminbi) and Romanian leu.

 

The following table analyzes foreign currency risk from non-derivative financial instruments as of March 31, 2025:

 

		U.S. dollars				Euro				Russian roubles				Others (1)				Total
Assets:
Cash and cash equivalents		Rs.	4,098			Rs.	390			Rs.	143			Rs.	272			Rs.	4,903
Other investments			210				104				-				-				314
Trade and other receivables			59,076				498				2,865				2,133				64,572
Other assets			797				17				3				34				851
Total		Rs.	64,181			Rs.	1,009			Rs.	3,011			Rs.	2,439			Rs.	70,640
Liabilities:
Trade and other payables		Rs.	8,298			Rs.	1,660			Rs.	528			Rs.	234			Rs.	10,720
Short-term borrowings			10,898				-				-				38				10,936
Long-term borrowings			1,851				242				18				38				2,149
Other liabilities and provisions			8,640				149				111				512				9,412
Total		Rs.	29,687			Rs.	2,051			Rs.	657			Rs.	822			Rs.	33,217

 

(1)

Others primarily consists of Romanian new leus, Chinese yuans (Renminbi), U.K. pounds sterling and Japanese yen.

 

 

179

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

30. Financial risk management (continued)

 

For the years ended March 31, 2026 and 2025, every 10% depreciation/appreciation in the exchange rate between the Indian rupee and the respective currencies for the above mentioned financial assets/liabilities would affect the Company’s net profit by Rs.3,163 and Rs.3,742, respectively.

 

Interest rate risk

 

As of March 31, 2026, the Company had loans with floating interest rates as follows:

 

·

Rs.41,500 of loans carrying a floating interest rate of T-bill + 35bps to 55 bps;

·

Rs.12,690 of loans carrying a floating interest rate of REPO rate + 75bps

·

Rs.3,799 of loans carrying a floating interest rate of 3 Months T-bill + 84 bps;

·

Rs.1,423 of loans carrying a floating interest rate of Key rate + 3.48% to 3.98%;

·

Rs.2,795 of loans carrying a floating interest rate of TIIE + 1.35%; and

·

Rs.727 of loans carrying a floating interest rate of CDI + 1.55%.

 

As of March 31, 2025, the Company had loans with floating interest rates as follows:

 

·

Rs.22,000 of loans carrying a floating interest rate of T-bill + 35 bps to 70 bps;

·

Rs.3,800 of loans carrying a floating interest rate of 3 Month T-bill + 84 bps;

·

Rs.10,856 of loans carrying a floating interest rate of 6 Months SOFR + 10 bps to 65 bps;

·

Rs.1,274 of loans carrying a floating interest rate of Key rate + 4.7% to 5.9%;

·

Rs.2,217 of loans carrying a floating interest rate of TIIE + 1.35%; and

·

Rs.595 of loans carrying a floating interest rate of CDI + 1.55%.

 

For details of the Company’s short-term and long-term loans and borrowings, including interest rate profiles, refer to Note 16 of these consolidated financial statements.

 

For the years ended March 31, 2026 and 2025, every 10% increase or decrease in the floating interest rate component applicable to its loans and borrowings would affect the Company’s net profit by Rs.347 and Rs.271 respectively.

The carrying value of the Company’s borrowings, the interest component of which was designated in a cash flow hedge, was Rs.0 as of March 31, 2026 and 2025.

 

The Company’s investments in term deposits (i.e., certificates of deposit) with banks and short-term liquid mutual funds are for short durations, and therefore do not expose the Company to significant interest rates risk.

 

Note that “CDI” means the Interbank Certificate of Deposit (Certificado de Depósito Interbancário), “Key rate” means the key interest rate published by the Central Bank of Russia, “REPO” means the “Repurchasing option” rate published by the Reserve Bank of India, “SOFR” means Secured Overnight Financing Rate, “T-bill” means the India Treasury bill and “TIIE” means the Equilibrium Inter-Banking Interest Rate (Tasa de Interés Interbancaria de Equilibrio).

 

Commodity rate risk

 

Exposure to market risk with respect to commodity prices primarily arises from the Company’s purchases and sales of active pharmaceutical ingredients, including the raw material components for such active pharmaceutical ingredients. These are commodity products, whose prices may fluctuate significantly over short periods of time. The prices of the Company’s raw materials generally fluctuate in line with commodity cycles, although the prices of raw materials used in the Company’s active pharmaceutical ingredients business are generally more volatile. Cost of raw materials forms the largest portion of the Company’s cost of revenues. Commodity price risk exposure is evaluated and managed through operating procedures and sourcing policies. As of March 31, 2026, the Company had not entered into any material derivative contracts to hedge exposure to fluctuations in commodity prices.

 

b.

Credit risk

 

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of expected losses in respect of trade and other receivables and investments.

 

Trade and other receivables

 

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

 

Investments

 

The Company limits its exposure to credit risk by generally investing in liquid securities and only with counterparties that have a good credit rating. The Company does not expect any losses from non-performance by these counter-parties, and does not have any significant concentration of exposures to specific industry sectors or specific country risks.

 

 

180

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

30. Financial risk management (continued)

 

Details of financial assets – not due, past due and impaired

 

None of the Company’s cash equivalents, including term deposits (i.e., certificates of deposit) with banks, were past due or impaired as of March 31, 2026 and March 31, 2025. The Company’s credit period for trade and other receivables payable by its customers generally ranges from 20 - 180 days.

 

The aging of trade and other receivables is given below:

 

		As of March 31,
Particulars		2026				2025
Neither past due nor impaired		Rs.	86,003			Rs.	81,010
Past due
Less than 365 days			14,623				9,070
More than 365 days			905				467
Past due – impaired
Less than 365 days			141				-
More than 365 days			1,394				1,351
		Rs.	103,066			Rs.	91,898
Less : Allowance for credit losses			(1,847	)			(1,478	)
Total		Rs.	101,219			Rs.	90,420

 

See Note

8

of these consolidated financial statements for the activity in the allowance for credit losses on trade and other receivables.

 

Other than trade and other receivables, the Company has no significant class of financial assets that is past due but not impaired.

 

c.

Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company’s reputation.

 

As of March 31, 2026 and 2025, the Company had uncommitted lines of credit from banks of Rs.49,109 and Rs.50,904 respectively.

 

As of March 31, 2026, the Company had working capital of Rs.134,409, including cash and cash equivalents of Rs.15,368, investments in term deposits with banks, bonds and commercial papers of Rs.36,534 and investments in units of mutual funds of Rs.35,912.

 

As of March 31, 2025, the Company had working capital of Rs.119,720, including cash and cash equivalents of Rs.14654, investments in term deposits with banks, bonds and commercial papers of Rs.9,948 and investments in units of mutual funds of Rs.33,186.

 

The table below provides details regarding the contractual maturities of significant financial liabilities (other than long-term borrowings and obligations under leases, which have been disclosed in Note 1

6

to these consolidated financial statements) as of March 31, 2026:

 

Particulars		2027				2028				2029				2030				Thereafter				Total
Trade and other payables		Rs.	33,411			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	33,411
Short-term borrowings			59,135				-				-				-				-				59,135
Derivative financial instruments			6,898				-				-				-				-				6,898
Other liabilities and provisions			43,582				357				73				-				-				44,012

 

The table below provides details regarding the contractual maturities of significant financial liabilities (other than long-term borrowings and obligations under leases, which have been disclosed in Note 1

6

to these consolidated financial statements) as of March 31, 2025:

 

Particulars		2026				2027				2028				2029				Thereafter				Total
Trade and other payables		Rs.	35,523			Rs.	-			Rs.	-			Rs.	-			Rs.	-			Rs.	35,523
Short-term borrowings			38,045				-				-				-				-				38,045
Derivative financial instruments			1,286				-				-				-				-				1,286
Other liabilities and provisions			35,870				97				51				50				849				36,917

 

 

181

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

31.

Contingencies

 

The Company is involved in disputes, lawsuits, claims, governmental and/or regulatory inspections, inquiries, investigations and proceedings (collectively, “Legal Proceedings”), including patent and commercial matters that arise from time to time in the ordinary course of business. Most of the claims involve complex issues. Often, these issues are subject to uncertainties and therefore the probability of a loss, if any, being sustained and an estimate of the amount of any loss is often difficult to ascertain. Consequently, for a majority of these claims, it is not possible to make a reasonable estimate of the expected financial effect, if any, that will result from ultimate resolution of the proceedings. This is due to a number of factors, including: the stage of the proceedings (in many cases trial dates have not been set) and the overall length and extent of pre-trial discovery; the entitlement of the parties to an action to appeal a decision; clarity as to theories of liability; damages and governing law; uncertainties in timing of litigation; and the possible need for further legal proceedings to establish the appropriate amount of damages, if any. In these cases, the Company, based on internal and external legal advice, assesses the need to make a provision or discloses information with respect to the nature and facts of the case.

 

The Company also believes that disclosure of the amount sought by plaintiffs, if that is known, would not be meaningful with respect to those legal proceedings.

 

Although there can be no assurance regarding the outcome of any of the Legal Proceedings referred to in this Note, the Company does not expect them to have a materially adverse effect on its financial position, results of operations or cash flows, as it believes that the likelihood of loss in excess of amounts accrued (if any) is not probable. However, if one or more of such Legal Proceedings were to result in judgments against the Company, such judgments could be material to its results of operations or cash flows in a given period.

 

Product and patent related matters

 

Matters relating to National Pharmaceutical Pricing Authority

 

Norfloxacin, India litigation

 

The Company manufactures and distributes Norfloxacin, a formulations product, and in limited quantities, the active pharmaceutical ingredient norfloxacin. Under the Drugs (Prices Control) Order (the “DPCO”), the National Pharmaceutical Pricing Authority (the “NPPA”) established by the Government of India had the authority to designate a pharmaceutical product as a “specified product” and fix the maximum selling price for such product. In 1995, the NPPA issued a notification and designated Norfloxacin as a “specified product” and fixed the maximum selling price. In 1996, the Company filed a statutory Form III before the NPPA for the upward revision of the maximum selling price and a writ petition in the Andhra Pradesh High Court (the “High Court”) challenging the validity of the designation on the grounds that the applicable rules of the DPCO were not complied with while fixing the maximum selling price. The High Court had previously granted an interim order in favour of the Company; however, it subsequently dismissed the case in April 2004.

 

The Company filed a review petition in the High Court in April 2004 which was also dismissed by the High Court in October 2004. Subsequently, the Company appealed to the Supreme Court of India, New Delhi (the “Supreme Court”) by filing a Special Leave Petition.

 

During the year ended March 31, 2006, the Company received a notice from the NPPA demanding the recovery of the price charged by the Company for sales of Norfloxacin in excess of the maximum selling price fixed by the NPPA, which was Rs.285 including interest.

 

The Company filed a writ petition in the High Court challenging this demand order. The High Court admitted the writ petition and granted an interim order, directing the Company to deposit 50% of the principal amount claimed by the NPPA, which was Rs.77. The Company deposited this amount with the NPPA in November 2005. In February 2008, the High Court directed the Company to deposit an additional amount of Rs.30, which was deposited by the Company in March 2008. In November 2010, the High Court allowed the Company’s application to include additional legal grounds that the Company believed strengthened its defence against the demand. For example, the Company added as grounds that trade margins should not be included in the computation of amounts overcharged, and that it was necessary for the NPPA to set the active pharmaceutical ingredient price before the process of determining the ceiling on the formulation price. In October 2013, the Company filed an additional writ petition before the Supreme Court challenging the inclusion of Norfloxacin as a “specified product” under the DPCO. In January 2015, the NPPA filed a counter affidavit stating that the inclusion of Norfloxacin was based upon the recommendation of a committee consisting of experts in the field. On July 20, 2016, the Supreme Court remanded the matters concerning the inclusion of Norfloxacin as a “specified product” under the DPCO back to the High Court for further proceedings. During the three months ended September 30, 2016, the Supreme Court dismissed the Special Leave Petition pertaining to the fixing of prices for Norfloxacin formulations.

 

During the three months ended December 31, 2016, a writ petition pertaining to Norfloxacin was filed by the Company with the Delhi High Court. In addition, the Company has filed writ petitions challenging the inclusion and designation of Theophylline/Doxofylline, Cloxacillin and Ciprofloxacin as “specified products” under the DPCO and the related demand notices issued thereunder. These matters were consolidated with the Norfloxacin matter and have been adjourned to

October 2

8, 2026, for hearing.

 

Based on its best estimate, the Company has recorded a provision

as a

 potential liability for sale proceeds in excess of the notified selling prices, including the interest thereon, and believes that the likelihood of any further liability that may arise on account of penalties pursuant to this litigation is not probable.

 

Litigation relating to Cardiovascular and Anti-diabetic formulations

 

In July 2014, the NPPA, pursuant to the guidelines issued in May 2014 and the powers granted by the Government of India under the Drugs (Price Control) Order, 2013, issued certain notifications regulating the prices for 108 formulations in the cardiovascular and antidiabetic therapeutic areas. The Indian Pharmaceutical Alliance (“IPA”), in which the Company is a member, filed a writ petition in the Bombay High Court challenging the notifications issued by the NPPA on the grounds that they were ultra vires, ex facie and ab initio void. The Bombay High Court issued an order to stay the writ in July 2014. On September 26, 2016, the Bombay High Court dismissed the writ petition filed by the IPA and upheld the validity of the notifications/orders passed by the NPPA in July 2014. Further, on October 25, 2016, the IPA filed a Special Leave Petition with the Supreme Court, which was dismissed by the Supreme Court.

 

 

182

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

31.

Contingencies (continued)

 

Product and patent related matters (Continued)

 

Litigation relating to Cardiovascular and Anti-diabetic formulations (Continued)

 

During the three months ended December 31, 2016, the NPPA issued show-cause notices relating to allegations that the Company exceeded the notified maximum prices for 11 of its products. The Company has responded to these notices.

 

On March 20, 2017, the IPA filed an application before the Bombay High Court for the recall of the judgment of the Bombay High Court dated September 26, 2016. This recall application filed by the IPA was dismissed by the Bombay High Court on October 4, 2017. Further, on December 13, 2017, the IPA filed a Special Leave Petition with the Supreme Court for the recall of the judgment of the Bombay High Court dated October 4, 2017, which was dismissed by Supreme Court on January 10, 2018.

 

During the three months ended March 31, 2017, the NPPA issued notices to the Company demanding payments relating to the foregoing products for the allegedly overcharged amounts, along with interest. On July 13, 2017, in response to a writ petition which the Company had filed, the Delhi High Court set aside all the demand notices of the NPPA and directed the NPPA to provide a personal hearing to the Company and pass a speaking order. A personal hearing in this regard was held on July 21, 2017. On July 27, 2017, the NPPA passed a speaking order along with the demand notice directing the Company to pay an amount of Rs.776. On August 3, 2017, the Company filed a writ petition challenging the speaking order and the demand notice. Upon hearing the matter on August 8, 2017, the Delhi High Court stayed the operation of the demand order and directed the Company to deposit Rs.100 and furnish a bank guarantee for Rs.676. Pursuant to the order, the Company deposited Rs.100 on September 13, 2017 and submitted a bank guarantee of Rs.676 dated September 15, 2017 to the Registrar General, Delhi High Court. On November 22, 2017, the Delhi High Court directed the Union of India to file a final counter affidavit within six weeks, subsequent to which the Company could file a rejoinder. On May 10, 2018, the counter affidavit was filed by the Union of India. The Company subsequently filed a rejoinder and both were taken on record by the Delhi High Court. The Union of India filed an Affidavit on July 8, 2025, conceding the ground on 10% increase on Maximum Retail Price for every 12 months basis the Bard Judgement (Bharat Serums and Vaccines Limited vs Union of India & Ors.) of the Delhi High Court dated November 8, 2023, and shared the recomputed demand for Rs.664 in place of the original demand of Rs.776. The matter has been adjourned to August 11, 2026 for hearing.

 

Based on its best estimate, the Company has recorded a cumulative provision of Rs.521 (Rs.479 through March 31, 2025) under “Selling, general and administrative expenses” as a potential liability for sale proceeds in excess of the notified selling prices, including the interest thereon, and believes that the likelihood of any further liability that may arise on account of penalties pursuant to this litigation is not probable.

 

However, if the Company is unsuccessful in such litigation, it will be required to remit the sale proceeds in excess of the notified selling prices to the Government of India with interest and could potentially include penalties, which amounts are not readily ascertainable.

 

Other product and patent related matters

 

Ranitidine recall and litigation

 

On October 1, 2019, the Company initiated a voluntary nationwide recall in the United States of its generic ranitidine products, at the retail level for over-the-counter products and at the consumer level for prescription products, due to the presence of N-Nitrosodimethylamine (“NDMA”) above levels established by the U.S. Food and Drug Administration (“U.S. FDA”). On April 1, 2020, the U.S. FDA requested manufacturers to withdraw all ranitidine products from the U.S. market.

 

Federal Multidistrict Litigation - MDL 2924

 

The Company and/or one or more of its affiliates were named as defendants in thousands of federal lawsuits related to ranitidine. In 2020, these lawsuits were consolidated for pre-trial purposes into

In re Zantac (Ranitidine) Products Liability Litigation (MDL No. 2924)

(“MDL 2924”)

,

a multi-district litigation in the U.S. District Court for the Southern District of Florida.

 

On December 31, 2020, the MDL 2924 court dismissed all claims asserted against generic manufacturers based on federal preemption, with leave to amend certain causes of action. On July 8, 2021, all the amended causes of action against generic manufacturers were dismissed with prejudice. On November 7, 2022, the U.S. Court of Appeals for the 11th Circuit affirmed dismissal of the third-party payor claims. On December 6, 2022, May 15, 2023, and July 14, 2023, the MDL 2924 court entered Daubert and summary judgment rulings dismissing all designated and non-designated cancer personal injury claims against all defendants, including generic manufacturers, and on July 26, 2023, dismissed all economic loss class actions and granted summary judgment in medical monitoring class actions. Final judgments in favor of all defendants were entered on September 26, 2023 and November 14, 2023.

 

On December 26, 2023, the 11th Circuit consolidated the MDL 2924 appeals. Plaintiffs filed opening briefs on April 10, 2024, defendants filed briefs on July 25, 2024, and plaintiffs filed reply briefs on November 8, 2024. Oral argument occurred on October 10, 2025.

 

The Company believes that all of the aforesaid complaints and asserted claims are without merit and it denies any wrongdoing and intends to vigorously defend itself against the allegations. Any liability that may arise on account of these claims is unascertainable at this time. Accordingly, no provision was made in these consolidated financial statements.

 

State Court Ranitidine-related Actions

 

Ranitidine-related actions were also filed against the Company in various U.S. state courts. The New Mexico Attorney General filed an action asserting public nuisance and negligence claims, and the court denied the generic defendants’ preemption motion to dismiss; trial was scheduled for September 15, 2025, and the parties requested a continuance. The City of Baltimore filed a similar action, which was dismissed with prejudice as to the generics. In January 2021, the Company was served in a California Proposition 65 action, and on May 7, 2021, the court dismissed the claims against generic manufacturers without leave to amend; the dismissal was affirmed on appeal, and the California Supreme Court denied review.

 

 

183

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

31.

Contingencies (continued)

 

Other product and patent related matters (continued)

 

Ranitidine recall and litigation (continued)

 

More than 360 private plaintiffs filed ranitidine-related actions against the Company in California, Illinois, New Jersey, New York, and Pennsylvania. The Company has been voluntarily dismissed from all cases filed in New Jersey, New York, and Pennsylvania. In Illinois, the cases were consolidated for pre-trial proceedings, and on August 17, 2023, the trial court dismissed all claims against generic manufacturers with prejudice based on federal preemption. On June 30, 2025, the Illinois First District affirmed judgment in favor of the generic manufacturers in the Valadez matter, and on September 24, 2025, the Illinois Supreme Court denied the petition for leave to appeal. In California, approximately 214 cases against the Company were coordinated in Judicial Council Coordination Proceedings in Alameda County, and on December 23, 2024, the Company entered into a confidential master settlement agreement to resolve the California cases pending against it.

As of May

5

, 2026, all of those cases have been dismissed pursuant to the settlement

.

 

The Company believes that all of the aforesaid complaints and asserted claims are without merit and it denies any wrongdoing and intends to vigorously defend itself against the allegations. Any liability that may arise on account of these claims is unascertainable at this time. Accordingly, no provision was made in these consolidated financial statements.

 

Class Action under the Canadian Competition Act filed in Federal Court in Toronto, Canada

 

On June 3, 2020, a Class Action Statement of Claim was filed by an individual consumer in Federal Court in Toronto, Canada, against the Company’s U.S. and Canadian subsidiaries and 52 other generic drug companies. The Statement of Claim alleges an industry-wide, overarching conspiracy to violate Sections 45 and 46 of the Canadian Competition Act by conspiring to allocate the market, fix prices, and maintain the supply of generic drugs in Canada. The action is brought on behalf of a class of all persons, from January 1, 2012 to the present, who purchased generic drugs in the private sector. The Statement of Claim states that it seeks damages against all defendants on a joint and several basis, attorney’s fees and costs of investigation and prosecution. An Amended Statement of Claim was served on the Company’s U.S. and Canadian subsidiaries on January 15, 2021 and added an additional 20 generic drug companies. The Amended Statement of Claim also removed the identification of defendant companies with conspiracy allegations regarding specific generic drugs and alleges a conspiracy to allocate the North America Market as to all generic drugs in Canada. A Second Fresh as Amended Statement of Claim was served on the Company's U.S. and Canadian subsidiaries on August 24, 2022 and adds an additional 10 drug companies. The Second Fresh as Amended Statement of Claim reinstituted the identification of defendant companies with conspiracy allegations regarding specific generic drugs. On June 1, 2023, plaintiffs served and filed a Motion Record for Certification of the proposed class action. On January 15, 2024, the plaintiffs served and filed a Third Fresh as Amended Statement of Claim, clarifying the proposed class as including: consumers who purchased generic drugs at pharmacies; prescription drug plan holders or sponsors including employers, businesses, governments, and individual plan holders or sponsors; private insurers and insurance companies that purchase or reimburse for generic drugs; and corporate and other entities that purchase or reimburse for generic drugs in the private sector. It also clarifies the proposed class as excluding distributors, wholesalers, and pharmacies. On June 17, 2024, the plaintiffs served and filed a Supplementary Motion Record for Certification.

 

The Company’s and all defendants’ responding evidence to the certification motion was delivered on August 2, 2024. The plaintiffs’ reply evidence for the certification motion was delivered November 15, 2024. At the same time, the plaintiffs delivered a further amended claim (the Fourth Amended Statement of Claim), which advances new allegations representing a significant shift in the core conspiracy claim and theory of the case. In addition to the alleged market allocation conspiracy, the plaintiffs now allege that the defendant generic drug manufacturers also conspired with pharmacies to “fix invoice prices for generic drugs in Canada at the maximum formulary price,” and that the defendants facilitated this alleged conspiracy through the use of “illegal and anticompetitive kickbacks” paid to pharmacies.

 

The certification motion previously set by the court for five days was rescheduled to the week of October 27, 2025. Defendants’ sur-reply evidence was filed on April 25, 2025, and the plaintiffs’ sur-sur-reply evidence was filed on May 23, 2025. Cross-examinations on the affidavits, including the experts’ reports, were completed in June 2025. The plaintiff’s written arguments were delivered on August 1, 2025, the defendants’ responding written arguments were delivered on September 12, 2025, and the plaintiff's reply written arguments were delivered on October 3, 2025. The certification motion was heard from October 27 through October 31, 2025.

 

On February 20, 2026 the Federal Court denied certification against the Company and all other defendants. Plaintiffs did not appeal this decision within the required timeline, and the matter is therefore effectively terminated, as it cannot proceed as a class action and the plaintiff's individual claim was found to disclose no cause of action.

 

United States Antitrust Multi-District Litigations

 

Since November 2016, the

Generic Drug Price Fixing Antitrust Multi-District Litigation

, MDL 2724 (the “MDL 2724”) has been pending in the United States District Court in Philadelphia, Pennsylvania. A multi-district litigation or MDL is a U.S. legal proceeding in which all cases relating to the same subject and claims filed anywhere in the United States are sent and consolidated into one legal proceeding in a single U.S. court for purposes of all pretrial activities, such as discovery (including document production and depositions), motions and other legal proceedings. These legal proceedings are administered on a joint or consolidated basis up until trial and then, when all pretrial proceedings have been concluded, cases are sent back to the courts where they were originally filed (if not originally filed in the MDL District) for trial purposes.

 

All cases filed in the MDL 2724 encompass claims that certain generic drug manufacturers/sellers in the United States (and certain named individual defendants) engaged in a conspiracy, beginning approximately in the year 2009, to agree on the prices at which each generic drug would be sold, and also on the market shares and customers that each manufacturer would have for a generic drug. They include alleged violations of federal antitrust laws and of state consumer protection and antitrust laws of numerous jurisdictions, as well as claims of unjust enrichment.

 

 

184

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

31. Contingencies (continued)

 

Other product and patent related matters (continued)

 

United States Antitrust Multi-District Litigations (continued)

 

As of the date of this report, there are approximately 250 plaintiffs having filed a total of 206 cases. The claims in all the cases encompass a total of 404 generic drugs sold during a period beginning approximately in the year 2009. The Company (through its U.S. subsidiary, Dr. Reddy’s Laboratories, Inc.) is named specifically as a defendant with respect to 23 generic drugs that it sold during this period of time.

 

In addition, even though each defendant (including the Company) did not sell all the drugs encompassed by the claims, the plaintiffs assert that there was an “overarching conspiracy” among the generic manufacturers which encompassed an agreement and understanding throughout the industry that generic manufacturers would cooperate with each other on prices, customers and market shares on

all

generic drugs sold in the United States, and that each manufacturer would cooperate on the “fair share” conspiracy whenever it entered or sold a drug in a specific generic drug market. As a result of this alleged “overarching conspiracy” claim, the plaintiffs claim that each defendant (including the Company) is liable for not only the damages suffered with respect to the specific drugs that a defendant sold, but is also liable for

all

of the damages with respect to

all

of the drugs alleged in a case whether a manufacturer defendant sold that drug or not.

 

The plaintiffs seek “treble” damages (i.e., three times the actual damages sustained) of the claimed anticompetitive “overcharge” during the period 2009-2020 on the drugs at issue allegedly caused by the alleged conspiracies plus injunctive relief, and attorney’s fees and costs in the litigation. The plaintiffs also allege claims for disgorgement of alleged unjust enrichment of profits earned by each defendant, including the Company, and punitive damages as a result of the alleged violations. The plaintiffs in the cases fall into the following categories:

 

·

The Attorneys General of 49 U.S. States, the District of Columbia and the U.S. territories of Puerto Rico, Virgin Islands and Guam, which all allege that they were injured by the price fixing, customer allocation and bid rigging conspiracy in their general economies and that there were injuries suffered by consumers in their jurisdictions, seeking the disgorgement of improper profits on the generic drugs, and damages suffered by governmental agencies (such as government hospitals, agencies and prisons) that purchased generic drugs, encompassing a total of 129 generic drugs. The Company is named as to seven drugs. In addition, each of the plaintiffs seek to enforce their own state antitrust laws, which enable them to impose fines on a defendant in addition to seeking treble damages and disgorgement of alleged unjust enrichment from each defendant;

·

Class actions on behalf of all companies that directly purchased generic drugs from one or more of the defendants during a period beginning approximately in the year 2009 (the “Direct Purchaser Plaintiff” Class or “DPP” Class). This class action consists of all wholesaler/distributors, group purchasing organizations, and large pharmacies and retailers who purchased directly from one or more defendants. These claims encompass 148 drugs, of which the Company sold 11 drugs;

·

Class actions on behalf of all companies that indirectly purchased generic drug and resold them during a period beginning approximately in the year 2009 (the “Indirect Reseller Plaintiff” Class or “IRP” Class). This class consists of all pharmacies and retailers that purchased generic drugs from a wholesaler/distributor and resold the drugs. These claims encompass 179 generic drugs, of which the Company sold 20 drugs;

·

Class actions on behalf of all companies and consumers that were end payers for the purchase of generic drugs by consumers (the “End Payer Plaintiff Class” or “EPP” Class). This class consists of all health care plans, insurance companies and union welfare funds that paid for generic drugs purchased by their members (consumers). These claims encompass 152 generic drugs, of which the Company sold 12 drugs; and

·

Approximately 200 individual companies (which have opted out of the class actions), consisting of pharmacy retailers, health insurers, self-insured health plan employers, hospitals, counties and other local governmental agencies, (the “Direct Action Plaintiffs” or “DAPs”) have individually filed complaints and alleged claims. These claims encompass a total of more than 400 drugs, of which the Company sold 23 drugs.

 

All complaints in the MDL 2724 are being simultaneously litigated together, on a consolidated basis, for all discovery and pre-trial purposes, except the Attorneys General Cases which were remanded back to the District of Connecticut and will no longer be included in the MDL 2774 in the Eastern District of Pennsylvania. Discovery is still proceeding. The first three cases that have been designated for the first trials in the MDL 2724 (the so-called “bellwether” cases) do not involve the Company’s U.S. subsidiary as a defendant. These bellwether cases encompass claims by the DPPs and EPPs as to two specific drugs that were not sold by the Company’s U.S. subsidiary and claims by the Attorney Generals as to approximately 80 topical drugs and creams that were not sold by the Company’s U.S. subsidiary. The trials in these bellwether cases are anticipated to occur in 202

7

.

 

A second round of three bellwether cases have been selected which are expected to be tried in late-2026 or 2027. They include: a case encompassing a single drug that does not involve the Company’s U.S. subsidiary as a defendant; a case by the Attorney Generals encompassing 15 drugs in which the Company’s U.S. subsidiary is named as to two drugs (meprobamate and zoledronic acid); and a case brought by Humana, Inc., encompassing 15 drugs in which the Company’s U.S. subsidiary is named as to one drug (divalproex). In both of the last two cases, the plaintiffs seek joint and several liability for the claimed damages (including claimed treble damages) and state civil penalties encompassing the drugs that the Company’s U.S. subsidiary sold, plus joint and several liability for the claimed damages (including claimed treble damages) and state civil penalties suffered on all of the drugs in the cases based on the allegation of participation in an industry-wide “overarching conspiracy.”

 

 

185

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

31.

Contingencies (continued)

 

Other product and patent related matters (continued)

 

United States Antitrust Multi-District Litigations (continued)

 

In addition to the cases filed in the MDL 2724, approximately 150 companies (consisting primarily of health insurers, and health plans) have filed three

praecipe

of actions in the Pennsylvania Court of Common Pleas in Philadelphia, Pennsylvania, against 52 generic drug companies, including the Company’s U.S. subsidiary, giving notice of potential, unspecified antitrust claims against the named defendants. These

praecipes

of actions have been stayed pending the developments and potential completion of the cases in the MDL 2724.

 

The Company believes that all of the aforesaid complaints and asserted claims are without merit and it denies any wrongdoing and intends to vigorously defend itself against the allegations. Any liability that may arise on account of these claims is unascertainable at this time. Accordingly, no provision was made in these consolidated financial statements.

 

Civil litigation with Mezzion

 

On January 13, 2017, Mezzion Pharma Co. Ltd. and Mezzion International LLC (collectively, “Mezzion”) filed a complaint in the New Jersey Superior Court against the Company and its wholly owned subsidiary in the United States. The complaint pertains to the production and supply of the active pharmaceutical ingredient (“API”) for udenafil (a patented compound) and an udenafil finished dosage product during a period from calendar years 2007 to 2015. Mezzion alleges that the Company failed to comply with the U.S. FDA’s current Good Manufacturing Practices (“cGMP”) at the time of manufacture of the API and finished dosage forms of udenafil and that, as a result, in January 2016, this caused the U.S.FDA to deny Mezzion’s New Drug Application (“NDA”) for udenafil for an erectile dysfunction (“ED”) indication. The Company filed a motion to dismiss Mezzion’s complaint on the technical grounds that the Court lacks jurisdiction over the Company. In January 2018, the Court denied the Company’s motion to dismiss the complaint on the jurisdictional matter. The Company’s interlocutory appeal of said denial was also denied. The case is continuing in pretrial discovery. A trial date for the same is yet to be scheduled.

 

The Company denies any wrongdoing or liability in this regard, and intends to vigorously defend against the claims asserted in Mezzion’s complaint. Any liability that may arise on account of this claim is unascertainable. Accordingly, no provision was made in these consolidated financial statements

 

186

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

31. Contingencies (continued)

 

Revlimid

®

Antitrust Litigation

 

In 2023 and 2024, three lawsuits were filed against Dr. Reddy’s Laboratories, Inc. (“DRL Inc.”) and/or Dr. Reddy’s Laboratories Ltd. (“DRL Ltd.” and together with DRL Inc., “DRL”), and three additional groups of plaintiffs sought to add DRL to their pending actions and/or through additional lawsuits, in federal court in New Jersey concerning the drug product Revlimid® and generic equivalents. Litigation has been pending in that court since at least 2019 by various plaintiffs asserting antitrust claims and similar claims against Celgene Corporation (“Celgene”) and Bristol-Myers Squibb Company (“BMS”) related to Revlimid®,

In re Revlimid & Thalomid Purchaser Antitrust Litigation

, C.A. No. 19-cv-07532 (D.N.J.) (“In re Revlimid action”). Starting in 2022, certain plaintiffs also filed lawsuits in this litigation against Teva Pharmaceuticals USA Inc. (“Teva”) and Natco Pharma Limited (“Natco”) as well. Then, in 2023, plaintiffs Mayo Clinic and LifePoint Corporate Services, General Partnership filed a complaint against DRL Inc. as well as defendants Celgene, BMS, Natco, and Teva (C.A. No. 23-cv-22321 (D.N.J.)). In a second lawsuit in 2023 (C.A. No. 23-cv-22117 (D.N.J.)), plaintiff Intermountain Health, Inc. filed a complaint against DRL Inc. and the same group of defendants Celgene, BMS, Natco, and Teva (Mayo Clinic, LifePoint Corporate Services, General Partnership, and Intermountain Health, Inc., together, the “Hospital Plaintiffs”). The Hospital Plaintiffs have subsequently added DRL Ltd. as a defendant to their lawsuits. In a third lawsuit, filed in 2024 (C.A. No. 24-cv-00379 (D.N.J.)), plaintiffs Walgreen Co., Kroger Specialty Pharmacy, Inc., and CVS Pharmacy Inc. (together, the “Retailer Plaintiffs”), who previously had sued Celgene, BMS, Natco, and Teva, filed an additional complaint against DRL Inc. and DRL Ltd. The Hospital Plaintiffs’ and Retailer Plaintiffs’ actions against DRL have been consolidated with the In re Revlimid action. Subsequently, through amended complaints, three additional groups of plaintiffs have sought to add DRL as a defendant in their already pending lawsuits previously consolidated into the In re Revlimid action. The first such plaintiff is United Healthcare Services, Inc. (“United”) (C.A. No. 20-cv-18531 (D.N.J.)).

 

The second such group of plaintiffs is composed of Cigna Corp., Humana Inc., Blue Cross Blue Shield Association, Health Care Service Corporation, Blue Cross and Blue Shield of Florida, Inc., and Molina Healthcare, Inc. (C.A. Nos. 19-cv-07532 (D.N.J.), 21-cv-11686 (D.N.J.), 21-cv-10187 (D.N.J.), 21-cv-06668 (D.N.J.), and 22-cv-04561(D.N.J.)) (together, the “Insurer Plaintiffs”). The third such group of plaintiffs is composed of Jacksonville Police Officers and Fire Fighters Health Insurance Trust, Carpenters and Joiners Welfare Fund, Teamsters Local 237 Welfare Fund and Teamsters Local 237 Retirees’ Benefit Fund, and Teamsters Western Region and New Jersey Health Care Fund, who bring their claims on behalf of a purported class of end-payors of Revlimid® and generic equivalents (C.A. No. 22-cv-06694 (D.N.J.)) (the “EPP Plaintiffs”).

 

The allegations brought by the Hospital Plaintiffs, the Retailer Plaintiffs, United, the Insurer Plaintiffs, and the EPP Plaintiffs (collectively, “Plaintiffs”) against DRL in these cases are similar: they allege that the patent settlement agreement among DRL, Celgene and BMS concerning Revlimid® violated federal and state antitrust laws and state consumer protection laws by improperly delaying generic entry of Revlimid® through 2022 and then limiting generic competition of Revlimid® through 2026. The Plaintiffs’ claims against DRL are also substantially similar to the claims these plaintiffs have brought against defendants Celgene, BMS, Natco, and Teva.

 

Each of these lawsuits naming DRL as a defendant have been consolidated with the ongoing In re Revlimid action. A trial date has not yet been scheduled. On June 6, 2024, the court issued an order on the pending motions to dismiss filed by other defendants, in which the court dismissed all claims at issue in that motion, including claims challenging the patent settlement agreements. The order allowed plaintiffs to file amended complaints. On August 5, 2024, all Plaintiffs filed amended complaints, including the amended complaints filed by United, Insurer Plaintiffs, and EPP Plaintiffs, described above, which sought to add DRL as a defendant in those actions for the first time. On October 7, 2024, DRL and all other defendants to the In re Revlimid action filed motions to dismiss each of Plaintiffs’ lawsuits in their entirety. Those motions are pending, and discovery currently is stayed.

 

On December 16, 2024, several of the Insurer Plaintiffs also filed substantially similar complaints to those already pending in the In re Revlimid action against DRL, Natco, Teva, and AbbVie Inc. (C.A. Nos. 24-cv-11168 (D.N.J.); 24-cv-11169 (D.N.J.); 24-cv-11176 (D.N.J.); 24-cv-1121 (D.N.J.); 24-cv-11230 (D.N.J.)) (the “Standalone Actions”). On January 13, 2025, DRL and all other defendants to the Standalone Actions filed a letter requesting the court that they be allowed to brief a motion to dismiss the Standalone Actions, including for substantially the same reasons already briefed in the motion to dismiss the claims raised in the In re Revlimid action.

 

On May 5, 2025, the cases were reassigned from Judge Esther Salas to Judge Michael Farbiarz, also of the District of New Jersey.  A trial date has not been set.

The Company intends to vigorously defend its positions. Any liability that may arise on account of this litigation is unascertainable. Accordingly, no provision has been made in these consolidated financial statements of the Company.

 

Other matters

Internal Investigation

 

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 July 6, 2021 the Company received a subpoena from the SEC for the production of related documents, which were provided to the SEC.

 

The Company engaged with the SEC and DOJ, including through submissions and presentations regarding the initial complaint and additional complaints relating to other markets, and in relation to its Global Compliance Framework, which included enhancement initiatives undertaken by the Company, and the Company complied with its listing obligations as it relates to updating the regulatory agencies. On February 23, 2026 the Company received a letter from the SEC stating that, based on the information available to it, the SEC has concluded its investigation and does not intend to recommend any enforcement action against the Company at this time. On March 5, 2026, the Company received a letter from the DOJ stating that, based on the information available to it, the DOJ has closed its inquiry.

 

 

187

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

31. Contingencies (continued)

 

Environmental matters

Land pollution

 

 

The Indian Council for Environmental Legal Action filed a writ in 1989 under Article 32 of the Constitution of India against Union of India and others in the Supreme court of India for safety of people living in the Patancheru and Bollaram areas of the Medak district. Such writ named the Company among the list of alleged polluting industries. In 1996, the Andhra Pradesh District Judge ordered the alleged polluting industries to compensate affected farmers at prescribed rates of Rs.0.0013 per acre of dry land and Rs.0.0017 per acre for wet land. Pursuant to this order, the Company paid total compensation of Rs.3 to the affected farmers. The Andhra Pradesh High Court dismissed the writ petition on February 12, 2013 and transferred the case to the National Green Tribunal (the “NGT”), Chennai, India. The interim orders passed in the writ petitions will continue until the matter is decided by the NGT, and a Fact Finding Committee was constituted in October 2015 through an order by the NGT.

 

The NGT allowed the alleged polluting industries to nominate a representative to the Fact Finding Committee. However, the Company, along with others, challenged the Committee’s constitution and composition, and the NGT directed that the Committee not commence operations until such challenges are disposed of. The NGT, Chennai disposed of the challenge on October 24, 2017, following which the Bulk Drug Manufacturers Association of India, in which the Company is a member, filed a review petition against the judgment on various aspects.

 

In another case (in which the Company was not a party), the NGT, Delhi issued a judgment dated November 16, 2017  directing the continuation of the Fact Finding Committee’s moratorium imposed in the Patancheru and Bollaram areas until the Ministry of Environment, Forest and Climate Change passes an order. The Company filed an appeal challenging this judgment before the High Court of Hyderabad.

 

In June 2022, the Hon’ble High Court of Hyderabad disposed of the appeal, allowing the Company to seek remedies available under the NGT Act, 2010 before the Supreme Court of India.

 

On April 24, 2019, the Government of Telangana issued Government Order Manuscript (G.O.Ms.) No. 24, permitting the expansion of existing units in the Patancheru–Bollaram area upon payment of an amount equal to 1% of the annual turnover of the applicable unit for the fiscal year ended March 31, 2019, based on the NGT’s October 24, 2017 order. Accordingly, the Company accordingly made a provision of Rs.29.4 for the year ended March 31, 2019 representing the estimated probable cost of its planned expansion of industrial units in the area.

 

Subsequently, in September 2019, the Telangana State Pollution Control Board (“TSPCB”) issued operational guidelines requiring a retrospective levy on industrial units equal to 0.5% of their annual turnover for fiscal years 2016-2017 to 2018–2019 for the purposes of restoration of such affected area. The Company has four industrial units in the area and is contesting these guidelines. The TSPCB recommended the issuance of a Consent For Operation for the change in product mix for one of the Company’s industrial units, subject to payment of an amount equal to 0.5% of the annual turnover of such unit for fiscal years 2016–2017 to 2018-2019. The Company vigorously defend itself against the operational guidelines.

 

In November 2019, the TSPCB issued demand notices to certain industrial units of the Company seeking a remediation fee of 0.5% of prior year turnover for fiscal years 2015–2016 to 2018–2019, based on its operational guidelines and relevant orders. On November 22, 2019, the Hon’ble High Court of Judicature at Hyderabad issued an interim order which stayed the demands on the condition that the Company deposit Rs.60 as the remediation fee for fiscal year 2018–2019, which the Company has paid. The stay continues, and the Hon’ble High Court has since disposed of the interim order with liberty for the Company to approach the NGT, if necessary.

 

The Company believes that any additional liability that might arise in this regard is not probable. Accordingly, no provision relating to these claims has been made in the consolidated financial statements.

 

Fuel Surcharge Adjustments

 

The Andhra Pradesh Electricity Regulatory Commission (

the

"APERC") has issued

various

orders approving

the

levy of Fuel Surcharge Adjustment (“FSA”) charges for the period

from

April 1, 2008 to March 31, 2013. The Company has challenged the validity of such lev

ies

 through writ petitions, which are pending before the High Court of Andhra Pradesh and the Hon’ble Supreme Court of India. The total amount approved by

the

APERC in respect of FSA charges is Rs.482. The Company has recogni

z

ed Rs.219 as potential liability towards FSA charges after taking into account all of the available information and legal provisions.

 

However, the Company has paid Rs.354 under protest pursuant to demands raised

by power distribution companies

through electricity bills. The Company remains exposed to additional liability should the APERC orders be upheld by the Courts

.

 

During the three months ended June 30, 2016, the Supreme Court of India dismissed the Special Leave Petition filed by the Company in this regard for the period from April 1, 2012 to March 31, 2013. As a result, for the quarter ended June 30, 2016, the Company recognized an expenditure of Rs.55 (by de-recognizing the payments under protest) representing the FSA charges for the period from April 1, 2012 to March 31, 2013.

 

Indirect taxes related matters

 

The Company received a field tax audit report from the Federal Tax Service authority in respect of one of its foreign subsidiaries for the period from January 2020 to December 2022. The report concluded that certain services were subject to value-added tax (VAT). The Company filed objections to the findings, and a revised audit report was issued on September 15, 2025 with a reduced VAT liability. Based on its best estimate, the Company had recorded a provision of Rs. 695 under “Selling, General and Administrative Expenses” for the three months ended September 30, 2025.

 

The Company continued to defend its position and submitted further objections, asserting that the specified services should not be subject to VAT. On March 23, 2026, the Company received the final order from the Federal Tax Service authorities, pursuant to which the originally proposed VAT liability was substantially reduced.

 

During the three months ended March 31, 2026, based on the final order, the Company has recorded an additional provision of Rs.1,141 (

bringing

the cumulative provision recorded during the year ended March 31, 2026 to Rs.1,836) under “Selling, general and administrative expenses” including  applicable interest and penalties and covering the periods both under audit as well as subsequent period from calendar year 2023 through March 31, 2026.

 

The Company believes that the likelihood of any further liability that may arise on account of this field tax audit is not probable.

 

 

188

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

a.

In January 2020, the Commissioner of Goods and Services Tax, India issued notices alleging that the Company has improperly claimed an input tax credit of Rs.307. The Company then received an order from the Additional Commissioner of Goods and Services Tax in favor of the Company’s right to claim such input tax credit. Subsequently the tax authorities filed an appeal against the favorable order with the Commissioner of Goods and Services Tax (Appeals). The Commissioner of Goods and Service Tax (Appeals) passed an order rejecting the Company’s right to claim such input tax credit. The Company filed an appeal against such order before the Hon’ble High Court of Telangana.

 

The Company believes that it has correctly distributed and claimed the input tax credit within the provisions of applicable laws and hence no additional liability will accrue in this regard.

 

b.

The Company has also received an order from Goods and Services Tax (“GST”) authorities of various states in respect of its claimed input tax credit on education cess. The Company has filed an appeal against these orders before the Hon’ble High Court of Telangana and recorded a provision of Rs.31 as of March 31, 2026.

 

In both the above-mentioned cases, pursuant to the constitution of the Goods and Services Tax Appellate Tribunal (“GSTAT”), which is the designated appellate authority under the GST law, the Company has withdrawn the appeal pending before the Hon’ble High Court of Telangana and is in the process of filing the appeal before the GSTAT.

 

c.

In February 2022, the Company paid under protest an amount of Rs.123 towards a GST reverse charge. In January 2025, the Additional Commissioner of GST passed an order confirming the demand as per the show-cause notice dated July 5, 2024. Aggrieved by the order, the Company filed an appeal before the first appellate authority. The appellate authority passed an order on February 27, 2026 sustaining the demand confirmed by the Additional Commissioner of GST.

 

The Company is in the process of filing a further appeal against the appellate order before GSTAT and believes the demand in such order is not enforceable and the likelihood of any liability is not probable.

 

Other indirect tax related matters

 

Additionally, the Company is in receipt of various demand notices from the Indian Sales and Service Tax authorities. The total disputed amount is Rs.482. The Company has responded to such demand notices and believes that the chances of any liability arising from such notices are not probable. Accordingly, no provision is made in these consolidated financial statements as of March 31, 2026.

 

Tax claim for Merger of Dr. Reddy’s Holdings Limited into Dr. Reddy’s Laboratories Limited

 

The Company received a reassessment notice from the Income Tax Department of India for income alleged to have escaped assessment due to the merger of Dr. Reddy’s Holdings Limited into Dr. Reddy’s Laboratories Limited. For details, see Note 3

2

below.

 

Others

 

Additionally, the Company is involved in other disputes, lawsuits, claims, governmental and/or regulatory inspections, inquiries, investigations and proceedings, including patent and commercial matters that arise from time to time in the ordinary course of business. Except as discussed above, the Company does not believe that there are any such contingent liabilities that are expected to have any material adverse effect on its consolidated financial statements.

 

32.

Merger of Dr. Reddy’s Holdings Limited into Dr. Reddy’s Laboratories Limited

 

The Board of Directors, at its meeting held on July 29, 2019, had approved the amalgamation of Dr. Reddy’s Holdings Limited (“DRHL”), an entity held by the Promoter Group, which held 24.83% of Dr. Reddy’s Laboratories Limited (the “Company”), into the Company (the “Scheme”). This Scheme was subject to the approval of shareholders, stock exchanges, the National Company Law Tribunal (“NCLT”) and other relevant regulators as per the provisions of Section 230 to 232 and any other applicable provisions of the Companies Act, 2013.

 

The Scheme was intended to simplify the shareholding structure and reduction of shareholding tiers. The Promoter Group cumulatively was to continue to hold the same number of shares in the Company, pre and post the amalgamation. All costs, charges and expenses relating to the Scheme was borne out of the surplus assets of DRHL. Further, any expense, if exceeding the surplus assets of DRHL, will be borne directly by the Promoter Group.

 

During the fiscal year ended March 31, 2020, the Scheme was approved by the board of directors, members and unsecured creditors of the Company. The no-observation letters from the BSE Limited and National Stock Exchange of India Limited were received on the basis of no comments received from Securities and Exchange Board of India (“SEBI”). The petition for approval of the Scheme was filed with the Hon’ble NCLT, Hyderabad Bench.

 

The aforementioned Scheme was approved by the NCLT, Hyderabad Bench vide its Order dated April 5, 2022. Subsequently, the Company filed the NCLT order with the Ministry of Company Affairs on April 8, 2022. Pursuant to the Scheme of Amalgamation and Arrangement as approved by the NCLT, an aggregate of 41,325,300 equity shares, face value of Rs.5 each held by DRHL in the share capital of the Company have been cancelled and an equivalent 41,325,300 number of equity shares, face value of Rs.5 each were allotted to the shareholders of DRHL. There was no change in the total equity shareholding (Promoter/Public Shareholding) of the Company, on account of the allotment/ cancellation of equity shares pursuant to the approved Scheme.

 

 

189

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

In relation to this merger approved by the NCLT, the Company received a show cause notice from the Income Tax Department of India on April 4, 2025, under Section 148A(1) of the Income-tax Act, 1961. The notice sought an explanation as to why a reassessment notice under Section 148 should not be issued for income alleged to have escaped assessment due to the merger. Subsequent to the submission of the reply in response to the above notice, the Company received an order 148A(3) and a notice under section 148 of the Income Tax Act on May 30, 2025 from the tax authorities, proposing to assess or reassess the income for the relevant year.

 

The Company has filed a writ petition before the Hon’ble High Court for the State of Telangana, challenging the validity of the order passed under Section 148A(3) of the Income-tax Act, 1961 and the consequent notice issued under Section 148, both dated May 30, 2025. Pending disposal of the writ petition, the Hon’ble High Court has, by way of interim relief, granted a stay on further proceedings pursuant to the order under Section 148A(3) and the notice under Section 148. The stay shall remain in force until the next date of hearing. The matter is currently scheduled for hearing on June 18, 2026.

 

The Company believes that there is no escaped tax pursuant to the said merger scheme as the amalgamation was carried out for the above stated purpose. Further, it was carried out in compliance with various applicable laws in India and after taking with applicable regulatory approvals. The Company will take suitable action to defend its position, and believes that the chances of any liability arising from such orders are less than probable. Accordingly, no provision is made in the consolidated financial statements as of March 31, 2026.

 

Further, the said merger scheme also provides that the Promoters of the Company will jointly and severally indemnify, defend and hold harmless the Company, its directors, employees, officers, representatives, or any other person authorized by the Company (excluding the Promoters) for any liability, claim, or demand, which may devolve upon the Company on account of this amalgamation.

 

3

3

.

Geopolitical Conflicts

 

The Company considered the uncertainties relating to ongoing geopolitical instability and armed conflicts and hostilities (including in Russia, Ukraine and the Middle East) in assessing the recoverability of receivables, goodwill, intangible assets, investments and other assets. The outcome of the conflict is difficult to predict, and any of them could have an adverse impact on the macroeconomic environment. Management has considered all potential impacts of these conflicts including adherence to global sanctions and other restrictive measures against Russia and any retaliatory actions taken by Russia, as well as disruptions in global trade routes and transportation infrastructure arising from ongoing conflicts in the Middle East. For this purpose, the Company considered internal and external sources of information up to the date of approval of these consolidated financial statements

(i.e.,

M

ay

 

29

, 2026)

.

 

Based on its judgments, estimates and assumptions, the Company expects to fully recover the carrying amount of receivables, inventory, goodwill, intangible assets, investments and other assets. Accordingly, during the year ended March 31, 2026, the impact of such instability, conflicts and disruptions on the Company’s operations and financial condition was not material. The Company will continue to closely monitor any material changes to future geopolitical and economic conditions.

 

 

190

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

3

4

.

Regulatory Inspection of facilities

 

Tabulated below are the details of the U.S. FDA inspections of facilities of the Company which were carried out or remained open during the year ended March 31, 2026:

 

		Unit		Details of observations
October 2023 and September 2025		Biologics, Hyderabad, India		Nine observations were noted in the U.S. FDA inspection. The Company responded to the observations. Further to this inspection, five observations were noted in the Pre-Approval Inspection (“PAI”) conducted by the U.S. FDA from September 4-12, 2025, to which the Company has responded within the stipulated timelines. The Company has received a Post Application Action Letter (“PAAL”) from the U.S. FDA on January 9, 2026 to which the Company has responded within the stipulated timelines and has received dates for inspection.
May 2025		API Miryalaguda (CTO Unit-V) plant, Telangana, India		Two observations were noted in the U.S. FDA inspection, conducted from May 19-24, 2025, to which the Company has responded on June 13, 2025. The Company received an Establishment Inspection Report (“EIR”), from the U.S. FDA and the facility was classified as Voluntary Action Indicated.
May 2025		API Middleburgh plant, New York, U.S.A.		Two observations were noted in the U.S. FDA inspection, conducted from May 12-16, 2025, to which the Company has responded on June 9, 2025. The Company received an EIR on July 21, 2025, from the U.S. FDA and the facility was classified as Voluntary Action Indicated.
July 2025		Formulations Srikakulam plant 11, Andhra Pradesh, India		Seven observations were noted in the U.S. FDA inspection conducted from July 10-18, 2025, to which the Company has responded on August 8, 2025. The Company received an EIR on October 20, 2025, from the U.S. FDA and the facility was classified as Voluntary Action Indicated.
September 2025		API Mirfield, Yorkshire, UK		Seven observations were noted in the U.S. FDA inspection conducted from September 1-5, 2025. The Company has responded to all related communications within the stipulated timelines.
November 2025		API Srikakulam Plant (SEZ), Andhra Pradesh, India		No observations were noted in the U.S. FDA inspection conducted from November 10-14, 2025. The Company received an EIR on March 2, 2026, from the U.S. FDA and the facility was classified as No Action Indicated.
December 2025		Formulations Srikakulam plant 1 (SEZ), Andhra Pradesh, India		Five observations were noted in the U.S. FDA inspection conducted from December 4-12, 2025, to which the Company has responded within the stipulated timelines . The Company received an EIR on March 5, 2026, from the U.S. FDA and the facility was classified as Voluntary Action Indicated.

 

 

191

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

3

5

.

Business Combination

 

A.

Agreement with Nestlé India Limited

 

On April 25, 2024, the parent 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 are carried out through Dr. Reddy’s and Nestlé Health Science Limited (the “Nutraceuticals subsidiary”). This arrangement is strategically important for both companies as it allows to combine their complementary strengths and expand their reach in the nutraceutical market.

 

The transaction was concluded on August 1, 2024. The parent company invested Rs.7,344 in the Nutraceuticals subsidiary, while Nestlé India contributed Rs.7,056, and as a result the parent company and Nestlé India hold ownership stakes of 51% and 49% respectively. Further, Nestlé India has a call option to increase their shareholding to

60

% after six years from the closing date for a purchase price based on fair market value. Subsequently, the Nutraceutical subsidiary acquired Nestlé India’s nutraceuticals and supplements portfolio, including product licenses, teams and employees, for Rs.2,231. Additionally, a royalty is payable to Nestlé India equal to 4.5% of post-closing net sales of such portfolio.

 

The parent company accounted for the acquisition from Nestlé India under IFRS 3, “Business Combinations”. Accordingly, the parent company allocated purchase consideration and recognized product related intangibles and other intangibles of Rs.1,982, property, plant and equipment and current assets of Rs.42 and goodwill of Rs.207, on the acquisition date (i.e., August 1, 2024).

 

The related acquisition costs were not material and have been charged to the consolidated income statement for the year ended March 31, 2025.

No pro-forma information is disclosed in these consolidated financial statements, as the impact of this acquisition on these consolidated financial statements is not material.

Non-Controlling interest:

 

Nestlé India’s 49% ownership stake in the Nutraceuticals subsidiary is reported as a NCI in the consolidated financial statements.

 

The carrying amount of the 49% shareholding held by Nestlé India, recorded under non-controlling interest, is

Rs.3,394

 

and Rs.3,778 as of March 31, 2026 and March 31, 2025, respectively,

 

Such carrying amount

aris

es

 from the initial measurement at the Nestlé India’s proportionate share of identifiable net assets as of the acquisition date and

is

subsequently adjusted with the share of profit based on ownership percentage.

 

B.

Business transfer agreement with Haleon:

 

On June 26, 2024, the Company entered into definitive agreement with Haleon UK Enterprises Limited (“Haleon”) to acquire Haleon’s global portfolio of consumer healthcare brands in the Nicotine Replacement Therapy category (the “NRT Business”) outside of the United States of America for a total consideration of up to Rs. 56,121 (GBP 500), including an upfront cash payment of Rs.51,407 (GBP 458) and earn-out consideration of up to Rs.4,714 (GBP 42).

 

The acquisition was structured as a purchase of 100% of the shares of NorthStar Switzerland SARL, whose assets includes intellectual property, employees, agreements with commercial manufacturing organizations, marketing authorizations, and other assets related to the commercialization of brands of the NRT Business. The acquisition included all formats such as lozenge, patch, spray, and gum in all applicable global markets outside of the United States of America.

 

The transaction was completed on September 30, 2024. At closing, the Company paid Haleon an upfront cash consideration of Rs. 51,407 (GBP 458). The agreement also includes contingent consideration of up to Rs. 4,714 million (GBP

42

million), payable upon achieving specified sales targets in calendar years 2024 and 2025, bringing the total potential consideration to Rs.56,121 million (GBP 500 million).

 

The Company accounted for the transaction under IFRS 3, “Business Combinations” using the acquisition method. The fair value of the consideration transferred was Rs.53,660. Based on the purchase price allocation, the Company recognized product related intangible assets (brands) of Rs.54,973, deferred tax liabilities of Rs.8,483, and goodwill of Rs.7,170. This acquisition pertains to the Company’s Global Generics segment.

 

The fair value was estimated using the discounted cash flows technique, which considers the present value of the expected future earn-out payment discounted from their respective payment dates using a risk-adjusted discount rate. The significant unobservable inputs in the valuation is the estimated sales forecast. The Company has estimated that the prescribed sales target will be met.

 

The Company paid earn-out consideration of Rs.1,655 (GBP 15) and Rs.3,389 (GBP 27) during the three months ended March 31, 2025 and March 31, 2026, respectively, upon achieving the specified NRT Business sales targets for calendar years 2024 and 2025.

 

 

192

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

B.

Business transfer agreement with Haleon (continued)

The Company substantially completed the integration of the acquired NRT Business, with the majority of markets transitioned and local marketing authorizations transferred to the Company. For the limited markets still under transition, the Company continues to obtain distribution and related services under Transitional Distribution Services Agreement with the Haleon Group until the rem

a

ining transfers are completed.

 

The amount of revenue

and profit before tax

included in the consolidated income statements pertaining to the acquired NRT business since September 30, 2024 is Rs.12,020

and

Rs.

1,011 (after the effect of acquisition related expenses) respectively

for the year ended March 31, 202

5

.

3

6

.

Subsequent Events

 

Please refer to Notes 19, 31 and 34 of these consolidated financial statements for the details of subsequent events relating to the proposed dividend, contingencies and regulatory inspection of facilities respectively.

 

193

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

37.

Organizational structure

 

Dr. Reddy’s Laboratories Limited is the parent company. Tabulated below is the list of subsidiaries, joint ventures and associates as of March 31, 2026:

 

Name of the subsidiaries/associates/joint ventures		Country of Incorporation		Percentage of Direct/Indirect Ownership Interest
Aurigene Discovery Technologies (Malaysia) Sdn. Bhd.		Malaysia		100% (1)
Aurigene Oncology Limited ( Formerly, Aurigene Discovery Technologies Limited)		India		100%
Aurigene Pharmaceutical Services Limited		India		100% (1)
beta Institut gemeinnützige GmbH		Germany		100% (6)
betapharm Arzneimittel GmbH		Germany		100% (6)
Cheminor Investments Limited		India		100%
Dr. Reddy’s Farmaceutica Do Brasil Ltda.		Brazil		100%
Dr. Reddy’s Laboratories (EU) Limited		United Kingdom		100% (7)
Dr. Reddy’s Laboratories (Proprietary) Limited		South Africa		100% (7)
Dr. Reddy’s Laboratories (UK) Limited		United Kingdom		100% (3)
Dr. Reddy’s Laboratories Canada, Inc.		Canada		100% (7)
Dr. Reddy’s Laboratories Chile SPA.		Chile		100% (7)
Dr. Reddy’s Laboratories Inc.		U.S.A.		100% (7)
Dr. Reddy’s Laboratories Japan KK		Japan		100% (7)
Dr. Reddy’s Laboratories Kazakhstan LLP		Kazakhstan		100% (7)
Dr. Reddy’s Laboratories Malaysia Sdn. Bhd.		Malaysia		100% (7)
Dr. Reddy’s Laboratories New York, LLC		U.S.A.		100% (4)
Dr. Reddy’s Laboratories Philippines Inc.		Philippines		100% (7)
Dr. Reddy’s Laboratories Romania Srl		Romania		100% (7)
Dr. Reddy’s Laboratories SA		Switzerland		100%
Dr. Reddy’s Laboratories Taiwan Limited		Taiwan		100% (7)
Dr. Reddy’s Laboratories (Thailand) Limited		Thailand		100% (7)
Dr. Reddy’s Laboratories LLC, Ukraine		Ukraine		100% (7)
Dr. Reddy’s New Zealand Limited.		New Zealand		100% (7)
Dr. Reddy’s Srl		Italy		100% (8)
Dr. Reddy’s Bio-Sciences Limited		India		100%
Dr. Reddy’s Laboratories (Australia) Pty. Limited		Australia		100% (7)
Dr. Reddy’s Laboratories SAS		Colombia		100% (7)
Dr. Reddy's Netherlands B.V. (formerly Dr. Reddy’s Research and Development B.V.)		Netherlands		100% (9)
Dr. Reddy’s (Beijing) Pharmaceutical Co. Limited		China		100% (7)
DRES Energy Private Limited		India		26% (10)
DRL Impex Limited		India		100% (11)
Dr. Reddy’s Formulations Limited		India		100%
Idea2Enterprises (India) Pvt. Limited		India		100%
Imperial Owners and Land Possessions Private Limited (Formerly, Imperial Credit Private Limited) (Dissolved on August 5, 2025)		India		100%
Industrias Quimicas Falcon de Mexico, S.A. de CV		Mexico		100%
Kunshan Rotam Reddy Pharmaceutical Co. Limited		China		51.33% (2)
Lacock Holdings Limited		Cyprus		100% (7)
Dr. Reddy’s Laboratories LLC		Russia		100% (7)(14)
Promius Pharma LLC		U.S.A.		100% (4)
Reddy Holding GmbH		Germany		100% (7)
Reddy Netherlands B.V.		Netherlands		100% (7)
Reddy Pharma Iberia SAU		Spain		100% (7)
Reddy Pharma Italia S.R.L.		Italy		100% (5)
Reddy Pharma SAS		France		100% (7)
Svaas Wellness Limited (Divested on April 7, 2026)		India		100%
Nimbus Health GmbH		Germany		100% (6)
Dr. Reddy’s Laboratories Jamaica Limited		Jamaica		100% (7)
O2 Renewable Energy IX Private Limited		India		26% (10)
Dr. Reddy’s and Nestle Health Science Limited (Formerly, Dr. Reddy’s Nutraceuticals Limited) (Refer  t o  Note 35.A of these consolidated financial statements for further details)		India		51%
Dr. Reddy’s Employees ESOS Trust		India		Refer to below footnote (13)
Cheminor Employees Welfare Trust		India		Refer to below footnote (13)

 

 

194

 

 

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 

Dr. Reddy’s Research Foundation		India		Refer to below footnote (13)
Clean Renewable Energy KK 2A Private Limited (From July 31, 2024)		India		26.99% (10)
Northstar Switzerland SARL (From September 30, 2024)		Switzerland		100% (7)
North Star OpCo Limited (From September 30, 2024)		United Kingdom		100% (12)
North Star Sweden AB (From September 30, 2024)		Sweden		100% (12)
Dr. Reddy's Denmark ApS (From October 4, 2024)		Denmark		100% (7)
Dr. Reddy’s Finland Oy (From December 20, 2024)		Finland		100% (7)
Kunshan Rotam Reddy Medicine Company Limited		China		51.33% (2)(15)
Dr. Reddy’s Laboratories (Vietnam) Company Limited (From May 9, 2025)		Vietnam		100% (7)

 

(1)

Indirectly owned through Aurigene Oncology Limited ( Formerly, Aurigene Discovery Technologies Limited) .

(2)

Kunshan Rotam Reddy Pharmaceutical Co. Limited and Kunshan Rotam Reddy Medicine Company Limited are subsidiaries as per  the Indian Companies Act, 2013, as the Company holds a 51.33% stake. However, the Company accounts for this investment in accordance with IFRS 11, “Joint Arrangements” using  the equity  method and does not consolidate it in the Company’s financial statements.

(3)

Indirectly owned through Dr. Reddy’s Laboratories (EU) Limited.

(4)

Indirectly owned through Dr. Reddy’s Laboratories Inc.

(5)

Indirectly owned through Lacock Holdings Limited.

(6)

Indirectly owned through Reddy Holding GmbH.

(7)

Indirectly owned through Dr. Reddy’s Laboratories SA.

(8)

Indirectly owned through Reddy Pharma Italia S.R.L.

(9)

Indirectly owned through Reddy Netherlands B.V.

(10)

Accounted for using the equity method as per IAS 28, “ Investments in Associates and Joint Ventures ”.

(11)

Indirectly owned through Idea2Enterprises (India) Pvt. Limited.

(12)

Indirectly owned through Northstar Switzerland SARL.

(13)

The Company does not have any equity interests in this entity but has significant influence or control over it.

(14)

45.19% held directly by Dr. Reddy’s Laboratories Limited.

(15)

Indirectly owned through Kunshan Rotam Reddy Pharmaceutical Co. Limited.

 

 

195

  

ITEM 19. EXHIBITS

 

Exhibit Number		Description of Exhibits		Footnotes
1.1		Memorandum and Articles of Association of the Registrant dated February 4, 1984.		(1)(3)(4)
1.2		Certificate of Incorporation of the Registrant dated February 24, 1984.		(1)(3)
1.3		Amended Certificate of Incorporation of the Registrant dated December 6, 1985.		(1)(3)
1.4		Amendment to Memorandum and Articles of Association of the Registrant dated June 12, 2009 (regarding an increase in the Company’s authorized share capital pursuant to the amalgamation of Perlecan Pharma Private Limited into Dr. Reddy’s Laboratories Limited, its parent company).		(5)
1.5		Amendment to Memorandum and Articles of Association of the Registrant dated July 19, 2010 Order of the Hon’ble High Court of Andhra Pradesh, India dated July 19, 2010 (regarding Amendment to Memorandum and Articles of Association of the Registrant and capitalization or utilization of undistributed profit or retained earnings or security premium account or any other reserve or fund in connection with our bonus debentures).		(7)
1.6		Amended and Restated Articles of Association of the Registrant dated September 17, 2015.		(8)
1.7		Amendment to Memorandum and Articles of Association of the Registrant dated April 5, 2022, and Order of Hon’ble National Company Law Tribunal, Hyderabad Bench, dated April 5, 2022 (to effect an increase in the Registrant’s authorized share capital pursuant to the amalgamation of Dr. Reddy’s Holdings Limited into the Registrant).		(10)
1.8		Amendment to Memorandum and Articles of Association of the Registrant dated September 12, 2024 (to effect an increase in the Registrant’s authorized share capital pursuant to the 1:5 forward stock split effected on October 28, 2024).
2.1		Form of Amended and Restated Deposit Agreement, including the form of American Depositary Receipt, by and among the Registrant, JP Morgan Chase Bank, N.A., as Depositary, and the Holders and Beneficial Owners of American Depositary Receipts issued thereunder.		(11)
2.2		Description of Securities registered under Section 12 of the Exchange Act.
2.3		Dr. Reddy’s Laboratories Limited Employee Stock Option Scheme, 2002.		(2)
2.4		Dr. Reddy’s Employees ADR Stock Option Scheme, 2007.		(6)
2.5		Dr. Reddy’s Employees Stock Option Scheme, 2018.		(9)
4.1		Agreement by and between Dr. Reddy’s Laboratories Limited and Dr. Reddy’s Research Foundation regarding the undertaking of research dated February 27, 1997.		(1)
4.2		Agreement for the Sale and Purchase of all of the Quotas of Northstar Switzerland SARL dated June 26, 2024 between Dr. Reddy's Laboratories SA and Haleon UK Enterprises Limited.		(13)
8		List of subsidiaries, associates and joint ventures of the Registrant.
11.1		Code of Business Conduct and Ethics		(12)
11.2		Code of Conduct to Regulate, Monitor and Report Trading by Designated Persons		(12)
12.1		Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2		Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1		Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2		Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15.1		Consent of Independent Registered Public Accounting Firm (Ernst & Young Associates LLP).
97		Dr. Reddy’s Laboratories Limited Recovery Policy		(12)

 

(1)

Previously filed on March 26, 2001 with the SEC along with Form F-1.

(2)

Previously filed on October 31, 2002 with the SEC along with Form S-8.

(3)

Previously filed with the Company’s Form 20-F for the fiscal year ended March 31, 2003.

(4)

Previously filed with the Company’s Form 20-F for the fiscal year ended March 31, 2006.

(5)

Previously filed with the Company’s Form 20-F for the fiscal year ended March 31, 2010.

(6)

Previously filed on March 5, 2007 with the SEC along with Form S-8.

(7)

Previously filed with the Company’s Form 20-F for the fiscal year ended March 31, 2011.

(8)

Incorporated by reference to Exhibit 99.1 to the Company’s Form 6-K dated September 25, 2015.

(9)

Previously filed on September 5, 2018 with the SEC along with Form S-8.

(10)

Incorporated by reference to Exhibit 99.2 to the Company’s Form 6-K dated June 2, 2022.

(11)

Previously filed on October 23, 2024 with the SEC along with Form F-6.

(12)

Previously filed with the Company’s Form 20-F for the fiscal year ended March 31, 2024.

(13)

Previously filed with the Company’s Form 20-F for the fiscal year ended March 31, 2025.

 

 

196

 

SIGNATURES

 

The registrant hereby certifies that it meets all of the requirements for filing on Form 20–F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

 

	DR. REDDY’S LABORATORIES LIMITED
	By:	/s/Erez Israeli
		Erez Israeli
		Chief Executive Officer
	By:	/s/M.V. Narasimham
		M.V. Narasimham
		Chief Financial Officer
May 29, 2026

 

197

 

EXHIBIT 2.2

 

DESCRIPTION OF SECURITIES

 

REGISTERED UNDER SECTION 12 OF THE EXCHANGE ACT

 

As of March 31, 2026, Dr. Reddy’s Laboratories Limited (“we,” “us,” and “our”) had the following series of securities registered pursuant to Section 12(b) of the Exchange Act: 

 

Title of each class		Trading symbol		Name of each exchange on which registered
American depositary shares, each representing one equity share		RDY		New York Stock Exchange

 

 Our equity shares are traded on the BSE Limited (formerly known as the Bombay Stock Exchange Limited) (“BSE”) and National Stock Exchange of India Limited (“NSE”), (collectively, the “Indian Stock Exchanges”) under the ticker symbols “500124” and “DRREDDY”, respectively. Our American Depositary Shares (or “ADSs”), as evidenced by American Depositary Receipts (or “ADRs”), are traded in the United States on the New York Stock Exchange (“NYSE”) under the ticker symbol “RDY” and on NSE IFSC Limited under the ticker symbol “DRREDDY”. Each ADS represents one equity share. Our ADSs, as evidenced by ADRs, began trading on the NYSE and NSE IFSC Limited on April 11, 2001 and December 9, 2020, respectively.

 

In connection with the registration of our ADSs pursuant to the requirements of the Securities and Exchange Commission (but not for trading), our equity shares are registered under Section 12(b) of the Exchange Act. This exhibit contains a description of the rights of (i) the holders of shares and (ii) ADR holders. Shares underlying the ADSs are held by J.P. Morgan Chase Bank, N.A., the depositary, and holders of ADSs will not be treated as holders of the shares.

 

The following summary is subject to and qualified in its entirety by our Memorandum and Articles of Association, as amended, and by Indian law, particularly the Indian Companies Act, 2013, as amended (the “Companies Act”).

 

This is not a summary of all the significant provisions of our Memorandum and Articles of Association, or of Indian law and does not purport to be complete. Capitalized terms used but not defined herein have the meanings given to them in our annual report on Form 20-F for the fiscal year ended March 31, 2026. 

 

 ORDINARY SHARES

ITEM 9. General

 

9.A.3. Pre-emptive rights

 

A company incorporated in India must offer its holders of shares preemptive rights to subscribe and pay for a proportionate number of shares to maintain their existing ownership percentages prior to the issuance of any shares, unless these rights have been waived by at least 75% of its shareholders present and voting at a shareholders’ general meeting.

 

U.S. investors in our ADSs may be unable to exercise preemptive rights for the shares underlying our ADSs unless a registration statement under the Securities Act of 1933 is effective with respect to the rights or an exemption from the registration requirements of the Securities Act is available. Our decision to file a registration statement will depend on the costs and potential liabilities associated with a registration statement as well as the perceived benefits of enabling U.S. investors in our ADSs to exercise their preemptive rights and any other factors we consider appropriate at the time. We might choose not to file a registration statement under these circumstances. If we issue any of these securities in the future, such securities may be issued to the depositary, which may sell them in the securities markets in India for the benefit of the investors in our ADSs. There can be no assurances as to the value, if any, the depositary would receive upon the sale of these securities. If the depositary determines that the rights could not be sold, the depositary might allow such rights to lapse. To the extent that U.S. investors in our ADSs are unable to exercise preemptive rights, their proportional interests in us would be reduced.

 

 

9.A.5. Type and class of securities

(a) Generally

 

One ADS represents one equity share of Rs.1 par value per share. As of March 31, 2026, we had 834,656,970 outstanding equity shares. As of March 31, 2026, 11.94% of our issued and outstanding equity shares were held by holders of our ADSs, as evidenced by ADRs. Our equity shares and their holders are registered in a registry of members. All of our shares have equal voting rights and carry equal entitlements to dividends. The Memorandum and Articles of Association were amended to effect an increase in our authorized share capital to 1,450,000,000 equity shares, pursuant to the 1:5 forward stock split implemented effective as of October 28, 2024. Said amendment to the Memorandum and Articles of Association is attached as Exhibit 1.8 to our Annual Report on Form 20-F for the year ended March 31, 2025.

 

Under certain circumstances, the Reserve Bank of India must approve the sale of equity shares underlying ADSs by a non-resident of India to a resident of India. The Reserve Bank of India has given general permission to effect sales of existing shares or convertible debentures of an Indian company by a resident to a non-resident, subject to certain conditions, including the price at which the shares must be sold.

 

Additionally, except under certain limited circumstances, if an investor seeks to convert the Indian rupee proceeds from a sale of equity shares in India into foreign currency and then repatriate that foreign currency from India, he or she will have to obtain an additional approval from the Reserve Bank of India for each such transaction. Required approval from the Reserve Bank of India or any other government agency may not be obtained on terms favorable to a non-resident investor or at all.

 

Investors who exchange our ADSs for our underlying equity shares may be subject to the provisions of the Companies Act and to the disclosure obligations that may be necessary pursuant to the Amended and Restated Deposit Agreement with our depositary. The Companies Act requires that, where the registered owner of shares does not hold the beneficial interest in such shares, both the registered owner and the beneficial owner of such equity shares are required to disclose to the company the nature of their interest, particulars of the registered owner and certain other details.

 

(b) Restrictions on transfer

 

Foreign investment in Indian securities, whether in the form of foreign direct investment or in the form of portfolio investment, is governed by the Foreign Exchange Management Act, 1999, as amended (“FEMA”), and the rules, regulations and notifications issued thereunder. Set forth below is a summary of the restrictions on transfers applicable to both foreign direct investments and portfolio investments, including the requirements under Indian law applicable to the issuance and transfer of ADSs.

 

Foreign Direct Investment

 

FEMA empowers the Reserve Bank of India (the “RBI”) to frame regulations to prohibit, restrict or regulate the transfer or issuance of any security by a person resident outside India. These regulations were published as the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017. The Government of India superseded these regulations on October 17, 2019 through its notification of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

 

As per these regulations, foreign direct investments can be made in India, other than in certain prohibited sectors, through the “automatic route” or, if the sectors or activities are not permitted under the automatic route, then under the “government route”. If the automatic route applies, then the non-resident investor or the Indian company does not require any approval from Government of India for the investment. If the government route applies, then prior approval of the Government of India is required. Proposals for foreign investment under the government route, are considered by the respective administrative ministry or department.

 

These regulations also contain provisions regarding sector specific guidelines for foreign direct investment and the levels of permitted equity participation. The total foreign investment shall not exceed the sectoral or statutory cap limit indicated for each sector. In sectors or activities for which no sectoral or statutory cap limit is indicated or not prohibited under these regulations, foreign investment is permitted up to 100% under the automatic route, subject to applicable laws/regulations, security and other conditions.

 

In May 1994, the Government of India announced that purchases by foreign investors of ADSs, as evidenced by ADRs, and foreign currency convertible bonds of Indian companies would be treated as foreign direct investment in the equity issued by Indian companies for such offerings. Therefore, offerings that involve the issuance of equity that results in Foreign Direct Investors holding more than the stipulated percentage of direct foreign investments (which depends on the category of industry) would require approval from the Foreign Investment Promotion Board.

 

For investments in the pharmaceutical sector, the Foreign Direct Investment limit is 100%. However, unlike Foreign Direct Investments in new pharmaceutical projects (sometimes called “greenfield” investments), Foreign Direct Investments in existing Indian pharmaceutical companies (sometimes called “brownfield” investments) are nonetheless subject to approval by the Foreign Investment Promotion Board in excess of 74% (which can incorporate conditions for its approval at the time of grant). Thus, foreign ownership of in excess of 74% of our equity shares would be allowed but would require certain approvals.

 

 

The Ministry of Finance abolished the Foreign Investment Promotion Board in May 2017 and the processing of applications for Foreign Direct Investment and approval of the Government thereon under the Policy and FEMA, was transferred to be handled by the concerned Ministries/Departments in consultation with the Department for Promotion of Industry and Internal Trade.

 

Portfolio Investment Scheme

 

Under Indian law, persons or entities residing outside of India cannot acquire securities of an Indian company listed on a stock exchange (“Portfolio Investments”) unless such non-residents are (a) persons of Indian nationality or origin residing outside of India (also known as Non-Resident Indians or “NRIs”) or (b) registered Foreign Institutional Investors (“FIIs”) or Foreign Portfolio Investors (“FPIs”).

Portfolio Investments by NRIs

A variety of methods for investing in shares of Indian companies are available to NRIs. These methods allow NRIs to make Portfolio Investments in existing shares and other securities of Indian companies on a basis not generally available to other foreign investors.

 

Portfolio Investments by FIIs

In September 1992, the Government of India issued guidelines that enable FIIs, including institutions such as pension funds, investment trusts, asset management companies, nominee companies and incorporated/institutional portfolio managers, to invest in all of the securities traded on the primary and secondary markets in India. Under the guidelines, FIIs are required to obtain an initial registration from the Securities and Exchange Board of India (“SEBI”), and a general permission from the RBI to engage in transactions regulated under the Foreign Exchange Management Act. FIIs must also comply with the provisions of the SEBI (Foreign Institutional Investors Regulations) 1995. When it receives the initial registration, the FII also obtains general permission from the RBI to engage in transactions regulated under the Foreign Exchange Management Act. Together, the initial registration and the RBI’s general permission enable the registered FII to: (i) buy (subject to the ownership restrictions discussed below) and sell unrestricted securities issued by Indian companies; (ii) realize capital gains on investments made through the initial amount invested in India; (iii) participate in rights offerings for shares; (iv) appoint a domestic custodian for custody of investments held; and (v) repatriate the capital, capital gains, dividends, interest income and any other compensation received pursuant to rights offerings of shares.

 

Portfolio Investments by FPIs

The regime permitting Portfolio Investments by FIIs was previously governed by the SEBI (Foreign Portfolio Investors) Regulations, 2014 (the “2014 FPI Regulations”). Further with a view to ease investments by FPIs, the 2014 FPI Regulations were amended through the SEBI (Foreign Portfolio Investors) Regulations, 2019, which was notified on September 23, 2019 (the “2019 FPI Regulations” and, together with the 2014 FPI Regulations, the “FPI Regulations”).

 

A person which has been registered as a FPI under chapter II of the 2019 FPI Regulations may purchase or sell capital instruments of an Indian company on a recognized stock exchange in India as well as purchase shares and convertible debentures offered to the public under the FPI Regulations.

 

A FPI is defined as any investment made by a person resident outside India in capital instruments where such investment is (a) less than 10% of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company or (b) less than 10% of the paid up value of each series of capital instruments of a listed Indian company. FPIs are subject to ownership limits in Portfolio Investments, as further described below, and only certain categories of FPIs may invest or deal in exchange traded derivative contracts approved by SEBI from time to time.

 

FPIs are required to be registered with the designated depositary participant on behalf of SEBI subject to compliance with “Know Your Customer” rules.

 

The 2019 FPI Regulations have categorized FPIs based on regulatory status and country of residence — that is, whether the entity is from a Financial Action Task Force (“FATF”) member country. The operating guidelines have provided guidance on re-categorization of FPIs. While Category-I FPIs under the 2014 FPI Regulations would remain the same, the former Category-II FPIs have been re-characterized under the 2019 FPI Regulations as Category-I or –II, depending upon their eligibility.

 

A FPI may purchase or sell capital instruments of an Indian company on a recognized stock exchange in India as well as purchase shares and convertible debentures offered to the public under the FPI Regulations.

 

Further, a FPI may sell shares or convertible debentures so acquired (i) in an open offer in accordance with the Securities Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; or (ii) in an open offer in accordance with the Securities Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; or (iii) through buyback of shares by a listed Indian company in accordance with the Securities Exchange Board of India (Buy-back of Securities) Regulations, 2018. A FPI may also acquire shares or convertible debentures (i) in any bid for, or acquisition of securities in response to an offer for disinvestment of shares made by the central government or any state government of India; or (ii) in any transaction in securities pursuant to an agreement entered into with merchant banker in the process of market making or subscribing to unsubscribed portion of the issue in accordance with SEBI (ICDR) Regulations, 2018.

 

Ownership restrictions

 

The SEBI and the RBI regulations restrict portfolio investments in Indian companies by FIIs, NRIs and FPIs, all of which we refer to as “foreign portfolio investors.” Under current Indian law, FPIs may in the aggregate hold not more than 24.0% of the equity shares of an Indian company, and NRIs in the aggregate may hold not more than 10.0% of the shares of a publicly traded Indian company through portfolio investments.

 

 

The Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (the “NDI Rules”) has brought about a substantial change in the Schedule II to the NDI Rules, stating that effective as of April 1, 2020, the aggregate limit would be the sectoral cap applicable to such Indian company. An Indian company may, with the approval by resolution of its board of directors and by special resolution of its members: (i) decrease the aggregate limit before March 31, 2020 to a lower threshold of 24%, 49% or 74%, as it deems fit, or (ii) increase the aggregate limit to 49% or 74%, or the sectoral cap or statutory ceiling, as it deems fit. However, once the aggregate limit is increased, the limit cannot be reduced later.

 

Our shareholders on September 24, 2001 had passed a resolution enhancing the limits of portfolio investment by FIIs in the aggregate to 49% and NRIs in the aggregate may hold not more than 10.0% of our equity shares through portfolio investments. However pursuant to the applicability of the NDI rules, the sectoral cap applicable to our company is 74%. Holders of ADSs are not subject to the rules governing FPIs unless they convert their ADSs into equity shares.

 

 If a FPI’s investments exceed the prescribed limits, the FPI will have the option to divest its excess holdings within five trading days, failing which the entire investment in the company will be considered a Foreign Direct Investment (“FDI”). If the investment falls under a category where FDI is prohibited, the aggregate FPI limit is capped at 24%.

 

No single FPI may hold more than 10.0% of the shares of an Indian company and no single NRI may hold more than 5.0% of the shares of an Indian company. If multiple entities have at least 50% overlap in their ownership (direct or ultimate beneficial owners), then such entities shall be treated as part of the same group and the above percentage of FPI investment limit shall apply to the entire group as if they were a single FPI.

 

As of March 31, 2026, FIIs and FPIs collectively held 21.14% of our equity shares, foreign nationals and companies held 0.01% of our equity shares and NRIs held 0.92% of our equity shares.

 

In September 2011, the Securities and Exchange Board of India (“SEBI”) enacted the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (the “2011 Takeover Code”), which replaces the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The 2011 Takeover Code was thereafter amended from time to time.

 

Under the 2011 Takeover Code, upon acquisition of shares or voting rights in a publicly listed Indian company (the “target company”) such that the aggregate shareholding of the acquirer (meaning a person who directly or indirectly, acquires or agrees to acquire shares or voting rights in the target company, or acquires or agrees to acquire control over the target company, either alone or together with any persons acting in concert), is 5% or more of the shares of the target company, the acquirer is required to, within two working days of such acquisition, disclose the aggregate shareholding and voting rights in the target company to the target company and to the stock exchanges in which the shares of the target company are listed.

 

Furthermore, an acquirer who, together with persons acting in concert with such acquirer, holds shares or voting rights entitling them to 5% or more of the shares or voting rights in a target company must disclose every sale or acquisition of shares representing 2% or more of the shares or voting rights of the target company to the target company and to the stock exchanges in which the shares of the target company are listed within two working days of such acquisition or sale or receipt of intimation of allotment of such shares.

 

Every acquirer, who together with persons acting in concert with such acquirer, holds shares or voting rights entitling such acquirer to exercise 25% or more of the voting rights in a target company, has to disclose to the target company and to stock exchanges in which the shares of the target company are listed, their aggregate shareholding and voting rights as of the thirty-first day of March, in such target company within seven working days from the end of the fiscal year of that company.

 

The acquisition of shares or voting rights that entitles the acquirer to exercise 25% or more of the voting rights in or control over the target company triggers a requirement for the acquirer to make an open offer to acquire additional shares representing at least 26% of the total shares of the target company for an offer price determined as per the provisions of the 2011 Takeover Code. The acquirer is required to make a public announcement for an open offer on the date on which it is agreed to acquire such shares or voting rights. Such open offer shall only be for such number of shares as is required to adhere to the maximum permitted non-public shareholding.

 

Since we are a listed company in India, the provisions of the 2011 Takeover Code will apply to us and to any person acquiring our ADSs, equity shares or voting rights in our company.

 

Pursuant to the 2011 Takeover Code, we must report to the Indian stock exchanges on which our equity shares are listed, any disclosures made to us under 2011 Takeover Code.

 

Holders of ADSs may be required to comply with such notification and disclosure obligations pursuant to the provisions of the Deposit Agreement entered into by such holders, our company and the depositary of our ADRs.

 

Subsequent transfer of shares

 

A person resident outside India holding the shares or debentures of an Indian company may transfer the equity instruments held by him, in compliance with the conditions specified in the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 ("NDI Rules"), as follows:

 

(i)

A person resident outside India who is not a NRI, an overseas citizen of India or a former Overseas Corporate Body (“OCB”), may transfer by way of sale or gift, the equity instruments held by him to any person resident outside India;

 

(ii)

A NRI may transfer by way of sale or gift, the equity instruments held by that person to another NRI or to any person resident outside India; or

 

(iii)

A person resident outside India holding the equity instruments of an Indian company in accordance with the NDI Rules, (a) may transfer such equity instrument to a person resident in India by way of sale or gift; or (b) may sell such equity instrument on a recognized Stock Exchange in India through a registered broker.

 

 

In enacting the NDI Rules, the Central Government superseded the Foreign Exchange Management (Transfer or Issue of Securities by a person Resident Outside India) Regulations, 2017.

 

The NDI Rules give the readers a consolidated view of the transfer or issue of securities by a person resident outside India and also clarifies several aspects of FDI. These regulations aim towards further simplification and provide greater clarity on differentiation between FDI and FPI.

 

ADS guidelines

 

Shares of Indian companies represented by ADSs may be approved for issuance to foreign investors by the Government of India under the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993 (the “1993 Scheme”), as modified from time to time, promulgated by the Government of India. The 1993 Scheme is in addition but without prejudice to the other policies or facilities, as described below, relating to investments in Indian companies by foreign investors. The issuance of ADSs pursuant to the 1993 Scheme also affords to holders of the ADSs the benefits of Section 115AC of the Income Tax Act, 1961 for purpose of the application of Indian tax laws. In March 2001, the RBI issued a notification permitting, subject to certain conditions, two-way fungibility of ADSs. This notification provides that ADSs converted into Indian shares can be converted back into ADSs, subject to compliance with certain requirements and the limits of sectorial caps.

 

The Ministry of Finance, Government of India, enacted The Depository Receipts Scheme, 2014 (the “Depository Receipts Scheme”) effective as of December 15, 2014. In order to facilitate the issuance of depository receipts by Indian companies outside India, the Depository Receipts Scheme repeals the former provisions dealing with depository receipts in the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993. The Depository Receipts Scheme now governs the issue or transfer of permissible securities to a foreign depository by eligible persons and defines the rights and duties of a foreign depository and obligations of a domestic custodian.

 

There are certain relaxations provided under the Depository Receipts Scheme subject to prior approval of the Ministry of Finance. For example, a registered broker is permitted to purchase shares of an Indian company on behalf of a person resident outside of India for the purpose of converting those shares into ADSs. However, such conversion is subject to compliance with the provisions of the Depository Receipts Scheme and the periodic guidelines issued by the regulatory authorities. Therefore, depository receipts converted into Indian shares may be converted back into depository receipts, subject to certain limits of sectorial caps.

 

Under the Depository Receipts Scheme, a foreign depository may take instructions from depository receipts holders to exercise the voting rights with respect to the underlying equity securities. Additionally, a domestic custodian has been defined to include a custodian of securities, an Indian depository, a depository participant or a bank having permission from SEBI to provide services as custodian. Further, the Depository Receipts Scheme provides that the aggregate of permissible securities which may be issued or transferred to foreign depositories for issue of depository receipts, along with permissible securities already held by persons resident outside India, shall not exceed the limit on foreign holding of such permissible securities under the Foreign Exchange Management Act, 1999.

 

The Securities and Exchange Board of India (“SEBI”) introduced a framework for the issuance of Depository Receipts (“DRs”) by companies listed on stock exchanges in India and for the “permissible securities” underlying any such DR issuance (“DR Framework”), pursuant to its circular dated October 10, 2019. Further, the SEBI issued amendments dated November 28, 2019 and December 18, 2020, on the framework for issuance of DRs and amended the scope and process for permissible holder of DRs, respectively. The requirements for issuance of DRs set out in the DR Framework are in addition to the requirements under the Companies Act, 2013 and rules thereunder, the 2014 Scheme and the foreign exchange regulations. The key aspects provided under the DR framework are:

 

·

Eligible Issuer –Only a company incorporated in India and listed on a recognized stock exchange in India is allowed to issue the underlying securities for issuance of DRs, which must be permissible securities (as discussed below), and only their holders may transfer such underlying securities.

 

·

Permissible Holders – Indian residents and NRIs are not allowed to be permissible holders or beneficial owners of DRs. However, this restriction is not applicable in case the DRs are issued to NRIs pursuant to any share-based employee benefit scheme(s), that are implemented by the listed company in line with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, or any bonus issue or any rights issue of shares.

 

·

Obligations of Listed Company – The listed company must comply with applicable laws and regulations and ensure that only permissible securities are issued as the underlying securities for any DR issuance. Further, the listed company must issue such permissible securities only to the permissible holders. The listed company shall be responsible for identification of any holder (like NRI), who are issued DRs in terms of any share-based employee benefit scheme(s). Further, the listed company must provide the information of NRI DR holders to the designated depository in India, for the purpose of monitoring foreign investment limits.

 

 

·

Minimum Public Shareholding – In the case of issuance of new DRs, the listed company shall ensure that the limit on foreign holding of permissible securities as prescribed under applicable FEMA regulations is not exceeded and shall comply with the minimum public shareholding norms in India, after excluding the permissible securities held by the depository.

 

·

Minimum Price - The minimum price for the issuance or transfer of permissible securities is the price applicable to the corresponding mode of issue (i.e., public offer, preferential allotment or qualified institutions placement) to domestic investors in India under applicable laws.

 

The jurisdictions where DRs may be issued and exchanges where DRs may be listed pursuant to the DR Framework were notified pursuant to a circular dated November 28, 2019. While the DR framework for listed entities has been operationalized, further amendments and requirements may be notified from time to time.

 

Under the DR framework, ‘permissible securities’ has also been defined to mean “equity shares and debt securities, which are in a dematerialized form and rank pari passu with the securities issued and listed on a Recognized stock exchange “. Previously, under the 2014 Depository Receipts Scheme, companies were only required to comply with eligibility requirements pertaining to prohibition from accessing capital markets or dealing in securities.

The Department of Economic Affairs, Ministry of Finance made amendments to certain provisions of the Securities Contracts (Regulation) Rules, 1957 pursuant to Securities Contracts (Regulation) (Amendment) Rules, 2015, on February 25, 2015. An amended, the “public shareholding” for our equity shares held by the public includes shares underlying depository receipts if the holder of such depository receipts has the right to issue voting instruction and such depository receipts are listed on an international stock exchange in accordance with the Depository Receipts Scheme.

 

Fungibility of ADSs

 

A registered broker in India can purchase shares of an Indian company that issued ADSs, on behalf of a person residing outside India, for the purposes of converting the shares into ADSs.

 

The Depository Receipts Scheme states that the aggregate of permissible securities which may be issued or transferred to foreign depositories for issue of depository receipts, along with permissible securities already held by persons resident outside India, shall not exceed the limit on foreign holding of such permissible securities under the Foreign Exchange Management Act, 1999.

 

Transfer of ADSs

 

A person resident outside India may transfer ADSs held in an Indian company to another person resident outside India without any permission. A person resident in India is not permitted to hold ADSs of an Indian company, except in connection with the exercise of stock options.

 

Shareholders resident outside India who intend to sell or otherwise transfer equity shares within India should seek the advice of Indian counsel to understand the requirements applicable at that time.

 

9.A.6. Limitations or qualifications

 

Not applicable.

 

9.A.7. Other rights

 

Not applicable.

 

ITEM 10.B. Memorandum and articles of association

 

10.B.3. Shareholder rights

(a)

Dividend rights.

 

Our board of directors recommends the payment of a dividend which is then declared by our shareholders in a general meeting. However, the board is not obliged to recommend a dividend. Similarly, under our Articles of Association and the Companies Act, our shareholders may, at the Annual General Meeting, declare a dividend in an amount less than that recommended by the board of directors, but they cannot increase the amount of the dividend. The dividend declared by the shareholders, if any, is required to be distributed and paid to shareholders in proportion to the paid up value of their shares within 30 days of the declaration by the shareholders at the Annual General Meeting. Pursuant to our Articles of Association, our board of directors has discretion to declare and pay interim dividends without shareholder approval.

 

Under the Companies Act, 2013 and rules made thereunder, dividends may be paid out of profits of a company in that financial year in which the dividend is declared after providing for depreciation or out of the undistributed profits of previous fiscal years after providing for depreciation. Before declaring any dividend in any financial year, a company may transfer a percentage of its profits which it considers appropriate to its reserves.

 

The Companies Act, 2013 further provides that in case of an inadequacy or absence of profits in any year, a maximum of 10% of paid-up capital can be declared as dividend, subject to other provisions contained in the Companies (Declaration and Payment of Dividend) Rules, 2014.

 

The Companies Act, 2013 provides that any dividends that remain unpaid or unclaimed after a period of 30 days from the date of their declaration are to be transferred to a special bank account opened by the company at an approved bank. We transfer any dividends that remain unpaid or unclaimed within 7 days from the date of expiration of such 30 days’ period to such account. If any amount in this account has not been claimed by the eligible shareholders within seven years from the date of the transfer, we transfer the unclaimed dividends to an Investor Education and Protection Fund established by the Government of India under the provisions of the Companies Act, 2013.

(b)

Voting rights.

 

All of our equity shares have the same voting rights. For all matters submitted to vote in a shareholders meeting of the Company, every holder of an equity share, as reflected in the records of the Company as on the record date set for the shareholders meeting, shall have one vote in respect of each share held. There are no cumulative voting rights. If you are an ADR holder and the depositary asks you to provide it with voting instructions, you may instruct the depositary how to exercise the voting rights for the shares which underlie your ADSs. After receiving voting materials from us, the depositary will notify the ADR holders of any shareholder meeting or solicitation of consents or proxies. This notice will describe how you may instruct the depositary to exercise the voting rights for the shares which underlie your ADSs. For instructions to be valid, the depositary must receive them on or before the date specified. The depositary will try, as far as is practical, subject to the provisions of and governing the underlying shares or other deposited securities, to vote or to have its agents vote the shares or other deposited securities as you instruct. The depositary will only vote or attempt to vote as you instruct. The depositary will not itself exercise any voting discretion. Neither the depositary nor its agents are responsible for any failure to carry out any voting instructions, for the manner in which any vote is cast or for the effect of any vote.

 

As per SEBI (Listing Obligations and Disclosure Requirements) Regulations it is mandatory for e-voting facilities to be provided to all shareholders in respect of all shareholders’ resolutions in accordance with the procedure prescribed in the Companies (Management and Administration) Rules, 2014. Our procedures comply with such rules and provide the opportunity for electronic voting by shareholders.

 

The Companies Act, 2013 and our Articles of Association require that at least two-thirds of our directors be subject to re-election by our shareholders in rotation and that, at every annual general meeting, one-third of the directors who are subject to re-election must retire from the Board. However, if eligible for re-election, they may be re-elected by our shareholders at the annual general meeting.

 

Due to India’s adoption of the Companies Act, 2013, effective as of April 1, 2014, non-full time independent directors are no longer required to retire from the Board by rotation. As a result, at annual general meetings held after April 1, 2014, our non-full time independent directors are excluded from the calculation of the two-thirds directors who are subject to re-election by our shareholders in rotation.

 

Our non-full time independent directors hold office for a term of up to 5 consecutive years from the date of initial appointment under the provisions of the Companies Act, 2013. The appointment of non-full time independent director shall require approval of our shareholders through a special resolution within a period of three months from the date of appointment or at next shareholders meeting whichever is earlier Each such non-full time independent director shall be eligible for re-appointment for a second term of up to 5 consecutive years if determined in a special resolution passed by our shareholders.

(c) Rights to share in our profits.

 

See “Dividend Rights” in subsection (a) above.

(d) Rights to share in any surplus in the event of our liquidation.

As per the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016, certain payments have preference over payments to be made to equity shareholders. These payments having preference include payments to be made by us to our employees, taxes, payments to secured and unsecured lenders and payments to holders of any shares entitled by their terms to preferential repayment over the equity shares.

 

 

In the event of our company’s liquidation, all preferential amounts, if any, shall be discharged by us. Our remaining assets shall be distributed to the holders of our equity shares based upon the proportion of the number of shares held to the total equity shares outstanding as on that date.

 

(e) Redemption provisions.

 

Not applicable.

(f) Sinking fund provisions.

 

Not applicable.

(g) Liability to further capital calls by us.

 

Although our Memorandum and articles of association do provide for certain capital call obligations in respect of any monies unpaid on the shares of a shareholder, all of our issued and outstanding shares have been fully paid in. Accordingly, our shareholders are not obliged to make further contributions with respect to their shares.

(h) Any provision discriminating against any existing or prospective holder of such securities as a result of such shareholder owning a substantial number of shares.

 

No such provisions are applicable under our Memorandum and articles of association. However, for a summary of the restrictions under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (the “2011 Takeover Code”), see item 9.A.5. “Type and class of securities” set forth above.

 

10.B.4. Changes to shareholder rights

 

Currently, only one class of equity shares is authorized and outstanding under our Memorandum and articles of association.  However, if at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may be varied with the consent in writing of the holders of such proportion of the issued shares of that class as maybe specified in the Companies Act or rules made thereunder, or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class. If a capital increase is approved, then our shareholders would generally have certain pre-emptive rights as described above.

 

10.B.6. Limitations on rights to own securities

 

No limitations on the rights to own securities are applicable under our memorandum and articles of association. However, for a summary of the restrictions on transfers applicable to both foreign direct investments and portfolio investments, including the requirements under Indian law applicable to the issuance and transfer of ADSs, see item 9.A.5. “Type and class of securities” set forth above.

 

10.B.7 Change in control

 

No provisions that would have an effect of delaying, deferring or preventing a change in control of the company are applicable under our Memorandum and articles of association. However, for a summary of the restrictions under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, see item 9.A.5. “Type and class of securities” set forth above.

 

10.B.8 Disclosure of shareholdings

 

The Companies Act requires that, where the registered owner of shares does not hold the beneficial interest in such shares, both the registered owner and the beneficial owner of such equity shares are required to disclose to the company the nature of their interest, particulars of the registered owner and certain other details.

 

 

 

10.B.9 Differences in the law

 

See the references to Indian law throughout this “Item 10.B Memorandum and articles of association.”

 

10.B.10 Changes in capital

 

The requirements of the memorandum and articles of association regarding changes in capital are not more stringent than the requirements of Indian law.

 

ITEM 12. Description of Securities Other than Equity Securities

 

12.A. Debt Securities.

 

Not applicable.

 

12.B. Warrants and Rights

 

Not applicable.

 

12.C. Other securities

 

Not applicable.

 

12.D. American Depositary Shares

 

J.P. Morgan Chase Bank, N.A. is the depositary for our American depositary shares program pursuant to the Amended and Restated Deposit Agreement (the “Deposit Agreement”). American depositary shares (“ADSs”) represent ownership interests in securities that are on deposit with the depositary. ADSs are normally represented by certificates that are commonly known as American depositary receipts (“ADRs”) or by book-entry statements which reflect ownership of ADSs. Each ADS represents an ownership interest in one share which we have deposited with the custodian, as agent of the depositary, under the Deposit Agreement. In the future, each ADS will also represent any securities, cash or other property deposited with the depositary but not distributed by it directly to you. 

 

Only the depositary is registered as shareholder in our share register. An ADR is not an equity share and an ADR holder is not a shareholder of our company. The ADR is vested with rights defined and enumerated in the Deposit Agreement.

 

JPMorgan Chase Bank, N.A.’s office is located at 383 Madison Avenue, New York, New York, 10179. 

 

You may hold ADSs either directly or indirectly through your broker or other financial institution. If you hold ADSs directly, by having an ADS registered in your name on the books of the depositary, you are an ADR holder. This description assumes you hold your ADSs directly. If you hold the ADSs through your broker or financial institution nominee, you must rely on the procedures of such broker or financial institution to assert the rights of an ADR holder described in this section. You should consult with your broker or financial institution to find out what those procedures are. 

 

Because the depositary’s nominee will actually be the registered owner of the shares, you must rely on it to exercise the rights of a shareholder on your behalf. The obligations of the depositary and its agents are set out in the Deposit Agreement. The Deposit Agreement and the ADSs are governed by New York law. 

 

The following is a summary of the material terms of the Deposit Agreement. Because it is a summary, it does not contain all the information that may be important to you. For more complete information, you should read the entire Deposit Agreement and the form of ADR which contains the terms of your ADSs. A copy of the Deposit Agreement is filed as an exhibit to our Form F-6 filed with the SEC on October 23, 2024.

 

 Share Dividends and Other Distributions 

 

We may make various types of distributions with respect to our securities. The depositary has agreed to pay to you the cash dividends or other distributions it or the custodian receives on shares or other deposited securities, after deducting it’s and the custodian’s expenses and any fees owing with respect thereto. You will receive these distributions in proportion to the number of underlying shares your ADSs represent. 

 

Except as stated below and to the extent the depositary is legally permitted, it will deliver such distributions to ADR holders in proportion to their interests in the following manner:

 

Cash

 

The depositary will distribute any U.S. dollars available to it resulting from a cash dividend or other cash distribution if this is practicable and can be done on a reasonable basis. The depositary will attempt to distribute this cash in a practicable manner, and may deduct any taxes required to be withheld, any expenses of converting foreign currency and transferring funds to the United States and other expenses and adjustments.

 

 

Shares

 

In the case of a distribution in shares, the depositary will issue additional ADRs to evidence the number of ADSs representing such shares. It will only issue whole ADSs. The depositary will sell any shares which would result in fractional ADSs and distribute the net proceeds to the ADR holders entitled to them.

 

Rights to receive additional shares

 

In the case of a distribution of rights to subscribe for additional shares or other rights, if we provide satisfactory evidence that the depositary may lawfully distribute such rights, the depositary may arrange for ADR holders to instruct the depositary as to the exercise of those rights. However, if we do not furnish that evidence or if the depositary determines it is not practicable to distribute the rights, the depositary may:

·

sell the rights if practicable and distribute the net proceeds as cash, or

·

allow the rights to lapse, in which case ADR holders will receive nothing.

 

We have no obligation to furnish such evidence, or to file a registration statement under the Securities Act in order to make any rights available to ADR holders.

 

Other distributions 

 

In the case of a distribution of securities or property other than those described above, the depositary may either:

·

distribute those securities or property in any manner it deems equitable and practicable,

·

to the extent the depositary deems distribution of such securities or property not to be equitable and practicable, sell those securities and distribute any net proceeds in the same way it distributes cash, or

·

hold the distributed property, in which case the ADSs will also represent the distributed property.

 

Any U.S. dollars will be paid via wire transfer and/or distributed by checks drawn on a bank in the United States for whole dollars and cents (fractional cents will be withheld without liability for interest and dealt with in accordance with the depositary’s then current practices).

 

The depositary may choose any practical method of distribution for any specific ADR holder, including the distribution of foreign currency, securities or property, or it may retain those items, without paying interest on or investing them, on behalf of the ADR holder as deposited securities. 

 

The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADR holders.

 

We cannot assure you that the depositary will be able to convert any currency at a specified exchange rate or sell any property, rights, shares or other securities at a specified price, or that any of those transactions could be completed within a specified time period.

 

Deposit, Withdrawal and Cancellation 

 

The depositary will issue ADSs upon the deposit of shares or evidence of rights to receive shares with the custodian. In the case of the currently outstanding ADSs, we previously arranged for the shares to be deposited. 

 

Except for shares that we deposit, no shares may be deposited by persons located in India, residents of India or for, or on the account of, such persons. Under current Indian laws and regulations, except in certain limited circumstances, the depositary cannot accept deposits of outstanding shares and issue ADRs evidencing ADSs representing those shares. 

 

Shares deposited in the future with the custodian must be accompanied by documents, including: instruments showing that such shares have been properly transferred or endorsed to the person on whose behalf the deposit is being made; instruments assigning such shares to the depositary, the custodian or their nominee; and proxies entitling the custodian to vote such deposited shares. Additional shares may be deposited with the depositary or custodian only as agreed by the depositary and ourselves and permitted by applicable law.

 

The custodian will hold all deposited shares for the account of the depositary. ADR holders thus have no direct ownership interest in the shares and only have the rights set out in the Deposit Agreement. The custodian will also hold any additional securities, property and cash received on or in substitution for the deposited shares. The deposited shares and any such additional items are referred to as “deposited securities.” 

 

Upon each deposit of shares, receipt of related delivery documentation and compliance with the other provisions of the Deposit Agreement, including the payment of the fees and charges of the depositary and any taxes or other fees or charges owing, the depositary will issue an ADR or ADRs in the name of the person entitled to them evidencing the number of ADSs to which that person is entitled. Certificated ADRs will be delivered at the depositary’s principal New York office or any other location that it may designate as its transfer office.

 

 When you turn in your ADRs for withdrawal at the depositary’s office, the depositary will, upon payment of applicable fees, charges and taxes, and upon receipt of proper instructions, deliver the underlying shares at the custodian’s office. At your risk, expense and request, the depositary may deliver deposited securities at other places that you may request. 

 

The depositary may only restrict the withdrawal of deposited securities in connection with:

 

·

temporary delays caused by closing our transfer books or those of the depositary or the deposit of shares in connection with voting at a shareholders’ meeting, or the payment of dividends,

·

the payment of fees, taxes and similar charges, or

·

compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of deposited securities.

 

U.S. securities laws provide that this right of withdrawal may not be limited by any other provision of the Deposit Agreement. 

 

Once you have withdrawn shares, except in certain limited circumstances, you may be unable to redeposit them under the Deposit Agreement. 

 

If you withdraw the shares evidenced by your ADSs, under Indian law you will be charged a stamp duty which is a specified percentage of the market value of the shares you will be charged in respect of such withdrawn shares.

 

Voting Rights 

 

If you are an ADR holder and the depositary asks you to provide it with voting instructions, you may instruct the depositary as to how to exercise the voting rights for the shares which underlie your ADSs. After receiving voting materials from us, the depositary will notify the ADR holders of any shareholder meeting or solicitation of consents or proxies. This notice will describe how you may instruct the depositary to exercise the voting rights for the shares which underlie your ADSs. In lieu of distribution of such voting materials, the depositary may distribute to you a notice how to retrieve such materials (e.g., by reference to a website containing the materials for retrieval or a contact for requesting copies of the materials). For instructions to be valid, the depositary must receive them on or before the date specified.

 

The depositary will try, as far as is practical, subject to the provisions of the underlying shares or other deposited securities, to vote or to have its agents vote the shares or other deposited securities as you instruct. The depositary will only vote or attempt to vote as you instruct. The depositary will not itself exercise any voting discretion. Neither the depositary nor its agents are responsible for any failure to carry out any voting instructions, for the manner in which any vote is cast or for the effect of any vote.

 

We cannot guarantee that you will receive voting materials in time to instruct the depositary to vote and it is possible that you will not have the opportunity to vote. If you hold your ADSs through brokers, dealers or other third parties, you will have even less time to instruct the depositary to vote.

 

Record Dates 

 

The depositary may fix record dates for the determination of the ADR holders who will be entitled (or obligated, as the case may be):

·

to receive a dividend, distribution or rights,

·

to give instructions for the exercise of voting rights at a meeting of holders of ordinary shares or other deposited securities,

·

for the determination of the registered holders who shall be responsible for the fee assessed by the depositary for administration of the ADR program and for any expenses as provided for in the ADR, or

·

to receive any notice or to act in respect of other matters all subject to the provisions of the Deposit Agreement.

 

Reports and Other Communications 

 

The depositary will make available for inspection by ADR holders any written communications from us which are both received by the custodian or its nominee as a holder of deposited securities and made generally available to the holders of deposited securities. These communications will be furnished by us in English.

 

Fees and Expenses 

 

What fees and expenses will I be responsible for paying? 

 

The depositary may collect from (i) each person to whom ADSs are issued, including, without limitation, issuance against deposit of shares, issuance in respect of share distributions, rights and other distributions, issuance pursuant to a stock dividend or stock split, or issuance pursuant to a merger, exchange of securities or any other transaction or event affecting the ADSs or the deposited shares, and (ii) each person surrendering ADSs for withdrawal of deposited securities or whose ADSs are cancelled or reduced for any reason, U.S.$5.00 for each 100 ADSs (or portion thereof) issued, delivered, reduced, cancelled or surrendered (as the case may be). 

 

The following additional charges shall be incurred by the ADR holders, by any party depositing or withdrawing shares or by any party surrendering ADRs or to whom ADRs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by the Company or an exchange of stock regarding the ADRs or the deposited securities or a distribution of ADRs), whichever is applicable:

·

a fee of up to U.S.$.0.05 per ADS issued, delivered, reduced, cancelled or surrendered, or upon which a distribution is made;

·

a fee of up to U.S.$0.05 per ADS for any Cash distribution made pursuant to the Deposit Agreement;

 

 

·

a fee of U.S.$0.05 per ADS per calendar year (or portion thereof) for services performed, by the depositary in administering our ADR program (which fee may be charged on a periodic basis during each calendar year and shall be assessed against holders of ADRs as of the record date set by the depositary and shall be payable by billing such Holders or by deducting such charge from one or more cash dividends or other cash distributions);

·

any other charge payable by any of the depositary, any of the depositary’s agents, including, without limitation, the custodian, or the agents of the depositary’s agents in connection with the servicing of our shares or other deposited securities (which charge shall be assessed against registered holders of our ADRs as of the record date or dates set by the depositary and shall be payable at the sole discretion of the depositary by billing such registered holders or by deducting such charge from one or more cash dividends or other cash distributions);

·

a fee of up to U.S.$0.05 per ADS for the distribution of securities (other than ADSs or rights to purchase additional ADSs), or the sale of securities in connection with a distribution, in each case by or on behalf of us, the depositary and/or any third party;

·

stock transfer or other taxes and other governmental charges;

·

SWIFT, facsimile transmission or any other method of communication and any applicable delivery charges incurred at your request;

·

transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities;

·

expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars; and

·

a transaction fee per request for cancellation of ADSs as disclosed on the “Disclosures” page (or successor page) of www.adr.com, as updated by the depositary from time to time, and any applicable delivery expenses; and

·

such fees and expenses as are incurred by the depositary or its custodian (including without limitation expenses incurred in connection with compliance with foreign exchange control regulations or any law or regulation relating to foreign investment) in connection with the sale or delivery of deposited securities or the servicing of our equity shares, or otherwise in connection with the depositary’s or its custodian’s compliance with applicable law, rule or regulation.

 

We will pay all other charges and expenses of the depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to time between us and the depositary. The fees described above may be amended from time to time in accordance with the Deposit Agreement.

 

Payment of Taxes 

 

ADR holders must pay any tax or other governmental charge payable by the custodian or the depositary on any ADS or ADR, deposited security or distribution. If an ADR holder owes any tax or other governmental charge, the depositary may:

·

deduct the amount thereof from any cash distributions, or

·

sell deposited securities and deduct the amount owing from the net proceeds of such sale.

 

In either case the ADR holder remains liable for any shortfall. Additionally, if any tax or governmental charge is unpaid, the depositary may also refuse to effect any registration, registration of transfer, split-up or combination of deposited securities or withdrawal of deposited securities (except under limited circumstances mandated by securities regulations). If any tax or governmental charge is required to be withheld on any non-cash distribution, the depositary may sell the distributed property or securities to pay those taxes and distribute any remaining net proceeds to the ADR holders entitled to them.

 

Reclassifications, Recapitalizations and Mergers 

 

If we take actions that affect the deposited securities, including (1) any change in par value, split-up, consolidation, cancellation or other reclassification of deposited securities or (2) any recapitalization, reorganization, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all of our assets, then the depositary may choose to:

·

amend the form of ADR,

·

distribute additional or amended ADRs,

·

distribute cash, securities or other property it has received in connection with such actions,

·

sell any securities or property received and distribute the proceeds as cash, or

·

take no action.

 

If the depositary does not choose any of the above options, any of the cash, securities or other property it receives will constitute part of the deposited securities and each ADS will then represent a proportionate interest in that property.

 

Amendment and Termination 

 

We may agree with the depositary to amend the Deposit Agreement and the ADSs without your consent for any reason. ADR holders must be given at least 30 days notice of any amendment that imposes or increases any fees or charges (other than stock transfer or other taxes and other governmental charges, transfer or registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or affects any substantial existing right of ADR holders. If an ADR holder continues to hold an ADR or ADRs after being notified of these changes, the ADR holder will be considered to have agreed to such amendment. Notwithstanding the foregoing, an amendment can become effective before notice is given if this is necessary to ensure compliance with a new law, rule or regulation.

 

 

No amendment will impair your right to surrender your ADSs and receive the underlying securities. If a governmental body adopts new laws or rules which require the Deposit Agreement or the ADS to be amended, we and the depositary may make the necessary amendments, which could take effect before you receive notice of them. 

 

The depositary may terminate the Deposit Agreement by giving the ADR holders at least 30 days prior notice, and it must do so at our request. If the depositary determines that termination is required by law, or to avoid subjecting it to liability under applicable law, then it need not give ADR holders prior notice of termination. After termination, the depositary’s only responsibility will be (i) to deliver deposited securities to ADR holders who surrender their ADRs, and (ii) to hold or sell distributions received on deposited securities. After the termination date, if the deposited securities are listed and publicly traded on a securities exchange, the depositary may, if permissible and practicable, sell the deposited securities which remain (which sale may be effected in a block sale/single lot transaction) and hold the net proceeds of such sales, without liability for interest, in trust for the ADR holders who have not yet surrendered their ADRs. After making those sales, the depositary shall have no obligations except to account for the proceeds of sale and other cash. The depositary will not be required to invest such proceeds or pay interest on them.

 

After the termination date, if the deposited securities are not listed and publicly traded on a securities exchange, or if for any reason the depositary does not sell the deposited securities, then the depositary shall use its reasonable efforts to cancel all outstanding ADRs and arrange for the deposited securities to be delivered to us or an independent trust company, to be held in trust and transferred to the former ADR holders. However, such deposited securities may be cancelled with no consideration payable to the former ADR holders in certain extenuating circumstances, such as our bankruptcy, insolvency, receivership or liquidation, or if the depositary believes it cannot practicably sell such deposited securities promptly and without undue effort. 

 

Limitations on Obligations and Liability to ADR Holders 

 

The Deposit Agreement expressly limits the obligations and liability of the depositary, ourselves and our respective agents. Neither we nor the depositary nor any such agent will be liable if:

·

a present or future law or regulation governing the deposited securities, a present or future provision of our charter, or an act of God, war or other circumstance beyond our control prevent, delay or subject to any civil or criminal penalty any act which the Deposit Agreement or the ADRs provide shall be done or performed by any one of us,

·

the applicable person shall exercise or fail to exercise any discretion under the Deposit Agreement or the ADR,

·

the applicable person shall perform its obligations without gross negligence or willful misconduct,

·

the applicable person shall take any action or inaction in reliance upon the advice of or information from legal counsel, accountants, any person presenting shares for deposit, any registered holder of ADRs, or any other person believed by it to be competent to give such advice or information, or

·

the applicable person shall rely upon any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties.

 

Neither the depositary nor its agents have any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities or the ADRs. It and its agents are only obligated to appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities or the ADRs, which in its opinion may involve it in expense or liability, if indemnity satisfactory to it against all expense (including fees and disbursements of counsel) and liability is furnished as often as it requires. 

 

 

The depositary will not be responsible for:

·

failing to carry out instructions to vote the deposited securities or for the manner in which the deposited securities are voted or the effect of the vote,

·

any delay, error or failure in selling any securities or converting any currency or securities, absent its own willful default or gross negligence,

·

informing ADS holders about any relevant laws, tax matters or legal requirements,

·

the content of any information submitted to it by us for distribution to ADS holders,

·

any ADS holder’s tax consequences or failure to obtain any tax benefits, credits or refunds, or

·

any indirect, special, punitive or consequential damages or lost profits.

 

The depositary may own and deal in deposited securities and in ADSs. 

 

Disclosure of Interest in ADSs 

 

We may from time to time request you and other holders and beneficial owners of ADSs to provide information as to:

·

the capacity in which you and other holders and beneficial owners own or owned ADSs,

·

the identity of any other persons then or previously interested in such ADSs, and the nature of such interest and various other matters.

 

You agree to provide any information requested by us or the depositary pursuant to the Deposit Agreement. The depositary has agreed to use reasonable efforts to comply with written instructions received from us requesting that it forward any such requests to you and other holders and beneficial owners and to forward to us any responses to such requests to the extent permitted by applicable law.

 

We may restrict transfers of the shares where the transfer might result in an ownership of shares in contravention of or exceeding the limits under the governmental approval which we received from the Indian government in connection with this offering, applicable law or our organizational documents. In such cases, we reserve the right to require you to deliver your ADSs for cancellation and withdrawal of the shares underlying such ADSs.

 

 Requirements for Depositary Actions 

 

We, the depositary or the custodian may refuse to:

·

issue, register or transfer an ADR or ADRs;

·

effect a split-up or combination of ADRs;

·

deliver distributions on any such ADRs; or

·

permit the withdrawal of deposited securities (unless the Deposit Agreement provides otherwise), until the following conditions have been met:

·

the holder has paid all taxes, governmental charges, and fees and expenses as required in the Deposit Agreement;

·

the holder has provided the depositary with any information it may deem necessary or proper, including, without limitation, proof of identity and the genuineness of any signature; and

·

the holder has complied with such regulations as the depositary may establish under the Deposit Agreement.

 

The depositary may also suspend the issuance of ADSs, the deposit of shares, the registration, transfer, split-up or combination of ADRs, or the withdrawal of deposited securities (unless the Deposit Agreement provides otherwise), if the register for ADRs or any deposited securities is closed or if we or the depositary decides it is advisable to do so.

 

 Books of Depositary 

 

The depositary or its agent will maintain a register for the registration, registration of transfer, combination and split-up of ADRs. You may inspect such records at the depositary’s designated office during regular business hours. In the case of uncertificated ADRs, the register shall be the Direct Registration System established by The Depository Trust Company.

 

The depositary will also maintain facilities to record and process the issuance, cancellation, combination, split-up and transfer of ADRs. These facilities may be closed from time to time, to the extent not required by law to remain open. 

 

 

EXHIBIT 8

Dr. Reddy’s Laboratories Limited

 

Dr. Reddy’s Laboratories Limited is the parent company. Tabulated below is the list of subsidiaries, joint ventures and associates as of March 31, 2026:

 

Name of the subsidiaries/associates/joint ventures	Country of Incorporation	Percentage of Direct/Indirect Ownership Interest
Aurigene Discovery Technologies (Malaysia) Sdn. Bhd.	Malaysia	100%(1)
Aurigene Oncology Limited (Formerly, Aurigene Discovery Technologies Limited)	India	100%
Aurigene Pharmaceutical Services Limited	India	100%(1)
beta Institut gemeinnützige GmbH	Germany	100%(6)
betapharm Arzneimittel GmbH	Germany	100%(6)
Cheminor Investments Limited	India	100%
Dr. Reddy’s Farmaceutica Do Brasil Ltda.	Brazil	100%
Dr. Reddy’s Laboratories (EU) Limited	United Kingdom	100%(7)
Dr. Reddy’s Laboratories (Proprietary) Limited	South Africa	100%(7)
Dr. Reddy’s Laboratories (UK) Limited	United Kingdom	100%(3)
Dr. Reddy’s Laboratories Canada, Inc.	Canada	100%(7)
Dr. Reddy’s Laboratories Chile SPA.	Chile	100%(7)
Dr. Reddy’s Laboratories Inc.	U.S.A.	100%(7)
Dr. Reddy’s Laboratories Japan KK	Japan	100%(7)
Dr. Reddy’s Laboratories Kazakhstan LLP	Kazakhstan	100%(7)
Dr. Reddy’s Laboratories Malaysia Sdn. Bhd.	Malaysia	100%(7)
Dr. Reddy’s Laboratories New York, LLC	U.S.A.	100%(4)
Dr. Reddy’s Laboratories Philippines Inc.	Philippines	100%(7)
Dr. Reddy’s Laboratories Romania Srl	Romania	100%(7)
Dr. Reddy’s Laboratories SA	Switzerland	100%
Dr. Reddy’s Laboratories Taiwan Limited	Taiwan	100%(7)
Dr. Reddy’s Laboratories (Thailand) Limited	Thailand	100%(7)
Dr. Reddy’s Laboratories LLC, Ukraine	Ukraine	100%(7)
Dr. Reddy’s New Zealand Limited.	New Zealand	100%(7)
Dr. Reddy’s Srl	Italy	100%(8)
Dr. Reddy’s Bio-Sciences Limited	India	100%
Dr. Reddy’s Laboratories (Australia) Pty. Limited	Australia	100%(7)
Dr. Reddy’s Laboratories SAS	Colombia	100%(7)
Dr. Reddy's Netherlands B.V. (formerly Dr. Reddy’s Research and Development B.V.)	Netherlands	100%(9)
Dr. Reddy’s (Beijing) Pharmaceutical Co. Limited	China	100%(7)
DRES Energy Private Limited	India	26%(10)
DRL Impex Limited	India	100%(11)
Dr. Reddy’s Formulations Limited	India	100%
Idea2Enterprises (India) Pvt. Limited	India	100%
Imperial Owners and Land Possessions Private Limited (Formerly, Imperial Credit Private Limited) (Dissolved on August 5, 2025)	India	100%
Industrias Quimicas Falcon de Mexico, S.A. de CV	Mexico	100%
Kunshan Rotam Reddy Pharmaceutical Co. Limited	China	51.33%(2)
Lacock Holdings Limited	Cyprus	100%(7)
Dr. Reddy’s Laboratories LLC	Russia	100%(7)(14)
Promius Pharma LLC	U.S.A.	100%(4)
Reddy Holding GmbH	Germany	100%(7)
Reddy Netherlands B.V.	Netherlands	100%(7)
Reddy Pharma Iberia SAU	Spain	100%(7)
Reddy Pharma Italia S.R.L.	Italy	100%(5)
Reddy Pharma SAS	France	100%(7)
Svaas Wellness Limited (Divested on April 7, 2026)	India	100%
Nimbus Health GmbH	Germany	100%(6)
Dr. Reddy’s Laboratories Jamaica Limited	Jamaica	100%(7)
O2 Renewable Energy IX Private Limited	India	26%(10)
Dr. Reddy’s and Nestle Health Science Limited (Formerly, Dr. Reddy’s Nutraceuticals Limited) (Refer to Note 35.A of these consolidated financial statements for further details)	India	51%
Dr. Reddy’s Employees ESOS Trust	India	Refer to below footnote(13)

 

 

Name of the subsidiaries/associates/joint ventures	Country of Incorporation	Percentage of Direct/Indirect Ownership Interest
Cheminor Employees Welfare Trust	India	Refer to below footnote(13)
Dr. Reddy’s Research Foundation	India	Refer to below footnote(13)
Clean Renewable Energy KK 2A Private Limited (From July 31, 2024)	India	26.99%(10)
Northstar Switzerland SARL (From September 30, 2024)	Switzerland	100%(7)
North Star OpCo Limited (From September 30, 2024)	United Kingdom	100%(12)
North Star Sweden AB (From September 30, 2024)	Sweden	100%(12)
Dr. Reddy's Denmark ApS (From October 4, 2024)	Denmark	100%(7)
Dr. Reddy’s Finland Oy (From December 20, 2024)	Finland	100%(7)
Kunshan Rotam Reddy Medicine Company Limited	China	51.33%(2)(15)
Dr. Reddy’s Laboratories (Vietnam) Company Limited (From May 9, 2025)	Vietnam	100%(7)

 

(1)

Indirectly owned through Aurigene Oncology Limited (Formerly, Aurigene Discovery Technologies Limited).

(2)

Kunshan Rotam Reddy Pharmaceutical Co. Limited and Kunshan Rotam Reddy Medicine Company Limited are subsidiaries as per the Indian Companies Act, 2013, as the Company holds a 51.33% stake. However, the Company accounts for this investment in accordance with IFRS 11, “Joint Arrangements” using the equity method and does not consolidate it in the Company’s financial statements.

(3)

Indirectly owned through Dr. Reddy’s Laboratories (EU) Limited.

(4)

Indirectly owned through Dr. Reddy’s Laboratories Inc.

(5)

Indirectly owned through Lacock Holdings Limited.

(6)

Indirectly owned through Reddy Holding GmbH.

(7)

Indirectly owned through Dr. Reddy’s Laboratories SA.

(8)

Indirectly owned through Reddy Pharma Italia S.R.L.

(9)

Indirectly owned through Reddy Netherlands B.V.

(10)

Accounted for using the equity method as per IAS 28, “Investments in Associates and Joint Ventures”.

(11)

Indirectly owned through Idea2Enterprises (India) Pvt. Limited.

(12)

Indirectly owned through Northstar Switzerland SARL.

(13)

The Company does not have any equity interests in this entity but has significant influence or control over it.

(14)

45.19% held directly by Dr. Reddy’s Laboratories Limited.

(15)

Indirectly owned through Kunshan Rotam Reddy Pharmaceutical Co. Limited.

 

EXHIBIT 12.1

 

Certification Pursuant to Section 302 of

the Sarbanes-Oxley Act of 2002

 

I, Erez Israeli, certify that:

 

1.

I have reviewed this annual report on Form 20-F of Dr. Reddy’s Laboratories Limited (the “Company”).

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

 

3.

Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report.

 

4.

The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal control over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.

 

5.

The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

 

	/s/ Erez Israeli
	Erez Israeli
Date: May 29, 2026	Chief Executive Officer

 

 

EXHIBIT 12.2

 

Certification Pursuant to Section 302 of

the Sarbanes-Oxley Act of 2002

 

I, M.V. Narasimham, certify that:

 

1.

I have reviewed this annual report on Form 20-F of Dr. Reddy’s Laboratories Limited (the “Company”).

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

 

3.

Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report.

 

4.

The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.

 

5.

The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

 

	/s/ M.V. Narasimham
	M.V. Narasimham
Date: May 29, 2026	Chief Financial Officer

 

EXHIBIT 13.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. Section 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Annual Report of Dr. Reddy’s Laboratories Limited (the “Company”) on Form 20-F for the year ended March 31, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Erez Israeli, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

	/s/ Erez Israeli
	Erez Israeli
Date: May 29, 2026	Chief Executive Officer

 

 

EXHIBIT 13.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. Section 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Annual Report of Dr. Reddy’s Laboratories Limited (the “Company”) on Form 20-F for the year ended March 31, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, M.V. Narasimham, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

	/s/ M.V. Narasimham
	M.V. Narasimham
Date: May 29, 2026	Chief Financial Officer

 

 

EXHIBIT 15.1

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We consent to the incorporation by reference in the following Registration Statements:

 

1.

Registration Statement (Form S-8 No. 333-101013) pertaining to Dr. Reddy’s Employees Stock Option Scheme, 2002, of Dr. Reddy’s Laboratories Limited;

2.

Registration Statement (Form S-8 No. 333-141072) pertaining to Dr. Reddy’s Employees ADR Stock Option Scheme, 2007, of Dr. Reddy’s Laboratories Limited; and

3.

Registration Statement (Form S-8 No. 333-227193) pertaining to Dr. Reddy’s Employees Stock Option Scheme, 2018, of Dr. Reddy’s Laboratories Limited.

 

of our reports dated May 29, 2026, with respect to the consolidated financial statements of Dr. Reddy’s Laboratories Limited and the effectiveness of internal control over financial reporting of Dr. Reddy’s Laboratories Limited included in this Annual Report (Form 20-F) of Dr. Reddy’s Laboratories Limited for the year ended March 31, 2026.

 

/s/ Ernst & Young Associates LLP

 

May 29, 2026