Form 6-K - Dr. Reddy's

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DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (in thousands, except share and per share data) 17. Employee stock incentive plans (continued) The terms and conditions of the grants made during the three months ended June 30, 2007 under the above plans are as follows: Number of Exercise Vesting Contractual instruments price Period life DRL 2002 Plan: - Category A — — — — - Category B DRL 2007 Plan: 386,060 Rs.5.00 1 to 4 years 5 years - Category A — — — — - Category B 206,818 Rs.5.00 1 to 4 years 5 years Aurigene ESOP Plan — — — — The Black-Scholes model inputs used in computing the fair value of the grants made during the three months ended June 30, 2008 and June 30, 2007 are as follows: June 30, 2008 June 30, 2007 Volatility 28.79% - 30.07% 28.40% - 32.70% Exercise price Rs. 5.00 Rs. 5.00 Expected term 1 to 4 years 1 to 4 years Discount rate — Bond equivalent yield rate 7.76%- 7.94% 7.80% - 8.20% Dividend yield rate 0.59% 0.75% The fair values of services received in return for share options granted to employees are measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured based on the Black-Scholes model. For the three months ended June 30, 2008 and June 30, 2007 Rs.34,022 and Rs.44,074, respectively, has been recorded as total employee share based expense under all the employee stock incentive plans. As of June 30, 2008, there is approximately Rs.418,634 of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of 3.36 years. 18. Employee benefit plans Gratuity benefits In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan (the “Gratuity Plan”) covering certain categories of employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement or termination of employment. The amount of payment is based on the respective employee’s last drawn salary and the years of employment with the Company. Effective September 1, 1999, the Company established the <strong>Dr</strong>. Reddy’s Laboratories Gratuity Fund (the “Gratuity Fund”). Liabilities in respect of the Gratuity Plan are determined by an actuarial valuation, based upon which the Company makes contributions to the Gratuity Fund. Trustees administer the contributions made to the Gratuity Fund. Amounts contributed to the Gratuity Fund are invested in specific securities as mandated by law and generally consist of federal and state government bonds and debt instruments of government-owned corporations. The components of net periodic benefit cost for the three months ended June 30, 2007 and June 30, 2008 are as follows: Three months ended June 30, 2008 2007 Service cost Rs.10,662 Rs. 8,695 Interest cost 6,708 5,551 Expected return on plan assets (5,309) (4,223) Net amount recognized Rs.12,061 Rs.10,023 37
18. Employee benefit plans (continued) DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (in thousands, except share and per share data) Details of total employee benefits obligation outstanding are provided below: As at June 30, 2008 March 31, 2008 Present value of unfunded obligations Rs. 3,479 Rs. 3,074 Present value of funded obligations 329,826 319,267 Fair value of plan assets (288,699) (289,076) Present value of net obligations 44,606 33,265 Unrecognized actuarial gains and losses (22,061) (22,781) Total employee benefits obligation outstanding Rs. 22,545 Rs. 10,484 Pension plan All employees of Industrias Quimicas Falcon de Mexico S.A. de C.V. (“Falcon”) are entitled to a pension plan in the form of a Defined Benefit Plan. The pension plan provides a payment to vested employees at retirement or termination of employment. This payment is based upon the employee’s integrated salary and is paid in the form of a monthly pension over a period of 20 years computed based upon a predefined formula. Liabilities in respect of the pension plan are determined by an actuarial valuation, based upon which the Company makes contributions to the pension plan fund. This fund is administered by a third party who is provided guidance by a technical committee formed by senior employees of Falcon. The components of net periodic benefit cost for the three months ended June 30, 2007 and June 30, 2008 are as follows: Three months ended June 30, 2008 2007 Service cost Rs. 3,700 Rs. 3,794 Interest cost 5,316 5,108 Expected return on plan assets (4,339) (5,332) Amortization of net transition obligation/(asset) 895 — Net amount recognized Rs. 5,572 Rs. 3,570 Details of the total employee benefits assets outstanding are provided below: As at June 30, 2008 March 31, 2008 Present value of unfunded obligations Rs. 55,648 Rs. 50,099 Present value of funded obligations 225,940 202,597 Fair value of plan assets (233,303) (212,838) Present value of net obligations 48,285 39,858 Unrecognized actuarial gains and losses (66,211) (61,040) Total employee benefits assets outstanding Rs. (17,926) Rs. (21,182) 19. Loans and borrowings Short term loans and borrowings The Company had lines of credit of Rs.17,659,000 as of June 30, 2008 and March 31, 2008 from its bankers for working capital requirements. These lines of credit are renewable annually. The Company has the right to draw upon these lines of credit based on its requirements. 38
Page 1 and 2: SECURITIES AND EXCHANGE COMMISSION
Page 3 and 4: TABLE OF CONTENTS ITEM 1. FINANCIAL
Page 5 and 6: DR. REDDY’S LABORATORIES LIMITED
Page 7 and 8: [Continued from table on page 6, fi
Page 9 and 10: 1. Reporting Entity DR. REDDY’S L
Page 30 and 31: 6. Business combinations DR. REDDY
Page 32 and 33: 7. Financial instruments DR. REDDY
Page 34 and 35: 11. Other intangible assets DR. RED
Page 40 and 41: 19. Loans and borrowings (continued
Page 42 and 43: 20. Related parties (continued) DR.
Page 44 and 45: 21. Contingencies (continued) DR. R
Page 46 and 47: ITEM 2. OPERATING AND FINANCIAL REV
Page 48 and 49: Statement on Changes in Profit Figu
Page 50 and 51: decrease was partially offset by an
Page 52 and 53: Income tax expense Income tax expen
Page 54 and 55: ITEM 4. RECENT DEVELOPMENTS In July
Page 56 and 57: In August 2008, Allgemeinen Ortskra
Page 58 and 59: SIGNATURES Pursuant to the requirem

Form 6-K - Dr. Reddy's

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