Good Health Can’t Wait.

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Good Health Can’t Wait. Dr. Reddy’s Laboratories Limited NOTES TO FINANCIAL STATEMENTS (All amounts in Indian Rupees millions, except share data and where otherwise stated) 2.35: HEDGES OF FOREIGN CURRENCY RISK AND DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED) Hedges of recognised assets and liabilities Changes in the fair value of derivative contracts that economically hedge monetary assets and liabilities in foreign currencies and for which no hedge accounting is applied are recognised in the statement of profit and loss. The changes in fair value of such derivative contracts as well as the foreign exchange gains and losses relating to the monetary items are recognised as part of foreign exchange gains and losses. Outstanding derivative contracts The following are the details of the notional amount of outstanding foreign exchange derivative contracts: As at 31 March 2015 CATEGORY CURRENCY CROSS CURRENCY AMOUNTS IN MILLIONS BUY / SELL PURPOSE Forward Contract USD INR USD 176.9 Sell Hedging Forward Contract RUB INR RUB 300 Sell Hedging Option Contract USD INR USD 340 Sell Hedging As at 31 March 2014 CATEGORY CURRENCY CROSS CURRENCY AMOUNTS IN MILLIONS BUY / SELL PURPOSE Forward Contract USD INR USD 10 Buy Hedging Forward Contract USD INR USD 467.5 Sell Hedging Forward Contract EUR USD EUR 28 Sell Hedging Option Contract USD INR USD 235 Sell Hedging Derivative financial instruments valuation The Company enters into derivative financial instruments with various counterparties, principally financial institutions and banks. Derivatives valued using valuation techniques with market observable inputs are mainly interest rate swaps, foreign exchange forward contracts and foreign exchange option contracts. The most frequently applied valuation techniques include forward pricing, swap models and Black Scholes models (for option valuation), using present value calculations. The Company had a net asset of ` 279 as of 31 March 2015 as compared to a net asset of ` 432 as of 31 March 2014 towards these derivative financial instruments. Un-hedged significant foreign currency exposure The year-end significant foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below: Un-hedged significant foreign currency exposure as at 31st March 2015 CURRENCY FOREIGN CURRENCY IN MILLIONS EXCHANGE RATE ` MILLIONS RUB 639 1.07 684 EUR (34) 67.19 (2,284) ZAR 79 5.12 404 MXN 441 4.10 1,808 Un-hedged significant foreign currency exposure as at 31st March 2014 CURRENCY FOREIGN CURRENCY IN MILLIONS EXCHANGE RATE ` MILLIONS RUB 1,070 1.69 1,808 EUR (20) 82.69 (1,654) ZAR 84 5.65 475 MXN 114 4.59 523 152
Standalone Financial Statements Annual Report 2014 - 15 NOTES TO FINANCIAL STATEMENTS (All amounts in Indian Rupees millions, except share data and where otherwise stated) 2.36: FINANCIAL RISK MANAGEMENT The Company’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company’s primary risk management focus is to minimize potential adverse effects of market risk on its financial performance. The Company’s risk management assessment and policies and processes are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Board of Directors and the Audit Committee are responsible for overseeing Company’s financial risk assessment and management policies and processes. a. Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of customers to which the Company grants credit terms in the normal course of business. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables. Trade receivables The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country, in which the customer operates, also has an influence on credit risk assessment. As at 31 March 2015 and 31 March 2014, the maximum exposure to credit risk in relation to trade receivables is ` 47,117 and ` 45,615, respectively (net of allowances). Trade receivables include foreign currency receivables of USD 37 million (amounting to ` 2,333) from Dr. Reddy’s Venezuela, C.A., a wholly owned subsidiary of the Company in Venezuela. During the year ended 31 March 2015, the Venezuelan economy was adversely impacted by a significant decline in crude oil prices, leading to higher inflation rates and significantly delayed approvals for import payments. Further, Venezuelan government has introduced multi-tiered exchange rate system for different category of imports. As of 31 March 2015, the exchange rates in all the three aforesaid tiers are as follows: • CENCOEX preferential rate – 6.3 VEF per USD; • SICAD rate - 12 VEF per USD; and • SIMADI rate - approximately 193 VEF per USD. As per the existing laws in Venezuela, payments towards the importation of pharmaceutical products qualify for the CENCOEX preferential rate of 6.3 VEF per USD, and the Company’s Venezuelan subsidiary has been receiving approvals at such preferential rate. Accordingly, no provision for bad and doubtful debts is recorded during the year ended 31 March 2015 in respect of these outstanding trade receivables. Trade receivables that are neither past due nor impaired Trade receivables amounting to ` 28,687 and ` 30,673 were neither past due nor impaired as at 31 March2015 and 31 March 2014 respectively. Trade receivables that are past due but not impaired The Company’s credit period for customers generally ranges from 20 – 180 days. The age analysis of the trade receivables has been considered from the due date of the invoice. The ageing of trade receivables that are past due but not impaired is given below: PERIOD (IN DAYS) AS AT 31 MARCH 2015 AS AT 31 MARCH 2014 1-90 12,257 10,555 91-180 2,410 3,254 More than 180 3,763 1,133 Total 18,430 14,942 153
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ANNUAL REPORT 2014-15 Good Health C
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Our Brand We are in the business of
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Corporate Overview Annual Report 20
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Notice Annual Report 2014 - 15 NOTI
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E-Voting Annual Report 2014 - 15 IN
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Dr. Reddy’s Laboratories Limited
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The future belongs, not to those wh
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