1

INDEX

S.NO CONTENTS PAGE NO.

1. Dr.Reddy’s Company History 10-12

2. Dr.Reddy’s Statistics 13-14

3. Dr.Reddy’s Logo 15-16

4. Dr.Reddy’s Tie-ups & Annual

Turnover

17-18

5. Dr.Reddy’s Organization Structure

& Managemant

19-22

6.Dr.Reddy’s Financial Statements:

Profit and Loss Accounts

Balance Sheets

23-33

7. Dr.Reddy’s Ratio Analysis 34-48

8. Conclusion 49

9. Bibliography 50-51

2

DR.REDDY’S

COMPANY

HISTORY

3

HISTORY:

Dr. Reddy's Laboratories Ltd. is one of India's leading pharmaceutical companies with

global ambitions. The company has departed from the Indian pharmaceutical market

mainstream of copying patented drugs to pursue the development of its own--patentable--

molecules. As such, the company has already achieved success with a number of

promising anti-diabetic molecules. At the same time, Dr. Reddy's is pursuing a share of

the lucrative, but highly competitive, U.S. generics market, including the higher-margin

"branded generic" market. Dr. Reddy's operates through several strategic business units,

including: Branded Finished Dosages; Generic Finished Dosages; Bulk Actives; Custom

Chemicals; Biotechnology; Diagnostics; Critical Care; and Discovery Research. A leader

in its domestic market, the company is also active on the international scene, which

accounted for 64 percent of the company's total sales of Rs 18 billion ($392 million) in

2003. North America contributed 32 percent of sales, while Russia added 28 percent. The

rest of the company's international revenues were generated through the Asian, African,

and South American markets. Dr. Reddy's is led by founder and Chairman Dr. Anji

Reddy and CEO (and Reddy's son-in-law) G.V. Prasad. Dr. Reddy's Laboratories was the

first Asian pharmaceutical company, excluding Japan, to list on the New York Stock

Exchange.

Bulk Actives to Generics in the 1980s:

In 1970, the Indian government, then led by Indira Ghandi, abrogated laws respecting

international pharmaceutical patents. The move, meant to reduce the cost of providing

healthcare to India's large and exceedingly poor population, had the effect of

supercharging the country's pharmaceutical sector. With a long history in process

chemistry, and a large and highly educated pool of scientists, the sector quickly became

experts at reverse-engineering, and then copying, the drugs developed by the world's

large multinationals.

4

The new industry quickly became one of the world's most energetic markets--by the

1990s, there were more than 20,000 companies operating in India's pharmaceuticals

industry. Indian producers were able to produce drugs and their components for a fraction

of the cost of their Western counterparts, and quickly found an enormous demand

throughout the developing world. Yet the highly competitive domestic market, as well as

the slender margins available from the copied--many would call them pirated--drugs

forced the Indian companies to develop highly cost-effective manufacturing and

marketing models.

Reddy remained with IDPL into the early 1970s. The change of law and the rise of new

opportunities in the pharmaceutical industry, however, encouraged him to set up his own

business, and in the mid-1970s, Reddy founded a company for producing and selling bulk

actives--the basic ingredients of drug compounds--to pharmaceutical manufacturers.

Reddy's clientele soon featured a host of national and multinational companies, such as

Burroughs Welcome and others.

In the early 1980s, however, Reddy sought to aim higher and establish himself as a

manufacturer of finished products. In 1984, Reddy founded Dr. Reddy's Laboratories,

using $40,000 of his own, backed by a bank loan for $120,000. Reddy jumped into the

market of producing copies, taking advantage of the 1970 law. As he told Forbes: "We

are products of that. But for that, we wouldn't be here. It was good for the people of

India, and it was good for this company."

The company achieved another crucial milestone in 1987 when it gained U.S. FDA

approval for its ibuprofen formulation. That approval, which was coupled with the all-

important FDA certification of its factory, marked the start of the company's international

formulations exports.

Risking on Research in the 1990s

By the early 1990s, Reddy's, like its Indian counterparts, boasted a wide range of

"copied" drugs in its portfolio. International sales were also becoming an increasingly

important part of the company's total revenues, a trend boosted by the company's entry

5

into the Russian market in 1991. That country later grew into one of the company's

primary export markets.

Reddy's shift initially met with skepticism from the Indian community. As Reddy told the

Financial Times: "I made a statement in Bangalore in 1993. I said: 'Don't think that

because we don't have millions of dollars we cannot invent new drugs. Don't shy away

from this.' But nobody had the conviction that an Indian company could discover

anything."

Nonetheless, for its research and development effort, Reddy's adopted a standard practice

among even the largest multinationals, that of developing "analogue" preparations of

existing drugs. By slightly altering the composition of a molecule or preparation, Reddy

would be able to present a new drug, which was sufficiently different chemically to

achieve a separate patent.

The shift into research represented only one prong of Dr. Reddy's ambitions. In its

determination to become a player in the global market, the company moved to end

production of illegal copies and instead shift its operations to the manufacture of--legal--

generic drugs. In 1994, the company placed a rights issue of $48 million in order to

construct a new facility dedicated to producing generic drugs capable of meeting the

legislative requirements of Western markets. The company also opened a U.S. subsidiary

in New Jersey that year.

By 1995, Reddy's initial research and development efforts had already paid off, as the

company filed its first patent application for a new and promising anti-diabetes

formulation. The company successfully completed laboratory testing on the drug, an

insulin sensitizer dubbed balaglitazone by 1997. Yet, lacking the funds to engage in its

own clinical testing, the company placed the patent up for grabs, and licensed it to Novo

Nordisk in 1997. This marked a first for an Indian-developed drug. The following year,

Novo Nordisk acquired the license for Dr. Reddy's second insulin sensitizer, ragaglitazar.

Going Global in the 21th Century

6

The year 1997 marked a new era for Dr. Reddy's. In that year, the U.S. FDA adopted new

rules, designed to encourage the growth of the generic drugs market in the United States,

which provided a six-month exclusivity period for the first company to gain approval to

market newly available drugs in a generic form. Dr. Reddy's decided to get in on the

action--as an estimated $60 billion of drugs was expected to outgrow their patents over

the next ten years--and in 1997 the company filed an abbreviated new drug application

(ANDA, used for registering a drug in its generic formula) for a generic version of the

popular anti-ulcer medication Zantac.

Buoyed by its early success, Dr. Reddy's moved to expand its operations at the turn of the

century. In 1999, the company made a new acquisition, buying up American Remedies

Limited, based in Chennai, boosting its formulations capacity. That year, also, the

company set up a research and development subsidiary, Reddy US Therapeutics, in

Atlanta, Georgia, placing part of its drug discovery effort closer to the U.S. market.

In 2000, the company made another important acquisition, this time of Cheminor Drugs

Limited, which enabled Dr. Reddy's to claim the number three spot among Indian

pharmaceutical companies. That year, the company launched the commercial distribution

of its first generics in the United States. Back home, the company's research efforts had

paid off with the filing of an Investigational New Drug Application for an anti-cancer

molecule developed in the company's labs.

Dr. Reddy's global ambitions now took it to the New York Stock Exchange, where the

company listed its stock in 2001, becoming the first Asian pharmaceutical company

outside of Japan to do so. The company clearly revealed its ambitions, as Reddy told

Business Week: "We want to be a truly innovative company discovering and marketing

drugs the world over." That year, the company scored a new success in its research

activities, licensing a second-generation anti-diabetic molecule to Novartis in a deal

worth some $55 million. Meanwhile, on the generics front, the company was lifted when

its application for a 40mg generic version of the popular anti-depressive Prozac was

awarded a 180-day exclusivity period. That period generated some $56 million--nearly all

profit--for the company.

7

The year 2002 also marked the company's first overseas acquisition, when it paid £9

million to acquire the United Kingdom's BMS Laboratories Ltd. and its marketing and

distribution subsidiary Meridian Healthcare Ltd. That purchase enabled the company to

expand into the U.K.--and ultimately European--generics market.

At the end of 2002, Dr. Reddy's scored a new victory in the U.S. market, when it

successfully defeated lawsuits lobbied by Pfizer to prevent the Indian company's

marketing of its own variant of the pharmaceutical giant's Novasc. The company then

began preparations to introduce its version of the drug in 2003. Yet the new compound

was expected to mark a new step for the company, as it became determined to enter the

higher-margin branded generics category.

Dr. Reddy's backed this change in strategy with a new portfolio of drugs, including the

filing of an ANDA for fexofenadine HCI (better known as Allegra, from Aventis) in

April 2003. In July of that year, the company scored a new victory when it was granted

tentative FDA approval to develop and market generic versions of the Bristol Myers

Squibb drug Serzone. Dr. Reddy's appeared well on its way to achieving its goal of

becoming a global pharmaceutical company.

Principal Subsidiaries: Aurantis Farmaceutica Ltda (Brazil; 50%); Aurigene Discovery

Technologies Inc. (U.S.A.); Aurigene Discovery Technologies Limited; Cheminor Drugs

Limited; Compact Electric Limited; Dr. Reddy's Exports Limited (22%); Dr. Reddy's

Farmaceutica Do Brazil Ltda.; Dr. Reddy's Laboratories (EU) Limited (U.K.); Dr.

Reddy's Laboratories (Proprietary) (South Africa); Dr. Reddy's Laboratories (UK)

Limited; Dr. Reddy's Laboratories Inc. (U.S.A.); DRL Investments Limited India;

Kunshan Rotam Reddy Pharmaceutical Co. Limited (China; 51%); OOO JV Reddy

Biomed Limited (Russia); Pathnet India Private Limited (49%); Reddy Antilles N.V.

(Antilles); Reddy Cheminor S.A. (France); Reddy Netherlands B.V.; Reddy

Pharmaceuticals Hong Kong Limited; Reddy Pharmaceuticals Singapore; Reddy US

Therapeutics Inc.; Zenovus Biotech Limited. `

8

Principal Competitors: RPG Enterprises; GlaxoSmithKline Consumer Healthcare Ltd.;

East India Pharmaceutical Works Ltd.; Cipla Ltd.; Concept Pharmaceuticals Ltd.;

Khandelwal Laboratories Ltd.; Dabur India Ltd.

DR.REDDY’S

STATISTICS

9

STATISTICS:

Public Company

Incorporated: 1984

Employees: 5,796

Sales: Rs 18.01 billion ($391.8 million) (2003)

Stock Exchanges: Bombay New York

Ticker Symbol: RDY

NAIC: 325412 Pharmaceutical Preparation Manufacturing

Address:

7-1-27, Ameerpet

Hyderabad, Andhra Pradesh 500 016

India

Telephone: 91-40-373-1946

Fax: 91-40-373-1955

http://www.drreddys.com

10

DR . REDDY’S

LOGO

11

COMPANY LOGOS:

New logo:

Old logo:

12

DR.REDDY’S

TIE-UPS

&

ANNUAL

TURNOVER

13

NATCO PHARMA, DR REDDY’S IN CANCER DRUG TIE-UP:

16 April 2009,

Mumbai: Drug maker Natco Pharma Ltd said on Wednesday it has entered into an

agreement with Dr Reddy’s Laboratories Ltd to jointly develop and sell generic cancer

products.

Dr Reddy’s will pay an undisclosed amount upfront for securing the rights to sell the

products and for capacities to make the drugs, Natco said in a statement to the stock

exchange, adding the firms also have a profit-sharing agreement in place.

The deal covers oral and injectible drugs, including paclitaxel, the generic form of

Abraxis Bioscience’s breats cancer drug Abraxane.

Natco will exclusively supply the drugs to Dr Reddy’s, which will sell them globally, it

said. The deal could be expanded to include more products, Natco added.

Natco shares ended up 8.9% at Rs71.30 in a firm Mumbai market.

RECENT TURNOVER OF THE COMPANY:

Hyderabad, May 18, 2009:

(IANS) City-based drug major Dr Reddy’s Laboratories Monday reported 89 percent

jump in net profits to Rs.850 crore ($167 million) in 2008-09 from Rs.450 crore the year

before.

The total income of the company grew 39 percent to Rs.6,940 crore last fiscal from

Rs.5,000 crore in 2007-08, the company said in a regulatory filing.

Dr Reddy’s, which booked a forex loss of Rs.63.4 crore for the fiscal, owed its growth to

the successful launch of the generic version of GlaxoSmithKline’s Imitrex in November

2008. The drug is used to treat migraines.

14

DR.REDDY’S

ORGANISATION

STRUCTURE

&

MANAGEMENT

15

ORGANIZATION STRUCTURE AND MANAGEMENT:

Board of Directors:

Dr Reddy’s Board of Directors comprises eminent individuals from diverse fields. The

Board acts with autonomy and independence in exercising strategic supervision,

discharging its fiduciary responsibilities, and in ensuring that the management observes

the highest standards of ethics, transparency and disclosure.

Our directors are experts in the diverse fields of medicine, chemistry and medical

research human resource development, business strategy, finance, and economics. They

review all significant business decisions, including strategic and regulatory matters.

Every member of the Board, including the non-executive directors, has full access to any

information related to our company.

Committees appointed by the Board focus on specific areas, take decisions within the

authority delegated to them and make specific recommendations to the Board on matters

in their areas or purview.

Whole time directors:

1. Dr. Anji Reddy,

Chairman.

2. G V Prasad,

Executive Vice Chairman and Chief Executive Officer.

3. Satish Reddy,

Managing Director & Chief Operating Officer.

Committees of the Board:

Committees appointed by the Board focus on specific areas and take informed decisions

within the framework of delegated authority, and make specific recommendations to the

Board on matters in their areas or purview. All decisions and recommendations of the

committees are placed before the Board for information or for approval.

16

We have six Board-level Committees, namely

The Audit Committee

The Compensation Committee

The Governance Committee

The Shareholders' Grievance Committee

The Investment Committee

The Management Committee

The members of the Committees of Board are as under:

Audit Committee:

Dr. Omkar Goswami (Chairman)

Kalpana Morparia

Ravi Bhoothalingam .

Management Committee:

Satish Reddy (Chairman)

G V Prasad

Ravi Bhoothalingam

Compensation Committee:

Ravi Bhoothalingam (Chairman)

Kalpana Morparia

Dr. JP Moreau.

Investment Committee :

G V Prasad (Chairman)

Ravi Bhoothalingam

Satish Reddy.

17

Governance Committee :

Anupam Puri (Chairman)

Dr. Omkar Goswami.

Shareholders' Grievance Committee:

Ravi Bhoothalingam (Chairman)

G V Prasad

Satish Reddy.

Management Team:

The Management Council is the top tier of our company's management structure.

The management of Dr. Reddy's has developed and implemented policies, procedures

and practices that attempt to translate our company's vision, mission and purpose into

reality. The management also identifies, measures, monitors and controls the risks factors

in the business and ensures safe, sound and efficient operation.

The Management Council meets every quarter under the chairmanship of the CEO.

18

DR.REDDY’S

FINANCIAL

STATEMENTS

19

20

FINANCIAL STATEMENTS:

Businesses report information in the form of financial statements issued on a periodic

basis. GAAP requires the following four financial statements:

Balance Sheet - statement of financial position at a given point in time.

Income Statement - revenues minus expenses for a given time period ending at a

specified date.

Statement of Owner's Equity - also known as Statement of Retained Earnings or

Equity Statement.

Statement of Cash Flows - summarizes sources and uses of cash; indicates

whether enough cash is available to carry on routine operations.

Balance Sheet:

The balance sheet is based on the following fundamental accounting model:

Assets  =  Liabilities  +  Equity

Assets can be classed as either current assets or fixed assets. Current assets include cash,

accounts receivable, marketable securities, notes receivable, inventory, and prepaid assets

such as prepaid insurance. Fixed assets include land, buildings, and equipment. Such

assets are recorded at historical cost, which often is much lower than the market value.

Liabilities represent the portion of a firm's assets that are owed to creditors. Liabilities

can be classed as short-term liabilities (current) and long-term (non-current) liabilities.

Current liabilities include accounts payable, notes payable, interest payable, wages

payable, and taxes payable. Long-term liabilities include mortgages payable and bonds

payable.

Equity is referred to as owner's equity in a sole proprietorship or a partnership, and

stockholders' equity or shareholders' equity in a corporation. The equity owners of a

21

business are residual claimants, having a right to what remains only after the creditors

have been paid.

Income Statement:

The income statement presents the results of the entity's operations during a period of

time, such as one year. The simplest equation to describe income is:

Net Income  =  Revenue  -  Expenses

Revenue refers to inflows from the delivery or manufacture of a product or from the

rendering of a service. Expenses are outflows incurred to produce revenue.

Income from operations can be separated from other forms of income. In this case, the

income can be described by:

Net Income  =  Revenue  -  Expenses  +  Gains  -  Losses

where gains refer to items such as capital gains, and losses refer to capital losses, losses

from natural disasters, etc.

Cash Flow Statement:

The nature of accrual accounting is such that a company may be profitable but

nonetheless experience a shortfall in cash. The statement of cash flows is useful in

evaluating a company's ability to pay its bills. For a given period, the cash flow statement

provides the following information:

Sources of cash

Uses of cash

Change in cash balance

The information used to construct the cash flow statement comes from the beginning and

ending balance sheets for the period and from the income statement for the period.

22

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.3.2005

Particulars Amount (Rs.)

IncomeSales Turnover 1,625.6Excise Duty 76.80Net Sales 1,548.76Other Income -8.41Stock Adjustments 29.62Total Income 1,569.97ExpenditureRaw Materials 574.04Power & Fuel Cost 43.21Employee Cost 178.66Other Manufacturing Expenses 47.43Selling and Admin Expenses 546.35Miscellaneous Expenses 25.48Preoperative Exp Capitalised 0.00Total Expenses 1,415.17Operating Profit 163.21PBDIT 154.80Interest 12.73PBDT 142.07Depreciation 92.46Other Written Off 5.23Profit Before Tax 44.38Extra-ordinary items 0.00PBT (Post Extra-ord Items) 44.38Tax -21.10Reported Net Profit 65.46Total Value Addition 841.14Preference Dividend 0.00Equity Dividend 38.26Corporate Dividend Tax 5.37Per share data (annualised)Shares in issue (lakhs) 765.19Earning Per Share (Rs) 8.55Equity Dividend (%) 100.00Book Value (Rs) 271.05

23

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.3.2006

Particulars Amount (Rs.)

IncomeSales Turnover 2,101.97Excise Duty 98.71Net Sales 2,003.26Other Income 95.98Stock Adjustments 36.72Total Income 2,135.96ExpenditureRaw Materials 792.87Power & Fuel Cost 48.23Employee Cost 205.85Other Manufacturing Expenses 74.95Selling and Admin Expenses 567.59Miscellaneous Expenses 33.42Preoperative Exp Capitalised 0.00Total Expenses 1,722.91Operating Profit 317.07PBDIT 413.05Interest 24.63PBDT 388.42Depreciation 111.33Other Written Off 13.31Profit Before Tax 263.78Extra-ordinary items -0.01PBT (Post Extra-ord Items) 263.77Tax 52.64Reported Net Profit 211.12Total Value Addition 930.04Preference Dividend 0.00Equity Dividend 38.35Corporate Dividend Tax 5.38Per share data (annualised)Shares in issue (lakhs) 766.95Earning Per Share (Rs) 27.53Equity Dividend (%) 100.00

24

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.3.2007

ParticularsAmount (Rs.)

IncomeSales Turnover 3,872.92Excise Duty 89.66Net Sales 3,783.26Other Income 233.95Stock Adjustments 23.23

Total Income 4,040.44

ExpenditureRaw Materials 1,144.82Power & Fuel Cost 57.83Employee Cost 299.04Other Manufacturing Expenses 155.63Selling and Admin Expenses 777.06Miscellaneous Expenses 44.76Preoperative Exp Capitalised 0.00Total Expenses 2,479.14Operating Profit 1,327.35PBDIT 1,561.30

Interest 51.96

PBDT 1,509.34Depreciation 133.50Other Written Off 18.16Profit Before Tax 1,357.68Extra-ordinary items -0.02PBT (Post Extra-ord Items) 1,357.66Tax 188.99Reported Net Profit 1,176.86Total Value Addition 1,334.32Preference Dividend 0.00Equity Dividend 62.97

Corporate Dividend Tax 10.70

Per share data (annualised)

Shares in issue (lakhs) 1,679.12

Earning Per Share (Rs) 70.09

Equity Dividend (%) 75.00

25

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.3.2008

ParticularsAmount

(Rs.)IncomeSales Turnover 3,428.40Excise Duty 84.51Net Sales 3,343.89Other Income 197.29Stock Adjustments 93.87Total Income 3,635.05ExpenditureRaw Materials 1,347.33Power & Fuel Cost 77.12Employee Cost 366.28Other Manufacturing Expenses 130.35Selling and Admin Expenses 896.54Miscellaneous Expenses 37.44Preoperative Exp Capitalised 0.00Total Expenses 2,855.06Operating Profit 582.70PBDIT 779.99Interest 14.69PBDT 765.30Depreciation 161.99Other Written Off 20.71Profit Before Tax 582.60Extra-ordinary items -0.06PBT (Post Extra-ord Items) 582.54Tax 108.88Reported Net Profit 475.22Total Value Addition 1,507.73Preference Dividend 0.00Equity Dividend 63.06Corporate Dividend Tax 10.72Per share data (annualised)Shares in issue (lakhs) 1,681.73Earning Per Share (Rs) 28.26Equity Dividend (%) 75.00Book Value (Rs) 286.12

26

Balance Sheet of Dr.Reddy’s Laboratoriesas on 31.3.05

Liabilities Amount (Rs.)

Total Share Capital 38.26Equity Share Capital 38.26Share Application Money 0.00Preference Share Capital 0.00Reserves 2,035.82Revaluation Reserves 0.00Networth 2,074.08Secured Loans 3.27Unsecured Loans 269.96Total Debt 273.23Total Liabilities 2,347.31

AssetsGross Block 1,004.22Less: Accum. Depreciation 441.68Net Block 562.54Capital Work in Progress 60.13Investments 358.46Inventories 303.81Sundry Debtors 417.64Cash and Bank Balance 41.09

Total Current Assets 762.54

Loans and Advances 387.70

Fixed Deposits 850.64

Total CA, Loans & Advances 2,000.88

Deffered Credit 0.00

Current Liabilities 451.50

Provisions 183.18

Total CL & Provisions 634.68

Net Current Assets 1,366.20

Miscellaneous Expenses 0.00

Total Assets 2,347.33

Contingent Liabilities 189.19

Book Value (Rs) 271.05

Balance Sheet of Dr.Reddy’s Laboratories as on 31.3.06

27

Liabilities Amount (Rs.)

Total Share Capital 38.35

Equity Share Capital 38.35

Share Application Money 0.00

Preference Share Capital 0.00

Reserves 2,223.79

Revaluation Reserves 0.00

Networth 2,262.14

Secured Loans 145.13

Unsecured Loans 778.74

Total Debt 923.87

Total Liabilities 3,186.01

AssetsGross Block 1,052.90

Less: Accum. Depreciation 491.08

Net Block 561.82

Capital Work in Progress 112.92

Investments 911.36

Inventories 443.10

Sundry Debtors 581.22

Cash and Bank Balance 25.50

Total Current Assets 1,049.82

Loans and Advances 723.61

Fixed Deposits 625.44

Total CA, Loans & Advances 2,398.87

Deferred Credit 0.00

Current Liabilities 624.25

Provisions 174.70

Total CL & Provisions 798.95

Net Current Assets 1,599.92

Miscellaneous Expenses 0.00

Total Assets 3,186.02

Contingent Liabilities 2,409.27

Book Value (Rs) 294.95

Balance Sheet of Dr.Reddy’s Laboratories as on 31.3.07

Liabilities Amount (Rs.)

28

Total Share Capital 83.96Equity Share Capital 83.96Share Application Money 0.00Preference Share Capital 0.00Reserves 4,289.40Revaluation Reserves 0.00Networth 4,373.36Secured Loans 1.92Unsecured Loans 327.98Total Debt 329.90Total Liabilities 4,703.26AssetsGross Block 1,291.19Less: Accum. Depreciation 609.15Net Block 682.04Capital Work in Progress 280.61Investments 966.99Inventories 487.58Sundry Debtors 1,055.70Cash and Bank Balance 148.60Total Current Assets 1,691.88Loans and Advances 1,028.56Fixed Deposits 1,308.11Total CA, Loans & Advances 4,028.55Deffered Credit 0.00Current Liabilities 731.96Provisions 522.97Total CL & Provisions 1,254.93Net Current Assets 2,773.62Miscellaneous Expenses 0.00Total Assets 4,703.26Contingent Liabilities 1,896.92Book Value (Rs) 260.45

Balance Sheet of Dr.Reddy’s Laboratories as on 31.3.08

Liabilities Amount (Rs.)

Total Share Capital 84.09

29

Equity Share Capital 84.09Share Application Money 0.00Preference Share Capital 0.00Reserves 4,727.72Revaluation Reserves 0.00Networth 4,811.81Secured Loans 3.40Unsecured Loans 458.91Total Debt 462.31Total Liabilities 5,274.12

AssetsGross Block 1,750.21Less: Accum. Depreciation 762.80Net Block 987.41Capital Work in Progress 245.71Investments 2,080.71Inventories 640.93Sundry Debtors 897.71Cash and Bank Balance 67.19

Total Current Assets 1,605.83

Loans and Advances 1,272.02

Fixed Deposits 470.15

Total CA, Loans & Advances 3,348.00

Deffered Credit 0.00

Current Liabilities 786.36

Provisions 601.38

Total CL & Provisions 1,387.74

Net Current Assets 1,960.26

Miscellaneous Expenses 0.00

Total Assets 5,274.09

Contingent Liabilities 1,892.55

Book Value (Rs) 286.12

30

DR.REDDY’S

RATIO ANALYSIS

31

RATIO ANALYSIS:

When it comes to investing, analyzing financial statement information (also known as

quantitative analysis), is one of, if not the most important element in the fundamental

analysis process. At the same time, the massive amount of numbers in a company's

financial statements can be bewildering and intimidating to many investors. However,

through financial ratio analysis, you will be able to work with these numbers in an

organized fashion.

Financial ratio analysis is the calculation and comparison of ratios which are derived

from the information in a company's financial statements. The level and historical trends

of these ratios can be used to make inferences about a company's financial condition, its

operations and attractiveness as an investment.

Financial ratios are calculated from one or more pieces of information from a company's

financial statements. For example, the "gross margin" is the gross profit from operations

divided by the total sales or revenues of a company, expressed in percentage terms. In

isolation, a financial ratio is a useless piece of information. In context, however, a

financial ratio can give a financial analyst an excellent picture of a company's situation

and the trends that are developing.

A ratio gains utility by comparison to other data and standards. Taking our example, a

gross profit margin for a company of 25% is meaningless by itself. If we know that this

company's competitors have profit margins of 10%, we know that it is more profitable

than its industry peers which is quite favourable. If we also know that the historical trend

is upwards, for example has been increasing steadily for the last few years, this would

also be a favourable sign that management is implementing effective business policies

and strategies.

32

Among the dozens of financial ratios available, we've chosen 30 measurements that are

the most relevant to the investing process and organized them into six main categories as

per the following list:

1) Liquidity Measurement Ratios

- Current Ratio

- Quick Ratio

- Cash Ratio

- Cash Conversion Cycle

2) Profitability Indicator Ratios

- Profit Margin Analysis

- Effective Tax Rate

- Return On Assets

- Return On Equity

- Return On Capital Employed

3) Debt Ratios

- Overview Of Debt

- Debt Ratio

- Debt-Equity Ratio

- Capitalization Ratio

- Interest Coverage Ratio

- Cash Flow To Debt Ratio

33

4) Operating Performance Ratios

- Fixed-Asset Turnover

- Sales/Revenue Per Employee

- Operating Cycle

5) Cash Flow Indicator Ratios

- Operating Cash Flow/Sales Ratio

- Free Cash Flow/Operating Cash Ratio

- Cash Flow Coverage Ratio

- Dividend Payout Ratio

6) Investment Valuation Ratios

- Per Share Data

- Price/Book Value Ratio

- Price/Cash Flow Ratio

- Price/Earnings Ratio

- Price/Earnings To Growth Ratio

- Price/Sales Ratio

- Dividend Yield

- Enterprise Value Multiple

It is imperative to note the importance of the proper context for ratio analysis. Like

computer programming, financial ratio is governed by the GIGO law of "Garbage

In...Garbage Out!" A cross industry comparison of the leverage of stable utility

34

companies and cyclical mining companies would be worse than useless. Examining a

cyclical company's profitability ratios over less than a full commodity or business cycle

would fail to give an accurate long-term measure of profitability. Using historical data

independent of fundamental changes in a company's situation or prospects would predict

very little about future trends. For example, the historical ratios of a company that has

undergone a merger or had a substantive change in its technology or market position

would tell very little about the prospects for this company.

Credit analysts, those interpreting the financial ratios from the prospects of a lender,

focus on the "downside" risk since they gain none of the upside from an improvement in

operations. They pay great attention to liquidity and leverage ratios to ascertain a

company's financial risk. Equity analysts look more to the operational and profitability

ratios, to determine the future profits that will accrue to the shareholder.

Although financial ratio analysis is well-developed and the actual ratios are well-known,

practicing financial analysts often develop their own measures for particular industries

and even individual companies. Analysts will often differ drastically in their conclusions

from the same ratio analysis.

Let us now practically work on some of the important formulas in ratio analysis taking

values from the four year statements we have in the previous papers:

1) Liquidity Measurement Ratios

Liquidity ratios attempt to measure a company's ability to pay off its short-term debt

obligations. This is done by comparing a company's most liquid assets (or, those that can

be easily converted to cash), its short-term liabilities. In general, the greater the coverage

of liquid assets to short-term liabilities the better as it is a clear signal that a company can

pay its debts that are coming due in the near future and still fund its ongoing operations.

On the other hand, a company with a low coverage rate should raise a red flag for

investors as it may be a sign that the company will have difficulty meeting running its

operations, as well as meeting its obligations.

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A) Current Ratio:

The current ratio is a popular financial ratio used to test a company's liquidity (also

referred to as its current or working capital position) by deriving the proportion of current

assets available to cover current liabilities.

The current ratios of the consecutive four years are:

CURRENT RATIO

INTERPRETATION:

The current ratio is used extensively in financial reporting. However, while easy to

understand, it can be misleading in both a positive and negative sense - i.e., a high current

ratio is not necessarily good, and a low current ratio is not necessarily bad. Here the current

ratio is satisfactory in the years 2006,and good in the year 2008.

B) Quick Ratio:

Year Value

2005 3.15

2006 3.00

2007 3.21

2008 2.41

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The quick ratio - aka the quick assets ratio or the acid-test ratio - is a liquidity indicator that further refines the

current ratio by measuring the amount of the most liquid current assets there are to cover current liabilities.

The quick ratio is more conservative than the current ratio because it excludes inventory and other current

assets, which are more difficult to turn into cash. Therefore, a higher ratio means a more liquid current position.

The Quick Ratios of consecutive four years are:

Year Value

2005 2.59

2006 2.43

2007 2.81

2008 1.94

QUICK RATIO

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INTERPRETATION:

A higher ratio means a more liquid current position.it means the liquid current position of

the company is good in 2007 (2.81) and satisfactory in 2005,2006,2008. Current yr ratio

is very bad when it compared to the previous year.

2. PROFITABILITY INDICATOR RATIOS:

In the income statement, there are four levels of profit or profit margins - gross profit,

operating profit, pretax profit and net profit. The term "margin" can apply to the absolute

number for a given profit level and/or the number as a percentage of net sales/revenues.

Profit margin analysis uses the percentage calculation to provide a comprehensive

measure of a company's profitability on a historical basis (3-5 years) and in comparison

to peer companies and industry benchmarks.

Basically, it is the amount of profit (at the gross, operating, pretax or net income level)

generated by the company as a percent of the sales generated. The objective of margin

analysis is to detect consistency or positive/negative trends in a company's earnings.

Positive profit margin analysis translates into positive investment quality. To a large

degree, it is the quality, and growth, of a company's earnings that drive

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A) Gross Profit Ratio:

The Gross Profit Ratios of consecutive four years are:

Year value

2005 4.56

2006 10.26

2007 31.55

2008 12.58

GROSS PROFIT RATIO

INTERPRETATION:

This ratio ratio indicates the degree to which the selling price of good per unit or in whole

may decline without resulting in losses from operations to the firm. when we observe the

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above ratios there is an increase in the profit margin from 2005-2007,but a vast decline in

gross profit in the year 2008(12.58).

B) Net Profit Ratio:

The Net Profit Ratio of consecutive four year:

Year Values

2005 4.06

2006 10.08

2007 29.01

2008 13.57

NET PROFIT RATIO

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INTERPRETION:

An increase in the ratio over the previous year indicates improvement in the operational

efficiency of the business. The net profit ratio in 2007(29.01) is good and 2008(13.57) is

comparatively good when compared to 2005 and 2006.

C) Operating Profit Ratio:

The Operating Profit Ratios for the consecutive four years are:

Year Value

2005 10.53

2006 15.82

2007 35.08

2008 17.42

OPERATING PROFIT RATIO

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INTERPRETATION:

The operating profit margin is high in the firm it is considered as a good sign to the

company as its operating expenses are decreased. For the current year 2008 i.e(17.42) we

can say the company position is satisfactory as operating ratio is high than the gross

profit margin.

D)Return On Equity:

This ratio indicates how profitable a company is by comparing its net income to its

average shareholders' equity. The return on equity ratio (ROE) measures how much the

shareholders earned for their investment in the company. The higher the ratio percentage,

the more efficient management is in utilizing its equity base and the better return is to

investors.

The returns on equity shares for the consecutive four years are:

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Year Value

2005 3.15

2006 9.33

2007 26.90

2008 9.87

RETURN ON EQUITY RATIO

INTERPRETATION:

Generally, the higher this ratio, the more risky a creditor will perceive its exposure in

your business, making it correspondingly harder to obtain credit. It is the return on the

amount invested in the company in the form of equity share capital. The higher is the

return will be more interest for the investor to invest in the company. Hence the current

year return on equity(9.87) is satisfactory but not good when compared to the previous

year

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3) DEBT RATIOS:

The debt-equity ratio is another leverage ratio that compares a company's total liabilities

to its total shareholders' equity. This is a measurement of how much suppliers, lenders,

creditors and obligors have committed to the company versus what the shareholders have

committed.

To a large degree, the debt-equity ratio provides another vantage point on a company's

leverage position, in this case, comparing total liabilities to shareholders' equity, as

opposed to total assets in the debt ratio.

The Debt Equity Ratios of the four consecutive years are:

Year Value

2005 .13

2006 .40

2007 .07

2008 .09

DEBT EQUITY RATIO

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INTERPRETATION:

The ratio compares equity percentage with total debt of the company. A lower the

percentage means that a company is using less leverage and has a stronger equity

position. This creates a confidence in the investor to invest in the company. The current

year debt equity ratio(.09) is positively good.

CONCLUSION FOR RATIO ANALYSIS:

After the examination of the above ratios given above makes it clear that the overall

performance of the company is much poorer in the current year as compared to previous

year.

CONCLUSION:

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I here conclude my company analysis report by giving an idea on the project report in

brief.

My report consists the company history, statistics, and its organization structure and

management, which is the minimum information is to be noted. It also contains four year

consecutive income statements and balance sheets which are required for ratio analyzing.

It is really good and I am feeling great to read a public company. This helps me in

knowing an organization and its position in the business world which is compulsory to a

MBA student to know.

M.MADHU LATHA

(08211E0020)

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BIBLIOGRAPH

Y

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BIBLIOGRAPHY:

1. Financial Management, Dr. S N Maheshwari, Sulthan Chand & Sons.2007

2. Financial Accounting for Business Management, Ashish K. Battacharya.2007

3. Management Accounting, R P Trivedi, Pankaj Publications.2007

WEBSITES:

S.no Website

1. www.drreddys.com

2. www.investopedia.com

3. www.moneycontrol.com

4. Money.rediff.com

5. www.wikipedia.com

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