Good Health Can’t Wait.

Statutory Reports • Management Discussion and Analysis Annual Report 2014 - 15
PSAI BUSINESS
HIGHLIGHTS FY2015
` 25.46 bn
6%
REVENUE
17% of Dr. Reddy’s total revenues.
41%
REVENUE FROM EUROPE
MARGIN IMPROVEMENT
Despite relatively low top-line growth,
PSAI showed significant margin
improvement thanks to a better
product mix.
77
DMFs FILED GLOBALLY
Including 12 in the US and 16 in
Europe. Cumulatively, there were 735
DMF filings as of 31 March 2015.
imports. Despite uncertainties, we
continue to remain positive about our
therapy focused first to market approach
in this market.
PHARMACEUTICAL SERVICES AND
ACTIVE INGREDIENTS (PSAI)
Our PSAI segment includes active
pharmaceutical ingredients,
intermediates and contract research
services business.
The latest report from Transparency
Market Research on active
pharmaceutical ingredients (API)
suggests that the segment, currently
valued at approximately US$120 billion,
is anticipated to grow at a CAGR of
7% to reach US$180 billion by 2020.
There has also been an increase in the
influence of API players from emerging
economies, especially India and China,
which is expected to continue going
forward.
Although the life cycle of API emulates
that of a commodity business, we expect
our PSAI segment to show growth thanks
to our investments in newer technologies
and platforms of the future. We are also
pursuing a partnership model to enable
our customers to reach more markets
faster and efficiently by leveraging our
cost leadership and presence across
the globe. We continue to be one of the
significant API players in the industry,
supporting internally as well as global
customers such as Teva, Mylan, Sandoz,
Actavis among others. Over one-third of
our API sales in FY2015 were to the top
five generics players in the world.
FINANCIALS
CONSOLIDATED FINANCIALS
Table 2 below gives the abridged IFRS
consolidated financial performance of
Dr. Reddy’s for FY2015 compared to
FY2014.
REVENUES
Revenues increased by 12% to ` 148,189
million in FY2015. Revenue growth was
largely driven by our Global Generics
segment’s operations in the North
America, Venezuela and India. Adverse
exchange rates movement resulted in
lower reported revenues because of the
decrease in Indian rupee realization from
sales in euro and Russian rouble.
GROSS PROFIT
Gross profit rose by 13% to ` 85,403
million in FY2015. This translates to a
gross profit margin of 57.6% in FY2015
versus 57.4% in FY2014. The gross profit
margin for Global Generics was 65.2%;
and for the PSAI business, it was 22.4%.
After taking into account the impact
of the exchange rate fluctuations of
the Indian rupee against multiple
currencies in the markets in which
the Company operates, gross profits
from our Global Generics segment
decreased due to impact of changes
in our existing business mix (i.e., a fall
in the share of sales of higher gross
margin products and an increase in the
share of relatively lower gross margin
products). Factors that positively
affected gross profit margins for the
PSAI segment include an increase in
TABLE 2 CONSOLIDATED FINANCIAL PERFORMANCE ACCORDING TO IFRS
PARTICULARS FY2015 FY2014 GROWTH
` MILLION % W` MILLION %
%
Revenues 148,189 100% 132,170 100% 12%
Cost of revenues 62,786 42% 56,369 43% 11%
Gross profit 85,403 58% 75,801 57% 13%
Selling, general & administrative expenses 42,585 29% 38,783 29% 10%
Research and development expenses 17,449 12% 12,402 9% 41%
Other (income)/expense, net (917) (1%) (1,416) (1%) (35%)
Results from operating activities 26,286 18% 26,032 20% 1%
Net finance income 1,682 1% 400 0% 321%
Share of profit of equity accounted investees, net of income tax 195 0% 174 0% 12%
Profit before income tax 28,163 19% 26,606 20% 6%
Income tax (expense)/benefit (5,984) (4%) (5,094) (4%) 17%
Profit for the period 22,179 15% 21,512 16% 3%
Diluted EPS (` per share) 129.75 126.04 3%
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