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Cash Flow Management- Dr Reddy

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CON ONTENTS: -

1.I nt r oduct i on 2.Theor et i calf r amewor kofcashflow ma management 3.M . Me t hodol ogy I . Needoft hes t udy I I . Scopeandper i odoft hes t udy I I I . Obj ect i ve soft hes t udy I V. Met hodol ogy  V. Li mi t at i onsofcashflow anal ysi s 4.Pr ofil eoft hei ndust ry 5.Pr ofil eoft hecompany 6.Anal ysi sandi nt er pr et at i on 7.Fi ndi ngsandsuggest i ons 8.C . Concl usi ons 9.Bi bl i ogr aphy

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12 315 1617

1834 3548 4991 92 93 94

 

CASH FLOW STATEM ME ENT:

I NTR RO ODUCTI ON

Fr om t he financi alpoi ntofvi ew a firm basi cal l y ge ner at escash and spends cash.I tge ner at es cash when i ti ssues securi t i es,ri ses a  bankl oansel l sapr oductdi sposesanasse t ,soasof or t h.I tspendscash  when i tr edeems secur i t i es, pays i nt er est and di vi dends. Pur chases mat eri al s,acqui r esan assetet c. Theact i vi t i est hatgener at ecash and cal l edsour cesofcashandt heact i vi t i est hatabsorbcashar ecal l eduses ofcash.

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MEANI NG OF CASH FLOW STATEM ME ENT

 A cash flow st at ementi sa s t at ementdepi ct i ng change i n cash posi t i on f r om oneper i od t o anot her .Forexampl e,i fcash bal anceofa  busi nessi sshown byi t sbal anceshee ton31st  December1978at r s20, 000 whi l et he cas h bal ance as i t s bal ance shee t on 31st De December 1979i sRs30, 000 t her ehasbeen an i nflow ofcas hr s10, 000 i nt he  year 1979 ascompar ed t ot heyear1978.Thecash s t at ementexpl ai ns t her easonsf ors uch i nflowsoroutflowscash,ast hecasem mi i ghtbe.I t al so hel ps manage menti n maki ng pl ans f ort he i mmedi at ef ut ur e.A pr oj ec t edsashflow st at eme mentofacashbudge twi l lhel pt hem ma anagem me ent i n ascer t ai ni ng how much cash wi l lbeavai l abl et o meetobl i gat i onst o t r ade cr edi t or s, t o pay bank l oans and t o pay di vi dend t o t he shar ehol der s. A pr oper pl anni ng of cas h r es our ce s wi l le nabl et he manage mentt ohav ecash av ai l abl ewhenev ernee dedandputi tt osom me e pr ofit abl eorpr oduct i veusei ncaset her ei ssurpl uscashavai l abl e.

 The t er m “ cash”her e st ands f orcash and bank bal ances i thas al r eadybeenexpl ai nedi nt hepr evi ouschapt ert hatt het erm “ f unds”wi l l excl udef r om i t spurvi ew al lot hercurr entasset sand curr entl i abi l i t i es andt het er ms“ f undsflow st at eme ment ”and“ cashflow st at em me ent ”wi l lhave synonym mo ousm me eani ngs.Howev er ,f ort hepur poseoft hi sst udy ,wear e 3

 

cal l i ng t hi s par toft hi ss t udy cash flow anal ys i s and notf unds flow anal ysi s.

PREPARATI ONO OF FCASH FLOW STATEME MENT  A cash flow st at ementcan bepr epar ed on t hesamepat t er n on  whi ch a f unds flow s t at eme nt i s pr epar ed.The change i nt he cash posi t i onf r om oneper i odt oanot heri scom mp put edbyt aki ngi nt o“ sour ces” and“ appl i cat i on”ofcash.   sour ce s ofcas h can be bot hi nt er nalas w we el las Sour ces of cas h: ext ernal . 1.I nt er nalsour ces :

Cash f r om oper at i ons i st he mai n i nt er nal s our ce. The ne t pr ofit shown by t hepr ofitand l ossaccountwi l lhav et obeadj ust ed f ornoncas hi t em ms sf or findi ng out f r om oper at i ons.Som me e oft hes ei t ems ms as f ol l o w ws s : i . Depr eci at i on:

Depr eci at i on doesnotr esul ti n outflow ofcash and t her ef or enetpr ofit  wi l lhavei ncr eased byt heamountofdepr eci at i onordevel opme ntr ebat e charge di nor dert ofindoutt her ealcashgener at edf r om oper at i ons. i i . Amort i zat i onofi nt angi bl eass et s:

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Goodwi l l,pr el i mi nary expenses,et c.when wr i t t en off agai nstpr ofit s r educet henetprofit swi t houteffec t i ngt hecas h bal ance .The amo mount s  wr i t t en off shoul d,t her ef or e, beadded back t opr ofit st ofindout t he cash f or m oper at i ons. i i i . Loss onsal e of fixedasse t s:

I tdoesnotr esul ti n out flow ofcash and ,t her ef or e,shoul d beadded  backt opr ofit s. i v . Gai ns f or m sal eoffixed ass et s:

Si ncesal eoffixedasset si st akenasasepar at esour ce ofcash,i tshoul d  bededuct edf r om ne tpr ofit s.

v . Cr eat i onofr es er ves:

I fpr ofit f ort heyearhasbeen arr i vedataf t erchar gi ngt ransf erst o r es er ves , such t r ansf er s shoul d be added back t o pr ofit s. i n cas e oper at i onsshow anetl oss,such net l ossaf t ermaki ng adj ust ment s f ornoncash i t em ms s wi l lbe shown asan appl i cat i onofcash.

 Thus, cash f or m oper at i ons i scomput ed on t he pat t er n of comp mput at i on of ‘ Funds’f r om oper at i ons, asexpl ai ned i nt he earl i er chapt er .Howeve r ,t o findout r eal cash f r om oper at i ons, asexpl ai ned i nt he earl i erchapt er .However t ofind out r ealcash f r om oper at i ons , adj ust ment s wi l lhavet obe made f or‘ changes’i n cur r entasset sand

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c ur r e ntl i abi l i t i e sar i s i ng on ac count ofope r at i ons, v i z . ,t r a dede bt or s , t r adecr e di t or s, bi l l sr e ce i v abl e, bi l l spay abl e, e t c . For t hesake of c onve ni ence com mp put at i on of cash f r om oper at i ons canbes t udi edbyt aki ng t wodi ffer entsi t uat i ons: lt r ansact i ons ar ecasht r ansact i ons, and 1 Wh ) en al

2 Wh ) en al lt r ansact i ons ar enotcasht r ansact i ons.

 A.Whenal lt r ansact i ons ar ecash t r ansact i ons:

 Thecomput at i on ofcash f r om oper at i ons wi l lbev er ysi mpl ei n t hi s case.Thenetpr ofitasshown byt hepr ofit andl ossaccountwi l lbe t akenas t heam mo ountofcashf or m oper at i ons.

Cash from operations operations = Net profit profit

 

B.Whenal lt r ansact i onsarenotcash t r ansact i on:

  I nt heexam mp pl egi v enabov e,wehavecom mp put edcashf r om operat i onsont hebasi sthatal lt r ansact i onsar ecasht r ansact i ons.I t doesnotr eal l yhappeni nact ualpr act i ce.Thebusi nesssel l sgoodson cr edi t .I tpur chases goodson cr edi t s.Cer t ai n expensesar eal waysout st andi ng and some me oft he i ncom me esar e noti mmedi at er eal i z ed.Under such ci r cumst ances,t he netpr ofitm ma ade by a firm can notge ner at e

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equi pmentamo mountofcash.Thecom mp put at i on ofcashf r om oper at i onsi n suchasi t uat i oncanbedoneconveni ent l yi fi ti sdonei nt ages: wost

mp put at i on off unds ( i . e. ,wor ki ng capi t al )f r om oper at i ons as 1)Com expl ai nedi nt hepr ecedi ngchapt erand

us t ment si nt he f unds so cal cul at ed f or t he changes i nt he 2 A ) dj curr entassent s( excl udi ngcash)andcurr entl i abi l i t i es.

 Adj ust ment sf orchangesi ncur r entasset sandcur r entl i abi l i t i es

I nt hei l l ust r at i on gi ven abovet hecash f r om oper at i onshasbeen com mp put ed on t he sam me e pat t er n on whi ch f unds f r om oper at i ons ar e comp mput ed.Asa mat t eroff act ,t hef undsf r om oper at i onsi nt hi scase.  Thi si sbecauseoft hepr esumpt i onst hatar eal lcash t r ansact i onsand al lgoodshavebeensol d.however ,t her em ma aybecr edi tpur chases, cr edi t sal es,out st andi ngandpr epai dexpenses, et c. I n such a casef r om oper at i ons.Thi shas been expl ai ned i nt he f ol l ow wi i ngpages:

I . Effectofcr edi tsal es: 7

 

I nbusi nessther ear ebot hcasesal esandcr edi tsal es.I ncase,t het ot al sal esar eRs. 30000outofwhi cht hecr edi tsal esar eRs. 10000i tmeans sal eshavecont ri but edonl yont heext entofRs. 20000i npr ovi di ngcash f r om operat i ons.  Thus,whi l ecomput i ngcash f r om oper at i ons.I twi l lbenecessar y t hatsui t abl eadj ust ment sf orout st andi ngdebt orsar eal som ma ade.

 Thecashf r om oper at i onscancal cul at edont hebasi soft he Cashf r om oper at i ons=Netpr ofit+Debt orsout st andi ngatt hebegi nni ng   oft heAccount i ngyear

 

Debt or sout st andi ng at t heendoft heAccount i ngyear

Or  

Cash from operations = Net profit + Decrease in debtors Or - Increase in debtors

I I . Effectofcr edi tpur chases :

 What everhasbeen s t at ed r egar di ngcr edi tsal esi sal soappl i cabl e t ocr edi tpur chase.Theonl ydi ffer encewi l lbet hatdecr easei n cr edi t ors f r om oneperi od t oanot herwi l lr esul tIdecr easeofcash f r om oper at i ons  becausei tmeansmor ecash payment shavebeen madet ot hecr edi t or s

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 whi ch wi l lr esul tIoutflow ofcash.On t he ot her hand i ncr ease i n cr edi t or sf r om oper at i onsf r om becausel esspaym me enthasbeenmadet o

t he cr edi t ors f or goods suppl i ed whi ch wi l lr esul ti ni ncr ease ofcash  bal anceatt hedi sposaloft hebusi ness.  

Thus,t heeffectofcr edi tpur chasescanbeshownwi t ht hehel pof

t hef ol l owi ngequat i oni ncom mp put i ngcashf r om oper at i ons:

+i ncreasei ncredi t ors Cashf r om oper at i ons=Netpr ofit  

or decreasei ncredi t ors

 

Effectofopeni ngandcl osi ngst ock:

 Theamountofopeni ng s t ock i schar ged t ot hedebi tsi deoft he pr ofitand l ossAccount .I tt husre ducest henetpr ofitwi t houtr educi ng t hecashf r om oper at i ons.Si mi l ar l y ,t heamountofcl osi ngst ocki sputon t hecr edi tsi deoft hepr ofitandl ossAccount . I tt husi ncr easest heam mo ountofnetpr ofitwi t houti ncr easi ng t hecash f r om oper at i ons.  

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 Theeffectofchangei ns t ock on cash f r om oper at i onscan now be putasf ol l ow ws s.

  Cashf r om oper at i ons=Netpr ofit

+Decr easei nst ock or -I ncreasei nst ock

Effectofouts t andi ng expenses ,i ncom me esr ecei ved i n advance,et c.

 Theeffectoft hesei t emson cash f r om oper at i onsi ssi mi l art ot heeffect ofcr edi t or s.Thi s means any i ncr ease i nt hese i t em ms s wi l lr esul ti n i ncr easei n cash f r om oper at i onswh whi l eanydecr easeme meansdecr easei n cash f r om oper at i ons.Thi si s bec ause ne t pr ofit f r om oper at i ons i s comp mput ed af t erchar gi ng t o al lexpenseshas notbeen pai d;t hi s wi l l r esul ti n decr ease i n netpr ofitwi t houtofa corr espondi ng decr ease i n cashf r om oper at i ons.Si mi l ar l y ,i ncom me ere cei vedi nadvancesnott aken i n t oaccountwhi l ecal cul at i ngpr ofitf r om operat i ons,sci encei tr el at est o t he nexty ear .I tt her ef or e,means cash f r om oper at i ons wi l lbe hi gher t hent heact ualnetpr ofitasshownbyt hepr ofitandl ossAccount .    Thus t he effectofi ncome r ecei ved i n advance and outst andi ng expensesoncashf r om oper at i ons,canbeshownasf ol l ows:

   

+i ncr easei nout st andi ngexpenses +i ncr easei ni ncom me er ecei vedi nadvance

  Cashf r om oper at i ons=Netpr ofit decr easei nout st andi ngexpenses

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Effec tofpre pai dexpense sandout s t andi ngi ncom me es :

 Thepr epai d expensesand out s t andi ngi ncomeon cash f r om oper at i ons i s si mi l ar t ot he effect ofdebt or s.Whi l e comp mput i ng net pr ofit f r om oper at i ons,t heexpensesonl yf ort heaccount i ngyeararecharge dt ot he pr ofitandl ossaccount .Expensespai di nadvancear enotchar gedt ot he pr ofit and l oss acc ount . Thus,pr epayme ment ofexpenses does not decr ease netpr ofitf ort he yearbuti tdecr ease cash f r om oper at i ons . si mi l arl y ,i ncom me eearnedduri ng ayeari scr edi t edt othepr ofitandl oss accountwhet heri thasbee nr ec ei ve d ornot .Thus,i ncom me e,whi ch has notbeenr ece i ve dbutwhi chhasbecom me edue,i ncr easest henetpr ofitf or t heyearwi t houti ncr easi ngcashf orm oper at i ons.  Thus,t heeffectofpr epai dexpensesandaccr uedi ncomesi n cash f r om oper at i onscanbeshowni nt hef ol l owi ngequat i on:    

+decr easei npr epai dexpenses +dec r easei naccr uedi ncom me e +De Decr easei ndebt ors

  Ca r om oper at i ons=Netpr ofit +Decr  shf easei nst ock i ncr easei npr epai dexpenses   +Decr easei npr epai dexpenses   +Dec r easei naccr uedi ncom me e I n r e a s e n c r e d t o sg expenses,  The  over al leffectofs t ock,debt or s,+ c r ec d i t o r s ,i ou t s t ai n dr i n  e,r + I n c r e a s ei n o u t s t an d i n ge ex p e ns e s i ncom me ec ei ve d advance ,pr epai dexpe n s e s a n d a cc r u e d i n c o m me c a n b e showni nt hef orm oft hef ol l owi ngf orm mu ul a: Cashf r om oper at i ons=Ne tpr ofit

 

-I ncr easei ndebt ors

 

-I ncreasei nst ock

 

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I ncr easei npr epai dexpenses -I ncr easei naccruedi ncom me e

 

 The abov ef or mul a may be summ mma ar i z ed i nt he f or m off ol l owi ng generalrul es: I ncr easei nacurr entasset De cr e as ei nac ur r e ntl i abi l i t y Re sul t si n  

 AND

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Decr easei ncur r entasset I nc r e as ei n c ur r e ntl i abi l i t y Resul t si n  

2.Ext ernalsour ces:  Theext er nalsour cesofcashar e: 1)I ssueofnew shar es:

I n caseshareshavebeen i ssuedf orcash,t henetcash r ecei ved( i e.af t er deduct i ngexpensesoni ssueofshare sordi scountoni ssueofshareswi l l  bet akenasasour ceofcash. 2)Rai si ngl ongt erm l oans:

Long t er m l oans such as i ss ue ofdebent ur es ,l oans f r om i ndust r i al financi al corporat i on, st at e financi al corporat i ons, I . D. B. I . Et c. , are sour cesofcash.Theyshoul dbeshownsepar at el y . 3)Pur chaseofpl antandmachi ner yon def er r edpaym me ent s:

I n cas epl antand machi ner yhasbee n pur chaseon adef er r ed payme ment sys t em m, ,i tshoul dbeshown asaseparat esour ceofcash t ot heext entof def er r edcr edi t .Howeve r ,t hecostofmachi ner ypur chased wi l lbeshown asan appl i cat i onofcash. 4)Shor tt er m borr ow wi i ngs– cash cr edi t sf r om banks:

Shor tt er m bor r owi ng,et c. Fr om banksi ncr easecash avai l abl eand t hey havet obeshow wn nsepar at el yundert hi sahead. 5)Sal eoffixed asset s,i nvest ment s,et c:

I tresul t si ngenerat i onofcashandt heref ore,i sasour ceofcash.

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Decr easei nvari ouscur r entasset sandi ncr easei nvari ouscurr ent l i abi l i t i es may be t aken as ext er nalsour ces ofcash,i ft hey are not adj ust edwhi l ecom mp put i ngcashf r om oper at i ons.

 Appl i cat i onofcash:  Appl i cat i onofcashmayt akeanyofhef al l owi ngf or ms :

Pur chaseoffixedasset s:   Cash may be ut i l i z ed f oraddi t i onalfixed asset s orr enewal s or r epl acem me entofexi st i ngfixedasset s.

Paym me entofl ongt er ml oans:  The payme nt ofl ong t er m l oans such as l oans f r om financi al i nst i t ut i onsordebent ur esr esul t si n decreasei n cash.i ti stheref orean appl i cat i onofcash.

Decr easei ndef err edpaymentl i abi l i t i es:  A payment f or pl ant and machi ner y pur chases on def er r ed paym me ent basi shast obema madeasf ort heagr eem me ent .I ti st her ef or ean appl i cat i on ofcash.

Lossonam mo ountofoper at i ons: Losssuffer ed on am mo ountofbusi nessoper at i onswi wi l lr esul ti n out flow ofcas h.

Paym me entoft ax: Paym me entoft ax wi l lr esul ti n decr easei fcash and hencei ti san appl i cat i on ofcash.

Paym me entofdi vi dend: 14

 

 Thi s decr eases t he cash avai l abl ef or busi ness and hence i ti s appl i cat i onofcash.

Decr easedi nunsecur edl oans,deposi t s:  Thedecr easei nt hese l i abi l i t i esdenot est hatt heyhavebeen pai d offt ot hatext ant .I tresul t s,t heref ore,i noutflow ofcash.

UTI LI TY OFCASH FLOW ANALYSI S  

A cash flow s t at em me enti s use f ulf orshor t t er m pl anni ng.A

 busi nessent er pr i seneedssuffici entcash t omee ti t svar i ousobl i gat i ons i nt henearf ut ur esuchaspaym me entofdebt sm ma at ur i ngi nt henearf ut ur e, expenses oft he busi ness,et c.A hi st ori calanal ysi s oft he di ffer ence sour ce sand appl i cat i onsofcas h wi l lenabl et hemanagementt o make r el i abl ecash flow pr oj ect i onsf ort hei mmedi at ef ut ur e.I tmaythen pl an outf ori nves t mentofsur pl usorm me eet i ngt hedefici ti fany .Thusa cash flow anal ysi si san i mport antfinanci alt oolf ort hem ma anagem me enti t schi ef advant agesar easf ol l ows:

Hel pi n effi ffic ci ent ofcash managem me ent :  cash flow anal ys i s hel ps i n eval uat i ngfinanci alpol i ci esand cash posi t i on.Cash i st hebasi sf oral l oper at i onsand hencea pr oj ec t ed cash flow st at em me entwi l lenabl et he managem me entt o pl an and coor di nat et he financi aloper at i ons pr oper l y .  The managementcan known how much cash i s needed,f r om whi ch sour cew wi i l lbe der i v ed,how much can be ge ner at ed i nt er nal l yand how muchcanbeobt ai nedf r om out si de.

 cash flow anal ys i s pr ovi des Hel pi ni nt er nalfinanci almanagem me ent: i nf orm ma at i on aboutf unds,whi ch wi l lbeavai l abl ef r om oper at i ons.Thi s 15

 

 wi l lhel pt he manageme nt i n de t er mi ni ng pol i ci es r egar di ng i nt er nal financi almanagem me ent e g.poss i bi l i t y ofr epaym me ent ofl ong t er m debt di vi dend pol i ci esofpl anni ngr epl acem me entofpl antandm ma achi nery .

 cash flow s t at eme mentdi sc l ose st he Di scl oses t he movem me ent ofcash: comp mpl et est oryoft hecashmovem me ent .Thei ncr easei nordecr easeofcash andt her easonst her ef orecan beknown,i tdi scl osest her easonsf orl ow cashbal ancei nspi t eofheavyoper at i ngpr ofit soff orheavycashbal ance i nspi t eofl ow pr ofit s. However,com mp pari son ofori gi nalf orecastwi t ht heact ualr esul t s hi ghl i ght st he t r ends ofmov em me ent s ofcas h,whi ch may ot her wi se go undet ect ed.  t he ext ant of Di scl oses t he success or f ai l ur e of cash pl anni ng: succes s orf ai l ur e ofcas h pl anni ng can be known by compari ng t he pr oj ec t edcas h flow s t at eme mentand nec es sar yr em me edi almeas ur escan be taken.

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CASH FORECASTS  The cash f or ecast s hel pi n de t er mi ni ng t he amount of cash r equi r edandt hesour cesf r om whi ch i twi l lbeobt ai nedduri ngdi ffer ent t i me per i ods. Thi si s al so known as cas h budget i ng . t he di ffer ent met hodsofcashbudge t i ngorm ma aki ngcashf or ecast sar eexpl ai nedi nt he chapt er“ budget arycont r ol ”gi venl at eri nt hebook.

Cl assi fiedcashflow s t at em me ent

 Thecashflow st at ement sar ecl assi fiedi nt ot hr eecl asses.

Cash flowsf r om oper at i ngact i vi t i es Cashflowsf r om i nvert i ngact i vi t i es Cashflowsf r om financi ngact i vi t i es

 Thr ough t hi sf or mat cal l sf or mor e det ai l s. I t pr ovi des usef ul i nf or mat i ononhow cas hflowshav ebeeni nfluencedbydi ffer entki ndsof deci si ons.Gi vent hegr eat eri nf orm ma at i onalcont actofsuchaf orm ma at,t he 17

 

di sc uss i on paperon “ cash flow s t at em me ent s”pr epar ed byt heacc ount i ng pr i nci pl es boar d of t he i nst i t ut e of char t ed account i ng of I ndi a r ecom mm mends t hi sf orm ma at .I nci dent al l yt he l i st i ng gui del i nes ofst ock exchangesi nI ndi anow r equi r et hatal ll i st edcom mp pani esm mu usti ncl udea cash flow s t at eme mentpr epar ed account i ngt ot hef or matsugge st ed i n he deci si on pr operi nt hei rannualr eport s.

Formatofcas hflow st at eme ment CASH FLOW STATEME MENT Fort hey earendi ngon…… ………… Bal anceason11200  

Cas hbal anc e…. .

…………. .

 

Bankbal ance…. .

……………

 Add:sour cesofcash I ssueofshar es  

……………

Rai si ngofl ongt er ml oans

………….

Sal eoffixe dasset s

…………. .

 

Shor tt er m ope r at i ons

 

Cashf r om oper at i ons

…………. .

Pr ofitasperpr ofitandl ossacc ount …………  Add/Less:adj ust me ntf ornoncashi t ems …………  Add:i ncr easei nl i abi l i t i es  

…………

Decr easei ncur r entasse t s

…………

Less:i ncr easei ncur r entasse t s

…………

 

………….

 

Dec r eas ei ncurr entl i abi l i t i es Tot alcashavai l abl e( 1)

Less:Appl i cat i onsofcash:   Redempt i onofr edeema mabl epr ef er ence shar es 18

…………. . …………. .

……………

 

 

Redemp mpt i onofl ongt er ml oans

…………. .

 

Pur chasesoffixe dasset s

…………. .

 

Decr easei ndef er r edpayme mentl i abi l i t i es

…………. .

Cashoutflow onaccountofoper at i ons

……………

Taxpai d Di vi de ndpai d

…………… ……………

     

Decr easedi nunsecur edl oansdepos i t set c

…………….

 

Tot alappl i cat i ons( 2)

……………

 

Cl osi ngbal ance*

 

Cashbal ance

 

…………. .

Bankbal ance

………….

* i tshoul dt al l ywi wi t ht hebal anceasshownby

NEED OF THE STUDY:  To s t udy has gr eat si gni ficance and wi l lpr ovi de benefit st o var i ous part i esw wh hodi r ect l yori ndi r ect l yi nt er actwi t ht hecompany. I ti si mpor t ant because i ti s benefici al t ot he emp mpl oy s and offer mot i vat i on by showi ng how act i v el yt hey ar e cont r i but i ng f or t he comp mpany’ sgr owt h. I ti sbenefici alt ot hem ma anagem me entoft hecom mp panyasi tpr ovi desacl ear cutpi ct ur ewi t hr egar dt ot hecashflow st at em me ent s.

SCOPE AND PERI OD OF THE STUDY: Thescopeoft hest udyi sl i mi t ed t oDr .Reddy’ sl abor at or i es

 

l i mi t ed onl yandt heper i odofhes t udy20132014

OBJECTI VESO OF FTH HE ESTUDY:  Toassesst heabi l i t yoft heent er pr i se. •

19

 



 Topl anandcoor di nat et hefinanci aloper at i onspr oper l y .



 Toknow muchcashi sneededf r om whi chsour cei twi l lbeder i ved, t o know how much wi l lbeavai l abl et o mee tobl i gat i onst ot r ade c r e di t or s .



How much can bege ner at ed i nt er nal l yand how much coul d be obt ai nedf r om outsi de.

METHO OD DO OL LOGY: Fort hest udy ofcash flowsofDr .Reddy’ sl aborat ori esl i mi t ed.The secondarydat at hati s,t hefinanci alr eportoft hecom mp panyf r om t heyear 20132014aret akeni nt oconsi der at i on. •

 Thet heor et i calcont ent sar egat her edf r om emi nentt extbooksand r e f e r e nc el i br a r yatDr .Re ddy ’ sl abor a t or i e sl i mi t e d.



 Thefinanci aldat aandi nf or mat i oni sgat her edf r om annualr epor t s oft hecoi nt ernalr ecor ds.



I nt er pr et at i onsandconcl usi onsarepur el ybasedonmyopi ni on.

 TI TLE OFSTUDY:  The t i t l e of t he st udy i s “ CASH FLOW MANAGEMENT” i n DR. REDDY’ SLABORATO OR RI ESLTD D, ,t echops,uni t 1,bol l ar am m. .

LI MI TATI ONSO OF FCASH FLOW ANALYSI S:

 Cash flow anal ysi si sausef ult ooloffinanci alanal ysi s.However ,i thas  beenownl i mi t at i ons.Thesel i mi t at i onsar easunder: •

Cas h flow st at ement can not be equat ed wi t h t he i ncome s t at em me ent .An i ncom me est at eme mentt akesi nt oaccountbot h cash as

20

 

 wel las non cash i t ems and,t her ef or e,netcash flow does not nece ssar i l ym me eanneti ncom me eoft hebusi ness . •

 Thecash bal anceasdi scl osedbyt hecash flow s t at ementmaynot r epr esentt her eall i qui d posi t i on oft hebusi nesssi ncei tcan be easi l yi nfluence dbypost poni ngpur chase sandot herpaym me ent s.



Cash flow s t at eme mentc annotr epl acet hei ncome mest at em me entort he f unds flow s t at eme ment .Each oft hem has a se par at ef unct i on t o perf orm m. .

I n spi t eoft hesel i mi t at i ons,i tcan besai dt hatcash flow st at eme menti sa usef ulsuppl em me ent aryi nst rument .I tdi scl osest hevol umeaswel last he speedatwhi cht hecash flowsi nt hedi ffer entse gm me ent soft hebusi nes s t hi shel pst hem ma anagem me enti nknowi ngt heam mo ountofcapi t alt i edupi na part i cul arsegm me entoft hebusi ness.Thet echni queofcash flow anal ysi s,  when used i n conj unct i on wi t hr at i oanal ysi s,ser vesasabar ome t eri n measuri ngt hepr ofit abi l i t yandfinanci alposi t i onoft hebusi ness.  

INDUSTRIAL PROFILE:-

1.I nt r oducti on I ndi a’ s phar mace ut i cal se ct or has been t he subj ec t of m mu uch conj ect ur er ecent l y because evol vi ng i nt el l ect ualpr opert y( I P)l aw ws s ar e sur e t o al t er t he st at us quo. As a knowl edge dri v en i ndust r y , pharm ma aceut i cal sareespeci al l ysensi t i vet or egul at orychangest hataffect I P.I nt hepast ,I ndi an pharm ma aceut i calfir mshaveder i ve d consi der abl e r eve nuesby sel l i ngcopi esofWest er n com mp pani es’pat ent ed pr oduct s.I n 21

 

2012,t hi spr act i cew wi i l ll i kel y come met o an end,when I ndi ai mpl em me ent s st r ongerI Ppr ot ect i onl aws ws.Whati sl essobvi ousi show t hei ndust ry  wi l lr eacti nt hepos t 2012 envi r onme nt .Exi s t i ngr esear ch hasanal yz ed 2012 f r om a number of angl es, r angi ng f r om consum me er f oc used t o i nve st or f ocused, and used bot ht heor et i cal( t opdown)and com mp panyspeci fic( bot t om mup)met hods. By f ocusi ng on t he st r at egi c act i vi t i es of t wel ve i nfluent i al com mp pani es, t hi s paper makes pr oj ect i ons about how t he I ndi an pharm ma aceut i cali ndust rym mi i ghtdev el opi nt hecom mi i ngdecades.I tcan be ar guedt hatt hi sm me e t hodput st oom mu uchem mp phasi sont her ol eoft hefirm i nt hel argeri ndust rycont ext ,andover l ooksot herf act orssuchaspat ent enf or ce ment ,mar ketse gm me ent at i on,and dem ma and. Howev er ,gi v en t hat firm st r at egi es are deri ved f r om assessm me ent s ofe xt ernalf act ors,i ti s r easonabl et oi nves tsom me econfidencei nt hem m. .Fur t her mor e,t hee xt entt o  whi ch phar maceut i calcompani es cont r olt hei rown des t i ni es mustbe obser ved.Consi der ,f orexampl e,t hepr ospectofcr eat i ngnew dr ugsi n I ndi a.I ndi a’ scapaci t yt opr oducei t sow wn nI Pi sverymu much cont i ngenton t hes ucce ssoffir mss uchasDr .Reddy’ s Labor at or i es( DRL)andRanbaxy .

1. 1St r uct ur eofpaper  Thepr i nci palobj ect i veoft hi spaperi st opr oj ectt heeffect st hat 2012 I Pl awsar el i kel yt ohaveon t he I ndi an pharm ma aceut i cali ndust ry . Sec t i on 2 pr ovi des backgr ound on phar mace ut i cal si n I ndi a, whi l e sect i on 3st ri kesatt heheartoft hei ssuei nquest i onbyreport i ngand anal yzi nghow com mp pani esar epr epar i ngf or2012. 1. 2Sum mm mar yoffindi ngs  T h sr e se a r ch sa ur p po r t s n u b e r o f c o n c l u s i o n sp aa bt o u t hr e m p a c t ofr e f or ms mi s o n t h e ph m ma a c e ua t i c a lm i n d u s t r y . I n c r e a s e d e n tt p oi t ec t i o n nee d not spel l di sas t er f or I ndi an pharm ma aceut i cal c om mp pani es , ev en t hought hecur r entpr act i ceofpr ofit i ngf r om ot hercom mp pani es’ I Pwi l ll i kel yceaset obea st rat egi copt i on.Thef ut uresuccessofI ndi an pharm ma aceut i calcom mp pani eshi ngeson t hei rabi l i t yt ofindpr oduct i ver ol es f ort hem ms sel vesi nt hepost 2012envi r onment .  Themostpubl i ci z edr eact i on ofI ndi anfir mst o2012hasbeen t he dev el opm me entofdr ug di scov er y pr ogr am ms s by com mp pani es such as DRL, Ranbaxy , Woc khar dt , and Dabur , who pl an t o use pr oduct pat ent pr ot ect i on as an i ncent i vet o pr oducet hei rown wn I P.To be sur e,I ndi an dr ug di scov er y pr ogr am ms s ar e st i l li nt hei ri nf ancy and t her er em ma ai n consi der abl e obst acl es on t he hori zon.I ndi an com mp pani es have nei t her 22

 

t he capi t al bases nor t he experi ence oft hei r mu mul t i nat i onal c om mp pany ( MNC)com mp pe t i t or s.Ont heot herhand,oddsar ehi ght hatsom me efirm ms si n I ndi a wi l l succ ee di n dr ug di sc ove r y wi t hi nt he next f ew ye ar s. I f succe ssf ul ,I ndi a wi l lbe t he one oft he fir st e mer gi ng econom mi i es t o pr oduce cut t i ngedge t ec hnol ogy .Notal lI ndi an pharm ma aceut i calfir ms poss es st he r es our ce s, t he wi l l , or t he knowhow t oi ni t i at e drug di scov er y ,butt her ei s hope f orl ess er endowed com mp pani es af t er2012. Consi der t he f ol l owi ng poi nt s. Fi r s t , 90 per ce nt 1 of t he I ndi an pharm ma aceut i calmar ketc onsi st s ofse cond and t hi r d gener at i on dr ugs t hatareno l ongersubj ectt o pat entprot ect i on i nt hedeve l oped wor l d.  Af t er2012,I ndi an compani eswi l lbeabl et o cont i nuet opr oducesuch dr ugs.I thaseve n been suggest edt hatt hem ma arketf ort heseol derdr ugs  wi l li ncr ease as t he pr i ces f ornewer ,onpat entdr ugs i ncr ease.Some comp mpani eshaveal r eady est abl i shed t hem ms sel vesas export er sofgener i c drugst ot hedevel opedworl d,and2012pat entl egi sl at i ondoesnotposea t hr eatt ot hes er ev enue sour ce s.Sec ond,I ndi an drug comp mpani eshave adv ant ag es ov er MNCs i n t he I ndi an mar ke ti n a number of no t echnol ogi calar eas,i ncl udi ng market i ng,di st ri but i on,and t r adi t i onal medi ci nes.Som me eI ndi an com mp pani esarel ev er agi ngt hesenot ec hnol ogi cal st r engt hs ( and ev en bui l di ng ent i r e busi nes se s ar ound t hem m) )as t hey appr oac h 2012.Thi r d, m me er ge r s and acqui si t i ons ( M&A)hav e becom me e i ncr easi ngl y com mm mon. By mat chi ng com mp pani es wi t h com mp pl ement ar y st r engt hs,t heM M& &Apr ocessprom mi i sest obet t erequi pI ndi an com mp pani est o comp mpet ewi t h MNCsi n ye ar sahead.Tot heext entt hatM&A act i vi t yhas occ ur r ed bet wee n I ndi an and mul t i nat i onal fir ms, t he di st i nct i ons  bet weent het wogr oupsar ei ncr easi ngl ybl ur r ed.Fouroft het wel vefir ms i nt he sam mp pl ef ort hi s paperwer e MNC subsi di ari es.Accor di ngl y ,t he paperal sooffer si nsi ght si nt ot hesecom mp pani es’2012r el at ed st r at egi es. Mos tMNCs t hatal r eady hav ea pr es encei nI ndi a ar ebui l di ng up t he capaci t yt ol ocal i zef urt hert hei rpost 2012 I ndi an oper at i ons,pendi ng t hespeci ficnat ur eoft henew pat entenvi r onment .Ther ece nt l ypassed Excl usi veMa Mar ket i ngRi ght s( EMR)am me endm me entt oI ndi a’ spat entacthas demo monst r at ed t o MNCs t hatt he gover nment wi l lt r yt o acc om mm modat e t hei ri nt er est si n comi mi ng year s,butt he post 2012 scenari of orpat ent pr ot ect i on i sst i l lf arf r om cl ear .Sect i on 3. 3. 7 det ai l st hecurr ent st hat under l i el ocal i zat i on deci si onsf orM MN NCs.MNCsw wi i t houtI ndi an pr esence  wi l l undoubt edl y ent er t he mar ke t af t er 2012. I ti sl i kel yt hat a consi der abl e shar e of new ent r ant s wi l l r el y on comar ket i ng arr ange ment swi t hl ocalcom mp pani esand ot herMN MNCst odi st r i but et hei r pr oduct s. 23

 

2.Overvi ew  Thi ssect i on pr ovi dest hebackgr oundt ost r at egi ci ssuesdi scussed i n sect i on 3.I ti s com mp pr i sed off oursubsect i ons,each ofwhi ch offer s di ffer entper spect i veson pharm ma aceut i cal si nI ndi a.Sect i on 2. 1hi ghl i ght s maj ordev el opment si nt hei ndust r y ove rt hepastc ent ur y;sec t i on 2. 2 pr ese nt sa f unct i onalmodeloft he pharm ma aceut i calpr oductc ycl e;and sect i on 2. 3 exami nes t he r egul at or y envi r onm me ent i n whi ch pharm ma aceut i calcom mp pani es oper at e.Fi nal l y ,sect i on 2. 4 consi der st he ev ol ut i onofdom me es t i cdema mandf ordrugs. 2. 1A Br i efHi st ory( 1900–1999)  TheI ndi an phar maceut i cali ndust r yt r acesi t sr oot st ot he1903 f or mat i on ofBengalChem mi i calandPharm ma aceut i calWor ksi n Cal cut t aby Pr of essorP. C.Roy.Duri ngt hefir sthal foft het went i et hcent ury ,however , anddespi t em mo odesteffort sont hepartoft hecol oni algover nmentt ospur l ocalpr oduct i on,I ndi ar em ma ai ned l ar gel ydependenton t heUK,Fr ance, andG Ge er manyf ormedi ci nes .  Thenew andi ndependentgov er nmenti n1947—whi chemphasi z ed i ndust r i al i z at i on t o achi ev e sel f r el i ance— —i i nve st ed heavi l y i n pharm ma aceut i cal s( am mo ongot heri ndust r i es)andcur bedi mport s.2 Yet ,i n cont r astt oi t spol i ci est owar dot hersect ors,t hegovernmentdi dnot di scour agef orei gn firm ms sf r om com mp pet i ngi nI ndi a.I n ot hersect ors,sel f r el i ance was pur sued at hi gh cos t , but phar mace ut i cal pol i ci es emp mphasi z ed nat i onalheal t h.Becauset her ewas no l ocalsubst i t ut ef or MNCs’t echnol ogy,t hegover nmentdi dnotdi scour aget hei rpr esencei n t he count ry .I nf act ,unt i l1970,t he I ndi an pharm ma aceut i cali ndust ry consi s t ed al mostent i r el yofMNCs,mostofwhi ch mai nt ai ned mi ni mal physi caloper at i onsi nI ndi a.  Thegover nme ntt ooki t sfir stconcr et est epst owar dsel f r el i ancei n pharm ma aceut i cal s wi t ht he es t abl i shmentofHi ndust an Ant i bi ot i cs Lt d. ( HAL)i n 1954 and I ndi an Dr ugs and Phar mace ut i cal s Lt d.( I DPL)i n 1961. I DPL ( i n spi t e of i t s gr oss l y i neffi ffic ci ent char act er ) bec am me e i nst rument ali nt hedevel opmentoft hei ndust rybyservi ngast hevehi cl e f or a compr ehensi v e Sov i et sponsor ed pr ogr am i n whi ch Russ i ans suppl i ed machi ner y , per sonnel , and t ec hni calknowhow t o pr oduce ant i bi ot i cs.TheI DPLdevel opmentpr ogram hel pedsel f r el i ancei nsever al  ways.Fi r s t ,i tshowed t hati twaspossi bl et opr oducedr ugsi nI ndi aat comp mpet i t i ve cost s.Second,i t devel oped human and physi calcapi t al , 24

 

some meofwhi chmove di nduecour set oot hercom mp pani es.Thi r d,i tspur r ed t heexi st enceofanet workofsupporti nst i t ut es,pharm ma acycol l eges,and upanddowns t r eam busi ness es .  The I DPL pr ogr am al one was i nsuffici ent t oj umpst ar tl ocal i ndust r y . Local com mp pani es nee ded a way t o com mp pet e wi t h mor e exper i enced and bet t er endowed f or ei gn firms;onl yt hen woul dt he i ndust ry have t he cr i t i calmass t o sust ai ni t sel f .The 1970 Pat entAct madeheadwa wayt owar dt hi send byr ec ogni z i ngpat ent son proc es se sbut notpat ent s on pr oduct s,whi ch i nt ur n enabl ed l ocalfir ms t ol egal l y pr oducecom mp poundst hatwer epat ent edel se wher e.Conse quent l y ,sc or es ofI ndi an pharm ma aceut i calc om mp pani es ev ol ve dt or ev er se engi nee r and cheapl ysel lcopi esofal lmaj ordrugs.Al t hough manyW We est er n obser ver s cri t i ci zet he1970Pat entActon et hi calgrounds,i tcannotbedeni edt hat t he l egi sl at i on hel ped t o devel op I ndi a’ s pharm ma aceut i cali ndust ry .Over t henextt hi r t yye ar s,t hei ndust r ywoul d gr ow f r om a handf ulofMNC pl ay er st ot oday’ s 16, 000 l i ce nse d phar maceut i cal c om mp pani es . Fr om 1970, l ocalI ndi an firm ms sr ev er se engi nee r ed bul k dr ugs,whi ch t hey ei t hersol d whol esal eorpr ocessedi nt osi mpl ef orm mu ul at i ons.Meanwhi l e, MNCs— —r r el uct antt o exposet hei rI Pi n such a l awl es s mar ket —l i mi t ed t hei rexposur et oI ndi a.By 1997,MNCs had comet o acc ountf or30 per centofbul ksand20per centofl ocal l ypr oducedf orm mu ul at i ons. 4Most MNCsdi dt hebar em mi i ni mum nee dedt ost ayi nt heI ndi an mar ket( such as pr oduci ng si mpl ef orm mu ul at i onsf r om i mport ed bul ks) ,whi l eaw wa ai t i ng t hear ri valofst r ongerpat entpr ot ect i on.Thef ew MNCst hathavebeen  bul l i sh t owar dI ndi a overt hepastt hi r t y year shav el ocalmanager st o t hankf ort hei raggressi vepost ur e. Even wi t houtst r ongpat entpr ot ect i on,t heI ndi an pharm ma aceut i cal i ndust rym ma at ur eddur i ngt he1980s.I n part i cul ar ,l ocalcom mp pani esgre w l ess r el i ant upon r eve r seengi neer i ng f or r ev enues. By i ncr easi ngl y f ocusi ngon at t r i but essuchasnoveldel i ver ysyst em ms s,I ndi an fir msw we er e on t hei rw wa ay t o cr eat i ng r ev enues based on t hei rown wn added val ue. Com mp pani es al so st art ed t o pr oduce pr oduct s bet t er t ai l or ed f or t hei r mar ket st hant ypi calMNC pr oduct s.Fore xam mp pl e,Lupi nLabsi nt r oduce d i t sAKT4ki t s,whi chcom mb bi nedf ourant i t uber cul osi s( ant i TB)drugst hat  wer e gener al l y admi ni s t er ed t oge t heri nt o a si ngl e package.The AKT4 ki t swer ewel lr ecei vedbyTB pat i ent s,whonol ongerhadt oworr yabout t hel ac kofa vai l abi l i t yofanyonedr ug .( Se l e ct i v edi s c ont i nuat i onofant i  TB dr ugscanl eadt or esi st anceandevenr el apsei nTB pat i ent s. )

2. 2Th e Pr h ar m a c e u t i ca P r oc dt u c t i oc noC y c l e P ha m a ce u t i c a l pl r o d u i o n ns i s t s of a number of di sc r et e act i vi t i es.Because di ffer entphases oft he pharm ma aceut i calpr oduct i on 25

 

cycl erequi redi fferentt ypesofr esour cesandl evel soff undi ng,i ti susef ul t o exami ne firm ms s’st r at egi es wi t hi nt hei roper at i onalcont ext s.I nf act , manyoft heconcl usi onsdr aw wn ni n sect i on 3. 3. 1arer el evantonl ywi t hi n cer t ai nphasesoft hepr oductcycl e.Thi spaperassumest hatt hepr oduct cycl e has f our mai n com mp ponent s: 1) di scove ry , 2) cl i ni cal t r i al s, 3) pr oduct i onandmanuf act ur i ng,and4)mar ket i nganddi st r i but i on. Lar ge MNCs t ypi cal l y have act i vi t i es t hat span al l of t hese ar eas. Howev er ,sm ma al l erc om mp pani es— —i i nI ndi aandel se wher e—o —of t en speci al i z ei n oneormor ef unct i ons. 2. 2. 1Di scovery

I n pri nci pl e,di scoveri ng new drugs i s a st r ai ght f orwar d pr ocess. Fi r st ,chem mi i st ssuppl yr esearch sci ent i st swi t h comp mpoundsf ort est i ng,a pr ocessr ef er r ed t o as l ead gener at i on.Gener al l y ,such com mp poundsar e cl osel yr el at ed mol ecul es wi t hi n a gi ve n di sease ar ea. I nt he Wes t ,  because t he success of a di scover y oper at i on i s at l east par t i al l y cont i nge nt upon t he number ofl eads,drug com mp pani es hav er ec ent l y t ur ned t o com mb bi nat or i al chem mi i st r yi n or der t o acce l er at et he l ead gener at i on pr ocess.( Com mb bi nat ori alchem mi i st ry ,wi t hi t s hi gh cost s and unpro ve n effec t i ve ness ,has notye tgai ned wi des pr ead acce pt ance i n I ndi a. ) Second, sc i ent i st s scr een mol ecul es i n al ab envi r onment by n vi t r o( conduct i ng i Pet ridi sh)t est s.Next ,comp mpounds wi t h at t r act i ve nv i v o  n medi calqual i t i esar eadvancedt oan “ ani malhouse”f ori t e s t s .I vi vo t est s ar e use dt o det er mi ne t he mi ni mum dosag e nece ssar yt o pr oducet hei nt endedr es ul t s( effic fficacy)andt hem ma axi mum nonl e t haldose ( t oxi ci t y)oft hedrugi n quest i on i n ani malsubj ect s.Com mp pani esusual l y nv i v o fil ef orpat entpr ot ect i onofpr om mi i si ngcomp mpoundsm mi i dwayt hr oughi t est i ng.Addi t i onal l y,r esear chsci ent i st snot eanysi deeffect st hatmaybe i n a s s oc i as t e d i t h t h e d r ug ’ s i n s r a t i o n . F o l l o w wi i n g t h e o m mp p l et i o nt o f vi v o t e t s ,wc o m mp p a ni e s m aa ydm ap pi l yt t o c o n d u c t c l i ni c a lc t r i a l s o n h e i r

comp mpoundsi nt hei rdesi r edmarket s.Perm mi i ssi ont oconductcl i ni calt ri al s depends on t her es ul t sofbot ht hei n vi t r oandi nv i v o  t est s,and t hei r conf orm mi i t yt o gener al l y accept ed st andards,as t hey aredet er mi ned i n i ndi vi dualcount ri es. 2. 2. 2Cl i ni calTri al s

 Whi l et es t i ngon ani mal spr ovi desval uabl eandnecessar yi nsi ght s i nt o a drug’ smedi calchar act eri st i cs,r egul at ory aut hori t i esi n vi rt ual l y al lmar ket sr equi r e comp mpr ehensi ve cl i ni cal t r i al s on human subj ect s  bef or e gr ant i ng pr oduct i on and mar ket i ng appr oval .The st andar ds f or cl i ni calt r i al s are consi der abl y mor e st ri ngentt han t hose f or ani mal t es t i ng. D Do oct or s and ot her pr of ess i onal s who admi ni st er t r i al s ar e 26

 

r equi r ed t o pass r evi ews t hat ar e adm mi i ni s t er ed by i ndependent I nst i t ut i onalRevi ew Boar ds( I RBs) . 6Tri al sm mu ustem mp pl oydoubl ebl i ndt est pr oce dur es . Pr oduct i on f aci l i t i es shoul d be i n acc or d wi t h Good Manuf act uri ngPr act i ces( GMP)asdet er mi nedbyt her el evantr egul at ory aut hori t y. 7 Thi sl i sti s notexhaust i ve;cl i ni calt ri al s ar e exact i ng and, consequent l y , expensi ve t o admi ni st er . Fur t her mor e, si nce di ffer ent count r i es have di ffer entst andards,i ti s necess ary t o conductcl i ni cal t r i al si n mul t i pl el ocat i ons ( or at l east si mul t aneousl yi nt he same me l ocat i on)t o achi evegl obaldi st ri but i on.Severalanal yst shavesuggest ed t hat I ndi ai s wel l sui t ed f or cl i ni cal t ri al s because i t has a st r ong uni ve r si t y sys t em capabl e ofpr oduci ng l owcos thuman capi t al ,and a l arge popul at i on of poor and r el at i vel y di sease-r i dden pot ent i al t est subj ect s.Some me l oc alcom mp pani es— nam me el y Cedi l l a and Ranbaxy—hav e  begun t ofil lt hi sr ol e.However ,t hei ssuesal l uded t oabovest i l lpr event gl obal cl i ni cal t r i al sf r om bei ng a vi abl e opt i on f or most I ndi an phar mace ut i calcom mp pani es.Ther ef or e,whi l e MNCs may begi nt o use I ndi af or cl i ni calt ri al si nt he nearf ut ure,l ocalcom mp pani es wi l ll i kel y enl i stot herfirm ms st oassi stt hem i nt hi scapaci t yas t heydi scov ernew dr ugs. 2. 2. 3Product i onandManuf act ur i ng

Phar maceut i calproduct i on consi s t s ofbul k dr ug manuf act ur i ng ( i n whi ch act i vecom mp poundsar esynt hesi zedon an i ndust r i alscal e)and f orm mu ul at i on manuf act uri ng( i n whi ch act i veand i nact i vei ngredi ent sar e packaged i nt ot abl et s, capsul es, l i qui ds, and i nj ect i bl es. Bul k dr ug manuf act ur i ng i s mor e t ec hnol ogy i nt ensi ve t han f or mul at i on manuf act ur i ngbecause,whi l et hef orm me erdr awsf r om r eve r seengi neer i ng ski l l s and r equi r es knowl edge ofchem mi i calpr ocesses,t he l at t erme mer el y appr oxi mat est hej ob oft hel ocalpharm ma aci ston a l arge rscal e.I ndi an comp mpani eshavepr ove nt hem ms sel ve scapabl ei n bot h ar eas,asbarr i er st o ent r y ar e modes tand domes t i c manuf act ur i ng gui del i nes ar el i ber al . Howev er ,t oexpor tpr oduct st odev el opedmar ket s,comp mpani esm mu ustbr i ng t hei rf act ori esi nt oconf orm ma ancew wi i t h GMPst andar ds( seesect i on 2. 3. 1) . U. S.FoodandDr ugAdm mi i ni s t r at i on ( FDA)andUK Depar t mentofHeal t h and Soci al Ser vi ces ( DHSS) sanct i oned f act or i es ar e conse quent l y pr emi mi um asse t si nI ndi a.Accor di ngt oD. M.Gavaskar ,managi ngdi r ect or ofKnol lPharm ma aceut i cal s,GMPcom mp pl i antf aci l i t i es ar e 2530 per cent morev al uabl et hannoncomp mpl i antf aci l i t i es.Thi scostpr em mi i um r ender si t di fficul tf orsma mal l ercom mp pani est ocom mp pet ei nmanuf act ur i ng. 2. 2. 4Mar ket i ngandDi st ri but i on 27

 

Si nce fixed cos t s—s —such as t hose f orR&D and cl i ni calt r i al s—  r epr esentaconsi der abl eport i on oft het ot alcost sf ordevel opi ngdrugs, pharm ma aceut i calpr ofitmar gi nsar el ar gel ycont i ngentupont henumberof cust om me er sr eached.Ther ef ore,com mp pani esst ri vet obui l dt hei rr eput at i ons  wi t h doct or swho pr escr i bephar maceut i cal sand t hepat i ent swho use t hem. m.The l ar ges t pharm ma aceut i calcom mp pani es i nI ndi a use fiel d sal es f orces,r angi ngi n si zef r om 500t oover2, 000,t obri ngthei rproduct st o t hedom me es t i c mar ket .Acc or di ng t o Uday Bhansal iofAr t hurAnder se n, I ndi an com mp pani es hav e a deci si ve edge ov er MNCs i n t er ms of di st r i but i on becauset heybet t erunder st and t henuancesoft heI ndi an mar ketf ordrugs. Unt i lr ec ent l y ,t he I ndi an mar ket al one pr ovi ded suffici ent pr ofit abi l i t yf orI ndi an pharm ma aceut i calcom mp pani es.Butas t hi s mar ket  becomes mor e congest ed and t he cost sf or pr oduci ng new pr oduct s grows,i ti si ncr easi ngl y necessary f orcom mp pani est ol ook f orcust om me er s  beyond I ndi a and t he dev el opi ng wor l d. Unf or t unat el y , mos tI ndi an comp mpani esdo notpr oduceenough product st oj ust i f yi nve st ment si n gl obalmarket i nganddi st ri but i on.Est abl i shedMNCs,ont heot herhand, enj oy r apportt hr oughoutt he wor l d’ s phar mace ut i calmar ket s.When Mer ck devel opsa new pr oduct ,f orexampl e,i tcan i nserti ti nt oal ar ge di st r i but i on syst em m. .I n or derf or I ndi a’ s pharm ma aceut i calcom mp pani es t o mat ch t he di st ri but i on capabi l i t i es oft he maj or i nt ernat i onalpl ayer s, t he ywi l ll i ke l yha vet oj oi nt he i ro wnl oc alf or c e s ,ore nl i s tt hesuppor tof MNCst osuppl em me entt hei reffor t s.

2. 3Regul at oryEnvi r onment I ti s al mos ti mpossi bl e t o engage i n a di scussi on about pharm ma aceut i cal s wi t houtaddr ess i ng r egul at i on.Thi si st r ue f or t wo r easons.Fi r st ,si ncedr ugsaffectt heheal t h and wel lbei ngofsomany ci t i ze ns,gove r nment has an i nt er es ti n assur i ng t hei r adher ence t o medi calst andards( seesecti on 2. 3. 1)andavai l abi l i t y( seesect i on 2. 3. 2) . Second,i nl i ghtoft hef actt hatpat ent abl er esearchcan r epr esentupt o t en per centofa gi ven dr ug comp mpany’ s costs t r uct ur e,I P pr ot ect i on i s essent i alt opr ovi defirms mswi t hi ncent i vest odevel opnew drugs. 2. 3. 1Appr ovalPr ocess

Unl i ke ot herpr oduct s,drugs mustunder go ext ensi ve appr ov al pr oce dur es bef or et hey may be mar ket ed. I ndi a’ s dom me es t i c appr ov al st andar ds ar e qui t el ow, but expor t pr oduct s mus t com mp pl y wi t h s a n r d i ndal l dc e s t i n a t i o nf mr ar ke t s . p o va l sa r e r ep qu i r ed f o r b o h pt r o dd ua c t ssa n p ro e s s e s . A t e a n e wAp d rr u g i s d e v e l o ed , r e g u l a t ot r y 28

 

aut hori t i esoverseecl i ni calt ri al s,whi ch det erm mi i neeffic fficacy,t oxi ci t y,and si deeffect s( seesect i on 2. 2. 2) .Comp mpani esar ef r eet omanuf act ur eand f orm mu ul at eal lappr oved pr oduct sf orwhi ch t heyhavepr oduct i on r i ght s ( whet hernewl ypat ent ed mol ecul esoroffpat entsubst ances )asl ongas t herel evantaut hori t i esdet erm mi i net hatt hei rpr oduct i on f aci l i t i escompl y  wi t h gl obal GMP st andar ds. GMP s t andar ds appl y t o equi pment , sani t at i on,anddocument at i on. 2. 3. 2Pri ceCont rol s

Pri ce cont r ol s ar e not near l y as i mpor t ant i n t oday’ s pharm ma aceut i cal se ct or as are ot her r egul at ory i ssues.Thi si s part l y  becausemar ke t cl ear i ngpr i cesf orcont r ol l ed dr ugshav et ypi cal l yf al l en atorbel ow pri cecont r ol l ed l evel ssi ncet hel at e1970s.I n cases wher e pr i ce cont r ol s di d pose pr obl em ms s, c om mp pani es si mpl y adj us t ed t hei r pr oductport f ol i os accordi ngl y ,t oward noncont r ol l ed dr ugs.Butpr i ce cont r ol sar est i l lwort hyofment i on i nsof araspastpri cecont r olorder s hav e shaped cur r ent pharm ma aceut i cal oper at i ons. Fur t her mor e, i ti s pl ausi bl et hatpri cecont r ol swi l lassumear ol eofi ncr easi ngi mport ance i nt henearf ut ur e.I n 1970,t hegover nmenti nt r oducedt heD Dr r ugPr i ce Cont r olOr der( DPCO)t oguarant eepubl i caccesst o“ essent i al ”drugs,t o pr ovi dear easonabl erat eofr et urnt ocom mp pani es,andt oensur equal i t y . 9 I nr esponse t ot he DPCO,many firms conce nt r at ed on pr oduct i on of ( nonessent i al )dr ugs out si de i t s scope.Som me e eve n di ves t ed t hem ms sel ves compl et el yofcont r ol l eddrugs. Pri ort o1970,I ndi aemp mpl oyedWest ernst yl epat entl egi sl at i on,and r ec ogni z ed pr oductpat ent si n addi t i on t o pr oce ss pat ent s on drugs. Undert hatenvi r onment ,MNCspr osper ed whi l el ocalcom mp pani esl acked t he r es our ce st o ent er t he i ndus t r y . The 1970 Pat ent Act , whi ch r e p r es e n e c h a n ge i nf avor of l ocal producer s, c onsi st ed of t he f o l l o w wi i n gt kd eya cl a u s e s: 1)No phar maceut i calproductpat ent s ar e admi ss i bl e,onl y pr oces s pat ent sar eacknowl edged; 2)Thet er mf orapr ocesspat enti sf ourt eenyear s; 3)T )Thr eeyear sf r om fil i ng,pat ent s ar e deemed t o be endor se d as l i c enseofr i ght ; 4)Pat ent sm mu ustbewor kedwi t hi nt hr eeye ar soffil i ng; 5)T )TheI ndi an gover nmentmayuseoraut hor i z eot her st o uset he pat ent edi nvent i on. I n1995,t hegov er nmentam me endedt he1970Pat entActt oconf or m t o t he e1 T R I PS a c c o r d t h e Ur uguayr oundofGATT.Them ma ai n pr ovi si ons o ft h 9 9 5 or d i n a n co ef w e r e: 1)Ther ecogni t i onofpr oductpat ent s; 29

 

2)E )Exc l usi v e mar ket i ng r i ght s( EMR)f or new pr oduct sf r om 2000– 2012; 3)A mai l box pr ovi si on f orfil i ng pr oductpat entappl i cat i onsdur i ng t het ransi t i onal 1.p .per i odf r om 1995–2012; 4)Twent yyearpat entl i f e; 5)Shi f t i ngoft hebur denofpr ooft ot heal l egedi nf ri nger; 6)The ext ensi on of pr ot ec t i on t oi ncl ude i mport ed mat er i al s and pr oduct s. 2. 3. 4Ot herRegul at oryI ssues

 Asi de f r om appr oval s, pr i ce cont r ol s, and pat ent pol i ci es, t he I ndi an gover nmenthasusedot hert act i cst or egul at et hepharm ma aceut i cal and ot hersect ors.These ar e pri mari l yt hose ofcl assi c pr ot ect i oni sm ( e. g. ,t ari ffs on i mport s, m ma andat ory l i censi ng, r est r i ct i ons banni ng i mport s,et c. ) .Li ber al i zat i on effort sof1991–1992soughtt odi sassem mb bl e pr oj ect i oni stbarr i er s and al l ow f or ei gn firm ms st o comp mpet eon mor eeven f oot i ng wi t ht hei rI ndi an count er part s.The mai n com mp ponent s oft hi s 1991–1992l i ber al i zat i oni ncl uded: a)M )MNCst r eat edasequalt oI ndi ancom mp pani es .  b)Aut omat i cappr ovalf or51per centf or ei gnequi t ypr oposal s. c)A )Aut om ma at i cappr ovalf orf or ei gnt echnol ogyagr eem me ent s. d)Mostbul kdr ugs( andt hei rf orms ms)del i censed. e)P )Pr ov i si on f or a hi gher r at e of r et ur n f or com mp pani es under t aki ngpr oduct i onf r om basi cst ages. 2. 4TheI ndi anMar ket  Thepr evi ous t hr ee subsect i onshave deal tpr i mar i l y wi t hf act or s per t ai ni ng t o phar mace ut i cal suppl y . Thi s se ct i on exam mi i nes t he co hn ar a c t e r i st i c s ft p ar m ma c e uI t i c a l de m ma a n d .f T h r ea i s m u c h a n t i ci pa t i on c c e r n i n g t h eo f u uh r e o fa t h e n d i an m a r k et o re p h r m ma ac e u t i c a l s . W i t h a popul at i on of950mi l l i on andapl et horaofdi seases,I ndi ai sadesi r abl e mar ketf ordr ugcom mp pani es.Fur t her mor e,i n spi t eoft hei rl ow i ncom me es, I ndi an consumer s hav e exhi bi t ed ext r aor di nar y phar maceut i cal pur chasi ng habi t s.Accor di ng t o Ranj i tShahani ,managi ng di r ect orof Novart i sI ndi aLi mi t ed,eve nt hough t hedol l arval ueoft heI ndi an dr ug mar keti sst i l lt oosma mal lt owarr antseri ousat t ent i on,t hema marketi soneof t he l ar ges ti nt he wor l di nt er ms ofvol ume.Fort he I ndi an mar kett o  j ust i f yl ar gephar maceut i cali nv es t me nt s,i ncomesanddr ugpr i cesneed t o ri se,and i ti s saf et o assume t hatt hi s wi l loccur .Barri ng unl i kel y pol i t i cal col l apse, I ndi ai s bound t o mai nt ai n i t s cour se of r api d dev el opment .I MS Heal t h es t i mat es8. 6 per ce ntannualgr owt hf ort he 30

 

I ndi an phar mace ut i calmar ketbet wee n 1998 and 2002,and f or ec ast s t hatt heI ndi anmarketwi l lbewort h$7. 8bi l l i on—i t sfigur ef ort heNort h  Amer i can dr ug mar ket i s $169. 1 bi l l i on—i n 2002. 16 Despi t et he apparentpr eci si on ofsuchpr oj ect i ons,sev er alunknownscompl i cat et he mar ket i ngi ni t i at i vesofpharm ma aceut i calcom mp pani es.I npart i cul ar ,t her ei s i nsuffici ent i nf or mat i on about : 1) t he t i me f r am me e of I ndi a’ sr i se t o econom mi i c pr osperi t y , 2) t he mar ket r eact i on t o l i ber al i zat i on ( i . e. , cust omers’wi l l i ngnesst ot ol erat epri cei ncreases) ,and3)t hest ruct ur eof t hepost 2012mar ket .

3.I mpactof2012on Fi rm St r at egi es  Thi s sect i on expl or es how I ndi an compani es ar er eact i ng t o ant i ci pat ed changes i n pat ent pr ot ect i on f ol l owi ng 2012. I t wi wi l l be dem mo onst r at ed t hat fir m st r at egi es ar e cont i nge nt upon expect at i ons aboutandcapaci t i est oadaptt ot henew pat entenvi r onment .

3. 1Expectat i ons  Ther ear es t i l lmanyunknownsconcer ni ngt heant i ci pat ed pat ent l egi sl at i on i n2012.Eveni f( asi sexpect ed)t henew pat entl aw nom mi i nal l y comp mpl i es wi t h WTO gui del i nes ,m mu uch unce r t ai nt y per si st s abouti t s speci ficoper at i on.Forexam mp pl e,t hel aw maybei nt er pr et edi n amanner t hatf av or sI ndi an com mp pani esov erMNCs.Fur t her mor e,cour t sm mi i ghtbe unwi l l i ngorunabl et oenf orcedeci si ons. 3. 1. 1New Del hi ’ sw wi i l lt oaffectchange

I n ev al uat i ngt hedegr eet owhi ch t heNew Del higov er nmentwi l l supportst r ongerpat entpr ot ect i on,i ti susef ult oconsi deri t sst andpoi nt  wi t hr espectt ot hecost sandbenefit sassoci at edwi t h pat entpr ot ect i on. I fper cei ved cost s,such as i ncr eased pr i cesand l ocalfirm ms s’weakened comp mpet i t i ve posi t i on,out wei gh t he benefit s associ at ed wi t hi nnovat i on, t hen New Del hi w wi i l l be i ncl i ned t o choos e weak l egi sl at i on and enf orcem me ent .I ft hegovernmentbel i evest hatst r ongpat entpr ot ect i on wi l l c ont r i but epos i t i v e l yt oI ndi a ’ so ve r al ls oc i aland i ndus t r i alwe l f ar e ,t he r e v e r s ewi wi l lbet r ue .

3. 1. 2New Del hi ’ sabi l i t yt oaffectchange

Eveni ft he2012pat entl aw f ul l ycom mp pl i eswi t hOPPIspeci ficat i ons, i tw wi i l l be i neffect i ve wi t hout pr oper enf or cem me ent . Pat ent exami ner s possessski l l snoteasi l yat t ai nabl ei nI ndi a,andt heygener al l ycom mm mand pr emi mi um com mp pensat i on.Lanj ouw es t i mat est hatt heI ndi an pat entand 31

 

t r adema mar k offic ffice( PTO)cur r ent l yspends$330, 000 perye ar ,wher easi t s U. S.count er partoper at eson a $300 mi l l i on budge t . 19 Obvi ousl y ,New Del hiwi l lhavet oal l ocat emorer esour cest oi t sPTO i fi ti st of unct i on effect i vel y .I n addi t i on,I ndi al acks ot hercompl em me ent ary pri vat e sect or f eat ur est hatar erequi r ed ofa wel l f unct i oni ngpat entsyst em m, ,such as pat entat t orneysandageneralappr eci at i on ofI Pi ssues. 20 3. 1. 3Fi r ms’vi ew ws s

I nt hefinalanal ysi s,pat ent sw wi i l lpr obabl ynotbeasst r ongoras  wel lenf or cedast heOPPIfir msandWes t er n gover nme nt swant ,butt he post 2012 sc enari o— —a agai nstt heappar entwi shesofNew Del hi —i ssur e t or epr esenta si gni ficantdepart ur ef r om t hest at usquo.Thepot ent i al r ange of pos si bl e out com me es poses si gni ficant pr obl ems f or firms at t emp mpt i ngt odr af tpost 2012st r at egi es.Sever aloft heMN MNCscover edi n t hi sst udyhav edec i dedt ore f r ai nf r om maki ngaj udge mentabout2012 unt i laf t ert hef act ,buthavedevi sedexpansi on pl anst odi st ri but ehi gher r eve nue,easi l y pr epared,fir stgener at i on dr ugs i nI ndi a.Ot herfirm ms s, such as Sun Phar mace ut i cal s,hav e made det ai l ed guess esaboutt he degree ofpat entpr ot ect i on t hey wi l lr ecei ve,and have i ni t i at ed cost l y, i rr ever si bl ei nvest ment sbasedon t hei rassumpt i ons.At hi r dsetoffirms ms, such as Wockhar dt ,i sm mo or ef or war dl ooki ng t han t hefir s tgr oup,but pl aces a hi gher val ue on wor kabl e cont i nge ncy s t r at egi es t han t he second. 3. 2Capabi l i ti es Because di ffer ent com mp pani es have di ffer ent s t r engt hs and  weaknesses,t wocompani esmaywel lputf or t hi dent i calanal ysesoft he post 2012 pat entenvi r onment ,ye tr eacti n com mp pl et el y di ffer entways.  Thi s subsect i on at t empt s t o hi ghl i ght some of t he f eat ur es t hat d i ff e r e n t i at e omp m an nc i e s r o mca op na e a n o t h er . i g ur e pa r e s e s a qu a l i t a t i v e sn a p s h o t o fc t h ep f u t i of n a l b i l i t i e s o fF t h e c o1 m mp p n i en st t h at co m mp p r i s e t hi s paper ’ s sam mp pl e.Accor di ng t ot he samp mpl e,i n al lf ourar eas oft he pr oductcycl e,t hem mo ostpr om mi i nentI ndi an com mp pani esarecom mp pet i t i vewi t h MNCs i nt he domes t i c mar ket .I ndi an com mp pani es exc elpar t i cul ar l yi n dom me es t i cm ma ar ket i nganddi st r i but i on.Fort heMN MNCs,t hedom me es t i cfigur es maybesom me ewhatmi sl eadi ng,becauseM MN NC subsi di ari esof t enr el yupon t hei r par entcom mp pani es f or assi st ance i n speci fic ar eas,r at hert han dupl i cat i ngwor kt hem ms sel ves. 3. 3. 1Si ze

Hi st or i cal l y , l ar ge compani es hav e dom mi i nat ed t he gl obal phar mace ut i cali ndus t r y .Thi s has been t he cas e pri mar i l y because cert ai n phases oft he pr oductcy cl e( see sect i on 2. 2) ,such as cl i ni cal 32

 

t ri al s and ( gl obal )mar ket i ng,r equi r e subst ant i ali nvest ment .I nI ndi a, t hr ee f act or s hav er educe d t he i mport ance of com mp pani es ’s i z e, as comp mpar edwi t h el se wher ei nt hew wo or l d.Localcom mp pani esdi d nothav et o engagei n di scoveryand cl i ni calt ri al s,l i mi t ed t hei roperat i onst oI ndi a andi t snei ghbors,andfinal l y ,wer eoffer edsubst ant i alpr ot ect i onunder t hedr ugpri cecont r olor der( DPCO) .Fort heser easons,bi ggerdi d not necessari l ymeanbet t eri nI ndi a. 3. 2. 2Mar ket s

Som me e oft he com mp pani es cov er ed i nt hi ss t udy,such as Lupi n Labor at ori es,DaburResear ch,and Knol lPharm ma aceut i cal s,sel lt hevast maj or i t y of t hei r pr oduct s wi t hi n I ndi a. Ot her s, such as Sun Pharm ma aceut i cal s,s el ll ar ge per cent ages ofout putt oI ndi a and ot her eme mer gi ngm ma ar ket st hathavel ow appr ovaland pat entst andar ds.A t hi r d groupsel l sbul ksandbr andedgener i cf orm mu ul at i onsal lovert heworl d.

3. 2. 3Pr esentTechnol ogi calCapabi l i t i es

 Technol ogi calcompet encei sdev el oped gr adual l y .Ther ef or e,fir ms t hat al r eady have t echnol ogi cal l yi nt ensi ve oper at i ons have a bet t er chanceatri si ngt ot hel eveloft hei rMN MNC com mp pet i t orst hant hoset hatdo not . 3. 3St r ategi es  Thi s sect i on eval uat es some of t he measur es compani es ar e adopt i ngt oensur esol vencyaf t er2012. 3. 3. 1Technol ogi calSt r engt heni ng

 The most common st r at egi c concer nt hat 2012 has r ai sed f or I ndi an pharm ma aceut i calcom mp pani esi st heper cei vedneedf ort echnol ogi cal st r engt h.Com mp pani esaref acedwi t ht her eal i zat i ont hatt heonl yw wa ayt hey cancont i nuet osel lfir stgenerat i on drugs( i nt heabsenceofl i censi ngor di s t r i but i on agr ee ment s) i s by di sc ov er i ng and dev el opi ng t hem i ndi genousl y .ForI ndi an firm ms s,t her ear et worout est ot hi send.Theycan ei t herl at chont ot heski l l sofMNCsort heycan em mb bar kon pr ogr am ms st o devel opt hei rownt echni calcapaci t i es. Mos tI ndi an fir ms sur veyed her e have dec i ded t hat new dr ug di sc ov er yi s an unf eas i bl e short t er m goal and hav e consequent l y pur sued mor em mo odes tt ec hnol ogi calpr ogr am ms s.Sun and Lupi nf al li nt o t hi scat egory .Whi l eacknowl edgi ngt hatnew dr ugdi scover ybel ongson t hei rl ongt er m hor i z ons, t hey have devi sed st r at egi es t hat affor d pr ofit abl eoper at i onswi t houtnew dr ugs.Bot hhavewor kedt obr i ngm mo or e 33

 

oft hepr oduct i on pr ocessundert hei rown cont r ol( t hr ough f orwar dand  backwar di nt egr at i on)whi l e si mul t aneousl y shar peni ng t hei r exi st i ng R&D pr act i ces.Lupi ne,f orexampl e,pri des i t sel fon i t si nnovat i vel i ne ext ensi ons.Even i ft hesecom mp pani eshad mor ecapi t alatt hei rdi sposal , t heywoul dbeunl i kel yt opur suenew dr ugdi sc ov er ypr ogr am ms sbecause t hei rma manager sfirm ml l ybel i evet hatt echnol ogi calcom mp pet enceneedst obe f os t e r e dg r adual l y . 3. 3. 2Redefini ngNew Dr ugD Di i scover y

Sev er al I ndi an com mp pani es ( e. g. , Ranbaxy ,D DR RL, D Da abur , and  Wo  W ockhar dt )ar et ur ni ng t he pr ospectofi ncr eased pat entpr ot ect i on t o t hei radvant age by spear headi ng new drug di sc ov er y pr ogr am ms s.Thei r effor t s have at t r act ed much at t ent i on. Skept i cs asse r tt hat I ndi an comp mpani esar enotl ar geenough t odi scov eranddev el opt hei rown dr ugs succe ssf ul l y .I ndi an com mp pani es al so l ack t he experi ence oft he maj or pl ayer s;l eadi ngM MN NCshavespentt hebet t erpartoft het went i et hcent ury honi ngR&D ski l l s. 3. 3. 3M Pu b i c r e s a r c h o sl t i n d i ve i d u a l s surv eyed f ort hi s paperwer edeci dedl y negat i ve

aboutI ndi a’ spubl i cresearchf aci l i t i es.I nt heory ,publ i cR&D l absshoul d  be an i nval uabl er esour ce t oI ndi a’ s smal l erdr ug compani es because t hey al l ow t hem acce sst ol ead mol ec ul esand ot herspec i al i z ed R&D f unct i onst hatt heycoul dnotot herwi seafford.I n pr act i ce,however ,t he curr entqual i t yofsuchl absi ssopoort hatr el yi ngon t hem f orsurvi val , i nt heopi ni on ofmostexper t s,i soneoft hebi ggestmi st akescom mp pani es can make.A not abl eexce pt i on t ot hi smaxi mi st heI ndi an I nst i t ut eof Sci ence ( I I S) ,whi ch has been qui t e successf ulatconduct i ng cl i ni cal t ri al s.Whet herornotot herpubl i cr esearchl abscan f ol l ow I I S’exampl e r em ma ai nst obese en. 3. 3. 4Lever agi ngNont echnol ogi calSt r engt hs

Ont hesur f ace,2012see mst ocal lf orI ndi ancom mp pani est obecom me e mor et ec hnol ogi cal l yf ocused, and i ndeed, a number ofI ndi a’ s mor e pr omi mi nentfir ms( e. g.Ranbaxy ,DRL,and Woc khar dt )ar epur sui ngt hi s goalby devel opi ng U. S.FDAappr ov ed pr oce ss es and drug di sc ov er y pr ogr ams ms. As 2012 dr aws near er , however ,I ndi a’ s phar mace ut i cal com mp pani es mus t al so expand and dev el op t hei r nont echnol ogi cal st r engt hs t o kee p pace wi t h MNC com mp pet i t i on. I n keepi ng wi t ht hi s  br oaderdevel opme nts t r at egy ,somecompani es( e. g.Sun,Lupi n,e t c. )ar e undert aki ng l ess t echnol ogi cal l y ori ent ed i ni t i at i ves.Sun,f or exampl e, r ec ent l y expanded i t s R&D oper at i ons t o pl ace gr eat eremp mphasi s on 34

 

devel opi ng st at eof t heartpr ocesses and noveldel i very syst em ms s.Such endeavor sf al lshortofnew dr ugdi scover y ,butt heyrepr esenti mport ant st epst ow wa ar dt echnol ogi calsel f suffici ency. 3. 3. 5G Gr r ow wi i ngLar ger

Sec t i on 3. 2. 1 dem mo onst r at ed t hat onl y l ar ge phar mace ut i cal com mp pani es can engage i n al lf our phases of t he phar maceut i cal pr oduct i on cy cl e.I ndi an com mp pani es— —w whi ch have t r adi t i onal l yl i mi t ed t hems mse l ve st o dom me es t i c pr oduct i on and di st r i but i on—mus tt her ef or e grow l argert o ent er di scovery and cl i ni calt ri al si n addi t i o nt ot he i r cur r entoper at i ons,and/ort oexpand t odeve l oped exportmarket s.Thi s sec t i onr evi ewst hem me eansbywhi cht hesecom mp pani esar egr owi ng. 3. 3. 6Hel pf r om Par entCom mp pani es

Som me eM MN NC subsi di ari es( e. g. ,HMR,Knol l ,andGl axo)haveadopt ed a mor er el axed post ur et owar d 2012 t han I ndi abase d com mp pani es .For t hem, m,adapt at i on consi st sofwai t i ngt o seewh wher eopport uni t yl i esand t hen capi t al i zi ng on i t by t r ansf er r i ng r esour ces f r om t hei r par ent or gani zat i on.

3. 3. 7Expor tFocus

Li ber al i z at i on has subs t ant i al l y i ncr eas ed t he gl obal comp mpet i t i venessofI ndi an pharm ma aceut i calpr oduct s,as l ocalcom mp pani es hav e bee nf or ced t o comp mpet e al ongsi de MNCs i nt hei rhom me e mar ke t . Mor eov er ,ast heI ndi an mar ketbecom me esm mo or ecr owded,comp mpani esar e i ncr easi ngl y pr es sur ed t ol ook el se wher ei n or der t o expand t hei r r ev enues . For t hes er easons, t he maj or i t y of t he I ndi an com mp pani es pr ofil edf ort hi spaperhavet akenspeci ficm me easur est oboostexport s. 3. 3. 8Local i zat i on ofOper at i onsf orM MN NCs

Pharm ma aceut i cali ndust ry expert s have l ong ar gued t hatI ndi ai s especi al l y wel ls ui t ed f or dr ug pr oduct i on and di scov er y because i t possessesanabundantsuppl yofhi ghl yski l l edl abor ,aw wi i der angeofr aw mat eri al s,andast r ongdom me est i cm ma ar ket .However ,aconsi der abl eport i on of phar mace ut i cal M MN NCs hav e ei t her av oi ded I ndi a al t oget her or mai nt ai nedt hem mi i ni mum pr es encenec es sar yt ogai nmar ketacce ss .

4.Appendi x:Com mp panyPr ofil es  Thi s appendi xr evi ews t he oper at i ons oft hecompani es sur veyed f ort hi spaper .Each com mp panyi srev i ewed wi t hr espectt opri nci pall i nes ofbusi nessandst r at egi cconsi der at i onsf or2012. 4. 1D Da aburResear chFoundati on Dr .D. B.Ananat haNar ayana,HeadofR&D Dr .RaviJai n,Seni orManager 35

 

Daburwasf oundedi n 1884 asaphar mace ut i calcompany ,buti n t heensui ngyear s,hasgr eat l ydi ver si fiedi nt opr oductl i nesrangi ngf r om cheese st ov et er i nary product s.Onl y 5 per ce ntof1994 t ur nov erwas der i ved f r om phar maceut i cal s, because si nce 1993, Dabur has consc i ousl y“ undi v er si fied” and conce nt r at ed on doi ng f ewer t hi ngs  bet t er .St i l l ,Dabur ’ s scope ofoper at i onsi s vastwhen j uxt aposed wi t h t hat of ot her pharm ma aceut i cal c om mp pani es.Li ber al i z at i on has affect ed Daburi n a numberofways .Fi r st ,i ncr ease d com mp pet i t i on has er oded pr ofitmar gi nsi nmanyofDabur ’ sm ma ar ket s.I nt hepas t ,Daburproduce d asm ma anypr oduct saspossi bl et ocapi t al i zeon i t sdi st ri but i on expert i se. Now,I ndi a’ si nf r ast ruct ur ei s great l yi mpr oved and speci al i st s can sel l pr oduct sf orl essthan Dabur ’ st ot alcost .I nr esponset of al l i ngm ma ar gi ns, Dabur has abandoned f ai l i ng pr oduct s and pur sued pr oduct i vi t yenhanci ng measur essuch as f r ei ghtcostcont r ol ,pr oces s aut om ma at i on, and a pr opose d mer ge rwi wi t h DaburRes ear ch Foundat i on ( atpr es ent , R&D i s done a cont r actbasi s wi t ht he r es ear ch f oundat i on) .Sec ond, st r ongerI P pr ot ect i on hasent i cedDaburt obui l dupi t spharm ma aceut i cal  busi nessandpur suenew dr ugdi scover y .

4. 2Dr .Reddy’ sLabor at or i es( DRL) Dr .K.Anj iReddy,Chai r man Mr .K.Sur esh,Gener alManager Mr .T.Bal am mu ur al iKr i shna,Manager alManager Dr .M,Sat yanar ayanaReddy,Gener i ngManager Mr .P. V.SankarDass,Market Dr .G. O. M.Reddy( DRLResear chFoundati on) ,Vi cePr esi dent DRL wasf ounded asa bul k drugcompanyi n 1984.I thassi nce added f or mul at i ons and new drug r es ear ch t oi t s docketofbusi nes s act i vi t i es.DRLpri desi t sel foni t sabi l i t yt or everseengi neeranymol ecul e i nsi xm mo ont hs.I t sproductmi xcom mp pr i sesanev enbal anceofhi ghvol ume ( e. g. ,ant i bact eri al )and hi gh margi n( e. g. ,car di ovascul ar)drugs.DRL’ s pr i mary obj ec t i vei st o se r vet he I ndi an mar ket ,buti ti s much mor e i nvol ved i n exportmar ket st han mostofi t scom mp pet i t ors.I n addi t i on t o expor t i ngt oot here mer gi ngmar ket s,DRL expor t sa si ze abl evol umeof  bul kdr ugst oWest er nmar ket s.Al ongwi t hRanbaxyandCi pl a,DRLhas evol vedi nt oakeypl ayeri nt hegl obalgeneri csma market .DRLat t em mp pt st o have a physi calpr ese nce i n al lofi t s expor tm ma ar ket s,t hr ough j oi nt  vent ur e t i eups, whol l y o wned subsi di ar i es, and cont r act ual arr angem me ent s.Per hapst hem mo ostnot abl easpectofDRL’ scurr entst r at egy 36

 

i si t svi gor oussupportofnew drugdi scoveryi nI ndi a;i nt hi sr espect ,i t i sar guabl yt hem mo ostadvance dI ndi ancom mp pany . 4. 3Gl axoI ndi aLt d. i veVi cePr esi dent Mr .MadhavB.Kur dekar ,Execut Gl axo’ s gl obal st r engt h has t r adi t i onal l y been t he desi gn and pe r od u c t i o n o f l e ad i n g e d g e , h i gh m r i n dr ua gs . F o hx e p a ss ts v e nf t y fi v e  y a r s , i n o r d e r t o p ar t i c i p a t e i n t h ea I ng d i an m r k e t ,r Gt l a o h a be e e n o r c e d t osel li t sbestdrugsatpri ceswel lbel ow whati tchar gesel sewher ei nt he  wor l d.Gl axoI ndi aal sopr oducesbul kdr ugsandf or mul at i ons,andsel l s dr ugs on behal fofot her f or ei gn comp mpani es t hat do not have I ndi an pr esence.Gl axoI ndi adoesnotsel lt heent i r epr oductl i neofi t spar ent company ,UKbasedG Gl l axo

4. 4Hi ndust an Ant i bi oti csLtd.( HAL) Mr .M. C.Abr aham m, ,Managi ngD Di i r ec t or Mr .S. R.Nai k,Gener alManager Founded i n 1954,HAL i sa st at eownedcom mp pany ,and oneoft he key bui l di ng bl ocks of t he I ndi an phar mace ut i cal i ndust r y . The c ompany ’ sor i g i nalobj e c t i v e swe r et hr e e f ol d:j obc r e at i on,l i f es av i ng ,and t ec hnol ogi cal di ffusi on. Today , HAL manuf act ur es sev ent yei ght f orm mu ul at i onsandf ourbul kdr ugs. HAL’ s cor por at e pr act i ce s wi l lnotbe affec t ed by t he adve ntof st r ongerpat entpr ot ect i oni n2012because— —a asas t at eownedcomp mpany—  i t has nev er engage d i n se mi e t hi cal pr act i ce s such as r ever se engi neeri ng.H Ho owever ,ot herf acet s ofl i beral i zat i on and ri si ng l evel s of com mp pet i t i on hav e chal l enge d HAL. As ot her fir ms becom me e mor e com mp pet i t i ve and mor e pr oduct i ve, HAL r emai ns shackl ed by i t s i nt r act abl ebur eaucr acy . 4. 5HoechstMar i on RousselLtd.( HMR) ngDi r ec t or Mr .Debabrat aBhadur y,Managi HMR i sam mu ul t i nat i onalchem mi i calcom mp panyt hathashadoper at i ons i n I ndi a si nce 1956. Ov Ov er t he past sev er al y ear s HMR I ndi a has abandoned i t s pet r ochem mi i caldi vi si ons i n or dert of ocus effi ffic ci ent l y on pharm ma aceut i cal s, a pr act i ce whi ch mi r r or st he i nt ent of i t s par ent company .H HM MR’ s effic ffici ency dri v e has al so consi st ed of t aki ng f ul l advant age ofeconom mi i es ofscal e by cent r al i zi ng cer t ai nf unct i ons i n Fr ankf ur tand es t abl i shi ng good communi cat i on t hr oughoutt he HMR f am mi i l y .Asa r esul t ,HMR I ndi ai smu much mor ecl osel yi nt egr at ed wi t hi t s par entcom mp panyt han ar em mo os tot herMNC phar mace ut i calsubsi di ar i es i nI ndi a.Al t hough i ti nves t sl argesumsofmoneyt osupportpr opat ent 37

 

l obbi esi nNew Del hi ,HMR,l i keot herMNCs,i sunsur eofwhatt oexpect oft he post 2012 pat entr egi me.Rat hert han subj ect i ng i t sel ft o such uncer t ai nt y ,i thas pur sued a st r at egy ofr el yi ng on headquart er si n Fr ankf ur tf orpr oduct s,t ec hnol ogy ,and mar ket i ngpr ogr am ms son an asneeded basi s.Meanwhi l e,i thasdi vest ed i t sel fofi t sl ocalpri mary/bul k R&D f aci l i t i es.I nt er est i ngl y ,HMR has fil ed mor epat ent si nI ndi at han anyot herdrugcompany ,andpendi ngat t r act i vepat entpr ot ect i on,i tmay  wel lr ei nvesti ni t sI ndi an oper at i onsaf t er2012.Whet herornoti tdoes so wi l lhave al mostno i mpacton t he t ypes ofpr oduct si ti s abl et o pr oduceandsel li nI ndi a. 4. 6Knol lPhar maceuti cal sLt d.( BASFPhar ma) Mr .D. M.Gavaskar ,Managi ngDi r ec t or& Pr es i dent Dr .A. V.Pr abhu,Vi cePresi dent I n 1997, BASF ac qui r ed UKbased Boo t s Pharmac eut i cal s. Subsequent l y ,Boot sI ndi a was r es t r uct ur ed underKnol l ,BASF’ s U. S.  based phar maceut i calsubsi di ar y .I nI ndi a,Knol lact swi t h consi der abl e aut onom my yf r om i t s cor por at e par ent .D D. . M. Gav askar ,i t s managi ng di r ect orand pr esi dent ,bel i evest hataut onom my yi snecessaryf orKnol lt o serve i t s market s adequat el y .Two r easons under l i et hi s bel i ef .Fi r st , comp mpl ex mat r i x st r uct ur es ,i n whi ch em mp pl oy ee s per f or m bot hr egi onal and f unct i onaldut i es,t end t oi nhi bi tdi st ri but i on r el at i onshi ps,whi ch are cr i t i calt o successi nI ndi a.Second,i n many r espect st he I ndi an mar ketdi ffer sf undam me ent al l yf r om t hegl obalmar ket .Forexam mp pl e,cough and col d medi ci nesar ecur r ent l yt hesecond l arge stf unct i onalsegme ment i nI ndi a,al t hough t hey ar e oft r i vi ali mport ance on t he wor l d sce ne.  Adopt i ng a mor ecent r al i z ed appr oach woul d weaken Knol l ’ si ndi vi dual capaci t yt o pr om mo ot e cough and col dr em me edi es .I n ge ner al ,a ce r t ai n degr ee ofaut onom my yi s nece ssar yt o capi t al i zeon Knol l ’ s st r engt hs— —a a st r ong di st r i but i on net wor k and an i nt i mat e knowl edge oft he I ndi an mar ketf ordrugs.Knol ldoesnoti nvol vei t sel fi n export s( onl y3per cent ofi t spr oduct sar eexport ed) . 4. 7Lupi nLabor at or i esLtd. Mr .Lal i tKumar  P , resi dent alManager Mr .Shr i kantKul karni ,Gener Lupi ni sa t went yse ve n ye ar ol dI ndi an pharm ma aceut i calcom mp pany . I nt hepast ,Lupi n deri ved a consi der abl e port i on ofi t sr evenuesf r om pr oduci ng bul k and i nt er medi at e dr ugs wi t h no i nf r i ngi ng pr oce ss es , many ofwhi ch wer e bound by pr oduct pat ent si n mor e devel oped count r i es.I t speci al i ze si n ant i TB medi cat i ons and cephal ospori n’ s ( ant i bi ot i csderi vedf r om t heCephal ospor i um g enusoff ungi ) . 38

 

 Wi  Wi t ht heonsetofgover nme ntl i ber al i z at i on and t hepr ospect s of i ncr eased pat entpr ot ect i on af t er2012,Lupi n hasdeci dedl ychangedi t s cour sei n sever always.Fi r st ,i thasshi f t edf ocusf r om l owmargi n bul ks t o hi gherval ueadded product s,such as nov eldel i v er y sys t em ms s and ni chepr oduct sf orsel ect i vem ma arket s.Second,i thas adopt ed an export f ocus;i n1997,55per centoft ur novercam me ef r om export s.

4. 8Ni chol asPi r am ma alI ndi aLt d.( NPI L) Dr .A. G.Seshdr i nathan,Vi cePr esi dent Est abl i shed i n 1947, NPI L i s engag ed i n t he sal e of pharm ma aceut i cal s and gl ass pr oduct sf or t he pharm ma aceut i cali ndus t r y .  Wi  W i t hi nphar maceut i cal s,NPI Lhasapr esencei nt hecar di ovascul ar ,ant i i nf ect i ve,ant aci d,and derm ma at ol ogi calsegme ment soft hema mar ket .Wi t ht he exce pt i on ofcar di ovascul ar ,t hese ar e hi ghvol ume segm me ent s.NPI L’ s pr i nci pals t r at egy i st o bui l d econom mi i es ofsc al ei nt he pr oduct i on of hi ghvol umedr ugs,whi ch i tt hen mar ket si nI ndi aand ot herc ount r i es  wi t h si mi l ardr ugmar ket s,such asAf r i ca,Sout heastAsi a,and Russi a.  As i ti s st r ong i n mar ket i ng and di st r i but i on, NPI L has al so been part i cul arl yact i vei nmarket i ngM MN NC pr oduct si nI ndi a.

4. 9Novar t i sI ndi aLt d. Mr efExecut i veOffi ce r .Ranj i tShahani ,Chi Novar t i sI ndi a Lt d.was f or med i n 1997,f ol l owi ng t he mer gerof Sandoz( I ndi a)andHi ndust an Ci baGei gy .Theol dHi ndust an Ci baGei gy ( I ndi a)hadt r adi t i onal l yf ocused on pr oduci ngf orm mu ul at i onsofi t spar ent comp mpany’ spr oduct sf ort heI ndi an mar ket ,asw we el lasasm ma al lnumberof exportmar ket swi t hcondi t i onssi mi l art ot hoseofI ndi a.Morer ecent l y, Novart i sI ndi a,asi ti snow cal l ed,hasbegun t opr oducebul k dr ugsf or usei nl ocalf orm mu ul at i onsandf orexportt oot herNovart i spl ant s.

4. 10R Ra anbaxyLaborat ori es Dr .J. M.Khanna,Executi veVi cePr es i dent& Mem mb beroft heBoar d i veDi r ect or( New Dr ugDi scover y) Dr .Sudar shanAr ora,Execut st antDi rect or Dr .M. R.Mar at he,Assi Ranbaxyi st hel ar ges tI ndi an dr ugcom mp pany ,sec ondonl yt oGl Gl axo I ndi ai nt erm ms sofoveral lpharm ma aceut i calmar ketshar e.Becauseofi t ssi ze and gl obalamb mbi t i ons,Ranbaxy hasr ece i ve d al ar geam mo ountofpr essi n t h eel a s se v e r al y e a r s . I nd ee d , m n ya a n a l y s t s e l i e v ea t h a t R a n ba xt y i s e sp c i at l l y w e l l po s i t i o n e d t o c o m mp pa e t e l o n g s i d eb m mu u l t i n t i o n al s i n f u ur e decades.Parv i ndar Si ngh— —t t he 55 year ol d chai r man ofRanbaxy— —i i s 39

 

convi ncedt hatI ndi a’ spharm ma aceut i cali ndust ryi sevol vi ngi n awaythat  wi l lmake compl acency a l osi ng st r at egy i n year st o come.He bel i eves t hatI ndi an com mp pani esneed dr ast i cal l yt oreori entt hem ms sel vest orem ma ai n comp mpet i t i vei nt hepost 2012 mar ket pl ace. 26 Ranbaxy i spur sui ngt hr ee i ni t i at i vesi nr esponset oi t schangi ngenvi r onment :new drugdi scovery , gl obal i zat i on,and dom me es t i cst r engt heni ng.Thecom mp panyhasal sovo wed nott oi nt r oduceany mor epi r at ed dr ugs,as doi ng so wi l lt hr eat en i t s cr edi bi l i t y .

4. 11SunPhar maceut i cal sLaborat ori esLt d. Mr .RakeshM Me eht a,Vi cePr esi dent Sun Phar mace ut i cal s,f ounded i n 1983,makesf or mul at i onsand  bul kdr ugst hatar esui t abl ef orI ndi a’ smar ke tneedsandt hoseoff or ei gn market sw wi i t h si mi l arcondi t i ons.Wi t hi nt hi scont ext ,Sun offer sbundl es ofbr anded gener i cs i nt hr ee t her apeut i c areas—n —neur ol ogy,psychi at ry , andcar di ol ogy— —a asw we el lasspeci al i zed,hi ghmargi npr oduct si nsegm me ent s such as gast r oent er ol ogy.None oft hesesegm me ent si s subj ectt oI ndi a’ s pri cecont r olr egi me.I ndust ryexpert sappl audSun’ sdi ver sepr oductl i ne andi t si nnov at i v em ma ar k e t i ngi ni t i at i v e s.

4. 12 Wockhar dtLtd. orVi cePr esi dent Mr .Vi nodPabi ,Seni yGener alManager Mr .JavedHuss ai n,Deput Dr .M. V.Patel ,Di rect or Dr .S. K.Agarwal ,Seni orSci ent i st Dr .Sudar sanJagannat han,Sci ent i st  Wo  W ockhar dti san I ndi an phar maceut i calcompany engaged i nt he pr oduct i on andsal eofbul ksandf orm mu ul at i ons,l argevol umeparent er al s, i nf ant f oods, and agr i cul t ur al pr oduct s. I t s speci al t y t her apeut i c segme ment s ar e sys t emi c ant i bi ot i cs, cough and col d r emedi es, ant i spasmo modi cs/ant i chol i ner gi cs/gast r opr oki net i cs, anal ges i cs, ant i sept i cs/di si nf ect ant s, and bi ot ec hnol ogy . For t he most part ,  Wo  W ockhar dtf ocuses on dr ugs wi t hr el at i v el y hi gh bar r i er st o ent r yi n t er ms oft ec hnol ogy .Wockhar dt ’ s appr oach t o pharm ma aceut i cal si s al so

di seaseori ent ed. 40

 

 The company t ar ge t s ar eas of medi cal need and t hen bui l ds  baske t sofdr ugsaccor di ngl y . Pri or t ot he gover nment ’ sl i ber al i zat i on pr ogram ms si nt he ear l y 1990s,Wockhar dtr est ri ct edi t sel ft of ormu mul at i on pr oduct i on,usi ngbul ks pur chased f r om ot her sour ces. Si nce t hen, i t has emer ged as a pr omi mi nentpr oduce rofbul ksi ni t sown r i ght ,andnow pr oduce sal most i t s ent i r er equi r em me entofbul k drugs.Thi s has hel ped t he com mp pany t o achi ev e r el at i ve l y hi gh oper at i ng pr ofit abi l i t y com mp par ed wi t h i t s comp mpet i t ors.

COM OMPANY PROFI LE

I nt r oducti on Dr . Reddy’ s l abor at or i es wer e f ounded by Dr . ANJI Reddy, a ent r epre neursci ent i sti n1984.TheDNAoft hecom mp pany i s dr awn f r om i t s f ounder and hi s vi si on t o est abl i sh I ndi a’ s fir stdi scovery l ed gl obalphar maceut i calcom mp pany .“ The com mp panyi sf ocuse d on cr eat i ng and del i veri ngi nnovat i ve and qual i t y pr oduct st ohel ppeopl el eadt he he al t hi er l i v es ” . Dr .Reddy’ si st her esearchbased comp mpanyw wi i t hver t i cal l yi nt egrat ed oper at i ons .The com mp pany dev el ops , manuf act ur er s and mar ket s a  wi de r ange ofphar maceut i calpr oduct s i nI ndi a and over seas.“ The  basi c r esear ch pr ogr am of Dr .Reddy’ s f ocuses on cancerdi abet es,  bact er i ali nf ect i ons andpai n. Dr .ANJI Reddy ,havi ngmoved outof “ soll t d” {st andard or gani cs l i mi t ed}a com mp panyhehadsuccessf ul l ycof ounded,st art ed Dr .Reddy’ s l abor at ori eswi t h$40, 000i ncashand$1, 20, 000i nbankl oan.  Today ,t hecompanywi t hr ev enuesofr s. 194tcompanyand youngest amo mong i t spee rgr oup. 41

 

Dr .Reddy’ s cr eat e and del i veri nnovat i ve pharm ma aceut i calheal t h car e sol ut i ons t hat hel p peopl e enj oy l onge r heal t hi er and mor e pr oduct i vel i vest hr ought wo par al l elobj ect i ves.  A.Del i ver i ng affor dabl eandaccessi bl e medi at i on t oal lpar t soft he  wor l d. B.Di sc ove r i ng , dev el opi ng

and c om mm mer ci al i z i ng

i nnov at i ve

medi ci nes t hatsat i sf yunmetmedi calneeds.

Scope of DR.Reddy’ s wor l dmar kets I . Reddy’ sgener i cf orm mu ul at i ons have al sobecom me e ve rypopul ari n qual i t y consci ous r egul at edmar ket s suchas t heusandEur ope. I I . Reddy’ si st he firs tphar mace ut i calcom mp pany f r om Asi a paci fic ( o u t s i d1 e, n)t o bel i st ed i n new Yor k st ock exc hange on  A p r i l 1 2J 0a 0p 1a . I I I . Wemanuf act ur e act i vepharm ma aceut i cali ngr edi ent s and fini shed dosage f orm ms sand marketgl obal l y wi t ha f ocus onuni t edst at es, Eur ope, I ndi a,Russi an. I V. .G Gener i cs busi nes se s s t ar t ed oper at i ons i n 2001 and f ocuse s pri mari l yont he nor t hAmer i caandEur opemar ket s.  V. API i soneoft he maj orbusi nessdi vi si onsof Dr .Reddy’ s,wher e t h e y ar e q i p p ed10 w0 i t h s i x m ul t i t o n , st a e o f h r t f a ci l i t i ey s  w h i ch o ffe e ruo v er va r i et i es o f b u l k at c t i v e st ae nda s e ve r a l k e i nt er medi at es.Wher et hei rAPI ar ee xport ed wor l dwi de,whi ch i ncl ude bot heme mer gi ngaswel las deve l opedm ma arket s.  VI . Pr i nci palmar ke t si nt hebusi nesssegme nti ncl udenor t hAmer i ca, uni t ed st at es and Canada,Eur ope,mi ddl eeast ,sout h eastAsi a andI ndi a.  VI I . Dr .Reddy’ s br anded f or mul at i ons ar e mar ket ed i nt he count r y acrossRussi a, Lat i nAmeri ca, sout hAsi a,chi naand Af ri ca.   MAK KI I NG OF DR R. . RED DD DY’ S 42

 

I n 1973 af t ergai ni ng si xyear s ofexpert i se and experi ence i n t hema manuf act ur i ng andi mpl eme ment at i on new t ec hnol ogi esi n bul kdrugs f r om publ i cse ct or com mp pany I DPL HYD.Dr. Reddy’ sdec i ded t ose tupa  basi c dr uguni t att hat t i me t her e wer ef ew ot her pl ayer si nt he pri vat esect or att heendoft hepharm ma aceut i calval uechai n. Reddy’ s ai m wast odeve l opandm ma anuf act ur i ng awi de spect r um ofbul k dr ugst oe nabl e t he pharm ma aceut i cali ndust r yt ol aunch t hei r f orm mu ul at i ons unf et t er ed. I nt heyr1976  t omanuf act ur ef ort hefir stt i mei nI ndi a, a dr ug c al l e d“me met r odi nazol e”  f ort het r eat mentofamo moebi cdysent ery t hedrug  becameahi t . Dr. Reddy’ spl ayed am ma aj orr ol ei npi oneer i ng t het echnol ogyand pr oduct i onof“s anant i bac t e r i ali nI ndi a. ul phame met honazol e” 

MI SSI ON :

43

 

 To bet he fir s t phar maceut i cal company t hat successf ul l y discovers t akes i t s pr oduct s f r om di scovery t o com mm mer ci all aunch gl obal l y .

COR ORE PURPOSE: STATEM ME ENT :  To hel p peopl el ead heal t hi er l i ves.

 The pur pose of t hi ss t at ement answer st he ques t i on why doweexi st?weexi st asan organi zat i on t ohel ppeopl el ead heal t hi er l i v esby i nnov at i ng t o mee t unmet medi cal nee ds maki ng

and by

phar maceut i cal pr oduct s affor dabl e and avai l abl e t oa

l ar g e rc r os ss ec t i on ofs oc i e t y .

 VI SI ON : STATEM ME ENT :

 To become a di scovery l edgl obalphar maceut i calcompany.  Thevi si on st at eme ntunder l i nes t woaspect sofwhat Dr .Reddy’ s  want st obecome di scover yl ed and gl obal .I nt hewor dsof “Dr .ANJI .Reddy’ s l aborat ori es wi l li nnovat e agai n not j ust f or Reddy”“Dr manki nd” .

Vi si on st at em me ent hel psi nt hef ol l ow wi i ng st eps: 

I tpr ovi des l ong t erm di r ect i on t ot he com mp pany.



I tchal l enges and i nspi r es ev ery mem mb berofDr .Reddy’ s.



I tuni t esal lmemb mber s oft he Dr .Reddy’ sf am mi i l yi nt he pur sui tof a com mm mongoal .

I tmot i vat esust o define gl obal benchmar ks f or each busi ness ac t i v i t yi nDr .Re ddy’ s .  VALUES: 

44

 

Qual i t y:  wear  w e dedi cat ed t o achi evi ng t he hi ghes tl evel s ofqual i t y I n everyt hi ng wedot o del i ght cust om me ers,i nt ernalandext ernal ,every t i me.  w d t he sel f es t eem and di gni t y of Respect f ori ndi vi dual : e uphol each ot her by cr eat i ng an open cul t ur e conduci ve f or e xpr essi onof  vi ews and i deas i r r espect i ve of hi er ar chy .  we cr eat e an envi r onmentof I nnovat i veandcont i nuousl earni ng: i nnovat i on andl earni ng t hatf ost ers, i n each one ofus, adesi r e t o exceland wi l l i ngnesst oexperi ment.  we seek oppor t uni t i es col l abor at i onand t eam mw work:

t o

bui l d

r el at i onshi ps and l ever age knowl edge expert i se and r esour ces t o cr eat e great er val ue across f unct i ons,busi nesses and l ocat i ons.  we t  w ake ut mos tcar et opr ot ect Harm mo onyand soci alr esponsi bi l i t y: ournat ur al e nvi r onment and se r v e t he comm mmuni t i es i n whi ch we l i veand wor k.

EXCELLENCE:   we st r i v ef or excel l encei never yt hi ng wet hi nk 

Excel l ence means cont i nuousl yi mpr ovi ng.



St ri vi ng t obet hebest.



Cr eat i ng abenchmar kf or ot her st of ol l ow .



Excel l ence i sexecut i on.



I thas nopl ace f ormedi ocri t y.

say anddo.

Dr .Reddy’ s bei ng aoneoft he l eadi ng pharm ma aceut i cali ndust ry t o l aunch t hei r f orm mu ul at i ons,unfil t er ed.Ther e wer e onl y a coupl eof pharm ma aceut i calcom mp pany’ s att hatt i mewi t ht he capaci t y t o deve l op newer drugs,bi tt hey woul d not sel lt he bul kt oot herf ormu mul at ors. 45

 

Her e, Dr .Reddy’ s pl ayeda maj or r ol ei n pi oneeri ng t he t echnol ogy andpr oduct i on of‘ sul pham me et honazol e’anant ibact eri ali nI ndi a.  Anot herdr eam wast odoi t on hi sown ,becauset hatwast he t i me t hathi s sec ond exper i ment wi t h par t ner shi p wasal sor umbl i ng. Her eal i zehi sdr eam short l yt her eaf t ert hen heest abl i shed Dr .Reddy’ s l abor at ori esi n1984.Thepr ocessandpr oduct i on ofmet hyl dopawast he ul t i mat ec hal l enge.Chem mi i st s atDr .Reddy’ ss t r eam ml l i ned andsi mpl i fied.  The uni t pr ocess f ori ti n spi t e oft he compl i cat ed nat ur e oft he pr oce ss f ori t and wi t hi n amat t erof 6 mont hs t he com mp pany was r eadyt omanuf act ur et he dr ug.  The companyhas sev er al di st i nct i onst oi t s cr edi t .Bei ng t he fir st phar maceut i calcom mp pany f r om Asi a paci fic t o bel i st ed on t he new Yor kst ockexc hangei sonl yoneam mo ongt hem m. . Dr .ANJIReddy i swel lknow f or hi spassi on f or r ese arc h and dr ugdi scove ry .Dr .Reddy’ s st art ed i t sdr ugdi scove rypr ogram mm med i n 1993 and wi t hi nt hr eey ear si tachi ev edi t s fir stbr eak t hr ough byout l i censi ng an ant i di abet esm mo ol ecul et onovonordi ski nmarc h1997. wi t h t hi s ver ysm ma al lbutsi gni ficantst ep,t heI ndi an i ndust rywentt hr ough a par adi gm shi f t i ni t s i mage f r om bei ng known a j ust‘ copycat s’t o ‘ i nnov at or s ’ !  Thr ough i t s success,Dr .Reddy’ s pi oneer ed dr ug di scover yi n I ndi a. Ther e ar e se ve r al such i nflec t i on poi nt s

i n t he com mp pany’ s

evol ut i on f r om abul kdrug{ API }m ma anuf act ur ei nt oavert i cal l yi nt egrat ed gl obalpharm ma aceut i calcom mp panyt oday .  Today ,t he company manuf act ur es and mar ket s API ( bul k act i v es ) , fini shed

dosage s and bi ol ogi cs

i n ov er 100 count r i es

 wor l dwi de,i n addi t i on t o havi ng a v er y pr omi si ng dr ug di scover y 46

 

pi pel i ne .when Dr .Reddy’ s st art ed i t s fir stbi g move i n 1986 f r om manuf ac t uri ng

and

mar ke t i ng

bul k

act i v es

t o

t he

dom me es t i c( I ndi an) mar kett o manuf act ur i ng and export i ng di fficul t t omanuf act ur e bul k act i ve s such as met hyl dopa t o hi ghl y r egul at ed ove r se as mar ket ,i t had t o not onl y ov er com me er egul at or y and l eg al hur dl es butal so bat t l edeepl y ent r enched mi ndseti ssues ofI ndi an pharm ma acy i ndust ry ,i nst ar kcont r ast ,i s know gl obal l yf or i t s pr oven hi gh qual i t yl owcost advant age i n del i ver i ng saf e and effect i ve pharm ma aceut i cal s.  Thi s t r ansi t i on al t hough and of t enper i l ous one, was made possi bl et hanks t ot he pi oneer i ng effor t s ofcom mp pani es suchas Dr . Reddy’ sl aborat ori es.  Today , Dr .Reddy’ scont i nuesi t sj our ney .Lev er agi ngon i t s‘ l ow cost ,hi gh i nt el l ect ’advant age.Forayi ng i nt o new market s and new  busi nesses.  Taki ng on new chal l enges and gr owi ng s t r onger and mor e capabl e.Each f ai l ur e ande achsuccessr enewi ng t hesense ofpur pose and hel pi ng t he com mp pany ev ol ve . Wi t h ove r950 sci ent i st s wor ki ng acr oss t he gl obe ar ound t he cl oc k ,t he com mp pany cont i nues i t s r el ent l ess mar ch f orwar dt o di scov er and del i ve r a br eakt hr ough medi ci ne t oaddr es san unme tmedi calnee d make a di ffer ence t o peopl e’ sl i vesworl dwi de.and wheni tdoes t hat ,i twoul donl yone t he  begi nni ng an ye ti twoul d bet he mos ti mpor t ant st ep.As Lao Tz u  wr ot el ongt i me ago,‘Even a1000 mi l ej our neys t ar t swi t h a si ngl e step.

BUSI NESSES:

47

 

DR.Reddy’ s i s a ver t i cal l y i nt egrat ed ,gl obalpharm ma aceut i cal comp mpany wi t h pr ove n r ese ar ch capabi l i t i es and pr ese nce acr osst he pharm ma aceut i cal val uechai n .we manuf act ur e act i v e pharm ma aceut i cal i ngr edi ent s andfini shed dosage f or ms and mar kett hem gl obal l y ,wi t h af ocus on uni t edst at es, Eur ope,I ndi a andRussi a. I n addi t i on ,t he dr ug di sc ov er y arm oft he com mp pany conduct s basi cr es ear ch i nt he ar eas ofdi abet es, car di ovascul ar ,i nflammat i onandbact eri ai nf ect i on.

COR OREAR RE EAS:  The cor e busi nesses ofact i ve phar maceut i cali ngr edi ent s( API ) and br anded f or mul at i ons ar e wel les t abl i shed wi t h an i mpr ess i ve t r ack r ecordof gr ow wt t h andpr ofit abi l i t y .Ourgeneri cs busi ness st art ed oper at i ons i n2001 and f ocuses pr i mari l y on t he Nort hAmer i ca and EU mar ket s.wehave bui l ta r obust pi pel i ne of gener i cpr oduct s,  whi ch wi l lhel p us dr i ve gr owt hi nt hemedi um and l ongt er m .i n addi t i on, t hecom mp panyi si nvest i ng i ncr eat i ng busi nessesoft he f ut ur e t hei nnovat i onl edbusi nesses-ofspeci al t yand drugdi scovery.  The r evenues f or fiscal2012wer eU. S. $446mi l l i on.

 ACTI VE PHARMACEUTI CALI NGREDI ENTS:  Act i ve phar maceut i cal i ngr edi ent s ( API )i s one oft he maj or  busi ness di vi si onsofDr .Reddy’ s.we ar e equi ppedwi t hsi xmul t i t on, s t at e o f– t he–ar tf ac i l i t i e s ,whi c h offe ro ve r100v ar i e t i e sofbul kac t i v e s and sev er alkeyi nt er medi at es.our act i vepharm ma aceut i cali ngr edi ent s ar e export ed wor l dw wi i de , whi ch i ncl ude bot h em me er gi ng as wel las dev el oped m ma ar ket s .Pri nci palmar ket s i nt hi s busi nes s se gm me ent i ncl ude nor t hAmer i ca( t heuni t eds t at es and Canada) , Eur ope,Mi ddl e East,SE Asi a andI ndi a. 48

 

 Thei r exper t i se i n or gani csynt hesi s, pr ocess devel opmentanda cont r ol l ed suppl y chai n enabl esus t o pr ovi de our cust om me er s wi t h hi gh qual i t y bul k act i ves at com mp pet i t i vepri ces .wear e aggr essi vel y  bui l di ng ourpr oductpor t f ol i ot ocat ert ogener i cpl ayer si nt heeme r gi ng mar ket s and generi c and pat ent chal l enge f orm mu ul at or s i nr egul at ed mar ket s. Dr .Reddy’ s offer s an unparal l el ed port f ol i ot oi t s cust om me er s,  who i ncl ude i nnovat or s and gener i c f or mul at or s wor l d wi de .The pr oduct s ar e wel ldocument ed accor di ng t ot hel at es tI CH and ot her regul at ory gui del i nes.  Al lt heabov eadvant agesmake Dr .Reddy’ sAPI, ani dealpar t neri n t hepr oductdev el opment e ffor t s.

I NTEGRATEDR RO ODUCT DEVELOPMENT:  The keyel ementi n gener i c dr ug devel opme nt i st heneed f or speed.t her ei sagr owi ng needt or educe t het i me i nw wh hi cha cheaper generi c al t ernat i ve i spr ovi ded t ot hemasses ,st ayi ng wi t hi n t he r egul at oryf r am me ewor kand honor i ng t he I Pi mper at i ve s.They have as many as

200 sci ent i st s

wor ki ng on pr oc ess i nnov at i on and

si mpl i ficat i on’manuf act ur i ng cycl et i me r educt i on,wast e andener gy r educt i on andcont i nuouspr oces si mpr ov em me ent . “ Rachna”,i sa pr oj ec tmanagem me entappr oach t hatdri ve st hei r pr oductdevel opme mentpr oce ss .Thi s appr oach ensur esa s moot h wor k flow f r om pr oduct sel ect i on dev el opi ng t he synt hesi sr out ei n R&D LAB( s) ,pl ant scal eupandval i dat i ons-final l y cul mi nat i ng i nt hefil i ng ofa dr ugmast erfil e.  The f ocus i s on usi ng t he mostadvanced t echni ques i nt he pr oducti dent i ficat i on and st ruct ur e el uci dat i on .our sci ent i st s have 49

 

enabl ed ust o devel op pr ocessesf orover 100 m mo ol ecul es.Thei rt al ent andsuper i orR&D ski l l s havef uel l ed r api d pr ocess dev el opment and r educt i oni npr oductdev el opmentt i me.

RESEARCH AND DEVELOPM ME ENT:  The r esear ch and devel opme ntdi vi si on,es t abl i shed i nt hel at e 1980’ s ,i st he cent r al t ot he act i ve pharm ma aceut i cali ngr edi ent s  busi ness. I t c ont r i but es si gni ficant l yt o our busi ness by cr eat i ng i nt el l ect ualpr opert y,provi di ng researcht oreducet hecostofpr oduct i on of our pr oduct s and pl ayi ng an act i ve r ol ei n t he se l ec t i on dev el opmentofnew product s.

50

and

 

 Theanal yt i calr esear ch gr oup suppor t st he devel opme ntact i vi t y  bycar r yi ngouti mpur i t ypr ofil i ng, st r uct ur e el uci dat i on and st abi l i t y st udi es.

BRANDED FOR RM MULATI ONS:  The br anded f or mul at i ons hasev ol v ed f r om an I ndi an mar ke t pl ayer t oagl obal organi zat i on st art i ng wi t hbr andsbasedoni t s ow wn n f orm mu ul at i ons,i thasgr own t hr ough br andandcom mp panyacqui si t i on ,a  val uabl epr oductmi x di st r i but i on st r engt h andt her apeut i c ar eaf ocus t obecom me eoneoft he count ry’ sl ar gestpl ayers. Dr .Reddy’ s br andedf orm mu ul at i ons ar emar ket ed i nt he count r y acr ossRussi a,ci st ,Lat i nAmeri ca,Sout hAsi a,chi naand Af ri ca.

GENER RI I CS :  The gener i cs busi ness gi v es a di r ectpr esence i nt he wor l d mar ket s. i thas gr own aggr ess i ve l y on t he back of som me epr ofit abl e pr oduct s succ es sf ul l ycl ear i ng i nspect i ons byUSFDA,MCC and t he MCA i t spat ht ov al uehas t aken t he hi gherr i sk,hi gh re t ur nr out e,  wi t h aser i es ofpat ent chal l enge pr oduct s.I t s cur r ent f ocus i st o i nnovat e andbui l d bot ht echnol ogi caland com mm mer ci alski l l st obui l d c apabi l i t i e sf or s pe c i alpr o duc t s . DRUG DI SCOVER RY Y: Dr .Reddy’ s drug di scoverypr ogr am i satt he heartofi t s vi si ont obeagl obaldi scovery l ed maj or wi t h 260sci ent i st sf orcedexcl usi vel y ondi scover yr esear ch,23pat ent sand ani nem mo ol ecul epi pel i ne.  The r esear chf oundat i on i nI ndi a has wor l dcl asschemi st r yand st r ong pharm ma acol ogyski l l s.I t sAt l ant a,USAl aborat oryf ocuses on ear l y st age r esear ch ski l l sl i ke scr eeni ng.

t arge ti dent i ficat i on 51

and

t hr ough put

 

DI MENSI ONS: Chem mi i sor bsdrugs l t d.mer ged i nt oDr .Reddy’ sl abs i nt he year 200001 r es t r uct ur ed as st  and pr ese nt l y r ategi c busi ness uni t s, not i fied asbusi nessuni t s{   BU} o

Bul k

o

Br andedf orm mu ul at i on Gener i cs

o

R&D em me er gi ng busi ness

o

Corpor at e cent er

o

ORGANI ZATI ON UNI TS : SBU BULKhas6uni t s 

3uni t si nbol lr am. m.



Iuni ti n Jeedi met l a.



1uni ti n mi ry al aguda.



1uni ti n pydibhi mavar am

CHA HART RTPRESENTATI ON OF DR. RED DD DY’ S ORGANI SATI ON DI MENSI ONS

52

 

Under { di scoveri ng r esearch}  T , hel at estemer gi ng busi nessi s

 w ch i s ant idi abet i cmedi ci ne. {“BALAGLI TZO ON NE”}I N 2015 , hi Under{devel opi ng busi ness} ,   i tcov er s •

Oncol ogy



Bi ol ogy’ s



Cps-cust om pharm ma aceut i caloper at i ons.

COR ORPERATEH HU UM MA AN RESO OU UR RC CE CLASSI FI CATI ONSI ND DR R.RED DD DY’ S

53

 

QUALI TY POLI CY:  Thepol i cyunder t aken i nDr .Reddy’ si nt hef ol l owi ng s t eps Cust om me erf ocus:  They ar e c omm mmi i t t ed t o del egabl e cust omer s by pr ovi di ng pr oduct s Andservi ces t hat exceed expect at i ons consi st ent l yi nt erm ms s ofqual i t ySpeed t omar k,del i ver yand com mp pet i t i veness. Execut i on excel l ence:  We  W e wi l l const ant l yi mpr ov e syst ems t echnol ogi es i nf or mat i on r egul at oryc om mp pl i ancesand t echni calsupport . Com mp pet encybui l di ng:  We  W e wi l lensur e hi gh l evel of compe t ency by at t r act i ng and r e t ai ni ng  Tal ent ed per sonneli n al l ar eas t hr oughessent i aleducat i on and Dev el opme ment .  We  W e wi l l devel op and mai nt ai n mut ual l y Benefici al part ner shi ps:  benefici alr el at i onshi pswi t h al lbusi nessassoci at esand pr ovi def ast i ng  val uet oal lst akehol der s.

KEY MI MI LESTO ON NES:   I thas becom me eoneoft he l eadi ng pharm ma aceut i calcom mp panyi n 2014I ndi ai nt urnoverand profit abi l i t y. 54

 

2013-Rev enues t ouchUSD 1bi l l i on i nDec em mb ber2013. Dr .Reddy’ s obt ai ns i t ssecond180daym ma arket i ng excl usi vi t yf or a ge ner i c drug i nt he us mar ketdur i ng wi t ht he l aunch of Ondeneset r on hydr ochl ori det abl e t s .  Be com me es an aut hori z edg ener i cpart nerf or Mer ck’ s Pr oscarR   i nt he usmarketduri ng180dayexcl usi vi t yperi od. & Zocor   Ac qui r es he f ourt hl ar gest generi cscom mp panyi n  bet a P har m-t Ger many f ora t ot alent erpri seval ueof$480mi l l i on   2012

  Ac qui r es

Roche’ s API Busi ness at t he st at e of t hear t manuf act ur i ng si t ei nM Me exi cowi t ht he t ot al i nves t ment ofUSD 59Mi l l i on.   Anno unces t he f or mat i on ofPer lcan Par ma :I ndi a’ s Fi r st I nt egr at edDr ugDev el opme mentCom mp pany .   Anno unces I ndi a’ s fir s t maj or codevel opme nt and comm mmer ci al i zat i on deal f ori t s mol ecul e BALAGLI DRFTZONE ( 2593) ,wi t hRHEO sc i ence.   Anno unces a uni que par t ner shi pf or t he commer ci al i z at i on of  ANDAS   wi t hI CI CIVent ur e.

2011 Acqui r es access t o Dr ug Del i ver yt echnol ogy Pl at f or ms i nt he Der mat ol ogy segm me entt hr ough t heacqui si t i onofTr i genesi s.

2010 A year excl usi ve   nnounces a 15-

pr oduct devel opment and

market i ng agr eeme mentf or OTC dr ugswi t hl i ni er H He eal t h pr oduct si nt he US.   2002Conduct si t sfir stover seasacqui si t i ons–BMSLaborat ori esLi mi t ed andM Me er i di anHeal t hcar ei nUK UK.

200155

 

Bec om me es t he fir s tAsi a Paci fic Phar maceut i calcom mp pany ,out si de  Japan,t ol i s ton t he New Yor k s t ock exchange.Li st ed wi t ht he symb mbol‘ RDY’OnApr i l11, 2001.  Out– l i cense s DRF4158TO Nov ar t i sf or upt oUS$ 55M MI I LLI ON upf r ontpaym me ent . 



Launches i t sfir stgeneri cpr oduct, Rani t i di ne, i nt he USm ma arket .

  2000

DR. REDDY’ S Labor at or i es

becom me es

I ndi a’ s

t hi r d l ar ge st

phar mace ut i cal com mp pany wi t ht he mer ge r ofchem mi i nor dr ugs l i mi t ed,agroupcomp mpany . 

Reddy USTher apeut i cs,aw wh hol l yownedsubsi di ary ,i ses t abl i shed atAt l ant a,US t oconductt argetbased drug di scovery .

  1999 A si t i on of Amer i can Remedi es Li mi t ed , a phar maceut i cal   cqui comp mpanybase di nI ndi a.

1997--Li ce nse s ant i di abet i cmol ec ul e DRF 2593 ( BALAGLI TZONE),t o Nov o Nor di sk .Bec om me es t he firs tI ndi an phar mace ut i calcom mp pany t o out l i censean ori gi nalmol ecul e.

1995

Dr .Reddy’ s Res ear chFoundat i on es t abl i shed t he com mp panydr ug di scov er y pr ogr am mm medst art s.



I thas al so setupofaj oi ntvent ur ei nRussi a.

199456

 

MakeaGDR i ss ue of USD 48m mi i l l i on.Foundat i onst onel ai df or afini shed dosagesf aci l i t yt ol at er t ot he hi ghl yr egul at e mar ket s such as t he US.

1990s t

DR.Reddy’ sf or t he1  t i me i nI ndi a,exportNor and floxaci n  oEur ope andf areast . ci pr ofl flo oxaci n t

BALANCE SHEET AS AT 31ST MARCH 2015 (All amounts in Indian rupees except share data and where otherwise state)

PARTI CULARS

 ASAT31ST   ASAT31ST  SHEDULES MARCH2015 MARCH2014

SOURCES OF FUNDS Shareho!er"# $%&!" Share capital

(

eser!es and surplus



84 0, 86 5 47, 2 77 , 8 14 48, 118, 049

Loa& $%&!" Secured loans "n secured loans

* 

De$erre! 'a )a*))'+, &e'

,*)

APPLICATION OF FUNDS APPLICATION F)e! a""e' a&! )&'a&)*e" #ross bloc$ %ess& accumulated depreciation and amorti'ation

/*01.2( 1/01,,. .3,/33,5

*1, 1./01,. .,23,0/.

 (01. *130130 3,2,01

/2/1.3. 53,0,

.331, ./,0,

(31.,1(,/ 312310.2)

(10((10( 21,0(1.*.)

.

57

 

 Net bloc$  Capital wor$-in-pro4ress includin4 capital ad!ances)   I&e"'4e&' C%rre&' a""'" oa&" a&! a!a&e"

2

In!entories Sundr5 debtors Cash and ban$ balance %oans and ad!ances

3 / 0 (,

C%rre&' )a*))')e" a&! 6ro)")o&" Current liabilities 6ro!isions

Ne' %rre&' a""e'"

01/31(.   1.31(,2 12,331,25 (01*,21(03

21/,1*/2   1/,21,/( ,2,./ /1*,1(2

 

   

1/3.1/*2 (,1..31,,/ (1.231((( 31,1(33 3/,0..,132

   

21/,/1.2/ 0,,1//( /,/0,..   2,/2,2.3  

21**13. (1,/12( /,32,/3 2,1,3

 

53 53, ,0 0, , 

./ ./, ,0 0, , 

    (( (

,

21,01** /10331,/2 .1*3*1(3 /10(1/2 2,1,2

 Notes to accounts 7he schedules referred to abo!e form inte4ral part of the balance sheet

PROFIT AND LOSS ACCOUNT AS AT 31 ST MARCH 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated) SC89

6A7IC"%AS

D"%9

:O 789 ;9A9ND9D *(S7  <AC8 ,(.

:O 789 ;9A9ND9D *(S7  <AC8 ,(

INCO<9 Sales1 4ross dut5 on sales %ess& 9xcise Sales1 net %icense fees Ser!ice income Other income

(*

58

1/21/2.   **../1*,/) 33,30,55/ (.1/* (21*3*   (10((,*(* 35,50,0/5

 

*/1/,1*/( 3301*0,)) 3/,500,1 (1313*3 31,, (1(.,1/, ,1/*1,/

 

 

969NDI7"9 <aterial costs Con!ersion char4es 9xcise dut5 6ersonal cost Operatin4 and other expenses

(. (2

(1.*12, ../12 /21/,/ *12/21,* 31/201,.(

((1(.10(, (1(*1,* ((31(0( 130312. 31(33102

esearch de!elopment 6ro!ision and for decline in the expenses !alue of lon4 term in!estments

(3

*1(01, (**1(3(

1.31(,0 31,20

:inance char4es Depreciation and amorti'ation

(/

(,(1//*   (12(01/2 *,1,,01,/ .1/(1,3 (1,//1/,/) 13.1(0 (*1,*21*0.

3012/ (1**.1,,0 31(/1.0( (*12./1.3 (1//01/2) ((132/1.0* *1(021.,/

(313//12(

(102.1(,(

(

6rofit before taxation Income tax expenses

(0

6rofit after taxation >alance in profit and loss account brou4ht forward

Amount a!ailable for appropriation

COUNTINUED PROFIT AND LOSS ACCOUNT All amounts in Indian rupees thousands1 except share data and where otherwise stated) SC89

6A7IC"%AS

D"%9

59

:O 789 ;9A9ND9D *(S7  <AC8 ,(.

:O 789 ;9A9ND9D *(S7  <AC8 ,(

 

A66O6IA7ION 6roposed di!idend on e?uit5 share 7a 7ax x and proposed di!idend Di!idend of pre!ious 5ear 7ransfer to 4eneral reser!e >alance carried forward 9arnin4s for share >asic @par !alue s. par share Diluted @par !alue s.par share

,)

2*,12/ (,31(30 2, 3.1 (21.3102(

20123( (,31,(*  (1(321/.0 (*1,.(1*(2

(313//12(

(102.1(,(

/3 /,0

3* 3*3

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated)

60

 

6articulars As At*(m t*(mar arch ch, ,(. (.

As At *(m *(mar arch ch, ,( (

SCHEDULE 1:SHARE CAPITAL CAPITAL A%'hor)8e! ,,,,,,,,pre!ious 5ear&,,1,,,1,,,)e e?uit5 shares of s. each I""%e! (231(3102pre!ious 5ear (2310(1*/, e?uit5 share of s . each full5 paid @up note  @() "%*"r)*e! a&! 6a)! %6 (231(3102 pre!ious 5ear(2310(1(/,) s. each full5 paid-up /,1/2 Add& :orfeited share capitalNote) (

(1,,,1,,,

(1,,,1,,,

/,1/2.

/*01.2

/*01.2, /*01.2(

.0,5

 

(

/*01.2(

3,51

 SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31ST MARCH 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6articulars As As At*(march,(. At*(march,( 61

 

SCHEDULE 2: RESER9ES AND SURPLUS 

Ca6)'a re"ere >alance at the be4innin4 and end of the 5ear Se%r)')e" 6re4)%4 ao%&' >alance at the be4innin4 of the 5ear A!!:- ecei!ed durin4 the 5ear on exercise of

emplo5ee stoc$ options A!!:- eser!ed durin4 the 5ear durin4 5ear on issue of American depositor5 sharesADS) Le"":- utili'ed for issue of shares Le"":-utili'ation to words ADS issue expenses E46o+ee "'o o6')o&" o%'"'a&!)&  >alance at the be4innin4 of the 5ear Add & options 4ranted durin4 the 5ear %ess & options forfeited durin4 he 5ear %ess & options exercised durin4 the 5ear >alance at the end of the 5ear A) De$erre! "'o o46e&"a')o& o"' >alance at the be4innin4 of the 5ear Add & options 4ranted durin4 the 5ear  %ess& amorti'ation durin4 the 5ear1 net of forfeiture %ess& options forfeited durin4 he 5ear >alance at the end of the 5ear>) A)->) ;e&era re"ere >alance at the be4innin4 of he 5ear Add& transferred transferred from 6B% Account Fore)& %rre&+ 'ra&"a')o& re"ere >alance at the be4innin4 of the 5ear Additionsdeductions durin4 the 5ear  He!)& re"ere  Additionsdeductions durin4 the 5ear  Pro$)' a&! o"" ao%&' >alance in 6B% account

3132

3132  

(31.(0132 *  

31/331/(

(1.3

/*1//,

------------------1/,.2,33/

(,1(2013,, */*13/0) 310,) 1/,51,/3

/1/2 ,(1., (212() (,/12.3) .301,3,

2(1,.* 01.( *21*.,) 2/12/) /1/2

 ,1// ,(1., ,31(.) (212() .100/

 (210. 01.( (/(12(() *21*.,) ,1//

32,0/2   (1(*31, 3.1 12,12,2

22/,0.   (,102,1(/. (1(321/.0 12,13/,0..

/10/) (3*1** 12.,33 (,1,2)

-----/10/) ., ------

(10,0.< 1,5/.,1

-----13,051,31

./,2//,15.

.2,.,005

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 2015

All stated) 6artamounts iculars in Indian rupees thousands1 except share As data and where otherwise As At*(march,(. At*(march,( 62

 

SCHEDULE 3 SECURED SECURED LOANS Fro4 o'her 'ha& *a&" %oan from Indian renewable ener45 de!elopment a4enc5

:inance lease obli4ation

(*1*,.

(01..

,13(3

------

3.,022

1,255

 

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6articulars As As At*(march,(. At*(march,(

 SCHEDULE . UN SECURED LOANS Sales tax deferment loan from the 4o!ernment of Andhra pradeshinterest free )

2*12

2/13,/

1,0,1/3/ *10/

12/13,, .21*/2

.,5,052

3,2/,/.

Fro4 *a&"

6ac$in4 credit loans >an$ o!er draft

63

 

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated)

6articulars

A s At*(march,(. 64

As At*(march,(

 

SCHEDULE  : IN9ESTMENTS >rou4ht forward "n?uoted trade in!estments I& =o)&' e&'%re 9?uit5 shares held in $unshan rotham redd5  pharmaceutical co ltd china I& o'her o46a&)e" /120*pre!ious 5ear /120*)ordinar5 shares of roubles (1,,, each of biomed ussia ltd I& a6)'a o$ 6ar'&er"h)6 $)r4 (a "%*")!)ar+< #lobe enterprises 1India a partnership firm with Dr redd5s holdin4s pri!ate ltd or4ani'ed under the Indian 6artnership act (0* wherein the the compan5 and Dr redd5s holdin4s pri!ate ltd share the profit Bloss for 5ear in the ratio of 0.&.respecti!el5) 6artner capital account &

Dr redd5s laborataries limited @s 1*02 Drredd5s Dr redd5s holdin4s pri!ate limited @s(,( No& 'ra!e (a<)& !e*e&'%re"   .pre!ious 5ear &. ) ,-0based on offer side side fixed rate of ( month <IOI S) con!ictable debentures of s .,1,,,1,,, each of Citicorp finance India ltd (,pre!ious 5ear (,),-0.based on offer side fixed rate of ( month <IOIS con!ertible debentures of s .,1,,,1,,, each of Citicorp finance India ltd .pre!ious 5ear&.),-(*.based on offer side fixed rate of (month <IOIS con!ertible debentures of rs (,,1,,,1,,, each cit5 crop finanindia ltd

(.1.1,(

310(1*

01,/

01,0

2.1..3

2.1..3

1*02

1*02

.,1,,,

.,1,,,

.,,1,,,

.,,1,,,

.,,1,,,

.,,1,,,

S89D"%9S >A%ANC9 S8997 :O 789 ;9A 9ND9D *( S7 <AC8 ,(.CON7IN"9D S89D"%9 2) All amounts in Indian rupees thousands1 except share data and where otherwise stated)

65

 

6articulars

As At*(march,(.

As At*(march,(

1,,,

1,,,

02.

02.

1,,

1,,

-----

,

1/,2,3/

,,0

,,122*

-------

0313/.

------

.,01,0/

------

(1,,,1,,,

------

(1,,,1,,,

------

.,,1(3

-------

3,50/,/3 20,0/,1./   (1.,,10.,) 1,30,1/

------,,05

(*<I& e>%)'+ "hare" ,,1,,,pre!ious 5ear &,,1,,,)ordinar5 shares of s (, each of alte$ en4ineerin4 ltd India /1/.0 pre!ious 5ear /1/.0)e?uit5 shares of rs (,,

each of Eeedimetla effluent treatment limited India 1,,,pre!ious 5ear,,,) e?uoit5 shares of rs (,,each of prio4rassi!e effluent treatment limited India (< )& 4%'%a $%&!"  Nill pre!ious 5ear &1,,,) units of "7I master master 4ain0 'o'a %&>%o'e! o& 'er4 )&e"'4e&'" (II< Current in!estments at cost tr mar$et !alue which e!er is less I& M%'%a F%&!   (0121.132pre!ious 5ear& nill) nill) units of >S% inter!al income-INS7%-<ON78%;-series 4rowth   01021.//10,pre!ious 5ear& nill) units of A>N A<O inter!al found <onthl5 plan a 4rowth-ren   ,1(0*13*.120pre!ious 5ear& nill) nill) units of >irla d5namic bond fund-retau$-4riwth   (,,1,,,1,,,1,,pre!ious 5ear& nill) nill) units of S>I debt fund series-*, da5s--3-<ar-,/)4rowth   321.21** 321. 21**10p 10pre!ious re!ious 5ear& nill) units of 7A7 7A7A D5namic bond fund option >-4rowth   .1/(,1023120pre!ious 5ear& nill) units of eliance <onthl5 inter!al fund-seues institutional 4rowth plan Area'e o"' o$ )&e"'4e&'" (I?II?III< Le"":- pro!ision for decline other then temporar5 in the !alue of lon4 term in!estments TOTEL IN9ESTMENT, NET

A44re4ate cost of ?uoted in!estment A44re4ate cost of un ?uoted in!estments <ar$et !alue of ?uoted in!estment <ar$et !alue of mutual funds

 

*1,02 ,1/,1,.( (01,* *1.(.102*

   

(1*231330) ,302,12

*1,02 012221/,0 ((100* 2(

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 2015

All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6A7IC"%AS 6A 7IC"%AS

As 66

As

 

At*(march ch ,(.

At*(march,( ,( 

SHEDULE / IN9ENTORIES Stores1 spares and pac$in4 materials aw materials For$-in pro4ress

.021( 1.**13/0 121/3*

*.122* 1,001.. (12*122

:inished 4ood

(1,.123

231(..

,.0,3.3

.,/5,3

As At*(march,(.

As At*(march,(

 

6A7IC"%AS SCHEDULE  SUNDR7 DEBTORS DEBTORS unsecured ) Debts outstandin4 outstandin4 for period period exceedin4 six six months Considered 4ood Considered doubtful Other debts Considered 4ood

%ess &pro!ision for doubtful debts

*01(2 (*1*

..1(.2 ((1,

/12310 ,10,.2

(,1(,(1/. 10,/,2.

(*1*)

((1,)

,//,0

10,55/,00

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated)

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated) 67

 

6A7IC"%AS SCHEDULE  CASH AND [email protected] BALENCES Cash in hand >alances with schedule ban$s In current account In 99:C current account In deposit account In un claimed di!idend account In un claimed fractional share pa5 order account >alances with non-schedule ban$ India Incurrent accounts

As At*(march,(.

As At*(march,(

(310,

.1/

.1/ 2012/2 13,(1.*3 (*3 222

.3012 23*1(/, (*1,/(1,22 (12, 222

((.1*/ 5,3/3,.1/

(12** 1.,5/,111

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated) 68

 

6A7IC"%AS

As As At*(march,(. At*(march,(

SCHEDULE 10 LOANS AND AD9ENCES AD9ENCES un secured) Co&")!ere! oo! %oans and ad!ances to wholl5 owned subsidiar5

companies step down subsidiar5 companies Eoint !enture and associates Ad!ance reco!erable from perlecan pharma pri!ate ltd Ad!ances to material suppliers Staff loans and ad!ances Interest accrued on in!estments Other ad!ance reco!erable in cash or in $ind of or for !alue to be recei!ed <A7 credit entitlement entitleme nt >alances with customers central excise etc Deposits

.1.*21/3

1/313

,1(./

/013(2

*/1(. (10.3 310/. (10*31/0

*,31,./ (21*(3 .12*, (1(,1*

132, /31((* (,21(.

----.21/// (,*1003

Co&")!ere! !o%*'$% Ad!ances towards in!estments Staff loans and ad!ances %oans and ad!ances to a wholl5 owned subsidiar5 compan5 and associate Other ad!ances reco!erable in cash or in $ind of for !alue to be recei!ed

/1,.2 21.,, *2(13*

/1,.2 21.,, *.31200

.1.,3 ,352,.1

.123( /,.,103

%ess& pro!ision for doubtful debts

*,130.)

102)

,21 ,21, ,. .

/,0. ,0..,1 .,1//

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated) 69

 

6A7IC"%AS SCHEDULE 11 CURRENT LIABILITIES Sundr5 creditors Due to small scale industrial underta$in4s Others 6a5able to subsidiar5 companies and Eoint !enture Interest accrued but not due on loan "nclaimed di!idendsG 7rade deposits Other liabilities

As At*(march,(.

As At*(march,(

*(1/( 21(,,100 01*32

31,/2 .10.31/*3 ((1,3(

.1*2 (1*3 */1,0. (.120 ,0,5

(12 (12, ,1. /*100, ,33.,2/5

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6A7IC"%AS As At*(march,(. As At*(march,( SCHEDULE 12 PRO9ISIONS

6roposed di!idend 7ax on proposed di!idend includin4 di!idend tax) 6ro!ision for tax net of ad!ance tax s *12((10(1pre!ious 5ear s1/*1.*)

2*,12/ (,31(30

2012( (,31,(*

(,21(/*

*10,

*,1(0( 212/, 00,1

(122( *.1( 1,02,.1

Pro)")o& $or

#ratuit5 %ea!e enhancement

ST

SHEDULES PROFITLOSS ACCOUNT THE 7EAR  MARCH in Indian rupees thousands1FOR except share data ENDED and where31otherwise 2015 All amounts stated) 70

 

6A7IC"%AS

As At*(march,(.

As At*(march,(

2.1,

/01,./

./133*

(1/.

*1*(. (210. ((,120 ,,1(,. ---13. 31233 (03122 1,11,313

*1,,, (10( /20 ,2100 .12(/ (13/, ((01*/2 231/ 1,1,23

SCHEDULE 13 OTHER INCOME I&'ere"' )&o4e

On fixed deposits 4ross tax deducted at source &s (1.1./ pre!ious 5ear &s3,12,/)   On loans to subsidiaries and Eoint !enture On non - trade in!estments 4ross tax deducted at source s.1/*pre!ious 5ears s 23*)   On others #ain on redemption of mutual fund units Sale of spent chemicals 6rofit on sale of fixed assets net o5alt5 income from subsidiar5 :orei4n exchan4e 4ain net <iscellaneous income

ST

SHEDULES PROFITLOSS ACCOUNT FOR THE 7EAR ENDED 31  MARCH 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated) 71

 

6A7IC"%AS SCHEDULE 1. MATERIAL MATERIAL COSTS (a<Ne' ()&rea"e <!erea"e )& "'o Openin4 For$ @in pro4ress :inished 4ood Closin4 For$ in process :inished 4ood Ne' ()&rea"e < (*<Ra 4a'er)a" o&"%4e! Openin4 stoc$ of raw materials Add& purchases %ess& closin4 stoc$ 

As At*(march,(.

(12*122 2031(.. 121/3* (1,.123

1,001.. 01,,102 ((1*,,1,/ 1.**13/0)

As At*(march,(

(13/1/*3 1*,12( *1301*, (313(0)

,/,25

/01., (12*122 2031(..

(103/1(2 /10021//2 (,103.1,., 1,001..)

1(,/1*( 1*,12( (232,20<

,/5,.

< "'ore" he4)a" "6are" a&! 6a)& 4a'er)a" o&"%4e! 2,013,205

(,0.,.0

2,3,5/ 12,53.,0 2

1,52,2. 11,215,10

(!<6%rha"e" o$ 'ra!e! oo!"

SHEDULES PROFITLOSS ACCOUNT FOR THE 7EAR ENDED 31ST MARCH 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated) 72

 

6A7IC"%AS

As At*(march,(.

As At*(march,(

SCHEDULE 15 PERONAL COSTS

Salaries1 wa4es and bonus Contribution to pro!ident and other funds For$man and staff welfare expenses For$man Amorti'ation of deferred stoc$ compensation cost

1/3.1*( ,,10*

1(/01(03 (312.(

,1/( ,31(.

001(0* (/(12((

3,,203

2,//,52

ST

SHEDULES PROFIT LOSS ACCOUNT FOR THE 7EAR ENDED 31   MARCH 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated) 73

 

6A7IC"%AS

As At*(march,(.

SCHEDULE 1 OPERATIN; OPERATIN; AND OTHER EPENSES 6ower and fuel epairs and maintenance >uildin4s

6lant and machiner5 Others ent ates and taxes Insurance 7ra!elin4 and con!e5ance Communication Ad!ertisements Commission on sales Carria4e out wards Other sellin4 expenses 6rintin4 and stationer5 Donations %e4al and professional >ad debts written off  6ro!ision for doubtful ad!ances 6ro!ision for doubtful debts Directors sittin4 fees Directors remuneration Auditors remuneration >an$ char4es 9xchan4e loss 1net Sundr5 expenses

As At*(march,(

33(1(2*

.3/1/0

.*1(00

301(,,

3.1(03 *0.1*,0 (((1*/( .2100/ (/,1222 ,31,2 (,1,. /.10( (,12,2 (1(,1,** 1*..1(2 331(( (.1.. .*/1/(3 *,12/ .1/20 1(, *2. (/*133, 31/3 .1,(/ *1*(0 3,1,( /,,051

1/3 0,1(3 0(10,* *(1.., (0*120, *(31((0 /1./, **1,. ,12(0 0/31*0 1,,01((/ /,1/3( 301(/( 22,13 3123 (03123( (10,, *., *31*2( /12. *01//* HH *22*3 /,1//,2

SHEDULES PROFIT LOSS ACCOUNT FOR THE 7EAR ENDED 31ST  MARCH 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated) 74

 

6A7IC"%AS

As At*(march,(.

SCHEDULE 1/: REDEARCH AND DE9ELOPMENT EPENSES:6ersonnel costs Clinical trial expenses

Chemicals and consumables %e4al and professional char4es 6ower and fuel Other expenses

%ess&- Amount Amount reimbursed as per the research and de!elopment arran4ements

As At*(march,(

(1,**1/ //.1*3

3031,* (1*31000

//,1/3. (/13/( (,102. (13,

/**122 012 3/1(/ *1

3,30,/0

3,22,51.

/01.,. 3,21,20.

/.1,. 2,.5/,10

SHEDULES PROFIT LOSS ACCOUNT FOR THE 7EAR ENDED 31ST  MARCH 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6A7IC"%AS As As At*(march,( At*(march,(. SCHEDULE 1 :FINANCE CHAR;ES Interest on pac$in4 credit loan 21//* *(/1*/. Other finance char4es *31,,, (2(103 101,3 ./,2

SHEDULES PROFIT LOSS ACCOUNT FOR THE 7EAR ENDED 31ST  MARCH 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated) 75

 

6A7IC"%AS

As At*(march,(.

As At*(march,(

SCHEDULE 1: INCOME TAE TAES S C%rre&' 'ae" Domestic taxes

<A7 credit entitlement entitlem ent De$erre! 'ae" Domestic taxes Fr)&e *e&e$)' 'a

2.13

(130103(

132,)

H

0(1(3(

0,1,*0

(331(* 1,0,0

201/. 1,,.

"'

CASH FROM OPERATION OPERATION $or 'he +ear e&!e! 31  4arh 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated) 76

 

31St MARCH 2015

31St MARCH 2014 5841027 13658457

PARTICULAR

Proft beore taxato! Add:- Non operating expenses "e#re$ato! "e#re$at o! a!% a&ort'ato! Pro()o! or *ea+t, tax Pro()o! -a% %ebt) *rtte! o. I!$o&e ro& re%e&#to! o &/t/a+ /!%) /!t) A&ort'ato! o %eerre% )to$ $o&#e!)ato! ex#e!)e !et U!rea+'e% U!rea+'e % ore! ex$,a!e a!  +o))  Pro()o! or %e$+!e ! t,e (a+/e o +o! ter& !(e)t&e!t) !et I!tere)t !$o&e !a!$e $,are) Proft Pr oft  +o)) o! )a+e o fxe% a))et) !et Pro()o! Pro( )o! or %o/bt/+ %ebt) Pro()o! Pro( )o! or %o/bt/+ a%(a!$e) Operating cash fows beore working capital changes Less:- Non operational income I!$rea)e  "e$rea)e ! )/!%r %ebtor I!$rea)e ! !(e!tore) I!$rea)e ! +oa!) a!% a%(a!$e) "e$rea)e ! $/rre!t +ab+te) a!% #ro()o!) Cash generated rom operations Less:- I!$o&e taxe) #a% Ca), ro& o#erato!)

77

1619862

1335009

2574  30468 110269 207125

2147 7467 869 181611

214067 133171

151539 472069

936117 101883 3319 2102 5689 7,!,"#

704883 479682 45618 41900 197671 !,%7'," %

1446616 4618321 1533507 444868 1185982 683341 645411 $,%#7,$& 392864 928931 ",&,%' # !,!!#,$## 1181490   #,&'7,&%#

 

CASH FLO STATEMENT STATEMENT $or 'he +ear e&!e! 31"' 4arh 2015 All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6A7IC"%A *(S7 <  <A AC8 ,(. *(S7 <AC8 ,( SOURCES OF CASH 21.,010 (1.231((( Openin4 balance

6roceed from issue of share capital Le"":-epa5ment of lon4 term  barrowin4 Le"":- epa5ment of short term  barrowin4 6roceed from short term  barrowin4 Le"":- Interest paid Le"":- Di!idend paid includin4 di!idend tax) Cash from operation   APPLICATIONS OF CASH Cash in hand >alance with ban$    In current AC   In deposit AC   In 99:C current AC In unclaimed di!idend AC   In unclaimed fractional share  pa5 order AC AC   In mar4in mone5 6urchase of fixed assets Le"":- 6roceeds from sale of fixed assets 6urchase of in!estment Le"":- proceeds form sale of in!estment %oan and ad!ances 4i!en to subsidiaries Eoint !entures B associates Le"":- Interest recei!ed

(.1,

(,1,01.3(

(010(

/1(0*

(10(1./ *113, 0313/* 3*31//

-(1021(.0)

1,31220

31,3(1/.0 (1(31.,, 0*12(/ *3103

1001.(0

(21*/2

.../2// 20,5/,30

/10*310/ 1,13,22

(310,

.1/ 3010 (*1,301. 23*1(/, (12, 222

.201222 13,,120 2012/2 (1*3 222 (12/ 1./1.2,

.1*..1/23

(12( *1//1*,0

(1.2(1/3

313( *1/0133 (121.,

1.,1/(0

/,12*3 3.103( **(1/20

*1/,13

((1,2103*

.1,.2

..12/ 3*31//

9ffected exchan4e 4i!en on cash on cash e?ui!alences

78

(1(,

(1,,

2001.

-.1(02)

.1.0

3100*

20,5/,30

1,13,22

 

A&a+")" a&! )&'er6re'a')o& Ca"h $o "'a'e4e&' (201.-2015<



Cash from operation of the compan5 amount is s .1../12//  Co Compared mpared to last 5ear it is decreased



7he purchase of fixed assets amount is s 3(21.3 3( 21.3



7he increasin4 unsecured loans 7hen the increasin4 of cash so it is an sources of cash



In cash from operations the net profit durin4 the 5ear amount is s .1/(1,3 Compared to lost 5ear cash from operation on decreasin4 due to decreasin4 in non operation income



 Non operation expenses is decreased1 but all so non operation income is decreased

79

 

BLANCE SHEET AS AT 31ST MARCH 201. All amounts in India rupees thousands1 except share data and where otherwise state)

PARTI CULARS

 ASAT31ST   ASAT31ST  SHEDULES MARCH2014 MARCH2013

SOURCES OF FUNDS ShareholdersJ funds Share capital eser!es and surplus

( 

Loa& $%&!" Secured loans "n secured loans

* 

De$erre! 'a )a*))'+, &e'

( 0*)

APPLICATION OF FUNDS APPLICATION F)e! a""e' a&! )&'a&)*e" #ross bloc$ %ess& accumulated depreciation and amortisation  Net bloc$  Capital wor$-in-pro4ress includin4 capital ad!ances)

/*01.2( 1/01,,.

*13**1.22 12(1(3 ------------------- -------------------  (01.   (1.(1/. *130130 313/31(,

.

2

I&e"'4e&' C%rre&' a""'" oa&" a&! a!a&e" In!entories Sundr5 debtors Cash and ban$ balance %oans and ad!ances

3 / 0 (,

C%rre&' )a*))')e" a&! 6ro)")o&" Current liabilities 6ro!isions

(( (

   

Ne' %rre&' a""e'"

 Notes to accounts 7he schedules referred to abo!e form inte4ral part of the balance sheet

  */*13* 1*310

(0

80

3,2,01 .331,

,23,5 .*,1/3

./,0,

32,30,5

(10((10( 21,0(1.*.)

(,1./1033 10(,1/2)

021/,1*/2 1/,21,/(

.12(/1(.( (1(01(2,

,2,./ /1*,1(2

,/./,311 /1(310*3

1/3.1/*2 (,1..31,,/ (1.231((( 31,.1*, 3/,0.5,35

1*,102/ .1/(1(2, 21.,010 213321.2 23,52,013

21.3,1*, 30*1..0 31*2*10/0 012/(1*02 ./,0,

.1.*112/ .3,12. 21(,*1*, (31.13(( 32,30,5

 

PROFIT AND LOSS ACCOUNT AS AT 31 ST MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated) SC89

6A7IC"%AS

D"%9

:O 789 ;9A9ND9D *(S7 <AC8

:O 789 ;9A9ND9D *(S7  <AC8 ,(*

,(

INCO<9 Sales1 4ross %ess& 9xcise dut5 on sales Sales1 net %icense fees Ser!ice income Other income

(*

969NDI7"9 <aterial costs Con!ersion char4es 9xcise dut5 6ersonal cost Operatin4 and other expenses esearch and de!elopment expenses %oss on sale of non trade in!estment 1net 6ro!ision for decline in the !alue of lon4 term in!estments In!estment written off

(

(. (2

:inance char4es Depreciation and amortisation

(3

6rofit before taxation Income tax expenses 6rofit after taxation >alance in profit and loss account brou4ht forward

(/

Amount a!ailable for appropriation

81

*/1/,1*/( 3301*0,)) *31.,,100( (1313*3 31,, (1(.,1/, .0,.3,0.

,10..1(( 0(,123*) ,1,12/ 010/ 2,1.., (1*,13(( 21,35,/11

((1(.10(, (1(*1,* ((31(0( 130312. 31(33102 1.31(,0   --31,20

31.2(1.2 .(1* 321. 1(/1 .1,,100* (13.1, (/1* (3.1,,,

 ------

----

3012/ (1**.1,,0 2/,1.,51 (*12./1.3

(1( (1((*1**3 1,/2,05 12*3122

(1//01/2) ((132/1.0* *1(021.,/

.21,3) 1(((1*0 (1/(.12

1.,5,101

3,2,/03

81

 

COUNTINUED PROFIT AND LOSS ACCOUNT All amounts in Indian rupees thousands1 except share data and where otherwise stated)

6A7IC"%AS

SC89

D"%9

A66O6IA7ION 6roposed di!idend on e?uit5 share 7a 7ax x and proposed di!idend Di!idend of pre!ious 5ear 7ransfer to 4eneral reser!e >alance carried forward 9arnin4s for share >asic @par !alue s. par share Diluted @par !alue s.par share

:O 789 ;9A9ND9D *(S7 <AC8 ,(

:O 789 ;9A9ND9D *(S7  <AC8 ,(*

20123( (,31,(*  (1(321/.0 (*1,.(1*(2 1.,5,101

*/*13* .*13/ (( ((1( *13/1(, 3,2,/03

3* 3*3

(*30 (*3

(0)

82

 

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated)

6articulars

As A Att*(ma *(marc rch h,( ,( 

SC89D"%9 (&S8A9 CA6I7A% CA6I7A% Authori'ed ,,,,,,,,pre!ious 5ear&(,,1,,,1,,,)e e?uit5 shares of s. each Issued (2310(1*/,pre!ious 5ear 32120133, e?uit5 share of s . each full5 paid @up note @() subscribed and paid up (2310(1/(,pre!ious 5ear 32120.3,) s. each full5 paid-up Add& :orfeited share capitalNote)

(1,,,1,,,

.,,1,,,

/*01.2

*/*13

/*01.2,  

(

As At *(ma *(marrch, ch,(* (*

*/*13 /*01.2( 3,51

 

(

*/*13* 33,./3

83

 

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6articulars As As At*(march,( At*(march,(* SCHEDULE 2: RESER9ES AND SURPLUS  Ca6)'a re"ere >alance at the be4innin4 and end of the 5ear Se%r)')e" 6re4)%4 ao%&' >alance at the be4innin4 of the 5ear Add & ecei!ed durin4 the 5ear on exercise of emplo5ee stoc$ options Add & eser!ed durin4 durin4 the 5ear on issue of American depositor5 sharesADS) %ess& utili'ed for issue of shares %ess &utili'ation to words ADS issue expenses E46o+ee "'o o6')o&" o%'"'a&!)&  >alance at the be4innin4 of the 5ear Add & options 4ranted durin4 the 5ear %ess & options forfeited durin4 he 5ear %ess & options exercised durin4 the 5ear >alance at the end of the 5ear A) De$erre! "'o o46e&"a')o& o"' >alance at the be4innin4 of the 5ear Add & options 4ranted durin4 the 5ear  %ess& amorti'ation durin4 the 5ear1 net of forfeiture %ess& options forfeited durin4 he 5ear >alance at the end of the 5ear>)

A)->) ;e&era re"ere >alance at the be4innin4 of he 5ear Add& transferred transferred from 6B% Account Fore)& %rre&+ 'ra&"a')o& re"ere >alance at the be4innin4 of the 5ear Additionsdeductions durin4 the 5ear  Pro$)' a&! o"" ao%&' >alance in 6B% account

313.

3132  

31/331/(

 

313*1,,.

/*1//,

(*1/,3

(,1(2013,, */*13/0) 310,) (31.(0132*

HH H H 31//31/(

2(1,.* 01.( *21*.,) 2/12/) /1/2

3.1, (..12,, 0/10,,) 3(1,.0) 2(1,.*

 (210. 01.( (/(12(() *21*.,) ,1//

102. (..12,, (**1,3*) 3(1,0) (21.0

312,  

((1(2(

(,102,1(/. (1(321/.0 (1(*31, HHH /0/) /00/ (*1,.(1*(2 .2,.,005

(,1301,2( ((1( (,102,1(/. H H H *13/1(, 22,23/,.

84

 

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6articulars As As At*(march,( At*(march,(* SCHEDULE 3 SECURED SECURED LOANS

%oan from Indian renewable ener45 de!elopment a4enc5

(01..

.1(.

HH 1,255

(121(, 1,.51,25

Shor' 'er4 oa&" $ro4 *a&"

%oan from state ban$ of India

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6articulars As As At*(march,( At*(march,(*

 SCHEDULE . UN SECURED LOANS Sales tax deferment loan from the 4o!ernment of Andhra pradeshinterest free )

2/13,/

3,10/,

12/13,, .21*/2

21/0*1,(/ /*1(

3,2/,/.

/,//,.10

Fro4 *a&"

6ac$in4 credit loans >an$ o!er draft

85

 

86

 

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated)

6articulars

SCHEDULE  : IN9ESTMENTS >rou4ht forward "n?uoted trade in!estments In Eoint !enture 9?uit5 shares held in $unshan rotham redd5  pharmaceutical co ltd china

In other companies /120*pre!ious 5ear /120*)ordinar5 shares of roubles (1,,, each of biomed ussia ltd I&a6)'a o$ 6ar'&er"h)6 $)r4 (a "%*")!)ar+< #lobe enterprises 1India a partnership firm with Dr redd5s holdin4s pri!ate ltd or4ani'ed under the Indian 6artnership act (0* wherein the the compan5 and Dr redd5s holdin4s pri!ate ltd share the profit Bloss for 5ear in the ratio of 0.&.respecti!el5) 6artner capital account & Dr redd5s laborataries limited @s 1*02 Drredd5s Dr redd5s holdin4s pri!ate limited @s(,( No& 'ra!e (a<)& !e*e&'%re" .pre!ious 5ear &. ) ,-0based on offer side fixed rate of ( month mumbai inter ban$  O!ernite interest swap <IOI S) con!ictable debentures of s .,1,,,1,,, each of Citicorp finance India ltd (,pre!ious 5ear (,),-0.based on offer side fixed rate of ( month <IOIS con!ertible debentures of s .,1,,,1,,, each of Citicorp finance India ltd .pre!ious 5ear&.),-(*.based on offer side fixed rate of (month <IOIS con!ertible debentures of rs (,,1,,,1,,, each cit5 crop finanindia ltd

As At*(march,(

As At*(march,(*

310(1*

3131*0

01,0

**0133

2.1..3

2.1..3

1*02

1*02

.,1,,,

.,1,,,

.,,1,,,

.,,1,,,

.,,1,,,

.,,1,,,

87

 

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 201.(CONTINUED SHEDULE < All amounts in Indian rupees thousands1 except share data and where otherwise stated)

6articulars

As At*(march,(

As At*(march,(*

1,,,

1,,,

02.

02.

1,,

1,,

,

,

,,0

,110,551

0122010,. (1*231330)

01((*123 /.013(,)

TOTEL IN9ESTMENT, NET

,302,12

,21/,3/

A44re4ate cost of ?uoted in!estment A44re4ate cost of un ?uoted in!estments <ar$et !alue of ?uoted in!estment <ar$et !alue of mutual funds

*1,02 012221/,0 ((100* 2(

*1,02 01((,1..( ((1./ 2

(*<I& e>%)'+ "hare" ,,1,,,pre!ious 5ear &,,1,,,)ordinar5 shares of s (, each of alte$ en4ineerin4 ltd India /1/.0 pre!ious 5ear /1/.0)e?uit5 shares of rs (,, each of Eeedimetla effluent treatment limited India 1,,,pre!ious 5ear,,,) e?uoit5 shares of rs (,,each of prio4rassi!e effluent treatment limited India (< )& 4%'%a $%&!" ,,,pre!ious 5ear &1,,,)untis of utimaster4ain0

ii

total un?uoted in!estments

Area'e o"' o$ )&e"'4e&'" (I?II< %ess&pro!ision for decline other then temporar5 in the !alue of lon4 term in!estments

 

88

 

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated)

6A7IC"%AS

SHEDULE / IN9ENTORIES Stores1 spares and pac$in4 materials aw materials For$-in pro4ress :inished 4ood

As At*(march,(

As At*(march,(*

*.122* 1,001.. (12*122 231(..

*12* (103/1(2 (13/1/*3 /01.,

.,/5,3

.,.30,

  SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6A7IC"%AS SCHEDULE  SUNDR7 DEBTORS DEBTORS unsecured ) Debts outstandin4 outstandin4 for period period exceedin4 six six months Considered 4ood Considered doubtful Other debts Considered 4ood

%ess &pro!ision for doubtful debts

As At*(march,(

As At*(march,(*

..1(.2 ((1,

(123 (201*,

(,1(,(1/. 10,/,2. ((1,)

.12231/0* 5,/,3 (201*,)

10,55/,00

5,12,10

89

 

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated)

6A7IC"%AS SCHEDULE  CASH AND [email protected] BALENCES Cash in hand >alances with schedule ban$s In current account In 99:C current account In deposit account In un claimed di!idend account In un claimed fractional share pa5 order account >alances with non-schedule ban$ India Incurrent accounts

As At*(march, ,( (

As At*(march,(*

.1/

0 1***

.3012 23*1(/, (*1,/(1,22 (12, 222

(2,1./( ,1(/. 21.1( (1((, 220

(12** 1.,5/,111

*1(*0 ,50,.2

90

 

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6A7IC"%AS As As At*(march,( At*(march,(* SCHEDULE 10 LOANS AND AD9ENCES AD9ENCES

un secured) Considered 4ood %oans and ad!ances to wholl5 owned subsidiar5 companies step down subsidiar5 companies Eoint !enture and associates Ad!ance reco!erable from perlecan pharma pri!ate ltd Ad!ances to material suppliers Staff loans and ad!ances Interest accrued on in!estments Other ad!ance reco!erable in cash or in $ind of or for !alue to be recei!ed Ad!ance tax net of pro!ision for current taxes s *1,2/1,/ pre!ious 5ear s /,123) <A7 credit entitlement entitleme nt >alances with customers central excise etc Deposits Considered doubtful Ad!ances towards in!estments Staff loans and ad!ances %oans and ad!ances to a wholl5 owned subsidiar5 compan5 and associate Other ad!ances reco!erable in cash or in $ind of for !alue to be recei!ed %ess& pro!ision for doubtful debts

1/313

12,,1*

/013(2

*1.(

*,31,/ (21*(3 .1*2, (1(,1*

*(,1/* ,1**0 H 23,13/

(1.*

**1.*2

H .21/// (,*1003

((1,/ *3(1.*0 01/22

/1,.2 21.,, *.31200

/1,.2 21.,, (/*1*(

.123(

012/

313,1*.2 102) /,0.5,.30

31,,*13(( 31..) ,//,.5

91

 

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6A7IC"%AS As As At*(march,( At*(march,(* SCHEDULE 11 CURRENT LIABILITIES

Sundr5 creditors Due to small scale industrial underta$in4s Others 6a5able to subsidiar5 companies and Eoint !enture Interest accrued but not due on loan "nclaimed di!idendsG 7rade deposits Other liabilities

31,/2 .10.31/*3 ((1,3( (12 (12, ,1. *,1(. ,5/0,.30

31.20 .1(.310, 21(/3 (.1(2 (1((, (1( .1.0 5,532,.

SHEDULES BALANCE SHEET FOR THE 7EAR ENDED 31 ST MARCH 201.

All rupees thousands1 except share data stated) 6Aamounts 7IC"%AinIndian S As and where otherwise As At*(march,( At*(march,(* SCHEDULE 12 PRO9ISIONS

2012( (,31,(*

*/*13* .*13/

#ratuit5

(122(

H

%ea!e enhancement

*.1(

(**1*00

/3,55

5/0,5.

6roposed di!idend 7a 7ax x on proposed di!idend includin4 di!idend tax) 6ro!ision for

92

 

SHEDULES PROFITLOSS ACCOUNT FOR THE 7EAR ENDED 31ST MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6A7IC"%AS As As At*(march,( At*(march,(* SCHEDULE 13 OTHER INCOME Di!idends  Non-trade in!estments Interest income On fixed deposits 4ross tax deducted at source &s 3,12,/ pre!ious 5ear &s(*(1.00) On loans to subsidiaries and Eoint !enture On non trade in!estments 4ross tax deducted at source s23* pre!ious 5ears 5ears s (013,) On others #ain on redemption of mutual fund units Sale of spent chemicals 6rofit on sale of fixed assets net o5alt5 income from subsidiar5 :orei4n exchan4e 4ain net <iscellaneous income

H

0

/01,./

.231*/,

(1/.

*21(*

*1,,, (10( /20 ,2100 .12(/ (13/, ((01*/2 /1/,0

/.1/3 21** (1.(, (,(1./0 **,1(/ *10/ HHH 21..*

1,150,20

1,230,/11

93

 

SHEDULES PROFITLOSS ACCOUNT FOR THE 7EAR ENDED 31ST MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6A7IC"%AS As At*(march,( As At*(march,( SCHEDULE 1. MATERIAL MATERIAL COSTS (a<Ne' ()&rea"e <!erea"e )& "'o Openin4 For$ @in pro4ress :inished 4ood Closin4 For$ in process :inished 4ood Ne' ()&rea"e < (*<Ra 4a'er)a" o&"%4e! Openin4 stoc$ of raw materials Add& purchases

%ess& closin4 stoc$ 

< "'ore" he4)a" "6are" a&! 6a)& 4a'er)a" o&"%4e! (!<6%rha"e" o$ 'ra!e! oo!"

(13/1/*3 /01.,

(12*122 2031(..

1(,/1*(

1*,12( *1/,)

(1,,/1.3. 3*1.2(

(13/1/*3 /01.,

(103/1(2 /10021//2

001. .10/,1.(

(,103.1,., 1,001..)

2103102 (103/1(2)

(13(1(*2

1(,/1*( *231,.)

/1/3.10/

10013/

(1,21,/

321,2

(1.21/ 11,215,10

1(3(1// /,51,52

94

 

SHEDULES PROFITLOSS ACCOUNT FOR THE 7EAR ENDED 31ST MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6A7IC"%AS As As At*(march,( At*(march,(* SCHEDULE 15 PERONAL COSTS

Salaries1 wa4es and bonus Contribution to pro!ident and other funds For$man Fo r$man and staff welfare expenses Amorti'ation of deferred stoc$ compensation cost

1(/01(03 (312.( 001(0* (/(12((

(120,1/2 /1/. (012/, (**1,3*

2,//,52

2,12,..2

95

 

SHEDULES PROFIT LOSS ACCOUNT FOR THE 7EAR ENDED 31ST  MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6A7IC"%AS As As At*(march,( At*(march,(* SCHEDULE 1 OPERATIN; OPERATIN; AND OTHER  EPENSES 6ower and fuel epairs and maintenance >uildin4s 6lant and machiner5 Others ent  ates and taxes Insurance 7ra!elin4 and con!e5ance Communication Ad!ertisements Commission on sales Carria4e out wards Other sellin4 expenses 6rintin4 and stationer5 Donations %e4al and professional >ad debts written off  6ro!ision for doubtful ad!ances 6ro!ision for doubtful debts Directors sittin4 fees Directors remuneration Auditors remuneration

>an$ char4es 9xchan4e loss 1net Sundr5 expenses

.3/1/0

/10*

301(,, 1/3 0,1(3 0(10,* *(1.., (0*120, *(31((0 /1./, **1,. ,12(0 0/31*0 1,,01((/ /,1/3( 301(/( 22,13 3123 (03123( (10,, *., *31*2( /12.

1*3* *.12 (/21. 2/1**/ ./1//. (2310, ,0123 201**. *013/. (/01// 33102 (1.*10,0 ..13*0 2,1,*0 2/1020 31*0 ((130* (1/. *2, 2*1(.0 /12,

*01//* HH *22*3

*1,(. (,*1.3 2.*(

/,1//,2

5,200,3

96

 

SHEDULES PROFIT LOSS ACCOUNT FOR THE 7EAR ENDED 31ST  MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6A7IC"%AS As As At*(march,(* At*(march,( SCHEDULE 1/ :FINANCE CHAR;ES Interest on forei4n currenc5 loan notes issued on ac?uisition of Drredd5Js Drredd5Js laboratories 9")limited Interest on pac$in4 credit loan Other finance char4es

HH

**

*(/1*/. (2(103 ./,2

(3.133 */1( 21.,2.1

SHEDULES PROFIT LOSS ACCOUNT FOR THE 7EAR ENDED 31ST  MARCH 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6A7IC"%AS As As At*(march,( At*(march,(* SCHEDULE 1: INCOME TAE TAES S C%rre&' 'ae"

Domestic taxes <A7 credit entitlement entitlem ent De$erre! 'ae" Domestic taxes Fr)&e *e&e$)' 'a

(130103( H

301(/ ((1,/)

0,1,*0

*(013.

201/.

2/130.

1,,.

52,.0/

97

 

CASH FROM OPERATION $or 'he +ear e&!e! 31"' 4arh 201. (All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6A7IC"%A *(S7 <arch ,( *(S7 <arch ,(*

(*12./1.3

12*3122

(1**.1,,0 1(3 3123 /20)

(1((*1**3 (1.,. 31*0 (1.(,)

(/(12((

(**1,3*

(.(1.*0) ----31,20

21(0 (/1* (3.1,,,

3,1//*) --3012/ .12(/) (10,, (03123( 15,./3,10.

2/0123) 0) (1( **1(/) (1/. ((130* 3,3/5,2

12(/1*(

(120/10*

Increase Increase in in in!entories loans B ad!ances Increase in current liabilities B pro!isions

1/2/ 2/*1*( +*01/2)

(1*01/2, 321((3 +(1/*1(,)

Cash 4enerate from operations Le"":- Income tax paid Ca"h $ro4 o6era')o&"

10,11,.3 (1(/(10,

1,005,13 ,/1((

,3/,.

//,/2/

6rofit before taxation A!!:-No& o6era')& e6e&"e" Depreciation and amorti'ation 6ro!ision for wealth tax >ad debts written off Income from redemption of mutual funds units Amorti'ation of deferred stoc$ compensation expense1 net "n reali'ed forei4n exchan4e 4ain)loss %oss on sale of lon4 term in!estment1 net 6ro!ision for decline in the !alue of lon4 term in!estments Interest income Di!ided income :inance char4e 6rofit and sale of fixed assets net 6ro!ision for doubtful debt 6ro!ision for doubtful ad!ances

Le"":- No& o6era')& )&o4e Increase in sundr5 debtors

98

 

CASH FLO STATEMENT STATEMENT $or 'he +ear e&!e! 31"' 4arh 201. All amounts in Indian rupees thousands1 except share data and where otherwise stated) 6A7IC"%A *(S7 <  <A AC8 ,( *(S7 <AC8 ,(* /10(313 SOURCES OF CASH 21.,01.3( Openin4 balance 3*12*/ (,1,01.3( 6roceed from issue of share

capital net of issue of expenses Le"":-epa5ment of lon4 term  barrowin4 Le"":- epa5ment of short term  barrowin4 6roceed from short term  barrowin4 Le"":- Interest paid Le"":- Di!idend paid includin4 di!idend tax) Cash from operation   APPLICATIONS OF CASH Cash in hand >alance with ban$    In current AC   In deposit AC   In 99:C current AC In unclaimed di!idend AC   In unclaimed fractional share  pa5 order AC AC   In mar4in mone5 6urchase of fixed assets Le"":- 6roceeds from sale of fixed assets 6urchase of in!estment Le"":- proceeds form sale of in!estment %oan and ad!ances 4i!en to subsidiaries Eoint !entures B associates Le"":- Interest recei!ed Le"":-Di!idend recei!ed 9ffected exchan4e 4i!en on cash on cash e?ui!alences

01//

/1(0*

31,3(1/.0 (1(31.,, 0*12(/ *3103

313,,1/.0 (1,1/ (001,30 (21*/2 *21*2/

1001.(0

302133 (.12*1//2

.1/

01*** (013, 21.1*2( ,1(/. (1((, 220

(1.2(1/3 *1/,13

1,.( (1/*1,3 2/*133

3.103( **(1/20

(,1,,1/ (1(, .131/00

.1,.2

*10(*133

2001. ---

(*1.2(1,*.

/10*310/ (/12(*1/

3010 (*1,301. 23*1(/, (12, 222 (12( *1//1*,0 /,12*3

-312*31(,*)

-.1(02) 3100* (/12(*1/

3,.1,/3 0

21.,,1,02 (1(/.1/,

13.1./*

*1,/1*2( -1023) (.12*1//

99

 

A&a+")" a&! )&'er6re'a')o& Ca"h $o "'a'e4e&' (2013-201.<



Cash from operation of the compan5 amount is s /1((1(



7he purchase of fixed assets amounts is s 12(/130 12(/ 130



7hee decre 7h decreas asin in4 4 of unsec unsecur ured ed loans loans 7hen 7hen th thee de decr crea ease se of ca cash sh so it is an application of cash



7he income tax is paid1 but the decreases of cash a!ailable for business And hence it is an application of cash c ash



In cash from operations the net profit durin4 the 5ear amount is s(*12./1.3

FINDIN;S AND SU;ESSTIONS

100

 

( 9!en throw throw the the compan5 compan5 ha!e 4ood profit profitabili abilit5 t5 the compan5 compan5 shows shows concentratin4 on operatin4 expenses to decrease in profitabilit5 Compared to last 5ear it is decreased  7he compan5 compan5 should should raise its its e?uit5 e?uit5 share capital capital to to fit and to compan5 compan5 with with 4enerall5 accepted norms * 7he curr current ent ratio ratio of of the the compa compan5 n5 is 3:1 which is moderate It needs to be further  impro!ed  7he compan5 compan5 should should $eep its in!ento in!entor5 r5 at optimum optimum le!els le!els 7rade 7rade credito creditors rs should should also be $ept at minimum that is to sa5 that trade creditors should be paid and the compan5 should a!ail cash discount on account of prompt pa5ment which helps in impro!in4 the profitabilit5 and maintainin41 the current ratio at a rate hi4her then the present . 7he wor$in4 wor$in4 capital capital is better better11 the excess excess of wor$in4 wor$in4 capital capital con!erted con!erted in to to  purchase of fixed assets

CONCLUSIONS

101

 

( >5 the obser!at obser!ation ion we can sa5 that that the profit profit before before tax tax is decreasin4 decreasin4 in in this 5ear1 5ear1 ie the profit before tax pre!ious 5ear ,( is (*12./1.31and in the present 5ear ,(. is .1/(1,3  It can be concluded concluded from from the cash cash flow statem statement ent that the the compan5 compan5 should rise1 rise1 the lon4 term funds risin4 b5 share capital * 7he o!erall o!erall financi financial al position position of the Dr Dr redd5J redd5Jss labs %td %td is satis satisfacto factor5 r5 and needs needs to be impro!ed further in the future  7he debt e?uit5 e?uit5 ratio ratio decreased1 decreased1 ie ie b5 the obser!ation obser!ation we we can sa5 the compan5 compan5 is in a position to pa5 all the debts . 7he wor$in4 wor$in4 capital capital increased1 increased1 the the excess of of wor$in4 wor$in4 capital capital is a con!erted con!erted in to the purchase of fixed assets

BIBLIO;RAPH7

F)&a&)a 4a&ae4e&' - Khan - Lain

102

 

F)&a&)a 4a&ae4e&' G I< 6ande5 F)&a&)a 4a&ae4e&' - 6rasanna Chandra

 Annual reports of Dredd5Js Dredd5Js laboratories %td for the 5ear ,(*-,( and an d ,(-,(. Internal reports of Dredd5Js Dredd5Js %td wwwdrredd5Jscom www5ahoocom

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