1

INDEX
S.NO 1. 2. 3. 4. CONTENTS Dr.Reddys Company History Dr.Reddys Statistics Dr.Reddys Logo Dr.Reddys ie-!ps " #nn!a$ !rno%er 5. Dr.Reddys (rgani)ation Str!ct!re 1+-22 " *anagemant 6. Dr.Reddys ,inancia$ Statements .ro/it and Loss #cco!nts 0a$ance S1eets &. '. +. Dr.Reddys Ratio #na$ysis Conc$!sion 0i2$iograp1y 34-4' 4+ 50-51 23-33 PAGE NO. 10-12 13-14 15-16 1&-1'

DR.REDDYS

COMPANY HISTORY

HISTORY:
Dr. Reddy's Laboratories Ltd. is one of India's leading pharmaceutical companies with global ambitions. The company has departed from the Indian pharmaceutical mar et mainstream of copying patented drugs to pursue the de!elopment of its own""patentable"" molecules. #s such$ the company has already achie!ed success with a number of promising anti"diabetic molecules. #t the same time$ Dr. Reddy's is pursuing a share of the lucrati!e$ but highly competiti!e$ %.&. generics mar et$ including the higher"margin 'branded generic' mar et. Dr. Reddy's operates through se!eral strategic business units$ including( )randed *inished Dosages+ ,eneric *inished Dosages+ )ul #cti!es+ -ustom -hemicals+ )iotechnology+ Diagnostics+ -ritical -are+ and Disco!ery Research. # leader in its domestic mar et$ the company is also acti!e on the international scene$ which accounted for ./ percent of the company's total sales of Rs 10 billion 12332 million4 in 2553. 6orth #merica contributed 32 percent of sales$ while Russia added 20 percent. The rest of the company's international re!enues were generated through the #sian$ #frican$ and &outh #merican mar ets. Dr. Reddy's is led by founder and -hairman Dr. #n7i Reddy and -89 1and Reddy's son"in"law4 ,.:. ;rasad. Dr. Reddy's Laboratories was the first #sian pharmaceutical company$ e<cluding =apan$ to list on the 6ew >or &toc 8<change.

Bulk Actives to Generics in the 1980s:

In 13?5$ the Indian go!ernment$ then led by Indira ,handi$ abrogated laws respecting international pharmaceutical patents. The mo!e$ meant to reduce the cost of pro!iding healthcare to India's large and e<ceedingly poor population$ had the effect of supercharging the country's pharmaceutical sector. @ith a long history in process chemistry$ and a large and highly educated pool of scientists$ the sector Auic ly became e<perts at re!erse"engineering$ and then copying$ the drugs de!eloped by the world's large multinationals.

The new industry Auic ly became one of the world's most energetic mar ets""by the 1335s$ there were more than 25$555 companies operating in India's pharmaceuticals industry. Indian producers were able to produce drugs and their components for a fraction of the cost of their @estern counterparts$ and Auic ly found an enormous demand throughout the de!eloping world. >et the highly competiti!e domestic mar et$ as well as the slender margins a!ailable from the copied""many would call them pirated""drugs forced the Indian companies to de!elop highly cost"effecti!e manufacturing and mar eting models. Reddy remained with ID;L into the early 13?5s. The change of law and the rise of new opportunities in the pharmaceutical industry$ howe!er$ encouraged him to set up his own business$ and in the mid"13?5s$ Reddy founded a company for producing and selling bul acti!es""the basic ingredients of drug compounds""to pharmaceutical manufacturers. Reddy's clientele soon featured a host of national and multinational companies$ such as )urroughs @elcome and others. In the early 1305s$ howe!er$ Reddy sought to aim higher and establish himself as a manufacturer of finished products. In 130/$ Reddy founded Dr. Reddy's Laboratories$ using 2/5$555 of his own$ bac ed by a ban loan for 2125$555. Reddy 7umped into the mar et of producing copies$ ta ing ad!antage of the 13?5 law. #s he told Forbes: '@e are products of that. )ut for that$ we wouldn't be here. It was good for the people of India$ and it was good for this company.' The company achie!ed another crucial milestone in 130? when it gained %.&. *D# appro!al for its ibuprofen formulation. That appro!al$ which was coupled with the all" important *D# certification of its factory$ mar ed the start of the company's international formulations e<ports. Risking on Research in the 1990s )y the early 1335s$ Reddy's$ li e its Indian counterparts$ boasted a wide range of 'copied' drugs in its portfolio. International sales were also becoming an increasingly important part of the company's total re!enues$ a trend boosted by the company's entry B

into the Russian mar et in 1331. That country later grew into one of the company's primary e<port mar ets. Reddy's shift initially met with s epticism from the Indian community. #s Reddy told the Financial Times: 'I made a statement in )angalore in 1333. I said( 'Don't thin that because we don't ha!e millions of dollars we cannot in!ent new drugs. Don't shy away from this.' )ut nobody had the con!iction that an Indian company could disco!er anything.' 6onetheless$ for its research and de!elopment effort$ Reddy's adopted a standard practice among e!en the largest multinationals$ that of de!eloping 'analogue' preparations of e<isting drugs. )y slightly altering the composition of a molecule or preparation$ Reddy would be able to present a new drug$ which was sufficiently different chemically to achie!e a separate patent. The shift into research represented only one prong of Dr. Reddy's ambitions. In its determination to become a player in the global mar et$ the company mo!ed to end production of illegal copies and instead shift its operations to the manufacture of""legal"" generic drugs. In 133/$ the company placed a rights issue of 2/0 million in order to construct a new facility dedicated to producing generic drugs capable of meeting the legislati!e reAuirements of @estern mar ets. The company also opened a %.&. subsidiary in 6ew =ersey that year. )y 133B$ Reddy's initial research and de!elopment efforts had already paid off$ as the company filed its first patent application for a new and promising anti"diabetes formulation. The company successfully completed laboratory testing on the drug$ an insulin sensitiCer dubbed balaglitaCone by 133?. >et$ lac ing the funds to engage in its own clinical testing$ the company placed the patent up for grabs$ and licensed it to 6o!o 6ordis in 133?. This mar ed a first for an Indian"de!eloped drug. The following year$ 6o!o 6ordis acAuired the license for Dr. Reddy's second insulin sensitiCer$ ragaglitaCar. Going Global in the 21th Century

The year 133? mar ed a new era for Dr. Reddy's. In that year$ the %.&. *D# adopted new rules$ designed to encourage the growth of the generic drugs mar et in the %nited &tates$ which pro!ided a si<"month e<clusi!ity period for the first company to gain appro!al to mar et newly a!ailable drugs in a generic form. Dr. Reddy's decided to get in on the action""as an estimated 2.5 billion of drugs was e<pected to outgrow their patents o!er the ne<t ten years""and in 133? the company filed an abbre!iated new drug application 1#6D#$ used for registering a drug in its generic formula4 for a generic !ersion of the popular anti"ulcer medication Dantac. )uoyed by its early success$ Dr. Reddy's mo!ed to e<pand its operations at the turn of the century. In 1333$ the company made a new acAuisition$ buying up #merican Remedies Limited$ based in -hennai$ boosting its formulations capacity. That year$ also$ the company set up a research and de!elopment subsidiary$ Reddy %& Therapeutics$ in #tlanta$ ,eorgia$ placing part of its drug disco!ery effort closer to the %.&. mar et. In 2555$ the company made another important acAuisition$ this time of -heminor Drugs Limited$ which enabled Dr. Reddy's to claim the number three spot among Indian pharmaceutical companies. That year$ the company launched the commercial distribution of its first generics in the %nited &tates. )ac home$ the company's research efforts had paid off with the filing of an In!estigational 6ew Drug #pplication for an anti"cancer molecule de!eloped in the company's labs. Dr. Reddy's global ambitions now too it to the 6ew >or &toc 8<change$ where the company listed its stoc in 2551$ becoming the first #sian pharmaceutical company outside of =apan to do so. The company clearly re!ealed its ambitions$ as Reddy told Business Week: '@e want to be a truly inno!ati!e company disco!ering and mar eting drugs the world o!er.' That year$ the company scored a new success in its research acti!ities$ licensing a second"generation anti"diabetic molecule to 6o!artis in a deal worth some 2BB million. Eeanwhile$ on the generics front$ the company was lifted when its application for a /5mg generic !ersion of the popular anti"depressi!e ;roCac was awarded a 105"day e<clusi!ity period. That period generated some 2B. million""nearly all profit""for the company.

The year 2552 also mar ed the company's first o!erseas acAuisition$ when it paid F3 million to acAuire the %nited Gingdom's )E& Laboratories Ltd. and its mar eting and distribution subsidiary Eeridian Healthcare Ltd. That purchase enabled the company to e<pand into the %.G.""and ultimately 8uropean""generics mar et. #t the end of 2552$ Dr. Reddy's scored a new !ictory in the %.&. mar et$ when it successfully defeated lawsuits lobbied by ;fiCer to pre!ent the Indian company's mar eting of its own !ariant of the pharmaceutical giant's 6o!asc. The company then began preparations to introduce its !ersion of the drug in 2553. >et the new compound was e<pected to mar a new step for the company$ as it became determined to enter the higher"margin branded generics category. Dr. Reddy's bac ed this change in strategy with a new portfolio of drugs$ including the filing of an #6D# for fe<ofenadine H-I 1better nown as #llegra$ from #!entis4 in #pril 2553. In =uly of that year$ the company scored a new !ictory when it was granted tentati!e *D# appro!al to de!elop and mar et generic !ersions of the )ristol Eyers &Auibb drug &erCone. Dr. Reddy's appeared well on its way to achie!ing its goal of becoming a global pharmaceutical company. Principal ubsi!iaries: #urantis *armaceutica Ltda 1)raCil+ B5I4+ #urigene Disco!ery Technologies Inc. 1%.&.#.4+ #urigene Disco!ery Technologies Limited+ -heminor Drugs Limited+ -ompact 8lectric Limited+ Dr. Reddy's 8<ports Limited 122I4+ Dr. Reddy's *armaceutica Do )raCil Ltda.+ Dr. Reddy's Laboratories 18%4 Limited 1%.G.4+ Dr. Reddy's Laboratories 1;roprietary4 1&outh #frica4+ Dr. Reddy's Laboratories 1%G4 Limited+ Dr. Reddy's Laboratories Inc. 1%.&.#.4+ DRL In!estments Limited India+ Gunshan Rotam Reddy ;harmaceutical -o. Limited 1-hina+ B1I4+ 999 =: Reddy )iomed Limited 1Russia4+ ;athnet India ;ri!ate Limited 1/3I4+ Reddy #ntilles 6.:. 1#ntilles4+ Reddy -heminor &.#. 1*rance4+ Reddy 6etherlands ).:.+ Reddy ;harmaceuticals Hong Gong Limited+ Reddy ;harmaceuticals &ingapore+ Reddy %& Therapeutics Inc.+ Deno!us )iotech Limited. J

Principal Co"petitors: R;, 8nterprises+ ,la<o&mithGline -onsumer Healthcare Ltd.+ 8ast India ;harmaceutical @or s Ltd.+ -ipla Ltd.+ -oncept ;harmaceuticals Ltd.+ Ghandelwal Laboratories Ltd.+ Dabur India Ltd.

DR.REDDYS

STATISTICS

STATISTICS:
Public Co"pany #ncorporate!: 130/ $"ployees: B$?3. ales: Rs 10.51 billion 12331.0 million4 125534 tock $%changes: )ombay 6ew >or &icker y"bol: RD> 'A#C: 32B/12 ;harmaceutical ;reparation Eanufacturing

A!!ress:
?"1"2?$ #meerpet Hyderabad$ #ndhra ;radesh B55 51. India &elephone: 31"/5"3?3"13/. (a%: 31"/5"3?3"13BB http(KKwww.drreddys.com

15

DR . REDDYS

LOGO

11

COMPANY LOGOS:
'e) logo:

*l! logo:

12

DR.REDDYS

TIE-UPS & ANNUAL TURNOVER

13

NATCO PHARMA, DR REDDYS IN CANCER DRUG TIEUP:

1+ April 2009,
Eumbai( Drug ma er 6atco ;harma Ltd said on @ednesday it has entered into an agreement with Dr ReddyLs Laboratories Ltd to 7ointly de!elop and sell generic cancer products. Dr ReddyLs will pay an undisclosed amount upfront for securing the rights to sell the products and for capacities to ma e the drugs$ 6atco said in a statement to the stoc e<change$ adding the firms also ha!e a profit"sharing agreement in place. The deal co!ers oral and in7ectible drugs$ including paclita<el$ the generic form of #bra<is )ioscienceLs breats cancer drug #bra<ane. 6atco will e<clusi!ely supply the drugs to Dr ReddyLs$ which will sell them globally$ it said. The deal could be e<panded to include more products$ 6atco added. 6atco shares ended up 0.3I at Rs?1.35 in a firm Eumbai mar et.

RECENT TURNOVER OF THE COMPANY:

-y!eraba!, .ay 18, 2009:
1I#6&4 -ity"based drug ma7or Dr ReddyLs Laboratories Eonday reported 03 percent 7ump in net profits to Rs.0B5 crore 121.? million4 in 2550"53 from Rs./B5 crore the year before. The total income of the company grew 33 percent to Rs..$3/5 crore last fiscal from Rs.B$555 crore in 255?"50$ the company said in a regulatory filing. Dr ReddyLs$ which boo ed a fore< loss of Rs..3./ crore for the fiscal$ owed its growth to the successful launch of the generic !ersion of ,la<o&mithGlineLs Imitre< in 6o!ember 2550. The drug is used to treat migraines.

1/

DR.REDDYS

ORGANISATION STRUCTURE & MANAGEMENT

1B

ORGANIZATION STRUCTURE AND MANAGEMENT:

Boar! o/ 0irectors:
Dr ReddyLs )oard of Directors comprises eminent indi!iduals from di!erse fields. The )oard acts with autonomy and independence in e<ercising strategic super!ision$ discharging its fiduciary responsibilities$ and in ensuring that the management obser!es the highest standards of ethics$ transparency and disclosure. 9ur directors are e<perts in the di!erse fields of medicine$ chemistry and medical research human resource de!elopment$ business strategy$ finance$ and economics. They re!iew all significant business decisions$ including strategic and regulatory matters. 8!ery member of the )oard$ including the non"e<ecuti!e directors$ has full access to any information related to our company. -ommittees appointed by the )oard focus on specific areas$ ta e decisions within the authority delegated to them and ma e specific recommendations to the )oard on matters in their areas or pur!iew. 1hole ti"e !irectors: 12 0r2 An3i Re!!y, -hairman. 22 G 4 Prasa!, 8<ecuti!e :ice -hairman and -hief 8<ecuti!e 9fficer. 52 atish Re!!y, Eanaging Director M -hief 9perating 9fficer.

Co""ittees o/ the Boar!:

-ommittees appointed by the )oard focus on specific areas and ta e informed decisions within the framewor of delegated authority$ and ma e specific recommendations to the )oard on matters in their areas or pur!iew. #ll decisions and recommendations of the committees are placed before the )oard for information or for appro!al.

1.

@e ha!e si< )oard"le!el -ommittees$ namely

The #udit -ommittee The -ompensation -ommittee The ,o!ernance -ommittee The &hareholders' ,rie!ance -ommittee The In!estment -ommittee The Eanagement -ommittee

The members of the -ommittees of )oard are as under( Au!it Co""ittee: Dr. 9m ar ,oswami 1-hairman4 Galpana Eorparia Ra!i )hoothalingam . .anage"ent Co""ittee: &atish Reddy 1-hairman4 , : ;rasad Ra!i )hoothalingam Co"pensation Co""ittee: Ra!i )hoothalingam 1-hairman4 Galpana Eorparia Dr. =; Eoreau. #nvest"ent Co""ittee ( , : ;rasad 1-hairman4 Ra!i )hoothalingam &atish Reddy.

1?

Governance Co""ittee : #nupam ;uri 1-hairman4 Dr. 9m ar ,oswami. harehol!ers6 Grievance Co""ittee: Ra!i )hoothalingam 1-hairman4 , : ;rasad &atish Reddy.

.anage"ent &ea":
The Eanagement -ouncil is the top tier of our company's management structure. The management of Dr. Reddy's has de!eloped and implemented policies$ procedures and practices that attempt to translate our company's !ision$ mission and purpose into reality. The management also identifies$ measures$ monitors and controls the ris s factors in the business and ensures safe$ sound and efficient operation. The Eanagement -ouncil meets e!ery Auarter under the chairmanship of the -89.

10

DR.REDDYS

FINANCIAL STATEMENTS

13

FINANCIAL STATEMENTS:
)usinesses report information in the form of financial statements issued on a periodic basis. ,##; reAuires the following four financial statements(

Balance heet " statement of financial position at a gi!en point in time. #nco"e tate"ent " re!enues minus e<penses for a gi!en time period ending at a specified date. tate"ent o/ *)ner6s $7uity " also nown as &tatement of Retained 8arnings or 8Auity &tatement. tate"ent o/ Cash (lo)s " summariCes sources and uses of cash+ indicates whether enough cash is a!ailable to carry on routine operations.

Balance heet:
The balance sheet is based on the following fundamental accounting model( Assets 8 9iabilities : $7uity #ssets can be classed as either current assets or fi<ed assets. -urrent assets include cash$ accounts recei!able$ mar etable securities$ notes recei!able$ in!entory$ and prepaid assets such as prepaid insurance. *i<ed assets include land$ buildings$ and eAuipment. &uch assets are recorded at historical cost$ which often is much lower than the mar et !alue. Liabilities represent the portion of a firm's assets that are owed to creditors. Liabilities can be classed as short"term liabilities 1current4 and long"term 1non"current4 liabilities. -urrent liabilities include accounts payable$ notes payable$ interest payable$ wages payable$ and ta<es payable. Long"term liabilities include mortgages payable and bonds payable. 8Auity is referred to as owner's eAuity in a sole proprietorship or a partnership$ and stoc holders' eAuity or shareholders' eAuity in a corporation. The eAuity owners of a

25

business are residual claimants$ ha!ing a right to what remains only after the creditors ha!e been paid.

#nco"e tate"ent:
The income statement presents the results of the entity's operations during a period of time$ such as one year. The simplest eAuation to describe income is( 'et #nco"e 8 Revenue ; $%penses Re!enue refers to inflows from the deli!ery or manufacture of a product or from the rendering of a ser!ice. 8<penses are outflows incurred to produce re!enue. Income from operations can be separated from other forms of income. In this case$ the income can be described by( 'et #nco"e 8 Revenue ; $%penses : Gains ; 9osses where gains refer to items such as capital gains$ and losses refer to capital losses$ losses from natural disasters$ etc.

Cash (lo) tate"ent:

The nature of accrual accounting is such that a company may be profitable but nonetheless e<perience a shortfall in cash. The statement of cash flows is useful in e!aluating a company's ability to pay its bills. *or a gi!en period$ the cash flow statement pro!ides the following information(

&ources of cash %ses of cash -hange in cash balance

The information used to construct the cash flow statement comes from the beginning and ending balance sheets for the period and from the income statement for the period.

21

PR*(#& A'0 9* Particulars

ACC*<'& (*R &-$ =$AR $'0#'G 51252200> A"ount ?Rs2@ 1$.2B.. ?..05 1$B/0.?. "0./1 23..2 1,>+929A B?/.5/ /3.21 1?0... /?./3 B/..3B 2B./0 5.55 1,B1>21A 1.3.21 1B/.05 12.?3 1/2.5? 32./. B.23 //.30 5.55 //.30 "21.15 .B./. 0/1.1/ 5.55 30.2. B.3? ?.B.13 0.BB 155.55 2?1.5B

Income &ales Turno!er 8<cise Duty 6et &ales 9ther Income &toc #d7ustments Total Income 8<penditure Raw Eaterials ;ower M *uel -ost 8mployee -ost 9ther Eanufacturing 8<penses &elling and #dmin 8<penses Eiscellaneous 8<penses ;reoperati!e 8<p -apitalised Total 8<penses 9perating ;rofit ;)DIT Interest ;)DT Depreciation 9ther @ritten 9ff ;rofit )efore Ta< 8<tra"ordinary items ;)T 1;ost 8<tra"ord Items4 Ta< Reported 6et ;rofit Total :alue #ddition ;reference Di!idend 8Auity Di!idend -orporate Di!idend Ta< ;er share data 1annualised4 &hares in issue 1la hs4 8arning ;er &hare 1Rs4 8Auity Di!idend 1I4 )oo :alue 1Rs4

22

PR*(#& A'0 9* Particulars

ACC*<'& (*R &-$ =$AR $'0#'G 51252200+ A"ount ?Rs2@ 2$151.3? 30.?1 2$553.2. 3B.30 3..?2 2,15>29+ ?32.0? /0.23 25B.0B ?/.3B B.?.B3 33./2 5.55 1,A22291 31?.5? /13.5B 2/..3 300./2 111.33 13.31 2.3.?0 "5.51 2.3.?? B2../ 211.12 335.5/ 5.55 30.3B B.30 ?...3B 2?.B3 155.55

Income &ales Turno!er 8<cise Duty 6et &ales 9ther Income &toc #d7ustments Total Income 8<penditure Raw Eaterials ;ower M *uel -ost 8mployee -ost 9ther Eanufacturing 8<penses &elling and #dmin 8<penses Eiscellaneous 8<penses ;reoperati!e 8<p -apitalised Total 8<penses 9perating ;rofit ;)DIT Interest ;)DT Depreciation 9ther @ritten 9ff ;rofit )efore Ta< 8<tra"ordinary items ;)T 1;ost 8<tra"ord Items4 Ta< Reported 6et ;rofit Total :alue #ddition ;reference Di!idend 8Auity Di!idend -orporate Di!idend Ta< ;er share data 1annualised4 &hares in issue 1la hs4 8arning ;er &hare 1Rs4 8Auity Di!idend 1I4

23

PR*(#& A'0 9* Particulars

ACC*<'& (*R &-$ =$AR $'0#'G 51252200A A"ount ?Rs2@ 3$0?2.32 03... 3$?03.2. 233.3B 23.23 B,0B02BB 1$1//.02 B?.03 233.5/ 1BB..3 ???.5. //.?. 5.55 2$/?3.1/ 1$32?.3B 1$B.1.35 B1.3. 1$B53.3/ 133.B5 10.1. 1$3B?..0 "5.52 1$3B?... 100.33 1$1?..0. 1$33/.32 5.55 .2.3? 15.?5 1$.?3.12 ?5.53 ?B.55

Income &ales Turno!er 8<cise Duty 6et &ales 9ther Income &toc #d7ustments Total Income 8<penditure Raw Eaterials ;ower M *uel -ost 8mployee -ost 9ther Eanufacturing 8<penses &elling and #dmin 8<penses Eiscellaneous 8<penses ;reoperati!e 8<p -apitalised Total 8<penses 9perating ;rofit ;)DIT Interest ;)DT Depreciation 9ther @ritten 9ff ;rofit )efore Ta< 8<tra"ordinary items ;)T 1;ost 8<tra"ord Items4 Ta< Reported 6et ;rofit Total :alue #ddition ;reference Di!idend 8Auity Di!idend -orporate Di!idend Ta< ;er share data 1annualised4 &hares in issue 1la hs4 8arning ;er &hare 1Rs4 8Auity Di!idend 1I4

2/

PR*(#& A'0 9* Particulars

ACC*<'& (*R &-$ =$AR $'0#'G 512522008 A"ount ?Rs2@ 3$/20./5 0/.B1 3$3/3.03 13?.23 33.0? 5,+5>20> 1$3/?.33 ??.12 3...20 135.3B 03..B/ 3?.// 5.55 2,8>>20+ B02.?5 ??3.33 1/..3 ?.B.35 1.1.33 25.?1 B02..5 "5.5. B02.B/ 150.00 /?B.22 1,>0A2A5 5.55 .3.5. 15.?2 1$.01.?3 20.2. ?B.55 20..12

Income &ales Turno!er 8<cise Duty 6et &ales 9ther Income &toc #d7ustments Total Income 8<penditure Raw Eaterials ;ower M *uel -ost 8mployee -ost 9ther Eanufacturing 8<penses &elling and #dmin 8<penses Eiscellaneous 8<penses ;reoperati!e 8<p -apitalised Total 8<penses 9perating ;rofit ;)DIT Interest ;)DT Depreciation 9ther @ritten 9ff ;rofit )efore Ta< 8<tra"ordinary items ;)T 1;ost 8<tra"ord Items4 Ta< Reported 6et ;rofit Total :alue #ddition ;reference Di!idend 8Auity Di!idend -orporate Di!idend Ta< ;er share data 1annualised4 &hares in issue 1la hs4 8arning ;er &hare 1Rs4 8Auity Di!idend 1I4 )oo :alue 1Rs4

Balance heet o/ 0r2Re!!yCs 9aboratoriesas on 512520>

2B

9iabilities
Total &hare -apital 8Auity &hare -apital &hare #pplication Eoney ;reference &hare -apital Reser!es Re!aluation Reser!es 6etworth &ecured Loans %nsecured Loans Total Debt Total Liabilities

A"ount ?Rs2@ 30.2. 30.2. 5.55 5.55 2$53B.02 5.55 2$5?/.50 3.2? 2.3.3. 2?3.23 2,5BA251 1$55/.22 //1..0 B.2.B/ .5.13 3B0./. 353.01 /1?../ /1.53 ?.2.B/ 30?.?5 0B5../ 2$555.00 5.55 /B1.B5 103.10 .3/..0 1$3...25 5.55 2,5BA255 103.13 2?1.5B

Assets
,ross )loc Less( #ccum. Depreciation 6et )loc -apital @or in ;rogress In!estments In!entories &undry Debtors -ash and )an )alance Total -urrent #ssets Loans and #d!ances *i<ed Deposits Total -#$ Loans M #d!ances Deffered -redit -urrent Liabilities ;ro!isions Total -L M ;ro!isions 6et -urrent #ssets Eiscellaneous 8<penses Total #ssets -ontingent Liabilities )oo :alue 1Rs4

Balance heet o/ 0r2Re!!yCs 9aboratories as on 512520+

2.

9iabilities
Total &hare -apital 8Auity &hare -apital &hare #pplication Eoney ;reference &hare -apital Reser!es Re!aluation Reser!es 6etworth &ecured Loans %nsecured Loans Total Debt Total Liabilities

A"ount ?Rs2@
38.35 38.35 0.00 0.00 2,223.79 0.00 2,262.14 145.13 778.74 923.87

5,18+201
1,052.90 491.08 561.82 112.92 911.36 443.10 581.22 25.50 1,049.82 723.61 625.44 2,398.87 0.00 624.25 174.70 798.95 1,599.92 0.00

Assets
,ross )loc Less( #ccum. Depreciation 6et )loc -apital @or in ;rogress In!estments In!entories &undry Debtors -ash and )an )alance Total -urrent #ssets Loans and #d!ances *i<ed Deposits Total -#$ Loans M #d!ances Deferred -redit -urrent Liabilities ;ro!isions Total -L M ;ro!isions 6et -urrent #ssets Eiscellaneous 8<penses Total #ssets -ontingent Liabilities )oo :alue 1Rs4

5,18+202
2,409.27 294.95

Balance heet o/ 0r2Re!!yCs 9aboratories as on 512520A

2?

9iabilities
Total &hare -apital 8Auity &hare -apital &hare #pplication Eoney ;reference &hare -apital Reser!es Re!aluation Reser!es 6etworth &ecured Loans %nsecured Loans Total Debt Total Liabilities

A"ount ?Rs2@ 03.3. 03.3. 5.55 5.55 /$203./5 5.55 /$3?3.3. 1.32 32?.30 323.35

B,A0522+
1$231.13 .53.1B .02.5/ 205..1 3...33 /0?.B0 1$5BB.?5 1/0..5 1$.31.00 1$520.B. 1$350.11 /$520.BB 5.55 ?31.3. B22.3? 1$2B/.33 2$??3..2 5.55

Assets
,ross )loc Less( #ccum. Depreciation 6et )loc -apital @or in ;rogress In!estments In!entories &undry Debtors -ash and )an )alance Total -urrent #ssets Loans and #d!ances *i<ed Deposits Total -#$ Loans M #d!ances Deffered -redit -urrent Liabilities ;ro!isions Total -L M ;ro!isions 6et -urrent #ssets Eiscellaneous 8<penses Total #ssets -ontingent Liabilities )oo :alue 1Rs4

B,A0522+
1$03..32 2.5./B

Balance heet o/ 0r2Re!!yCs 9aboratories as on 5125208

20

9iabilities
Total &hare -apital 8Auity &hare -apital &hare #pplication Eoney ;reference &hare -apital Reser!es Re!aluation Reser!es 6etworth &ecured Loans %nsecured Loans Total Debt Total Liabilities

A"ount ?Rs2@ 0/.53 0/.53 5.55 5.55 /$?2?.?2 5.55 /$011.01 3./5 /B0.31 /.2.31 >,2AB212 1$?B5.21 ?.2.05 30?./1 2/B.?1 2$505.?1 ./5.33 03?.?1 .?.13 1$.5B.03 1$2?2.52 /?5.1B 3$3/0.55 5.55 ?0..3. .51.30 1$30?.?/ 1$3.5.2. 5.55 >,2AB209 1$032.BB 20..12

Assets
,ross )loc Less( #ccum. Depreciation 6et )loc -apital @or in ;rogress In!estments In!entories &undry Debtors -ash and )an )alance Total -urrent #ssets Loans and #d!ances *i<ed Deposits Total -#$ Loans M #d!ances Deffered -redit -urrent Liabilities ;ro!isions Total -L M ;ro!isions 6et -urrent #ssets Eiscellaneous 8<penses Total #ssets -ontingent Liabilities )oo :alue 1Rs4

23

DR.REDDYS

RATIO ANALYSIS

35

RATIO ANALYSIS:
@hen it comes to in!esting$ analyCing financial statement information 1also nown as Auantitati!e analysis4$ is one of$ if not the most important element in the fundamental analysis process. #t the same time$ the massi!e amount of numbers in a company's financial statements can be bewildering and intimidating to many in!estors. Howe!er$ through financial ratio analysis$ you will be able to wor with these numbers in an organiCed fashion. *inancial ratio analysis is the calculation and comparison of ratios which are deri!ed from the information in a company's financial statements. The le!el and historical trends of these ratios can be used to ma e inferences about a company's financial condition$ its operations and attracti!eness as an in!estment.

*inancial ratios are calculated from one or more pieces of information from a company's financial statements. *or e<ample$ the 'gross margin' is the gross profit from operations di!ided by the total sales or re!enues of a company$ e<pressed in percentage terms. In isolation$ a financial ratio is a useless piece of information. In conte<t$ howe!er$ a financial ratio can gi!e a financial analyst an e<cellent picture of a company's situation and the trends that are de!eloping. # ratio gains utility by comparison to other data and standards. Ta ing our e<ample$ a gross profit margin for a company of 2BI is meaningless by itself. If we now that this company's competitors ha!e profit margins of 15I$ we now that it is more profitable than its industry peers which is Auite fa!ourable. If we also now that the historical trend is upwards$ for e<ample has been increasing steadily for the last few years$ this would also be a fa!ourable sign that management is implementing effecti!e business policies and strategies.

31

#mong the doCens of financial ratios a!ailable$ we'!e chosen 35 measurements that are the most rele!ant to the in!esting process and organiCed them into si< main categories as per the following list( 1@ 9i7ui!ity .easure"ent Ratios " -urrent Ratio " Nuic Ratio " -ash Ratio " -ash -on!ersion -ycle

2@ Pro/itability #n!icator Ratios " ;rofit Eargin #nalysis " 8ffecti!e Ta< Rate " Return 9n #ssets " Return 9n 8Auity " Return 9n -apital 8mployed

5@ 0ebt Ratios " 9!er!iew 9f Debt " Debt Ratio " Debt"8Auity Ratio " -apitaliCation Ratio " Interest -o!erage Ratio " -ash *low To Debt Ratio

32

B@ *perating Per/or"ance Ratios " *i<ed"#sset Turno!er " &alesKRe!enue ;er 8mployee " 9perating -ycle

>@ Cash (lo) #n!icator Ratios " 9perating -ash *lowK&ales Ratio " *ree -ash *lowK9perating -ash Ratio " -ash *low -o!erage Ratio " Di!idend ;ayout Ratio

+@ #nvest"ent 4aluation Ratios " ;er &hare Data " ;riceK)oo :alue Ratio " ;riceK-ash *low Ratio " ;riceK8arnings Ratio " ;riceK8arnings To ,rowth Ratio " ;riceK&ales Ratio " Di!idend >ield " 8nterprise :alue Eultiple

3t

is imperati!e to note the importance of the proper conte<t for ratio analysis. Li e

computer programming$ financial ratio is go!erned by the ,I,9 law of "Garbage In...Garbage Out!" # cross industry comparison of the le!erage of stable utility

33

companies and cyclical mining companies would be worse than useless. 8<amining a cyclical company's profitability ratios o!er less than a full commodity or business cycle would fail to gi!e an accurate long"term measure of profitability. %sing historical data independent of fundamental changes in a company's situation or prospects would predict !ery little about future trends. *or e<ample$ the historical ratios of a company that has undergone a merger or had a substanti!e change in its technology or mar et position would tell !ery little about the prospects for this company. -redit analysts$ those interpreting the financial ratios from the prospects of a lender$ focus on the 'downside' ris since they gain none of the upside from an impro!ement in operations. They pay great attention to liAuidity and le!erage ratios to ascertain a company's financial ris . 8Auity analysts loo more to the operational and profitability ratios$ to determine the future profits that will accrue to the shareholder. #lthough financial ratio analysis is well"de!eloped and the actual ratios are well" nown$ practicing financial analysts often de!elop their own measures for particular industries and e!en indi!idual companies. #nalysts will often differ drastically in their conclusions from the same ratio analysis. Let us now practically wor on some of the important formulas in ratio analysis ta ing !alues from the four year statements we ha!e in the pre!ious papers(

1@ 9i7ui!ity .easure"ent Ratios

LiAuidity ratios attempt to measure a company's ability to pay off its short"term debt obligations. This is done by comparing a company's most liAuid assets (or, those that can be
easily converted to cash), its short-ter short-ter liabilities. !n "eneral, the "reater the covera"e o# li$%id assets to liabilities the better as it is a clear si"nal that a co &any can &ay its debts that are co in" d%e in ay be a si"n that the co &any (ill have di##ic%lty eetin" r%nnin"

the near #%t%re and still #%nd its on"oin" o&erations. 'n the other hand, a co &any (ith a lo( covera"e rate sho%ld raise a red #la" #or investors as it its o&erations, as (ell as eetin" its obli"ations.

A@ Current Ratio:

3/

The current ratio is a &o&%lar #inancial ratio %sed to test a co

c%rrent or wor liabilities.

&any)s

liAuidity (also re#erred to as its

ing capital &osition) by derivin" the &ro&ortion o# c%rrent assets available to cover c%rrent

&he current ratios o/ the consecutive /our years are:

=ear

4alue

255B 255. 255? 2550

3.1B 3.55 3.21 2./1

C<RR$'& RA&#*

3B

3.5 3 2.5 2 1.5 1 0.5 0 2005 2006 2007 2008 VALUE

#'&$RPR$&A&#*': The current ratio is used e<tensi!ely in financial reporting. Howe!er$ while easy to understand$ it can be misleading in both a positi!e and negati!e sense - i.e., a hi"h c%rrent ratio
is not necessarily "ood, and a lo( c%rrent ratio is not necessarily bad.

Here the current ratio is

the year 2008.

satisfactory

in

the

years

2556,and

"ood

in

B@ Duick Ratio:
The Auic ratio
- a*a the $%ic* assets ratio or the

acid"test ratio

- is a li$%idity indicator that #%rther

re#ines the c%rrent ratio by

eas%rin" the a o%nt o# the

ost liAuid c%rrent assets there are to cover eans a ore

c%rrent liabilities. +he $%ic* ratio is and other c%rrent assets, (hich are li$%id

ore conservative than the c%rrent ratio beca%se it e,cl%des inventory ore di##ic%lt to t%rn into cash. +here#ore, a hi"her ratio c%rrent &osition.

&he Duick Ratios o/ consecutive /our years are:

3.

=ear 255B 255. 255? 2550

4alue 2.B3 2./3 2.01 1.3/

D<#CE RA&#*
3 2.5 2 1.5 1 0.5 0 2005 2006 2007 2008 value

I6T8R;R8T#TI96(
# hi"her ratio
eans a ore li$%id c%rrent &osition.it eans the li$%id c%rrent &osition o# the co &any is "ood in 2007 (2.81) and satis#actory in 2005,2006,2008. -%rrent yr ratio is very bad (hen it co &ared to the &revio%s year.

22 PR*(#&AB#9#&= #'0#CA&*R RA&#* :

In the income statement,
there are #o%r levels o# &ro#it or &ro#it ar"ins -

gross profit, operating

profit, &reta, &ro#it and net &ro#it. +he ter

. ar"in. can a&&ly to the absol%te n% ber #or a "iven &ro#it

3?

level and/or the n% ber as a &ercenta"e o# net sales/reven%es. 0ro#it calc%lation to &rovide a co &rehensive and in co &arison to &eer co &anies and

ar"in analysis %ses the &ercenta"e ind%stry bench ar*s.

eas%re o# a co &any)s &ro#itability on a historical basis (3-5 years)

)asically$ it is the amount of profit 1at the gross$ operating$ preta< or net income le!el4 generated by the company as a percent of the sales generated. The ob7ecti!e of margin analysis is to detect consistency or positi!eKnegati!e trends in a company's earnings. ;ositi!e profit margin analysis translates into positi!e in!estment Auality. To a large degree$ it is the Auality$ and growth$ of a company's earnings that dri!e

A@ Gross Pro/it Ratio:

&he Gross Pro/it Ratios o/ consecutive /our years are: =ear 255B 255. 255? 2550 GR* value /.B. 15.2. 31.BB 12.B0 PR*(#& RA&#*

30

35 30 25 20 15 10 5 0 2005 2006 2007 2008 values

I6T8R;R8T#TI96(
This ratio ratio indicates the degree to which the selling price of good per unit or in whole may decline without resulting in losses from operations to the firm. when we obser!e the abo!e ratios there is an increase in the profit margin from 255B"255?$but a !ast decline in gross profit in the year 2550112.B04.

B@ 'et Pro/it Ratio:

&he 'et Pro/it Ratio o/ consecutive /our year:

=ear
33

4alues

255B 255. 255? 2550

/.5. 15.50 23.51 13.B?

'$& PR*(#& RA&#*

30 25 20 15 10 5 0 2005 2006 2007 2008 values

I6T8R;R8TI96(
#n increase in the ratio o!er the pre!ious year indicates impro!ement in the operational efficiency of the business. The net profit ratio in 255?123.514 is good and 2550113.B?4 is comparati!ely good when compared to 255B and 255..

C@ *perating Pro/it Ratio:

/5

&he *perating Pro/it Ratios /or the consecutive /our years are: =ear 4alue 255B 15.B3 255. 1B.02 255? 3B.50 2550 1?./2 *P$RA&#'G PR*(#& RA&#*
40 35 30 25 20 15 10 5 0 2005 2006 2007 2008 values

I6T8R;R8T#TI96(
The operating profit margin is high in the firm it is considered as a good sign to the company as its operating e<penses are decreased. *or the current year 2550 i.e11?./24 we can say the company position is satisfactory as operating ratio is high than the gross profit margin.

0@Return *n $7uity:

/1

This ratio indicates how profitable a company is by comparing its net income to its a!erage shareholders' eAuity. The return on eAuity ratio 1R984 measures how much the shareholders earned for their in!estment in the company. The higher the ratio percentage$ the more efficient management is in utiliCing its eAuity base and the better return is to in!estors.

&he returns on e7uity shares /or the consecutive /our years are: =ear 255B 255. 255? 2550 4alue 3.1B 3.33 2..35 3.0?

R$&<R' *' $D<#&= RA&#*

30 25 20 15 10 5 0 2005 2006 2007 2008 values

/2

I6T8R;R8T#TI96(
,enerally$ the higher this ratio$ the more ris y a creditor will percei!e its e<posure in your business$ ma ing it correspondingly harder to obtain credit. It is the return on the amount in!ested in the company in the form of eAuity share capital. The higher is the return will be more interest for the in!estor to in!est in the company. Hence the current year return on eAuity13.0?4 is satisfactory but not good when compared to the pre!ious year

5@ 0$B& RA&#* :
The debt"eAuity ratio is another le!erage ratio that compares a company's total liabilities to its total shareholders' eAuity. This is a measurement of how much suppliers$ lenders$ creditors and obligors ha!e committed to the company !ersus what the shareholders ha!e committed. To a large degree$ the debt"eAuity ratio pro!ides another !antage point on a company's le!erage position$ in this case$ comparing total liabilities to shareholders' eAuity$ as opposed to total assets in the debt ratio.

&he 0ebt $7uity Ratios o/ the /our consecutive years are: =ear 4alue

/3

255B 255. 255? 2550

.13 ./5 .5? .53

0$B& $D<#&= RA&#*

0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2005 2006 2007 2008 values

I6T8R;R8T#TI96(
The ratio compares eAuity percentage with total debt of the company. # lower the percentage means that a company is using less le!erage and has a stronger eAuity position. This creates a confidence in the in!estor to in!est in the company. The current year debt eAuity ratio1.534 is positi!ely good.

-96-L%&I96 *9R R#TI9 #6#L>&I&(

#fter the e<amination of the abo!e ratios gi!en abo!e ma es it clear that the o!erall performance of the company is much poorer in the current year as compared to pre!ious year.

//

C*'C9< #*':
I here conclude my company analysis report by gi!ing an idea on the pro7ect report in brief. Ey report consists the company history$ statistics$ and its organiCation structure and management$ which is the minimum information is to be noted. It also contains four year consecuti!e income statements and balance sheets which are reAuired for ratio analyCing. It is really good and I am feeling great to read a public company. This helps me in nowing an organiCation and its position in the business world which is compulsory to a E)# student to now.

.2.A0-< 9A&-A ?08211$0020@

/B

BIBLIOGRAPHY

/.

B#B9#*GRAP-=:
12 (inancial .anage"ent, 0r2 ' .ahesh)ari, ulthan Chan! F ons2200A

22 (inancial Accounting /or Business .anage"ent, Ashish E2 Battacharya2200A 52 .anage"ent Accounting, R P &rive!i, Panka3 Publications2200A

1$B #&$ : 2no

12 22 52 B2 >2

1ebsite
)))2!rre!!ys2co" )))2investope!ia2co" )))2"oneycontrol2co" .oney2re!i//2co" )))2)ikipe!ia2co"

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