RESEARCH INSIGHT: DR.REDDY LABORATERIES Ltd.

Porter’s Five Forces Analysis:

Sector -1: Pharmaceuticals Industry

In the current crisis of Covid, one of the important sectors that had gone very high with profits in the
stock market is the Pharmaceuticals sector. So, am interested and want to know the changes that
took place in this particular sector during covid and the main reasons for the hike. Apart from that, I
wanted to research whether every company in this particular sector had increased market price. If it
is a no, what companies had observed profits, and what are the reasons for such. And one of the
other reasons to choose this particular sector is that economists have spread that within 3 years
pharmaceuticals sectors will rise by 3x.

HEALTH IS WEALTH is one of the most believed saying by all the people in the
world. To ensure safety health pharmaceutical industry is the man and most important
player. Therefore, here’s an attempt to assess the profitability in an industry by
understanding porters five-industry level forces.

1. Bargaining power of buyers : LOW OR MEDUM

 Pharmacy is one of the most unique industry because pharmacy or medicine

is an urgency or necessity rather than a luxury.
 So, the bargaining power for a buyer is ether low or medium but never high
 The only entities with any negotiating power are the pharmacies and medical
institutions that fulfil the medical patients’ prescriptions.
 And also even ethically also there are some restrictions by government in
order to make sure that no high prices or profits are being charged on the
public.
 And most of the organisations prefer to buy the medicines in bulk quantities
which will result in pressure on the industry and leads to frequent price
check.
 One more man reason for low bargaining power s that, no matter what
customer/ patent needs to buy whatever is prescribed by the doctor.
 Therefore, as a conclusion we can say that bargaining power of buyers is
medium in case of large organisations like health centres, but whereas in case
of small buyers like individuals it is very low.
2. Bargaining Power of Suppliers: LOW

 Suppliers refers to those who supply raw materials to the companies’ in an

industry.
 In the present competitive industry, raw materials are available from various
sources.
 And therefore any company can easily switch to other sources.
 Suppliers usually offer multiple products to the manufacturer, which
moderates pricing on rarer materials and unique equipment.
 Here, in case of high cost, suppliers can also go for forward negotiation and
become a pharmacy company.

3. Rivalry among Existing Competitors: HIGH

 Pharmaceutical industry will always be on the top lists of the industries that
earn high reruns.
 This will boost all the innovators to be more creative and competitive in the
industry.
 Though it requires high capital investment, there’s a scope for high growth
prospectus.
 The rivalry in the market can be in the form of price competition,
advertisements and product innovation etc.
 Almost all the market player’s involved in the market have existed for a long
time and are globally recognised.
 As technology is also growing rapidly which is giving a high scope for the
competitors.

4. Threat of Substitutes Products: HIGH

 Healthiness of an individual is necessary until his life expires. It means unless

and until human world exists, there’s a need for pharmacy.
 Therefore demand for pharmacy continues and industry thrives.
 Production of these generic products is not that tough, so, threat of
substitutes is almost high.
 Sometimes the effect of substitution also varies based on the drug or
medicine.
  There’s also patents and license system where the protection of the inventor
or the original owner is ensured.
 Generic drug companies do not have the high costs associated with the
research & development of new drugs and that allows them to sell at cheaper
prices

5. Threat of New Entrants: LOW

 High entry barriers due to costs associated with research & development of
new drugs.
 In addition to that the restrictions and rules taken by government are also
high.
 As trust is also plays man role, consumers will prefer the same player rather
than a new one.
 Addition to above reasons, high capital requirements, strategies, risk of high
failure are more reasons for low threat of new entrants.

General overview:
Dr. Reddy's Laboratories is an Indian multinational pharmaceutical company located
in Hyderabad, Telangana, India.
The company was founded by Anji Reddy, who previously worked in the mentor
institute Indian Drugs and Pharmaceuticals Limited.
Dr. Reddy's originally launched in 1984 producing active pharmaceutical ingredients.
 Dr. Reddy's manufactures and markets a wide range of pharmaceuticals in India and
overseas.
The company has over 190 medications, 60 active pharmaceutical ingredients (APIs) for
drug manufacture, diagnostic kits, critical care, and biotechnology products.
Dr. Reddy's began as a supplier to Indian drug manufacturers, but it soon started exporting
to other less-regulated markets.
By the early 1990s, the expanded scale and profitability from these unregulated markets
enabled the company to begin focusing on getting approval from drug regulators for their
formulations and bulk drug manufacturing plants - in more-developed economies.
By the early 1990s, the expanded scale and profitability from these unregulated markets
enabled the company to begin focusing on getting approval from drug regulators for their
formulations and bulk drug manufacturing plants - in more-developed economies.
By the early 1990s, the expanded scale and profitability from these unregulated markets
enabled the company to begin focusing on getting approval from drug regulators for their
formulations and bulk drug manufacturing plants - in more-developed economies.

SHARE HOLDNG PATTERN OF THE COMPANY:

PROMOTERS No.of %of shares

shares

% Individuals   2,017,888 1.22

Hindu Undivided   1,117,940 0.67

Family

Companies   41,325,300 24.85

  Sub 44,461,128 26.74

Total

Public Holding:      

Indian Financial   2,578,373 1.55

Institutions

Banks   71,905 0.04

Mutual Funds   21,177,798 12.73

  Sub 23,828,076 14.32

Total

FOREIGN      
HOLDING:

Foreign   14,056,986 8.45

Institutional
Investors
 NRIs   1,647,346 0.99

ADRs   20,095,772 12.08

Foreign Nationals   1,459 0.00

Foreign Portfolio   34,223,623 20.58

Investors

  Sub 70,025,186 42.11

Total

Indian Public &   27,986,841 16.83

Corporates

TOTAL   166,301,231 100.00

MANAGEMENT OF THE COMPANY:

Allan Oberman Independent Director

Anil Namboodiripad Global Head

Archana Bhaskar Chief Human Resource Officer

Bharat N Doshi Independent Director

Bruce L A Carter Independent Director

Deepak Sapra Global Head

Erez Israeli Chief Executive Officer

G V Prasad Co-Chairman & Manag. Director

Ganadhish Kamat Global Head

K Satish Reddy Chairman

Kalpana Morparia Independent Director

Leo Puri Independent Director

M V Ramana CEO - Branded Markets

Marc Kikuchi CEO - North America Generics

Parag Agarwal Chief Financial Officer

Patrick Aghanian CEO - European Generics

Prasad R Menon Independent Director

Raymond De Vre Global Head

Sandeep Poddar Co. Secretary & Compl. Officer

Sanjay Sharma Global Head

Sauri Gudlavalleti Global Head

Shikha Sharma Independent Director

Sridar Iyengar Independent Director

Yugandhar Puvvala Global Head

SWOT ANALYSIS:
S-STRENGTHS:
 Book Value per share improving for last 2 years.
 Good returns on capital expenditures.
 FII / FPI or Institutions increasing their shareholding.
 Automation of activities.
 Product innovation.
 Strong distribution network.
 Successful track record of integrating complimentary firms through mergers &
acquisition.
 Company with Low Debt.
 Company with Zero Promoter Pledge
 Efficient in managing Assets to generate Profits - ROA improving since last 2 years.
W-WEAKNESS:
 Negative Breakdown Second Support.
  High attrition rate in work force.
 Marketing of the products left a lot to be desired. 
 Track record on environment consideration is not very encouraging.
 Organization Culture.
O-OPPORTUNITIES:
 Brokers upgraded recommendation or target price in the past three months.
 New environmental policies.
 New customers from online channel.
 Marketing into International Markets.
 Growing Market Size.
T- THREATS:
 Increasing Trend in Non-Core Income.
 Insiders sold stocks.
 Red Flags.
 Currency fluctuations.
 Growing strengths of local distributors.
 New environment regulations.

COMPETTVE ANALYSIS: The comparision and competitors of DR.Reddys are as follows :

Dr.Reddy's Cipla Otsuka CVS Caremark

Laboratories Specialty
Cipla is a globalOtsuka is aPharmacy
Dr. Reddy's Laboratories ispharmaceutical company
an Indian multinationalcompany, whichenagged in theCVS Caremark
pharmaceutical companydevelops andpharmaceutical Specialty Pharmacy is
based in Hyderabad,produces drugsindustry. a provider of
Telangana, India for the treatment pharmacy services.
of arthritis,
diabetes, weight
control,
depression, and
cardiovascular
diseases.
Employees 21,650 23,043 1,2131% increase 1,6581% increase
Twitter 28.1 k 24.3 k 1.6 k 334.5 k
followers
Number of 293 84 10 831
tweets (last
30 days)
Average 2.6 1.6 2.5 0.3
likes per
tweet (last
30 days)
Percentage 46.08% 52.38% 80% 15.04%
of tweets
with
engagemen
t (last 30
days)
Alexa 214219 229889 491557 N/A
Website
Rank
Employee  4.1  3.9 N/A N/A
Rating

CONCLUSION:
After observation all the facts and figures of Dr.Reddys, the company has went through high
growth since its inception. Especially in the recent times the company’s share price has also
touched all-time high. Various acquisitions and deals in the international wise are also being
taken.
Many stock brokers are also recommending the investors to invest in the company’s
shares.so, on over all basis Dr.Reddys is on the developing path and returns giving company
for the investors.