~~Umang Vohra,~~Saumen Chakraborty,Chief Financial Officer,~~, +91-40-49002005, umangvohra@drreddys.com~~+91-40-49002004, saumenc@drreddys.com

8-2-337, Road No. 3, Banjara Hills, Hyderabad, ~~Andhra Pradesh~~Telangana 500 034, India

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

Securities registered or to be registered pursuant to Section 12(g) of the Act. None.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None.

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Note —– Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated ~~filer, or a smaller reporting company.~~filer. See the definitions of ~~“large accelerated filer,”~~ “accelerated filer” and ~~“smaller reporting company”~~“large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

In this annual report on Form 20-F, references to “$” or “U.S.$” or “dollars” or “U.S. dollars” are to the legal currency of the United States and references to “ “Rs.” or “rupees” or “Indian rupees” are to the legal currency of India. Our financial statements ~~are presented in Indian rupees and translated into U.S. dollars and~~ are prepared in accordance with International Financial Reporting Standards, or “IFRS”, as issued by the International Accounting Standards Board, or “IASB”. ~~References to “Indian GAAP” are to Indian Generally Accepted~~These standards include International Accounting ~~Principles~~Standards, or “IAS”, and ~~references to “U.S. GAAP” are to United States Generally Accepted Accounting Principles.~~their interpretations issued by the International Financial Reporting Interpretations Committee, or “IFRIC”, or its predecessor, the Standing Interpretations Committee, or “SIC”. References to a particular “fiscal” year are to our fiscal year ended March 31 of such year. References to our “ADSs” are to our American Depositary Shares.

References to “U.S.” or “United States” are to the United States of America, its territories and its possessions. References to “India” are to the Republic of India. References to “EU” are to the European Union. All references to “we,” “us”, “our”, “DRL”, “Dr. Reddy’s” or the “Company” shall mean Dr. Reddy’s Laboratories Limited and its subsidiaries. “Dr. Reddy’s” is a registered trademark of Dr. Reddy’s Laboratories Limited in India. Other trademarks or trade names used in this annual report on Form 20-F are trademarks registered in the name of Dr. Reddy’s Laboratories Limited or are pending before the respective trademark ~~registries.~~registries, unless otherwise specified. Market share data is based on information provided by IMS Health Inc. and its affiliates (“IMS Health”), a provider of market research to the pharmaceutical industry, unless otherwise stated.

Our financial statements are presented in Indian rupees and translated into U.S. dollars for the convenience of the reader. Except as otherwise stated in this report, all convenience translations from Indian rupees to U.S. dollars are ~~based on~~at the ~~noon buying~~certified foreign exchange rate ~~in the City~~ of ~~New York~~U.S.$1 = Rs.62.31, as published by Federal Reserve Board of Governors on March 31, ~~2012 for cable transfers in Indian rupees as certified for customs purposes by the Federal Reserve Bank of New York, which was 50.89 per U.S.$1.00.~~2015. No representation is made that the Indian rupee amounts have been, could have been or could be converted into U.S. dollars at such a rate or any other rate. ~~As of July 13, 2012 that rate was 55.10 per U.S.$1.00.~~

Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.

Information contained in our website, www.drreddys.com, is not part of this Annual Report and no portion of such information is incorporated herein.

IN ADDITION TO HISTORICAL INFORMATION, THIS ANNUAL REPORT CONTAINS CERTAIN FORWARD- LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE “EXCHANGE ACT”). THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED IN THE FORWARD- LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THE SECTIONS ENTITLED “RISK FACTORS” AND “OPERATING AND FINANCIAL REVIEW AND PROSPECTS” AND ELSEWHERE IN THIS REPORT. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH REFLECT MANAGEMENT’S ANALYSIS ONLY AS OF THE DATE HEREOF. IN ADDITION, READERS SHOULD CAREFULLY REVIEW THE OTHER INFORMATION IN THIS ANNUAL REPORT AND IN OUR PERIODIC REPORTS AND OTHER DOCUMENTS FILED AND/OR FURNISHED WITH THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) FROM TIME TO TIME.

You should read the selected consolidated financial data below in conjunction with our consolidated financial statements and the related notes, as well as the section titled “Operating and Financial Review and Prospects,” all of which are included elsewhere in this Annual Report onForm 20-F. The selected consolidated ~~statements of~~ income statement data for the ~~five~~ years ended March 31, 2015, 2014, 2013, 2012 ~~2011, 2010, 2009~~ and ~~2008~~2011 and the selected consolidated statement of financial position data as of March 31, 2015, 2014, 2013, 2012 ~~2011, 2010, 2009~~ and ~~2008~~2011 have been prepared and presented in accordance with IFRS as issued by the IASB, and have been derived from our audited consolidated financial statements and related notes included elsewhere herein. The selected consolidated financial data below has been presented for the five most recent fiscal years. Historical results are not necessarily indicative of future results.

For the convenience of the reader, our consolidated financial statements as of March 31, ~~2012~~2015 have been translated into U.S. dollars at the ~~noon buying~~certified foreign exchange rate ~~in New York City~~of U.S.$1 = Rs.62.31, as published by Federal Reserve Board of Governors on March 31, ~~2012 for cable transfers in Indian rupees, as certified for customs purposes by the Federal Reserve Bank of New York, of U.S.$1.00 = 50.89.~~2015. No representation is made that the Indian rupee amounts have been, could have been or could be converted into U.S. dollars at such a rate or any other rate.

The following table sets forth, for the fiscal years indicated, information concerning the number of Indian rupees for which one U.S. dollar could be exchanged based on the noon buying rate in the City of New York on business days during the period for cable transfers in Indian rupees as certified for customs purposes by the Federal Reserve Bank of New York. The column titled “Average” in the table below is the average of the daily noon buying rate on the last business day of each month during the year.

The following table sets forth the high and low exchange rates for the previous six months and is based on the noon buying rates in the City of New York on business days of each month during such period for cable transfers in Indian rupees as certified for customs purposes by the Federal Reserve Bank of New York.

On ~~July 13, 2012,~~June 12, 2015, the noon buying rate in the city of New York was ~~55.10~~ Rs.64.02 per U.S. dollar.

You should carefully consider all of the information set forth in this Form 20-F and the following risk factors that we face and that are faced by our industry. The risks below are not the only ones we face. Additional risks not currently known to us or that we presently deem immaterial may also affect our business operations. Our business, financial condition or results of operations could be materially or adversely affected by any of these risks. ThisForm 20-F also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face as described below and elsewhere. See “Forward-Looking Statements.”

~~Our success depends on our ability to successfully develop and commercialize new pharmaceutical products.~~

Our future results of operations depend, to a significant degree, upon our ability to successfully develop and commercialize additional products in our Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products segments. We must develop, test and manufacture generic products as well as prove that our generic products are bio-equivalent or bio-similar to their branded counterparts, either directly or in partnership with contract research organizations. The development and commercialization process, particularly with respect to proprietary products, is both time consuming and costly and involves a high degree of business risk. Our products currently under development, if and when fully developed and tested, may not perform as we expect or meet our standards of safety and efficacy. Necessary regulatory approvals may not be obtained in a timely manner, if at all, and we may not be able to successfully and profitably produce and market such products. Our approved products may not achieve expected levels of market acceptance.

If we fail to comply fully with government regulations or to maintain continuing regulatory oversight applicable to our research and development activities or regarding the manufacture of our products, or if a regulatory agency amends or withdraws existing approvals to market our products, it may delay or prevent us from developing or manufacturing our products.

Our research and development activities are heavily regulated. If we fail to comply fully with applicable regulations, then there could be a delay in the submission or approval of potential new products for marketing approval. In addition, the submission of an application to a regulatory authority does not guarantee that approvals required to market the product will be granted. Each authority may impose its own requirements and/or delay or refuse to grant approval, even when a product has already been approved in another country. In ~~the United States, as well as~~ many of the international markets into which we sell our products, including the United States, the approval process for a new product is complex, lengthy and expensive. The time taken to obtain approval varies by country but generally takes from six months to several years from the date of application. This approval process increases the cost to us of developing new products and increases the risk that we will not be able to successfully sell such new products.

Regulatory agencies may at any time reassess the safety and efficacy of our products based on new scientific knowledge or other factors. Such reassessments could result in the amendment or withdrawal of existing approvals to market our products, which in turn could result in a loss of revenue, and could serve as an inducement to bring lawsuits against us. In our ~~bio-generics~~bio-similars business, due to the intrinsic nature of biologics, our bio-similarity claims can always be contested by our competitors, the innovator company and/or the applicable regulators.

Additionally, governmental authorities, including among others the U.S. Food and Drug Administration (“U.S. FDA”) and the U.K. Medicines and Healthcare Products Regulatory Agency (“MHRA”), heavily regulate the manufacturing of our products, including manufacturing quality standards. Periodic audits are conducted on our manufacturing sites, and if the regulatory and quality standards and systems are not found adequate, it could result in an audit observation (on Form 483, if from the U.S. FDA), or a subsequent investigative letter which may require further corrective actions. More recently, a number of Indian generic pharmaceutical companies were issued import alerts and warning letters by the U.S. FDA. A significant proportion of our manufacturing base of active pharmaceutical ingredients and formulations plants servicing the United States and other markets of our Global Generics business are based out of India. There appears to be an increasing trend by the U.S. FDA and governmental regulators in other developed countries towards manufacturing site audits which are unannounced and conducted with unprecedented rigor and expectations. While our quality practices and quality management systems are conducted in a manner designed to satisfy these types of audits, we cannot guarantee that our efforts will prevent adverse outcomes such as audit observations, corrective action requests, warning letters or import bans. Also, unresolved audits may delay new product approvals or/and launches thereby impacting our future revenues and profitability.

Furthermore, we deal with numerous third party manufacturers and despite our strict oversight, any lapse in their quality practices and quality management systems could lead to such adverse outcomes in the event of an audit.

If we or our third party suppliers fail to comply fully with such regulations or to take corrective actions which are mandated, then there could be a government-enforced shutdown of our production facilities or ~~a Detention Without Physical Examination (“DWPE”)~~an import ban, ~~(e.g., see the description in Item 4.a. below of the June 2011 DWPE import ban for our manufacturing facility at Cuernavaca, Mexico),~~ which in turn could lead to product shortages that delay or prevent us from fulfilling our obligations to customers, or we could be subjected to government fines. For example, the U.S. FDA imposed an import ban on our manufacturing facility at Cuernavaca, Mexico from June 2011 through July 2012. Failure to comply fully with such regulations could also lead to a delay in the approval of our new products.

Further, while physicians may prescribe products for uses that are not described in the product’s labeling and that differ from those approved by the U.S. FDA or other similar regulatory authorities (an “off label” use), we are permitted to market our products only for the indications for which they have been approved. The U.S. FDA and other regulatory agencies actively enforce regulations prohibiting promotion of off-label uses, and significant liability can be imposed on manufacturers found to be engaged in off-label marketing violations, including fines in the tens or hundreds of millions of dollars, as well as criminal sanctions. If some of our products are prescribed off label, regulatory authorities such as the U.S. FDA could take enforcement actions if they conclude that we or our distributors have engaged in off label marketing.

An increasing portion of our portfolio ~~are~~is “biologic” products. Unlike traditional “small-molecule” drugs, biologic drugs cannot be manufactured synthetically, but typically must be produced from living plant or animal micro-organisms. As a result, the production of biologic drugs that meet all regulatory requirements is especially complex. Even slight deviations at any point in the production process may lead to batch failures or recalls. In addition, because the production process is based on living micro-organisms, the process could be affected by contaminants that could impact those micro-organisms. In such an event, production shutdowns and extensive and extended decontamination efforts may be required.

The regulatory requirements are still evolving in many developing markets where we sell or manufacture products, including our bio-similar products. In these markets, the regulatory requirements and the policies and opinions of regulators may at times be unclear, inconsistent or arbitrary due to absence of adequate precedents or for other reasons. As a result, there is increased risk of withholding or delay of regulatory approvals for new products or government-enforced shutdowns and other sanctions. And, in some cases, there is increased risk of our inadvertent non-compliance with such regulations.

Significant delays in the development of pathways for the registration and approval of such bio-similar products, or significant impediments that may be built into such pathways, could diminish the value of the investments we have made and will continue to make in our biotechnology capabilities. For example, in the healthcare reform legislation adopted in the United States, biosimilar products may not be approved for twelve years following approval of the branded biotechnology product. As a result, filings and launches of biosimilar products may be delayed significantly, adversely affecting our ability to develop a successful biosimilars business. The U.S. FDA is in the process of establishing regulations relating to biosimilars to implement the new healthcare legislation. These regulations, when ultimately adopted, could further complicate the process of bringing biosimilar products to market on a timely basis and could thus adversely affect our ability to develop a successful biosimilars business. While the U.S. FDA has issued guidelines, these guidelines contain features that could significantly prolong the biosimilar development process and significant ambiguity and questions remain, including for example questions regarding standards and criteria for biosimilars and interchangeables.

There has been a trend of increased regulatory review of over-the-counter products for safety and efficacy questions, which could potentially affect our over-the-counter products business.

~~Our over-the-counter products business sells over-the-counter medicines.~~ In recent years, significant questions have arisen regarding the safety, efficacy and potential for misuse of certain over-the-counter medicine products. Litigation, particularly in the United States, sometimes gives rise to these questions. As a result, health authorities around the world have begun to re-evaluate some important over-the-counter products, leading to restrictions on the sale of some of them and even the banning of certain products. For example, in 2010, the U.S. FDA undertook a review of one cough medicine ingredient to consider whether over-the-counter sales of the ingredient remained appropriate. While the U.S. FDA has not, to date, changed the ingredient’s status, further regulatory or legislative action may ~~follow, and litigation sometimes follows actions such as these, particularly in the United States.~~follow. Additional actions and litigation regarding over-the-counter products are possible in the future. If the U.S. FDA or another regulator were to review one or more of our over-the-counter products for such purposes, and if such review resulted in the U.S. FDA or another regulator charging us with violations applicable to such product, it could have a significant adverse effect on our sales of such over-the-counter products and, thus, our overall profitability.

We have operations in certain countries susceptible to political and economic instability that could lead to disruption or ~~economic instability.~~other adverse impacts upon such operations.

We ~~are a global pharmaceutical company. Although a significant proportion of our sales are in North America (the United States and Canada) and Western Europe, we~~ expect to derive an increasing portion of our sales ~~and future growth~~ from ~~other~~ regions such as Latin America, Russia and other countries of the former Soviet Union, Central Europe, Eastern Europe and South Africa, all of which may be more susceptible to political orand economic instability. For example, there has been severe political instability in Ukraine following civilian riots and political unrest which began in November 2013, destabilization of the Ukrainian President’s office in February 2014, and subsequent military action in the country operating under a temporary government. As a result of ongoing conflict in the region, the United States and the European Union have imposed sanctions on certain individuals and companies in Ukraine and Russia. Political instability in the region has combined with low worldwide oil prices that significantly devalued the Russian rouble and may continue to have a negative impact on the Russian economy. In addition, the Ukrainian hryvnia also experienced significant devaluation in 2014.

We monitor significant political, legal and economic developments in these regions and attempt to mitigate our exposure where possible. However, mitigation is not always possible, and our international operations could be adversely affected by political, legal and economic developments, such as changes in capital and exchange controls; expropriation and other restrictive government actions; intellectual property protection and remedy laws; trade regulations; procedures and actions affecting approval, production, pricing and marketing of, reimbursement for and access to our products; and intergovernmental disputes, including embargoes and/or military hostilities.

In addition, in many less-developed markets, we rely heavily on third-party distributors and other agents for the marketing and distribution of our products. Although our policies prohibit these third parties from making improper payments or otherwise engaging in improper activities to influence the procurement decisions of government agencies, physicians, pharmacies, hospitals or other health care professionals, we may not be able to effectively manage these third parties. Many of these third parties do not have internal compliance resources comparable to ours. Business activities in many of these markets have historically been more susceptible to corruption. If our efforts to screen third-party agents and detect cases of potential misconduct fail, we could be held responsible and subjected to civil and criminal penalties for the noncompliance of these third parties under applicable laws and regulations, including the U.S. Foreign Corrupt Practices Act, which may have a material adverse effect on our reputation and our business, financial condition or results of operations.

Significant portions of our manufacturing operations are conducted outside the markets in which our products are sold, and accordingly we often import a substantial number of products into such markets. We may, therefore, be denied access to our customers or suppliers or denied the ability to ship products from any of our sites as a result of closing of the borders of the countries in which we sell our products, or in which our operations are located, due to economic, legislative, political and military conditions, including hostilities and acts of terror, in such countries.

If we are sued by consumers for defects in our products, it could harm our reputation and thus our profits.

Our business inherently exposes us to potential product liability claims, and the severity and timing of such claims are unpredictable. Notwithstanding pre-clinical and clinical trials conducted during the development of potential products to determine the safety and efficacy of products for use by humans following approval by regulatory authorities, unanticipated side effects may become evident only when drugs and bio-similars are introduced into the marketplace. Due to this fact, our customers and participants in clinical trials may bring lawsuits against us for alleged product defects. In other instances, third parties may perform analyses of published clinical trial results which raise questions regarding the safety of pharmaceutical products, and which may be publicized by the media. Even if such reports are inaccurate or misleading, in whole or in part, they may nonetheless result in claims against us for alleged product defects.

~~Historically, in~~Under the ~~event a patient or group of patients suffered adverse events from taking the generic version of a branded drug~~current regulatory scheme in the United States, branded drug manufacturers can independently update product labeling through the “changes being effected” (“CBE”) supplement process, but a generic ~~pharmaceutical manufacturers relied on U.S. laws which~~manufacturer is only permitted ~~them~~ to ~~pass that liability back~~use the CBE process to ~~the innovator pharmaceutical company that originally brought~~update its label if the branded drug manufacturer changes its label first. This can prevent generic manufacturers from complying with state law warning requirements and, as a result, state product liability suits based on failure-to-warn and design defect claims against generics manufacturers have generally been determined to ~~market. However in recent years, courts across~~be preempted by Federal law.

Following the United States ~~have begun to hold the~~Supreme Court’s June 2013 ruling inMutual Pharmaceutical Co. v. Bartlett upholding such preemption and immunity of generic manufacturers, ~~directly responsible~~the U.S. FDA proposed a new rule in November 2013 that would allow generic manufacturers to independently update product labeling through the CBE supplement process. If the U.S. FDA’s proposed new rule is adopted, it may eliminate this preemption and increase our potential exposure to lawsuits relating to product safety, side effects and warnings on labels. This new potential exposure to lawsuits may also increase the risk that, in the future, we may not be able to obtain the type and amount of coverage we desire at an acceptable price and self-insurance may become the sole commercially reasonable means available for managing the ~~safety~~product liability risks of ~~their drugs~~our business.

Additionally, the proposed rule is likely to increase management and ~~have found them~~operating costs as a result of the need to ~~be strictly liable for injuries emanating from the use of generics.~~

~~Product~~set up database and software systems to monitor and track changes made, revisit internal processes regarding product label changes by regulatory teams, enable signal detection by pharmacovigilance and make changes in packaging and logistics involving our supply chain teams. Any failure to do this adequately can lead to an increase in our potential exposure to product liability claims ~~regardless~~and litigation.

The risk of ~~their merits or the ultimate success of the defense against them, are costly. Although we have obtained product liability coverage with respect~~exposure to products that we manufacture and the clinical trials that we conduct, if any product liability claim sustained against us is not covered by insurance or exceeds the policy limits, it could harm our business and financial condition.

~~This risk~~lawsuits is likely to increase as we develop our own ~~new-patented~~new patented products, or limited competition/complex products, such as injectables or biosimilars, in addition to making generic versions of drugs that have been in the market for some time. In addition, the existence or even threat of a major product liability claim could also damage our reputation and affect consumers’ views of our other products, thereby negatively affecting our business, financial condition and results of operations.

Product liability insurance coverage for pharmaceutical companies is becoming more expensive and, from time to time, the pharmaceutical industry has experienced difficulty in obtaining desired amounts of product liability insurance coverage. As a result, it is possible that, in the future, we may not be able to obtain the type and amount of coverage we desire at an acceptable price and self-insurance may become the sole commercially reasonable means available for managing the product liability risks of our business.

Reforms in the health care industry and the uncertainty associated with pharmaceutical pricing, reimbursement and related matters could adversely affect the marketing, pricing and demand for our products.

Our success ~~will depend~~depends, in part, on the extent to which government and health administration authorities, private health insurers and other third-party payors will pay for our products. Increasing expenditures for health care has been the subject of considerable public attention in almost every jurisdiction where we conduct business. Both private and governmental entities are seeking ways to reduce or contain health care costs by limiting both coverage and the level of reimbursement for new therapeutic products. These pressures are particularly strong given the lingering effects of the recent global economic and financial crisis, including the ongoing debt crisis in certain countries in Europe. In many countries in which we currently operate, including India, pharmaceutical prices are subject to regulation. The existence of government-imposed price controls and mandatory discounts and rebates can limit the revenues we earn from our products.

We expect these efforts to continue ~~in the year ended March 31, 2013~~ as healthcare payors around the ~~globe—~~globe, in particular government-controlled health authorities, insurance companies and managed care ~~organizations—~~organizations, step up initiatives to reduce the overall cost of healthcare.

India recently enacted the National Pharmaceuticals Pricing Policy, 2012. As a result, hundreds of drugs on India’s National List of Essential Medicines were identified and subjected to price controls in India. On May 15, 2013, the Department of Pharmaceuticals released Drugs (Price Control) Order, 2013 governing the price control mechanism for 348 drugs listed in the National List of Essential Medicines. As per this order, the prices of each of the drugs are determined based on the average of all drugs having an Indian market share of more than 1% by value. The individual drug price notifications for a majority of the products have been released by the National Pharmaceutical Pricing Authority. For the year ended March 31, 2014, based on these notifications, we were adversely impacted by approximately 4% (annualized impact) of our revenues from sales of all of our formulation products in India.

In the United States, numerous proposals that would affect changes in the health care system have been introduced in Congress and in some state ~~legislatures, including the enactment in December 2003 of expanded Medicare coverage for drugs, which became effective in January 2006.~~ legislatures.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively, the “PPACA”), were signed into law. The PPACA is one of the most significant healthcare reform measures in the United States in decades, and is expected to significantly impact the U.S. pharmaceutical industry. ~~We may see an increase in revenues by virtue of the PPACA’s anticipated extension of health insurance to tens of millions of previously uninsured Americans~~The PPACA imposes additional rebates, discounts and ~~the prohibitions on denials of health insurance coverage due to pre-existing diseases~~fees, mandates certain reporting and ~~on lifetime value limits on insurance policy coverage. However, the PPACA~~ contains various ~~provisions which~~other requirements that could adversely affect our business, ~~including~~as more particularly described under “Patient Protection and Affordable Care Act” in our Global Generics segment’s discussion of U.S. Government regulations below in Item 4.B. ‘Business overview’.

~~The PPACA imposes on pharmaceutical manufacturers a variety~~Departments of ~~additional rebates, discounts~~Health and ~~fees. Among other things,~~Human Services, Labor, and the Treasury jointly issued interim final regulations to implement the provisions of the PPACA ~~includes~~that prohibit the use of preexisting condition exclusions, eliminate lifetime and annual ~~non-deductible fees for entities that manufacture or import certain prescription drugs~~dollar limits on benefits, restrict contract rescissions, and biologics. The first year for which the fee applies is calendar year 2011, and the fee is due by September 30 of the following calendar year (i.e., 2012). This fee is calculated based upon each organization’s percentage share of total branded prescription drug and biologics sales to U.S. government programs (such as Medicare, Medicaid and Veterans’ Affairs and Public Health Service discount programs), and authorized generic products are generally treated as branded products. The manufacturer must have at least $5 million in sales of branded prescription drugs or biologics in order to be subject to the fee.provide patient protections.

In April 2012, we received an invoice from the United States Internal Revenue Service (the “IRS”) estimating our liability for the manufacturers’ fee for calendar year 2011 to be $92,696, based upon our calendar year 2010 sales of branded and authorized generic prescription drugs and biologics. We expect our sales of brand and authorized generic products during calendar year 2011 to be below the threshold limit of $5 million, and thus we may not be subject to the fee for calendar year 2012, based on our calendar year 2011 sales.

In addition, the PPACA changed the computations used to determine Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program by redefining the average manufacturer’s price (“AMP”), effective October 1, 2010, and by using 23.1% instead of 15% of AMP for most branded drugs and 13% instead of 11% of AMP for generic drugs, effective January 1, 2010. The PPACA also increased the number of healthcare entities eligible for discounts under the Public Health Service pharmaceutical pricing program.

The PPACA has pro-generic provisions that could increase competition in the generic pharmaceutical industry and therefore adversely impact our selling prices or costs and reduce our profit margins. Among other things, the PPACA creates an abbreviated pathway to U.S. FDA approval of “biosimilar” biological products and allows the first interchangeable bio-similar biological product 18 months of exclusivity, which could increase competition for our bio-generics business. Conversely, the PPACA has some anti-generic provisions that could adversely affect our bio-generics business, including provisions granting the innovator of a biological drug product 12 years of exclusive use before generic drugs can be approved based on being biosimilar.

The PPACA makes several important changes to the federal anti-kickback statute, false claims laws, and health care fraud statutes that may make it easier for the government or whistleblowers to pursue such fraud and abuse violations. In addition, the PPACA increases penalties for fraud and abuse violations. If our past, present or future operations are found to be in violation of any of the laws described above or other similar governmental regulations to which we are subject, we may be subject to the applicable penalty associated with the violation which could adversely affect our ability to operate our business and our financial results.

To further facilitate the government’s efforts to coordinate and develop comparative clinical effectiveness research, the PPACA establishes a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in such research. The manner in which the comparative research results would be used by third-party payors is uncertain.

On January 27, 2012, The Centers for Medicare and Medicaid Services (“CMS”) issued its long awaited proposed rule implementing the Medicaid pricing and reimbursement provisions of the PPACA and related legislation. CMS accepted comments on this proposed rule through April 2, 2012, and ~~we are waiting for~~issuance of the final rule by CMS ~~to issue a final rule.~~is pending.

On June 28, 2010 the Departments of Health and Human Services, Labor, and the Treasury jointly issued interim final regulations to implement the provisions of PPACA that prohibit the use of preexisting condition exclusions, eliminate lifetime and annual dollar limits on benefits, restrict contract rescissions, and provide patient protections.

~~During the year ended March 31, 2011, the PPACA’s changes to manufacturer rebates under the Medicaid Drug Rebate Program impacted our U.S. Generics business, but the impact was not material.~~

On June 28, 2012, the U.S. Supreme Court ruled on certain challenged provisions of the PPACA. The U.S. Supreme Court generally upheld the constitutionality of the PPACA, including its individual mandate that requires most Americans to buy health insurance starting in 2014, and ruled that the Anti-Injunction Act did not bar the ~~court~~Court from reviewing that PPACA provision. However, the U.S. Supreme Court struck down the PPACA’s provisions requiring each state to expand its Medicaid program or lose all federal Medicaid funds. The Court did not invalidate the PPACA’s expansion of Medicaid for states that voluntarily participate; it only held that a state’s entire Medicaid funding cannot be withheld due to its failure to participate in the expansion.

Pending full implementation of the PPACA, we are continuing to evaluate all potential scenarios surrounding its implementation and the corresponding impact on our financial condition, results of operations and cash flow.

In Germany, ~~an important market for us,~~ the government has introduced several healthcare reforms in order to control healthcare spending and promote the prescribing of generic drugs. As a result, the prices of generic pharmaceutical products in Germany have declined, impacting our revenues, and may further decline in the future. Furthermore, the shift to a tender (i.e., competitive bidding) based supply model in Germany has led to a significant decline in the prices for our products and impacted our market opportunities in that country. Similar developments may take place in our other key markets. We cannot predict the nature of the measures that may be adopted or their impact on the marketing, pricing and demand for our products.

The European Union enacted the European Falsified Medicines Directive (Directive 2011/62/EU) to reform the rules for importing into the European Union active substances for medicinal products for human use. As of January 2, 2013, all imported active substances must have been manufactured in compliance with standards of good manufacturing practices (“GMP”) at least equivalent to the GMP of the European Union. The manufacturing standards in the European Union for active substances are those of the “International Conference for Harmonisation” – ICH Q7. The provisions of the Directive are intended to reduce the risk of counterfeit medicines entering the supply chain.

During the fiscal year ended March 31, 2012, Russia introduced Federal Law # 323, titled “On the Foundations of Healthcare for Russian Citizens”. ~~Portions of this new law became effective on November 23, 2011 and the remainder became effective on January 1, 2012.~~ This ~~new~~ law imposes stringent restrictions on interactions between (i) healthcare professionals, pharmacists, healthcare management organizations, opinion leaders (both governmental and from the private sector) and certain other parties (collectively referred to as “healthcare decision makers”), and (ii) companies that produce or distribute drugs or medical equipment and any representatives or intermediaries acting on their behalf (collectively referred to as “medical product representatives”). Some of the key provisions of this law ~~are~~include prohibitions on:

one-on-one meetings and communications between healthcare decision makers and medical product representatives, except for participation in clinical trials, pharmacovigilance, group educational events and certain other limited exceptions;

the acceptance by a healthcare decision maker of compensation, gifts or entertainment paid by medical product representatives;

the agreement by a healthcare decision maker to prescribe or recommend drug products or medical equipment; or

the engagement by a healthcare decision maker in a “conflict of interest” transaction with a medical product representative, unless approved by regulators pursuant to certain specified procedures.

Although certain of the above prohibitions technically restrict only the actions of healthcare decision makers, liability for non-compliance with such restrictions nonetheless extends to both the healthcare decision maker and the medical product representative. ~~Penalties for non-compliance with this new law have not yet been clarified.~~

The Eurasian Economic Union (“EEU”), whose member states are Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan, officially started functioning on January 1, 2015. Among other things,, the year ended March 31, 2012, the Department of Pharmaceuticals under the ministry of Chemicals and Fertilizers in India proposed a revised national Pharmaceutical Pricing policy. The draft policy, as published, proposed to apply price controls to 348 drugs listed in the National List of Essential Medicines (as opposed to the 74 drugs currently subject to price control in India), and to revise the price control mechanism by benchmarking the prices based on market dynamics and eliminating the current cost-based model. Pending finalizationmember states of the ~~policy, its impact~~EEU signed an international agreement establishing common principles and rules of functioning of the market for medicines within the EEU, which agreement will be effective starting on ~~our business cannot be ascertained.~~January 1, 2016.

In ~~addition, governments~~March 2015, Russia enacted amendments to Article 61 of the Federal Law ‘On Circulation of Medicines’, which amendments create new rules for the registration, manufacture and quality control of medicines, including new rules for the calculation and registration of the maximum retail prices of vital and essential medicines established by the list of “Essential and Vital Drugs” (also known as the “ZhNVLS”).

In January 2015, the Russian government enacted the Priority Action Plan for sustainable economic and social stability development in 2015, which includes a number of impacts on the pharmaceutical industry.

Governments throughout the world heavily regulate the marketing of pharmaceutical products. Most countries also place restrictions on the manner and scope of permissible marketing to government agencies, physicians, pharmacies, hospitals and other health care professionals. In certain countries certain prescribed marketing codes or guidelines are required to be followed by the pharmaceutical companies. Although our company policies prohibit our employees and third party distributors from violating such regulations, we may not be able to ~~effectively~~completely prevent this, especially in markets that have historically been more susceptible to corruption. The effect of such regulations may be to limit the amount of revenue that we may be able to derive from a particular product. Moreover, if we or our third party distributors fail to comply fully with such regulations, then civil or criminal actions could be brought against us, which may have a material adverse effect on our reputation and our business, financial condition or results of operations.

The use of tender systems and other forms of price control could reduce prices for our products or reduce our market opportunities.

A number of markets in which we operate have implemented or may implement tender systems in an effort to lower prices. Under such tender systems, manufacturers submit bids which establish prices for generic pharmaceutical products. Upon winning the tender, the winning company will receive a preferential reimbursement for a period of time. The tender system often results in companies underbidding one another by proposing low pricing in order to win the tender.

For example, this has resulted in more than 90% of generic products currently sold in German retail outlets being supplied through contracts procured in competitive bidding tenders, thereby causing significant pressure on product margins.

Certain other countries may consider the implementation of a tender system or other forms of price controls. Even if a tender system is ultimately not implemented, the anticipation of such could result in price reductions. Failing to win tenders, or the implementation of similar systems or other forms of price controls in other markets leading to further price declines, could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or share price.

If we are unable to patent new products and processes or to protect our intellectual property rights or proprietary information, or if we infringe on the patents of others, our business may be materially and adversely impacted.

Our overall profitability depends, among other things, on our ability to continuously and timely introduce new generic as well as proprietary products. Our success ~~will depend,~~depends, in part, on our ability in the future to obtain patents, protect trade secrets, intellectual property rights and other proprietary information and operate without infringing on the proprietary rights of others. Our competitors may have filed patent applications, or hold issued patents, relating to products or processes that compete with those we are developing, or their patents may impair our ability to successfully develop and commercialize new products.

Our success with our proprietary products depends, in part, on our ability to protect our current and future innovative products and to defend our intellectual property rights. If we fail to adequately protect our intellectual property, competitors may manufacture and market products similar to ours. We have been issued patents covering our innovative products and processes and have filed, and expect to continue to file, patent applications seeking to protect our newly developed technologies and products in various countries, including the United States. Any existing or future patents issued to or licensed by us may not provide us with any competitive advantages for our products or may even be challenged, invalidated or circumvented by competitors. In addition, such patent rights may not prevent our competitors from developing, using or commercializing products that are similar or functionally equivalent to our products.

We also rely on trade secrets, unpatented proprietary know-how and continuing technological innovation that we seek to protect, in part by confidentiality agreements with licensees, suppliers, employees and consultants. It is possible that these agreements ~~will~~may be breached and we ~~will~~may not have adequate remedies for any such breach. Disputes may arise concerning the ownership of intellectual property or the applicability of confidentiality agreements. Furthermore, our trade secrets and proprietary technology may otherwise become known or be independently developed by our ~~competitors or~~competitors. Therefore, despite all of our information security systems and practices, we may still not be able to ~~maintain~~ensure the confidentiality of information relating to such products.

If pharmaceutical companies are successful in limiting the use of generics through their legislative, regulatory and other efforts, ~~our~~ sales of our generic products may ~~suffer.~~be adversely impacted.

Many pharmaceutical companies increasingly have used state and federal legislative and regulatory means to delay generic competition. These efforts have included:

pursuing new patents for existing products that may be granted just before the expiration of earlier patents, which could extend patent protection for additional years or otherwise delay the launch of generics;

introducing “next-generation” products prior to the expiration of market exclusivity for the reference product, which often materially reduces the demand for the generic or the reference product for which we seek regulatory approval;

obtaining extensions of market exclusivity by conducting clinical trials of brand drugs in pediatric populations or by other methods;

selling the brand product as an authorized generic, either by the brand company directly, through an affiliate or by a marketing partner;

using the Citizen Petition process to request amendments to U.S. FDA standards or otherwise delay generic drug approvals;

seeking changes to U.S. Pharmacopeia, an organization that publishes industry recognized compendia of drug standards;

attaching patent extension amendments to non-related federal legislation;

engaging in state-by-state initiatives to enact legislation that restricts the substitution of some generic drugs, which could have an impact on products that we are developing; and

seeking patents on methods of manufacturing certain active pharmaceutical ingredients.

If pharmaceutical companies or other third parties are successful in limiting the use of generic products through these or other means, our sales of generic products may ~~decline. If we experience~~decline, leading to a material ~~decline in generic product sales,~~adverse effect on our results of operations, financial condition and cash ~~flows will suffer.~~flows.

If ~~competitors~~sales of authorized generic products are ~~successful in limiting competition for~~restricted, our sales of certain authorized generic products ~~through their legislative, regulatory and litigation efforts, our sales of certain generic products~~ may suffer.

Recently, some U.S. generic pharmaceutical companies who obtained rights to market and distribute a generic alternative of a brand product (i.e., an “authorized generics” arrangement) under the brand manufacturer’s new drug application (“NDA”) have experienced challenges to their ability to distribute authorized generics during a competitors’ 180-day period of abbreviated new drug application (“ANDA”) exclusivity under the Hatch-Waxman Act. These challenges have come in the form of Citizen Petitions filed with the U.S. FDA, lawsuits alleging violation of the antitrust and consumer protection laws, and seeking legislative intervention. For example, in February 2011, legislation was introduced in both the U.S. Senate and the U.S. House of Representatives that would ~~prohibit~~have prohibited the marketing of authorized generics during the 180-day period of ANDA exclusivity under the Hatch-Waxman Act. If distribution of authorized generic versions of brand products is otherwise restricted or found unlawful, our results of operations, financial condition and cash flows could be materially adversely affected.

If we are unable to defend ourselves in patent challenges, we could be subject to injunctions preventing us from selling our products, ~~resulting in a decrease in revenues,~~ or we could be subject to substantial liabilities that ~~would lower~~could adversely affect our profits. Further, our patent settlement agreements with the innovators may face government scrutiny, exposing us to significant damages

There has been substantial patent related litigation in the pharmaceutical industry concerning the manufacture, use and sale of various products. In the normal course of business, we are regularly subject to lawsuits and the ultimate outcome of litigation could adversely affect our results of operations, financial condition and cash flow. Regardless of regulatory approval, lawsuits are periodically commenced against us with respect to alleged patent infringements by us, such suits often being triggered by our filing of an application for governmental approval, such as an ANDA. The expense of any such litigation and the resulting disruption to our business, whether or not we are successful, could harm our business. The uncertainties inherent in patent litigation make it difficult for us to predict the outcome of any such litigation.

If we are unsuccessful in defending ourselves against these suits, we could be subject to injunctions preventing us from selling our products, resulting in a decrease in revenues, or to damages, which may be substantial. An injunction or substantial damages resulting from these suits could adversely affect our consolidated financial position, results of operations or liquidity.

Further, we have been involved in various litigations involving challenges to the validity or enforceability of registered patents and therefore settling said patent litigations has been and is likely to continue to be an important part of our business. Parties to such settlement agreements in the U.S., including us, are required by law to file them with the Federal Trade Commission (“FTC”) and the Antitrust Division of the Department of Justice for review. The FTC has publicly stated that, in its view, some of the brand-generic settlement agreements violate the antitrust laws and has brought actions against some brand and generic companies that have entered into such agreements. For example, in May 2015, Teva Pharmaceutical Industries agreed to a $1.2 billion settlement with the FTC to resolves anti-competition charges over sales of Provigil, a sleep-disorder prescription drug. Accordingly, we may receive formal or informal requests from the FTC for information about a particular settlement agreement, and there is a risk that the FTC may commence an action against us alleging violations of the antitrust laws.

Such settlement agreements may further expose us to claims by purchasers of the products for unlawfully inhibiting competition.

Similarly, the European Commission (“EU Commission”) has placed European operations of several brand and generic companies, under intense scrutiny in connection with its inquiry into possible anticompetitive conditions in the European pharmaceutical sector. More generally, there is a risk that the increased scrutiny of the European pharmaceutical sector may lead to changes in the regulation of our business that would have an adverse impact on our results of operations in Europe.

If we elect to sell a generic product prior to the final resolution of outstanding patent litigation, we could be subject to liabilities for damages.

At times we seek approval to market generic products before the expiration of patents for those products, based upon our belief that such patents are invalid, unenforceable, or would not be infringed by our products. As a result, we are involved in patent litigation, the outcome of which could materially adversely affect our business. Based upon a complex analysis of a variety of legal and commercial factors, we may elect to market a generic product even though litigation is still pending. This could be before any court decision is rendered or while an appeal of a lower court decision is pending. To the extent we elect to proceed in this manner, if the final court decision is adverse to us, we could be required to cease the sale of the infringing products and face substantial liability for patent infringement. These damages may be significant as they may be measured by a royalty on our sales or by the profits lost by the patent owner and not by the profits we earned. Because of the discount pricing typically involved with generic pharmaceutical products, patented brand products generally realize a significantly higher profit margin than generic pharmaceutical products. In the case of a willful infringer, the definition of which is unclear, these damages may even be trebled.

~~For example, in April 2006, we launched, and continue to sell fexofenadine, the generic version of Allegra~~^®, despite the fact that litigation with the company that holds the patents for and sells this branded product is still ongoing. In Canada, we continue to sell olanzapine tablets (the generic version of Eli Lilly’s Zyprexa^® tablets) through a partnership with Pharmascience, Inc., despite the fact that Pharmascience has agreed to pay damages if Eli Lilly is successful in its olanzapine patent litigation against Novopharm, and our partnership arrangement with Pharmascience would require us to share a portion of any such damages obligation realized by Pharmascience.

Furthermore, there may be risks involved in entering into in-licensing arrangements for products, which are often conditioned upon the licensee’s sharing in the patent-related risks.

For business reasons, we continue to examine such product opportunities (i.e., involving non-expired patents) going forward and this could result in patent litigation, the outcomes of which may ~~impact~~have a material adverse effect on our ~~profitability.~~results of operations, financial condition and cash flows.

Research and development efforts invested in our differentiated formulations pipeline may not achieve expected results.

In our Proprietary Products segment, our business model focuses on building a pipeline in the therapeutic areas of neurology and dermatology. We must invest increasingly significant resources to develop differentiated products, both through our own efforts and through collaborations, in-licensing and acquisition of products from or with third parties. The development of differentiated products involves processes and expertise different from those used in the development of generic drugs, which increases the risks of failure. During each stage, we may encounter obstacles that delay the development process and increase expenses, leading to significant risks that we will not achieve our goals and may be forced to abandon a potential product in which we have invested substantial amounts of time and money. These obstacles may include: preclinical failures; difficulty enrolling patients in clinical trials; delays in completing formulation and other work needed to support an application for registration; adverse reactions or other safety concerns arising during clinical testing; insufficient clinical trial data to support the safety or efficacy of the product candidate; and failure to obtain, or delays in obtaining, the required regulatory approvals for the product candidate or the facilities in which it is manufactured.

Because of the amounts required to be invested in augmenting our differentiated products pipeline, in some cases we are reliant on partnerships and joint ventures with third parties, and consequently face the risk that some of these third parties may fail to perform their obligations, or fail to reach the levels of success that we are relying on to meet our revenue and profit goals. Accordingly, our investment in research and development of innovative products can involve significant costs with no assurances of future revenues or profits.

If we fail to comply with environmental laws and regulations, or face environmental litigation, our costs may increase or our revenues may decrease.

We may incur substantial costs complying with requirements of environmental laws and regulations. In addition, we may discover currently unknown environmental problems or conditions. In all countries where we have production facilities, we are subject to significant environmental laws and regulations that govern the discharge, emission, storage, handling and disposal of a variety of substances that may be used in or result from our operations. In the normal course of our business, we are exposed to risks relating to possible releases of hazardous substances into the environment, which could cause environmental or property damage or personal injuries, and that could require remediation of contaminated soil and groundwater, which could cause us to incur substantial remediation costs that could adversely affect our consolidated financial position, results of operations or liquidity.

If any of our plants or the operations of such plants are shut down, it may severely hamper our ability to supply our customers and we may continue to incur costs in complying with regulations, appealing any decision to close our facilities, maintaining production at our existing facilities and continuing to pay labor and other costs, which may continue even if the facility is closed. As a result, our overall operating expenses may increase and our profits may ~~decrease.~~decrease significantly.

We operate in a highly competitive and rapidly consolidating industry which may adversely affect our revenues and profits.

Our products face intense competition from products commercialized or under development by competitors in all of our business segments based in India and overseas. Many of our competitors have greater financial resources and marketing capabilities than we do. Our competitors may succeed in developing technologies and products that are more effective, more popular or cheaper than any we may develop or license, thus rendering our technologies and products obsolete or uncompetitive, which would harm our business and financial results.

In our proprietary products business, many of our competitors have greater experience than we do in clinical testing, human clinical trials, obtaining regulatory approvals and in ~~the~~ marketing and ~~sale~~selling of brand, innovative and consumer-oriented products. They may be able to respond more quickly to new or emerging market preferences or to devote greater resources to the development and marketing of new products and/or technologies than we can. As a result, any products and/or innovations that we develop may become obsolete or noncompetitive before we can recover the expenses incurred in connection with their development. In addition, for these product categories we need to emphasize to physicians, patients and third-party payors the benefits of our products relative to competing products that are often more familiar or otherwise ~~more well-established.~~better established. If competitors introduce new products or new variations on their existing products, our marketed products, even those protected by patents, may be replaced in the marketplace or we may be required to lower our prices.

In our generics business, to the extent that we succeed in being the first to market a generic version of a significant product, and particularly if we obtain the 180-day period of market exclusivity in the United States provided under the Hatch-Waxman Act of 1984, as amended, our sales and profit can be substantially increased in the period following the introduction of such product and prior to a competitor’s introduction of the equivalent product or the launch of an authorized generic. Prices of generic drugs typically decline, often dramatically, especially as additional generic pharmaceutical companies ~~(including low-cost generic manufacturers based in India and China)~~ receive approvals and enter the market for a given ~~product and competition intensifies.~~product. Consequently, our ability to sustain our sales and profitability of any product over time is dependent on both the number of new competitors for such product and the timing of their approvals.

The number of significant new generic products for which Hatch-Waxman exclusivity is available, and the size of those product opportunities, ~~varies significantly over time~~has decreased in recent years and may decrease in future years in comparison to those available in the past. Patent challenges have become more difficult in recent years. Additionally, we increasingly share the 180-day exclusivity period with other generic competitors, which diminishes the commercial value of the exclusivity.

Our generics business is also facing increasing competition from brand-name manufacturers who do not face any significant regulatory approvals or barriers to ~~entry~~enter into the generics market. These brand-name companies sell generic versions of their products to the market directly or by acquiring or forming strategic alliances with our competitor generic pharmaceutical companies or by granting them rights to sell “authorized generics.” Moreover, brand-name companies continually seek new ways to delay the introduction of generic products and decrease the impact of generic competition, such as filing new patents on drugs whose original patent protection is about to expire, developing patented controlled-release products, changing product claims and product labeling, or developing and marketing as over-the-counter products those branded products that are about to face generic competition.

Our competitors, which include major multinational corporations, are consolidating, and the strength of the combined companies could affect our competitive position in all of our business areas. Furthermore, if one of our competitors or their customers acquires any of our customers or suppliers, we may lose business from the customer or lose a supplier of a critical raw material. In addition, our increased focus on innovative and specialty pharmaceuticals requires much greater use of a direct sales force than does our core generic business. Our ability to realize significant revenues from direct marketing and sales activities depends on our ability to attract and retain qualified sales personnel. Competition for qualified sales personnel is intense. We may also need to enter into co-promotion, contract sales force or other such arrangements with third parties, for example, where our own direct sales force is not large enough or sufficiently well-aligned to achieve maximum penetration in the market. Any failure to attract or retain qualified sales personnel or to enter into third-party arrangements on favorable terms could prevent us from successfully maintaining current sales levels or commercializing new innovative and specialty products.

If we have difficulty in identifying candidates for or consummating acquisitions and strategic alliances, our competitiveness and our growth prospects may be harmed.

In order to enhance our business, we frequently seek to acquire or make strategic investments in complementary businesses or products, or to enter into strategic partnerships or alliances with third parties. It is possible that we may not identify suitable acquisition, strategic investment or strategic partnership candidates, or if we do identify suitable candidates, we may not complete those transactions on terms commercially acceptable to us. We compete with others to acquire companies, and we believe that this competition has intensified and may result in decreased availability or increased prices for suitable acquisition candidates. Even after we identify acquisition candidates and/or announce that we plan to acquire a company, we may ultimately fail to consummate the acquisition. For example, we may be unable to obtain necessary regulatory approvals, including the approval of antitrust regulatory bodies.

All acquisitions involve known and unknown risks that could adversely affect our future revenues and operating results. For example:

We may fail to successfully integrate our acquisitions in accordance with our business strategy.

The initial rationale for the acquisition may not remain viable due to a variety of factors, including unforeseen regulatory changes and market dynamics after the acquisition, and this may result in a significant delay and/or reduction in the profitability of the acquisition.

We may not be able to retain the skilled employees and experienced management that may be necessary to operate the businesses we acquire. If we cannot retain such personnel, we may not be able to locate or hire new skilled employees and experienced management to replace them.

We may purchase a company that has contingent liabilities that include, among others, known or unknown patent or product liability claims or environmental liability claims.

We may purchase companies located in jurisdictions where we do not have operations and as a result we may not be able to anticipate local regulations and the impact such regulations have on our business.

In addition, if we make one or more significant acquisitions in which the consideration includes equity shares or other securities, ~~equity interests in us held by holders of the~~our equity shares may be significantly diluted and may result in a ~~dilution~~reduction of earnings per equity share. If we make one or more significant acquisitions in which the consideration includes cash, we may be required to use a substantial portion of our available cash or incur a significant amount of debt or otherwise arrange additional funds to complete the acquisition, which may result in a decrease in our net income and a consequential reduction in our earnings per equity share. Also, an increasing proportion of our alliances begin with research and development. Our results of operations may suffer if existing joint venture or collaboration partners withdraw, or if these products are not timely developed, approved or successfully commercialized. We cannot guarantee the successful outcome of such efforts, nor that they will result in any intellectual property rights or products that inure to our benefit.

If, as we expand into new international markets, we fail to adequately understand and comply with the local laws and customs, these operations may incur losses or otherwise adversely affect our business and results of operations.

Currently, we operate our business in certain countries through subsidiaries, joint ventures and equity investees or through supply and marketing arrangements with our alliance partners. In those countries where we have limited experience in operating subsidiaries and joint ventures and in reviewing equity investees, we are subject to additional risks related to complying with a wide variety of national and local laws, including restrictions on the import and export of certain intermediates, drugs and technologies. There may also be multiple, and possibly overlapping, tax structures. In addition, we may face competition in certain countries from companies that may have more experience with operations in such countries. We may also face difficulties integrating new facilities in different countries into our existing operations, as well as integrating employees that we hire in different countries into our existing corporate culture. If we do not effectively manage our operations in these subsidiaries and joint ventures and review equity investees effectively, or if we fail to manage our alliances, we may lose money in these countries and it may adversely affect our business and results of operations.

If we improperly handle any of the dangerous materials used in our business and accidents result, we could face significant liabilities that would lower our profits.

We handle dangerous materials including explosive, toxic and combustible materials such as ~~sodium azide, acrolein and~~ acetyl chloride. If improperly handled or subjected to the wrong conditions, these materials could hurt our employees and other persons, cause damage to our properties and harm the environment. Also, increases in business and operations in our plants, and the consequent hiring of new employees, can pose increased safety hazards. Such hazards need to be addressed through training, industrial hygiene assessments and other safety measures and, if not carried out, can lead to industrial accidents. Any of the foregoing could subject us to significant litigation or adversely impact our other litigation matters then outstanding, which could lower our profits in the event we were found liable, and could also adversely impact our reputation. In a worst case scenario, this could also result in a government forced shutdown of our manufacturing plants, which in turn could lead to product shortages that delay or prevent us from fulfilling our obligations to customers and would harm our business and financial results.

If there is delay and/or failure in supplies of materials, services and finished goods from third parties or failure of finished goods from our key manufacturing sites, it may adversely affect our business and results of operations.

In some of our businesses, we rely on third parties for the timely supply of active pharmaceutical ingredients (“API”), specified raw materials, equipment, formulation or packaging services and maintenance services, and in some cases there could be a single source of supply. ~~For instance, we rely on third party manufacturers for a major part of the supply of finished dosages sold in Germany.~~ Although, we actively manage these third party relationships to ensure continuity of supplies and services on time and to our required specifications, events beyond our control could result in the complete or partial failure of supplies and services or in supplies and services not being delivered on time.

In the event that we experience a shortage in our supply of raw materials, we might be unable to fulfill all of the API needs of our Global Generics segment, which could result in a loss of production capacity for this segment. Moreover, we may continue to be dependent on vendors, strategic partners and alliance partners for supplies of some of our existing products and new generic launches. Any unanticipated capacity or supply related constraints affecting such vendors, strategic partners or alliance partners can adversely affect our business or results of operations. Our key generics manufacturing sites also may have capacity constraints and, at times, we may not be able to generate sufficient supplies of finished goods.

If any of the foregoing delays or prevents us from timely ~~delivering~~delivery of our products to our customers, our relationships with the adversely affected customers could be harmed and we could be subject to contractually imposed financial penalties and/or lawsuits, any of which may adversely affect our business or results of operations.

Fluctuations in exchange rates and interest rate movements may adversely affect our business and results of operations.

~~Our principal subsidiaries are located in the United States, the United Kingdom, Germany, Switzerland, Mexico and Russia, and each has significant local operations.~~ A significant portion of our revenues are in currencies other than the Indian rupee, especially the U.S. dollar, the Euro, the Russian rouble, Venezuelan bolivar and the U.K. pound sterling, while a significant portion of our costs are in Indian rupees. As a result, if the value of the Indian rupee appreciates relative to these other currencies, our revenues measured in Indian rupees may decrease and our financial performance may be adversely impacted. This also exposes us to additional risks in the event of devaluations, hyperinflation or restrictions on the conversion of foreign ~~currencies.~~currencies, such as the devaluation of the Venezuelan bolivar that occurred in February 2013.

During the year ended March 31, 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.

On February 12, 2015, the Venezuelan government launched an overhaul of the exchange rate system and introduced a new exchange rate mechanism. The Marginal Currency System (known as “SIMADI”) is the third mechanism in the new three-tier exchange rate regime and allows for legal trading of the Venezuelan bolivar (“VEF”) for foreign currency with fewer restrictions than other mechanisms in Venezuela (CENCOEX and SICAD). 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 U.S. dollar, and we have been receiving approvals at such preferential rate. As of March 31, 2015, our Venezuelan subsidiary had approximately U.S.$39 million payables to the parent company and our other subsidiaries towards the importation of pharmaceutical products. Although these payables are entitled to repayment at the CENCOEX preferential rate, if circumstances change such that a devaluation of the CENCOEX preferential rate occurs, or if payments towards the importation of pharmaceutical products no longer qualify for the CENCOEX preferential rate, it could result in a significant impact on our future revenues and results of operations.

Further, we may also be exposed to credit risks in some of the emerging markets from our customers on account of adverse economic conditions.

We use derivative financial instruments to manage some of our net exposure to currency exchange rate fluctuations in the major foreign currencies in which we operate. We do not use derivative financial instruments or other “hedging” techniques to cover all of our potential exposure. Therefore, we are subjected to exchange rate fluctuations that could significantly affect our financial results.

In the recent past and particularly since March 2013, the Indian rupee exchange rates as compared to the U.S. dollar have been highly volatile. In the year ended March 31, 2015, the Indian rupee depreciated by approximately 1.1% against the U.S. dollar. Such depreciation of the Indian rupee against the U.S. dollar has had positive benefits to our financial results. However, the Euro and Russian rouble depreciated by approximately 4.5% and 22.3%, respectively, against the Indian rupee during the year ended March 31, 2015. Such depreciation of foreign currencies has caused, and further depreciation in the future will cause, our foreign currency revenues as measured in Indian rupees to decrease, and thus adversely affect our financial results.

Our success depends on our ability to retain and attract key qualified personnel and, if we are not able to retain them or recruit additional qualified personnel, we may be unable to successfully develop our business.

We are highly dependent on the principal members of our management and scientific staff, the loss of whose services might significantly delay or prevent the achievement of our business or scientific objectives. In India, it is not our practice to enter into employment agreements with our executive officers and key employees that are as extensive as are generally used in the United States, and each of those executive officers and key employees may terminate their employment upon notice and without cause or good reason. Currently, we are not aware of any executive officer’s or key employee’s departure that has had, or planned departure that is expected to have, any material impact on our operations. Competition among pharmaceutical companies for qualified employees is intense, and the ability to retain and attract qualified individuals is critical to our success. There can be no assurance that we will be able to retain and attract such individuals currently or in the future on acceptable terms, or at all, and the failure to do so would have a material adverse effect on our business, financial condition and results of operations. In addition, we do not maintain “key person” life insurance on any officer, employee or consultant.

We have ~~grown at~~concentrations of sales to certain customers that increases our credit risks. Consolidation among distributors and pharmaceutical companies could increase this risk, and also adversely impact our business prospects.

In the United States, similar to other pharmaceutical companies, we sell our products through wholesale distributors and large retail chains in addition to hospitals, pharmacies and other groups. During the year ended March 31, 2015, our ten largest customers accounted for approximately 87% of our North America Global Generics segment’s revenues. We are exposed to a ~~very rapid pace. Our inability to properly manage~~concentration of credit risk in respect of these customers such that if one or ~~support~~more are affected by financial difficulty, it could materially and adversely affect our financial results. If the recent trend of consolidation among distributors continues, this ~~growth~~risk may increase.

Furthermore, the recent trend of consolidation among distributors and pharmaceutical companies, both innovator and generic companies, could have ~~a material~~an adverse ~~effect~~impact on our ~~business.~~business prospects as well as our customers’ choices and preferences. There has been increased concern by pharmaceutical companies and their investors and other stakeholders over geographic and customer concentration risks, as well as the implementation of counter-measures and risk mitigation strategies. Some of our key risk mitigation strategies, such as key account management and locking up customer relationships, are likely to be at risk from such consolidations. If our response to these changes is not adequate and timely, our growth prospects and business can be adversely impacted.

~~We have grown very rapidly~~Counterfeit versions of our products could harm our patients and reputation.

Our industry has been increasingly challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the ~~past few years, including growth through~~Internet. Third parties may illegally distribute and sell counterfeit versions of our ~~acquisitions~~products, which do not meet the rigorous manufacturing and testing standards that our products undergo. Counterfeit products are frequently unsafe or ineffective, and can be potentially life-threatening. Counterfeit medicines may contain harmful substances, the wrong dose of the API or no API at all. However, to distributors and patients, counterfeit products may be visually indistinguishable from the authentic version.

Reports of adverse reactions to counterfeit drugs or increased levels of counterfeiting could materially affect patient confidence in the authentic product, and harm the business of companies such as ours. Additionally, it is possible that adverse events caused by unsafe counterfeit products would mistakenly be attributed to the authentic product. In addition, there could be thefts of inventory at warehouses, plants or while in-transit, which are not properly stored and ~~brands. This growth has significantly increased demands on our processes, systems and people. We have been making additional investments~~which are sold through unauthorized channels. Public loss of confidence in personnel, systems and internal control processes to help manage our growth. ttracting, retaining and motivating key employees in various departments and locations to support our growth is critical to our business, and competition for these people can be intense.

To facilitate our growth, we are carrying out reorganizations and deploying initiatives to improve our focus on delivery, to build decisive competitive advantages or/and to build sustainable cost structures. There is also an increasing need to manage information and asset related security.

~~If we are unable to hire and retain qualified employees,~~the integrity of pharmaceutical products as a result of counterfeiting or ~~if we do not invest in systems and processes to manage and support our rapid growth, the failure to do so may~~theft could have a material adverse effect on our business, financial ~~condition~~position and results of ~~operations.~~

~~Fluctuations in our quarterly revenues, operating results~~operations and ~~cash flows may adversely affect~~could cause the ~~trading price of our shares and ADSs.~~

Our quarterly revenues, operating results and cash flows have fluctuated significantly in the past and may fluctuate substantially from quarter to quarter in the future. Such fluctuations result from a variety of factors, including but not limited to changes in demand for our products, timing of regulatory approvals and of launches of new products by us and our competitors (particularly where we obtain the 180-day period of market ~~exclusivity in the United States provided under the Hatch-Waxman Act of 1984), and timing of our retailers’ promotional programs. Such fluctuations may result in volatility in the price~~value of our equity shares and ~~our ADSs. In such an event, the trading price of our shares and~~ ADSs ~~may be adversely affected.~~

Significant disruptions of information technology systems or breaches of data security could adversely affect our business.

Our business is dependent upon increasingly complex and interdependent information technology systems, including Internet-based systems, to support business processes as well as internal and external communications. In addition, our businesses and operating models increasingly depend on outsourcing and collaboration, which requires exchanging data and information. The size and complexity and interconnectivity of our computer systems make them potentially vulnerable to breakdown, malicious intrusion and computer viruses. Any such disruption may result in the loss of key information and/or disruption of production and business processes, which could materially and adversely affect our business.

In addition, our systems are potentially vulnerable to data security breaches, whether by employees or others, that may expose sensitive data to unauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property, or could lead to the public exposure of personal information (including sensitive personal information) of our employees, clinical trial patients, customers and others. Such breaches of security could result in reputational damage and could otherwise have a material adverse effect on our business, financial condition and results of operations. Further, increasing use of information technology (“IT”) systems in manufacturing processes would require us to manage issues arising out of human error and/or sabotage.

In our pursuit of operational excellence, several change management initiatives across our organization are currently in progress, including but not limited to information technology automation in the areas of manufacturing, research and development, supply chain and shared services. During the year ended March 31, 2015, we initiated outsourcing of our IT hardware and applications in order to improve IT capability and performance and the initiative is currentlyin progress. Any failure to effectively manage such change initiatives or implement adequate controls in automation, security or availability of information technology systems can have material adverse effects on our business.

Increased outsourcing or use of cloud services for conducting our business requires highly secure controls to ensure adequate security of information, considering potential for sabotage as well as availability. Data integrity, confidentiality and data privacy requirements are increasingly concerning regulators, and are incorporated into legal contracts. While we have invested heavily in the protection of data and information technology to reduce these risks, there can be no assurance that our efforts or those of our third-party service providers would be sufficient to protect against data deterioration or loss in the event of a system malfunction, or prevent data from being stolen or corrupted in the event of a security breach. We currently do not have any insurance that could mitigate the impact from all such risks.

Increasing use of social media could give rise to liability or breaches of data security.

We and our business associates are increasingly relying on social media tools as a means of communications. To the extent that we seek as a company to use these tools as a means to communicate about our products or about the diseases our products are intended to treat, there are significant uncertainties as to either the rules that apply to such communications, or as to the interpretations that health authorities will apply to the rules that exist. As a result, despite our efforts to comply with applicable rules, there is a significant risk that our use of social media for such purposes may cause us to nonetheless be found in violation of them. In addition, because of the universal availability of social media tools, our associates may make use of them in ways that may not be sanctioned by us, and that may give rise to liability, or that could lead to the loss of trade secrets or other intellectual property, or could lead to the public exposure of personal information (including sensitive personal information) of our employees, clinical trial patients, customers and others. In either case, such uses of social media could have a material adverse effect on our business, financial condition and results of operations.

A relatively small group of products may represent a significant portion of our net revenues, gross profit or net earnings from time to time.

Sales of a limited number of products may represent a significant portion of our net revenues, gross profit and net earnings. If the volume or pricing of ~~our largest selling~~such products declines in the future, our business, financial position and results of operations could be materially adversely affected.

Compliance with new and changing corporate governance and public disclosure requirements adds uncertainty to our compliance policies and increases our costs of compliance.

Changing laws, regulations and standards relating to accounting, corporate governance and public disclosure, including the Sarbanes Oxley Act of 2002, new SEC regulations, New York Stock Exchange rules, provisions of India’s Companies Act 2013, Securities and Exchange Board of India rules and Indian stock market listing regulations, create uncertainty for our company. These new or changed laws, regulations and standards may lack specificity and are subject to varying interpretations. Their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions to such governance standards.

In particular, continuing compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal control over financial reporting requires the commitment of significant financial and managerial resources and our independent auditor’s independent assessment of the internal control over financial reporting. Further, India’s Companies Act 2013 requires companies listed in India to be compliant with provisions concerning “Internal Financial Controls”.

In connection with this Annual Report on Form 20-F for the year ended March 31, 2015, our management assessed our internal controls over financial reporting, and determined that our internal controls were effective as of March 31, 2015 based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As we continue to undertake management assessments of our internal control over financial reporting in connection with annual reports on Form 20-F for future years, any deficiencies uncovered by these assessments or any inability of our auditors to issue an unqualified opinion could harm our reputation and result in a loss of investor confidence in the reliability of our financial statements, which could cause the price of our equity shares and ADSs to decline.

The COSO has recently issued the new internal control framework (“COSO 2013”) that relies heavily on entity level controls and operational risks, in addition to controls over financial reporting. Our current management assurance systems are geared to respond to the earlier COSO framework, and we are currently in the process of transitioning to the COSO 2013 framework.

We are committed to maintaining high standards of corporate governance and public disclosure, and our efforts to comply with evolving laws, regulations and standards in this regard have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. In addition, the new laws, regulations and standards regarding corporate governance may make it more difficult for us to obtain director and officer liability insurance. Further, our board members, chief executive officer and chief financial officer could face an increased risk of personal liability in connection with the performance of their duties. As a result, we may face difficulties attracting and retaining qualified board members and executive officers, which could harm our business. If we fail to comply with new or changed laws or regulations and standards differ, our business and reputation may be harmed.

We are subject to the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws, which impose restrictions and may carry substantial penalties.

We operate in certain jurisdictions that experience governmental corruption to some degree or are found to be low on the Transparency International Corruption Perceptions Index and, in some circumstances, anti-bribery laws may conflict with some local customs and practices. In addition, in many less-developed markets, we work with third-party distributors and other agents for the marketing and distribution of our products. Although our policies prohibit these third parties from making improper payments or otherwise violating these anti-bribery laws, any lapses in complying with such anti-bribery laws by these third parties may adversely impact us. Business activities in many of these markets have historically been more susceptible to corruption. If our efforts to screen third-party agents and detect cases of potential misconduct fail, we could be held responsible for the noncompliance of these third parties under applicable laws and regulations, including the U.S. Foreign Corrupt Practices Act.

Compliance with the U.S. Foreign Corrupt Practices Act and other anti-bribery laws has been subject to increasing focus and activity by regulatory authorities in recent years. We may be subject to injunctions or limitations on future conduct, be required to modify our business practices and compliance programs and/or have a compliance monitor imposed on us, or suffer other criminal or civil penalties or adverse impacts, including lawsuits by private litigants or investigations and fines imposed by local authorities.

Actions by our employees, or third-party intermediaries acting on our behalf, in violation of such laws, whether carried out in the United States or elsewhere, may expose us to liability for violations of such anti-bribery laws and accordingly may have a material adverse effect on our reputation and our business, financial condition or results of operations

Any failure to comply with the complex reporting and payment obligations under the Medicare and Medicaid programs or other laws regulating marketing practices may result in litigation or sanctions and adversely impact our business.

The U.S. laws and regulations regarding Medicare and/or Medicaid reimbursement and rebates and other governmental programs are complex. Some of the applicable laws may impose liability even in the absence of a specific intent to defraud. The subjective decisions and complex methodologies used in making calculations under these programs are subject to review and challenge, and it is possible that such reviews could result in material changes in the calculation outcomes. In the past several years, state and federal government agencies have conducted ongoing investigations of manufacturers’ reporting practices with respect to a drug’s average wholesale price (“AWP”) and wholesale acquisition cost (“WAC”), and in some cases have filed lawsuits in which they have alleged that reporting of inflated AWPs or WACs has led to excessive payments by Medicare and/or Medicaid for prescription drugs. In addition, we are notified from time to time of governmental investigations regarding marketing practices or pricing issues.

Responding to such queries and any resulting investigations or lawsuits is costly and unpredictable, and involves a significant diversion of management’s attention. Such allegations could, if proven or settled, result in significant monetary penalties and possible exclusion from Medicare, Medicaid and other programs. In addition, government authorities have significant leverage to persuade pharmaceutical companies to enter into corporate integrity agreements, which can be expensive and disruptive to operations.

If any of the above queries and/or investigations were to result in a lawsuit that was determined adversely to us or in a large cash settlement, it could require us to pay significant amounts and may have a material adverse effect on our business, results of operations, financial condition and cash flows.

Our success depends on our ability to successfully develop and commercialize new pharmaceutical products.

Our future results of operations depend, to a significant degree, upon our ability to successfully develop and commercialize additional products in our Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products segments. We must develop, test and manufacture generic products as well as prove that our generic products are bio-equivalent or bio-similar to their branded counterparts, either directly or in partnership with contract research organizations. The development and commercialization process, particularly with respect to proprietary products and biosimilars, is both time consuming and costly and involves a high degree of business risk. Our products currently under development, if and when fully developed and tested, may not perform as we expect or meet our standards of safety and efficacy. Necessary regulatory approvals may not be obtained in a timely manner, if at all, and we may not be able to successfully and profitably produce and market such products. Our approved products may not achieve expected levels of market acceptance.

Our research and development efforts are increasingly dependent on collaborating with third party partners and contract research organizations which have the capability to handle complex technologies and products. Lack of effective project management at our end, or any failure to manage collaboration arrangements among multiple partners, may pose significant risks to product development, to our ability to obtain requisite regulatory approvals in a timely manner, and to our ability to successfully and profitably produce and market such products. Additionally, if we fail to adequately protect critical proprietary or confidential information or associated intellectual property rights or fail to manage third party partners and contract research organizations that our business depends on, it might have a material adverse impact on our product development execution.

We have grown at a very rapid pace. Our inability to properly manage or support this growth may have a material adverse effect on our business.

We have grown very rapidly over the past few years. This growth has significantly increased demands on our processes, systems and people. We have been making additional investments in personnel, systems and internal control processes to help manage our growth. Attracting, retaining and motivating key employees in various departments and locations to support our growth is critical to our business, and competition for these people can be intense.

If we are unable to hire and retain qualified employees, or if we do not invest in systems and processes to manage and support our rapid growth, the failure to do so may have a material adverse effect on our business, financial condition and results of operations.

Fluctuations in our quarterly revenues, operating results and cash flows may adversely affect the trading price of our shares and ADSs.

Our quarterly revenues, operating results and cash flows have fluctuated significantly in the past and may fluctuate substantially from quarter to quarter in the future. Such fluctuations result from a variety of factors, including but not limited to changes in demand for our products, timing of regulatory approvals and of launches of new products by us and our competitors (particularly where we obtain the 180-day period of market exclusivity in the United States provided under the Hatch-Waxman Act of 1984), timing of our retailers’ promotional programs and successful development and commercialization of limited competition and complex products. Such fluctuations may result in volatility in the price of our equity shares and our ADSs. In such an event, the trading price of our shares and ADSs may be adversely affected.

Impairment charges or write downs in our books could have a significant adverse effect on our results of operations and financial results.

A substantial portion of the value of our assets pertains to various intangible assets and goodwill. The proportion of the intangible assets and goodwill to our total assets could increase significantly as we pursue various growth strategies. The value of these intangible assets and goodwill could be substantially impaired upon indications of impairment, with adverse effects on our financial condition and the value of our assets. For example, our financial performance for the years ended March 31, 2009 and 2010 was significantly impacted as a result of the impairments pertaining to our Germany operations.

There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with IFRS. Any future changes in estimates, judgments and assumptions used or necessary revisions to prior estimates, judgments or assumptions or changes in accounting standards could lead to a restatement or revision to previously issued financial statements.

The consolidated financial statements included in the periodic reports we file with the SEC are prepared in accordance with IFRS. The preparation of financial statements in accordance with IFRS involves making estimates, judgments and assumptions in areas such as valuation of inventories, sales returns, rebates and chargebacks provisions, determination of useful life of property, plant and equipment and intangible assets, assets and obligations relating to employee benefits, business combinations and contingencies. Estimates, judgments and assumptions are inherently subject to change in the future and any necessary revisions to prior estimates, judgments or assumptions could lead to a restatement. Furthermore, although we have recorded reserves for litigation related contingencies based on estimates of probable future costs, such litigation related contingencies could result in substantial further costs. Also, any new or revised accounting standards may require adjustments to previously issued financial statements. Any such changes could result in corresponding changes to the amounts of liabilities, revenues, expenses and income. Any such changes could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or share price.

There are risks associated with executing the strategies we adopt to achieve our core purpose as discussed in Item 4.B. below. Significant execution risks associated with our strategies include, but are not limited to:

developing and executing our complex product development, manufacturing and marketing strategies for North America and other key markets;

executing on our strategies for increasing our customer share and for key account management in our Active Pharmaceutical Ingredients (“API”) and Custom Pharmaceutical Services (“CPS”) businesses; and

executing our execution excellence and change management initiatives to ensure process safety, product quality and availability.

Changes in Indian tax regulations may increase our tax liabilities and thus adversely affect our financial results.

Currently, we ~~enjoy~~are entitled to various tax benefits and exemptions under Indian tax ~~laws.~~laws, such as tax benefits on research and development spending and exemptions applicable to income derived from manufacturing facilities located in certain tax exempted zones. Any changes in these laws or their application ~~in matters such as tax exemption on exportation income, research and development spending and transfer pricing,~~ may increase our tax liability and thus adversely affect our financial results.

The Union Budget, 2015 has proposed to reduce the rate of corporate tax from 30% to 25% over the next 4 years in a phased manner starting from the fiscal year ended March 31, 2017, and the process of reduction in corporate tax rate would be accompanied by rationalization and removal of various kinds of tax exemption and incentives for corporate tax payers.

In India’s Finance Act, 2012, the Government of India introduced a levy of service tax based on a negative list of services. Consequently, all services have become taxable, except notified exempted services. The Finance Act, 2015 has increased the rate of service tax from the present 12.36% (inclusive of surcharge and cess) to a consolidated rate of 14% effective as of June 1, 2015.

Further, the Union Budget, 2015 has proposed to implement Goods and Service Tax (“GST”) from April 1, 2016. GST will put in place a state-of-the-art indirect tax system which will integrate State economies and boost overall growth. It is proposed to subsume other taxes such as Central Excise duty, Service tax, Octroi, VAT and Sales tax, entry tax, etc., into GST, thus avoiding multiple layers of taxation that currently exist in India. Earlier the Government of India had introduced the Constitution (122nd Amendment) Bill, 2014 on Goods and Services Tax (“GST”) in lower house of the Parliament (i.e. Lok Sabha) on December 19, 2014 and it was approved by Lok Sabha on May 6, 2015. This Constitution amendment bill was subsequently moved to Upper house of the Parliament (i.e. Rajya Sabha) for its approval. However it was referred to a Select Committee on May 12, 2015, which shall give its report in the first week of monsoon session of Parliament. The proposed amendments in the Constitution will confer powers both to the Parliament and State legislatures to make laws for levying GST on the supply of Goods and Services on the same transaction, thereby harmonizing the Indirect Tax regime in the country.

Under the Finance Act, 2013, the effective rate of dividend distribution tax (“DDT”) was 16.995% inclusive of surcharge and cess. The Finance Act (No 2) 2014 made an amendment in section 115-O, which requires grossing up of the dividend amount distributed for computing DDT. Pursuant to the amendment, effective October 1, 2014, the effective rate of DDT increased from 16.995% to 19.994% inclusive of surcharge and cess, and as a result, dividend amounts receivable by our shareholders after taxes are reduced. Furthermore, as a result of increase in rate of surcharge in the Finance Act, 2015, effective April 1, 2015, the effective rate of DDT has increased from 19.994% to 20.3576% at present. If the effective rate of dividend distribution tax increases in the future, the dividend amount receivable by our shareholders after taxes may decrease further.

We operate in jurisdictions that impose transfer pricing and other tax-related regulations on our intercompany arrangements, and any failure to comply could materially and adversely affect our profitability.

We are required to comply with various transfer pricing regulations in India and other countries. Failure to comply with such regulations may impact our effective tax rates and consequently affect our net margins. Additionally, we operate in numerous countries and our failure to comply with the local and municipal tax regimes may result in additional taxes, penalties and enforcement actions from such authorities. Although our intercompany arrangements are based on accepted tax standards, tax authorities in various jurisdictions may disagree with and subsequently challenge the amount of profits taxed in such jurisdictions, which may increase our tax liabilities and could have a material adverse effect on the results of our operations.

We enter into various agreements in the normal course of business which periodically incorporate provisions whereby we indemnify the other party to the agreement.

In the normal course of business, we periodically enter into agreements with vendors, customers, alliance partners, innovators and others that incorporate terms for indemnification provisions. Our indemnification obligations under such agreements may be unlimited in duration and amount. We maintain insurance coverage that we believe will effectively mitigate our obligations under certain of these indemnification provisions (for example, in the case of outsourced clinical trials). However, should our obligations under an indemnification provision exceed our coverage or should coverage be denied, it could have a material adverse impact on our business, financial position and results of operations.

Current economic conditions may adversely affect our industry, financial position and results of operations.

In recent years, the global economy has experienced volatility and an unfavorable economic environment, and these trends may continue in the future. Reduced consumer spending, reduced funding for national social security systems or shifting concentrations of payors and their preferences, may force our competitors and us to reduce prices. The growth of our business may be negatively affected by high unemployment levels and increases in co-pays, which may lead some patients to delay treatments, skip doses or use less effective treatments to reduce their costs. We have exposure to many different industries and counterparties, including our partners under our alliance, research and promotional services agreements, suppliers of raw materials, drug wholesalers and other customers, who may be unstable or may become unstable in the current economic environment. We run the risk of delayed payments or even non-payment by our customers, which consist principally of wholesalers, distributors, pharmacies, hospitals, clinics and government agencies.

Significant changes and volatility in the consumer environment and in the competitive landscape may make it increasingly difficult for us to predict our future revenues and earnings.

~~We are subject to the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws, which impose restrictions and may carry substantial penalties.~~

The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to officials for the purpose of obtaining or retaining business. These laws may require not only accurate books and records, but also sufficient controls, policies and processes to ensure business is conducted without the influence of bribery and corruption. Our policies mandate compliance with these anti-bribery laws, which often carry substantial penalties including fines, criminal prosecution and potential debarment from public procurement contracts. Failure to comply may also result in reputational damages. Given the high level of complexity of these laws, however, there is a risk that some provisions may be inadvertently breached, for example through fraudulent or negligent behavior of individual employees, our failure to comply with certain formal documentation requirements or otherwise. Any violation of these laws or allegations of such violations, whether or not merited, could have a material adverse effect on our reputation and could cause the trading price of our ordinary shares and ADSs to decline.

In addition, in many less-developed markets, we rely heavily on third-party distributors and other agents for the marketing and distribution of our products. Many of these third parties do not have internal compliance resources comparable to ours. Business activities in many of these markets have historically been more susceptible to corruption. If our efforts to screen third-party agents and detect cases of potential misconduct fail, we could be held responsible for the noncompliance of these third parties under applicable laws and regulations, including the U.S. Foreign Corrupt Practices Act, which may have a material adverse effect on our reputation and our business, financial condition or results of operations.

Finally, we operate in certain jurisdictions that have experienced governmental corruption to some degree or are found to be low on the Transparency International Corruption Perceptions Index and, in some circumstances, anti-bribery laws may conflict with some local customs and practices. As a result of our policy to comply with the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws, we may be at a competitive disadvantage to competitors that are not subject to, or do not comply with, such laws in jurisdictions that have experienced higher levels of bribery and corruption.

Risks from disruption to production, supply chain or operations from natural disasters could adversely affect our business and operations and cause our revenues to ~~decline~~decline.

If flooding, droughts, earthquakes, volcanic eruptions or other natural disasters were to directly damage, destroy or disrupt our manufacturing facilities, it could disrupt our operations, delay new production and shipments of existing inventory or result in costly repairs, replacements or other costs, all of which would negatively impact our business. A significant portion of our manufacturing facilities are situated around Hyderabad, India, a region that has experienced earthquakes, floods and droughts in the past.

Even if we take precautions to provide back-up support in the event of such a natural disaster, the disaster may nonetheless affect our facilities, harming production and ultimately our business. And, even if our manufacturing facilities are not directly damaged, a large natural disaster may result in disruptions in distribution channels or supply chains. The impact of such occurrences depends on the specific geographic circumstances but could be significant.

In addition, there is increasing concern that climate change is occurring and may have dramatic effects on human activity without aggressive remediation steps. A modest change in temperature may cause a rising number of natural disasters. We cannot predict the economic impact, if any, of natural disasters or climate change.

If the world economy is affected due to terrorism, wars or epidemics, it may adversely affect our business and results of operations.

Several areas of the world, including India, have experienced terrorist acts and retaliatory operations in recent years. If the economy of our key markets (including but not limited to the United States, the United Kingdom, Germany, ~~and, among the emerging markets,~~ India, Venezuela and Russia) is affected by such acts, our business and results of operations may be adversely affected as a consequence.

In ~~recent years,~~the last decade, Asia experienced outbreaks of avian influenza and Severe Acute Respiratory Syndrome, or “SARS”. In addition, in 2009 a rising death toll in Mexico from a new strain of Swine Flu led the World Health Organization to declare a public health emergency of international concern. If the economy of our key markets is affected by such outbreaks or other epidemics, our business and results of operations may be adversely affected as a consequence.

Our principal shareholders have significant control over us and, if they take actions that are not in the best interests of our minority shareholders, the value of their investment in our ADSs may be harmed.

Our full time directors and members of their immediate families, in the aggregate, beneficially owned ~~25.61%~~25.48% of our issued shares as at March 31, ~~2012.~~2015. As a result, these people, acting in concert, are likely to have the ability to exercise significant control over most matters requiring approval by our shareholders, including the election and removal of directors and significant corporate transactions. This significant control by these directors and their family members could delay, defer or prevent a change in control, ~~of us,~~ impede a merger, consolidation, takeover or other business combination involving us, or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of ~~us, even if that was in our best interest.~~us. As a result, the value of the equity shares and/or ADSs of our minority shareholders may be adversely affected or our minority shareholders might be deprived of a potential opportunity to sell their equity shares and/or ADSs at a premium.

We are an Indian company. Our headquarters are located in India, a substantial part of our operations are conducted in India and a significant part of our infrastructure and other assets are located in India. In addition, a substantial portion of our total revenues for the year ended March 31, ~~2012~~2015 continued to be derived from sales in India. As a result, the following additional risk factors apply that are not specific to our company or industry.

We may be subjected to additional compliance and litigation risks as a result of introduction of the new Companies Act, 2013 in India and changes to the SEBI Equity Listing Agreement.

As a company that is incorporated in India, we are governed by the rules and regulations covered under the Indian Companies Act, 1956. Significant amendments to the Companies Act were adopted in 2013 and 2014 and a majority of the provisions of the new Act (called the “Companies Act, 2013”) were implemented beginning in April, 2014. Some of the significant changes were in the areas of board and governance processes, boardroom responsibilities, disclosures, compulsory corporate social responsibility, audit matters, initiation of class action suits by shareholders or depositors, fraud reporting and whistle-blower mechanisms.

In addition, the Securities and Exchange Board of India (“SEBI”) revised certain requirements of the Equity Listing Agreement pertaining to corporate governance matters that must be followed by listed Indian public companies effective as of October 1, 2014. Some of these changes were intended to align the Equity Listing Agreement with the requirements of the Companies Act, 2013, while others included: new requirements as to parent company shareholder approval for certain sales or leases of assets or disinvestments in subsidiaries; risk management committee requirements for certain large companies; requirements that plans be in place for orderly succession for appointments to the board and senior management; shareholder approval requirements for certain transactions with related parties; and increased definitions of the rights and roles of shareholders.

Certain provisions of the Companies Act, 2013 and the new Equity Listing Agreement clauses are subject to varying interpretations and their application in practice may evolve over time as additional guidance is provided by regulatory and governing bodies. This may result in delays or continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions.

If communal disturbances or riots erupt in India, or if regional hostilities increase, this would adversely affect the Indian economy, which our business depends upon.

India has experienced communal disturbances, terrorist attacks and riots during recent years. For example, Mumbai, India’s commercial capital, was the target of serial railway bombings in July 2006 as well as the “26/11” attacks on November 26, 2008. Hyderabad, the city in which we are headquartered, was also subjected to terrorist acts in May and August 2007 and more recently in February 2013, although none of our operations were impacted by these terrorist acts.

During the last several years, the state of Telangana, where our headquarters is located, experienced political disruption relating to a movement to bifurcate a part of the then existing undivided state of Andhra Pradesh into a new separate state of “Telangana”. In February 2014, the Indian Parliament approved such bifurcation and announced creation of a new state of “Telangana” with effect from June 2, 2014.

Due to civil disturbances and “Bandhs” (i.e., political protests in the form of worker strikes), several productive days were lost from forced or precautionary closures of our production units and offices during the agitation movement. We experienced such issues in 2009 and 2013 in Andhra Pradesh (now Telangana). If there are any such strikes, political protests or civil unrest in the future, our business and results of operations may be adversely affected as a consequence.

Additionally, India has from time to time experienced hostilities with neighboring countries. The hostilities have continued sporadically. Hostilities and tensions may occur in the future and on a wider scale. These hostilities and tensions could lead to political or economic instability in India and harm our business operations, our future financial performance and the price of our shares and our ADSs.

A slowdown in economic growth in India may adversely affect our business and results of operations.

Our performance and the quality and growth of our business are necessarily dependent on the health of the overall Indian economy. The Indian economy has grown significantly over the past few years. Any future slowdown in the Indian economy could harm us, our customers and other contractual counterparties. In addition, the Indian economy is in a state of transition. The share of the services sector of the Indian economy is rising while that of the industrial, manufacturing and agricultural sector is declining. It is difficult to gauge the impact of these fundamental economic changes on our business.

~~If communal disturbances or riots erupt in India, or if regional hostilities increase, this would adversely affect the Indian economy, which our business depends upon.~~

During the year ended March 31, 2010, the state of Andhra Pradesh, where our headquarters is located, experienced political disruption relating to a separatist movement seeking to bifurcate the existing state of Andhra Pradesh into two separate states of “Telangana” and “Andhra”. Due to civil disturbances and “Bandhs” (i.e., political protests in the form of worker strikes) called for, several productive days were lost from forced or precautionary closures of our production units and offices. If there are further strikes, political protests or civil unrest, our business and results of operations may be adversely affected as a consequence.

If wage costs or inflation rise in India, it may adversely affect our competitive advantages over higher cost countries and our profits may decline.

Wage costs in India have historically been significantly lower than wage costs in developed countries and have been one of our competitive strengths. However, wage increases in India may increase our costs, reduce our profit margins and adversely affect our business and results of operations.

Due to various macro-economic factors, the rate of inflation has recently been highly volatile in India. According to the economic report released by the Department of Economic Affairs, Ministry of Finance in India, the annual inflation rate in India, as measured by the benchmark wholesale price index, Base 2004-05=100 was ~~6.9%~~-2.33% for the year ended March 31, ~~2012~~2015 (as compared to ~~9.7%~~6.00% for the year ended March 31, ~~2011)~~2014). This trend may ~~not~~ continue ~~and~~to fluctuate and/or the rate of inflation may rise substantially. We may not be able to pass these inflationary costs on to our customers by increasing the price we charge for our products. If this occurs, our profits may decline.

Stringent labor laws may adversely affect our ability to have flexible human resource policies; labor union problems could negatively affect our production capacity and overall profitability.

Labor laws in India are more stringent than in other parts of the world. These laws may restrict our ability to have human resource policies that would allow us to react swiftly to the needs of our business. Approximately 7%5% of our employees belong to a number of different labor unions. If we experience problems with our labor unions, our production capacity and overall profitability could be negatively affected.

Indian law imposes certain restrictions that limit a holder’s ability to transfer the equity shares obtained upon conversion of ADSs and repatriate the proceeds of such transfer, which may cause our ADSs to trade at a premium or discount to the market price of our equity shares.

Under certain circumstances, the Reserve Bank of India must approve the sale of equity shares underlying ADSs by a non-resident of India to a resident of India. The Reserve Bank of India has given general permission to effect sales of existing shares or convertible debentures of an Indian company by a resident to a non-resident, subject to certain conditions, including the price at which the shares ~~may~~must be sold. Additionally, except under certain limited circumstances, if an investor seeks to convert the Indian rupee proceeds from a sale of equity shares in India into foreign currency and then repatriate that foreign currency from India, he or she will have to obtain an additional approval from the Reserve Bank of India for each such transaction. Required approval from the Reserve Bank of India or any other government agency may not be obtained on terms favorable to a non-resident investor or at all.

Indian legal restrictions may limit the supply of our ADSs. The only way to add to the supply of our ADSs will be through a primary issuance because the depositary is not permitted to accept deposits of our outstanding shares and issue ADSs representing those shares. However, an investor in our ADSs who surrenders an ADS and withdraws our shares will be permitted to redeposit those shares in the depositary facility in exchange for our ADSs. In addition, an investor who has purchased our shares in the Indian market will be able to deposit them in the ADS program, but only in a number that does not exceed the number of underlying shares that have been withdrawn from and not re-deposited into the depositary facility. Moreover, there are restrictions on foreign institutional ownership of our equity shares as opposed to our ADSs.

Financial instability in other countries, particularly emerging market countries in Asia, could affect our business and the price and liquidity of our shares and our ADSs.

The Indian markets and the Indian economy are influenced by economic and market conditions in other countries, particularly emerging market countries in Asia. Although economic conditions are different in each country, investors’ reactions to developments in one country can have adverse effects on the securities of companies in other countries, including India. Any worldwide financial instability or any loss of investor confidence in the financial systems of Asian or other emerging markets could increase volatility in Indian financial markets or adversely affect the Indian economy in general. Either of these results could harm our business, our future financial performance and the price of our equity shares and ADSs.

If U.S. investors in our ADSs are unable to exercise preemptive rights available to our non-U.S. shareholders due to the registration requirements of U.S. securities laws, the investment of such U.S. investors in our ADSs may be diluted.

A company incorporated in India must offer its holders of shares preemptive rights to subscribe and pay for a proportionate number of shares to maintain their existing ownership percentages prior to the issuance of any shares, unless these rights have been waived by at least 75% of ~~the company’s~~our shareholders present and voting at a shareholders’ general meeting. U.S. investors in our ADSs may be unable to exercise preemptive rights for the shares underlying our ADSs unless a registration statement under the Securities Act of 1933 is effective with respect to the rights or an exemption from the registration requirements of the Securities Act is available. Our decision to file a registration statement will depend on the costs and potential liabilities associated with a registration statement as well as the perceived benefits of enabling U.S. investors in our ADSs to exercise their preemptive rights and any other factors we consider appropriate at the time. We might choose not to file a registration statement under these circumstances. If we issue any of these securities in the future, such securities may be issued to the depositary, which may sell them in the securities markets in India for the benefit of the investors in our ADSs. There can be no assurances as to the value, if any, the depositary would receive upon the sale of these securities. To the extent that U.S. investors in our ADSs are unable to exercise preemptive rights, their proportional interests in us would be reduced.

Our equity shares and our ADSs may be subject to market price volatility, and the market price of our equity shares and ADSs may decline disproportionately in response to adverse developments that are unrelated to our operating performance.

Market prices for the securities of Indian pharmaceutical companies, including our own, have historically been highly volatile, and the market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. Factors such as the following can have an adverse effect on the market price of our ADSs and equity shares:

general market conditions,

speculative trading in our shares and ADSs, and

developments relating to our peer companies in the pharmaceutical industry.

There may be less company information available in Indian securities markets than securities markets in developed countries.

There is a difference between the level of regulation and monitoring of the Indian securities markets over the activities of investors, brokers and other participants, as compared to the level of regulation and monitoring of markets in the United States and other developed economies. The Securities and Exchange Board of India is responsible for improving disclosure and other regulatory standards for the Indian securities markets. The Securities and Exchange Board of India has issued regulations and guidelines on disclosure requirements, insider trading and other matters. There may, however, be less publicly available information about Indian companies than is regularly made available by public companies in developed countries, which could affect the market for our equity shares and ADSs.

Indian stock exchange closures, broker defaults, settlement delays, and Indian Government regulations on stock market operations could affect the market price and liquidity of our equity shares.

The Indian securities markets are smaller than the securities markets in the United States and Europe and have experienced volatility from time to time. The regulation and monitoring of the Indian securities market and the activities of investors, brokers and other participants differ, in some cases significantly, from those in the United States and some European countries. Indian stock exchanges have at times experienced problems, including temporary exchange closures, broker defaults and settlement delays and if similar problems were to recur, they could affect the market price and liquidity of the securities of Indian companies, including our shares. Furthermore, any change in Indian Government regulations of stock markets could affect the market price and liquidity of our equity shares and ADSs.

Dr. Reddy’s Laboratories Limited was incorporated in India under the Companies Act, 1956, by its promoter and our ~~current~~former Chairman, the late Dr. K. Anji Reddy, as a Private Limited Company on February 24, 1984. We were converted to a Public Limited Company on December 6, 1985 and listed on the Indian Stock Exchanges in August 1986 and on the New York Stock Exchange on April 11, 2001. We are registered with the Registrar of Companies, ~~Andhra Pradesh,~~ Hyderabad, Telangana, India as Company No. 4507 (Company Identification No. ~~U85195AP1984 PLC 004507)~~L85195TG1984PLC004507). Our registered office is situated at 8-2-337, Road No. 3, Banjara Hills, Hyderabad, ~~Andhra Pradesh~~Telangana 500 034, India and the telephone number of our registered office is +91-40-49002900. The name and address of our registered agent in the United States is Dr. Reddy’s Laboratories, Inc., ~~200 Somerset Corporate Boulevard (Bldg II), Bridgewater,~~107 College Road East, Princeton, New Jersey ~~08807.~~08540.

OnFiling of three 505(b)(2) New Drug Applications with the U.S. Food and Drug Administration

During March and April ~~1, 2011~~2015, we ~~launched Peg-grafeel,™ our brand of pegylated filgrastim (pegfilgrastim). Peg-grafeel™ has been approved in India to reduce~~filed three 505(b)(2) New Drug Applications (“NDAs”) with the duration of neutropenia and the incidence of febrile neutropenia in patients treated with cytotoxic chemotherapy for malignancy (with the exception of chronic myeloid leukemia and myelodysplastic syndromes). Pegfilgrastim is a pegylated long-lasting variant of filgrastim. One injection of pegfilgrastim can replace up to 14 injections of filgrastim, which must be administered daily. It can be administered once per chemotherapy cycle, providing convenience to the patient while eliminating many of the additional costs of treatment. Peg-grafeel™ is manufactured using our ‘PEGtech’ brand of activated methyl ether polyethylene glycol alcohols (“mPEGs”) which are synthesized at our facilities located in Mexico and the United Kingdom.

~~On April 12, 2011, we launched over-the-counter (“OTC”) fexofenadine hydrochloride tablets, a bioequivalent version of Sanofi-Aventis’ Allegra~~^® ~~tablets, which received OTC sales approval from the United States~~U.S. Food and Drug Administration ~~(the “U.S.~~(“U.S. FDA”) ~~on January 24, 2011. The U.S. FDA approved~~:

DFD-01, a corticosteroid delivered in a novel non-irritating spray platform, intended for the treatment of patients suffering from psoriasis;

DFD-09, a modified release oral tetracycline intended for the treatment of rosacea; and

DFN-11, a drug-device combination product intended to treat acute migraine episodes in certain patient populations who are inadequately managed with existing treatment regimens.

Refer to Note 38 to our ~~Abbreviated New Drug Application (“ANDA”) for fexofenadine hydrochloride~~consolidated financial statements.

Acquisition of select portfolio of the established products business of UCB in India

In October 2014, we launched sirolimus tablets ~~on April 12, 2011. According to IMS Health, sales~~1 mg and 2 mg, a therapeutic equivalent generic version of ~~branded and generic fexofenadine hydrochloride prescription products~~RAPAMUNE^® (sirolimus) tablets in the United States, ~~were~~following the approval by the U.S. FDA. The RAPAMUNE^® tablets brand had U.S. sales of approximately $206 million for the twelve months ended August 31, 2014, according to IMS Health.

In December 2014, we launched valganciclovir tablets USP 450 mg, a therapeutic equivalent generic version of VALCYTE^® (valganciclovir) tablets in the United States, following the approval by the U.S.~~$452~~ FDA. The VALCYTE^® tablets brand had U.S. sales of approximately $440 million for the twelve months ended October 31, 2014, according to IMS Health.

In December 2014 and February 2015, we launched pregabalin capsules in Germany and the United Kingdom, respectively, following the approval by the European regulatory agencies. Our pregabalin capsules are indicated for epilepsy and generalized anxiety disorder (and not indicated for neuropathic pain). Pregabalin capsules of the innovator (LYRICA^® from Pfizer) are indicated for neuropathic pain, epilepsy and generalised anxiety disorder. LYRICA^® capsules brand had Germany sales and U.K sales of approximately $379 million and $457 million, respectively, for the twelve months ended December 31, ~~2010.~~

~~On June 3, 2011,~~In December 2014, we acquired the ~~U.S. FDA issued a warning letter asking for additional data~~title and ~~corrective actions to four items pertaining~~rights to the chemical manufacturing facility at Cuernavaca, Mexico (the “Mexico facility”), which is owned by our wholly-owned subsidiary, Industrias Quimicas Falcon de Mexico SA de C.V. The four items in the warning letter related to certainHabitrol^® brand (an over-the-counter nicotine replacement therapy transdermal patch) from Novartis Consumer Health Inc. and began distribution of the 12 observations on Form 483 that the U.S. FDA issued to us after it inspected the Mexico facility in November 2010. Additionally, on June 28, 2011, the U.S. FDA posted on its website an import alert, or Detention Without Physical Examination (“DWPE”) alert. As a consequence of the DWPE alert, the Mexico facility is unable to export intermediates and active pharmaceutical ingredients, with the exemption of naproxen and naproxen sodium, to U.S. customers, and we are unable to export to U.S. customers our generics products that include intermediates and active pharmaceutical ingredients from our Mexico facility, until such time as the concerns raised by the U.S. FDA in their warning letter are addressed to their satisfaction and the DWPE alert is lifted. Further details of the warning letter and the DWPE alert are available on the U.S. FDA website. We subsequently worked collaboratively with the U.S. FDA to resolve the matters contained in the warning letter. The U.S. FDA re-inspected the Mexico facility in March 2012 and issued two observations on Form 483. We sent the U.S. FDA a timely response to the two remaining observations, and are awaiting a reply and final report.

~~On July 25, 2011, we launched gemcitabine for injection (200 mg/vial and 1 g/vial), a bioequivalent version of Eli Lilly and Company’s Gemzar~~^®~~, in the United States. This launch followed the U.S. FDA’s approval of our ANDA for this product on July 25, 2011. According to IMS Health, U.S. sales of Gemzar~~^® ~~were approximately $634 million for the twelve months ended May 31, 2011.~~

~~On July 25, 2011, we launched fondaparinux sodium injection, a bioequivalent generic version of GlaxoSmithKline’s Arixtra~~^®, in the United States in collaboration with Alchemia Limited, Australia. The U.S. FDA gave the final approval on July 11, 2011 of our ANDAs for 2.5 mg/ 0.5 mL, 5.0 mg/ 0.4 mL, 7.5 mg/ 0.6 mL and 10 mg/ 0.8 mL doses of the drug in prefilled color-coded, single-dose syringes with automatic needle safety devices. We manufacture fondaparinux sodium injection under a license using a patented process developed by Alchemia Limited. The U.S. patents on Arixtra^® ~~expired in 2002, the year before Arixtra~~^® was launched in the United States. Alchemia Limited owns two issued patents and two pending patent applications in the United States pertaining to its process for the synthesis of fondaparinux sodium injection. According to IMS Health, U.S. sales of Arixtra^® ~~were approximately $340 million for the 12 months ended May 31, 2011.~~

On July 28, 2011 we signed a Memorandum of Understanding with Fujifilm Corporation, a company based in Japan, to enter into an exclusive partnership in the generics drug business for the Japanese market and to establish a joint venture in Japan. Fujifilm Corporation will own 51% of the joint venture and the 49% balance will be owned by us. This joint venture will develop, manufacture and promote competitive and high quality generic drugs utilizing both Fujifilm Corporation’s advanced quality control technologies and our expertise in cost competitive production technologies. Japan is the world’s second largest pharmaceutical market, estimated by IMS Health to be U.S.$97 billion. The Japanese generics market is estimated to be $11.6 billion and is characterized by low penetration—only approximately 23% of Japanese prescription drug sales by volume are generics products, as compared to 70% in the United States. The Japanese generics market is expected to grow significantly over the coming years as a result of macroeconomic factors such as the rapidly aging population and increasing healthcare funding gap. We intend for this joint venture to launch its first products in Japan within the next three to four years.

~~On August 30, 2011, we launched OTC fexofenadine hydrochloride and pseudoephedrine hydrochloride extended release tablets 180/240 mg, a bioequivalent version of Sanofi-Aventis’ Allegra~~^® ~~D24, in the United States. This launch followed the U.S. FDA’s approval of our ANDA for this product on June 26, 2011.~~

~~On August 31, 2011, we entered into a settlement agreement with Pfizer to resolve litigation related to Lipitor~~^® ~~tablets, 10 mg, 20 mg, 40 mg, and 80 mg, known generically as atorvastatin calcium tablets.~~

On September 2, 2011, we announced the initiation of clinical trials for dosing with DRL-17822 in patients with diagnosis of type II dyslipidemia. DRL-17822 is a selective, orally bioavailable inhibitor of cholesteryl ester transfer protein, for the treatment and/or prevention of dyslipidaemia, atherosclerosis and associated cardiovascular disease. The current study is being conducted under a clinical trial application in a number of countries in Europe. The objective of the study is to evaluate the efficacy and safety of DRL-17822 in patients with Type-II dyslipidemia.

~~On October 24, 2011, we launched olanzapine tablets, the bioequivalent version of Eli Lilly’s Zyprexa~~^®, in the United States pursuant to our partnership with Teva Pharmaceutical USA, Inc. (“Teva”). On October 23, 2011, we were awarded a 180-day period of marketing exclusivity in the United States for 20 mg olanzapine tablets. Pursuant to our commercialization, manufacture and supply agreement with Teva, it was agreed that we will supply the required quantities of 20 mg olanzapine tablets to Teva, and Teva will market this product in the United States. ~~In consideration for such supply~~

For a list of olanzapine, Teva is required to pay us a base purchase price and a profit share computed based on the ultimate net sale proceeds realized by Teva, subject to any reductions or adjustments that are required by the terms of the commercialization, manufacture and supply agreement. According to IMS Health, U.S. sales of Zyprexa^® ~~were approximately $3.2 billion for the twelve months ended September 30, 2011.~~

~~On March 2, 2012,~~other products we launched ~~ziprasidone hydrochloride capsules, a bioequivalent generic version of Pfizer’s Geodon~~^®, in the United States. This launch followed the U.S. FDA’s approval of our ANDA for ziprasidone hydrochloride capsules on March 2, 2012. We were awarded a 180-day period of marketing exclusivity for ziprasidone hydrochloride capsules in the United States. According to IMS Health, U.S. sales of Geodon^® ~~were approximately $1.34 billion for the twelve months ended December 31, 2011.~~

~~On March 27, 2012, we launched quetiapine fumarate tablets (25 mg, 50 mg, 100 mg, 200 mg, 300 mg and 400 mg), a bioequivalent generic version of AstraZeneca’s Seroquel~~^® ~~tablets in the United States. This launch followed the U.S. FDA’s approval of our ANDA for this product on March 27, 2012. According to IMS Health, U.S. sales of Seroquel~~^® ~~were approximately $4.6 billion for the twelve months ended December 31, 2011.~~

As of March 31, 2012, we had 29 active products in the pipeline of our Proprietary Products business, of which 7 were in clinical development stage. The Phase III study on DRL-NAB-P2 (terbinafine nail lacquer) was terminated in the quarter ended June 30, 2012 because the interim analysis of the blinded clinical trial data showed a lack of efficacy. Since we repositioned our research activities in the fiscal year ended March 31, 2010, we have been making focused efforts towards developing drugs to meet key unmet clinical needs. InStates during the year ended March 31, ~~2012 we filed 17 ANDAs in~~2015, refer to Item 5.A – ‘Operating results’.

We carried out the ~~United States. Cumulatively, we had 194 ANDAs (including ANDAs~~following organizational changes as part of our overall strategy of driving growth through ~~partnerships)~~competitive advantage:

In May 2014, Abhijit Mukherjee, President, Global Generics was appointed as ~~of March 31, 2012. A total of 80 ANDAs were pending approval at the U.S. FDA~~Chief Operating Officer. Prior to such appointment, he was responsible for our Global Generics business. Since such appointment, he has been responsible for our Global Generics business as ~~of March 31, 2012, of which 41 are Paragraph IV filings and 7 have first to file status. In~~well as our Pharmaceutical Services and Active Ingredients ~~segment, we filed 68 Drug Master Files~~ (“~~DMFs”~~PSAI”) ~~worldwide in~~business.

Commencing April 2015, all of our Chemical Technology Operations (“CTO”) and Formulation Technology Operations (“FTO”) were brought under the ~~year ended March 31, 2012,~~unified leadership of ~~which 14 were filed in~~Mr. Samiran Das to enable cross learning between these units, provide benefits of scale and foster an integrated operating framework. Along similar lines, the ~~United States, 14 were filed in Europe~~supply chain management function across our company was brought under the unified leadership of Mr. P. Yugandhar. Further, Mr. KVS Ram Rao now heads our PSAI commercial organization and ~~40 were filed in other countries. As of March 31, 2012, we had made a cumulative total of 543 DMF filings worldwide, including 187 DMFs in the United States~~manages its sales, strategy, business development and ~~152 DMFs in Europe. In addition we had 42 certificates of suitability granted by European authorities.~~new product management.

During the years ended March 31, ~~2012, 2011~~2015, 2014 and ~~2010,~~2013, we invested ~~6,816~~Rs.9,167 million, ~~8,718~~Rs.9,996 million and ~~4,068~~Rs.6,606 million (net of sales of capital assets), respectively, in capital expenditures for manufacturing, research and development facilities and other assets. We believe that these investments will create the capacity to support our strategic growth agenda. As of March 31, ~~2012,~~2015, we also had contractual commitments of ~~approximately 2,351~~Rs.4,173 million for capital expenditures. These commitments included ~~approximately 2,231~~Rs.4,018 million to be spent in India and ~~120~~Rs.155 million in other countries. We currently intend to finance our additional capital expansion plans entirely through our operating cash flows and through cash and other investments.

Established in 1984, we are an integrated global pharmaceutical company committed to providing affordable and innovative medicines through our three core business segments:

Global ~~Generics segment, which includes our branded and unbranded prescription and over-the-counter (“OTC”) drug products business;~~Generics;

Pharmaceutical Services and Active Ingredients (“PSAI”) ~~segment, which consists of our Active Pharmaceutical Ingredients (“API”) business and Custom Pharmaceutical Services (“CPS”) business;~~; and

Proprietary ~~Products~~Products.

Global Generics.This segment ~~which~~ consists of our ~~New Chemical Entities~~business of manufacturing and marketing prescription and over-the-counter finished pharmaceutical products ready for consumption by the patient, marketed under a brand name (branded formulations) or as generic finished dosages with therapeutic equivalence to branded formulations (generics). This segment includes the operations of our biologics business.

Pharmaceutical Services and Active Ingredients. This segment includes our business of manufacturing and marketing active pharmaceutical ingredients and intermediates, also known as “API” or bulk drugs, which are the principal ingredients for finished pharmaceutical products. Active pharmaceutical ingredients and intermediates become finished pharmaceutical products when the dosages are fixed in a form ready for human consumption such as a tablet, capsule or liquid using additional inactive ingredients. This segment also includes our contract research services business and our manufacture and sale of active pharmaceutical ingredients and steroids in accordance with specific customer requirements.

Proprietary Products.This segment consists of our differentiated formulations business, our new chemical entities (“NCEs”) ~~business, our Differentiated Formulations~~ business, and our dermatology focused specialty business operated through Promius™ Pharma.

Others.This includes the operations of our wholly-owned subsidiary, Aurigene Discovery Technologies Limited, a discovery stage biotechnology company developing novel and best-in-class therapies in the fields of oncology and inflammation and which works with established pharmaceutical and biotechnology companies in early-stage collaborations, bringing drug candidates from hit generation through Investigational New Drug (“IND”) filing.

We have a strong presence in highly regulated markets such as the United States, the United Kingdom and Germany, as well as ~~in emerging~~other key markets such as India, Russia, Venezuela, Romania, South Africa and certain countries of the former Soviet Union.

Our core purpose is to ~~provide~~accelerate access to affordable and innovative ~~medicines to enable people to lead healthier lives.~~medicines. Spiraling health care costs across the world have put many medicines out of the reach of millions of people who desperately need them. As a global pharmaceutical company, we take very seriously our responsibility to offer affordable alternatives to expensive medicines and help ~~alleviate the burden of~~patients manage their disease ~~on individuals and on the world.~~better. Our strategy to achieve this core purpose is to ~~combine industry-leading science~~focus on delivering first-to-market, tough-to-make products, developing differentiated products for unmet medical needs, introducing value-added services for patients and ~~technology, product offerings~~customers, and ~~customer service with execution excellence.~~ensuring availability of our products through a reliable and flexible supply chain. The key elements of our strategy include the following:

Our strengths in science and technology range from synthetic organic chemistry, formulation development, biologics development and small molecule based drug discovery. Such expertise enables the creation of unique competitive advantages with an industry-leading intellectual property and technology-leveraged product portfolio.

Global Generics: Through our branded and unbranded ~~Global Generics segment,~~drug products, we aim to offer ~~lower-cost~~affordable alternatives to highly-priced innovator brands, both directly and through key partnerships.

Our biologics business seeks to accelerate access to bio-similar products globally through process development and relevant clinical research. We were the first company to launch a generic version of rituximab in 2007, and have launched 4 bio-similar products in India and other key markets.

Our vertical integration and process innovation ~~ensures~~helps to ensure that ~~our~~quality products ~~remain price competitive.~~are available to the patients in need at all times.

Pharmaceutical Services and Active Ingredients: Our Pharmaceutical Services and Active Ingredients segment is comprised of our Active Pharmaceutical Ingredients (“API”) business and our Custom Pharmaceutical Services (“CPS”) business. Through our API and CPS businesses, we aim to offer technologically advanced product lines and niche product services through partnerships internally and externally.

Our product offerings in our API business are positioned to offer intellectual property and technology-advantaged products to enable launches ahead of others at competitive prices.

Through our CPS business, we aim to offer niche product service capabilities, technology platforms, and competitive cost structures to innovator and biotechnology companies.

Proprietary Products: Our Proprietary Products business is comprised of our Differentiated Formulations business, our New Chemical Entity (“NCE”) research business and our dermatology focused Specialty business.

Execution excellence provides the framework to create sustainable customer value across all of our activities. We have been investing in the following to achieve this:

The following table shows our revenues and the percentage of total revenues of our business segments for the years ended March 31, ~~2010, 2011~~2015, 2014 and ~~2012,~~2013, respectively:

Revenues by geographic market and by therapeutic area for the years ended March 31, ~~2010, 2011~~2015, 2014 and ~~2012~~2013 are discussed ~~in detail~~ in Note 5 to our consolidated financial statements.

The production processes for finished dosages are similar, to a certain extent, regardless of whether the finished dosages are to be marketed to highly regulated or less regulated markets. In many cases, the processes share common and interchangeable facilities and employee bases, and use similar raw materials. However, differences remain between highly regulated and less regulated markets in terms of manufacturing, packaging and labeling requirements and the intensity of regulatory oversight, as well as the complexity of patent regimes. While the degree of regulation in certain markets may impact product development, we are observing increasing convergence of development needs throughout both highly regulated and less regulated markets. As a result, when we begin the development of a product, we may not necessarily target it at a particular market, but will instead target the product towards a cluster of markets that will include both highly regulated and less regulated markets.

Today, we are one of the leading generic pharmaceutical companies in the world. With the integration of all the markets where we are selling generic pharmaceuticals into our Global Generics segment, our front-end business strategies in various markets and our support services in India are increasingly being developed with a view to leverage our global infrastructure.

Our Global Generics segment’s revenues were ~~70,243~~ Rs.120,556 million in the year ended March 31, ~~2012,~~2015, as compared to ~~53,340~~ Rs.105,164 million in the year ended March 31, ~~2011.~~2014. The revenue growth was largely led by this segment’s operations in ~~our key markets of North America (the~~the United States, India, Venezuela and ~~Canada) and Russia. In absolute currency terms (i.e., without taking into account~~ the effect of currency exchange rates), our Global Generics segment’s revenues had growth in all geographies except for Germany, where the performance was moderate relative to the year ended March 31, 2011. Germany continues to experience pricing pressure on account of the tender (i.e., competitive bidding) based supply system. However, we have initiated diversification into different revenue streams to stabilize our business in Germany.

United Kingdom. The following is a discussion of the key markets in our Global Generics segment.

Approximately ~~18%~~15% of our Global Generics segment’s revenues in the year ended March 31, ~~2012~~2015 were derived from sales in the Indian market. In India, ~~we mainly focus on the~~our key therapeutic categories ofinclude gastro-intestinal, cardiovascular, pain management and oncology. We are also increasing our presence in the niche areas of dermatology, urology and nephrology.

As of March 31, ~~2012,~~2015, we had a total of ~~249~~260 branded products in India. Our top ten branded products together accounted for ~~36%~~34% of our revenues in India in the year ended March 31, ~~2012.~~2015. According to ~~Operations Research Group International Medical Statistics (“ORG IMS”), a provider of market research to the pharmaceutical industry,~~IMS Health, in its ~~Moving Annual Total (“MAT”)~~moving annual total report for the 12-month period ended March 31, ~~2012,~~2015, our secondary sales in India grew by ~~10.5% as compared~~13.1%. In comparison, the Indian pharmaceutical market experienced growth of 12.1% during such period. IMS Health is a provider of market research to the Indian pharmaceutical ~~market growth of 16.3%.~~industry. Strategic Marketing Solutions and Research Center Private Limited (“SMSRC”), a prescription market research firm, in its report measuring pharmaceutical prescriptions in India for the period from November ~~2011~~2014 to February ~~2012,~~2015, ranked us 9^th12th in terms of the number of prescriptions generated in India during such period.

~~The following tables summarize the position of our top 10 brands in the Indian market for the years ended March 31, 2010, 2011 and 2012, respectively:~~

We generate demand for our products through our ~~approximately 4,400~~5,176 sales representatives (which include representatives engaged by us ~~as independent contractors)~~on a contract basis through a service provider) and front line managers, who frequently visit doctors to detail our related product portfolio. They also visit various pharmacies to ensure that our brands are adequately stocked.

We sell our products primarily through clearing and forwarding agents to approximately 2,500 wholesalers who decide which brands to buy based on demand. The wholesalers pay for our products in an agreed credit period and in turn sell these products to retailers. Our clearing and forwarding agents are responsible for transporting our products to the wholesalers. We pay our clearing and forwarding agents on a commission basis. We have insurance policies that cover our products during shipment and storage at clearing and forwarding locations.

In April 2015, we entered into a definitive agreement with UCB India Private Limited and other UCB group companies (together referred to as “UCB”) to acquire a select portfolio of established products business in the territories of India, Nepal, Sri Lanka and Maldives. The purchased business was acquired on a slump sale basis (an Indian tax law concept which refers to the transfer of a business as a going concern without values being assigned to individual assets and liabilities). The transaction includes approximately 350 employees engaged in operations of the acquired India business. The acquisition is expected to strengthen our presence in the areas of dermatology, respiratory and pediatric products. The total purchase consideration was Rs.8,000 million. The acquisition was closed on June 16, 2015.

During the year ended March 31, 2012, we launched Velocit pregnancy test kits and Nise gel through our Global Generics segment’s OTC division. This OTC division has 110 retail sales associates, and is focused on establishing a network of relationships with key pharmacy chains and individual pharmacies. These products also get promoted in parallel through our prescription products field sales force.

We compete with different companies in the Indian formulations market, depending upon therapeutic and product categories and, within each category, upon dosage strengths and drug delivery. On the basis of sales, we were the 16^th largest pharmaceutical company in India, with a market share of 2%2.2%, according to ~~ORG~~ IMS Health in its ~~MAT~~moving annual total report for the 12-month period ended March 31, ~~2012.~~2015.

Some of the key observations on the performance of the Indian pharmaceutical market, as published by ~~ORG~~ IMS Health in its ~~MAT~~moving annual total report for the 12-month period ended March 31, ~~2012,~~2015, are as follows:

The Indian pharmaceutical market ~~registered a~~experienced growth of ~~16.3%~~12.1% for such period.

New products launched in the preceding 24 months accounted for 6%5.2% of total Indian pharmaceutical growth for such period.

The top 300 existing brands grew at a rate of ~~16.7%~~12.8%, which was ~~marginally~~0.7% higher than the Indian pharmaceutical market’s overall average, and ~~continued to~~together they account for ~~32%~~30.9% of the market’s total sales.

There was an increasing emergence of bio-similar products to address the needs of patients in the oncology therapeutic area.

Our principal competitors in the Indian market include Cipla Limited, ~~Ranbaxy Laboratories Limited,~~ GlaxoSmithKline Pharmaceuticals Limited, Cadila Healthcare Limited, Sun Pharmaceutical Industries Limited, Alkem Limited, Mankind Pharma Limited, Pfizer Limited, Abbott India, Lupin Limited, Aristo Pharma Limited, Intas Pharma, Sanofi India Limited and Emcure Pharmaceuticals Limited.

The manufacturing and marketing of drugs, drug products and cosmetics in India is governed by many statutes, regulations and guidelines, including but not limited to the following:

The Drugs and Cosmetics Act, 1940 and the Drugs and Cosmetics Rules, 1945;

The Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954;

The Narcotic Drugs and Psychotropic Substances Act, 1985;

The Drugs (Price Control) Order, 1995 and 2013, read in conjunction with the Essential Commodities Act, 1955; ~~and~~

The Medicinal and Toilet Preparations (Excise Duties) Act, ~~1955.~~1955; and

The National Pharmaceuticals Pricing Policy, 2012.

These statutes, regulations and guidelines govern the testing, manufacturing, packaging, labeling, storing, record-keeping, safety, approval, advertising, promotion, sale and distribution of pharmaceutical products.

Pursuant to the amendments in May 2005 to Schedule Y of the Drugs and Cosmetics Act, 1940, manufacturers of finished dosages are required to submit additional technical data to the Drugs Controller General of India in order to obtain a no-objection certificate for conducting clinical trials as well as to manufacture new drugs for marketing.

~~All pharmaceutical manufacturers that sell products in India are subject to regulations issued by its~~An approval is required from the Ministry of Health (“MoH”). These regulations govern or influence the testing, manufacturing, packaging, labeling, storing, record-keeping, safety, approval, advertising, promotion, sale and distribution of products.

~~MoH approval of an application is required~~ before a generic equivalent of an existing or referenced brand drug can be marketed. When processing a generics application, the ~~MoH~~Ministry of Health usually waives the requirement of conducting complete clinical studies, although it ~~normally~~generally requires bio-availability and/or bio-equivalence studies. “Bio-availability” indicates the rate and extent of absorption and levels of concentration of a drug product in the blood stream needed to produce a therapeutic effect. “Bio-equivalence” compares the bioavailability of one drug product with another, and when established, indicates that the rate of absorption and levels of concentration of the active drug substance in the body are ~~the~~ equivalent for the generic drug ~~and~~with the previously approved drug. A generic application may be submitted for a drug on the basis that it is the equivalent of a previously approved drug. Before approving aour generic ~~product,~~products, the ~~MoH~~Ministry of Health also requires that our procedures and operations conform to ~~cGMP~~current Good Manufacturing Practice (“cGMP”) regulations, relating to good manufacturing practices as defined by various countries. We must follow the cGMP regulations at all times during the manufacture of our products. We continue to spend significant time, money and effort in the areas of production and quality testing to help ensure full compliance with cGMP regulations.

The timing of final ~~MoH~~Ministry of Health approval of a generic application depends on various factors, including patent expiration dates, sufficiency of data and regulatory approvals.

Under the present drug policy of the Government of India, certain drugs have been specified under the DPCO as subject to price control. The Government of India established the National Pharmaceutical Pricing Authority (“NPPA”) to control pharmaceutical prices. Under the DPCO, the NPPA has the authority to fix the maximum selling price for specified products. At present, more than 70 drugs and their formulations are categorized as specified products under the DPCO. A limited number of our formulation products fall in this category. Adverse changes in the DPCO list or in the span of price control can affect pricing, and hence, our Indian revenues.

On March 22, 2005, the Government of India passed the Patents (Amendment) Bill, 2005 (the “2005 Amendment”), introducing a product patent regime for food, chemicals and pharmaceuticals in India. The 2005 Amendment specifically provides that new medicines (patentability of which is not specifically excluded) for which a patent has been applied for in India on or after January 1, 1995 and for which a patent is granted cannot be manufactured or sold in India by anyone other than the patent holder and its assignees and licensees. This has resulted in a reduction of new product introductions in India ~~as well as other countries where similar legislation has been introduced,~~ for all Indian pharmaceutical companies engaged in the development and marketing of generic finished dosages and APIs. Processes for the manufacture of APIs and formulations were patentable in India even prior to the 2005 Amendment, so no additional impact results from patenting of such processes.

Under the present drug policy of the Government of India, certain drugs have been specified under the Drugs (Prices Control) Order, 2013 (the “DPCO”) as subject to price control. The Government of India established the National Pharmaceutical Pricing Authority (“NPPA”) to control pharmaceutical prices. Under the DPCO, the NPPA has the authority to fix the maximum selling price for specified products.

During the year ended March 31, ~~2012,~~2013, the Department of Pharmaceuticals under the ministry of Chemicals and Fertilizers of the Government of India proposed the National Pharmaceuticals Pricing Policy, 2012, a revised national Pharmaceutical Pricing ~~policy. The draft~~ policy ~~as published, proposed~~ to apply price controls to 348 drugs listed in National List of Essential Medicines. Some of our formulation products are subject to these price controls.

On May 15, 2013, the Department of Pharmaceuticals released Drugs (Price Control) Order, 2013 governing the price control mechanism for 348 drugs listed in the National List of Essential ~~Medicines (as opposed to the 74 drugs currently subject to price control in India), and to revise the price control mechanism by benchmarking~~Medicines. As per this order, the prices of each of the drugs are determined based on the simple average of all drugs having market ~~dynamics and eliminating the current cost based model. Pending finalization~~share of more than 1% by value. The individual drug price notifications for almost all of the ~~policy, its~~products have been released by the NPPA. Based on these notifications, we were adversely impacted by approximately 3% (the annualized impact onis approximately 4%) of our ~~business cannot be ascertained.~~annual revenues from sales of all of our formulation products in India during the year ended March 31, 2014.

Russia accounted for ~~16%~~12% of our Global Generics segment’s revenues in the year ended March 31, ~~2012. Pharmexpert, a market research firm,~~2015. IMS Health ranked us 13^th17th in sales in Russia with a market share of ~~1.58%~~1.77% as of March 31, ~~2012~~2015 in its moving annual total report for the 12-months ended March 31, ~~2012 (the “Pharmexpert MAT~~2015. According to IMS Health, as per its moving annual total report for the 12 months ended March ~~2012 report”). Pharmexpert also reported that~~31, 2015, our ~~generics revenues from Russia grew by 21% in~~sales value growth and volume decrease for the year ended March 31, ~~2012,~~2015 were 10.1% and 2.7%, respectively, as compared to ~~Russia’s commercial~~the Russian pharmaceutical market value growth and volume decrease of ~~17%.~~12.3% and 1.3%, respectively. We were the top ranked Indian pharmaceutical company in Russia for such period.

~~The following table provides a summary of the revenues of our top 10 brands in the Russian market for the years ended March 31, 2010, 2011 and 2012, respectively:~~

Our top four brands, Nise, Omez, Ketorol and ~~Ciprolet,~~Cetrine, accounted for ~~67%~~60% of our Global Generics segment’s revenues in Russia in the year ended March 31, ~~2012.~~2015. Omez (an anti-ulcerant product), Nise and Ketorol ~~(pain~~(both pain management products) and ~~Ciprolet (an anti-infective~~Cetrine (a respiratory product) were ranked as the ~~44th, 12th, 69th~~65th, 14th, 97th and ~~199th best selling~~150th best-selling formulation brands, respectively, in the Russian market as of March 31, ~~2012~~2015 by ~~Pharmexpert~~IMS Health in its ~~MAT~~moving annual total retail segment report for the 12 months ended March ~~2012 report.~~31, 2015.

Our strategy in Russia is to focus on the gastro-intestinal, pain management, anti-infectives, respiratory, oncology and cardiovascular therapeutic areas. Our focus is on building ~~brand leaders~~leading brands in these therapeutic areas in prescription, over-the-counter and hospital sales. Nise, Omez, ~~Ciprolet, Nise~~Ketorol, Cetrine and ~~Ketorol~~Ciprolet continue to be brand leaders in their respective categories, as reported by ~~Pharmexpert~~IMS Health in its ~~MAT~~moving annual total report for the 12-months ended March ~~2012 report.~~31, 2015.

Novigan, a pain management product, and Ibuclin, a cold and flu product, were switched from prescription to over-the-counter during the years ended March 31, 2013 and 2014, respectively. Revenues from these products grew by 8.6% and 86%, respectively, as reported by IMS Health in its moving annual total report for the 12-months ended March 31, 2015.

Growth (in Russian rouble absolute currency terms) during the year ended March 31, ~~2012~~2015 was driven by increased marketing initiatives for prescription products, launches of new products and scaling up of media and pharmacy chain activities for over-the-counter medicines. However, such revenue growth measured in Indian rupees was adversely impacted due to depreciation of the Russian rouble by approximately 22% as compared to the year ended March 31, 2014.

We operate in other countries of the former Soviet Union, including Ukraine, Kazakhstan, Belarus and Uzbekistan. For the year ended March 31, ~~2012,~~2015, revenues from these countries accounted for approximately 3% of our total Global Generics segment’s revenues.

Our marketing and promotion efforts in our Russian prescription division is driven by a team of ~~approximately 400~~284 medical representatives and ~~77 front line~~48 managers to detail our products to doctors in 6777 cities in Russia.

Our Russian ~~OTC~~over-the-counter (“OTC”) division has ~~141~~226 medical representatives and 40 managers and is focused on establishing a network of relationships with key pharmacy chains and individual pharmacies. Our Russian hospital division has 3941 hospital specialists and 17 key account managers, and is focused on expanding our presence in hospitals and institutes.

In Russia, we generally extend credit only to customers after they have established a satisfactory history of payment with us. The credit ratings of these customers are based on turnover, payment record and the number of the customers’ branches or pharmacies, and are reviewed on a periodic basis. We review the credit terms offered to our key customers on a periodic basis and modify them to take into account the ~~current~~ macro-economic scenario in Russia.

Our principal competitors in the Russian market include Berlin Chemi AG, Gedeon Richter Limited, Krka d.d., Teva Pharmaceutical Industries Ltd., Lek-Sandoz Pharmaceuticals (an affiliate of Novartis Pharma A.G.), Ranbaxy Laboratories Limited, Nycomed International Management GmbH and Zentiva N.V. (an affiliate of Sanofi-Aventis S.A.).

The Russian government’s prioritization plan for the pharmaceutical market is making a transition from a largely out-of-pocket market to the western European model of centralized reimbursements. In January 2005, Russia’s federal drug supply system (the Dopolnitelnoye lekarstvennoye obespechenoye, or “DLO”) was introduced with the objective of subsidizing medicine expenditures for sectors of the population with low income or certain categories of illnesses. The initial budget provided approximately 10% of the population with state-funded benefits for medicine expenditures. In late 2007, the Russian government decentralized the DLO and split it into two components. The first component, known as the 7 nosologies program, remains centralized and covers expensive treatments for patients with certain severe chronic diseases. The second component, known as the ONLS program, involves regional purchasing and covers the medicines reimbursed for patients who are designated members of vulnerable groups, such as children, pregnant women, veterans and the elderly.

In order to promote local industry, in October 2009 the Russian government announced the Strategy of Pharmaceutical Industry Development in the Russian Federation for the period up to the year 2020 (or the “Pharma 2020 plan”), which aims to develop the research, development and manufacturing of pharmaceutical products by Russia’s domestic pharmaceutical industry. The goal of the Pharma 2020 plan is to reduce Russia’s reliance on imported pharmaceutical products and increase Russia’s self-sufficiency in that regard. In March 2011, the Russian government announced the approval of 120 billion ~~rubles~~roubles ($4 billion) in financing for the Pharma 2020 plan.

During the year ended March 31, 2010, the Russian government announced a reference pricing regime, pursuant to which a price freeze on certain drugs categorized as “essential” was implemented effective as of April 2010. Pharmaceutical companies have had to register maximum import prices for approximately 5,000 drugs on a list of “Essential and Vital Drugs” (also known as the “ZhNVLS”). During the year ended March 31, 2011, the Russian government announced price re-registration in local currency (Russian roubles) for drugs categorized as “essential” and the new registered prices were effective as of December 10, 2010. Also, effective as of September 1, 2010, the price controls on certain drugs categorized as “non-essential” were removed by the Russian Ministry of Health.

For the past several years, the Russian Ministry of Industry and Trade has enacted and renewed short term government regulations under which local manufacturers (i.e., in Russia, Belarus and Kazakhstan) get a 15% price preference over non-local manufacturers in procurement tenders by the state.

During the year ended March 31, 2012, Russia introduced Federal Law # 323, titled “On the Foundations of Healthcare for Russian Citizens”. Portions of this new law became effective on November 23, 2011 and the remainder became effective on January 1, 2012. This new law imposes stringent restrictions on interactions between (i) healthcare professionals, pharmacists, healthcare management organizations, opinion leaders (both governmental and from the private sector) and certain other parties (collectively referred to as “healthcare ~~decisionmakers”~~decision makers”) and (ii) companies that produce or distribute drugs or medical equipment (collectively referred to as “medical product companies”) and any representatives or intermediaries acting on their behalf (collectively referred to as “medical product representatives”). Some of the key provisions of this law are prohibitions on:

one-on-one meetings and communications between healthcare ~~decisionmakers~~professionals and medical product representatives, except for participation in clinical trials, pharmacovigilance, group educational events and certain other limited ~~exceptions;~~exceptions approved by Russia’s Healthcare Organization Administration;

the acceptance by a healthcare ~~decisionmaker~~professional of compensation, gifts or entertainment paid by medical product representatives;

the agreement by a healthcare ~~decisionmaker~~professional to prescribe or recommend a drug ~~products~~product or medical equipment; or

the engagement by a healthcare ~~decisionmaker~~decision maker in a “conflict of interest” transaction with a medical product representative, unless approved by regulators pursuant to certain specified procedures.

At the end of 2013, the State Duma (i.e., the lower chamber of the Russian parliament) adopted a series of amendments to various healthcare related laws. Among other things, the “Law On Medicines” was amended to add regulations restricting interactions between medical product representatives with medical professionals in connection with events sponsored by medical product companies. Under these regulations, in the event that medical product companies wish to sponsor certain scientific, medical education or similar events, they are required to disclose the date, place and time of the event and the plans, programs and agendas for discussion. Disclosure is to be made by publishing appropriate information on their official websites not later than two months before the indicated events, and the same information shall also be sent to Russia’s Federal Healthcare Service (Roszdravnadzor).

Although certain of the above prohibitions technically restrict only the actions of healthcare ~~decisionmakers,~~professionals, liability for non-compliance with such restrictions nonetheless extends to both the healthcare ~~decisionmaker~~professional and the medical product representative. ~~Penalties~~Except providing information on conflicts of interest, no other liability has been currently prescribed for ~~non-compliance with this new law have~~medical product companies. The methodology to define a conflict of interest has not yet been clarified.

On July 2, 2013, the Ministry of Health of the Government of Russia published an order on its website that binds physicians to prescribe medicinal products by International Nonproprietary Name (i.e., active substance) or by combination list (which combines different International Nonproprietary Names in one treatment group).

Russia signed the agreement on a common market for medicines within the Eurasian Economic Union

The Eurasian Economic Union (“EEU”), whose member states are Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan, officially started functioning on January 1, 2015. Among other things,, the member states of the EEU signed an international agreement establishing common principles and rules of functioning of the market for medicines within the EEU, which agreement will be effective starting on January 1, 2016. According to the agreement, the market authorization for a particular medicine received in one EEU member state will be valid throughout the whole EEU territory. For these purposes, the member states are working on the necessary regulatory framework. By the end of calendar 2015, the EEU plans for its member states to sign 25 acts governing various stages of drugs circulation.

Russia’s Federal Law No. 34-FZ dated March 8, 2015 amends the Federal Law 61-FZ “On Circulation of Medicines”. The amendments create new rules for the registration, manufacture and quality control of medicines, including new rules for the calculation and registration of the maximum retail prices of vital and essential medicines established by the ZhNVLS. Most of the changes are effective commencing July 1, 2015, with certain changes effective starting in 2016 or 2017.

Calculation of the maximum sale price for medicines included in the ZhNVLS list shall be determined by the Government of the Russian Federation taking into account a variety of economic and/or social criteria. These amendments became effective from March 16, 2015. The updated EDL lists for 2015 approved by the Decree of the Government No. 2782-p dated December 30, 2014 became effective from March 1, 2015. These lists include the list of drugs for provision to specific groups of citizens, medicines prescribed by a decision of a medical commission of medical organizations, medical supplies from the 7 Nosologies program list, as well as the minimum range of medicines required for medical aid.

The Russian Government approved the Priority Action Plan for sustainable economic and social stability development in 2015 (the “Priority Action Plan”). The Priority Action Plan was signed by the Russian Prime Minister on January 27, 2015. The key areas that may impact the pharmaceutical industry in the Priority Action Plan are (i) supporting import substitution; (ii) optimization of budget costs and reduction of inefficient expenses; and (iii) particularly, in the public healthcare area, the following measures:

On February 2, 2015, the Russian Ministry of Health (“MoH”), Russian Federal Service on Tariffs and Russian Ministry of Economic Development (“MoED”) amended the Federal Law 61-FZ “On Circulation of Medicines “ to provide the possibility of one-time indexation of prices for low-cost essential drugs;

On February 27, 2015, the Russian Ministry of Finance, MoH and MoED suggested improvements for public drugs supply; and

On February 15, 2015, the Russian Ministry of Industry and Trade enacted restrictions on access of foreign drugs to state procurement tenders, if two or more locally manufactured drugs participate in the relevant tender.

There has been severe political instability in Ukraine following civilian riots and political unrest which began in November 2013, destabilization of the Ukrainian President’s office in February 2014, and subsequent military action in the destabilized country operating under a temporary government.

As a result of ongoing conflict in the region, the United States and the European Union have imposed sanctions on certain designated individuals and companies in Ukraine and Russia. These sanctions were targeted at persons threatening the peace and security of Ukraine, senior officials of the Government of the Russian Federation and the energy, defense and financial services sectors of Russia, but they have had macroeconomic consequences beyond those persons and industries. In December 2014, the United States imposed further sanctions aimed at blocking new investments in the Crimea region of Ukraine and trade between the United States or U.S. persons and Crimea. These sanctions also authorized the United States government to impose sanctions on any U.S. persons determined to be operating in the Crimea region of Ukraine, subject to certain authorizations for the export and reexport of certain agricultural commodities, medicine, medical supplies, and replacement parts to Crimea.

Political instability in the region has combined with low worldwide oil prices to significantly devalue the Russian rouble and may continue to have a negative impact on the Russian economy. In addition, the Ukrainian hryvnia also experienced significant devaluation in 2014. The possibility of additional sanctions implemented by the United States and/or the European Union against Russia or vice versa, continued political instability, civil strife, deteriorating macroeconomic conditions and actual or threatened military action in the region may result in serious economic challenges in Ukraine, Russia and the surrounding areas.

Among our operations, we are engaged in sales, distribution and marketing of pharmaceutical products in Russia and Ukraine, including its Crimea region, all through non-U.S. entities that sell to distributors. Our sales in Russia and Ukraine are not to any of the individuals, companies or sectors designated by the current sanctions, and our sales in the Crimea region of Ukraine accounted for approximately 0.02% of our total revenues for the year ended March 31, 2015. We do not believe that our business in Russia, Ukraine or its Crimea region violates any of the current sanctions. However, relevant regulators could take a view that is different from ours on the issue. We continue to monitor our subsidiaries’ activities in light of the restrictions imposed by these and any future sanctions.

During the year ended March 31, ~~2012,~~2015, North America (the United States and Canada) accounted for ~~45%~~54% of our total Global Generics ~~segment’s~~segment sales.

In ~~North America (the~~the United States, ~~and Canada),~~ we sell generic drugs that are the chemical and therapeutic equivalents of reference branded drugs, typically sold under their generic chemical names at prices below those of their brand drug equivalents. Generic drugs are finished pharmaceutical products ready for consumption by the patient. These drugs are required to meet the U.S. FDA standards that are similar to those applicable to their brand-name equivalents and must receive regulatory approval prior to their sale.

Generic drugs may be manufactured and marketed only if relevant patents on their brand name equivalents and any additional government-mandated market exclusivity periods have expired, been challenged and invalidated, or otherwise validly circumvented.

Generic pharmaceutical sales have increased significantly in recent years, partly due to an increased awareness and acceptance among consumers, physicians and pharmacists that generic drugs are the equivalent of brand name drugs. Among the factors contributing to this increased awareness are the passage of legislation permitting or encouraging substitution and the publication by regulatory authorities of lists of equivalent drugs, which provide physicians and pharmacists with generic drug alternatives. In addition, various government agencies and many private managed care or insurance programs encourage the substitution of generic drugs for brand-name pharmaceuticals as a cost-savings measure in the purchase of, or reimbursement for, prescription drugs. We believe that these factors ~~together with the large volume of branded products losing patent protection over the coming years,~~ should lead to continued expansion of the generic pharmaceuticals market as a whole. We intend to capitalize on the opportunities resulting from this expansion of the market by leveraging our product development capabilities, manufacturing capacities inspected by various international regulatory agencies and access to our own APIs, which offer significant supply chain efficiencies.

~~Our Canada~~In April 2008, we acquired BASF’s pharmaceutical contract manufacturing business ~~generated revenues of 632 million during~~and related facility in Shreveport, Louisiana, U.S.A. The acquisition included the ~~year ended March 31, 2012. This~~relevant business, ~~includes revenues from~~customer contracts, certain ~~profit sharing arrangements with distributors~~supplier contracts, related Abbreviated New Drug Applications (“ANDAs”) and New Drug Applications (“NDAs”), trademarks, as well as the manufacturing facility and assets owned by BASF in Shreveport, Louisiana. The facility is designed to ~~market certain of our generic products.~~manufacture solid, semi-solid and liquid dosage forms.

In March 2011, we acquired from GlaxoSmithKline plc and Glaxo Group Limited (collectively, “GSK”) a penicillin-based antibiotics manufacturing site in Bristol, Tennessee, U.S.A., the product rights for GSK’sAugmentin^®andAmoxil^®brands of oral penicillin-based antibiotics in the United States (GSK retained the existing rights for these brands outside the United States), certain raw materials and finished goods inventory associated with Augmentin^®, and rights to receive certain transitional services from GSK. The acquisition enabled us to enter the U.S. oral antibiotics market with a comprehensive product filing and a dedicated manufacturing site. Due to high competition in our antibiotics portfolio, with minimal or no margin for certain dosage strengths, we have initiated a restructuring of our antibiotics manufacturing operations during the year ended March 31, 2015, including a workforce reduction and the discontinuation of certain dosage strengths of Amoxil^® andAugmentin^®.

In December 2014, we acquired from Novartis Consumer Healthcare Inc. the title and rights to itsHabitrol^® brand (an over-the-counter nicotine replacement therapy transdermal patch) and related U.S. marketing rights. The acquisition enabled us to get a strong foothold in an approximately one billion dollar anti-smoking market in the United States with a robust platform in nicotine replacement therapy patches. With the increasingly favorable regulatory environment, including factors such as the PPACA and new U.S. FDA guidelines, and increased focus by retailers on treatments for smoking cessation, the nicotine replacement therapy category is poised for expansion and offers significant growth opportunities for us.

Through the coordinated efforts of our teams in the United States and India, we constantly seek to expand our pipeline of generic products. During the year ended March 31, ~~2012,~~2015, we filed 1713 ANDAs in the United States, including 98 Paragraph IV filings. During the year ended March 31, ~~2012,~~2015, the U.S. FDA granted us 166 final ~~ANDA approvals and 8 tentative~~ ANDA approvals. As of March 31, ~~2012,~~2015, we had filed a cumulative total of ~~194~~220 ANDAs in the United States, out of which 8068 ANDAs were pending approval at the U.S. FDA, including 178 tentative approvals. As of March 31, 2015, we had also filed two NDAs under section 505(b)(2) of the Federal Food, Drug and Cosmetic Act in the United States, one of which is tentatively approved and awaits final approval. We have also filed two new Investigational New Drugs (“INDs”), our proposed biosimilars to rituximab and PEG-GCSF, and we have received permissions from the U.S. FDA to conduct Phase I trials for both of these IND filings. The trials are under progress for both IND approvals.

During the year ended March 31, 2015, we in-licensed three ANDAs in the United States, of which two are Paragraph IV filings. As of March 31, 2015, we have in-licensed a cumulative total of five ANDAs in the United States, out of which four were pending approval with the U.S. FDA.

Our Canada business generated revenues of Rs.523 million during the year ended March 31, 2015. This business includes revenues from certain profit sharing arrangements with distributors who market certain of our generic products.

Dr. Reddy’s Laboratories, Inc., our wholly-owned subsidiary in ~~the~~Princeton, New Jersey, United States, is primarily engaged in the marketing of our generic products in ~~North America (the~~the United ~~States and Canada).~~States. In early 2003, we commenced sales of generic products under our own label. We have our own sales and marketing team to market these generic products. Our key account representatives for generic products call on purchasing agents for chain drug stores, drug wholesalers, health maintenance organizations, hospital group purchasing organizations (“GPOs”), specialty distributors and pharmacy buying groups.

~~During~~Our over-the-counter (“OTC”) division markets and distributes store brand OTC products. This division has successfully launched 10 products. OTC products include store brand generic equivalents of products that originally have prescription drug status and are switched to OTC drug status by the innovator upon U.S. FDA approval (sometimes called “Rx-to-OTC switch” products). For the year ended March 31, ~~2011, we completed a reorganization~~2015, our OTC division generated Rs.8,264 million in revenues.

A significant portion of our ~~North American (the~~revenue is derived from the sale of injectable products in the therapeutic areas of oncology, neurology and anti-allergy. During the years ended March 31, 2015 and 2014, we launched docetaxel, azacitidine, decitabine and zoledronic acid in the United ~~States~~States. We have also expanded our presence to drug wholesalers, GPOs, specialty distributors, integrated distribution networks (“IDNs”), clinics and ~~Canada) generics business~~hospitals to ~~centralize all commercial and business functions into our New Jersey office and centralize all operational functions into our Louisiana facility.~~market these products.

In the year ended March 31, ~~2008,~~2014, we ~~launched our own OTC~~started supplying products division. Since then, we successfully introduced ranitidine 150 mg OTC in September 2007 and omeprazole mg OTC in December 2009. In addition, fexofenadine and fexofenadine pseudophedrine 180/240 mg was transitioned fromfor private label customers for prescription to OTC during the year ended March 31, 2012. These prescription-to-OTC switches require approval by the U.S. FDA, a process initiated by the drug innovator, through either an Abbreviated New Drug Application (“ANDA”) or a New Drug Application (“NDA”).

Revenues and gross profit derived from the sales of generic pharmaceutical products are affected by certain regulatory and competitive factors. As patents and regulatory exclusivity for brand name products expire, the first ~~off-patent~~ manufacturer to receive regulatory approval for generic equivalents of such products is generally able to achieve significant market penetration. As competing ~~off-patent~~ manufacturers receive regulatory approvals on similar products, market share, revenues and gross profit typically decline, in some cases significantly. Accordingly, the level of market share, revenues and gross profit attributable to a particular generic product is normally ~~related to~~depended upon the number of competitors ~~in that product’s market~~ and the timing of that product’s regulatory approval and launch, in relation to competing approvals and launches. Consequently, we must continue to develop and introduce new products in a timely and cost-effective manner to maintain our revenues and gross margins. In addition, the other competitive factors critical to this business include price, product quality, ~~prompt delivery,~~consistent and reliable product supplies, customer service and reputation. Many of our competitors seek to participate in sales of generic products by, among other things, collaborating with other generic pharmaceutical companies or by marketing their own generic equivalent to their branded products. Our major competitors in the ~~U.S. market~~United States include Teva Pharmaceutical Industries Limited, Mylan Inc., ~~Watson Pharmaceuticals,~~Actavis Inc., Sandoz, a division of Novartis Pharma A.G., ~~Ranbaxy Laboratories Limited, Lupin~~Par Pharmaceuticals, Sun Pharmaceuticals Limited and ~~Caraco Pharmaceutical Laboratories~~Lupin Limited.

Recent consolidation of customer purchasing power via alliances and joint ventures (such as the Walgreens Boots Alliance Development, the Red Oak Sourcing joint venture between CVS and Cardinal Health, and the McKesson expanded distribution agreements with Rite Aid and Omnicare) has served to intensify the competition and drive down prices. Consolidation of manufacturers is also continuing and, at the same time, new manufacturers continue to enter the generic market in the United States, which may further lower our pricing power and adversely affect our revenues in that market.

Brand name manufacturers have devised numerous strategies to delay competition from lower cost generic versions of their products. One of these strategies is to change the dosage form or dosing regimen of the brand product prior to generic introduction, which may reduce the demand for the original dosage form as sought by a generic ANDA dossier applicant or create regulatory delays, sometimes significant, while the generic applicant, to the extent possible, amends its ANDA dossier to match the changes in the brand product. In many of these instances, the changes to the brand product may be protected by patent or data exclusivities, further delaying generic introduction. Another strategy is the launch by the innovator or its licensee of an “authorized generic” during the 180-day generic exclusivity period, resulting in two generic products competing ~~for~~in the market rather than just the product that obtained the generic exclusivity. This may result in reduced revenues for the generic company which has been awarded the generic exclusivity period.

The U.S. market for OTC pharmaceutical products is highly competitive. Competition is based on a variety of factors, including price, quality, ~~and assortment of products,~~product mix, customer service, marketing support, and ~~availability~~the reliability and flexibility of ~~and approvals~~the supply chain for ~~new~~ products. Our competition in store brand products in the United States consists of several publicly traded and privately owned companies, including large brand-name pharmaceutical companies. The competition is highly fragmented in terms of both geographic market coverage and product categories, such that a competitor generally does not compete across all product lines. ~~Some~~In the store brand market, we compete directly with companies such as Perrigo that sell store brand OTC products. With the acquisition of ~~our primary OTC competitors~~Habitrol^®, we now not only compete with store brands but also with large branded companies such as GlaxoSmithKline Consumer Care, which is an industry leader in the ~~United States include Perrigo Company, Watson Pharmaceuticals,~~nicotine replacement therapy category. In addition, since our products are generic equivalents of innovator brands, we also compete against large brand-name pharmaceutical companies. The competitive landscape and ~~Actavis Group. Most~~market dynamics of the ~~large~~OTC market are rapidly evolving. Large brand-name pharmaceutical companies have ~~financial resources substantially greater than ours. Large brand-name pharmaceutical~~begun to more aggressively pursue Rx-to-OTC switches in new categories, which could present opportunities for us and other companies ~~could~~that sell store brand products. On the other hand, pricing pressures continue to increase with the entry of new competitors in the ~~future manufacture more store brand products or reduce prices of their brand products. Additionally,~~market. On key select molecules, the ~~competitive landscape might change if generic prescription drug manufacturers elect~~expectation is that competition in this area will continue to ~~pursue OTC marketing status for products that have switched or are switching from prescription to OTC status.~~grow as newer categories experience Rx-to-OTC switches.

All pharmaceutical manufacturers that sell products in the United States are subject to extensive regulation by the U.S. federal government, principally pursuant to the Federal Food, Drug and Cosmetic Act, the Hatch-Waxman Act, the Generic Drug Enforcement Act and other federal government statutes and regulations. These regulations govern or influence the testing, manufacturing, packaging, labeling, storing, record keeping, safety, approval, advertising, promotion, sale and distribution of products.

Our facilities and products are periodically inspected by the U.S. FDA, which has extensive enforcement powers over the activities of pharmaceutical manufacturers. Non-compliance with applicable requirements can result in fines, criminal penalties, civil injunction against shipment of products, recall and seizure of products, total or partial suspension of production, sale or import of products, refusal of the U.S. government to enter into supply contracts or to approve new drug applications and criminal prosecution. The U.S. FDA also has the authority to deny or revoke approvals of drug active pharmaceutical ingredients and dosage forms and the power to halt the operations of non-complying manufacturers. Any failure ~~by us~~ to comply with applicable U.S. FDA policies and regulations could have a material adverse effect on the operations in our generics business.

U.S. FDA approval of an ANDA is required before a generic equivalent of an existing or referenced brand drug can be marketed. The ANDA approval process is abbreviated because ~~when processing an ANDA,~~ the U.S. FDA waives the requirement of conducting complete clinical studies, although it ~~normally~~generally requires bio-availability and/or bio-equivalence studies. An ANDA may be submitted for a drug on the basis that it is the equivalent of a previously approved drug or, in the case of a new dosage form, is suitable for use for the indications specified.

An ANDA applicant in the United States is required to review the patents of the innovator listed in the U.S. FDA publication entitled Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the “Orange Book,” and make an appropriate certification. There are several different types of certifications that can be made. A Paragraph IV filing is made when the ANDA applicant believes its product or its manufacture, use or sales thereof does not infringe on the innovator’s patents listed in the Orange Book or where the applicant believes that such patents are not valid or enforceable. The first generic company to file a Paragraph IV filing may be eligible to receive a six-month marketing exclusivity period starting from either the first commercial marketing of the drug by any of the first applicants or a decision of a court holding the patent that is the subject of the paragraph IV certification to be invalid or not infringed. A Paragraph III filing is made when the ANDA applicant does not intend to market its generic product until the patent expiration. A

Paragraph II filing is made where the patent has already expired. A Paragraph I filing is made when there are no patents listed in the Orange Book. Another type of certification is made where a patent claims a method of use, and the ANDA applicant’s proposed label does not claim that method of use. When an innovator has listed more than one patent in the Orange Book, the ANDA applicant must file separate certifications as to each patent.

Before approving a product, the FDA also requires that our procedures and operations conform to ~~cGMP~~current Good Manufacturing Practice (“cGMP”) regulations, relating to good manufacturing practices as defined in the U.S. Code of Federal Regulations. We must follow cGMP regulations at all times during the manufacture of our products. We continue to spend significant time, money and effort in the areas of production and quality to help ensure full compliance with cGMP regulations.

The timing of final U.S. FDA approval of an ANDA depends on a variety of factors, including whether the applicant challenges any listed patents for the drug and whether the brand-name manufacturer is entitled to one or more statutory exclusivity periods, during which the U.S. FDA may be prohibited from accepting applications for, or approving, generic products. In certain circumstances, a regulatory exclusivity period can extend beyond the life of a patent, and thus block ANDAs from being approved on the patent expiration date. For example, in certain circumstances the U.S. FDA may extend the exclusivity of a product by six months past the date of patent expiration if the manufacturer undertakes studies on the effect of their product in children, a so-called pediatric extension.

In June 2003, the U.S. FDA announced reforms in its generic drug review program with the goal of providing patients with greater and more predictable access to effective, low cost generic alternatives to brand name drugs.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Medicare Act of 2003”) modified certain provisions of the Hatch-Waxman Act. In particular, significant changes were made to provisions governing 180-day exclusivity and forfeiture thereof. The new statutory provisions governing 180-day exclusivity may or may not apply to an ANDA, depending on whether the first Paragraph IV certification submitted by any applicant for the drug was submitted prior to the enactment of the Medicare Amendments on December 8, 2003.

Where the first Paragraph IV certification was submitted on or after December 8, 2003, the new statutory provisions apply. Under these provisions, 180-day exclusivity is awarded to each ANDA applicant submitting a Paragraph IV certification for the same drug with regard to any patent on the first day that any ANDA applicant submits a Paragraph IV certification for the same drug. ~~The 180-day~~The180-day exclusivity period begins on the date of first commercial marketing of the drug by any of the first applicants or a decision of a court holding the patent that is the subject of the paragraph IV certification to be invalid or not infringed. However, a first applicant may forfeit its exclusivity in a variety of ways, including, but not limited to (a) failure to obtain tentative approval within 30 months after the application is filed or (b) failure to market its drug by the later of two dates calculated as follows: (x) 75 days after approval or 30 months after submission of the ANDA, whichever comes first, or (y) 75 days after each patent for which the first applicant is qualified for 180-day exclusivity is either (1) the subject of a final court decision holding that the patent is invalid, not infringed, or unenforceable or (2) withdrawn from listing with the U.S. FDA (court decisions qualify if either the first applicant or any applicant with a tentative approval is a party; a final court decision is a decision by a court of appeals or a decision by a district court that is not appealed). The foregoing is an abbreviated summary of certain provisions of the Medicare Act of 2003, and accordingly itsuch act should be consulted for a complete understanding of both the provisions described above and other important provisions related to 180-day exclusivity and forfeiture thereof.

Where the first Paragraph IV certification was submitted prior to enactment of the Medicare Act of 2003, the statutory provisions governing 180-day exclusivity prior to the Medicare Act of 2003 still apply. The U.S. FDA interprets these statutory provisions to award 180-day exclusivity to each ANDA applicant submitting a Paragraph IV certification for the same drug on the same day with regard to the same patent on the first day that any ANDA applicant submits a Paragraph IV certification for the same drug with regard to the same patent. The 180-day exclusivity period begins on the date of first commercial marketing of the drug by any of the first applicants or on the date of a final court decision holding that the patent is invalid, not infringed, or unenforceable, whichever comes first. A final court decision is a decision by a court of appeals or a decision by a district court that is not appealed.

Food and Drug Administration Safety and Innovation Act (“FDASIA”) and Generic Drug User Fee Agreement (“GDUFA”)

In 2012, the United States enacted the Food and Drug Administration Safety and Innovation Act (“FDASIA”), a landmark legislation intended to enhance the safety and security of the U.S. drug supply chain by imposing stricter oversight and by holding all drug manufacturers supplying products to the United States to the same U.S. FDA inspection standards.

Specifically, prior to the passage of FDASIA, U.S. law required U.S. based manufacturers to be inspected by the U.S. FDA every two years but remained silent with respect to foreign manufacturers, causing some foreign manufacturers to go as many as nine years without a routine U.S. FDA current Good Manufacturing Practice (“cGMP”) inspection, according to the Government Accountability Office. FDASIA requires foreign manufacturers to have cGMP inspections at least every two years, or more frequently for manufacturers with high risk profiles.

FDASIA also includes the Generic Drug User Fee Agreement (“GDUFA”), a program to provide the U.S. FDA with additional funds through newly imposed user fees on generic and biosimilar products. These new fees are estimated to total approximately $1.5 billion through 2018, and are intended to fund increases in the U.S. FDA’s operations and staffing with a focus on three key aims:

The establishment of dedicated biosimilar fees should also help ensure that the U.S. FDA has appropriate resources for managing the introduction of biosimilar products on the U.S. market. Under GDUFA, 70% of the total fees will be derived from facility fees paid by finished dosage form manufacturers and active pharmaceutical ingredient facilities listed or referenced in a pending or approved generic drug application. The remaining 30% of the total fees will be derived from application fees, including generic drug application fees, prior approval supplement fees and drug master file fees.

On November 13, 2013, the U.S. FDA proposed a new labeling rule which the agency believes will speed up the dissemination of new safety information about generic drugs to health professionals and patients by allowing generic drug manufacturers to use the same process as brand drug manufacturers to update safety information in the product labeling. Under the proposal, generic drug manufacturers would be able to independently update product labeling (also called prescribing information or package inserts) with newly-acquired safety information before the U.S. FDA’s review of the change, in the same way brand drug manufacturers do today. Generic manufacturers would also be required to inform the brand name manufacturer about the change. The U.S. FDA would then evaluate whether the proposed change is justified and make an approval decision on the generic drug labeling change and the corresponding brand drug labeling change at the same time, so that brand and generic drug products would ultimately have the same U.S. FDA-approved prescribing information.

Currently, generic manufacturers must wait to update product safety information until the corresponding brand name product has received approval to update its safety information. Brand drug manufacturers are allowed to independently update and promptly distribute updated safety information by submitting a “changes being effected” (“CBE”) supplement to the U.S. FDA. Generic manufacturers must notify the U.S. FDA of new safety information, and wait for the U.S. FDA and the brand manufacturer to determine the updated labeling, which may result in a delay in getting new information to health care professionals and patients.

Under current law, generic and brand drug manufacturers are required to promptly review safety information about their drugs and comply with the U.S. FDA’s reporting and recordkeeping requirements. When new information becomes available that causes the product labeling to be inaccurate, all drug manufacturers must take steps to update the labeling.

To enhance transparency while the U.S. FDA is reviewing the change and to make safety-related changes to drug labeling quickly available to health care professionals and the public, the U.S. FDA plans to create a web page where safety-related changes proposed by all drug manufacturers would be posted. Members of the public could subscribe to receive updates.

Because the current regulatory scheme only permits a generic manufacturer to use the CBE process to update its label if the branded drug manufacturer changes its label first, this can prevent generic manufacturers from complying with state law warning requirements. As a result, state product liability suits based on failure-to-warn and design defect claims against generics manufacturers have generally been held pre-empted by Federal law, and in June 2013 the United States Supreme Court upheld such pre-emption and immunity of generic manufacturers inMutual Pharmaceutical Co. v. Bartlett.

If the U.S. FDA’s proposed new rule is adopted, it may eliminate this pre-emption and increase our potential exposure to lawsuits relating to product safety, side effects and warnings on labels. This new potential exposure to lawsuits may also increase the risk that, in the future, we may not be able to obtain the type and amount of insurance coverage we desire at an acceptable price and self-insurance may become the sole commercially reasonable means available for managing the product liability risks of our business.

Comments on the proposed labeling rule were initially due on March 13, 2014. However, the U.S. FDA subsequently reopened the comment period from February 18, 2015 until April 27, 2015 in light of both the significant amount of interest in the proposal and the emergence of alternate proposals put forth and endorsed by the generic pharmaceutical industry. As of the date of this report, the U.S. FDA’s proposed rule has not been finalized or replaced with an alternate proposal.

Prescription Drug Marketing Act and Laws Regulating Payments to Healthcare ~~Reform—~~Professionals

The FDA also enforces the requirements of the Prescription Drug Marketing Act, which, among other things, imposes various requirements in connection with the distribution of product samples to physicians. Sales, marketing and scientific/educational grant programs must comply with the federal anti-kickback statute, the Medicare-Medicaid Anti-Fraud and Abuse Act, as amended, the False Claims Act, as amended, and similar state laws. Pricing and rebate programs must comply with the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990, as amended. We are also subject to Section 6002 of the Patient Protection and Affordable Care Act, commonly known as the Physician Payment Sunshine Act which regulates disclosure of payments to certain healthcare professionals and providers.

In March 2010, the ~~“Patient~~Patient Protection and Affordable Care ~~Act”,~~Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively, the “PPACA”), ~~was~~were signed into law. The PPACA is one of the most significant healthcare reform measures in the United States in decades, and is expected to significantly impact the U.S. pharmaceutical industry. ~~Among the provisions of the~~The PPACA imposes additional rebates, discounts and fees, mandates certain reporting and contains various other requirements that ~~may~~could adversely affect our business, ~~include~~including the following:

The PPACA is anticipated to expand healthcare coverage to tens of millions of U.S. citizens, mostly those employed in smaller companies and the unemployed. The PPACA also reduces certain co-payments for Medicaid, a joint federal and state health insurance program for the poor. These changes should provide opportunities for us to increase our pharmaceutical products sales volumes in the long term.

~~The PPACA also~~ imposes new rules regarding insurance regulation and access. For example, there will be new regulations governing the insurance industry that will prohibit the denial of coverage due to pre-existing diseases, and ban placing lifetime value limits on insurance policy coverage. Indirectly, these reforms should also provide opportunities for us to improve our pharmaceutical products sales volumes in the long term.

In addition, the PPACA set forth new regulations relating to biological drugs. Among other things, the PPACA creates an abbreviated pathway to U.S. FDA approval of “bio-similar” biological products and allows the first interchangeable bio-similar product 18 months of exclusivity. These pro-generic provisions may provide increased opportunities for our biogenerics business, but also could increase competition in that field and thus adversely impact the selling prices, costs and/or profit margins for our bio-generics business. Conversely, the PPACA also has some anti-generic provisions, including provisions granting the innovator of a biological drug product 12 years of exclusive use before generic drugs can be approved based on being bio-similar.

~~The PPACA imposes on pharmaceutical manufacturers a variety of additional rebates, discounts and fees. Among other things, the PPACA includes~~ annual, non-deductible fees for entities that manufacture or import certain prescription drugs and biologics. This fee is calculated based upon each ~~organization’s~~manufacturer’s percentage share of total branded prescription drug and biologics sales to U.S. government programs (such as Medicare, Medicaid, ~~and~~ Veterans’ Affairs and Public Health Service discount programs), and authorized generic products are generally treated as branded products. The manufacturer must have at least $5 million in sales of branded prescription drugs or biologics in order to be subject to ~~the~~this fee.

The ~~first year for which the fee applied was calendar year 2011, and the fee is due by September 30 of the following calendar year (i.e., 2012). In addition, the~~ PPACA changed the computations used to determine Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program by redefining the average manufacturer’s price (“AMP”), effective October 1, 2010, and by using 23.1% instead of ~~15%~~15.1% of AMP for most branded drugs and 13% instead of 11% of AMP for generic drugs, effective January 1, 2010.

The PPACA also increased the number of healthcare ~~entities~~organizations eligible ~~for discounts under~~to participate in the Public Health Service pharmaceutical pricing ~~program.~~program, which provides for government controlled prices that result in substantial discounts for participants.

The PPACA has pro-generic provisions that could increase competition in the generic pharmaceutical industry and therefore adversely impact our selling prices or costs and reduce our profit margins. Among other things, the PPACA creates an abbreviated pathway to U.S. FDA approval of “biosimilar” biological products and allows the first interchangeable bio-similar biological product 18 months of exclusivity, which could increase competition for our bio-similars business. Conversely, the PPACA has some anti-generic provisions that could adversely affect our bio-similars business, including provisions granting the innovator of a biological drug product 12 years of exclusive use before generic drugs can be approved based on being biosimilar.

The PPACA ~~made~~makes several important changes to the federal anti-kickback statute, false claims laws, and health care fraud statutes that may make it easier for the government or whistleblowers to pursue such fraud and abuse violations. In addition, the PPACA ~~increased~~increases penalties for fraud and abuse violations. If our past, present or future operations are found to be in violation of any of the laws described above or other similar governmental regulations to which we are subject, we may be subject to the applicable penalty associated with the violation which could adversely affect our ability to operate our business and our financial results.

To further facilitate the government’s efforts to coordinate and develop comparative clinical effectiveness research, the PPACA ~~established~~establishes a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in such research. The manner in which the comparative research results ~~will~~would be used by third-party payors is uncertain.

On June 28, 2010, the Departments of Health and Human Services, Labor, and the Treasury jointly issued interim final regulations to implement the provisions of the PPACA that prohibit the use of preexisting condition exclusions, eliminate lifetime and annual dollar limits on benefits, restrict contract rescissions, and provide patient protections.

~~During~~ On June 20, 2014 the ~~year ended March 31, 2011,~~Departments of Health and Human Services, Labor, and the Treasury jointly issued final regulations clarifying the relationship between a group health plan’s eligibility criteria and the PPACA’s ~~changes to manufacturer rebates under the Medicaid Drug Rebate Program impacted our U.S. Generics business, but the impact was not material.~~90-day limit on waiting periods.

On June 28, 2012, the U.S. Supreme Court ruled on certain challenged provisions of the PPACA. The U.S. Supreme Court generally upheld the constitutionality of the PPACA, including its individual mandate that requires most Americans to buy health insurance starting in 2014, and ruled that the Anti-Injunction Act did not bar the ~~court~~Court from reviewing that the PPACA provision. However, the U.S. Supreme Court ~~struck down~~invalidated the PPACA’s provisions requiring each state to expand its Medicaid program or lose all federal Medicaid funds. The Court did not invalidate the PPACA’s expansion of Medicaid for states that voluntarily participate; it only held that a state’s entire Medicaid funding cannot be withheld due to its failure to participate in the expansion.

~~The~~Pending full ~~impact~~implementation of the PPACA, ~~will be seen as it continues to be implemented, by promulgation of regulations and other administrative and judicial actions. We~~we are continuing to evaluate all potential scenarios surrounding its implementation and the corresponding impact ~~of the PPACA~~ on our financial condition, results of operations and cash flow.

On November 28, 2013, the Drug Quality and Security Act was signed into law in the United States. The legislation introduces a federal track-and-trace system for medicines with serial numbers added to individual packs and (non-mixed) cases within four years of the legislation’s adoption, and electronic tracing of production through the supply chain mandated within 10 years. It also strengthens licensure requirements for wholesale distributors and third-party logistics providers, and requires the U.S. FDA to maintain a database of wholesalers that will be available to the public through its website. The law also boosts oversight of compounding pharmacies that make drugs to order, and increases the powers of the U.S. FDA to oversee large-volume or ‘outsourcing’ compounders without individual prescriptions.

The Biologics Price Competition and Innovation Act of 2009 created a statutory pathway and abbreviated approval processes for the approval of biosimilar versions of brand-name biological products and a process to resolve patent disputes. On April 28, 2015, the U.S. FDA finalized three substantial draft guidance documents originally published in February 2012 that are intended to provide a roadmap for development of biosimilar products. On May 13, 2015, the U.S. FDA released another biosimilar guidance document. These guidance documents address quality considerations, scientific considerations and questions and answers regarding commonly posed issues.

Letter from the United States Congress seeking certain information on increase in generic drug prices

On October 2, 2014, two members of the United States Congress wrote to us requesting information and expressing concern over the “escalating prices” of two products, divalproex sodium ER and pravastatin sodium, marketed by us in the United States. We subsequently responded to this letter and clarified, among other things, that: (a) we launched divalproex sodium ER on August 19, 2013 and have not implemented a price increase on this product since then; and (b) we sold pravastatin sodium in the United States only during the time period of January 1, 2012 to August 20, 2012, during which time period we did not increase the price of this product.

Civil Investigative Demand from the Office of the Attorney General, State of Texas

On or about November 10, 2014, we received a Civil Investigative Demand (“CID”) from the Office of the Attorney General, State of Texas (the “Texas AG”) requesting certain information for the period of time between January 1, 1995 and the date of the CID. The CID includes a broad range of requests for information, documents and data regarding sales and price reporting in the U.S. marketplace of certain products. We subsequently communicated with the Texas AG, at which time they requested a sample of certain transactional data pertaining to one calendar quarter requested in the CID, and we provided such sample transactional data to the Texas AG on or about February 20, 2015.

On November 3, 2014, we received a subpoena duces tecum to appear before the Office of the Attorney General, California (the “California AG”) and produce records and documents relating to the pricing of 15 products. A set of five interrogatories related to pricing practices was served as well. We have communicated with the California AG, and we are working with them in tandem with the Texas AG in order to avoid duplication of efforts in providing the voluminous data requested.

In Canada, we are required to file product dossiers with the ~~country’s regulatory authority~~Health Canada for permission to market ~~the~~a generic formulation. The regulatory authorities may inspect our manufacturing facility before approval of the dossier. As of March 31, 2015, we have filed a total of 33 Abbreviated New Drug Submission (“ANDS”) in Canada, out of which 7 ANDS were pending approval, including 2 tentative approvals.

Our sales of generic ~~drugs~~medicines in Europe for the year ended March 31, ~~2012~~2015 were ~~8,259~~Rs.7,193 million, which accounted for ~~12%~~approximately 6% of our Global Generics segment’s ~~sales~~sales.

In the European Union (the “EU”), the manufacture and sale of pharmaceutical products is regulated in a manner substantially similar to that in the United States. Legal requirements generally prohibit the handling, manufacture, marketing and importation of any pharmaceutical product unless it is properly registered and manufactured in accordance with applicable law. The registration file relating to any particular product must contain ~~medical~~scientific data related to product efficacy and safety, including results of clinical testing and references to medical publications, as well as detailed information regarding production methods and quality control. ~~Health ministries~~Regulatory authorities are authorized to suspend, restrict or cancel the registration of a product if it is found to be harmful or ineffective, or manufactured and marketed other than in accordance with registration conditions.

In Germany, we sell a broad ~~and diversified~~ range of generic pharmaceutical products under the “betapharm” brand.

Over the last ~~five~~few years, the German pharmaceutical market has significantly changed. The healthcare reform known as the Statutory Health Insurance (SHI)—Competition Strengthening Act or Wettbewerbsstärkungsgesetz (“GKV-WSG”) (an act to strengthen the competition in public health insurance), which was effective as of April 1, 2007, has significantly increased the power of insurance companies and statutory health insurance funds (“SHI funds”) to influence dispensing of medicines.

Pursuant to the GKV-WSG law, those pharmaceutical products covered by rebate contracts with insurance companies and SHI funds have to be prescribed by physicians and dispensed by ~~pharmacies.~~pharmacies with priority. This has increased the power of insurance companies and SHI funds. As a result, many SHI funds have enacted tender (i.e., competitive bidding) processes to determine which pharmaceutical companies they will enter into rebate contracts ~~with, resulting~~with. This has resulted in ~~the market moving towards a tender based supply model while causing pressure on margins. We participate~~more than 90% of generic products currently sold in ~~these tenders~~German retail outlets being supplied through ~~our wholly-owned subsidiary, betapharm.~~

~~Traditionally, the SHI fund~~ contracts had the elements of basic rebate and incremental rebates on additional prescriptions generated through persons insured by these SHI funds. Since the new healthcare reforms, the SHI funds have been aggressiveprocured in ~~negotiating rebates for their contracts. In recent years, they have negotiated higher discounts.~~

~~With the above-mentioned discount contracts being effective, and further~~ competitive bidding tenders, announced by SHI funds, long term changes in the German market’s structural framework are ongoing. The German generics market has experienced a shift to a tender based supply model from the previous prescription based model, where the key driver for generating sales had previously been doctors’ prescriptions and pharmacists’ influence.thereby causing significant pressure on product margins. In response to these market changes, betapharm ~~has undergone~~underwent a comprehensive restructuring of its sales force, with a reduction of more than 200 employees since we acquired it in March 2006. In addition, we are participating in the tender opportunities by bidding at prices which meet our internal incremental profitability thresholds. In view of this, our success ratio in winning these tender awards has declined and, accordingly, the ratio of our tender based sales to our overall sales has significantly reduced over the past few years.

We market our generic products in the United Kingdom and other EU countries through our U.K. subsidiary, Dr. Reddy’s Laboratories (U.K.) Limited. This subsidiary was formed in the year ended March 31, 2003 after our acquisition of Meridian Healthcare Limited, a United Kingdom based generic pharmaceutical company. We currently market 3437 generic products in such countries, representing 8489 dosage strengths. We market our generic products in Italy through our Italian subsidiary, Dr. Reddy’s SRL. This subsidiary was formed in the year ended March 31, 2009 in connection with our acquisition of Jet Generici SRL, a company engaged in sale of generic finished dosages in Italy.

~~In Germany, having rebate contracts with SHI funds is an important criterion towards gaining volume market shares.~~ Our key competitors within the German generics market include the Sandoz group of Novartis Pharma A.G. (including its Hexal, Sandoz and 1A Pharma subsidiaries), the Ratiopharm group of Teva Pharmaceutical Industries Ltd. (including its Ratiopharm, AbZ-Pharma and CT Arzneimittel subsidiaries), Winthrop Arzneimittel GmbH and the Stada group of Stada Arzneimittel AG (including its Stada and Aliud subsidiaries). ~~With~~In the ~~discount~~rebate contracts with SHI funds, ~~becoming effective,~~ prices ~~have become~~are one of the most important competitive factors.

The United Kingdom is one of the largest markets for generic pharmaceuticals in Europe. It is also one of the most competitive markets, due to its ~~very~~ low barriers to entry. Significant vertical integration exists between wholesalers and retailers, ensuring low prices as long as there are several suppliers. ~~The number of major pharmaceutical companies in the U.K. pharmaceutical market has decreased due to consolidation.~~

The activities of pharmaceutical companies within the European Union are governed in particular by ~~Directive~~Directives 2001/~~83EC~~83/EC and 2003/94/EC, as ~~amended. This Directive outlines~~amended, and as implemented in national laws within the countries of the European Union. These Directives outline the legislative framework, including the legal basis of ~~approval, specific licensing~~marketing authorization procedures, and quality standards including manufacture, patient information and ~~pharmaco-vigilance~~pharmacovigilance activities. Our U.K. facilities are licensed and periodically inspected by the U.K. Medicines and Health Care Products Regulatory Agencies (“MHRA”) Inspectorate, which has extensive enforcement powers over the activities of pharmaceutical manufacturers. Non-compliance can result in product recall, plant closure or other penalties. In addition, the U.K. MHRA Inspectorate has approved and periodically inspected our manufacturing facility based in Andhra Pradesh, India for the manufacture of generic tablets and capsules for supply to Europe.

All pharmaceutical companies that manufacture and market products in Germany are subject to the rules and regulations defined by the German drug regulator, the Bundesinstitut für Arzneimittel und Medizinprodukte (“BfArM”) and the Federal Drug Authorities. All the licensed facilities of pharmaceutical companies in Germany are periodically inspected by the Federal Drug Authorities, which has extensive enforcement powers over the activities of pharmaceutical companies. Non-compliance can result in closure of the facility. Prior approval of a marketing authorization is required to supply products within the European Union. Such marketing authorizations may be restricted to one member state, ~~then recognized in other~~cover a selection of member states or can ~~cover~~be for the whole of the European Union, depending upon the form of registration ~~elected. In Germany, marketing authorizations have to be submitted for approval to the BfArM.~~procedure selected.

Generic or abridged applications omit full non-clinical and clinical data but contain limited non-clinical and clinical data, depending upon the legal basis of the application or to address a specific issue. ~~The majority of our generic applications are made on the basis of essential similarity although other criteria may be applied.~~ In the case of ~~an essentially similar~~a generic medicine application, the applicant is required to demonstrate that its generic product contains the same active pharmaceutical ingredients in the same dosage form for the same indication as the innovator product. Specific data is included in the application to demonstrate that the proposed generic product is ~~essentially similar~~interchangeable to the innovator product with respect to quality, safe usage and continued efficacy. European Union laws prevent regulatory authorities from accepting applications for approval of generics that rely on the safety and efficacy data of an innovator of a branded product until the expiration of the innovator’s data exclusivity period ~~(currently 6 or 10~~(usually 8 years from the first marketing authorization in the European ~~Union)~~Union, depending on the circumstances). The applicant is also required to demonstrate ~~bio-equivalence~~bioequivalence with the EU reference product. Once all these criteria are met, a marketing authorization may be considered for grant.

Unlike in the United States, there is no equivalent regulatory mechanism within the European Union to incentivize challenge to any patent protection, nor is any period of market exclusivity conferred upon the first generic approval. In situations where the period of data exclusivity given to the innovator of a branded product expires before their patent expires, the launch of our product would then be delayed until patent expiration.

Our U.K. facilities are licensed and periodically inspected by the U.K. Medicines and Healthcare products Regulatory Agencies (“MHRA”) good manufacturing practice Inspectorate, which has extensive enforcement powers over the activities of pharmaceutical manufacturers. Non-compliance can result in product recall, plant closure or other penalties and restrictions. In addition, the U.K. MHRA Inspectorate has approved and periodically inspected our manufacturing facilities based in Hyderabad, Telangana, India for the manufacture of generic medicines for supply to Europe. The German Federal Institute for Drugs and Medical Devices (Bundesinstitut für Arzneimittel und Medizinprodukte or “BfArM”) has also inspected our plants in Hyderabad as well as Vishakapatnam.

All pharmaceutical companies that manufacture and market human medicinal products in Germany are subject to the applicable rules and regulations executed by the BfArM and the supervisory authorities of the respective federal state in Germany. All pharmaceutical companies in Germany are periodically inspected by the competent supervisory authority, which has extensive enforcement powers over the activities of pharmaceutical companies. Non-compliance can result in closure of the facility.

In Germany, the government ~~continues~~has in recent years enacted a number of laws designed to ~~focus on reducing health care spending. During~~limit pharmaceutical cost increases, including the ~~year ended March 31, 2007, the German government passed~~GKV-WSG discussed above and the Economic Optimization of Pharmaceutical Care Act ~~(or “Arzneimittelversorgungs- Wirtschaftlichkeisgestz” or~~(also known as the “AVWG”)~~, which became effective as of May 1, 2006and was designed to contain increased pharmaceutical costs.~~

Another German law entitled the “Statutory Health Insurance Competition Strengthening Act” (or “Wettbewerbsstärkungsgesetz” or “GKV—WSG”), which became effective as of April 1, 2007, has significantly increased the ability of insurance companies and SHI funds to influence dispensing of medicines. Pursuant to the GKV—WSG law, pharmaceutical products covered by rebate contracts with insurance companies must be prescribed by physicians and dispensed by pharmacies. This has increased the role of insurance funds in the German pharmaceutical market.

. During the fiscal year ended March 31, 2011, the German government introduced a new law entitled “Act on the reorganization of the pharmaceutical market in the public health insurance” (or“~~Arzneimittel Marktes Neuordnungs Gesetz”~~Arzneimittelmarktneuordnungsgesetz”,commonly referred to as “AMNOG”), which affects reimbursement of drugs within ~~the~~ Germany’s statutory health care system in order to further control the costs of medical care. The key elements of this law are as follows:

Historically, the pharmaceutical companies had been free to set the initial asking price for novel drugs in the German public health system, subject to certain mandatory rebates. Under this new law, a pharmaceutical company ~~will determine~~determines the price for a new drug or new therapeutic indication for the first year after launch, but must submit to the Joint Federal Committee (the Gemeinsamer Bundesausschuss or “G-BA”) a ~~benefit~~benefit/risk assessment dossier on the drug at or prior to its launch. The G-BA ~~will analyze~~analyzes whether the drug shows an additional clinical benefit in comparison to a corresponding established drug (the “appropriate comparator therapy”).

If an additional benefit is established, the pharmaceutical company must negotiate the price of the drug with the Federal Association of the health insurance funds. If no agreement is reached in the negotiation, then the price ~~will be~~is determined pursuant to an arbitration procedure. There must be a minimum term of one year.

If no additional benefit is established, the drug is immediately included ~~into~~in a group of drugs with comparable pharmaceutical and therapeutic characteristics, for which maximum reimbursement prices have already been set. If this is not possible due to the drug’s novelty, then the pharmaceutical company must negotiate a reimbursement price with the Federal Association of the health insurance funds that may not exceed the costs of the appropriate comparator therapy.

The prices determined pursuant to the above procedures ~~will~~ also apply to private insurance agencies, privately insured persons and self-payers, although they may negotiate further discounts.

For drugs developed specifically to treat rare medical conditions that are designated as “orphan drugs”, the orphan drug will be presumed to have an additional benefit under certain circumstances.

A new regulation for packaging size had to be ~~fully~~ implemented byin 2013. Standard sizes ~~will be~~are now based upon the duration of therapies, instead of being based on fixed quantity. Three different types of package sizes are now allowed: N1-packages for treatment periods of 10 days; N2-packages for treatment periods of 30 days; and N3-packages for treatment periods of 100 days. ~~During the transition period, discrepancies of 20%, 10% and 5% will be respectively accepted for N1, N2 and N3 packages.~~

The law increases the choice to patients by the use of co-payment as an option for patients opting for a non-rebated generic drug.

~~Impairment~~In Germany, the German Drug Law (Arzneimittelgesetz) (“AMG”), which implements European Union requirements, is the primary regulation applicable to medicinal products. In 2012, the 16^th Amendment to the AMG and related laws were enacted in order to implement European Directives into national laws. Among other things, the most important changes refer to pharmacovigilance, clinical trials, protection measures against counterfeited medicines and liberalization of German drug advertising law. These transpositions of European Union legislation into national law also took place in the United Kingdom.

The German Social Code’s price freeze imposed on reimbursable drugs, which was due to expire at the ~~years ended~~end of 2013, was amended in 2013 and 2014 to extend the price freeze until December 31, 2017, although the continued price freeze will not apply to medicines subject to internal reference pricing. New European pharmacovigilance legislation (Regulation (EU) No 1235/2010 and Directive 2010/84/EU) was implemented in July 2012. These new requirements are intended to improve patient safety, but will also increase our administrative burdens and therefore our costs. In addition, there are proposals from the European Commission to introduce fees that industry pays for the simplification and maintenance of the European pharmacovigilance system as well as fees for the assessment of pharmacovigilance reports, study protocols and referrals. The principle of the proposal has been agreed, but the actual financial proposals are currently in the final stages of discussion and will likely be implemented during the year ending March 31, ~~2009~~2016. This may lead to further increased costs in Europe whenever such proposals are implemented.

We refer to all markets of our Global Generics segment other than North America, Europe, Russia and ~~2010, there was a shift to a competitive bidding (or “tender”) based supply model within~~other countries of the ~~German generic pharmaceutical market, with increasing tender activity by a number~~former Soviet Union and India as our “Rest of ~~statutory health insurance funds (“SHI funds”). Due to such market conditions, we reassessed~~ the ~~impact~~World” markets. Our significant Rest of ~~these tenders on~~the World markets include Venezuela, South Africa and Australia. Our revenues from our ~~future forecasted sales and profits during~~“Rest of the World” markets were Rs.13,057 million in the year ended March 31, ~~2010. As a result~~2015, an increase of ~~this re-evaluation, the carrying amounts of both the product related intangibles and the betapharm cash generating unit were determined~~77% as compared to be higher than their respective recoverable amounts. Accordingly, an impairment loss of 2,112 million for the product related intangibles and 6,358 million for the betapharm cash generating unit was recognized in our income statement during the year ended March 31, ~~2010. Of the impairment loss pertaining to the betapharm cash generating unit, 5,147 million was allocated to the carrying value~~2014.

Venezuela accounted for 7% of ~~goodwill during~~our Global Generics segment’s revenues in the year ended March 31, ~~2010, thereby impairing~~2015. IMS Health ranked us 18th in sales in Venezuela, with a market share of 1.78%, as of March 31, 2015 in its moving annual total report for the entire carrying value. The remaining 1,211 million was allocated to the trademark/brand—‘beta’, which forms a significant portion of the intangible asset value of the betapharm cash generating unit, during the year12-months ended March 31, ~~2010.~~

To offset the impact of reduced prices on betapharm’s profitability, we increased the proportion of betapharm’s products sourced from Indian manufacturing facilities, restructured betapharm’s work force (terminating approximately 200 employees during the year ended March 31, 2010)2015. According to such IMS Health report, our sales value and ~~reduced betapharm’s selling, general and administrative expenses to achieve a more sustainable structure in light of the current tender-based model and economic climate in Germany.~~

During the year ended March 31, 2012, there were further changes in the German generic pharmaceutical market that are expected to adversely impact the future operations of our German subsidiary, betapharm. Among other things, there was a reference pricing review that resulted in a reduction of the government mandated price of certain of betapharm’s products, which is expected to adversely affect betapharm’s sales margins. In addition, one of the key SHI funds, Barmer GEK, announced a large sales tender which is expected to cause significant impact on the price realization of some of the key products of betapharm.

We reassessed the impact of these changes on our future forecasted sales and profits, and as a result of this re-evaluation, the carrying amounts of certain product related intangibles were determined to be higher than their recoverable amounts. Accordingly, an impairment loss of 1,022 million was recognized in our income statementvolume growth for the year ended March 31, ~~2012.~~2015 were 149.7% and 141.2%, respectively, as compared to the Venezuela pharmaceutical market value growth and volume decrease of 52.5% and 1.65%, respectively. We were the top ranked Indian pharmaceutical company in Venezuela for such period.

~~Other markets~~Our top four brands, Zovanta, Omez, Ciprolet and Plagril, accounted for 64% of our Global Generics ~~segment~~segment’s revenues in Venezuela in the year ended March 31, 2015.

~~Other significant markets of our Global Generics segment include~~Our strategy in Venezuela ~~South Africa~~is to focus on the gastro-intestinal, pain management, anti-infectives, respiratory, oncology and ~~Australia.~~cardiovascular therapeutic areas. Our focus is on building leading brands in these therapeutic areas in prescription, over-the-counter and hospital sales. Nise, Omez, Ketorol, Cetrine and Ciprolet continue to be brand leaders in their respective categories, as reported by IMS Health in its moving annual total report for the 12 months ended March 31, 2015.

Our growth in Venezuela for the year ended March 31, 2015 was driven by increased marketing initiatives for prescription products.

~~During the year ended March 31, 2010, we entered into~~We have a strategic partnership with GlaxoSmithKline plc (“GSK”) to develop and market select products across emerging markets outside India. ~~This partnership will expand our reach in emerging economies, and leverage our product portfolio and process development strengths with GSK’s market knowledge and presence in such markets.~~ The products ~~will be~~are manufactured by us, and ~~will be~~ licensed and supplied to GSK in markets such as Latin America, Africa, the Middle East and Asia Pacific, excluding India.

~~During the year ended March 31,~~On June 30, 2012, we ~~signed~~entered into a ~~Memorandum~~partnership agreement with Merck Serono, a division of ~~Understanding with Fujifilm Corporation (“Fujifilm”)~~Merck KGaA, Darmstadt, Germany, to ~~enter into an exclusive~~co-develop a portfolio of biosimilar compounds in oncology, primarily focused on monoclonal antibodies (MAbs). The partnership covers co-development, manufacturing and commercialization of the compounds included in the ~~generics drug business for~~agreement. The partnership with Merck Serono expands on our presence in the ~~Japanese~~bio-similar space in select emerging market countries and ~~to establish a joint venture~~enables our entry in ~~Japan. Fujifilm Corporation will own 51%~~the bio-similar space into the regulated markets of the ~~joint venture~~United States and Europe.

The agreement is based on full research and development cost sharing. The deal structure calls for Merck Serono and us to co-develop the ~~49% balance~~molecules included in the agreement. We will lead early product development and complete Phase I development. Upon completion of Phase I, Merck Serono will take over manufacturing of the compounds and will lead Phase III development. Merck Serono will undertake commercialization globally, outside the United States, with the exception of select emerging markets that will be ~~owned~~co-exclusive or where we maintain exclusive rights. We will receive royalty payments from Merck Serono upon commercialization by us. This joint venture will develop, manufacture and promote competitive and high quality generic drugs utilizing both Fujifilm Corporation’s advanced quality control technologies and our expertise in cost competitive production technologies.

Japan is the world’s second largest pharmaceutical market (approximately $97 billion at consumer price level, according to IMS Health). The generics market in Japan is estimated to be approximately $11.6 billion and is characterized by low penetration—only approximately 23% of Japanese prescription drug sales by volume are generics products, as compared to approximately 70% inthem. In the United ~~States. The Japanese generics market is expected to grow significantly over~~States, the ~~coming years as~~parties will co-commercialize the products on a ~~result~~profit-sharing basis.

As part of ~~macroeconomic factors such as~~ the ~~rapidly aging population~~collaboration arrangement, we are currently conducting early product development, technology transfers and ~~increasing healthcare funding gap. The proposed joint venture is expected to start contributing to our revenues only after a period of three to four years.~~Phase I trials.

Manufacturing for our Global Generics segment entails converting active pharmaceutical ingredients (“API”) into finished dosages. As of March 31, ~~2012,~~2015, we had ~~nine~~thirteen manufacturing facilities within this segment. ~~Seven~~Eleven of these facilities are located in India and two are located in the United States (Shreveport, ~~Louisiana~~Louisiana; and Bristol, ~~Tennessee;)~~Tennessee). WeIn addition, we also have one packaging facility in the United Kingdom. ~~Two~~All of the Indian facilities, one each at Hyderabad and Vishakapatnam, are United States Food and Drug Administration (“U.S. FDA”) compliant and German drug regulator Bundesinstitut für Arzneimittel und Medizinprodukte (also known as “BfARM”) compliant. Two of the facilities in Hyderabad, India are also approved by the United Kingdom Medicines and Health Care Products Regulatory Agencies (“MHRA”) in addition to approvals from other regulated markets. During the year ended March 31, 2012, one facility in India and the one in Louisiana were inspected and approved by the U.S. FDA. These facilities are designed in accordance with and are compliant with current Good Manufacturing Practice (“cGMP”) requirements and are used for the manufacture of tablets, hard gelatin capsules, injections, liquids and creams for sale in India as well as other markets. ~~The~~All of our manufacturing ~~site in Vishakapatnam,~~sites’ laboratories and facilities are designed and maintained to meet increasingly stringent requirements of safety and quality. All of our sites outside of India is a state of the art facility for the manufacture of injectable form and solid oral products. The Vishakapatnam facility has satisfactorily passed inspection by the National Health Surveillance Agency (also known as “ANVISA”) of Brazil, the German BfARM and the U.S. FDA). All our overseas sites are approved by the respective regulatory bodies in the jurisdictions where they are located. ~~All these facilities manufacture products in line with cGMP and the requirements of the countries where they are located.~~

We manufacture most of our finished products at these facilities and also use contract manufacturing arrangements as we determine necessary. ~~We source some products from approved third parties based on the necessity and requirement of our markets.~~ For each of our products, we continue to identify, upgrade and develop alternate vendors as part of risk mitigation and continual improvement.

The ingredients for the manufacture of the finished products are sourced from in-house API manufacturing facilities and from vendors, both local and ~~foreign.~~non-local. Each of these vendors undergo a thorough assessment as part of the vendor qualification process before they qualify as an approved source. We attempt to identify more than one supplier in each drug application or make plans for alternate vendor development from time to time, considering the supplier’s history and future product requirements. ~~In addition, we obtain a significant portion of our inactive pharmaceutical ingredients from foreign suppliers.~~ Arrangements with international raw material suppliers are subject to, among other things, respective country regulations, various import duties and other government clearances.

The prices of our raw materials generally fluctuate in line with commodity ~~cycles, though the prices of raw materials used in our Generics business are generally more volatile.~~cycles. Raw material expense forms the largest portion of our ~~operating expenses.~~cost of revenues. We evaluate and manage our commodity price risk exposure through our operating procedures and sourcing policies.

The logistics services for storage and distribution in the United States, Germany, Venezuela and Russia are outsourced to a third party service provider.

We manufacture formulations in various dosage forms including tablets, capsules, injections, liquids and creams. These dosage forms are then packaged, quarantined and subject to stringent quality tests, to assure product quality before release into the market. We manufacture our key brands for our Indian markets at our facilities in Baddi, Himachal Pradesh, to take advantage of certain fiscal benefits offered by the Government of India, which ~~include~~includes partial exemption from income taxes ~~and excise duties~~ for a specified period.

All pharmaceutical manufacturers that sell products in any country are subject to regulations issued by the Ministry of Health ~~(“MoH”)~~ (or its equivalent) of the respective country. These regulations govern, or influence the testing, manufacturing, packaging, labeling, storing, record-keeping, safety, approval, advertising, promotion, sale and distribution of products. Our facilities and products are periodically inspected by various regulatory authorities such as the U.S. ~~FDA),~~FDA, the U.K. MHRA, the German BfARM, the South African Medicines Control Council, , the Brazilian ANVISA, the Romanian National Medicines Agency, ~~the Gulf Co-operation Council group, the Ministry of Health of Kirgystan and~~Ukrainian State Pharmacological Center, the local World Health Organization and Drug Control Authority of India, all of which have extensive enforcement powers over the activities of pharmaceutical manufacturers operating within their jurisdiction.

~~Product Transfers and Capacity Expansion~~Changes in OctoPlus N.V. operations

~~To meet growing demand in regulated markets,~~In the year ended March 31, 2013, we ~~are~~acquired Netherlands-based specialty pharmaceutical company OctoPlus N.V. (“OctoPlus”). OctoPlus has developed significant in-house expertise in the ~~process~~development and creation of ~~obtaining approvals from~~micro-spheres and liposomes using certain polymer based technologies that enhance and enable controlled-release of the ~~U.S. FDA for products from one additional finished dosage facility currently serving emerging markets. This will ease~~subject API into the ~~manufacturing pressure and optimize the capacities across our plants. We are also~~human body. OctoPlus is well-known in the ~~process~~market for formulating complex injectables using polylactic-co-glycolic acid (“PLGA”) technology, which requires significant expertise and experience. In addition, OctoPlus also uses its own patented PolyActive™ technology in specific project based injectables.

OctoPlus was previously engaged in our internal drug development projects as well as providing pharmaceutical development services to external customers. During the year ended March 31, 2015, we decided to significantly increase the utilization of ~~expanding our existing facilities~~OctoPlus’ technical know-how and ~~setting up new manufacturing facilities, including a plant which is part of a Special Economic Zone in Devunipalavalasa, Srikakulam, Andhra Pradesh, India.~~its time and effort on internal drug development projects, and to scale-down its external pharmaceutical development services.

Pharmaceutical Services and Active Ingredients ~~Segment~~ (“PSAI”) segment

Our ~~PSAI~~Pharmaceutical Services and Active Ingredients (“PSAI”) segment ~~accounted for 25%~~includes our business of ~~our total revenues for the year ended March 31, 2012. This segment includes~~manufacturing and marketing active pharmaceutical ingredients and intermediates, ~~(“API”),~~ also known as ~~active pharmaceutical products~~“API” or bulk drugs, which are the principal ingredients for finished pharmaceutical products. ~~This segment also includes contract research services~~Active pharmaceutical ingredients and ~~the manufacture and sale of API and steroids in accordance with specific customer requirements.~~

~~API becomes~~intermediates become finished pharmaceutical ~~product~~products when the dosages are fixed in a form ready for human consumption, ~~(such~~such as a tablet, capsule or ~~liquid)~~liquid using additional inactive ingredients. This segment also includes our contract research services business and our manufacture and sale of steroids in accordance with specific customer requirements.

Our PSAI segment’s revenues for the year ended March 31, 2015 were Rs.25,456 million, an increase of 6% as compared to the year ended March 31, 2014. Our PSAI segment accounted for 17% of our total revenues for the year ended March 31, 2015.

During the year ended March 31, 2015, we filed 77 Drug Master Files (“DMFs”) worldwide, of which 12 were filed in the United States, 16 were filed in Europe and 49 were filed in other countries. Cumulatively, our total DMFs filed worldwide as of March 31, 2015 were 735, including 219 DMFs filed in the United States.

We produce and market more than 100 different APIs infor numerous markets. We export API to emerging markets, as well as developed markets, covering more than 80 countries. Our principal markets in this business segment include North America (the United States and Canada) and Europe. Our PSAI segment’s API business is operated independently from our Global Generics segment and, in addition to supplying API to our Global Generics segment, our PSAI segment sells API to third parties for use in ~~creating~~manufacturing generic products, subject to any patent rights of other third parties. We export API to more than 80 countries, and our principal overseas markets in this business segment include North America (the United States and Canada) and Europe. Our PSAI segment’s API business also manufactures and supplies the API requirements of our pharmaceutical services business. The research and development group within our API business contributes to our business by creating intellectual property (principally with respect to novel and non-infringing manufacturing processes and intermediates), providing research intended to reduce the cost of production of our products and developing ~~approximately 15-20~~ new ~~products every year.~~products.

The pharmaceutical services (contract research and manufacturing) arm of our PSAI segment was established in 2001 to leverage our strength in process chemistry to serve the niche segment of ~~the~~Innovator pharmaceutical and fine chemicals industry. Over the years, our business strategy in this area has evolved to focus on the marketing of process development and manufacturing services. Our objective is to be the preferred partner for innovator pharmaceutical companies, providing a complete range of services that are necessary to take their innovations to the market speedily and more efficiently. The focus is to leverage our skills in process development, analytical development, formulation development and Current Good Manufacturing Practice (“cGMP”) to serve various needs of innovator pharmaceutical companies. We have positioned our PSAI segment’s Custom Pharmaceutical Services business to be the partner of choice for large and emerging innovator companies across the globe, with service offerings spanning the entire value chain of pharmaceutical services.

~~Emerging~~Developed Markets.Our PSAI segment’s principal overseas markets are the United States and Europe. Our PSAI segment’s sales to these markets were Rs.15,112 million for the year ended March 31, 2015, and accounted for 59% of our PSAI segment’s revenues for the year ended March 31, 2015. In the United States and Europe, the patent protection for a large number of high value branded pharmaceutical products expired in years ended March 31, 2011, 2012 and 2013 and this opened the market to generic products that sourced their API from our PSAI segment. However, during the years ended March 31, 2014 and 2015, such expirations were much less frequent, which resulted in a decrease in new opportunities in these markets for the customers of our PSAI segment. We market our products through our subsidiaries in the United States and Europe. These subsidiaries are engaged in all aspects of marketing activity and support our customers’ pursuit of regulatory approval for their products, focusing on building long-term relationships with the customers.

Other Key Markets.India is an important ~~emerging~~ market ~~accounting~~ for ~~15%~~our PSAI segment, with total sales of Rs.3,288 million, and it accounted for 13% of the PSAI segment’s revenues in the year ended March 31, ~~2012.~~2015. In India, we market our API products to Indian and multinational companies, many of whom are also our competitors in our Global Generics segment. The market in India is highly competitive, with severe pricing pressure and competition from ~~cheaper~~lower cost foreign imports in several products.

~~In India, our sales team works closely with our sales agents to market our products. The sales are made directly from the factory.~~

Our PSAI segment’s sales to all of the other ~~emerging~~ markets (excluding the United States, Europe and India) were ~~6,865~~ Rs.7,056 million for the year ended March 31, ~~2012.~~2015 and accounted for 28% of our PSAI segment’s revenues for the year. Our PSAI segment’s other key ~~emerging~~ markets include Brazil, Mexico, South Korea and Japan. While we work through our agents in these markets, our zonal marketing managers also interact directly with our key customers in order to service their requirements.

Our focus is on building relationships with top customers in each of these markets and partnering with them in product launches by providing timely technical and analytical support.

~~Developed Markets.~~Our principal markets are North America (the United States and Canada) and Europe. In the United States and Europe, the patent protection for a large number of high value branded pharmaceutical products expired in the years ended March 31, 2011 and 2012. This opened the market to generic products that sourced their API from our PSAI segment. We expect our API division to show growth in the coming years due to continued growth in our current API product portfolio as well as new opportunities from our pipeline of other API products used in branded formulations that will lose patent protection in the coming years. We market through our subsidiaries in the United States and Europe. These subsidiaries are engaged in all aspects of marketing activity and support our customers’ pursuit of regulatory approval for their products, focusing on building long-term relationships with the customers.

In our PSAI segment, we filed 68 DMFs worldwide in the year ended March 31, 2012, of which 14 were filed in the United States, 6 were filed in Canada and 48 were filed in other countries. With these filings, as of March 31, 2012 our PSAI segment has filed a total of 543 DMFs worldwide including 187 DMFs in the United States and 152 DMFs in Europe. For most of these, we are either already supplying commercial quantities or development quantities of API to various generic formulators. In addition, our PSAI segment also has 42 certificates of suitability granted by European authorities as of March 31, 2012.

For our custom pharmaceutical services line of business, we have focused business development teams dedicated to our key geographies of North America (the United States and Canada), the European Union and Asia Pacific. These teams target large and emerging innovator companies to build long-term business relationships focused on catering to their outsourcing needs.

Going forward, we expect our PSAI segment to show growth on account of our investments in newer technologies and platforms. 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.

The infrastructure for our PSAI segment consists of ~~six~~eight U.S. FDA-inspected plants (six of which are in India, ~~a U.S. FDA-inspected plant~~one of which is in Mexico, ~~a U.S. FDA-inspected plant~~and one of which is in Mirfield, United ~~Kingdom~~Kingdom) and three technology development centers ~~two~~(two of which are in Hyderabad, India and one of which is in Cambridge, United ~~Kingdom.~~

~~India~~Kingdom). ~~All of the facilities in India are located in the state of Andhra Pradesh. With over 840 reactors of different sizes offering 2.6 million liters of reaction volume annually,~~In addition, we have ~~the flexibility to produce quantities that range from a few kilograms to several metric tons. We are~~ also ~~in the process of setting~~set up a new manufacturing facility which is part of a Special Economic Zone located in Devunipalavalasa, Srikakulam, Andhra Pradesh, India.

India. All of the facilities in India are located in the states of Andhra Pradesh and Telangana. We have the flexibility to produce quantities that range from a few kilograms to several metric tons. The manufacturing process consumes a wide variety of raw materials that we obtain from sources that comply with the requirements of regulatory authorities in the markets to which we supply our products. We procure raw materials on the basis of our requirement planning cycles. We utilize a broad base of suppliers in order to minimize risk arising from dependence on a single supplier. We also source several APIs from third party suppliers for ~~the emerging markets to optimally utilize our in-house manufacturing capacities for the developed markets, which are more profitable relative to the emerging markets.~~resale. During the year ended March 31, ~~2012,~~2015, approximately ~~11%~~7% of our total API revenues resulted from sales of API procured from third-party suppliers. We maintain stringent quality controls when procuring materials from third-party suppliers.

The prices of our raw materials generally fluctuate in line with commodity cycles although the prices of raw materials used in our ~~active pharmaceutical ingredients~~API business are generally more volatile. Raw material expense forms the largest portion of our cost of revenues. We evaluate and manage our commodity price risk exposure through our operating procedures and sourcing policies.

Mexico. Our manufacturing plant in Cuernavaca, Mexico (the “Mexico facility”) was acquired from Roche during the year ended March 31, 2006. In addition to manufacturing the active pharmaceutical ingredients naproxen and naproxen sodium and a range of intermediates, the Mexico facility synthesizes steroids for use in pharmaceutical and veterinary products.

~~Following the U.S. FDA’s inspection~~The Dowpharma Small Molecules business, which we acquired from The Dow Chemical Company in April 2008, continues to offer niche capabilities, such as biocatalysis, chemocatalysis and hydroformulation, to provide cost effective solutions for chiral molecules. The non-exclusive license to Dow’s Pfēnex Expression Technology^TM for biocatalysis development, also acquired as part of the ~~Mexico facility in November 2010, the U.S. FDA issued a Form 483 with 12 observations. We timely responded~~acquisition, continues to ~~these observations. On June 3, 2011, the U.S. FDA issued a warning letter asking for additional data and corrective actions with respect~~offer us opportunities to 4 of the 12 observations. Additionally, on June 28, 2011, the U.S. FDA posted on its website an import alert, or Detention Without Physical Examination (“DWPE”) alert. As a consequence of the DWPE alert, the Mexico facility is unableprovide technology leveraged manufacturing services to ~~export intermediates and active~~innovators, including major global pharmaceutical ingredients, with the exemption of Naproxen and Naproxen Sodium, to U.S. customers, and we are unable to export to U.S. customers our generics products which include intermediates and active pharmaceutical ingredients from our Mexico facility, until such time as the concerns raised by the U.S. FDA in their warning letter are addressed to their satisfaction and the DWPE alert is lifted. Further details of the warning letter and the DWPE alert are available on the U.S. FDA website. We subsequently worked collaboratively with the U.S. FDA to resolve the matters contained in the warning letter. The U.S. FDA re-inspected the Mexico facility in March 2012 and issued two observations on Form 483. We sent the U.S. FDA a timely response to the two remaining observations, and are awaiting a reply and final report.companies.

For our contract research services, we have well-resourced synthetic organic chemistry laboratories, analytical laboratories and kilo laboratories at our technology development centers at Miyapur and Jeedimetla in Hyderabad, India. Our chemists and engineers understand cGMP manufacturing and regulatory requirements for synthesis, manufacture and formulation of a NCE from the pre-clinical stage to commercialization. To complete the full value chain in development services, we also provide formulation development services. We ~~now~~ have facilities for pre-formulation and formulation development, analytical development, clinical trial supplies, pilot scale and product regulatory support. Larger quantities of APIs are sourced from API plants in India and Mexico.

The Dowpharma Small Molecules business, which we acquired from The Dow Chemical Company in April 2008, continues to offer niche capabilities, such as biocatalysis, chemocatalysis and hydroformulation, to provide cost effective solutions for chiral molecules. We are leveraging the acquired business and intangibles (including customer contracts, associated API products, process technology and know-how, technology licensing rights, trademarks and other intellectual property) to provide services and products to our existing customers, as well as new customers. The non-exclusive license to Dow’s Pfēnex Expression Technology™ for biocatalysis development, also acquired as part of the acquisition, continues to offer us opportunities to provide technology leveraged manufacturing services to innovators, including major global pharmaceutical companies. Our contract research and manufacturing business is uniquely positioned in the market where it utilizes assets (both in terms of physical assets and technical know-how) of a vertically integrated pharmaceutical company and combines this with the service model which we built over the last few years.

The global API market can broadly be divided into regulated and less regulated markets. The less regulated markets offer low entry barriers in terms of regulatory requirements and intellectual property rights. The regulated markets, like the United States and Europe, have high entry barriers in terms of intellectual property rights and regulatory requirements, including facility approvals. As a result, there is a premium for quality and regulatory compliance along with relatively greater stability for both volumes and prices. During the year ended March 31, 2012, the competitive environment for the API industry continued to change due to increased consolidation in the global generics industry and vertical integration of some key generic pharmaceutical companies. As an API supplier, we compete with a number of manufacturers within and outside India, which vary in size. Our main competitors in this segment are Divis Laboratories Limited, Aurobindo Pharma Limited, Ranbaxy Laboratories Limited, Cipla Limited, Mylan Laboratories Limited, Sun Pharmaceutical Industries Limited and MSN Laboratories Limited, all based or operating in India. In addition, we experience competition from European and Chinese manufacturers, as well as from Teva Pharmaceuticals Industries Limited, based in Israel.

With respect to our custom pharmaceuticals business, we believe that contract manufacturing is a significant opportunity for Indian pharmaceutical companies, based on their strengths of a skilled workforce and a low-cost manufacturing infrastructure. Key competitors in India include Divis Laboratories Limited, Dishman Pharmaceuticals & Chemicals Limited, Jubilant Organosys Limited and Nicholas Piramal India Limited. Key competitors from outside India include Lonza Group, Koninklijke DSM N.V., Albany Molecular Research, Inc., Patheon, Inc. and Cardinal Health, Inc. We distinguish ourselves from our key competitors by offering a wider range of cost effective services spanning the entire pharmaceutical value chain. Growth in contract manufacturing is likely to be driven by increasing outsourcing of late-stage and off-patent molecules by large pharmaceutical companies to compete with generics. We expect India ~~is emerging~~to emerge as an alliance and outsourcing destination of choice for global pharmaceutical companies. ~~Companies such as Roche, Bayer, Aventis, Novartis, Eli Lilly, Merck Sereno and GlaxoSmithKline are all executing plans to make India the regional hub for API and supply of bulk drugs.~~

All pharmaceutical companies that manufacture and market products in India are subject to various national and state laws and regulations, which principally include the Drugs and Cosmetics Act, 1940, the Drugs (Prices Control) Order, 1995, various environmental laws, labor laws and other government statutes and regulations. These regulations govern the testing, manufacturing, packaging, labeling, storing, record-keeping, safety, approval, advertising, promotion, sale and distribution of pharmaceutical products.

In India, manufacturing licenses for drugs and pharmaceuticals are generally issued by state drug authorities. Under the Drugs and Cosmetics Act, 1940, the state drug administration agencies are empowered to issue manufacturing licenses for drugs if they are approved for marketing in India by the Drug Controller General of India (“DCGI”). Prior to granting licenses for any new drugs or combinations of new drugs, the DCGI clearance has to be obtained in accordance with the Drugs and Cosmetics Act, 1940.

~~Our PSAI segment is subject to a number of government regulations with respect to pricing and patents as discussed in our Global Generics segment.~~

We submit a DMF for active pharmaceutical ingredients to be commercialized in the United States. Any drug product for which an ANDA is being filed must have a DMF in place with respect to a particular supplier supplying the underlying API. The manufacturing facilities are inspected by the U.S. FDA to assess compliance with Current Good Manufacturing Practice regulations (“cGMP”). The manufacturing facilities and production procedures utilized at the manufacturing facilities must meet U.S. FDA standards before products may be exported to the United States. Eight of our manufacturing facilities are inspected and approved by the U.S. FDA. For European markets, we submit a European DMF and where applicable, obtain a certificate of suitability from the European Directorate for the Quality of Medicines.

Our Proprietary Products segment ~~involves the discovery~~consists of our differentiated formulations business, our new chemical entities (“NCEs”) business, and ~~differentiated formulations for subsequent commercialization and out-licensing. It also involves~~ our dermatology focused specialty business operated through Promius™ Pharma.

~~During the year ended March 31, 2012, we leveraged~~We continue to leverage our semi-virtual research and development model to expand our portfolio of drug discovery, differentiated and specialty formulations programs. ~~This was achieved~~Our research and development efforts primarily focus on repurposing or improving the clinical properties of known, well-characterized API in these areas. We achieve this by efficiently collaborating with ~~discovery~~different biotechnology companies and service providers, and tapping their expertise in the ~~niche~~different areas of our ~~interest.~~drug development process. We ~~also successfully progressed~~continue to progress towards building a diversified portfolio with a sustainable mix of proprietary, branded differentiated formulations generated through research and development, ~~portfolio~~ with significantly reduced fixed costs.

In our Proprietary Products segment, our business model focuses on building a pipeline in ~~the~~ therapeutic areas of ~~pain management,~~ dermatology and ~~infectious diseases.~~neurology.

Our research and development efforts have a unique “medicines-to-molecules” approach to product development. In this approach, we leverage in an integrated manner the disciplines of biology, chemistry, drug delivery, clinical development, regulatory and commercial positioning to construct ~~novel~~ differentiated formulations and NCEs.

We follow a hybrid research and development model, both in-house and virtual (i.e., operations are outsourced, subject to our ~~retention~~supervision of strategic and project management functions), with the following core principles:

develop creative research and development investment models and partnerships to tap external innovation focused on leveraging, rather than replicating, unique core competencies;

select assets based on potential for early risk mitigation, both with respect to product development and commercialization; and

leverage knowledge and presence in emerging markets (especially India) to maximize cost advantage.

Our principal research laboratory is based in Hyderabad, India. As of March 31, ~~2012,~~2015, we employed a total of 75152 scientists, including ~~approximately 14~~30 scientists who held Ph.D. degrees, across all of this segment’s locations. We pursue an integrated research strategy through a mix of translational, formulation and analytical research at our laboratories. Our research strategy focuses on discovery of new molecular targets, designing of screening assays to screen promising molecules and developing novel formulations of currently marketed drugs or combinations thereof to address unmet medical needs.

While we continue to seek licensing and development ~~arrangements~~opportunities with third parties to further develop our product pipeline, we also conduct clinical development of some candidate drugs ourselves, which will enable us to derive higher value for our products. Our goal is to balance internal development of our own product candidates with in-licensing of promising compounds that complement our strengths. We also pursue licensing and joint development of some of our lead compounds with companies looking to implement their own product portfolio.

As of March 31, ~~2012,~~2015, we had 2918 active products in our Proprietary Products development pipeline in various stages of ~~which 7 were in clinical~~ development. Since repositioning our research activities in the years ended March 31, 2009 and 2010, our Proprietary Products segment has focused its efforts towards developing drugs to meet key unmet clinical needs. We have ~~built a~~filed 3 NDAs for products from this pipeline, two in March 2015 and one in April 2015, all under section 505(b)(2) of ~~assets that we expect to produce a steady stream of Investigational New Drugs (“INDs”) in~~ the ~~coming years.~~ U.S. Federal Food, Drug and Cosmetic Act.

The details of our active products which are in Phase III or for which an NDA has been filed from our Proprietary Products segments ~~clinical development candidates~~ as of March 31, ~~2012~~2015 are as follows:


~~DRL-NAB-P5~~Compound	~~Psoriasis~~	~~Clinical~~	~~Targeting psoriasis~~
~~DFA-02~~DFN-11	~~Anti-infectives~~ DFD-09
Therapeutic Area	~~Clinical~~	~~Targeting bacterial infections~~
~~DFA-03~~Migraine	~~Anti-infectives~~ Dermatology

Indication	~~Clinical~~	~~Targeting bacterial infections~~
~~DFP-02~~Acute treatment of Migraine with or without aura in adults.	~~Migraine~~ Treatment of only inflammatory lesions (papules and pustules) of rosacea in adult patients.

Significant developments during the period	~~Clinical~~	~~Targeting migraine~~
~~DFP-03~~Successful completion of three bioequivalence studies.	~~Pain~~ Successful completion of bioequivalence studies.

Significant patents associated with the compound	~~Clinical~~ None.	~~Targeting pain~~ Patent applications are filed in India.

Current status/expected NDA filing*	U.S. NDA submitted.	U.S. NDA submitted.

Patents. Our Proprietary Products segment had the following patents filed and issued as of March 31, ~~2012:~~2015:

Stages of Testing Development.The stages of testing required before a pharmaceutical product can be marketed in the United States are generally as follows:

For ethical, scientific and legal reasons, animal studies are required in the discovery and safety evaluation of new medicines. Preclinical tests assess the potential safety and efficacy of a product candidate in animal models. The results of these studies must be submitted to the U.S. FDA as part of an Investigational New Drug (“IND”) application before human testing may proceed.

U.S. law further requires that studies conducted to support approval for product marketing be “adequate and well controlled.” In general, this means that either a placebo or a product already approved for the treatment of the disease or condition under study must be used as a reference control. Studies must also be conducted in compliance with good clinical practice requirements, and adverse event and other reporting requirements must be followed.

The clinical trial process can take five to ten years or more to complete, and there can be no assurance that the data collected will be in compliance with good clinical practice regulations, will demonstrate that the product is safe or effective, or, in the case of a biologic product, pure and potent, or will provide sufficient data to support U.S. FDA approval of the product. The U.S. FDA may place clinical trials on hold at any point in this process if, among other reasons, it concludes that clinical subjects are being exposed to an unacceptable health risk. Trials may also be terminated by institutional review boards, which must review and approve all research involving human subjects. Side effects or adverse events that are reported during clinical trials can delay, impede, or prevent marketing authorization.

The pharmaceutical and biotechnology industries are highly competitive. We face intense competition from organizations such as large pharmaceutical companies, biotechnology companies and academic and research organizations. The major pharmaceutical organizations competing with us have greater capital resources, larger overall research and development staff and facilities and considerably more experience in drug development. Biotechnology companies competing with us may have these advantages as well.

In addition to competition ~~for~~from collaborators and investors, these companies and institutions also compete with us in recruiting and retaining highly qualified scientific and management personnel.

Virtually all pharmaceutical and biologics products that we or our collaborative partners develop will require regulatory approval by governmental agencies prior to commercialization. The nature and extent to which these regulations apply varies depending on the nature of the products and also vary from country to country. In particular, human pharmaceutical products are subject to rigorous preclinical and clinical testing and other approval procedures by the relevant regulatory agency. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary widely from country to country.

In India, under the Drugs and Cosmetics Act, 1940, the regulation of the manufacture, sale and distribution of drugs is primarily the concern of the state authorities while the Central Drug Control Administration is responsible for approval of new drugs, clinical trials in the country, establishing the standards for drugs, control over the quality of imported drugs, coordination of the activities of state drug control organizations and providing expert advice with a view of bringing about the uniformity in the enforcement of the Drugs and Cosmetics Act, 1940.

~~For marketing~~In order to market a drug in the United States, we or our partners will be subject to regulatory requirements governing human clinical trials, marketing approval and post-marketing activities for pharmaceutical products and biologics. Various federal, and in some cases state, statutes and regulations also govern or influence the manufacturing, safety, labeling, storage, record-keeping and marketing of these products. The process of obtaining these approvals and the subsequent compliance with applicable statutes and regulations is time consuming and requires substantial resources, and the approval outcome is uncertain.

Generally, in order to gain U.S. FDA approval, a company first must conduct pre-clinical studies in the laboratory and in animal models to gain preliminary information on a compound’s activity and to identify any safety problems. Pre-clinical studies must be conducted in accordance with U.S. FDA regulations. The results of these studies are submitted as part of an IND application that the U.S. FDA must review before human clinical trials of an investigational drug can start. If the U.S. FDA does not respond with any questions, a drug developer can commence clinical trials thirty days after the submission of an IND.

In order to eventually commercialize any products, we or our collaborator first will be required to sponsor and file an IND and will be responsible for initiating and overseeing the clinical studies to demonstrate the safety and efficacy that is necessary to obtain U.S. FDA marketing approval. Clinical trials are normally done in three phases and generally take several years to complete. The clinical trials have to be designed taking into account the applicable U.S. FDA guidelines. Furthermore, the U.S. FDA may suspend clinical trials at any time if the U.S. FDA believes that the subjects participating in trials are being exposed to unacceptable risks or if the U.S. FDA finds deficiencies in the conduct of the trials or other problems with our product under development.

After completion of clinical trials of a new product, U.S. FDA marketing approval must be obtained. If the product is classified as a new pharmaceutical, we or our collaborator will be required to file a New Drug Application (“NDA”), and receive approval before commercial marketing of the drug. The testing and approval processes require substantial time and effort. NDAs submitted to the U.S. FDA can take several years to obtain approval and the U.S. FDA is not obligated to grant approval at all.

Even if U.S. FDA regulatory clearances are obtained, a marketed product is subject to continual review. If and when the U.S. FDA approves any of our or our collaborators’ products under development, the manufacture and marketing of these products will be subject to continuing regulation, including compliance with cGMP, adverse event reporting requirements and prohibitions on promoting a product for unapproved uses. Later discovery of previously unknown problems or failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions. Various federal and, in some cases, state statutes and regulations also govern or influence the manufacturing, safety, labeling, storage, record keeping and marketing of pharmaceutical products.

Our research and development processes involve the controlled use of hazardous materials and controlled substances. We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these materials and waste products.

Promius Pharma is our subsidiary in ~~Bridgewater,~~Princeton, New Jersey in the United States ~~of America~~ focusing on our U.S. Specialty ~~Business—i.e.,~~Business, which is engaged in the development and sales of branded specialty ~~products. It~~products in the therapeutic areas of dermatology and neurology.

Promius Pharma has a portfolio of in-licensed patented dermatology ~~products and off-patent cardiovascular~~ products. It also has an internal pipeline of dermatology products that are in different stages of development. Promius Pharma’s current portfolio contains innovative products for the treatment of seborrheic dermatitis, ~~onychomycosis,~~ acne ~~psoriasis~~ and ~~androgenic alopecia.~~steroid responsive dermatoses. It has commercialized ~~three~~five products: EpiCeram^®, which is a skin barrier emulsion for the treatment of atopic dermatitis; Scytera™, which is foam for the treatment of psoriasis; ~~and~~ Promiseb™, which is a cream for the treatment for seborrheic ~~dermatitis.~~

~~During the year ended March 31, 2012, Promius Pharma launched sales of~~dermatitis; Cloderm^® (clocortolone pivalate 0.1%) ~~in the United States pursuant to its collaboration agreement dated March 31, 2011 with Coria Laboratories Limited (a subsidiary of Valeant Pharmaceuticals International, Inc.). Cloderm~~^®, which is a cream used for treating dermatological ~~inflammation.~~inflammation; and Trianex^®, which is a cream for the treatment of the inflammatory and pruritic manifestations of corticosteroid responsive dermatoses.

Promius Pharma leverages our research, development and manufacturing facilities atin Hyderabad, India. Promius Pharma also works with various third party research organizations in conducting product development, pre-clinical and clinical studies. Promius Pharma has 3653 sales representatives, six regional sales managers and one sales director in the field. Its sales force targets physicians in the field of dermatology and is supported by a direct marketing team and a public relations program. ~~In addition to its sales force, Promius Pharma’s account managers also call on purchasing agents for drug wholesalers and chain drug stores.~~

The manufacturing of Promius Pharma’s products has been outsourced to third party manufacturers based in the United States and Europe.

Certain parts of our business are affected by seasonality, primarily the India and Russia geographies in the Global Generics segment. The ~~third party manufacturers are responsible for sourcing the raw materials required for manufacturing the products.~~seasonal impact of these particular businesses may affect a quarterly comparison within any fiscal year. However, ~~in some cases we source the active pharmaceutical ingredients and supply them~~there is generally no significant seasonality impact on a year to ~~the third party manufacturer. The logistics services for storage and distribution have also been outsourced to a third party service provider.~~year basis.

Dr. Reddy’s Laboratories Limited is the parent company in our group. We had the following subsidiary companies where our direct and indirect ownership was more than 50% as of March 31, ~~2012:~~2015:


Dr. Reddy’s Laboratories Inc.		~~USA~~U.S.A.		~~100~~	%100%⁽¹⁰⁾
Dr. Reddy’s Laboratories International SA		Switzerland		~~100~~	%100%⁽¹⁰⁾
Dr. Reddy’s Laboratories, LLC ~~Ukraine~~		Ukraine		~~100~~	%100%⁽¹⁰⁾
Dr. Reddy’s Laboratories Louisiana LLC		~~USA~~U.S.A.		~~100~~	%100%⁽⁶⁾
Dr. Reddy’s Laboratories New York, Inc.		~~USA~~U.S.A.	100%⁽¹⁰⁾	~~100~~	%⁽¹³⁾
Dr. Reddy’s Laboratories (Proprietary) Limited		South Africa		~~100~~	% 100%⁽¹⁰⁾
Dr. Reddy’s Laboratories Romania ~~SRL~~S.R.L.		Romania		~~100~~	%100%⁽¹⁰⁾
Dr. Reddy’s Laboratories SA		Switzerland	100%
Dr. Reddy’s Laboratories SAS (from November 4, 2014)	~~100~~	% Colombia	100%⁽¹⁰⁾
Dr. Reddy’s Laboratories Tennessee, LLC		~~USA~~U.S.A.		~~100~~	%100%⁽⁶⁾
Dr. Reddy’s Laboratories (UK) Limited		United Kingdom		~~100~~	%100%⁽⁵⁾
Dr. Reddy’s New Zealand ~~Ltd. (formerly Affordable Healthcare Ltd.)~~Limited.		New Zealand		~~100~~	%100%⁽¹⁰⁾
Dr. Reddy’s Pharma SEZ Limited		India		~~100~~	% 100%
Dr. Reddy’s ~~SRL (formerly Jet Generici SRL )~~Singapore PTE Limited		Singapore	100%⁽¹⁰⁾
Dr. Reddy’s Srl		Italy		~~100~~	%100%⁽¹¹⁾
Dr. Reddy’s Venezuela, C.A.		Venezuela		~~100~~	%100%⁽¹⁰⁾
DRL ~~Investments~~Impex Limited		India		~~100~~	% 100%
Eurobridge Consulting BVB.V.		Netherlands		~~100~~	%100%⁽¹⁾
Industrias Quimicas Falcon de Mexico, S.A. de CV		Mexico		~~100~~	% 100%
Idea2Enterprises (India) Pvt. Limited		India		~~100~~	% 100%
I-Ven Pharma Capital Limited (until November 20, 2014)		India		~~100~~	%100%⁽¹²⁾
Kunshan Rotam Reddy Pharmaceutical Co. Limited ~~(JV)~~		China		~~51.33~~	%51.33%⁽⁴⁾
Lacock Holdings Limited		Cyprus		~~100~~	% 100%⁽¹⁰⁾
OOO Dr. Reddy’s Laboratories Limited		Russia		~~100~~	% 100%⁽¹⁰⁾
OOO DRS LLC		Russia		~~100~~	%100%⁽⁹⁾
~~OOO Alfa~~OctoPlus B.V. (formerly ~~OOO JV Reddy Biomed Limited)~~OctoPlus N.V.)		~~Russia~~Netherlands	100%⁽¹³⁾
OctoPlus Development B.V.	~~100~~	% Netherlands	100%⁽¹⁴⁾
OctoPlus Sciences B.V.		Netherlands	100%⁽¹⁴⁾
OctoPlus PolyActive Sciences B.V.		Netherlands	100%⁽¹⁵⁾
OctoPlus Technologies B.V.		Netherlands	100%⁽¹⁴⁾
OctoShare B.V.		Netherlands	100%⁽¹⁴⁾


Name of the subsidiary		Country of Incorporation	Percentage of Direct/Indirect Ownership Interest
Promius Pharma LLC ~~(formerly Reddy Pharmaceuticals LLC)~~		~~USA~~U.S.A.		~~100~~	%100%⁽⁶⁾
Reddy Antilles N.V.		Netherlands	100%
Reddy Specialities GmbH	~~100~~	% Germany	100%⁽⁸⁾
Reddy Cheminor S.A.		France		~~100~~	%100%⁽²⁾
Reddy Holding GmbH		Germany	100%⁽¹⁰⁾	~~100~~	%⁽⁷⁾
Reddy Netherlands B.V.		Netherlands	100%⁽¹⁰⁾	~~100~~	%⁽¹⁾
Reddy Pharma Iberia SA		Spain		~~100~~	% 100%
Reddy Pharma Italia ~~SPA~~S.p.A.		Italy		~~100~~	%100%⁽⁷⁾
~~Reddy Pharmaceuticals Hongkong Limited~~		~~Hongkong~~		~~100~~	%⁽²⁾
~~Reddy US Therapeutics Inc.~~		~~USA~~		~~100~~	%⁽¹⁾
~~Trigenesis Therapeutics Inc.~~		~~USA~~		~~100~~	%

Macred India Private Limited, India was our wholly-owned subsidiary until July 19, 2010, at which time we sold an 80% controlling interest in the entity and retained a 20% non-controlling interest. We sold our remaining 20% interest on February 24, 2012.

(14)	Indirectly owned through OctoPlus B.V. (formerly OctoPlus N.V.)

(15)	Indirectly owned through OctoPlus Sciences B.V.

(16)	DRANU LLC is consolidated in accordance with guidance available in IFRS 10.

The following table sets forth current information relating to our principal facilities:

National Medicines Agency, Romania; Ministry of Health, Ukraine; Ministry of Health, Indonesia; Health Authorities, Nigeria; Ministry of Health, Kirgystan; World Health Organization, cGMP; ANVISA, Brazil; Medicines and Health Care Products Regulatory Agencies (“MHRA”), U.K., British Retail Consortium; Danish Medicines Agency.

(4)

U.S. FDA; Medicines and Healthcare Products Regulatory Agency, U.K.; ~~Ministry of Health, United Arab Emirates;~~ Medicines Control Council, South Africa; ANVISA, Brazil; ~~National Medicines Agency, Romania; Danish Medicines Agency,~~ Environmental Management System ISO 14001; Occupational Health and Safety Management ~~System—~~System – OHSAS 18001; Quality Management System-ISO 9001:~~2000.~~2000; BfARM, Germany; China Food and Drug Administration, China; Turkish Drug and Medical Institution, Turkey; Therapeutic Goods Administration, Australia; Ministry of Healthcare, Ukraine; National Center of Drugs, Medical Products and Medical Equipment Examination, Kazakhstan and WHO.

(5)	Leased facilities.

(6)	Million units.

(7)	On a single shift basis.

(8)

Tons.

(9)

Grams.

(10)	Three shift basis

(11)	Represents the aggregate capacity and production for the ~~first seven~~ facilities ~~listed~~serially numbered from 1 to 6 in this ~~table under PSAI.~~table.

(12)	Capacity and production at this facility is not separately tracked.

(13)	Represents the aggregate capacity and production for the ~~first five~~ facilities ~~listed~~serially numbered from 10 to 14 in this ~~table under Global Generics.~~table.

(14)	Installed capacity is variable and subject to changes in product mix, and utilization of manufacturing facilities given the nature of production.

(15)	On a two shift basis.

(16)	Kilograms.

(17)	This facility is part of our PSAI segment’s Special Economic Zone (“SEZ”) in Devunipalavalasa, Srikakulam, Andhra Pradesh, India.

(18)	Includes facilities of our Integrated Product Development Organization (“IPDO”), Leadership Academy and Global Distribution Centre located at our Bachupally Campus in Hyderabad, Telangana, India.

(19)	WHO-GMP, National Center of Drugs, Medical Products and Medical Equipment Examination, Kazakhstan, Ministry of Healthcare, Ukraine.

(20)	ISO 9001:2008, MHRA (UK), U.S. FDA and Korean FDA (Travapost).

(21)	This facility is used by our Global Generics and PSAI segments.

(22)	This facility is used by our Global Generics segment.

(23)	This facility is used by our PSAI segment.

Except for as indicated in the notes above, we own all of our facilities. All properties identified above, including leased properties, are either used for manufacturing and packaging of pharmaceutical products or for research and development activities. In addition, we have sales, marketing and administrative offices, some of which are owned and some others are leased properties. We believe that our facilities are optimally utilized.

~~We are~~During the year ended March 31, 2015, we obtained approvals from the U.S. FDA for products to be manufactured from a recently commissioned oral solid dosage form facility in the process of completing construction of another manufacturing plant at Baddi, Himachal Pradesh, India, in addition to a plant that already existed at this location. The new plant is intended for the manufacture of tablet and capsule finished dosages for our Global Generics segment. The project at Baddi is eligible for certain financial benefits, which include exemption from income tax for a specific period, offered by the Government of India to encourage industrial growth in the state of Himachal Pradesh, India.

~~We have completed construction of a facility at~~ a Special Economic Zone ~~located~~ in ~~Visakhapatnam,~~Devunipalavalasa, Srikakulam, Andhra Pradesh, India for the manufacture of oral and injectable cytotoxic finished dosages for our Global Generics segment. In November 2009, the U.S. FDA audited this facility and declared that we had resolved all Form 483 open items, enabling us to initiate the manufacture and supply of products from this facility to the United States, subject to the approval of product specific ANDAs. During June 2010, we commenced operations at this facility by manufacturing and exporting anastrazole tablets.

We are in the process of constructing a manufacturing plant at Devunipalavalasa, Ranasthalam Mandal, Andhra Pradesh, India, where our property has been designated as a Special Economic Zone under the applicable laws of the Government of India. The new plant is intended for the manufacture of new molecules, and certain high volume products of our Global Generics segment.

~~We are in~~During the ~~process of establishing~~year ended March 31, 2014, we set up a ~~plant~~new manufacturing facility in a Special Economic Zone in ~~Devunipalavalasa, Srikakulam,~~Duvvada, Visakhapatnam, Andhra Pradesh, India for the manufacture of ~~APIs. The~~parenteral (injectable form) products. This will help us meet the demand for such products in some of our key markets, including the United States.

During the year ended March 31, 2013, we expanded our biosimilars facility in Hyderabad, Telangana, India to meet growing demand in emerging markets.

During the year ended March 31, 2013, we set up a new manufacturing facility in a Special Economic Zone located in Devunipalavalasa, Srikakulam, Andhra Pradesh, India. We have begun filing some of our new DMFs from this location and we expect to file some more during the year ending March 31, 2016. This plant ~~will be~~is adjacent to an existing plant, in a newly acquired area of approximately 250 acres under a Pharmaceutical-Sector specific Special Economic Zone for fiscal benefits. This location also houses our Global Generics segment’s recently commissioned oral solid dosage form facility. The formal governmental approval for designating the property as a Special Economic Zone has been obtained. ~~The project is proposed~~

As of March 31, 2015, we had capital work-in-progress and capital commitments of Rs.6,119 million and Rs.4,173 million, respectively, for expansion of our manufacturing and research facilities, primarily relating to facilities located in India and the United States. We currently intend to finance our additional expansion plans entirely through our operating cash flows and through cash and other investments. A majority of these projects are expected to be ~~developed in a phased manner, subject to all regulatory approvals.~~completed during the fiscal years ending March 31, 2016 and March 31, 2017.

~~We have working capital facilities with banks~~Environmental laws and ~~in order to secure those facilities, we have created encumbrance charges on certain of our immovable and movable properties.~~ regulations

We are subject to significant national and state environmental laws and regulations which govern the discharge, emission, storage, handling and disposal of a variety of substances that may be used in or result from our operations at the above facilities. Non-compliance with the applicable laws and regulations may subject us to penalties and may also result in the closure of our facilities.

We are an ~~emerging~~integrated global pharmaceutical company ~~with proven research capabilities.~~committed to providing affordable and innovative medicines. We derive our revenues from the sale of finished dosage forms, active pharmaceutical ingredients and intermediates, development and manufacturing services provided to innovator pharmaceutical and biotechnology companies, and license fees from marketing authorizations for our ~~proprietary products segment.~~products.

The Chief Operating Decision Maker (“CODM”) evaluates our performance and allocates resources based on an analysis of various performance indicators by reportable segments. The CODM reviews revenue and gross profit as the performance indicator for all of the operating segments, and does not review the total assets and liabilities of an operating segment.

Pharmaceutical Services and Active Ingredients (“PSAI”); and

Proprietary Products.

Global ~~Generics~~Generics.:This segment consists of our business of manufacturing and marketing prescription and over-the-counter finished pharmaceutical products ready for consumption by the patient, marketed under a brand name (branded formulations) or as generic finished dosages with therapeutic equivalence to branded formulations (generics). This segment includes the operations of our biologics business.

Pharmaceutical Services and Active Ingredients ~~(“PSAI”)~~:. This segment includes our business of manufacturing and marketing active pharmaceutical ingredients and intermediates, also known as ~~active pharmaceutical products~~“API” or bulk drugs, which are the principal ingredients for finished pharmaceutical products. Active pharmaceutical ingredients and intermediates become finished pharmaceutical products when the dosages are fixed in a form ready for human consumption such as a tablet, capsule or liquid using additional inactive ingredients. This segment also includes our contract research services business and ~~the~~our manufacture and sale of active pharmaceutical ingredients and steroids in accordance with the specific customer requirements.

Proprietary ~~Products~~Products.:This segment ~~involves the discovery of new chemical entities and differentiated formulations for subsequent commercialization and out-licensing. Our differentiated formulations portfolio~~ consists of ~~new, synergistic combinations~~our Differentiated Formulations business, our New Chemical Entities (“NCEs”) business, and ~~technologies that improve safety and/or efficacy by modifying pharmacokinetics~~our dermatology focused specialty business operated through Promius™ Pharma.

Others.This includes the operations of ~~existing medicines. This segment also involves~~ our ~~specialty pharmaceuticals business,~~wholly-owned subsidiary, Aurigene Discovery Technologies Limited, a discovery stage biotechnology company developing novel and best-in-class therapies in the fields of oncology and inflammation and which ~~conducts sales~~works with established pharmaceutical and ~~marketing operations for in-licensed and co-developed dermatology products.~~biotechnology companies in early-stage collaborations, bringing drug candidates from hit generation through Investigational New Drug (“IND”) filing.

~~The CODM reviews revenue and gross profit as the performance indicator, and does not review the total assets and liabilities for each reportable segment.~~ The measurement of each segment’s revenues, expenses and assets is consistent with the accounting policies that are used in preparation of our consolidated financial statements.

Critical accounting policies are defined as those that in our view are the most important to the portrayal of our financial condition and results and that require the most exercise of ~~our~~management’s judgment. We consider the policies discussed under the following paragraphs to be critical for an understanding of our financial statements. Our significant accounting policies and application of these are discussed in detail in Notes 2 and 3 to our consolidated financial statements.

While preparing financial statements in conformity with IFRS, we make ~~judgments,~~certain estimates and assumptions that require difficult, subjective and complex judgments. These judgments affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses, disclosure of contingent liabilities at the statement of financial position date and the reported amount of income and expenses for the reporting period. Financial reporting results rely on our estimate of the effect of certain matters that are inherently uncertain. Future events rarely develop exactly as forecast and the best estimates require adjustments, as actual results may differ from these estimates under different assumptions or conditions. We continually evaluate these estimates and assumptions based on the most recently available information.

Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are as below:

Assessment of functional ~~currency for foreign operations;~~currency;

Financial instruments;

Business combinations;

Useful lives of property, plant and equipment and ~~intangibles;~~intangible assets;

Valuation of inventories;

Measurement of recoverable amounts of cash-generating units;

Assets and obligations relating to employee benefits;

Sales returns, rebates and chargeback provisions;

Evaluation of recoverability of deferred tax assets;

~~Inventory obsolescence;~~

~~Business combinations;~~ and

~~Contingencies and litigations.~~Contingencies.

Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured reliably. Revenue from the sale of goods includes excise duty and is measured at the fair value of the consideration received or receivable, net of returns, sales tax and applicable trade discounts and allowances. Revenue includes shipping and handling costs billed to the customer.

Revenue from sales of generic products in India is recognized upon delivery of products to distributors by our clearing and forwarding agents. Significant risks and rewards in respect of ownership of generic products are transferred by us when the goods are delivered to distributors from clearing and forwarding agents. Clearing and forwarding agents are generally compensated on a commission basis as a percentage of sales made by them. Revenue from sales of active pharmaceutical ingredients and intermediates in India is recognized on delivery of products to customers (generally formulation manufacturers) from our factories. Revenue from export sales and other sales outside of India is recognized when the significant risks and rewards of ownership of products are transferred to the customers, which occurs upon delivery of the products to the customers unless the terms of the applicable contract provide for specific revenue generating activities to be completed, in which case revenue is recognized once all such activities are completed.

Sales of generic products in India are made through clearing and forwarding agents to distributors. Significant risks and rewards in respect of ownership of generic products are transferred by us when the goods are delivered to distributors from clearing and forwarding agents. Clearing and forwarding agents are generally compensated on a commission basis as a percentage of sales made by them.

Sales of active pharmaceutical ingredients and intermediates in India are made directly to the end customers (generally formulation manufacturers) from our factories. Significant risks and rewards in respect of ownership of active pharmaceutical ingredients are transferred by us upon delivery of the products to the customers. Sales of active pharmaceutical ingredients and intermediates outside India are made directly to the end customers (generally distributors or formulations manufacturers) from our parent company or its consolidated subsidiaries. Significant risks and rewards in respect of ownership of active pharmaceutical ingredients are transferred by us upon delivery of the products to the customers, unless the terms of the applicable contract provide for specific revenue generating activities to be completed, in which case revenue is recognized once all such activities are completed.

During the year ended March 31, 2012, we applied the following accounting policy for the recognition of profit share revenues, which have historically been immaterial to our overall financial statements.

From time to time, we enter into marketing arrangements with certain business partners for the sale of our products in certain markets. Under such arrangements, we sell our products to the business ~~partner~~partners at a non-refundable base purchase price agreed upon in the arrangement, and we are also entitled to a profit share which is over and above the base purchase price. The profit share is typically dependent on the business partner’s ultimate net sale proceeds or net profits, subject to any reductions or adjustments that are required by the terms of the arrangement. Such arrangements typically require the business partner to provide confirmation of units sold and net sales or net profit computations for the products covered under the arrangement.

Revenue in an amount equal to the base purchase price is recognized in these transactions upon delivery of ~~the~~ products to the business ~~partner.~~partners. An additional amount representing the profit share component is recognized as revenue in the period which corresponds to the ultimate sales of the products made by business partners only when the collectability of the profit share becomes probable and a reliable measurement of the profit share is available. Otherwise, recognition is deferred to a subsequent period pending satisfaction of such collectability and measurability requirements. In measuring the amount of profit share revenue to be recognized for each period, we use all available information and evidence, including any confirmations from the business partner of the profit share amount owed to us, to the extent made available before the date our Board of Directors authorizes the issuance of our financial statements for the applicable period.

Revenues include amounts derived from product out-licensing agreements. These arrangements typically consist of an initial up-front payment upon inception of the license and subsequent payments dependent on achieving certain milestones in accordance with the terms prescribed in the agreement. Non-refundable up-front license fees received in connection with product out-licensing agreements are deferred and recognized over the period in which we have continuing ~~substantive~~ performance obligations. Milestone payments which are contingent on achieving certain clinical milestones are recognized as revenues either on achievement of such milestones, if the milestones are considered substantive, or over the period we have continuing ~~substantive~~ performance obligations, if the milestones are not considered substantive. If milestone payments are creditable against future royalty payments, the milestones are deferred and released over the period in which the royalties are anticipated to be paid.

In our U.S. Generics business, our gross revenues are significantly reduced by chargebacks, rebates, sales returns, ~~chargebacks, rebates,~~ discounts, shelf stock adjustments, Medicaid payments and similar “gross-to-net” adjustments. The estimates of “gross-to-net” adjustments for our operations in India and other countries outside of the U.S. relate mainly to sales return allowances in all such operations, and certain rebates to healthcare insurance providers are specific to our German operations. The patternEach of such ~~sales return allowances is generally consistent with our gross sales. In Germany, the rebates to healthcare insurance providers mentioned above~~adjustments are ~~contractually fixed~~discussed in ~~nature and do not involve significant estimations by us.~~detail below.

•

Sales Return ~~Allowances~~Allowances:: We account for sales returns by recording a provision based on our estimate of expected sales returns. We deal in various products and operate in various markets. Accordingly, our estimate of sales returns is determined primarily by our experience in these markets. In respect of established products, we determine an estimate of sales returns provision primarily based on historical experience of such sales returns. Additionally, other factors that we consider in determining the estimate include levels of inventory in the distribution channel, estimated shelf life, product discontinuances, price changes of competitive products, and introduction of competitive new products, to the extent each of these factors impact our business and markets. We consider all of these factors and adjust the sales return provision to reflect our actual experience. With respect to new products introduced by us, those have historically been either extensions of an existing product line where we have historical experience or in a general therapeutic category where established products exist and are sold either by us or our competitors.

We believe our estimation processes are reasonable methods of determining accruals for the “gross-to-net” adjustments. Chargeback accrual accounts for the highest element among the “gross-to-net” adjustments, and constituted approximately ~~79%~~71% of such “gross-to-net” adjustments for our U.S. Generics business for the year ended March 31, ~~2012.~~2015. For the purpose of the following discussion, we are therefore restricting our explanations to this specific element. While chargeback accruals depend on multiple variables, the most pertinent variables are our estimates of inventories on which a chargeback claim is yet to be received and the unit price at which the chargeback will be processed. To determine the chargeback accrual applicable for a reporting period, we perform the following procedures to calculate these two variables:

In view of this, we believe that the calculations are not subject to a level of uncertainty that warrants a probability-based approach. Accordingly, we believe that we have been reasonable in our estimates for future chargeback claims and that the amounts of reversals or adjustments made in the current period pertaining to the previous year’s accruals are immaterial. Further, this data is not determinable except on occurrence of specific instances or events during a period, which warrant an adjustment to be made for such accruals.

A roll-forward for each major accrual for our U.S. Generics operations is presented below for our fiscal years ended March 31, ~~2010, 2011~~2013, 2014 and ~~2012,~~2015, respectively:

The estimates of “gross-to-net” adjustments for our operations in India and other countries outside of the U.S. relate mainly to sales return allowances in all such operations, and certain rebates to healthcare insurance providers are specific to our German operations. The pattern of such sales return allowances is generally consistent with our gross sales. In Germany, the rebates to healthcare insurance providers mentioned above are contractually fixed in nature and do not involve significant estimations by us.

Our overall provision for sales returns as at March 31, 2015 was Rs.3,905 million, as compared to a provision of Rs.2,504 million as at March 31, 2014. This increase in our provision was primarily attributable to a higher allowance for returns provision created for the year ended March 31, 2015 due to higher sales recorded for the year ended March 31, 2015 and higher anticipated sales returns, based on our historical experience and recent trends in actual sales returns, in the markets in which we operate. For further information regarding our sales return provisions, refer to Note 20 to our consolidated financial statements.

Revenue from services rendered, which primarily relate to contract research, is recognized in ~~profit or loss~~the consolidated income statement as the underlying services are performed. Upfront non-refundable payments received under these arrangements are deferred and recognized as revenue over the expected period over which the related services are expected to be performed.

Export entitlements from government authorities are recognized in profit or loss as a reduction from cost of revenues when the right to receive credit as per the terms of the scheme is established in respect of the exports made by us, and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.

Non-derivative financial instruments consist of investments in mutual funds, equity securities, trade ~~receivables, certain~~and other ~~assets,~~receivables, cash and cash equivalents, loans and borrowings, trade and other payables and certain other assets and liabilities.

Non-derivative financial instruments are recognized initially at fair value plus any directly attributable transaction costs, except for those instruments that are designated as being fair value through profit and loss upon initial recognition. Subsequent to initial recognition, non-derivative financial instruments are measured as described below.

Cash and cash equivalents consist of cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. For this purpose, “short-term” means investments having a maturity of three months or less from the date of investment. Bank overdrafts that are repayable on demand and ~~which~~ form an integral part of our cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

~~Our~~Other investments consist of term deposits with original maturities of more than three months, mutual funds and equity securities.

Investments in mutual funds and equity securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, are recognized in other comprehensive income/(loss) and presented within equity. When an investment is derecognized, the cumulative gain or loss in equity is transferred to ~~profit or loss.~~the consolidated income statement.

An instrument is classified at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if we manage such investments and make purchase and sale decisions based on their fair value in accordance with our documented risk management or investment strategy. Upon initial recognition, attributable transaction costs are recognized in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is expected within one year or within the normal operating cycle of the business.

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. Trade receivables are classified as current assets if the collection is expected within one year or within the normal operating cycle of the business.

~~Other non-derivative financial~~Debt instruments ~~are measured at amortized cost using the effective interest method, less any impairment losses.~~

We derecognize a financial asset when the contractual right to the cash flows from that asset expires, or we transfer the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. If we retain substantially all the risks and rewards of ownership of a transferred financial asset, we continue to recognize the financial asset and also recognize a collateralized borrowing, at the amortized cost, for the proceeds received.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, we have a legal right and the ability to offset the amounts and intend either to settle on a net basis or to realize the asset and settle the liability simultaneously.

We initially recognize debt instruments issued on the date that they originate. All other financial liabilities are recognized initially on the trade date, which is the date ~~that~~ we become a party to the contractual provisions of the instrument. These are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method.

Other non-derivative financial ~~liability when its contractual obligations~~instruments are ~~discharged, cancelled or expired. The difference between~~measured at amortized cost using the ~~carrying amount of the derecognized financial liability and the consideration paid is recognized as profit or loss.~~effective interest method, less any impairment losses.

~~The functional currency of our parent company is the Indian rupee.~~ We are exposed to exchange rate ~~risk~~risks which ~~arises~~arise from our foreign exchange revenues, expenses and ~~expenses,~~borrowings primarily in U.S. dollars, U.K. pounds sterling, Russian roubles, Venezuelan bolivars and Euros, and foreign currency debt in U.S. dollars, Russian roubles and Euros.

We use derivative financial instruments, including foreign exchange forward contracts, option contracts and ~~option~~currency swap contracts, to mitigate our risk of changes in foreign currency exchange rates and interest rates. ~~Further, we~~We also use non-derivative financial instruments as part of our foreign currency exposure risk mitigation strategy.

We classify our ~~option and forward contracts~~derivative financial instruments that hedge foreign currency risk associated with highly probable forecasted transactions as cash flow hedges and measure them at fair value. The effective portion of such cash flow hedges is recorded in our hedging reserve, as a component of equity, and re-classified to the consolidated income statement as revenue in the period corresponding to the occurrence of the forecasted transactions. The ineffective portion of such cash flow hedges is recorded in the consolidated income statement as finance costs immediately.

We also designate certain non-derivative financial liabilities, such as foreign currency borrowings from banks, as hedging instruments for hedge of foreign currency risk associated with highly probable forecasted transactions. Accordingly, we apply cash flow hedge accounting ~~for~~to such relationships. Remeasurement gain/loss on such non-derivative financial liabilities is recorded in our hedging reserve, as a component of equity, and ~~re-classified~~reclassified to the consolidated income statement as revenue in the period corresponding to the occurrence of the forecasted transactions.

Upon initial designation of a hedging instrument, we formally document the relationship between the hedging instrument and hedged item, including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. We make an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80%~~—125%~~-125% relative to the gain or loss on the hedged items. For cash flow hedges to be “highly effective”, a forecast transaction that is the subject of the hedge must be highly probable and must present an exposure to variations in cash flows that could ultimately affect profit or loss.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in other comprehensive income/(loss), remains there until the forecast transaction occurs. If the forecast transaction is no longer expected to occur, then the balance in other comprehensive ~~income~~income/(loss) is recognized immediately in ~~profit or loss.~~

~~For~~Changes in the fair value of derivative financial instruments (such as forward contracts and option ~~contracts~~contracts) that economically hedge monetary assets and liabilities in foreign currencies, and for which no hedge accounting is applied, ~~changes in the fair value of such contracts~~ are recognized in the consolidated income statement. ~~Both the~~The changes in fair value of ~~the forward contracts and~~such derivative financial instruments, as well as the foreign exchange gains and losses relating to the monetary items, are recognized as part of “net finance ~~costs”.~~income/(expense)” in the consolidated income statement.

~~We use forward contracts and option contracts to hedge our exposure to~~ changes in the ~~fair value~~interest rates

Consistent with our risk management policy, we use interest rate swaps to mitigate the risk of ~~firm commitment contracts, and measure them at fair value. Any amount representing~~ changes in interest rates. We do not use such instruments for trading or speculative purposes.

We derecognize a financial asset when the ~~fair value~~contractual right to the cash flows from that asset expires, or we transfer the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ~~such forward contracts~~ownership of the financial asset are transferred. If we retain substantially all the risks and ~~option contracts~~rewards of ownership of a transferred financial asset, we continue to recognize the financial asset and also recognize a collateralized borrowing, at amortized cost, for the proceeds received.

We derecognize a financial liability when its contractual obligations are discharged, cancelled or expired. The difference between the carrying amount of the derecognized financial liability and the consideration paid is ~~recorded~~recognized as profit or loss.

Financial assets and liabilities are offset and the net amount presented in the ~~income statement. The corresponding gain/loss representing~~statement of financial position when, and only when, we have a legal right and ability to offset the ~~changes in~~amounts and intend either to settle on a net basis or to realize the ~~fair value of~~asset and settle the ~~hedged item attributable to hedged risk is also recognized in the income statement.~~liability simultaneously.

The consolidated financial statements are presented in Indian rupees, which is the functional currency of our parent company, DRL. Functional currency of an entity is the currency of the primary economic environment in which the entity operates.

In respect of all non-Indian subsidiaries that operate as marketing arms of our parent company in their respective countries/regions, the functional currency has been determined to be the functional currency of our parent company (i.e., the Indian rupee). The operations of these subsidiaries are largely restricted to the import of finished goods from our parent company in India, sale of these products in the foreign country and ~~remittance~~making of ~~the sale proceeds~~import payments to our parent company. The cash flows realized from sale of goods are ~~readily~~ available for ~~remittance~~making import payments to our parent company and cash is ~~remitted~~paid to our parent company on a regular basis. The costs incurred by these subsidiaries are primarily the cost of goods imported from our parent company. The financing of these subsidiaries is done directly or indirectly by our parent company.

In respect of subsidiaries whose operations are ~~self contained~~self-contained and integrated within their respective countries/regions, the functional currency has been determined to be the local currency of those countries/regions.

Transactions in foreign currencies are translated to the respective functional currencies of entities within our company group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are ~~retranslated to~~translated into the functional currency at the exchange rate at that date. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognized in profit or loss in the period in which they arise. ~~Non-monetary assets~~

When several exchange rates are available, the rate used is that at which the future cash flows represented by the transaction or balance could have been settled if those cash flows had occurred at the measurement date. In such circumstances, we consider all the relevant facts and ~~liabilities denominated~~circumstances in ~~foreign currencies that are measured at fair value are retranslated~~determining the most appropriate rate to use for the ~~functional~~purpose of translation, including practical difficulties, uncertainties or delays associated with applying a foreign currency at ~~the exchange rate at the date that the fair value was determined. Foreign currency differences arising upon retranslation are recognized in profit or loss.~~a particular rate.

Foreign exchange gains and losses arising from a monetary item receivable from a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of the net investment in the foreign operation and are recognized in other comprehensive income/(loss) and presented within equity as a part of foreign currency translation ~~reserve.~~

In case of foreign operations whose functional currency is different from Indian rupees (our parent company’s functional currency), the assets and liabilities of such foreign operations, including goodwill and fair value adjustments arising upon acquisition, are translated to ~~Indian rupees~~the reporting currency at exchange rates at the reporting date. The income and expenses of such foreign operations are translated to ~~Indian rupees~~the reporting currency at the monthly average exchange rates prevailing during the year. Resulting foreign currency differences are recognized in other comprehensive income/(loss) and presented within ~~equity. Such differences have been recognized in the foreign currency translation reserve net~~equity as part of ~~applicable taxes, if any.~~FCTR. When a foreign operation is disposed of, in part or in full, the relevant amount in the ~~foreign currency translation reserve~~FCTR is transferred to ~~profit or loss.~~the consolidated income statement.

~~Business combinations occurring~~We use the acquisition method of accounting to account for any business combination that occurred on or after April 1, ~~2009 are accounted for by applying~~2009. A business consists of inputs and processes applied to those inputs that have the ~~acquisition method. Control~~ability to create outputs. It is not clear in all circumstances whether the ~~power to govern the financial~~acquired set of activities and ~~operating policies of an entity so as to obtain benefits from its activities.~~assets constitutes a business or not. In ~~assessing control,~~such situations, we use our judgment and take into consideration ~~potential voting rights that currently are exercisable.~~various factors such as the industry, the structure of the entity’s operations and the stage of development, in determining whether the acquired set of activities and assets constitutes a business. Further, determining whether a particular set of assets and activities is a business is based on whether the integrated set is capable of being conducted and managed as a business by a market participant. The acquisition date is the date on which control is transferred to the acquirer. Judgment is applied in determining the acquisition date and determining whether control is transferred from one party to another. Control exists when we are exposed to, or have rights to, variable returns from our involvement with the entity and have the ability to affect, those returns through power over the entity. In assessing control, potential voting rights are considered only if the rights are substantive.

We measure goodwill as of the applicable acquisition date at the fair value of the consideration transferred, including the recognized amount of any non-controlling interest in the acquiree, less the net recognized amount ~~(generally fair value)~~ of the identifiable assets acquired and liabilities assumed. When the fair value of the net identifiable assets acquired and liabilities assumed exceeds the consideration transferred, a bargain purchase gain is recognized immediately in ~~profit or loss.~~the consolidated income statement. Consideration transferred includes the fair values of the assets transferred, liabilities incurred by us to the previous owners of the acquiree, and equity interests issued by us. Consideration transferred also includes the fair value of any contingent consideration. Consideration transferred does not include amounts related to settlement of pre-existing relationships. Any goodwill that arises on account of such business combination is tested annually for impairment. A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a present obligation and arises from a past event, and its fair value can be measured reliably. ~~We measure~~On an acquisition-by-acquisition basis, we recognize any non-controlling interest ~~at its proportionate interest~~ in the ~~identifiable net assets~~acquiree either at fair value or at the non-controlling interest’s proportionate share of the ~~acquiree.~~acquiree’s net assets. Transaction costs ~~that we incur~~incurred by us in connection with a business combination, such as finder’s fees, legal fees, due diligence fees and other professional and consulting fees, are expensed as incurred.

Goodwill arising upon the acquisition of subsidiaries represents the fair value of the consideration, including the recognized amount of any non-controlling interest in the acquirer, less the net recognized amount (generally fair value) of the identifiable assets, liabilities and contingent liabilities assumed, all measured as of the acquisition date. Such goodwill is included in intangible assets. When the fair value of the net identifiable assets acquired and liabilities assumed exceeds the consideration transferred, a bargain purchase gain is recognized immediately in profit or loss.

Acquisitions of non-controlling interests are accounted for as transactions with equity holders in their capacity as equity ~~holders,~~holders. The difference between any consideration paid and ~~therefore no goodwill~~the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity.

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and other costs directly attributable to bringing the asset to a working condition for its intended use. Borrowing costs that are directly attributable to the construction or production of a qualifying asset are capitalized as part of the cost of that asset.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Gains and losses upon disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized net within “other (income)/expense, net” in the consolidated income statement.

The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to us and its cost can be measured reliably. The costs of repairs and maintenance are recognized in the consolidated income statement as incurred.

Items of property, plant and equipment acquired through exchange of non-monetary assets are measured at fair value, unless the exchange transaction lacks commercial substance or the fair value of either the asset received or asset given up is not reliably measurable, in which case the asset exchanged is recorded at the carrying amount of the asset given up.

Depreciation is recognized in the consolidated income statement on a ~~result~~straight line basis over the estimated useful lives of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives. The depreciation expense is included in the costs of the functions using the asset. Land is not depreciated.

Leasehold improvements are depreciated over period of the lease agreement or the useful life, whichever is shorter.

Depreciation methods, useful lives and residual values are reviewed at each reporting date. The estimated useful lives are as follows:

Software for internal use, which is primarily acquired from third-party vendors and which is an integral part of a tangible asset, including consultancy charges for implementing the software, is capitalized as part of the related tangible asset. Subsequent costs associated with maintaining such ~~transactions.~~software are recognized as expense as incurred. The capitalized costs are amortized over the estimated useful life of the software or the remaining useful life of the tangible fixed asset, whichever is lower.

Advances paid towards the acquisition of property, plant and equipment outstanding at each reporting date and the cost of property, plant and equipment not ready to use before such date are disclosed under capital work-in-progress. Assets not ready for use are not depreciated.

Goodwill represents the excess of consideration transferred, together with the amount of non-controlling interest in the acquiree, over the fair value of our share of identifiable net assets acquired.

Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment, and any impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying value of the equity accounted investee.

Other intangible assets that are acquired by us, which have finite useful lives, are measured at cost less accumulated amortization and accumulated impairment losses.

Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate.

Expenditures on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding are recognized in profit or loss when incurred. ~~Development~~

Expenditures on development activities ~~involve~~involving a plan or design for the production of new or substantially improved products and ~~processes. Development expenditures~~processes are capitalized only if:

development costs can be measured reliably;

the product or process is technically and commercially feasible;

future economic benefits are ~~probable and ascertainable;~~probable; and

we intend to and have sufficient resources to complete development and to use or sell the ~~asset, and have sufficient resources to do so.~~asset.

The expenditures capitalized include the cost of materials and other costs directly attributable to preparing the asset for its intended use. Other development expenditures are recognized in profit or loss as incurred.

Our internal drug development expenditures are capitalized only if they meet the recognition criteria as mentioned above. Where regulatory and other uncertainties are such that the criteria are not met, the expenditures are recognized in profit or loss as incurred. This is almost invariably the case prior to approval of the drug by the relevant regulatory authority. ~~Where~~However, where the recognition criteria are met, ~~however,~~ intangible assets are capitalized and amortized on a straight-line basis over their useful economic lives from product launch. As of March 31, ~~2012,~~2015, no internal drug development expenditure amounts have met the recognition criteria. The expenditures to be capitalized include the cost of materials and other costs directly attributable to preparing the asset for its intended use. Other development expenditures are recognized in profit or loss as incurred.

In conducting our research and development activities related to ~~NCE and proprietary products,~~new chemical entities (“NCEs”), we seek to optimize our expenditures and to limit our risk exposures. Most of our current research and development projects related to NCEs ~~and proprietary products~~ are at an early ~~discovery phase where project costs are insignificant and cannot be directly identified to any specific project, as these costs generally represent staff and common facility costs.~~discovery/development phase. These early development stage exploratory projects are numerous and are characterized by uncertainty with respect to timing and cost of completion. At such time as a research and development project related to an NCE ~~or proprietary product~~ progresses into the more costly clinical study phases, where the costs can be tracked separately, such project is considered to be significant if:

Historically, none of our development projects related to NCEs have met the significance thresholds listed above.

A substantial portion of our current research and development activities relates to the development of bio-equivalent ~~generic~~ products, which do not require full scale clinical trials to be conducted prior to the filing by us of applications with regulatory authorities to allow the marketing and sale of such products. Our total research and development costs for the year ended March 31, ~~2012~~2015 were ~~5,911~~ Rs.17,449 million, which was approximately 6%12% of our total revenue for the year. The amounts spent on research and development related to our bio-equivalent products for the years ended March 31, ~~2012, 2011~~2015, 2014 and ~~2010~~2013 represented approximately ~~71%~~60%, ~~79%~~62%, and ~~83%~~60%, respectively, of our total research and development expenditures.

For each of our bio-equivalent generic product research and development projects, the timing and cost of completion varies depending on numerous factors, including, among others: the intellectual property patented by the innovator for the applicable product; the patent regimes of the countries in which we seek to market the product; our development strategy for such product; the complexity of the molecule for such product; and the time required to address any development challenges that arise during the development process. For any particular bio-equivalent generic product, these factors and other product launch requirements may vary across the numerous geographies in which we seek to market the product. In addition, bio-equivalent research and development projects often may relate to a number of different therapeutic areas. At aany particular point of time, we tend to have a very high number of bio-equivalent generic product research and development projects ongoing simultaneously, in various developmental stages, with the exact number of such active projects changing regularly. As a result, we believe it would be impractical for us to state the exact number of ongoing projects and the estimated timing or cost to complete such projects.

Payments to third parties for in-licensed products and compounds are capitalized if the regulatory approval for the products was available from the applicable counterparty or there were other contractual terms providing for a refund should the regulatory approvals not be received. These paymentsthat generally take the form of up-front payments and ~~milestones.~~milestones for in-licensed products, compounds and intellectual property are capitalized. Our criteria for capitalization of such assets are consistent with the guidance given in paragraph 25 of International Accounting Standard 38 (“IAS 38”) (i.e., receipt of economic benefits out of the separately purchased transaction is considered to be probable).

~~If we become entitled to a refund~~Acquired research and development intangible assets, which are under ~~the terms of~~development and have accordingly not yet obtained marketing approval, are recognized as In-Process Research and Development (“IPR&D”) assets. IPR&D assets are not amortized, but evaluated for potential impairment on an ~~in-license contract, the amount is recognized~~annual basis or when ~~the right to receive the refund is established. In such an event, any consequential difference as compared to~~there are indications that the carrying value ofmay not be recoverable. Any impairment charge on such IPR&D assets is recorded in the ~~asset is recognized in our Income Statement.~~consolidated income statement under “Research and Development expenses”.

Intangible assets relating to products in development, other intangible assets not available for use and intangible assets having indefinite useful life are subject to impairment testing at each ~~statement of financial position~~reporting date. All other intangible assets are tested for impairment when there are indications that the carrying value may not be recoverable. ~~Any~~All impairment losses are recognized immediately in the ~~profit or loss.~~

Intangible assets are de-recognized either on their disposal or where no future economic benefits are expected from their use. Losses arising on such de-recognition are recorded in profit or loss, and are measured as the difference between the net disposal proceeds, if any, and the carrying amount of respective assets as on the date of de-recognition.

Other intangible assets that are acquired by us, which have finite useful lives, are measured at cost less accumulated amortization and accumulated impairment losses. Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate.

Amortization is recognized in ~~profit or loss~~the consolidated income statement on a straight-line basis over the estimated useful lives of intangible assets or on any other basis that reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the entity. Intangible assets that are not available for use are amortized from the date they are available for use. In determining the useful life we consider the following factors:

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.

All impairment losses are recognized in ~~profit or loss. Any~~the consolidated income statement. When the fair value of available-for-sale financial assets declines below acquisition cost and there is objective evidence that the asset is impaired, the cumulative loss that has been recognized in ~~respect of an available-for-sale financial asset recognized previously in equity~~other comprehensive income is transferred to ~~profit or loss.~~the statement of income. An impairment loss ismay be reversed in subsequent periods if the ~~reversal can be related objectively to an event occurring after~~indicators for the impairment ~~loss was recognized. For financial assets measured at amortized cost and available-for-sale financial assets that~~no longer exist. Such reversals are ~~debt securities, the reversal is~~ recognized ~~in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognized directly~~ in other comprehensive ~~income/(loss) and presented within equity.~~income.

The carrying amounts of our non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, an impairment test is performed each year at March 31.

The recoverable amount of an asset or cash-generating unit (as defined below) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the ~~asset.~~asset or the cash-generating unit. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).

In the circumstances where the asset specific discount rate is not directly available from the market, we use surrogates to estimate the discount rate. For this purpose, we take into consideration the following rates:

Consideration is given to risks such as country risk, currency risk and price risk.

The goodwill acquired in a business combination is, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.

An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in ~~profit or loss.~~the consolidated income statement. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss for an asset other than goodwill is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss for an asset other than goodwill is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Goodwill that forms part of the carrying amount of an investment in an associate is

not recognized separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired.

Income tax expense consists of current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable ~~profit, and~~profit; differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable ~~future. In addition, deferred tax is not recognized for~~future; and taxable temporary differences arising upon the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Any deferred tax asset or liability arising from deductible or taxable temporary differences in respect of unrealized inter-company profit or loss on inventories held by us in different tax jurisdictions is recognized using the tax rate of the jurisdiction in which such inventories are held.

Withholding tax arising out of payment of dividends to shareholders under the Indian ~~income~~Income tax regulations is not considered aas tax expense for us and all such taxes are recognized in the statement of changes in equity as part of the associated dividend payment.

Inventories consist of raw materials, stores and spares, work in progress and finished goods, and are measured at the lower of cost and net realizable value. The cost of all categories of inventories is based on the weighted average method. Stores and spares consists of packing materials, engineering spares (such as machinery spare parts) and consumables (such as lubricants, cotton waste and oils) that are used in operating machines or consumed as indirect materials in the manufacturing process. Cost includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of finished goods and work in progress, cost includes an appropriate share of overheads based on normal operating capacity. Stores and spares consists of packing materials, engineering spares (such as machinery spare parts) and consumables (such as lubricants, cotton waste and oils) that are used in operating machines or consumed as indirect materials in the manufacturing process.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

The factors that we consider in determining the allowance for slow moving, obsolete and other non-saleable inventory includes estimated shelf life, planned product discontinuances, price changes, aging of inventory and introduction of competitive new products, to the extent each of these factors impact our business and markets. We consider all of these factors and adjust the inventory provision to reflect our actual experience on a periodic basis.

We are involved in disputes, lawsuits, claims, governmental and/or regulatory inspections, inquiries, investigations and proceedings, including patent and commercial matters that arise from time to time in the ordinary course of business. Most of the claims involve complex issues. We assess the need to make a provision for a liability for such claims and record a provision when we determine that a loss related to a matter is both probable and reasonably estimable.

Because litigation and other contingencies are inherently unpredictable, our assessment can involve judgments about future events. Often, these issues are subject to uncertainties and therefore the probability of a loss, if any, being sustained and an estimate of the amount of any loss are difficult to ascertain. ~~We also believe that disclosure of the amount of damages sought by plaintiffs, if that is known, would not be meaningful with respect to those legal proceedings.~~ This is due to a number of factors, including: the stage of the proceedings (in many cases trial dates have not been set) and the overall length and extent of pre-trial discovery; the

entitlement of the parties to an action to appeal a decision; clarity as to theories of liability; damages and governing law; uncertainties in timing of litigation; and the possible need for further legal proceedings to establish the appropriate amount of damages, if any. We also believe that disclosure of the amount of damages sought by plaintiffs, if that is known, would not be meaningful with respect to those legal proceedings.

Consequently, for a majority of these claims, it is not possible to make a reasonable estimate of the expected financial effect, if any, that will result from ultimate resolution of the proceedings. In ~~these cases,~~such circumstances, we disclose information with respect to the nature and facts of the case.

We recognize a provision if, as a result of a past event, we have a present legal or constructive obligation that can be estimated reliably, and it is probable (i.e., more likely than not) that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

A provision for restructuring is recognized when we have approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating costs are not ~~provided for.~~provided.

A provision for onerous contracts is recognized when the expected benefits to be derived by us from a contract are lower than the unavoidable cost of meeting ~~our~~its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, we recognize any impairment loss on the assets associated with that contract.

Expected reimbursements for expenditures required to settle a provision are recognized only when receipt of such reimbursements is virtually certain. Such reimbursements are recognized as a separate asset in the statement of financial position, with a corresponding credit to the specific expense for which the provision has been made.

~~The following table sets forth, for the periods indicated, our consolidated revenues by segment:~~Income Statement Data

~~The following table sets forth, for the periods indicated, our gross profits by segment:~~

The following table sets forth, for the periods indicated, financial data as percentages of total revenues and the increase (or decrease) by item as a percentage of the amount over the comparable period in the previous years.

~~Fiscal Year Ended March 31, 2012 Compared to Fiscal Year Ended March 31, 2011~~

The following table sets forth, for the periods indicated, our consolidated revenues by ~~geography:~~segment:

~~During the year ended~~Fiscal Year Ended March 31, ~~2012, the Indian rupee depreciated by approximately 5%, 9%, and 7% against the U.S. dollar, the Euro and the Russian rouble, respectively, as~~2015 compared to ~~the year ended~~Fiscal Year Ended March 31, ~~2011. This change in the exchange rates resulted in higher reported revenue growth rates because of the increase in Indian rupee realization from sales in U.S. dollars, Euros and Russian roubles.~~

~~Revenues from our Global Generics segment~~Our overall consolidated revenues were ~~70,243~~ Rs.148,189 million for the year ended March 31, ~~2012,~~2015, an increase of ~~32%~~12% as compared to ~~53,340~~ Rs.132,170 million for the year ended March 31, 2011. North America (the United States and Canada), Germany, India and Russia were the four key markets for our Global Generics segment, contributing approximately 86% of the revenues of this segment for the year ended March 31, 2012.

~~North America (the United States and Canada).~~Our revenues from North America (the United States and Canada) for the year ended March 31, 2012 were 31,889 million, an increase of 68% as compared to our revenues of 18,996 million for the year ended March 31, 2011. In U.S. dollar absolute currency terms (i.e., U.S dollars without taking into account the effect of currency exchange rates), such revenues grew by 62% in the year ended March 31, 2012 as compared to the year ended March 31, 2011. This growth was largely attributable to the following:

~~The following table sets forth, for the year ended March 31, 2012, products that we launched in North America (the United States and Canada):~~

~~Market share expansion in our existing key products such as lansoprazole, omeprazole Mg OTC, tacrolimus and higher contributions of our Shreveport facility.~~

~~According to IMS Health, 26 products in our prescription generics portfolio are ranked among the top three in U.S. market share for the year ended March 31, 2012.~~

During the year ended March 31, 2012, our OTC portfolio, which is one of the key focus areas of our North America (the United States and Canada) business, crossed $100 million in revenues. Our key OTC products include omeprazole magnesium, fexofenadine, fexofenadine-pseudoephedrine and ranitidine. We expect to introduce more such products in this portfolio, and expect our OTC portfolio to be a key growth driver in the future.

During the year ended March 31, 2012, we made 17 new ANDA filings, bringing our cumulative ANDA filings to 194. We now have 80 ANDAs pending approval at the U.S. FDA, out of which 41 are Paragraph IV filings and 7 have first to file status.

During the year ended March 31, 2013, we expect to launch a few more key products, and we remain optimistic about the long term growth opportunity in this market. However, there has been a delay in the anticipated launch of one of our key products, atorvastatin, which remains pending approval by the U.S. FDA.

~~Russia.~~Our revenues from Russia for the year ended March 31, 2012 were 11,024 million, an increase of 23% over the year ended March 31, 2011. In Russian rouble absolute currency terms (i.e., Russian roubles without taking into account the effect of currency exchange rates), such revenues grew by 15% in the year ended March 31, 2012 as compared to the year ended March 31, 2011. The growth was largely driven by an increase in sales volumes across our key brands, such as Nise, Omez, Ketorol, Senade and Cetrine. Pharmexpert, a market research firm, in its moving annual total report for the 12 months ended March 31, 2012 (the “Pharmexpert MAT March 2012”), reported our prescription secondary sales growth (i.e., sales made by our wholesalers to stockists and retailers) for the year ended March 31, 2012 at 21%, as compared to the Russian pharmaceutical market’s overall growth rate of 17% for the same period. Our rank in the Russian pharmaceutical market has improved from 15^th ~~as of March 31, 2011 to 13~~^th as of March 31, 2012, as per the Pharmexpert MAT March 2012 report. We launched 5 new brands in Russia during the year ended March 31, 2012, with two being OTC products. OTC products represent approximately 29% of our overall sales in Russia and we intend to further strengthen our OTC sales by continuous branding initiatives.

~~India~~. Our revenues from India for the year ended March 31, 2012 were 12,931 million, an increase of 11% as compared to the year ended March 31, 2011. This growth was driven by an increase in sales volumes across our key brands, such as Omez, Stamlo, Razo and Reditux, as well as revenues from 23 new brands launched in the year ended March 31, 2012.

Bio-similar products are one of our key growth drivers in India, and represent approximately 7% of our revenues from India in the year ended March 31, 2012. We are among the cost leaders in the bio-similar product category, which allows us to price our products comparatively cheaper than the innovator brands in India.

~~Germany~~. Our revenues from Germany for the year ended March 31, 2012 were 5,055 million, a decline of 7% as compared to the year ended March 31, 2011. In Euro absolute currency terms (i.e., Euros without taking into account the effect of currency exchange rates), such revenues for the year ended March 31, 2012 declined by 15% as compared to year ended March 31, 2011. The decline was largely due to the continuing pricing challenges in the tender (i.e., competitive bidding) based supply model in Germany, partly offset by additional revenues from new products launched during the twelve months ended March 31, 2012 under non-tender supply contracts.

~~Other Countries of the former Soviet Union.~~Our revenues from other countries of the former Soviet Union for the year ended March 31, 2012 were 2,236 million, an increase of 17% over the year ended March 31, 2011. This growth was largely led by increased revenues from sales in Uzbekistan and Kazakhstan, and partly by the depreciation of the Indian rupee against the U.S. dollar.

~~Other countries of Europe.~~Our revenues from our “Rest of Europe” markets (i.e., all European markets other than Germany, Russia and other countries of the former Soviet Union) were 3,203 million for the year ended March 31, 2012, an increase of 8% as compared to the year ended March 31, 2011. Such growth was primarily due to increased out-licensing of product rights, and partly due to depreciation of the Indian rupee against the Euro.

~~Other Markets.~~Our revenues from our “Rest of the World” markets (i.e., all markets other than North America, Europe, Russia and other countries of the former Soviet Union and India) were 3,904 million in the year ended March 31, 2012, an increase of 16% as compared to the year ended March 31, 2011. The growth was largely led by increased revenues from sales in South Africa, Australia and Venezuela, and was partially offset by the impact of depreciation of the Venezuelan bolivar against the Indian rupee.

Our PSAI segment’s revenues for the year ended March 31, 2012 were 23,812 million, an increase of 21% as compared to the year ended March 31, 2011. This was largely attributable to an increase in the sales of active pharmaceutical ingredients to generic customers, a strong recovery of customer orders in the pharmaceutical services segment and the impact of depreciation of the Indian rupee against multiple currencies. In the year ended March 31, 2012, our Pharmaceutical Services and Active Ingredients segment filed 68 Drug Master Files (“DMFs”) worldwide, of which 14 were filed in the United States, 14 were filed in Europe and 40 were filed in other countries. Cumulatively, our total worldwide DMFs as of March 31, 2012 were 543, including 187 DMFs in the United States.

Our total gross margin was 53,305 million for the year ended March 31, 2012, representing 55% of our total revenues for that period, as compared to 40,263 million for the year ended March 31, 2011, representing 54% of our total revenues for that period.

~~The following table sets forth, for the periods indicated, our gross margin by segment:~~

~~the favorable impact of launches of certain high margin new products in the United States;~~

~~the favorable impact of depreciation of the Indian rupee against multiple currencies in the markets in which we operate; and~~

~~the unfavorable impact of price erosions in some of our existing products~~

Our selling, general and administrative expenses for the year ended March 31, 2012 were 28,867, an increase of 22% as compared to 23,689 for the year ended March 31, 2011. This increase was primarily on account of the following:

~~increased personnel costs, due to annual raises and new recruitments;~~

~~higher distribution costs, due to increases in sales volumes and freight cost increases; and~~

~~the impact of depreciation of the Indian rupee against multiple currencies in the markets in which we operate.~~

Research and development expenses increased by 17% to 5,911 million during the year ended March 31, 2012, as compared to 5,060 million during the year ended March 31, 2011. Our research and development expenditures accounted for 6% of our total revenues during the year ended March 31, 2012, as compared to 7% during the year ended March 31, 2011. Approximately 70% of our research and development expenses during the year ended March 31, 2012 were spent towards the development of bio-equivalent generic products and the other 30% was dedicated to innovative and biologics research.

During the three months ended March 31, 2012, there were certain significant changes in the German generic pharmaceutical market that are expected to adversely impact the future operations of our German subsidiary, betapharm. Among other things, there was a reference pricing review that resulted in a reduction of the government mandated price of certain of our products being sold by betapharm, which is expected to adversely affect betapharm’s sales margins. In addition, one of the key SHI funds, Barmer GEK, announced a large sales tender that is expected to cause significant impact on the price realization of some of the key products of betapharm.

As a result of such adverse market developments, we reassessed the recoverable amounts of betapharm’s product-related intangibles, and of the cash generating unit that comprises these product-related intangibles and its trademark/brand “beta”. The recoverable amount of both the product-related intangibles and the betapharm cash generating unit were based on their fair value less costs to sell, which was higher than its value in use. As a result of this re-evaluation, the carrying amount of certain product-related intangibles was determined to be higher than its recoverable amount. Accordingly, an impairment loss of 1,022 million for the product related intangibles was recorded for the year ended March 31, 2012.

Further, based on our recent business performance and evaluation of expected cash flows from certain customer related intangibles pertaining to our New Zealand business, we have recorded an impairment loss of 18 million during the year ended March 31, 2012.

In the year ended March 31, 2012, our net other income was 765 million, as compared with net other income of 1,115 million in the year ended March 31, 2011. This decrease was largely on account of the following:

Net finance income was 160 million for the year ended March 31, 2012, as compared to a net finance expense of 189 million for the year ended March 31, 2011. The change was primarily on account of the following:

~~As a result of the above, profit before income taxes was 18,466 million for the year ended March 31, 2012, an increase of 48% as compared to 12,443 million for the year ended March 31, 2011.~~

~~Income tax expense was 4,204 million for the year ended March 31, 2012, as compared to an income tax expense of 1,403 million for the year ended March 31, 2011.~~

~~Our consolidated effective tax rate was 23% for the year ended March 31, 2012, as compared to 11% for the year ended March 31, 2011. This increase in the effective tax rate was primarily due to:~~

reduced tax incentives, as well as expiration of a tax holiday period, under Indian laws that applied to certain of our facilities located in India, amounting to an increase in tax expense by approximately 4%;

~~higher revenues from the launch of our product olanzapine in the United States, amounting to an increase in tax expense by approximately 3%; and~~

the unfavorable impact of changes in the profit mix of our subsidiaries (i.e., a decrease in the proportion of profit from subsidiaries with lower tax rates and an increase in the proportion of profit from subsidiaries with higher tax rates), coupled with an increase in expenses not deductible for tax purposes.

The rate of weighted deduction on our eligible research and development expenditures was equal to 200% for the years ended March 31, 2012 and 2011. The decrease in our eligible research and development expenditure did not cause any significant impact on our effective tax rate.

~~As a result of the above, our net result was a profit of 14,262 million for the year ended March 31, 2012, as compared to a net profit of 11,040 million for the year ended March 31, 2011.~~

~~Fiscal Year Ended March 31, 2011 Compared to Fiscal Year Ended March 31, 2010~~

~~The following table sets forth, for the periods indicated, our consolidated revenues by geography:~~

During the year ended March 31, 2011, the Indian rupee appreciated by approximately 4% and 10% against the U.S. dollar and the Euro, respectively, as compared to the year ended March 31, 2010. This change in the exchange rates resulted in lower reported revenue growth rates because of the decrease in rupee realization from sales in U.S. dollars and Euros.

Revenues from our Global Generics segment were 53,340 million for the year ended March 31, 2011, an increase of 10% as compared to 48,606 million for the year ended March 31, 2010. North America (the United States and Canada), Germany, India and Russia were the four key markets for our Global Generics segment, contributing approximately 85% of the revenues of this segment for the year ended March 31, 2011. The revenue growth was largely led by our key markets of North America (the United States and Canada), Russia and India. This growth was partly offset by the decrease in the Germany market on account of increasing pricing pressures due to competitive tenders.

~~North America (the United States and Canada).~~Our revenues from North America (the United States and Canada) for the year ended March 31, 2011 were 18,996 million, representing an increase of 13% as compared to our revenues of 16,817 million for the year ended March 31, 2010. In absolute dollar currency terms (i.e., without taking into account the effect of currency exchange rates), such revenues grew by 18% in the year ended March 31, 2011 as compared to the year ended March 31, 2010. The growth was driven by new products launched in the year ended March 31, 2011. During the year ended March 31, 2011, we launched 11 new products, with some of the key ones being: amlodipine benazapril, tacrolimus, lansoprazole, fexofenadine pseudoephedrine (180/240 mg) and zafirlukast. We launched fexofenadine-pseudoephedrine (180/240 mg) on January 31, 2011 after the District Court of New Jersey lifted the preliminary injunction previously granted to Sanofi-Aventis. The U.S. FDA, which had previously only approved fexofenadine for prescription sales in the United States, approved fexofenadine for over-the-counter sales in the United States in January 2011. We were allowed to liquidate our inventory in the United States after the U.S. FDA’S approval of over-the-counter sales and this limited period launch contributed to our growth for the year ended March 31, ~~2011. According to IMS Health, twenty five products in our prescription portfolio are ranked among the top 3 in U.S. market shares for the year ended March 31, 2011.~~

During the year ended March 31, 2011, over-the-counter products constituted approximately 14% of our total revenue in North America (the United States and Canada). Key over-the-counter products in this segment include omeprazole magnesium and ranitidine. We expect to introduce more new over-the-counter products in this segment, and expect them to be a key growth driver, in the future.

During the year ended March 31, 2011, we made 21 new ANDA filings, bringing our cumulative ANDA filings to 179. We now have 76 ANDAs pending approval at the U.S. FDA, out of which 38 are Paragraph IV filings and 10 have first to file status. We expect that our growth in North America (the United States and Canada) will largely be fueled by revenues from new product launches.

~~India~~. Our revenues from India for the year ended March 31, 2011 were 11,690 million, representing a growth of 15% over the year ended March 31, 2010. This growth was driven by sales volume growth of 11% across key brands and contribution from new products launched in the year ended March 31, 2011 of 4%. A total of 48 new products were launched by us in India, including one bio-similar product—darbepoetin alfa (Cresp^®~~). Bio-similar products are one of our key growth drivers in India and currently represent approximately 5% of our India revenues. Reditux~~^®, our first brand of bio-similar product launched three years ago, was the first, and still continues to be the only, bio-similar monoclonal antibody in the world. In the year ended March 31, 2011, Reditux^® registered a significant growth of 74% over the year ended March 31, 2010 and is now among our top 5 brands in India. In the near to medium term, we expect the growth of our business in India to be in line with the overall India market growth, and to be driven largely by volume growth across products and contribution from new product launches.

~~Russia.~~Revenues from Russia for the year ended March 31, 2011 were 8,942 million, representing an increase of 24% over the year ended March 31, 2010. In absolute Russian roubles currency terms (i.e., without taking into account the effect of currency exchange rates), such revenues grew by 29% in the year ended March 31, 2011 as compared to the year ended March 31, 2010. The growth2015 was largely driven by volume growth and new products launched in the year ended March 31, 2011. We launched 7 new brands in Russia during the year ended March 31, 2011, with many being over-the-counter (“OTC”) products. OTC products represent approximately 25% of our overall sales in Russia and we intend to further strengthen our OTC product sales by continuous branding initiatives. According to Pharmexpert, a market research firm, in its “Pharmexpert MAT March 2011” report, our prescription secondary sales (i.e., sales made by our wholesalers to stockists and retailers) for the year ended March 31, 2011 increased by 19% as compared to the Russian pharmaceutical market’s overall growth rate of 7.5%. Consequently, our rank in the Russian pharmaceutical market has improved from 16th as of March 31, 2010 to 15th as of March 31, 2011.

~~Other Countries of the former Soviet Union.~~~~Revenues from other countries of the former Soviet Union for the year ended March 31, 2011 were 1,916 million, representing growth of 2% over the year ended March 31, 2010.~~

~~Germany~~. Revenues from Germany for the year ended March 31, 2011 were 5,457 million, representing a decline of 25% over the year ended March 31, 2010. The decline was largely due to the continuing pricing challenges resulting from the continuing shift of the German generic pharmaceutical market towards a tender (i.e., competitive bidding) based supply model. In the year ended March 31, 2010, we took measures to restructure our German business (conducted through betapharm and Reddy Holding GmbH) and reduced our workforce by more than 200 personnel. This restructuring significantly improved our operating cash flows from Germany. We expect our business in Germany to remain challenging due to the continuous pricing pressure of a tender based supply business model.

~~Other Markets.~~Revenues from our “Rest of the World” markets (i.e., all markets other than North America, Europe, Russia and other countries of the former Soviet Union and India) were 6,369 million in the year ended March 31, 2011, representing a growth of 22% over the year ended March 31, 2010. Our “Rest of the World” markets include markets such as Venezuela, South-Africa, Australia and New Zealand, as well as various other small markets.

Revenues from our PSAI segment were 19,648 million for the year ended March 31, 2011, representing a decrease of 4% from the year ended March 31, 2010. The modest growth in our Active Pharmaceutical Ingredients business, driven by new product launches, was offset by pricing pressures in our existing products. The revenue decline in our Custom Pharmaceutical Services business was largely due to decreased customer orders, resulting from large pharmaceutical companies and bio-technology companies rationing their investments in research and development. During the year ended March 31, 2011, we filed 56 DMFs globally, including 19Global Generics segment’s operations in the United States, ~~7 in Europe and 30 in Russia,~~ India and our “Rest of the World” markets (i.e., all markets other than North America, Europe, Russia and other countries of the former Soviet Union, and India)~~. Accordingly,~~, primarily Venezuela.

The following table sets forth, for the periods indicated, our ~~cumulative total DMF filings were 486 worldwide~~consolidated revenues by geography:

~~Our gross profit increased to 40,263~~Global Generics segment were Rs.120,556 million for the year ended March 31, ~~2011, from 36,340~~2015, an increase of 15% as compared to Rs.105,164 million for the year ended March 31, ~~2010. Gross margin as~~ 2014. The revenue growth was largely led by this segment’s operations in the United States, India and Venezuela.

After taking into account the impact of exchange rate fluctuations of the Indian rupee against multiple currencies in the markets in which we operate, the foregoing increase in revenues of this segment was attributable to the following factors:

an increase of approximately 7% resulting from the introduction of new products during the year ended March 31, 2015;

a ~~percentage~~decrease of ~~total~~approximately 13% resulting from the net impact of decreases in sales prices of products; and

an increase of approximately 21% resulting from increased sales volumes of existing products (including the annualized impact of products launched during the year ended March 31, 2014).

The following is a discussion of the key markets in our Global Generics segment:

North America (the United States and Canada): Our Global Generics segment’s revenues ~~was 54%~~from North America (the United States and Canada) were Rs.64,723 million for the year ended March 31, ~~2011,~~2015, an increase of 17% as compared to ~~52%~~the year ended March 31, 2014. In U.S. dollar absolute currency terms (i.e., U.S. dollars without taking into account the effect of currency exchange rates), such revenues increased by 15% for the year ended March 31, ~~2010.~~2015 as compared to the year ended March 31, 2014.

a gain in market share of certain of our existing products, such as divalproex sodium ER, azacitidine, decitabine, and ziprasidone; and

the foregoing was partially offset by lower realization from certain of our existing products due to price decreases.

The following table sets forth products that we launched in the United States during the year ended March 31, 2015:

Furthermore, during the year ended March 31, 2015, we acquired from Novartis Consumer Health Inc. the title and rights to its Habitrol^® brand (an over-the-counter nicotine replacement therapy transdermal patch) and related U.S. marketing rights, and we began marketing the product in the United States.

During the year ended March 31, 2015, we made 13 new ANDA filings, and as of March 31, 2015 our cumulative ANDA filings were 220. As of March 31, 2015, we had 68 ANDAs pending approval at the U.S. FDA, of which 43 are Paragraph IV filings, and we believe we are the first to file with respect to 13 of these filings.

India: Our revenues from India for the year ended March 31, 2015 were Rs.17,870 million, an increase of 14% as compared to the year ended March 31, 2014. This growth was largely attributable to the increase in sales volumes across our key brands and revenues from new brands launched during the year ended March 31, 2015. According to IMS Health in its Moving Annual Total report for the year ended March 31, 2015, our secondary sales in India grew by 13.1% during such period, as compared to the India pharmaceutical market’s growth of 12.1% during such period. During the year ended March 31, 2015, we launched 18 new brands in India such as DOXT-SL^TM, Melgain^®, Xalibo^TM , and Resof™ (sofosbuvir).

Furthermore, in April 2015, we entered into a definitive agreement with UCB India Private Limited and other UCB group companies (together referred to as “UCB”) to acquire a select portfolio of established products business in the territories of India, Nepal, Sri Lanka and Maldives for a total purchase consideration of Rs.8,000 million. The purchased business was acquired on a slump sale basis (an Indian tax law concept which refers to the transfer of a business as a going concern without values being assigned to individual assets and liabilities). The transaction includes approximately 350 employees engaged in the operations of the acquired India business. The acquisition is expected to strengthen our presence in the areas of dermatology, respiratory and pediatric products. The acquired business had revenues of approximately Rs.1,500 million for the year ended December 31, 2014. The transaction was closed on June 16, 2015 and we began marketing of these products.

Emerging Markets: Our revenues from our “Emerging Markets” (which is comprised of Russia, other countries of the former Soviet Union, and certain other countries from our “Rest of the World” markets, primarily Venezuela, South Africa and Australia) for the year ended March 31, 2015 were Rs.30,770 million, an increase of 13% as compared to the year ended March 31, 2014. The reasons for this growth are set forth below in the separate discussions of these geographies.

Russia:Our Global Generics segment’s revenues from Russia were Rs.14,922 million for the year ended March 31, 2015, a decrease of 9% as compared to the year ended March 31, 2014. In Russian rouble absolute currency terms (i.e., Russian roubles without taking into account the effect of currency exchange rates), such revenues increased by 13% for the year ended March 31, 2015 as compared to the year ended March 31, 2014. Our over-the-counter (“OTC”) division’s revenues from Russia for the year ended March 31, 2015 were 36% of our total revenues from Russia, and we intend to further strengthen our OTC sales by continuous branding initiatives.

According to IMS Health, as per its report for the year ended March 31, 2015, our sales value (in Russian roubles) growth and volume growth from Russia, as compared to the Russian pharmaceutical market sales value (in Russian roubles) growth and volume growth for the year ended March 31, 2015 was as follows:

North America (the United States and Canada): Our Global Generics segment’s revenues from North America (the United States and Canada) for the year ended March 31, ~~2011.~~

~~Gross margin include credits~~2013 were Rs.37,846 million, an increase of ~~various export related incentive schemes granted by the Government~~19% as compared to our revenues of ~~India of 1,491~~Rs.31,889 million for the year ended March 31, ~~2011,~~2012. In U.S. dollar absolute currency terms (i.e., U.S. dollars without taking into account the effect of currency exchange rates), this segment’s revenues from such geography grew by 10% in the year ended March 31, 2013 as compared to ~~573~~ the year ended March 31, 2012.

Excluding the impact of Olanzapine profit share revenues from Teva Pharmaceuticals Ltd. of Rs.4,500 million for the year ended March 31, ~~2010. The magnitude of such credits that will be available to us in~~2012, the future will depend on the Government of India’s fiscal policies, which are based on macro-economic considerations. If the Government of India reduces the amount of such credits or otherwise modifies or alters the relevant schemes in any manner adverse to us, without a proportionate compensation in any other form, our gross margins may be adversely impacted.

Gross margin for our Global Generics segment increased to 65% for the year ended March 31, 2011, as compared to 60% for the year ended March 31, 2010. This growth was largely due to high margin new products inrevenues from North America (the United States and Canada) resulting in favorable changes in our products mix (i.e., an increase in the proportion of sales of higher gross margin products and a decrease in the proportion of sales of lower gross margin products) in this segment.

~~Gross margin for our PSAI segment decreased to 26%~~ for the year ended March 31, ~~2011,~~2013 increased by 38% as compared to ~~33% for~~ the year ended March 31, ~~2010. This decrease in gross margin was primarily due to pricing pressures experienced~~2012. In U.S. dollar absolute currency terms (i.e., U.S dollars without taking into account the effect of currency exchange rates), this segment’s revenues from such geography grew by our existing products in our Active Pharmaceutical Ingredients business and unfavorable changes in the services mix (i.e., an increase in the proportion of sales of lower gross margin services and a decrease in the proportion of sales of higher gross margin services) of our Custom Pharmaceutical Services business.

Selling, general and administrative expenses as a percentage of total revenues were 32% for the year ended March 31, 2011, which is the same as the percentage for the year ended March 31, 2010. Selling, general and administrative expenses increased by 5% to 23,689 million for the year ended March 31, 2011, as compared to 22,505 million for the year ended March 31, 2010. The increase was primarily on account of higher legal expenses in the United States attributable to fexofenadine related litigation costs; OTC related marketing expenditures in Russia and other counties of the former Soviet Union; and expenditures related to establishing a new field force in India. However, these increases in expenses were partially offset by cost decreases attributable to the restructuring of our German business (conducted through betapharm and Reddy Holding GmbH) and related workforce reductions during the year ended March 31, 2010.

Furthermore, amortization expenses decreased by 20% to 1,186 million for the year ended March 31, 2011, from 1,479 million for the year ended March 31, 2010. This decrease in amortization expenses was because we did not record any write- downs of assets of the betapharm cash generating unit29% in the year ended March 31, ~~2011,~~2013 as compared to ~~write-downs of 3,456 million of intangible assets and 5,147 million of goodwill of our betapharm cash generating unit in~~ the year ended March 31, ~~2010.~~

Research and development expenses increased by 33% to 5,060 million during the year ended March 31, 2011, as compared to 3,793 million during the year ended March 31, 2010. Our research and development expenditures accounted for 7% of our total revenues during the year ended March 31, 2011, as compared to 5% during the year ended March 31, 2010.2012. This ~~increase in costs~~growth was ~~primarily due to higher research and development expenditures in our Global Generics segment for the year ended March 31, 2011.~~

During the year ended March 31, 2009, there were significant changes in the German generic pharmaceuticals market that impacted the operations of our German subsidiary betapharm. The biggest change was the shift to a tender based supply model within the German generic pharmaceutical market, as most prominently evidenced by the announcement of a large competitive bidding (or “tender”) process by the Allgemeine Ortskrankenkassen (“AOK”), the largest German statutory health insurance fund (“SHI fund”). In addition, there was a continuing decrease in prices of pharmaceutical products and an increased quantity of discount contracts being negotiated with other SHI funds.

Further tenders were announced by several of the SHI funds during the year ended March 31, 2010. We participated in these tenders through our wholly owned German subsidiary, betapharm. The final results of a majority of these tenders indicated a lower than anticipated success rate for betapharm.

Due to these results, we re-assessed the impact of such tenders on our future sales and profits in the German market. In light of further deterioration of prices and adverse market conditions in Germany duelargely attributable to the ~~rapid shift of the German generic pharmaceutical market towards a tender (i.e., competitive bidding) based supply model, we recorded an impairment loss of:~~following:

~~Accordingly,~~Market share expansion in our existing key products such as ziprasidone and fondaparinux, ramp-up in our antibiotics portfolio and higher contributions by our facility in Shreveport, Louisiana, U.S.A. Our facility in Shreveport, Louisiana, U.S.A. accounted for approximately 4% of the revenue growth of this segment in North America (the United States and Canada), primarily due to a new multi-year contract signed with a customer during the previous year.

During the year ended March 31, ~~2010,~~2013, we ~~recorded a write-down~~made 19 U.S. filings, which includes one NDA filing under section 505(b)(2) and 18 ANDA filings, bringing our cumulative ANDA filings to 200. We now have 65 ANDAs pending approval at the U.S. FDA, out of ~~intangible assets of 3,456 million~~which 38 are Paragraph IV filings and ~~a write-down of goodwill of 5,147 million. In~~we believe 8 to have first to file status.

During the year ~~ended~~ending March 31, ~~2009,~~2014, we ~~recorded~~expect to launch a ~~write-down of intangible assets of 3,167 million~~few more key products, and ~~a write down of goodwill of 10,856 million. In~~we remain optimistic about the ~~year ended March 31, 2011, we did not record any further write-downs of assets of the betapharm cash generating unit.~~long term growth opportunity in this market.

~~In the year ended March 31, 2011, our net other income was 1,115 million, as compared to net other income of 569 million in the year ended March 31, 2010.~~India: Our ~~net other income in the year ended March 31, 2011 was primarily higher on account of a profit~~revenues from the sale of land amounting to 292 million and a benefit of negative goodwill of 73 million realized in accordance with purchase price allocation accounting under IFRS on account of our acquisition of a penicillin-based antibiotics manufacturing site in Bristol, Tennessee, U.S.A from GlaxoSmithKline plc and Glaxo Group Limited.

~~As a result of the foregoing, our earnings from operating activities were 12,629 million~~India for the year ended March 31, ~~2011, as compared to 2,008~~2013 were Rs.14,560 million, ~~for the year ended March 31, 2010. Our earnings from operating activities for the year ended March 31, 2010 were significantly lower due to the above referenced write-down~~an increase of ~~intangible assets of the betapharm cash generating unit of 3,456 million and write-down of goodwill of the betapharm cash generating unit of 5,147 million.~~

~~For the year ended March 31, 2011, our net finance expense was 189 million, as compared to net finance expense of 3 million for the year ended March 31, 2010.~~

~~Foreign exchange loss was 57 million for the year ended March 31, 2011, as compared to a foreign exchange gain of 72 million for the year ended March 31, 2010.~~

~~Net interest expense was 127 million for the year ended March 31, 2011, as compared to 123 million for the year ended March 31, 2010.~~

~~Profit on sale of investments was 68 million for the year ended March 31, 2011, as compared to 48 million for the year ended March 31, 2010.~~

The foregoing resulted in a profit (before income tax) of 12,443 million for the year ended March 31, 2011, as compared to 2,053 million for the year ended March 31, 2010. Our profit (before income tax) for the year ended March 31, 2010 was significantly lower due to the above referenced write-down of intangible assets of the betapharm cash generating unit of 3,456 million and write- down of goodwill of the betapharm cash generating unit of 5,147 million.

~~Income tax expense was 1,403 million for the year ended March 31, 2011, as compared to an income tax expense of 985 million for the year ended March 31, 2010.~~

~~The increase in our income tax expense was primarily attributable to the following factors:~~

A tax benefit that arose for the year ended March 31, 2010 in our German operations (primarily on account of the significant reversal of deferred tax liability on intangibles corresponding to the impairment charge recorded in betapharm) did not exist during the year ended March 31, 2011.

~~A higher proportion of our profits for the year ended March 31, 2011 were taxed in jurisdictions with higher tax rates~~13% as compared to the year ended March 31, ~~2010.~~2012. This growth was driven by an increase in sales volumes across our key brands, such as Omez, Nise, Stamlo, Razo and Reditux, as well as revenues from 24 new brands launched during the year. According to IMS Health, a market research firm, as per its moving annual total report for the 12 months ended March 31, 2013, our sales value grew by 13.7%. In comparison, the Indian pharmaceutical market grew by 10.2% during such period.

~~During~~Bio-similar products are one of our key growth drivers in India, and represent approximately 8% of our revenues from India in the year ended March 31, 2010, the German tax authorities concluded their preliminary tax audits for betapharm, covering the years ended March 31, 2001 through March 31, 2004, and objected to certain tax positions taken in those years’ income tax returns filed by betapharm.2013.

Emerging Markets: Our ~~estimate~~revenues from our “Emerging Markets” (which is comprised of Russia, other countries of the ~~additional tax liability that could arise on conclusion~~former Soviet Union, and certain other countries from our “Rest of the ~~tax audits is 302 million (EUR 5 million). Accordingly, we recorded the amount as additional tax expense in our income statement~~World” markets, primarily South Africa, Venezuela and Australia), for the year ended March 31, ~~2010. As part~~2013 were Rs.22,441 million, an increase of 31% over the ~~acquisition~~year ended March 31, 2012. This growth was due to the reasons set forth in the below discussions of ~~betapharm~~these geographies.

Russia:Our revenues from Russia for the year ended March 31, 2013 were Rs.14,048 million, an increase of 27% over the year ended March 31, 2012. In Russian rouble absolute currency terms (i.e., Russian roubles without taking into account the effect of currency exchange rates), such revenues grew by 18% in the year ended March 31, 2013 as compared to the year ended March 31, 2012. The growth was largely driven by an increase in sales across our key brands (such as Nise, Omez, Ketorol, Senade and Cetrine) as well as new product launches. According to IMS Health, a market research firm, as per its moving annual total report for the 12 months ended March 31, 2013, our sales value and volume growths for the year ended March 31, 2013 were 4.9% and 2.7%, respectively, as compared to the Russian pharmaceutical market value growth and volume decrease of 8.5% and 0.7%, respectively. During the same period, our volume market share increased from 1.65% to 1.70%. We launched 5 new brands in Russia during the year ended March 31, ~~2006,~~2013. OTC products represented approximately 34% of our overall sales in Russia and we ~~acquired certain pre-existing income tax liabilities pertaining~~intend to ~~betapharm for the fiscal periods prior to the date~~further strengthen our OTC sales by continuous branding initiatives.

Other countries of the closing of the acquisition (in March 2006). Accordingly, the terms of the Sale and Purchase Agreement provided that 324 million (EUR 6 million) of the purchase consideration would be set aside in an escrow account, to fund against certain indemnity claims by us in respect of legal and tax matters that may arise covering such pre-acquisition periods. The right to make tax related indemnity claims under the Sale and Purchase Agreement only applies with respect to taxable periods from January 1, 2004 until November 30, 2005, and lapses and is time barred at the end of the seven year anniversary of the closing of the acquisition (in March 2013). To the extent that the tax audits cover periods not subject to the indemnity rights under the Sale and Purchase Agreement, we have additional indemnity rights pursuant to a tax indemnity agreement with Santo Holdings, the owner of betapharm prior to 3i Group plc.

Upon receipt of such preliminary tax notices, we initiated the process of exercising such indemnity rights against the sellers of betapharm and Santo Holdings and have concluded that as of March 31, 2011 recovery of the full tax amounts demanded by the German tax authorities is virtually certain. Accordingly, a separate asset of 302 million (EUR 5 million) representing such indemnity rights has been recorded as part of “other assets” in the statement of financial position, with a corresponding credit to the current tax expense.

~~As a result of the foregoing, our net result was a profit of 11,040 million for the year ended March 31, 2011, as compared to a net profit of 1,068 million, for the year ended March 31, 2010.~~former Soviet Union: Our profit for the year ended March 31, 2010 was significantly lower due to the above referenced write-down of intangible assets of the betapharm cash generating unit of 3,456 million and a write-down of goodwill of the betapharm cash generating unit of 5,147 million.

~~Fiscal Year Ended March 31, 2010 Compared to Fiscal Year Ended March 31, 2009~~

For the year ended March 31, 2010, our Global Generics segment accounted for 69% of our total revenues, as compared to 72% for the year ended March 31, 2009. Revenues in this segment decreased by 2% to 48,606 million for the year ended March 31, 2010, as compared to 49,790 million for the year ended March 31, 2009. Excluding the impact of movements in foreign currency exchange rates and changes in mark to market values of cash-flow hedges (i.e., derivative contracts to hedge against foreign currency risks), the revenues of this segment decreased by 3% to 48,838 million for the year ended March 31, 2010, as compared to 50,590 million for the year ended March 31, 2009.

Revenues from North America (the United States and Canada) in this segment decreased by 15% to 16,817 million for the year ended March 31, 2010, as compared to 19,843 million for the year ended March 31, 2009. This decrease was primarily due to the launch of sumatriptan, our authorized generic version of Imitrex^®, in the year ended March 31, 2009, which generated revenues of 7,188 million for the year ended March 31, 2009, as compared to 2,543 million for the year ended March 31, 2010. Excluding the revenues from sumatriptan, our revenues in this segment from North America (the United States and Canada) grew by 13% to 14,274 million for the year ended March 31, 2010, as compared to 12,655 million for the year ended March 31, 2009. The increase was mainly due to new product launches, including nateglinide, omeprazole magnesium (OTC) and fluoxetine DR, which generated revenues of 763 million during the year ended March 31, 2010. Revenues from our OTC business in this segment increased by 59% to 1,575 million for the year ended March 31, 2010, as compared to 992 million for the year ended March 31, 2009.

Revenues from India constituted 21% of this segment’s total revenues for the year ended March 31, 2010, as compared to 17% for the year ended March 31, 2009. Revenues in this segment from India increased by 20% to 10,158 million for the year ended March 31, 2010, as compared to 8,478 million for the year ended March 31, 2009. This growth of 20% was primarily attributable to a 6% increase in revenues (amounting to 489 million) due to new product launches and a 16% increase in sales volumes of key brands (such as Omez and Omez DR, our brands of omeprazole, Razo and Razo D, our brand of rabeprazole, Reditux, our brand of rituximab, and Nise, our brand of nimesulide), which was partially offset by a decrease of 2% in average prices. Revenues from Europe in this segment decreased by 19% to 9,643 million for the year ended March 31, 2010, as compared to 11,886 million for the year ended March 31, 2009. Revenues of betapharm decreased to 7,298 million for the year ended March 31, 2010, as compared to 9,854 million for the year ended March 31, 2009. This decrease was primarily due to lower sales volumes and severe pricing pressures resulting from the rapid shift of the German generic pharmaceutical market towards a tender (i.e., competitive bidding) based supply model.

Revenues from Russia in this segment increased by 25% to 7,232 million for the year ended March 31, 2010, as compared to 5,803 million for the year ended March 31, 2009. This increase was largely on account of an increase in the prices of our key brands in the Russian market.

~~Revenues~~ from other countries of the former Soviet Union ~~in this segment increased by 4% to 1,887 million~~ for the year ended March 31, ~~2010, as compared to 1,821~~2013 were Rs.2,860 million, ~~for~~an increase of 28% over the year ended March 31, ~~2009.~~2012. This growth was largely led by increased revenues resulting from higher prices and increased sales volumes from sales in Ukraine, Belarus and Kazakhstan, and partly benefitted by depreciation of the Indian rupee against the U.S. dollar and Ukrainian hryvnia.

~~Revenues from other~~Rest of the World Markets: We refer to all markets in this segment increased by 46% to 2,869 million for the year ended March 31, 2010, as compared to 1,960 million for the year ended March 31, 2009. This increase was primarily due to increases in revenues from Venezuela, New Zealand and South Africa.

For the year ended March 31, 2010, our PSAI segment accounted for 29% of our total revenues, as compared to 27% for the year ended March 31, 2009. Revenues in this segment increased by 9% to 20,404 million for the year ended March 31, 2010, as compared to 18,758 million for the year ended March 31, 2009. Excluding the impact of movements in foreign currency exchange rates and changes in mark to market values of cash-flow hedges (i.e., derivative contracts to hedge against foreign currency risks), the revenues of this segment ~~increased by 2% to 19,875 million for the year ended March 31, 2010, as compared to 19,412 million for the year ended March 31, 2009.~~

Revenues in this segment from Europe increased by 8% to 6,652 million for the year ended March 31, 2010, as compared to 6,160 million for the year ended March 31, 2009. The increase was primarily due to increased sales of gemcitabine, clopidogrel and montelukast, all products that we were able to launch ahead of our competitors, which was partially offset by a decrease in the prices of our other products in Europe.

Revenues in this segment from North America (the United States and Canada) decreased by 5% to 3,673 million for the year ended March 31, 2010, as compared to 3,875 million for the year ended March 31, 2009. The decrease was primarily due to a decrease in sales volumes of naproxen, finasteride, ibuprofen and montelukast, which was partially offset by an increase in sales volumes of certain of our other products.

~~Revenues in this segment from our “Rest of the World” markets (i.e., all markets~~ other than North America, Europe, Russia and other countries of the former Soviet Union and ~~India) increased by 17% to 7,433~~India as our “Rest of the World” markets. Our revenues from our “Rest of the World” markets were Rs.5,533 million ~~for~~in the year ended March 31, ~~2010,~~2013, an increase of 42% as compared to ~~6,340 million for~~ the year ended March 31, ~~2009. This increase~~2012. The growth was ~~primarily due to an increase in~~largely led by increased revenues resulting from higher prices and increased sales volumes from ~~Israel, Turkey, Brazil~~South Africa, Australia and ~~Japan.~~Venezuela, and was partially offset by the impact of devaluation of the Venezuelan bolivar.

During the year ended March 31, 2010, revenues from India accounted for 13% of our revenues from this segment. Revenues in this segment from India increased by 11% to 2,646 million for the year ended March 31, 2010, as compared to 2,383 million for the year ended March 31, 2009, largely due to increases in prices of our products.Pharmaceutical Services and Active Ingredients (“PSAI”)

Total gross margin as a percentage of total revenues was 52% for the year ended March 31, 2010, as compared to 53% for the year ended March 31, 2009. Total gross margin decreased to 36,340 million for the year ended March 31, 2010, from 36,500 million for the year ended March 31, 2009. The decrease in gross margin was primarily due to a decrease in revenues from sales of sumatriptan, which generated a significantly higher margin than the average margin for our products.

~~Gross margin of this segment decreased to 60% of this~~Our Pharmaceutical Services and Active Ingredients (“PSAI”) segment’s revenues for the year ended March 31, ~~2010, as compared to 61%~~2013 were Rs.30,702 million, an increase of this segment’s revenues for the year ended March 31, 2009. Excluding the impact of derivative instruments designated as cash-flow hedges (i.e., derivative contracts to hedge against foreign currency risks), the gross margin of this segment was 60% of this segment’s revenues for the year ended March 31, 2010, as compared to 61.8% of this segment’s revenues for the year ended March 31, 2009. This decrease was due to lower revenues from sumatriptan, our authorized generic version of Imitrex^®, which was launched during the year ended March 31, 2009 and for which exclusivity ended in August 2009, partially offset by margin improvements in this segment’s Russian sales and margins for new products launched in our North America (the United States and Canada) business.

Gross margin of this segment increased to 33% of this segment’s revenues for the year ended March 31, 2010, as compared to 30% of this segment’s revenues for the year ended March 31, 2009. Excluding the impact of cash-flow hedges (i.e., derivative contracts to hedge against foreign currency risks), the gross margin of this segment was 32.5% of this segment’s revenues for the year ended March 31, 2010, as compared to 33% of this segment’s revenues for the year ended March 31, 2009. This increase in gross margin was primarily due to cost improvement initiatives taken in this segment’s business, which was partially offset by severe pricing pressures in this segment’s business resulting from increased competition.

Selling, general and administrative expenses increased by 7% to 22,505 million for the year ended March 31, 2010, as compared to 21,020 million for the year ended March 31, 2009. During the year ended March 31, 2010, we recorded a one-time charge of 885 million related to termination benefits payable to certain employees in Germany. During the year ended March 31, 2010, we also closed our research facility in Atlanta, Georgia in the United States of America, and announced a re-organization of our North American (the United States and Canada) generics business in Charlotte, North Carolina in the United States of America, which triggered one time closure related costs. Our selling and administrative expenses otherwise remained flat, primarily due to increases in salaries in our India business, offset by a decrease in overall costs in Germany due to restructuring.

~~Amortization expenses were 1,479 million during the year ended March 31, 2010, as compared to 1,503 million during the year ended March 31, 2009.~~

Research and development expenses decreased by 6% to 3,793 million during the year ended March 31, 2010, as compared to 4,037 million during the year ended March 31, 2009. As a percentage of our total revenues, our research and development expenditures decreased to 5% during the year ended March 31, 2010, as compared to 6% during the year ended March 31, 2009. The decrease in research and development expenses was due to lower project expenses and bio-study costs, as the number of projects that reached completion were lower29% as compared to the year ended March 31, ~~2009.~~ 2012. This was largely attributable to:

increases in the sales of active pharmaceutical ingredients to generic customers to support their generic product launches related to impending patent expirations, which increased our PSAI segment’s revenues by 9%;

a strong recovery of customer orders in our PSAI segment primarily due to increased pharmaceutical development services for certain products provided to our innovator company customers, which increased our PSAI segment’s revenues by 8%; and

the impact of depreciation of the Indian rupee against multiple currencies, which increased our PSAI segment’s revenues by 12%.

In the year ended March 31, ~~2010, we also calibrated~~2013, our ~~research~~PSAI segment filed 47 Drug Master Files (“DMFs”) worldwide, of which 5 were filed in the United States, 10 were filed in Europe and ~~development expenditures processes to reduce~~32 were filed in other countries. Cumulatively, our ~~investments~~total DMFs filed worldwide as of March 31, 2013 were 577, including 184 DMFs filed in ~~projects where expenditures were high and relative risk was greater.~~the United States.

~~During~~Our total gross margin was Rs.60,579 million for the year ended March 31, ~~2009, there were significant changes in the German generic pharmaceutical market that impacted the operations~~2013, representing 52% of our ~~German subsidiary betapharm. The biggest change was the shift~~total revenues for this period, as compared to a tender based supply model within the German generic pharmaceutical market, as most prominently evidenced by the announcement of a large competitive bidding (or “tender”) process by the Allgemeine Ortskrankenkassen (“AOK”), the largest German statutory health insurance fund (“SHI fund”). In addition, there was a continuing decrease in prices of pharmaceutical products and an increased quantity of discount contracts being negotiated with other SHI funds.

In the AOK tender, we were awarded 8 products (with 33 contracts) covering AOK-insured persons in various regions within Germany, which represented 17% of the overall volume of the products covered by the AOK tender. betapharm was among the top three companies in terms of number of contracts awarded. While our future sales volumes are expected to increaseRs.53,305 million for the products awarded to us under the AOK tender, we expect that our overall profit margins under the AOK tender arrangement will be significantly lower due to decreased prices per unit of product. Also, the products awarded to us in the AOK tender did not include products that we consider to be our key products.

Due to these developments, as at March 31, 2009, we tested the carrying value of our product related intangibles and goodwill for impairment. The impairment test resulted in our recording an impairment loss on certain product related intangibles amounting to 3,167 million and impairment loss of 10,856 million on goodwill of the betapharm cash generating unit during the year ended March 31, ~~2009.~~2012, representing 55% of our total revenues for this period.

~~Pursuant to~~The following table sets forth, for the ~~ongoing reforms~~periods indicated, our gross margin by segment:

the favorable impact of depreciation of the Indian rupee against multiple currencies in the ~~German generic pharmaceutical market as referenced earlier, further tenders were announced by several~~markets in which we operate;

the impact of one time profit share revenues from the ~~State Healthcare Insurance (“SHI”) funds during~~sale of olanzapine 20 mg tablets in the United States for the year ended March 31, ~~2010. We participated~~2012, which resulted in ~~these tenders through~~higher gross margins for such year;

the unfavorable impact of price erosions in some of our ~~wholly owned subsidiary betapharm. The final results~~existing products in the United States and Germany; and

the unfavorable impact of ~~a majority~~higher power and fuel costs in India due to an increase in tariff rates as well as imposition of ~~these tenders indicated a lower than anticipated success rate~~certain fuel surcharge adjustments.

~~Due to these results, we re-assessed~~ the impact of ~~such tenders on our future sales and profits~~the one time profit share revenues from the sale of olanzapine 20 mg tablets in the German market. In light of further deterioration of prices and adverse market conditions in Germany due to the rapid shift of the German generic pharmaceutical market towards a tender (i.e., competitive bidding) based supply model, we recorded an impairment loss of:

~~Accordingly, during~~ the year ended March 31, ~~2010,~~2012 which resulted in higher gross margins for such year, the gross margin for the year ended March 31, 2013 did not change significantly as compared to the gross margin for the year ended March 31, 2012.

Our selling, general and administrative expenses for the year ended March 31, 2013 were Rs.34,272 million, an increase of 15% as compared to Rs.29,907 million for the year ended March 31, 2012. Including the unfavorable impact of depreciation of the Indian rupee against multiple currencies in the markets in which we ~~recorded~~operate, this increase was primarily on account of the following:

increased personnel costs, due to annual raises and new recruitments, which increased our selling, general and administrative expenses by 9%; and

higher distribution costs, due to increases in sales volumes and freight cost increases, which increased our selling, general and administrative expenses by 3%.

Our selling, general and administrative expenses as a ~~write-down~~percentage of sales have gradually declined and were at 30% for the year ended March 31, 2013 as compared to 31% and 32% for the years ended March 31, 2012 and 2011, respectively.

Our research and development expenses for the year ended March 31, 2013 were Rs.7,674 million, an increase of 30% as compared to Rs.5,911 million for the year ended March 31, 2012. The increase in research and development expenditure was primarily due to increased spending in our innovative and bio-pharmaceutical research. Our research and development expenditures accounted for 6.6% of our total revenues for the year ended March 31, 2013, as compared to 6.1% for the year ended March 31, 2012. Approximately 60% of our research and development expenses for the year ended March 31, 2013 were spent towards the development of bio-equivalent generic products and the other 40% was dedicated to innovative and bio-pharmaceutical research.

Based on the business performance and expected cash flows from our business in Italy, we carried out an impairment test of ~~3,456 million~~ Dr. Reddy’s SRL’s cash-generating unit and ~~a write-down~~recorded an impairment loss of goodwill amounting to Rs.181 million for the year ended March 31, 2013. Further, we also recorded an impairment loss on intangibles amounting to Rs.10 million for the year ended March 31, 2013 pertaining to this cash-generating unit.

Consequent to the decline in expected cash flows of ~~5,147 million.~~ some of the products forming part of the product related intangibles pertaining to our Global Generics segment, we carried out an impairment test of such product related intangibles and recorded an impairment loss of Rs.497 million for the year ended March 31, 2013.

The above impairment losses were recorded under “Selling, general and administrative expenses” in the consolidated income statement.

In the year ended March 31, ~~2009, we recorded a write-down of intangible assets of 3,167 million and a write down of goodwill of 10,856 million.~~

In April 2008, we acquired BASF Corporation’s pharmaceutical contract manufacturing business and manufacturing facility in Shreveport, Louisiana in the United States of America. As part of the purchase price, 482 million was allocated to “customer related intangible assets” and “product-related intangibles”. 142 million of this allocation pertained to a contract with Par Pharmaceuticals Inc. (“Par”) relating to sales of ibuprofen to Par. During the year ended March 31, 2010, there was clear evidence of a decline in sales of ibuprofen to Par. Accordingly, as of December 31, 2009 we wrote off the remaining intangible asset of 133 million pertaining to this product and customer, as we expect no economic benefits from the use or disposal of these contracts in future periods. The amount derecognized is disclosed as part of “impairment loss on other intangible assets” in our consolidated income statement.

~~In the year ended March 31, 2010,~~2013, our net other income was ~~569~~ Rs.2,479 million as compared to the net other ~~expense~~income of ~~254~~Rs.765 million in the year ended March 31, ~~2009.~~2012. The ~~higher net other expenses in~~increase was primarily on account of the ~~year ended~~following:

In March ~~31, 2009 was largely due~~2013, we entered into an agreement with Nordion Inc. (formerly known as MDS Inc.) to ~~an expense~~settle our ongoing litigation for alleged breach of ~~916~~service obligations by Nordion Inc. during the years 2000 to 2004. As part of the settlement, we received a one-time settlement amount of Rs.1,220 million ~~for liquidated damages paid to Eli Lilly arising~~(U.S.$22.5 million) from Nordion Inc., out of ~~an unfavorable court decision relating to its olanzapine patent~~which Rs.108 million (U.S.$2 million) was towards reimbursement of research and development cost and was recorded as reduction in ~~Germany, explained further~~such cost. The balance of Rs.1,112 million (U.S.$20.5 million) was compensation for lost profits and was recorded as part of other income; and

a net increase in ~~Item 8.a. below under the heading “Legal Proceedings”.~~sales of spent chemicals by Rs.208 million.

~~As a result of the foregoing, our results from operating activities~~Net finance income was ~~a profit of 2,008~~Rs.460 million for the year ended March 31, ~~2010,~~2013, as compared to ~~a loss~~net finance income of ~~2,834~~ Rs.160 million for the year ended March 31, ~~2009.~~2012. The change was primarily on account of the following:

~~For the year ended March 31, 2010,~~ our net ~~finance expense~~foreign exchange gain was ~~3 million, as compared to net finance expense of 1,186~~ Rs.365 million for the year ended March 31, ~~2009.~~

~~For the year ended March 31, 2010, our finance expense, excluding~~2013, as compared to a net foreign exchange ~~gain/loss, decreased by 86% to 75 million, as compared to 553~~gain of Rs.689 million for the year ended March 31, ~~2009. The decrease was attributable to a decrease in~~ 2012;

our net interest expense ~~by 64% during the year ended March 31, 2010, due to a decline in interest rates and repayment of long term borrowings.~~

~~Foreign exchange gain~~ was 72 Rs.118 million for the year ended March 31, ~~2010,~~2013, as compared to ~~a foreign exchange loss~~net interest expense of ~~634~~ Rs.690 million for the year ended March 31, ~~2009. Foreign exchange gain was~~2012 primarily due to ~~depreciation~~increased interest income on our higher term deposits; and

our dividend and profit on sale of ~~the Indian rupee/U.S. dollar exchange rate by 3% during the year ended March 31, 2010. Our foreign exchange loss during the year ended March 31, 2009~~investments was primarily due to depreciation of the Indian rupee/U.S. dollar exchange rate by 14% during such period. Such depreciation resulted in losses on short U.S.$/INR derivative contracts and translation losses on outstanding packing credit loans in foreign currencies.

~~Profit/(loss) before income taxes~~

~~The foregoing resulted in a profit (before income tax) of 2,053~~Rs.213 million for the year ended March 31, ~~2010,~~2013, as compared to ~~a loss of 3,996~~Rs.161 million for the year ended March 31, ~~2009.~~2012.

~~Income tax expense~~As a result of the above, profit before income taxes was ~~985~~ Rs.21,676 million for the year ended March 31, ~~2010,~~2013, an increase of 17% as compared to ~~an income tax expense of 1,172~~Rs.18,466 million for the year ended March 31, ~~2009.~~2012.

Income tax expenses were lower primarily on account of a higher proportion of our profits for the year ended March 31, 2010 being taxed in jurisdictions with lower tax rates as compared to the year ended March 31, 2009. Additionally, taxable profits in our North American (the United States and Canada) business for the year ended March 31, 2010 were lower than those in the year ended March 31, 2009, largely on account of the expiration of market exclusivity for some of our high margin products during the year ended March 31, 2010. Furthermore, a tax benefit that arose for the year ended March 31, 2009 in our German operations (largely on account of a provision for damages in our olanzapine litigation with Eli Lilly in Germany) did not exist during the year ended March 31, 2010. The decrease in tax expenses was partially offset by reduced research and development expenditures, resulting in lower weighted deductions under Indian tax laws, and reduction in the proportion of our profits derived from tax exempted manufacturing units in India.expense

During the year ended March 31, 2010, the German tax authorities concluded their preliminary tax audits for betapharm, covering the years ended March 31, 2001 through March 31, 2004, and objected to certain tax positions taken in those years’ income tax returns filed by betapharm. Our estimate of the additional tax liability that could arise on conclusion of the tax audits, which are expected to be completed shortly, is 302 million (EUR 5 million). Accordingly, we recorded the amount as additionalIncome tax expense in our income statement for the year ended March 31, 2010. As part of the acquisition of betapharm during the year ended March 31, 2006, we acquired certain pre-existing income tax liabilities pertaining to betapharm for the fiscal periods prior to the date of the closing of the acquisition (in March 2006). Accordingly, the terms of the Sale and Purchase Agreement provided that 324 million (EUR 6 million) of the purchase consideration would be set aside in an escrow account, to fund against certain indemnity claims by us in respect of legal and tax matters that may arise covering such pre-acquisition periods. The right to make tax related indemnity claims under the Sale and Purchase Agreement only applies with respect to taxable periods from January 1, 2004 until November 30, 2005, and lapses and is time barred at the end of the seven year anniversary of the closing of the acquisition (in March 2013). To the extent that the tax audits cover periods not subject to the indemnity rights under the Sale and Purchase Agreement, we have additional indemnity rights pursuant to a tax indemnity agreement with Santo Holdings, the owner of betapharm prior to 3i Group plc.

Upon receipt of such preliminary tax notices, we initiated the process of exercising such indemnity rights against the sellers of betapharm and Santo Holdings and have concluded that as of March 31, 2010 recovery of the full tax amounts demanded by the German tax authorities is virtually certain. Accordingly, a separate asset of 302 million (EUR 5 million) representing such indemnity rights has been recorded as part of “other assets” in the statement of financial position, with a corresponding credit to the current tax expense.

~~As a result of the foregoing, our net result~~ was ~~a profit of 1,068~~Rs.4,900 million for the year ended March 31, ~~2010,~~2013, as compared to ~~a net loss~~income tax expense of ~~5,168~~ Rs.4,204 million for the year ended March 31, ~~2009.~~2012.

Our consolidated effective tax rate was 22.6% for the year ended March 31, 2013, as compared to a consolidated effective tax rate of 22.8% for the year ended March 31, 2012.

As a result of the above, our net result was a net profit of Rs.16,776 million for the year ended March 31, 2013, as compared to a net profit of Rs.14,262 million for the year ended March 31, 2012.

In November 2009, the IASB issued IFRS 9, “Financial instruments”, to introduce certain new requirements for classifying and measuring financial assets. IFRS 9 divides all financial assets that are currently in the scope of IAS 39 into two classifications – those measured at amortized cost and those measured at fair value. The standard, along with the proposed expansion of IFRS 9 for classifying and measuring financial liabilities, de-recognition of financial instruments, impairment, and hedge accounting, will be applicable for annual periods beginning on or after January 1, 2015, although entities are permitted to adopt earlier. We believe that the adoption of IFRS 9 will not have any material impact on our consolidated financial statements.

~~In May 2011, the IASB issued the following new standards and amendments on consolidated financial statements and joint arrangements:~~

All of the standards mentioned above are effective for annual periods beginning on or after January 1, 2013; earlier application is permitted as long as each of the other standards in this group is also early applied. We believe that adoption of IFRS 10, 11 and 12 and IAS 27 (revised 2011) and IAS 28 (revised 2011) will not have any material impact on our consolidated financial statements. With respect to IFRS 13, we are in the process of evaluating the impact of this new standard on our consolidated financial statements.

The amended standard requires recognition of changes in the net defined benefit liability/(asset), including immediate recognition of defined benefit cost, disaggregation of defined benefit cost into components, recognition of re-measurements in other comprehensive income, plan amendments, curtailments and settlements.

~~The amended standard introduced enhanced disclosures about defined benefit plans.~~

The amended standard modified accounting for termination benefits, including distinguishing benefits provided in exchange for services from benefits provided in exchange for the termination of employment, and it affected the recognition and measurement of termination benefits.

The amended standard provided clarification regarding various issues, including the classification of employee benefits, current estimates of mortality rates, tax and administration costs and risk-sharing and conditional indexation features.

These amendments are effective for annual periods beginning on or after January 1, 2013, although earlier application is permitted. We are in the process of evaluating the impact of these amendments on our consolidated financial statements.

The amended standard requires entities to group items presented in other comprehensive income based on whether they are potentially reclassifiable to profit or loss subsequently—i.e., those that might be reclassified and those that will not be reclassified.

The amended standard requires tax associated with items presented before tax to be shown separately for each of the two groups of other comprehensive income items (without changing the option to present items of other comprehensive income either before tax or net of tax).

These amendments are effective for annual periods beginning on or after July 1, 2012, although earlier application is permitted. We are required to adopt IAS 1 (Amended) by the accounting year commencing April 1, 2013. We believe that these amendments will not have any material impact on our consolidated financial statements.

In December, 2011, the IASB issued an amendment to IFRS 7 “Disclosures—offsetting financial assets and financial liabilities”. The amended standard requires additional disclosures where financial assets and financial liabilities are offset in the balance sheet. These disclosures would provide users with information that is useful in (a) evaluating the effect or potential effect of netting arrangements on an entity’s financial position and (b) analyzing and comparing financial statements prepared in accordance with IFRSs and U.S. GAAP. The amendment is effective for fiscal years beginning on or after January 1, 2013. Earlier application is permitted. We are in the process of evaluating the impact of these amendments on our consolidated financial statements.

In December, 2011, the IASB issued an amendment to IAS 32 “Offsetting financial assets and financial liabilities”. The purpose of the amendment is to clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. This includes clarifying the meaning of “currently has a legally enforceable right to set-off” and also the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The amendment is effective for fiscal years beginning on or after January 1, 2014. Earlier application is permitted. We are in the process of evaluating the impact of these amendments on the consolidated financial statements.

We have primarily financed our operations through cash flows generated from operations and a mix of long-term and short-term borrowings. Our principal liquidity and capital needs are for making investments, the purchase of property, plant and equipment, regular business operations and ~~drug discovery.~~research and development.

Our principal sources of short-term liquidity are internally generated funds and short-term borrowings, which we believe are sufficient to meet our working capital requirements. We ~~also~~ borrowed U.S.$220 million during the year ended March 31, 2012, which is to be repaid in eight quarterly installments beginning December 2014. Further, we also borrowed U.S.$150 million during the ~~repayment of~~year ended March 31, 2014, which ~~begins after three years from the origination date,~~is to be repaid in five quarterly installments beginning February 2018. These loans were borrowed primarily to repay some of our then existing short term borrowings and to meet ~~currently~~ anticipated capital ~~expenditures~~expenditure over the near term. As part of our growth strategy, we continue to review opportunities to acquire companies, complementary technologies or product rights.

The following table summarizes our statements of cash flows for the periods presented:

In addition to cash, inventory and our balance of accounts receivable, our unused sources of liquidity included ~~approximately 14,290~~Rs.10,438 million in available credit under revolving credit facilities with banks as of March 31, ~~2012.~~2015. We had no other material unused sources of liquidity as of March 31, ~~2012.~~2015.

The net result of our operating activities was a cash inflow of ~~16,150~~ Rs.25,033 million for the year ended March 31, ~~2012,~~2015, as compared to a cash ~~inflows~~inflow of ~~8,009 million and 13,226~~ Rs.19,463 million for the ~~years~~year ended March 31, ~~2011~~2014.

For the year ended March 31, 2015, our earnings before interest expense/income, profit/loss on sale of investments, tax expense, impairment loss/reversal of impairment loss, depreciation and ~~2010, respectively.~~amortization (“Adjusted EBITDA”) was Rs.36,168 million, out of which Rs.15,040 million was used towards increased working capital requirements. Such increase in working capital requirements primarily resulted from an increase in our trade receivables by Rs.10,905 million and an increase in our inventories by Rs.5,447 million. The increase in our trade receivables was primarily due to an increase in the proportion of sales made to customers with longer credit periods in the United States. The increase in our inventories was primarily to support the increased sales of our existing products as well as launches of new products.

The net result of our operating activities was a cash inflow of Rs.19,463 million for the year ended March 31, 2014, as compared to a cash inflow of Rs.13,317 million for the year ended March 31, 2013.

The net cash provided by our operating activities increased ~~significantly during~~by Rs.6,146 million for the year ended March 31, ~~2012,~~2014, as compared to the year ended March 31, ~~2011,~~2013. This increase was primarily due to our improved business performance for the ~~following reasons:~~year ended March 31, 2014, resulting in Adjusted EBITDA of Rs.33,187 million, as compared to Rs.27,818 million for the year ended March 31, 2013. Our business growth for the year ended March 31, 2014 was mainly attributable to launches of new products in the United States.

Our days’ sales outstanding (“DSO”)~~, based on the most recent quarter’s sales~~ as at March 31, ~~2012~~2015, December 31, 2014, March 31, 2014 and ~~2011,~~March 31, 2013, computed based on the sales for the three months ended March 31, 2015, December 31, 2014, March 31, 2014 and March 31, 2013, were 8795 days, 96 days, 86 days and 7986 days, respectively. The increase in our DSO was primarily ~~on account of:~~

~~increases in the trade credit periods provided to our customers in Russia, in line with the overall Russian market; and~~

changes in our business mix during the quarter ended March 31, 2012, in which we had higher revenues from markets such as Russia (in our Global Generics segment) and India (in our PSAI segment), where we offer longer credit periods as compared to our business in other territories.

During the year ended March 31, 2012, our net cash flows increased by 1,360 million from “other assets and other liabilities”, which primarily consists of the following: amounts pertaining to value added taxes; excise input credits that can be utilized to offset Indian excise and service tax liabilities; amounts pertaining to various export entitlement schemes that we claim, such as India’s Focus Product Scheme and Focus Market Scheme; advance payments to our vendors; advance payments from our customers; amounts payable by us to various governmental authorities for indirect taxes; and other accrued expenses.

~~The net cash provided by our operating activities decreased significantly during the year ended March 31, 2011, as compared to the year ended March 31, 2010, primarily~~ due to ~~the following reasons:~~

a number of new products were launched in the year ended March 31, 2011, which required significant cash outflows. As a result of increased accounts receivable and inventory from these launches, our working capital balance increased during such period, but the resulting cash inflows were not fully realized during such period.

~~Our DSO, based on the most recent quarter’s sales as at March 31, 2011 and 2010, were 79 days and 66 days, respectively. The following contributed to the increase in our DSO during this period:~~

increased sales during the quarter ended March 31, 2011, particularly from launches of new products in North America (the United States and Canada), which resulted in accounts receivable arising from such sales remaining outstanding as of March 31, 2011. During the year ended March 31, 2011, we launched 11 new products, with some of the key ones being: amlodipine benazapril, tacrolimus, lansoprazole, fexofenadine pseudoephedrine (180/240 mg) and zafirlukast. Fexofenadine-pseudoephedrine (180/240 mg) was launched by us on January 31, 2011 after the District Court of New Jersey lifted a preliminary injunction previously granted to Sanofi-Aventis. A substantial portion of the sales impact of such launches occurred during the quarter ended March 31, 2011; and

the credit period for our sales in North America (the United States and Canada) ranged from 60 to 90 days, which was longer than the credit period for our sales in many other geographic territories. Thean increase in the proportion of ~~receivables from~~ sales made to customers with longer credit periods in ~~North America during~~ the ~~last quarter of the year ended March 31, 2011 therefore increased the average credit period on our receivables and, as a result, our DSO.~~United States.

Our net cash used in investing activities ~~during~~for the year ended March 31, ~~2012~~2015 was ~~18,665~~ Rs.22,904 million, as compared to ~~8,658~~ Rs.16,620 million ~~and 6,998 million during~~for the ~~years~~year ended March 31, ~~2011 and 2010, respectively.~~2014.

Our net cash used in investing activities increased ~~significantly during~~for the year ended March 31, ~~2012,~~2015, as compared to the year ended March 31, ~~2011,~~2014, by Rs.6,284 million primarily due to the following reasons:

~~Such increase~~ in ~~investments during~~mutual funds and time deposits having an original maturity of more than three months increased by Rs.1,200 million for the year ended March 31, ~~2012 was partly offset by reduction in investments on account of~~2015 as compared to the ~~following:~~year ended March 31, 2014; and

•

~~there were no expenditures for business acquisitions~~related U.S. marketing rights during the year ended March 31, 2012. During the year ended March 31, 2011, we paid cash of 1,169 million for our acquisition from GlaxoSmithKline plc and Glaxo Group Limited (collectively, “GSK”) of its penicillin-based antibiotics manufacturing facility in Bristol, Tennessee, United States, the product rights for the Augmentin^® ~~(branded and generic) and Amoxil~~^® brands of oral penicillin-based antibiotics in the United States (GSK retained the existing rights for these brands outside the United States), certain raw material and finished goods inventory associated with Augmentin^®~~, and certain transitional services from GSK.~~2015.

Our net cash used in investing activities ~~increased during~~for the year ended March 31, ~~2011,~~2014 was Rs.16,620 million, as compared to Rs.13,944 million for the year ended March 31, 2013.

Our net cash used in investing activities increased for the year ended March 31, 2014, as compared to the year ended March 31, ~~2010,~~2013, by Rs.2,676 million primarily due to the following reasons:

~~Our net cash inflow as a result of financing activities was 3,735 million during~~ the year ended March 31, ~~2012, as compared to a net cash outflow as a result of financing activities of 377 million and 5,307 million during the years ended March 31, 2011 and 2010, respectively.~~

~~The following highlights the reasons for net cash inflows of 3,735 million during the year ended March 31, 2012 as compared to net cash outflows of 377 million during the year ended March 31, 2011:~~

~~The decrease in net cash outflow from financing activities during the year ended March 31, 2011,~~2014 as compared to the year ended March 31, ~~2010,~~2013; and

an increase in the amount spent on property, plant and equipment by Rs.3,411 million for the year ended March 31, 2014, as compared to the year ended March 31, 2013. The amount spent on property, plant and equipment for the year ended March 31, 2014 includes Rs.1,150 million (excluding taxes and duties) spent on property, plant and equipment acquired from Ecologic Chemicals Limited (Refer to Note 31 in our consolidated financial statements for further details).

The above increases in cash outflow towards investing activities for the year ended March 31, 2014 were partially offset by the impact of Rs.1,746 million of cash outflow for the year ended March 31, 2013 on account of the acquisition of OctoPlus N.V.

Our net cash outflows from financing activities were Rs.4,118 million for the year ended March 31, 2015, as compared to Rs.217 million for the year ended March 31, 2014.

During the year ended March 31, 2015, we had a cash inflow on account of net short term borrowings proceeds of Rs.4,068 million, repayment of two installments amounting to Rs.3,452 million (U.S.$55 million) due under the loan agreement by our Swiss subsidiary and payment of dividends (including corporate dividend tax) of Rs.3,587 million.

During the year ended March 31, 2014, we redeemed our 9.25% unsecured, non-convertible, redeemable debentures (sometimes referred to as our “bonus debentures”) for an aggregate payment of Rs.5,078 million, representing their face value, and we borrowed Rs.9,391 million (U.S.$150 million) pursuant to a long term loan arrangement for the purpose of our ongoing capital investments and paid dividend (including corporate dividend tax) of Rs.2,985 million.

Our net cash outflows from financing activities were Rs.217 million for the year ended March 31, 2014, as compared to Rs.1,792 million for the year ended March 31, 2013. The primary reasons for this decrease are as follows:

we redeemed our 9.25% unsecured, non-convertible, redeemable debentures (sometimes referred to as our “bonus debentures”) for an aggregate payment of Rs.5,078 million, representing their face value, during the year ended March 31, 2014;

we borrowed Rs.9,391 million (U.S.$150 million) pursuant to a long term loan arrangement for the purpose of our ongoing capital investments during the year ended March 31, 2014 (Refer to Note 17 to our consolidated financial statements for further details); and

we had a cash outflow on account of net short term borrowings repayments of Rs.858 million for the year ended March 31, 2014. In comparison, we had cash inflow from net short term borrowing proceeds of Rs.2,329 million for the year ended March 31, 2013, which was primarily ~~due to:~~drawn for our working capital needs.

•

~~such increase in short term borrowings was offset by increases in cash outflow due to the repayment of 5,463 million of the betapharm acquisition loan; and~~

The following table summarizes our principal debt obligations (excluding capital lease obligations) outstanding as of March 31, ~~2012:~~2015:

The maturities of our short-term borrowings from banks vary from one month to twelve months. Our objective in determining the borrowing maturity is to ensure a balance between flexibility, cost and the continuing availability of funds.

Subject to obtaining certain regulatory approvals, there are no legal or economic restrictions on the transfer of funds between us and our subsidiaries or for the transfer of funds in the form of cash dividends, loans or advances.

~~The maturities~~ However, transfers of funds from Venezuela are subject to certain exchange control regulations. Refer to Note 39 of our short-term borrowings from banks vary from one month to twelve months. Our objective in determining the borrowing maturity is to ensure a balance between flexibility, cost and the continuing availability of funds.consolidated financial statements.

Cash and cash equivalents are primarily held in Indian rupees, U.S. dollars, U.K. pounds sterling, Euros, Russian roubles, ~~South African rand~~Venezuela bolivars and Swiss francs.

As of March 31, ~~2012~~2015 and ~~2011,~~2014, we had committed to spend ~~approximately 2,351~~Rs.4,173 million and ~~3,459~~ Rs.2,920 million, respectively, under agreements to purchase property, plant and equipment. This amount is net of capital advances paid in respect of such purchases. These commitments will be funded through the cash flows generated from operations as well as cash flows from our long term borrowings.

Our research and development activities can be classified into several categories, which run parallel to the activities in our principal areas of operations:

In the years ended March 31, ~~2012, 2011~~2015, 2014 and ~~2010,~~2013, we expended ~~5,911~~ Rs.17,449 million, ~~5,060~~ Rs.12,402 million and ~~3,793~~ Rs.7,674 million, respectively, on research and development activities. The increase in research and development expenditure was in line with our strategy to expand our research and development efforts in complex formulations, differentiated formulations and bio-similar compounds.

We have filed and been issued numerous patents in our principal areas of operations: Global Generics, Pharmaceutical Services and Active Ingredients and Proprietary Products. We expect to continue to file patent applications seeking to protect our innovations and novel processes in several countries, including the United States. Any existing or future patents issued to or licensed by us may not provide us with any competitive advantages for our products or may even be challenged, invalidated or circumvented by our competitors. In addition, such patent rights may not prevent our competitors from developing, using or commercializing products that are similar or functionally equivalent to our products. As of March 31, ~~2012,~~2015, we had registered more than ~~640~~1,223 trademarks with the Registrar of Trademarks in India. We have also filed registration applications for non-U.S. trademarks in other countries in which we do business. We market several products under licenses in several countries where we operate.

Please see “Item 5: Operating and Financial Review and Prospects” and “Item 4. Information on the Company” for trend information.

The following summarizes our contractual obligations as of March 31, ~~2012~~2015 and the effect such obligations are expected to have on our liquidity and cash flows in future periods.

The list of our directors and executive officers and their respective age and position as of March 31, ~~2012~~2015 was as follows:

Our policy is to classify our officers as “executive officers” if they have membership on our Management Council. Our Management Council consists of various business and functional heads and is our senior management organization. As of March 31, ~~2012,~~2015, the Management Council consisted of:

Name and Designation

Education/Degrees Held

Age

Experience
in years

Date of commencement
of employment

Particulars of last employment

Dr. KVS Ram Rao Sr. Vice President and Business Head-Active Pharmaceutical Ingredients (API) and Custom Pharmaceutical Services (CPS)

B.Tech., M.E.,

Ph. D.

April 3, 2000

Head of Technical Services, Jubilant Life Sciences

M.V. Ramana Executive Vice President -Emerging Markets

MBA

October 15, 1992

—

Dr. Raghav Chari Executive Vice President- Proprietary Products

M.S. (Physics), Ph.D.

September 25, 2006

Head Corporate Strategy, NPS Pharmaceuticals Limited

Dr. S. Chandrasekhar President and Global Head of Human Resources

MBA., Ph.D.

August 12, 2013

Vice President and Head of Human Resources, IBM India.

Samiran Das

Executive Vice President and Head- Global Manufacturing Operations-Formulations TechOps (FTO) and Chemical TechOps (CTO)

B. Tech (Mechanical.)

June 15, 2011

Executive Director,

PepsiCo India.

Saumen Chakraborty

President, Chief Financial Officer and Global Head of Information Technology and Business Process Excellence

B.Sc. (H), PGDM, MBA (IIM)

July 2, 2001

Vice President, Tecumseh Products India Private Limited

Umang Vohra Executive Vice President and

Head-North America Generics

B.E., MBA

February 18, 2002

Manager, PepsiCo India

There was no arrangement or understanding with major shareholders, customers, suppliers or others pursuant to which any director or executive officer referred to above was selected as a director or member of our Management Council.

~~Dr. K. Anji Reddy~~is our founder and Chairman of our Board of Directors. He is also the founder of Dr. Reddy’s Research Foundation and Dr. Reddy’s Foundation for Human and Social Development. He has a Bachelor of Science degree in Technology of Pharmaceuticals and Fine Chemicals from the University of Bombay and a Ph.D. in Chemical Engineering from National Chemical Laboratories, Pune. He has six years experience with Indian Drugs and Pharmaceuticals Limited in the manufacturing and implementation of new technologies in bulk drugs. He is a member of the Board of Trade as well as the Prime Minister’s Task force on pharmaceuticals and knowledge-based industries. The Government of India bestowed, two of India’s prestigious civilian honors upon him, the “Padma Shri” in 2001 and the “Padma Bhusan” in 2011 for his distinguished service in the field of trade and commerce. In addition to positions held in our subsidiaries and joint ventures, he is a Director in Green Park Hotels and Resorts Limited (formerly known as Diana Hotels Limited), Araku Originals Limited and Pathenco APS.

~~Mr. G.V. Prasad~~is a member of our Board of Directors and serves as our Vice-Chairman and Chief Executive Officer. He was the Managing Director of Cheminor Drugs Limited, a Dr. Reddy’s Group Company, prior to its merger with us. He has a Bachelor of Science degree in Chemical Engineering from Illinois Institute of Technology, Chicago in the United States of America, and an M.S. in Industrial Administration from Purdue University, Indiana in United States of America. He is also an active member of several associations including the National Committee on Drugs and Pharmaceuticals. In addition to positions held in our subsidiaries and joint ventures, he is a Director of Green Park Hotels and Resorts Limited (formerly known as Diana Hotels Limited), Infotech Enterprises Limited and Acumen Fund in the United States of America.

Mr. Satish Reddyis a member of our Board of Directors and serves as our Chairman of the Board. Prior to May 2014, he held the titles of Vice Chairman and Managing ~~Director and Chief Operating Officer.~~Director. He has a Master of Science degree in Medicinal Chemistry from Purdue University, Indiana in the United States of America and a Bachelor of Technology degree in Chemical Engineering from Osmania University, Hyderabad. He iswas a member of the ~~member~~Drugs Technical Advisory Board of India, the Chairman of the Andhra Pradesh Chapter of the Confederation of Indian Industries ~~for Andhra Pradesh.~~(CII) and head of its National Committee on Pharmaceuticals. He is President of the Indian Pharmaceutical Alliance, a premier industry association of leading research-based Indian companies. In May 2015, the Ministry of Labour and Employment, Government of India, nominated Mr. Reddy as Chairman of the Board of Governors of the National Safety Council. In addition to positions held in our subsidiaries and joint ventures, he is also a Director of ~~GreenPark~~Green Park Hotels and Resorts Limited, ~~(formerly known~~Dr. Reddy’s Holdings Limited, Araku Originals Limited, Stamlo Hotels Limited, Dr. Reddy’s Research Foundation, Dr. Reddy’s Institute of Life Sciences, Young President’s Organisation Hyderabad Chapter, Molecular Connections Private Limited, Dr. Reddy’s Trust Services Private Limited, Satish Reddy Estates Private Limited, Quin Estates Private Limited, KAR Therapeutics & Estates Private Limited, Cipro Estates Private Limited, KAR Holdings (Singapore) Private Limited, Singapore, KAREUS Therapeutics (Singapore) Private Limited, Singapore and KAREUS Therapeutics, SA, Switzerland.

Mr. G.V. Prasadis a member of our Board of Directors and serves as ~~Diana~~our Co-Chairman, Managing Director and Chief Executive Officer. Prior to May 2014, he held the titles of Chairman and Chief Executive Officer. He was the Managing Director of Cheminor Drugs Limited prior to its merger with us. He has a Bachelor of Engineering degree in Chemical Engineering from Illinois Institute of Technology, Chicago in the United States of America, and an M.S. in Industrial Administration from Purdue University, Indiana in United States of America. Mr. Prasad was recognized as India’s Best CEO in the Large Company category by Business Today in 2014 and India Business Leader of the Year by CNBC Asia in 2015. In addition to positions held in our subsidiaries and joint ventures, he is a Director of Green Park Hotels ~~Limited).~~and Resorts Limited, Stamlo Hotels Limited, Dr. Reddy’s Holdings Limited, Dr. Reddy’s Institute of Life Sciences, Dr. Reddy’s Research Foundation, Molecular Connections Private Limited, Vijaya Productions Private Limited, Dr. Reddy’s Trust Services Private Limited, Indian School of Business and Acumen Fund in the United States of America.He also serves as a member of the Board of Governors of the Indian Institute of Technology, Hyderabad.

Mr. Anupam Purihas been a member of our Board of Directors since 2002. He retired from McKinsey and Company in late 2000. He was a Director and played a variety of other leadership roles during his 30-year career there. Before joining McKinsey and Company, he was Advisor for Industrial Development to the President of Algeria, and consultant to General Electric’s Center for Advanced Studies. He holds a Bachelor of Arts degree in Economics from St. Stephen’s College, Delhi University, and Master of Arts and M. Phil. degrees from Oxford University. He is also on the Board of Directors of Mahindra and Mahindra Limited, Tech Mahindra Limited, Mumbai Mantra Media Limited and our wholly owned subsidiary Dr. Reddy’s Laboratories Inc. in the United States of America.

Dr. Omkar Goswamihas been a member of our Board of Directors since 2000. He is a founder and Chairman of CERG Advisory Private Limited, a corporate advisory and economic research and consulting company. He was a senior consultant and chief economist at the Confederation of Indian Industry for six years. He has also served as editor of Business India, associate professor at the Indian Statistical Institute, Delhi, and as an honorary advisor to the Ministry of Finance. He holds a Bachelor of Economics degree from St. Xavier’s College, Calcutta University, a Master of Economics degree from the Delhi School of Economics, Delhi University and a Ph.D. degree from Oxford University. He is also a Director on the Boards of ~~Infosys Limited, DSP BlackRock Investment Managers Pvt. Limited,~~ Crompton Greaves Limited, IDFC Limited, Ambuja Cements Limited, ~~Max New York Life Insurance Company Limited,~~ Godrej Consumer Products Limited, Cairn India Limited, Infosys BPO Limited, Bajaj Finance Limited, Max ~~India~~Healthcare Institute Limited, IDFC Financial Holding Company Limited, Hindustan Construction Company Limited and ~~Avantha Power and Infrastructure~~DSP Black Rock Investment Managers Private Limited.

Mr. Ravi Bhoothalingamhas been a member of our Board of Directors since 2000. He has served as the President of The Oberoi Group and was responsible for its worldwide operations. He has also served as the Head of Personnel at BAT Plc, Managing Director of VST Industries Limited, and as a Director of ITC Limited. He holds a Bachelor of Science degree in Physics from St. Stephens College, Delhi and a Master of Experimental Psychology degree from Gonville and Caius College, Cambridge University. He is also a Director on the Board of Sona Koyo Steering Systems Limited.

Dr. J.P. Moreaujoined our Board as a member on May 18, 2007. In October 1976, Dr. Moreau founded Biomeasure Incorporated, based near Boston, Massachusetts, and was its President and Chief Executive Officer. Prior to that, he worked as Executive Vice-President and Chief Scientific Officer of the IPSEN Group where he was responsible for the Group’s research and development programs in Paris, London, Barcelona and Boston. He was a Vice-President, Research of IPSEN Group from April 1994, and had been a member of its Executive Committee. Dr. Moreau has a degree in chemistry from the University of Orléans and a ~~D.Sc~~D. Sc. in biochemistry. He has also conducted post-doctorate research at the École polytechnique. He has published over 50 articles in scientific journals and is named as an inventor or co-inventor in more than 30 patents. He is a regular speaker at scientific conferences and a member of Nitto Denko Scientific Advisory Board. Dr. Moreau was also responsible for establishing Kinerton Ltd. in Ireland in March 1989, a wholesale manufacturer of therapeutic peptides. He is also a Director on the Board of Mulleris Therapeutics Inc. and ProteoThera Inc. in the United States of America.

Ms. Kalpana Morpariajoined our Board as a member on June 5, 2007. Ms. Morparia is Chief Executive Officer of J.P. Morgan India. Ms. Morparia leads the Business Groups (Investment Banking, Asset Management, Treasury Services and Principal Investment Management) and Service Groups (Global Research, Finance, Technology and Operations) in India. Ms. Morparia is a member of J.P. Morgan’s global strategy team headquartered in New York, and is one of the key drivers of J.P. Morgan’s international expansion initiative. Prior to becoming Chief Executive Officer of J.P. Morgan India, Ms. Morparia served as Vice Chair on the Board of ICICI Group. She was a Joint Managing Director of ICICI Group from 2001 to 2007. Ms. Morparia has also served as Chief Strategy and Communications ~~Officer—~~Officer – ICICI Group. Ms. Morparia ~~has~~had been with the ICICI Group since 1975. A graduate in law from Bombay University, Ms. Morparia has served on several committees constituted by the Government of India. Ms. Morparia was named one of “The 50 Most Powerful Women in International Business” by Fortune magazine in 2008 and one of the 25 most powerful women in Indian business by Business Today, a leading Indian business journal, in the years 2004, 2005, 2006 and 2008. Ms. Morparia was also named one of the “The 100 Most Powerful Women” by Forbes Magazine in 2006. She also serves on the Board of Bennett, Coleman and Co. Limited, ~~CMC~~

Hindustan Unilever Limited, J.P. Morgan Services India Private Limited, J.P. Morgan Asset Management India Private Limited and Philip Morris International Inc. in the United States of ~~America, and~~America. She also serves as a member on the Board of Governors of Bharati Foundation.

Dr. Bruce L.A. Carterjoined our Board as a member on July 21, 2008. Dr. Carter was the Chairman of the Board and the former Chief Executive Officer of ZymoGenetics, Inc. in Seattle, Washington, in the United States of America. Dr. Carter was appointed as Chairman of the Board of ZymoGenetics in April 2005. From April, 1998 to January, 2009, he served as Chief Executive Officer of ZymoGenetics. Dr. Carter first joined ZymoGenetics in 1986 as Vice President of Research and Development. In 1988, Novo Nordisk acquired ZymoGenetics and, in 1994, Dr. Carter was promoted to Corporate Executive Vice President and Chief Scientific Officer for Novo Nordisk A/S, the then parent company of ZymoGenetics. Dr. Carter led the negotiations that established ZymoGenetics as an independent company from Novo Nordisk in 2000. Dr. Carter held various positions of increasing responsibility at G.D. Searle and Co., Ltd. from 1982 to 1986 and was a Lecturer at Trinity College, University of Dublin from 1975 to 1982. Dr. Carter received a B.Sc. with Honors in Botany from the University of Nottingham, England, and a Ph.D. in Microbiology from Queen Elizabeth College, University of London. Dr. Carter is also on the Board of Directors of ~~QLT Inc. in Canada,~~ TB Alliance, ~~in the United States of America, Immune Design Corp.~~New York Xencor Inc., Regulus Inc., and Enanta Pharmaceutical Inc. in the United States of America and ~~Xencur Inc. in the United States of America.~~our wholly-owned subsidiary Aurigene Discovery Technologies Limited.

Dr. Ashok S. Gangulyjoined our Board as a member on October 23, 2009.Dr. Ashok Ganguly is the Chairman of ABP Private Ltd. (formerly Ananda Bazar Patrika Group), and was a Director on the Central Board of the Reserve Bank of India from 2001 to 2009. Dr. Ganguly’s principal professional career spanned 35 years with Unilever Plc/NV. He was the Chairman of Hindustan Lever Ltd. from 1980 to 1990 and a member of the Unilever Board of Directors from 1990 to 1997 with responsibility for world-wide research and technology. He is a former member of the Board of British Airways Plc (1996-2005). He has served on several public bodies, the principal among them being as a member of the Science Advisory Council to the Prime Minister of India ~~(1985-89)~~(1985-1989) and the U.K. Advisory Board of Research Councils ~~(1991-94)~~(1991-1994). Currently, he is a member of the Prime Minister’s Council on Trade and Industry, Investment Commission and the India-U.S.A. CEO Council, set up by the Prime Minister of India and the President of the United States of America. He is also a member of the National Knowledge Commission to the Prime Minister. He is a recipient of the “Padma Bhushan” as well as the “Padma Vibhushan”, two of India’s prestigious civilian honors. At present he serves as a member of the Rajya Sabha, the upper house of the Parliament of India. Dr. Ganguly also serves as a ~~non-executive director~~Director of ~~Mahindra and Mahindra Limited,~~ Wipro Limited, ABP Private Limited and Vidhi Centre for Legal Policy. He also serves as a member on the Advisory Board of Diageo India ~~Pvt.~~Private Limited.

Mr. Sridar Iyengarjoined our Board as a member on August 22, 2011. Mr. Sridar Iyengar is an independent mentor investor in early stage start- up companies. For more than 35 years, he has worked in the United Kingdom, the United States and India with a large number of companies, advising them on strategy and other issues. Mr. Iyengar is the former President of Foundation for Democratic Reforms in India, a U.S. based non-profit organization. He is also an advisor to several venture and private equity funds in India. Earlier, he was a senior partner with KPMG in the United States and the United Kingdom and served for 3 years as the Chairman and CEO of KPMG’s operations in India. Mr. Iyengar holds a Bachelor of Commerce (Hons.) degree from Calcutta University and he is a Fellow of the Institute of Chartered Accountants in England and Wales. Mr. Iyengar is also ~~serves as a non-executive director~~on the Board of ~~Infosys Limited, Infosys BPO Limited,~~Directors of ICICI ~~Bank~~Venture Funds Management Company Limited, Rediff.com India Limited, Mahindra Holidays and Resorts India Limited, CL Educate Limited, ~~ICICI Prudential Life Insurance Company Limited,~~ Cleartrip ~~Travel Services~~ Private Limited, AverQ Inc., ~~Kovair Software Inc.,~~ Rediff Holdings Inc., in the United States of America, Cleartrip Inc.~~, iYogi~~ in the Cayman Islands, IYogi Limited in Mauritius and our wholly owned subsidiary Dr. Reddy’s Laboratories S.A. in Switzerland. He is also a member of ~~TiE Silicon Valley Inc., a U.S. based non-profit organization.~~the governing board of Janaagraha Center for Citizenship and Democracy.

Mr. Abhijit Mukherjeeis the ~~President~~Chief Operating Officer of our company and head of our Global Generics ~~segment.~~and Pharmaceutical Services and Active Ingredients (“PSAI”) businesses. Before joining us, he worked with Atul Limited for 10 years, where he held numerous positions of increasing responsibility. In his last assignment there he was President, Bulk Chemicals and Intermediates Business, and Managing Director, Atul Products Limited. He started his career as a management trainee in Hindustan Lever Limited (“HLL”) and worked at that company for 13 years, including three years in a Unilever company. He was primarily involved in technical assignments in the aroma chemicals business in HLL and Unilever and also in detergents and sulphonation plants of HLL. He holds a degree in Chemical Engineering from the Indian Institute of Technology in Kharagpur, India.

Mr. Alok Sonig is the Senior Vice President-Generics and head of our India formulations business. He joined us in June 2012 and has over 21 years of experience in healthcare, technology and consumer marketing. Prior to joining us, he worked with Bristol Myers Squibb in Princeton, New Jersey, U.S.A., as Vice President and Head of Global Commercial Excellence, Strategy and Business Model Innovation. Mr. Sonig holds a Bachelor’s of Engineering from Punjab Engineering College in India and an MBA from American University, Washington, D.C.

~~Mr.~~Dr. Amit ~~Patel~~Biswasis the Executive Vice President – Integrated Product Development (“IPDO”). He joined us on July 12, 2011 and ~~head~~has 26 years of ~~our North America Generics business. He is responsible for executing our company’s strategic efforts~~diverse and rich international experience, spanning academic and industrial research, product development, technical service and management of research and technology in the ~~North American generics market.~~areas of commodity plastics, engineering polymers, high performance fibers, industrial/automotive coatings and alternate energy technologies. Prior to joining us, ~~in 2003, Mr. Patel was co-founder and Chief Executive Officer of a healthcare services startup called MedOnTime that was later acquired by CTIS Inc., at which~~ he ~~served~~worked with Reliance Industries Limited as Senior Vice President, Technology Services and Emerging Technologies-Reliance Technology Group and was responsible for design and implementation of ~~Corporate Development. Earlier,~~Research and Technology Management processes, Business Transformation and Change Management, and interfacing with private/public institutions on Alternate Energy Technologies. He is a Master Black Belt in Six Sigma (GE Certification). Recently, he was made an Adjunct Professor at the Centre for Research in Nano-technology and Science at the Indian Institute of Technology in Bombay, India. He has 44 international publications, 3 book chapters and 4 patents. He holds a ~~strategy consultant with Marakon Associates where he focused on value-based management~~Ph.D. and ~~mergers~~Masters in Polymer Science from Case Western Reserve University, Ohio, U.S.A. and ~~acquisition. He received~~ a Bachelor of ~~Science degree~~Technology in ~~Economics from the Wharton School of Business at the University of Pennsylvania, a Bachelor of Applied Science degree in Systems~~Chemical Engineering from the ~~Moore School at the University~~Indian Institute of ~~Pennsylvania, and a Master of Business Administration degree from Harvard Business School.~~Technology, Bombay, India.

Dr. Cartikeya Reddyis the ~~Senior~~Executive Vice President and head of our Biologics division, which focuses on the development of biosimilar molecules for the Indian and global markets. Prior to joining us in 2004, Mr. Reddy worked with Genentech Inc., where he was a Group Leader in the area of Cell Culture Process Development. Before that, he was with the Biotechnology Division of Bayer Corporation, where he successfully led teams in the areas of Bioprocess Development and pilot scale manufacturing. Mr. Reddy holds a Master of Science degree and Ph.D. in Chemical Engineering from the University of Illinois, Urbana-Champaign, and was a Visiting Scholar at the Massachusetts Institute of Technology in Cambridge, Massachusetts, United States of America. He also graduated with a Bachelor of Technology degree in Chemical Engineering from the Indian Institute of Technology in Chennai, India.

~~Mr. Saumen Chakraborty~~Dr. KVS Ram Raois the Senior Vice President and ~~global head~~Head-Active Pharmaceutical Ingredients (API) and Custom Pharmaceutical Services (CPS). He joined us in 2000 and has over 22 years of ~~our Quality, Human Resources~~experience in New Product Development-API and ~~Information Technology functions.~~Global Oncology. In ~~this~~his current role, he is responsible for our ~~Quality, Information Technology, Business Process Excellence, Human Resources~~PSAI commercial organization managing sales, strategy, business development and Corporate Communications functions. Prior to this role, he was head of the Global Generics Operations along with Integrated Product Development across the organization. Mr. Chakraborty joined us in 2001 as Global Chief of Human Resources. He later took over as Chief Financial Officer in 2006 and then became our President—Corporate and Global Generics Operations in early 2009. He has 27 years of experience in strategic and operational aspects ofnew product management. Prior to joining us, Dr. Ram Rao worked at Jubilant Life Sciences where he ~~held various line manager, human resources~~headed the Technical Services Division and ~~other positions, including Senior Manager (Finance~~Gujarat Heavy Chemicals Limited where he was the Head of Research and ~~Accounts)~~Development. He holds a Ph.D. and a Masters degree in ~~Eicher, and Vice President (Operations) in Tecumseh. He graduated with honors as the valedictorian of his class from Visva-Bharati University in Physics, and went on to pursue management~~Chemical Engineering from the Indian Institute of Science (IISc), Bangalore along with a Bachelors Degree in Chemical Engineering from Osmania University, Hyderabad, India. He also holds a Diploma in Project Management ~~Ahmedabad.~~from Narsee Monjee Institute of Management Studies (NMIMS), India.

Mr. ~~Umang Vohra~~M.V. Ramanais the Executive Vice President and Head – Emerging Markets, Global Generics. He heads the Emerging Markets business of our ~~Chief Financial Officer and has over 17 years~~Global Generics segment, focusing on all emerging markets outside of experience across various functions within finance, strategic planning and corporate development. He is responsible for managing our organization’s global finance functions including among others Accounts and Controlling, Taxation, Compliance, Secretarial, Investor Relations and Treasury.India. He joined us on October 15, 1992 as a Management Trainee in ~~2002, and has been part of several~~the International Marketing division of our ~~key initiatives like acquisitions, research~~Branded Formulations business. In his 22 year tenure, he has handled various critical assignments including setting up the businesses in several countries across Asia, Latin America, Africa and development, de-risking and partnering transactions, operational improvements and migration to IFRS in our accounting, governance and finance processes. Prior to joining us, Mr. Vohra worked with Eicher and PepsiCothe Middle East. He holds a MBA degree from Osmania University, Hyderabad, India. ~~Mr. Vohra has a bachelor’s degree in computer engineering and he holds an MBA with a specialization in Finance from TA Pai Institute of Management (TAPMI), India.~~

Dr. Raghav Chariis the ~~Senior~~Executive Vice President and head of our Proprietary Products segment and is responsible for developing a viable portfolio of products across our New Chemical Entities and Differentiated Formulations businesses. Dr. Chari joined us in 2006 as Vice President- Corporate Development for our New Chemical Entities and Specialty business and has helped shape our Proprietary Products business strategy while developing strong alliance platforms. He started his career with McKinsey and Company, where he spent several years as an Associate, Engagement Manager and finally Associate Principal in McKinsey’s Pharmaceuticals and Medical Products practice. After McKinsey, he took leadership roles in strategy and business development with several smaller biotech companies. Prior to joining us, he was the head of the Corporate Strategy function at NPS Pharmaceuticals. Dr. Chari is a graduate in Mathematics and Physics from the California Institute of Technology and holds a Ph.D. in Theoretical Physics from Princeton University.

Dr. ~~R. Ananthanarayanan~~S. Chandrasekharis the ~~President—Pharmaceutical Services~~President and ~~Active Ingredients (PSAI)~~Global Head of our Human Resources (“HR”). He joined us in August 2013 and leads a wide range of HR initiatives in leadership development and coaching, talent development, employee engagement and organization design to integrate, grow and transform the organization globally in order to enable our enterprise to meet our business objectives. He has over 31 years of experience across India’s leading firms in public and private sectors engaged in multiple industries such as steel, manufacturing, telecom, information technology services and consulting. He is also among the first few Indians who have been accredited by the International Coach Federation – the world’s leading coach certification body—in the professional practice of executive coaching. Prior to joining us, Dr. Ananthanarayanan was President—Custom Research and Development and Manufacturing Services (CRAMS)—Aurosource division for APIs and Finished Dosage of Aurobindo Pharma, New Jersey, USA. He was also a key leadership member on the Executive Management Committee at Piramal Healthcare Ltd. and was theChandrasekhar worked with IBM, India as Vice President and Head of ~~Pharma Solutions business. He worked with Piramal Healthcare~~Human Resources for ~~over 7 years and~~the India/South Asia region. At IBM, he was ~~involved since~~a key member of the inception of its Pharma Solutions business. Prior to joining Piramal Healthcare, Dr. Ananthanarayanan was Managing Director—Asia and Head of Global Sourcing for Galpharm International Ltd, a U.K. based manufacturer/distributor of specialty pharmaceuticals and baby products. He has over 20 years of experience in the pharmaceutical industry with specialization in research and development, manufacturing operations, regulatory affairs, quality assurance, business development, global strategic sourcing, and mergers and acquisitions. Dr. Ananthanarayanan received a Ph.D. in Pharmaceutical TechnologyIndia Leadership Team and a ~~Bachelor’s degree~~Director on the Board of IBM India Private Limited. Dr. Chandrasekhar is an MBA from Leeds Business School, United Kingdom and is a Ph. D in ~~Pharmaceutical Sciences~~Organizational Behavior from ~~the~~Andhra University, ~~of Mumbai,~~ India.

~~Mr. M.V. Ramana~~ is the Senior Vice President and Head—Emerging Markets, Global Generics. He heads the Emerging Markets segment of our Global Generics business, focusing on all emerging markets outside of India. He joined us on October 15, 1992 as a Management Trainee in the International Marketing division of our Branded Formulations business. In his 19 year tenure, he has handled various critical assignments including setting up the businesses in several countries across Asia, Latin America, Africa and the Middle East. In his most recent assignment, he served as the Region Head of the Russia and countries of the former soviet union operations. He holds a MBA degree from Osmania University, Hyderabad, India.

Mr. Samiran Das is the Executive Vice ~~President—~~President – Global ~~Formulations Technical Operations~~Manufacturing Operations-Formulations TechOps (FTO) and ~~Global Generics Portfolio Management.~~Chemical TechOps (CTO). He joined us on June 15, 2011 and has diverse and rich experience in manufacturing across multiple sectors. Prior to joining us, he worked with Pepsico India as Executive Director, Technical Operations for Pepsico’s beverage business in the India region and was responsible for supply strategy and implementation, manufacturing footprint and expansion, quality assurance, safety, development of co-packing network, procurement and new product commercialization, and supply chain validation. At Pepsico, he was a member of the Regional Executive Committee and the Division Operations Leadership Council, with active involvement in Corporate Governance and Corporate Social Responsibility activities. Before that, he worked with companies like Union Carbide, ICI India, Hindustan Unilever, Godrej Pillsbury, Frito Lay India and D1-BP Fuel Crops India in different roles. He holds a Bachelors degree in Mechanical Engineering from the Indian Institute of Technology, Delhi, India.

~~Dr. Amit Biswas~~Mr. Saumen Chakraborty is the President, Chief Financial Officer and Global Head of Information Technology and Business Process Excellence of our company. In this role, he is responsible for managing our global finance functions including, among others, Accounts and Controlling, Taxation, Compliance, Secretarial, Investor Relations and Treasury. In addition, Mr. Chakraborty is also responsible for our Information Technology (“IT”) and Business Process Excellence (“BPE”) functions. As the Chief Financial Officer, Mr. Chakraborty was recognized as India’s Best CFO with Exemplary All Round Performance in the 5th Annual Business Today in 2014 – Yes Bank Best CFO Awards event. Mr. Chakraborty joined us in 2001 as Global Chief of Human Resources. He later took over as Chief Financial Officer in 2006 and then became our President—Corporate and Global Generics Operations in early 2009. In 2010 he was appointed as President and Global Head of Quality, Human Resources and Information Technology and focused on the integration of people practices, processes and information across the organization. He has 31 years of experience in strategic and operational aspects of management. Prior to joining us, he held various line management, human resources and other positions, including Senior Manager (Finance and Accounts) in the Eicher Group and Vice President (Operations) in Tecumseh Products Company. He graduated with honors as the valedictorian of his class from Visva-Bharati University in Physics and went on to pursue management from the Indian Institute of Management, Ahmedabad, Gujarat, India.

Mr. Umang Vohra is the Executive Vice ~~President—Integrated Product Development (IPDO).~~President and head of our North America Generics business and has over 20 years of experience across various functions within finance, strategic planning and corporate development. He is currently responsible for our North America Generics business. Prior to this, he was our Chief Financial Officer from January 2009 to December 2012, managing our organization’s global finance function. He joined us ~~on July 12, 2011~~in 2002, and has ~~23 years~~been part of ~~diverse and rich international experience, spanning academic and industrial research, product development, technical service and management~~several of our key initiatives, including acquisitions, research and ~~technology~~development, de-risking and partnering transactions, operational improvements and migration to IFRS in our accounting, governance and finance processes. He was awarded the ~~areas~~“Best CFO of ~~commodity plastics, engineering polymers, high performance fibers, industrial/automotive coatings~~India Award” by the Stars of the Industry Group and ~~alternate energy technologies.~~Asian Confederation of Businesses in June 2012. He was also recognized as the “Best CFO nominated by Sell Side analyst” at the 2012 All-Asia Executive Team survey done by the Institutional Investor magazine. Prior to joining us, heMr. Vohra worked with ~~Reliance Industries Limited as Senior Vice President, Technology Services~~Eicher and ~~Emerging Technologies—Reliance Technology Group~~PepsiCo India. Mr. Vohra has a bachelor’s degree in computer engineering and ~~was responsible for design and implementation of Research and Technology Management processes, Business Transformation and Change Management, and interfacing~~he holds an MBA with ~~private/public institutions on Alternate Energy Technologies. He is~~ a ~~Master Black Belt~~specialization in Six Sigma (GE Certification). Recently, he was made an Adjunct Professor at the IIT Bombay Centre for Research in Nano-technology and Science. He has 44 international publications, 3 book chapters and 4 patents. He holds a Ph.D. and Masters in Polymer ScienceFinance from ~~Case Western Reserve University, Ohio, USA and a Bachelor of Technology in Chemical Engineering from the Indian~~TA Pai Institute of ~~Technology, Bombay,~~Management (“TAPMI”), India.

Full-Time Directors.: The compensation of our Chairman of the Board (who formerly held the titles of Vice Chairman and Managing Director) and our Co-Chairman, Managing Director and Chief Executive Officer (who formerly held the titles of Chairman and Chief ~~Operating Officer~~Executive Officer) (who we refer to as our “full-time directors”) is divided into salary, commission and benefits. They are not eligible to participate in our stock option plans. The Nomination, Governance and Compensation Committee of the Board of Directors initially recommends the compensation for full-time directors. If the Board of Directors (the “Board”) approves the recommendation, it is then submitted to the shareholders for approval at the general shareholders meeting along with the proposal for their appointment or re-appointment.

~~On July 21, 2011,~~Our Chairman of the Board and our shareholders re-appointed Dr. K. Anji Reddy as Chairman effective as of July 13, 2011, and Mr. G.V. Prasad as Vice Chairman and Chief Executive Officer effective as of January 30, 2011. On July 24, 2007, our shareholders reappointed Mr. Satish Reddy asCo-Chairman, Managing Director and Chief Operating Officer effective as of October 1, 2007. On February 3, 2012, our Board of Directors re-appointed Mr. Satish Reddy as Managing Director and Chief Operating Officer effective October 1, 2012 subject to receiving our shareholders’ approval. Our Managing Director and Chief Operating Officer and Vice Chairman and Chief Executive Officer are each entitled to receive a maximum commission of up to 0.75% of our net profit (as defined under the Indian Companies Act, ~~1956) for the fiscal year. Our Chairman is entitled to receive a maximum commission of up to 1.0% of our net profit (as defined under the Indian Companies Act, 1956)~~2013) for the fiscal year. The Nomination, Governance and Compensation Committee, which is entirely composed of independent directors, recommends the commission for our Chairman ~~Vice Chairman~~of the Board and ~~Chief Executive Officer and~~our Co-Chairman, Managing Director and Chief ~~Operating~~Executive Officer within the limits of ~~1%,~~ 0.75% and 0.75%, respectively, of ~~the~~our net profits (as defined under the Indian Companies Act, ~~1956)~~2013) for each fiscal year.

Non-Full Time ~~Directors.~~Directors:~~Each of our non-full time directors receives an attendance fee of 10,000 (U.S.$196.56) for every Board meeting and Board committee meeting they attend.~~ In the year ended March 31, ~~2012, we paid an aggregate~~2015, none of ~~900,000 (U.S.$17,690.42) to~~ our non-full time directors were paid any sum as attendance fees. Non-full time directors are ~~also~~ eligible to receive a commission on our net profit (as defined under the Indian Companies ~~Act, 1956)~~Act) for each fiscal year. Our shareholders have approved a maximum commission of up to 0.5% of the net profits (as defined under the Indian Companies ~~Act, 1956)~~Act) for each fiscal year for all non-full time directors in a year. The Board determines the entitlement of each of the non-full time directors to commission within the overall limit. The non-full time directors were not granted stock options under the Dr. Reddy’s Employees Stock Option Scheme, 2002 ~~and~~or Dr. Reddy’s Employees ADR Stock Option Scheme, 2007 in the year ended March 31, ~~2012 as provided in the table below.~~2015.

For the year ended March 31, ~~2012,~~2015, the directors were entitled to the following amounts as compensation:

The initial compensation to all our executive officers is determined through appointment letters issued at the time of employment. The appointment letter provides the initial amount of salary and benefits the executive officer will receive as well as a confidentiality provision and a non-compete provision applicable during the course of the executive officer’s employment with us. We provide salary, certain perquisites, retirement benefits, stock options and variable pay to our executive officers. The Nomination, Governance and Compensation Committee of the Board reviews the compensation of executive officers on a periodic basis.

All of our employees at the managerial and staff levels are eligible to participate in a variable pay program, which consists of performance bonuses based on the performance of their function or business unit, and a profit sharing plan through which part of our profits can be shared with our employees. Our variable pay program is aimed at rewarding the individual based on the performance of ~~the~~such individual, their business unit/function and ~~the organization,~~our company as a whole, with significantly higher rewards for superior performances.

We also have two employee stock option schemes: the Dr. Reddy’s Employees Stock Option Scheme, 2002 and the Dr. Reddy’s Employees ADR Stock Option Scheme, 2007. The stock option schemes are applicable to all of our employees ~~and~~including directors ~~including~~and employees and directors of our subsidiaries. The stock option schemes are not applicable to promoter directors, promoter employees, non-full time directors (independent directors) and persons holding 2% or more of our outstanding share capital. The Nomination, Governance and Compensation Committee of the Board of Directors awards options pursuant to the stock option schemes based on the employee’s performance appraisal. Some employees have also been granted options upon joining us.

Compensation for executive officers who are full time directors is summarized in the table under “Directors’ compensation” above. The following table presents the annual compensation paid or payable to other executive officers for services rendered to us for the year ended March 31, ~~2012~~2015 and stock options ~~held by~~issued to all of our other executive officers ~~as of~~during the year ended March 31, ~~2012:~~2015:

Name
   Compensation
( in millions)    No. of
Options held    Fiscal Year
Of Grant    Exercise
Price ( )    Expiration
Date
(See note no.)
Umang Vohra
   12.7    875    2009    5    (1 )
      1,250    2010    5    (1 )
      1,250    2010    5    (2 )
      1,125    2011    5    (1 )
      1,125    2011    5    (2 )
      1,125    2011    5    (3 )
      1,125    2012    5    (1 )
      1,125    2012    5    (2 )
      1,125    2012    5    (3 )
      1,125    2012    5    (4 )
Dr. Raghav Chari
   22.5    750    2009    5    (1 )
      1,000    2010    5    (1 )
      1,000    2010    5    (2 )
      1,125    2011    5    (1 )
      1,125    2011    5    (2 )
      1,125    2011    5    (3 )
      1,000    2012    5    (1 )
      1,000    2012    5    (2 )
      1,000    2012    5    (3 )
      1,000    2012    5    (4 )
Dr. R. Ananthanarayanan
   17.0    —      —      —      —
      875    2012    5    (1 )
      875    2012    5    (2 )
      875    2012    5    (3 )
      875    2012    5    (4 )
M.V. Ramana
   13.4    750    2009    5    (1 )
      875    2010    5    (1 )
      875    2010    5    (2 )
      750    2011    5    (1 )
      750    2011    5    (2 )
      750    2011    5    (3 )
      650    2012    5    (1 )
      650    2012    5    (2 )
      650    2012    5    (3 )
      650    2012    5    (4 )
Samiran Das
   10.5    —      —      —      —
Dr. Amit Biswas
   6.1    —      —      —      —
K. B. Sankara Rao
(Retired on January 31, 2012)
   20.3    —      —      —      —
Vilas M. Dholye
(Retired on September 16, 2011)
   11.2    —      —      —      —

Gratuity ~~benefits:~~benefits.In accordance with applicable Indian laws, we provide for gratuity, a defined benefit plan (the “Gratuity Plan”) covering certain categories of ~~employees.~~employees of the parent company. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, at an amount based on the respective employee’s last drawn salary and the years of employment with us. Effective September 1, 1999, we established the Dr. Reddy’s Laboratories Gratuity Fund (the “Gratuity Fund”). Liability with regard to the Gratuity Plan is determined by an actuarial valuation, based upon which we make contributions to the Gratuity Fund. Trustees administer the contributions made to the Gratuity Fund. The amounts contributed to the Gratuity Fund are primarily invested in ~~specific securities as mandated by Indian law and generally consist of federal and state~~ Indian Government bonds and corporate debt securities. A small portion of the ~~debt instruments~~fund is also invested in equity securities of Indian ~~Government-owned corporations.~~

The net periodic gratuity benefit ~~costs~~cost recognized by us ~~were 69~~towards the aforesaid Gratuity Plan was Rs.155 million and 86 Rs.135 million ~~during~~for the years ended March 31, ~~2011~~2015 and ~~2012,~~2014, respectively.

Superannuation benefits.Our senior officers participate in superannuation, a defined contribution plan administered by the Life Insurance Corporation of India. We make annual contributions based on a specified percentage of each covered employee’s salary. We have no further obligations under the plan beyond our annual contributions. We contributed 49 Rs.68 million and 52 Rs.63 million to the superannuation plan during the years ended March 31, ~~2011~~2015 and ~~2012,~~2014, respectively.

Provident fund benefits.~~All~~In India, certain employees receive benefits from a provident fund, a defined contribution plan. Both the employee and employer each make monthly contributions to the plan equal to 12% of the covered employee’s basic salary. We have no further obligations under the plan beyond our monthly contributions. We contributed ~~258~~ Rs.492 million and ~~289~~ Rs.411 million to the provident fund plan during the years ended March 31, ~~2011~~2015 and ~~2012,~~2014, respectively.

401(k) retirement savings plans.In the United States, we sponsor a defined contribution 401(k) retirement savings plan for all eligible employees who meet minimum age and service requirements. We contributed 70 Rs.195 million and 75 Rs.162 million to this 401(k) retirement savings plan for the years ended March 31, ~~2011~~2015 and ~~2012,~~2014, respectively.

National Insurance ~~contributions~~contributions.. In the United Kingdom, certain social security benefits (such as pension, unemployment and disability) are funded by employers and employees through mandatory National Insurance contributions. We sponsor a defined contribution plan for such National Insurance contributions. The contribution amounts are determined based upon the employee’s base salary. We have no further obligations under the plan beyond our monthly contributions. We contributed 80 Rs.151 million and ~~101~~ Rs.151 million to the U.K. National Insurance scheme during the years ended March 31, ~~2011~~2015 and ~~2012,~~2014, respectively.

~~Pension plans~~Pension.. All employees of Industrias Quimicas Falcon de Mexico, SA de CV (“Falcon”), our subsidiary in Mexico, are governed by a defined benefit pension plan. The pension plan provides a payment to vested employees at retirement or termination of employment. ~~This payment is based on the employee’s integrated salary and is paid in the form of a monthly pension over a period of 20 years computed based on a predefined formula.~~ Liabilities in respect of the pension plan are determined by an actuarial valuation, based on which we make 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.

~~Long service benefit recognition.~~~~During~~The net periodic cost recognized under the year ended March 31, 2010 we introduced a post-employment defined benefit scheme under which all eligible employees of our parent company who completed a specified service tenure with our parent company would be eligible for a “Long Service Cash Award” at the time of their employment separation. The amount of such cash payment would be based on the respective employee’s last drawn salaryFalcon pension plan was Rs.22 million and ~~the specified number of years of employment with our parent company. We have valued the liability associated with this scheme through an independent actuary. During~~Rs.29 million during the years ended March 31, ~~2011~~2015 and ~~2012,~~2014, respectively.

Compensated leave of absence. Our current policies permit certain categories of employees to accumulate and carry forward a portion of their unutilized compensated absences and utilize them in future periods or receive cash in lieu thereof in accordance with the terms of such policies. We measure the expected cost of accumulating compensated absences as the additional amount that we expect to pay as a result of the unused entitlement that has accumulated at the statement of financial position date. Such measurement is based on actuarial valuation as at the statements of financial position date carried out by a qualified actuary. Towards this benefit, we recorded ~~an expense~~a total liability of 10 Rs.616 million and 15 Rs.463 million ~~respectively, under~~as at March 31, 2015 and 2014, respectively.

Long term incentive plan. Certain senior management employees of our company participate in a long term incentive plan which is aimed at rewarding the ~~scheme.~~individual based on the performance of such individual, their business unit/function and our company as a whole, with significantly higher rewards for superior performances. The total liability recorded by us towards this benefit was Rs.323 million as of March 31, 2015.

Our Articles of Association require us to have a minimum of three and a maximum of 20twenty directors. As of March 31, ~~2012,~~2015, we had ~~eleven~~ten directors on our Board, of which eight were non-full time independent directors.

The Companies Act, ~~1956~~2013 and our Articles of Association require that at least two-thirds of our directors be subject to re-election by our shareholders in ~~rotation. At~~rotation and that, at every annual general meeting, one-third of the directors who are subject to re-election must retire ~~and,~~from the Board. However, if eligible for re-election, they may be ~~reappointed~~re-elected by our shareholders at the annual general meeting.

Due to India’s adoption of the Companies Act, 2013, effective as of April 1, 2014, non-full time independent directors are no longer required to retire from the Board by rotation. As a result, at annual general meetings held after April 1, 2014, our non-full time independent directors will be excluded from the calculation of the two-thirds directors who are subject to re-election by our shareholders in rotation.

The Ministry of Corporate Affairs, Government of India, by a circular dated June 9, 2014, stated that all non-full time independent directors (including existing non-full time independent directors) are required to be appointed expressly under the provisions of the Companies Act, 2013 before March 31, 2015. Accordingly, all of our non-full time independent full time directors were re-appointed by our shareholders at the July 2014 annual general meeting.

The terms of each of our directors and their expected expiration dates are provided in the table below:

~~The~~As a result of the above, a proposal to vary the terms of ~~the contracts with~~appointment so that only our ~~full-time~~full time directors are ~~also disclosed~~subject to ~~all of~~retirement by rotation was placed before our shareholders inat the ~~notice of the~~July 2014 annual general meeting. Accordingly, our full time directors are now subject to retirement by rotation. The directors are not eligible for any termination benefit on the termination of their tenure with us. As a result of the above, Mr. G.V. Prasad shall retire by rotation and the proposal to reappoint him is being placed before our shareholders at the July 2015 annual general meeting.

Committees appointed by the Board focus on specific areas and take decisions within the authority delegated to them.

The Committees also make specific recommendations to the Board on various matters from time-to-time. All decisions and recommendations of the Committees are placed before the Board for information or approval. We had ~~seven~~eight Board-level Committees as of March 31, ~~2012:~~2015:

Nomination, Governance and Compensation Committee.

Science, Technology and Operations Committee.

Risk Management Committee.

Stakeholders’ Relationship Committee (formerly Shareholders’ Grievance ~~Committee.~~Committee).

Management Committee.

Investment Committee.

Corporate Social Responsibility Committee.

We have adopted charters for our Audit Committee, Nomination, Governance and Compensation Committee, Science, Technology and Operations Committee, Risk Management Committee, ~~and~~ Shareholders’ Grievance Committee and Corporate Social Responsibility Committee, formalizing the applicable committee’s procedures and duties. Each of these charters is available on our website atwww.drreddys.com/aboutus/committees-of-the-board.html.

Audit Committee.Our management is primarily responsible for our internal controls and financial reporting process. Our independent registered public accounting firm is responsible for performing independent audits of our financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and for issuing reports based on such audits. The Board of Directors has entrusted the Audit Committee to supervise these processes and thus ensure accurate and timely disclosures that maintain the transparency, integrity and quality of financial controls and reporting.

The Audit Committee consists of the following four non-full time, independent directors:

Mr. Sridar Iyengar (Chairman);

Dr. Omkar ~~Goswami (Chairman);~~Goswami;

Ms. Kalpana Morparia; and

Mr. Ravi ~~Bhoothalingam; and~~Bhoothalingam.

~~Mr. Sridar Iyengar (Effective August 22, 2011).~~

Our Company Secretary is the Secretary of the Audit Committee. This Committee met ~~on four occasions~~five times during the year ended March 31, ~~2012.~~2015. Our independent registered public accounting firm was generally present at all Audit Committee meetings during the year.

Supervise the financial reporting process;

Review our financial results, along with the related public filings, before recommending them to the Board;

Review the adequacy of our internal controls, including the plan, scope and performance of our internal audit function;

Discuss with management our major policies with respect to risk assessment and risk management;

Hold discussions with our independent registered public accounting firm on the nature and scope of audits, and any views that they have about the financial control and reporting processes;

Ensure compliance with accounting standards, and with listing requirements with respect to the financial statements;

Recommend the appointment and removal of our independent registered public accounting firm and their fees;

Recommend the appointment of cost auditors;

Review the independence of our independent registered public accounting firm;

Ensure that adequate safeguards have been taken for legal compliance both for us and for our Indian and foreign subsidiaries;

Review the financial statements of subsidiary companies, especially, investments made by them;

Review and approve any related party transactions;

Review the functioning of our whistle blower policies and procedures;

Scrutiny of inter-corporate loans and investments;

Value our undertakings or assets, wherever necessary;

Evaluate our internal financial controls and risk management systems;

Review the findings of any investigations related to suspected fraud; and

Implement compliance with all applicable provisions of the Sarbanes-Oxley Act of 2002.

Nomination, Governance and Compensation Committee.The primary functions of the Nomination, Governance and Compensation Committee are to:

Examine the structure, composition and functioning of the Board, and recommend changes, as necessary, to improve the Board’s effectiveness;

Formulate policies on compensation of our Directors, key managerial personnel and other employees and on Board diversity;

Formulate criteria for evaluation of our non-full time independent directors and the Board;

Assess our policies and processes in key areas of corporate governance, other than those explicitly assigned to other Board Committees, with a view to ensuring that we are at the forefront of good corporate governance; and

Regularly examine ways to strengthen our organizational health, by improving the hiring, retention, motivation, development, deployment and behavior of management and other employees. In this context, the Committee also reviews the framework and processes for motivating and rewarding performance at all levels of the organization, the resulting compensation awards, and make appropriate proposals for Board approval. In particular, it recommends all forms of compensation to be granted to our Directors, executive officers and senior management employees.

The Nomination, Governance and Compensation Committee also administers our Employee Stock Option Schemes.

The Nomination, Governance and Compensation Committee consists of the following non-full time, independent directors:

~~Mr. Anupam Puri (Chairman)~~Dr. Ashok S. Ganguly (Chairman effective August 1, 2014);

~~Dr. Ashok S. Ganguly;~~Mr. Anupam Puri (Chairman until July 31, 2014);

Ms. Kalpana Morparia; and

Mr. Ravi Bhoothalingam.

The Corporate Officer heading our Human Resources function serves as the Secretary of the Committee. The Nomination, Governance and Compensation Committee met ~~five~~three times during the year ended March 31, ~~2012.~~2015.

Science, Technology and Operations Committee.The primary functions of the Science, Technology and Operations Committee are to:

Advise the Board and our management on scientific, medical and technical matters and operations involving our development and discovery programs (generic and proprietary), including major internal projects, business development opportunities, interaction with academic and other outside research organizations;

Assist the Board and management to stay abreast of novel scientific and ~~technologies~~technology developments and innovations and anticipate emerging concepts and trends in therapeutic research and development, to help assure we make well-informed choices in committing its resources;

Assist the Board and our management in creation of valuable intellectual property;

Review the status of non-infringement patent challenges; and

Assist the Board and our management in building and nurturing science in our organization in accordance with our business strategy.

The Science, Technology and Operations Committee consists of the following non-full time, independent directors:

Dr. ~~Ashok S. Ganguly (Chairman)~~Bruce L.A. Carter (Chairman effective August 1, 2014);

Dr. ~~Bruce L.A. Carter;~~Ashok S. Ganguly (Chairman until July 31, 2014); and

The Corporate Officers heading our Integrated Product Development Operations, Proprietary Products and Biologics functions serve as the Secretary of the Committee with regard to their respective businesses. The Science, Technology and Operations Committee met four times during the year ended March 31, ~~2012.~~2015.

Risk Management Committee.The primary function of the Risk Management Committee is to:

Ensure that it is apprised of the most significant risks along with the action management is taking and how it is ensuring effective Enterprise Risk Management;

Discuss with senior management our Enterprise Risk Management and provide oversight as may be needed; and

Review risk disclosure statements in any public documents or disclosures.

The Risk Management Committee consists of the following non-full time, independent directors:

Dr. ~~Bruce L.A. Carter (Chairman)~~Omkar Goswami (Chairman effective August 1, 2014);

Dr. ~~Omkar Goswami;~~Bruce L.A. Carter (Chairman until July 31, 2014); and

Mr. Sridar ~~Iyengar (effective August 22, 2011).~~Iyengar.

Our Chief Financial Officer is the Secretary of the Risk Management Committee. This Committee met on three ~~occasions~~times during the year ended March 31, ~~2012.~~2015.

Corporate Social Responsibility (“CSR”) Committee. The primary function of the Corporate Social Responsibility Committee is to:

Formulate, review and recommend to the Board, a Corporate Social Responsibility Policy indicating the activities to be undertaken by us as specified in Schedule VII of the Companies Act, 2013;

Recommend the amount of expenditure to be incurred on the activities referred to in clause (a) of Section 135(3) of the Companies Act, 2013;

Provide guidance on various Corporate Social Responsibility activities undertaken by us and monitoring their progress; and

Monitor the adherence to our Corporate Social Responsibility Policy from time to time.

The Corporate Social Responsibility Committee consists of the following directors:

Mr. Ravi Bhoothalingam (Chairman);

Mr. G.V. Prasad; and

Our Chief of Sustainability is the Secretary of the Corporate Social Responsibility Committee. This Committee met four times during the year ended March 31, 2015.

Stakeholders Relationship Committee. Effective May 13, 2014, the name of our “Shareholders Grievance Committee” has been changed to “Stakeholders Relationship Committee” in accordance with the provisions of Section 178 of the Indian Companies Act, 2013. The primary function of the Stakeholders’ Relationship Committee is to:

Review investor complaints and their redress;

Review queries received from investors;

Review work done by our share transfer agent; and

Review corporate actions related to security holders.

Ms. Kalpana Morparia (Chairman effective August 1, 2014)

Mr. Ravi Bhoothalingam (Chairman until July 31, 2014);

Mr. G.V. Prasad; and

Our Company Secretary is the Secretary of the Stakeholders’ Relationship Committee. This Committee met four times during the year ended March 31, 2015.

The following table sets forth the number of our employees as at March 31, ~~2012, 2011~~2013, 2014 and ~~2010.~~2015.

We have not experienced any ~~material~~significant work stoppages in the years ended March 31, ~~2012 or 2011,~~2015 and 2014, and we consider our relationship with our employees and labor unions to be good. Approximately 7%5% of our employees belong to labor unions.

The following table sets forth, as of March 31, ~~2012~~2015 for each of our directors and executive officers, the total number of our equity shares and options owned by them:

We have adopted a number of stock option incentive plans covering either our ordinary shares or our ADSs, and we are currently operating under the Dr. Reddy’s Employees Stock Option Plan-2002 and the Dr. Reddy’s Employees ADR Stock Option Plan-2007. During the year ended March 31, ~~2012,~~2015, options to purchase ordinary shares and ADSs were awarded to various of our executive officers and ~~directors~~other employees under these two plans as follows: an aggregate of ~~318,580~~276,636 options were granted having an average exercise price of 5 Rs.5 per share or ADS and no options were granted at a fair market value based exercise price. Each option granted had an expiration date of five years from the vesting date, and each grant ~~(excluding the grants to Board members, which vest in one year)~~ provided for time-based vesting in 25% increments over four years. As of March 31, ~~2012,~~2015, options were outstanding under these two plans for an aggregate of ~~approximately 761,055~~683,804 shares and ADSs with an average exercise price of 5 Rs.5 per ~~share or ADS and approximately 11,000 shares and ADSs with an average exercise price of 441 per share or ADS.~~share.

For the years ended March 31, ~~2012~~2015 and ~~2011, 326~~2014, Rs.498 million and ~~265~~ Rs.436 million, respectively, ~~has~~have been recorded as employee share-based payment expense under all of our employee stock incentive plans. As of March 31, ~~2012,~~2015, there was ~~approximately 268~~Rs.558 million of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of ~~2.77~~3.60 years.

For further information regarding our options and stock option incentive plans, see Note 2019 to our consolidated financial statements.

All of our equity shares have the same voting rights. As of March 31, ~~2012,~~2015, a total of ~~25.61%~~25.48% of our equity shares were held by the following parties:

~~Dr. K. Anji Reddy (Chairman),~~

Mr. G.V. Prasad ~~(Vice Chairman~~(Co-Chairman, Managing Director and Chief Executive Officer),;

Mr. Satish Reddy ~~(Managing Director and Chief Operating Officer),~~(Chairman of the Board);

Mrs. K. Samrajyam, ~~wife~~mother of ~~Dr. K. Anji~~Mr. Satish Reddy, and Mrs. G. Anuradha, wife of Mr. G.V. Prasad (hereafter collectively referred as the “Family Members”),; and

Dr. Reddy’s Holdings Limited (formerly known as Dr. Reddy’s Holdings Private Limited) (a, a company in which ~~Dr. K. Anji Reddy~~the APS Trust owns ~~40%~~83.11% of the equity and the remainder is held by Mr. G.V. Prasad HUF, Mr. Satish Reddy individually and as HUF and the Family ~~Members).~~Members. Mr. G.V. Prasad, Mr. Satish Reddy, Mrs. G. Anuradha, Mrs. Deepti Reddy and their bloodline descendents are the beneficiaries of the APS Trust. Mr. G.V. Prasad, Mr. Satish Reddy, Mrs. G. Anuradha and Mrs. Deepti Reddy are the sole members of the Board of Directors of Dr. Reddy’s Holdings Limited. Mr. G.V. Prasad and Mr. Satish Reddy are the sole trustees of the APS trust.

The following table sets forth information regarding the beneficial ownership of our shares by the foregoing persons as of March 31, ~~2012:~~2015:

As otherwise stated above and to the best of our knowledge, we are not owned or controlled directly or indirectly by any government or by any other corporation or by any other natural or legal persons. We are not aware of any arrangement, the consummation of which may at a subsequent date result in a change in our control.

As of March 31, ~~2012,~~2015, we had ~~169,560,346~~170,381,174 outstanding equity shares. As of March 31, ~~2012,~~2015, there were ~~74,670~~74,648 record holders of our equity shares listed and traded on the Indian stock exchanges. Our American Depositary Shares (“ADSs”) are listed on the New York Stock Exchange. One ADS represents one equity share of 5 Rs.5 par value per share. As of March 31, ~~2012, 16.82%~~2015, 16.89% of our issued and outstanding equity shares were held by ADS holders. On March 31, ~~2012~~2015 we had approximately ~~15,858 ADS holders~~65 registered shareholders and 12,415 beneficial shareholders of record in the United States.

~~We have entered into transactions with the following related parties:~~Refer to Note 28 of our consolidated financial statements.

~~Green Park Hotel and Resorts Limited (formerly known as Diana Hotels Limited) for hotel services;~~

~~A.R. Life Sciences Private Limited for processing services of raw materials and intermediates;~~

~~Dr. Reddy’s Foundation for Human and Social Development towards contributions for social development;~~

~~Institute of Life Science towards contributions for social development;~~

~~K.K. Enterprises for packaging services for formulation products;~~

~~Ecologics Technologies Ltd. for analytical services;~~

~~SR Enterprises for transportation services; and~~

~~Dr. Reddy’s Laboratories Gratuity Fund.~~

These are enterprises over which key management personnel have control or significant influence (“significant interest entities”). Additionally, we have also provided and taken loans and advances from significant interest entities.

~~We have also entered into cancellable operating lease transactions with our directors and their relatives. The following is a summary of significant related party transactions:~~

~~The above table does not include the following transactions between us and our key management personnel:~~

During the year ended March 31, 2010, we exchanged a parcel of land owned by us for another parcel of land of equivalent size that adjoins our research facility, owned by our key management personnel. We concluded that this exchange transaction lacks commercial substance and have accordingly recorded the land acquired at the carrying amount of the land transferred, with no profit or loss being recorded.

The following financial statements and auditors’ report appear under Item 18 of this Annual Report on Form 20-F and are incorporated herein by reference:

Report of Independent Registered Public Accounting Firm

Consolidated statement of financial position as of March 31, ~~2012~~2015 and ~~2011~~2014

Consolidated income statement for the years ended March 31, ~~2012, 2011~~2015, 2014 and ~~2010~~2013

Consolidated statement of comprehensive ~~income/(loss)~~income for the years ended March 31, ~~2012, 2011~~2015, 2014 and ~~2010~~2013

Consolidated statement of changes in equity for the years ended March 31, ~~2012, 2011~~2015, 2014 and ~~2010~~2013

Consolidated statement of cash ~~flow statement~~flows for the years ended March 31, ~~2012, 2011~~2015, 2014 and ~~2010~~2013

Notes to the consolidated financial statements

Our financial statements included in this Annual Report onForm 20-F have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. The financial statements included herein are for our three most recent fiscal years.

For the year ended March 31, ~~2012,~~2015, our export revenues (i.e., revenues from all geographies other than India) were ~~80,219~~ Rs.127,031 million, and accounted for ~~83%~~86% of our total revenues.

~~We are involved in disputes, lawsuits, claims, governmental and/or regulatory inspections, inquiries, investigations and proceedings, including patent and commercial matters that arise from time~~Refer to ~~time in the ordinary course~~Note 36 of ~~business. The more significant matters are discussed below.~~

Most of the claims involve complex issues. Often, these issues are subject to uncertainties and therefore the probability of a loss, if any, being sustained and an estimate of the amount of any loss are difficult to ascertain. Consequently, for a majority of these claims, it is not possible to make a reasonable estimate of the expected financial effect, if any, that will result from ultimate resolution of the proceedings. This is due to a number of factors including: the stage of the proceedings (in many cases trial dates have not been set) and the overall length and extent of pre-trial discovery; the entitlement of the parties to an action to appeal a decision; clarity as to theories of liability; damages and governing law; uncertainties in timing of litigation; and the possible need for further legal proceedings to establish the appropriate amount of damages, if any.

In these cases, we disclose information with respect to the nature and facts of the case. We also believe that disclosure of the amount sought by plaintiffs, if that is known, would not be meaningful with respect to those legal proceedings.

However, although there can be no assurance regarding the outcome of any of the legal proceedings or investigations referred to in this Section 8.A., we do not expect any such legal proceedings or investigations to have a materially adverse effect on our financial position. However, if one or more of such proceedings were to result in judgments against us, such judgments could be material to our results of operations in a given period.

We manufacture and distribute Norfloxacin, a formulations product, and in limited quantities, the active pharmaceutical ingredient norfloxacin. Under the Drugs Prices Control Order (the “DPCO”) the Government of India has the authority to designate a pharmaceutical product as a “specified product” and fix the maximum selling price for such product. In 1995, the Government of India issued a notification and designated Norfloxacin as a “specified product” and fixed the maximum selling price. In 1996, we filed a statutory Form III before the Government of India for the upward revision of the maximum selling price and a writ petition in the Andhra Pradesh High Court (the “High Court”) challenging the validity of the designation on the grounds that the applicable rules of the DPCO were not complied with while fixing the maximum selling price. The High Court had previously granted an interim order in our favor; however it subsequently dismissed the case in April 2004. We filed a review petition in the High Court in April 2004 which was also dismissed by the High Court in October 2004. Subsequently, we appealed to the Supreme Court of India, New Delhi (the “Supreme Court”) by filing a Special Leave Petition, which is currently pending.

During the year ended March 31, 2006, we received a notice from the Government of India demanding the recovery of the price charged by us for sales of Norfloxacin in excess of the maximum selling price fixed by the Government of India, amounting to 285 million including interest thereon. We filed a writ petition in the High Court challenging this demand order. The High Court admitted the writ petition and granted an interim order, directing us to deposit 50% of the principal amount claimed by the Government of India, which amounted to 77 million. We deposited this amount with the Government of India in November 2005 and are awaiting the outcome of our appeal with the Supreme Court. In February 2008, the High Court directed us to deposit an additional amount of 30 million, which was deposited by us in March 2008. Additionally in November 2010, the High Court allowed our application to include additional legal grounds that we believe will strengthen our defence against the demand. For example, we have added as grounds that trade margins should not be included in the computation of amounts overcharged, and that it is necessary for the Government of India to set the active pharmaceutical ingredient price before the process of determining the ceiling on the formulation price. Based on our best estimate, we have recorded a provision for the potential liability related to the principal and interest amount demanded under the aforesaid order, and believe that possibility of any liability that may arise on account of penalty on this demand is remote. In the event we are unsuccessful in our litigation in the Supreme Court, we will be required to remit the sale proceeds in excess of the notified selling prices to the Government of India with interest and including penalties, if any, which amounts are not readily ascertainable.

~~In April 2006, we launched our fexofenadine hydrochloride 30 mg, 60 mg and 180 mg tablet products, which are generic versions of Sanofi-Aventis’ (“Aventis”) Allegra~~^® tablets. We are presently defending patent infringement actions brought by Aventis and Albany Molecular Research (“AMR”) in the United States District Court for the District of New Jersey. There are three formulation patents, three method of use patents, and three synthetic process patents which are at issue in the litigation. We have obtained summary judgment with respect to two of the formulation patents. Teva Pharmaceuticals Industries Limited (“Teva”) and Barr Pharmaceuticals, Inc. (“Barr”) were defending a similar action in the same court. In September 2005, pursuant to an agreement with Barr, Teva launched its fexofenadine hydrochloride 30 mg, 60 mg and 180 mg tablet products, which are AB-rated (bioequivalent) to Aventis’ Allegra^® tablets. Aventis brought patent infringement actions against Teva and its active pharmaceutical ingredients (“API”) supplier in the United States District Court for the District of New Jersey. There were three formulation patents, three use patents, and two API patents at issue in the litigation. Teva obtained summary judgment in respect of each of the formulation patents. On January 27, 2006, the District Court denied Aventis’ motion for a preliminary injunction against Teva and its API supplier on the three use patents, finding those patents likely to be invalid, and one of the API patents, finding that patent likely to be not infringed. The issues presented during Teva’s hearing are likely to be substantially similar to those which will be presented with respect to our fexofenadine hydrochloride tablet products. Subsequent to the preliminary injunction hearing, Aventis sued Teva and Barr for infringement of a new patent claiming polymorphic forms of fexofenadine.

We utilize an internally developed polymorph and have not been sued for infringement of the new patent. On November 18, 2008, Teva and Barr announced settlement of their litigation with Aventis. On September 9, 2009, AMR added a new process patent to the litigation. This new process patent is related to the manufacturing of the active ingredient contained in the group of tablets being sold under the Allegra^® ~~franchise (which include Allegra~~^®~~, Allegra-D 12~~^® ~~and Allegra-D 24~~^®~~). Subsequent to our receipt of the U.S. FDA approval in March 2010 for our ANDA relating to fexofenadine-pseudoephedrine higher strength (our generic version of Allegra-D 24~~^®), AMR and Aventis sought a preliminary injunction against us in the District Court of New Jersey to withhold the launch of our generic product in the U.S. market, arguing that they were likely to prevail on their claim that we infringed AMR’s U.S. Patent No. 7,390,906. In June 2010, the District Court of New Jersey issued the requested preliminary injunction against us. Sanofi-Aventis and AMR posted security of U.S.$40 million with the District Court of New Jersey towards the possibility that the injunction had been wrongfully granted. The security posted shall remain in place until further order of the Court. Pending the final outcome of the case, we have not recorded any asset in our consolidated financial ~~statements in connection with this product in the United States.~~

On January 28, 2011, the District Court of New Jersey ruled that, based on Sanofi-Aventis and AMR’s likely inability to prove infringement by our products, the preliminary injunction issued in June 2010 should be dissolved. Additionally, the court adopted our proposed claim construction for patent number 7,390,906. Aventis and AMR appealed the January 28, 2011 decisions of the District Court of New Jersey to the Federal Circuit of the United States Court of Appeals. We subsequently launched sales of its generic version of Allegra-D 24^®. Although the preliminary injunction was removed, all such sales are at risk pending final resolution of the litigation. Additionally, on April 27, 2011 a trial was held regarding two of the listed formulation patents 6,039,974 and 5,738,872 (on Allegra-D and Allegra-D12 products) that were asserted against us. We presented non-infringement and invalidity arguments for both and are awaiting a decision on this trial. In September 2011, Aventis withdrew its complaints regarding 7 of the 9 patents asserted against us, and thus only two of the patents (numbers 750,703 and 7,390,906) remain in dispute. In December 2011 and March 2012, the Federal Circuit of the U.S. Court of Appeals heard the arguments regarding the claim construction adopted by the District Court of New Jersey for patent number 7,390,906. We are awaiting the judgment from the Federal Circuit of the U.S. Court of Appeals. Subsequent to this, we expect to proceed to trial on the issues of infringement and validity.

If Aventis and AMR are ultimately successful in their allegations of patent infringement, we might be required to pay damages related to fexofenadine hydrochloride and fexofenadine-pseudoephedrine tablet sales made by us, and could also be prohibited from selling these products in the future.

Since 2007, we have sold “Oxycodon beta” (generic oxycontin) in Germany pursuant to a license and supply arrangement with Acino Holding Ltd. (formerly Cimex) (“Acino”). Since April 2007, there had been ongoing patent infringement litigation among Mundipharma International (“Mundipharma”), the innovator of generic oxycontin, and Acino and certain of its licensees of generic oxycontin. In January 2011, Mundipharma initiated a separate (secondary) legal action against us. We also signed a cost sharing agreement under which Acino agreed to share a portion of the losses resulting from any Mundipharma damage claim. In August 2011, Acino and Mundipharma entered into a settlement agreement for all patent litigation with respect to Acino’s oxycodone product and Mundipharma’s patents. As a result of this settlement agreement, all legal proceedings concerning Acino’s oxycodone product in Europe have been discontinued by all parties involved, and we are allowed to continue selling the oxycodone product in Germany.

~~We supply certain generic products, including olanzapine tablets (the generic version of Eli Lilly’s Zyprexa~~^® ~~tablets), to Pharmascience, Inc. for sale in Canada. Several generic pharmaceutical manufacturers have challenged the validity of the Zyprexa~~^® patents in Canada. In June 2007, the Canadian Federal Court held that the invalidity allegation of one such challenger, Novopharm Ltd., was justified and denied Eli Lilly’s request for an order prohibiting sale of the product. Eli Lilly responded by suing Novopharm for patent infringement. Eli Lilly also sued Pharmascience for patent infringement, but that litigation was dismissed after the parties agreed to be bound by the final outcome in the Novopharm case. As reflected in Eli Lilly’s regulatory filings, the settlement allows Pharmascience to market olanzapine tablets subject to a contingent damages obligation should Eli Lilly be successful in its litigation against Novopharm. Our agreement with Pharmascience includes a provision under which we share a portion of all cost and expense incurred as a result of settling lawsuits or paying damages that arise as a consequence of selling the products.

For the preceding reasons, we are exposed to potential damages in an amount that may equal our profit share derived from sale of the product. During October 2009, the Canadian Federal Court decided, in the Novopharm case, that Eli Lilly’s patent for Zyprexa^® was invalid. This decision was, however, reversed in part by the Canadian Federal Court of Appeal on July 21, 2010 and remanded for further consideration. In November 2011, the Canadian Federal Court again found the Eli Lilly Zyprexa^® patent invalid. Eli Lilly has filed an appeal to this decision. Pending resolution of such appeal, we continue to sell the product to Pharmascience and remain exposed to potential damages in an amount that may equal our profit share derived from sale of the product.

The Indian Council for Environmental Legal Action filed a writ in 1989 under Article 32 of the Constitution of India against the Union of India and others in the Supreme Court of India for the safety of people living in the Patancheru and Bollarum areas of Medak district of Andhra Pradesh. We have been named in the list of polluting industries. In 1996, the Andhra Pradesh District Judge proposed that the polluting industries compensate farmers in the Patancheru, Bollarum and Jeedimetla areas for discharging effluents which damaged the farmers’ agricultural land. The compensation was fixed at 1.30 million per acre for dry land and 1.70 million per acre for wet land. Accordingly, we have paid a total compensation of 3 million. The matter is pending in the courts and we believe that the possibility of additional liability is remote. We would not be able to recover the compensation paid, even if the decision of the court is in our favor.

During the year ended March 31, 2012, we, along with 14 other companies, received a notice from the Andhra Pradesh Pollution Control Board (“APP Control Board”) to show cause as to why action should not be initiated against us for violations under the Indian Water Pollution Act and the Indian Air Pollution Act. Furthermore, the APP Control Board issued orders to us to (i) stop production of all new products at our manufacturing facilities in Hyderabad, India without obtaining a “Consent for Establishment”, (ii) not manufacture products at such facilities in excess of certain quantities specified by the APP Control Board and (iii) furnish a bank guarantee (similar to a letter of credit) totaling to 12.5 million.

We appealed the APP Control Board orders to the Andhra Pradesh Pollution Appellate Board (the “APP Appellate Board”). The APP Appellate Board first stayed the APP Control Board orders and subsequently modified the orders, permitting us to file applications for Consents for Establishment and to increase the quantities of existing products which could be manufactured beyond that permitted by the APP Control Board, while requiring us not to manufacture new products at the specified facilities without the permission of the APP Control Board. The APP Appellate Board also reduced the total value of our bank guarantee required by the APP Control Board to 6.25 million.

We have challenged the jurisdiction of APP Control Board in imposing restrictions on manufacturing, both with respect to the quantity and the products mix, stating that the Drug Control Authority and the Industrial Development and Regulation Authority are the bodies legally empowered to license production of drug varieties and their quantities respectively.

A fact finding committee (the “APP Committee”) was constituted by the APP Appellate Board and was ordered to visit and report on the pollution control measures adopted by us. Pursuant to such orders, the APP Committee visited our premises in April 2012 and filed its report with the APP Appellate Board on June 23, 2012. The matter is pending before the APP Appellate Board for further hearing based on the APP Committee’s report.

In the first week of July 2012, the APP Control Board has issued further show cause notices and requested further information from some of the manufacturing companies located around Hyderabad and Visakhapatnam. We have also been requested to provide additional data and information and we have complied with the same. We are awaiting a response from the APP Control Board.

During the year ended March 31, 2003, the Central Excise Authorities of India issued a demand notice to one of our vendors regarding the assessable value of products supplied by this vendor to us. We have been named as a co-defendant in this demand notice. The Central Excise Authorities demanded payment of 176 million from the vendor, including penalties of 90 million. Through the same notice, the Authorities issued a penalty claim of 70 million against us. During the year ended March 31, 2005, the Central Excise Authorities issued an additional notice to this vendor demanding 226 million from the vendor, including a penalty of 51 million. Through the same notice, the Authorities issued a penalty claim of 7 million against us. Furthermore, during the year ended March 31, 2006, the Central Excise Authorities issued an additional notice to this vendor demanding 34 million. We have filed appeals against these notices. In August and September 2006, we attended the hearings conducted by the Customs, Excise and Service Tax Appellate Tribunal (the “CESTAT”) on this matter. In October 2006, the CESTAT passed an order in our favor setting aside all of the above demand notices. In July 2007, the Authorities appealed against CESTAT’s order in the Supreme Court of India, New Delhi. The matter is pending in the Supreme Court of India, New Delhi.

During the year ended March 31, 2010, the Central Excise Commissioner issued a show cause notice to us objecting to our methodology of distributing input service tax credits claimed for one of our facilities during the period of March 2008 to September 2009, and demanded an amount of 102 million plus interest and penalties. During the year ended March 31, 2012, the Central Excise Commissioner confirmed the show cause notice and passed an order demanding an amount of 102 million plus a 100% penalty and interest thereon. We have filed an appeal with the CESTAT against the Central Excise Commissioner’s order, and await a hearing before the CESTAT.

Furthermore, during the year ended March 31, 2012, the Commissioner issued an additional show cause notice to us demanding an amount of 125 million plus interest and penalties pertaining to our methodology of distributing input service tax credits claimed for one of our facilities during the period of October 2009 to March 2011. We have responded to such show cause notice and are currently awaiting a hearing with the Central Excise Commissioner.

In November 2007, the Attorneys General of the State of Florida and the Commonwealth of Virginia each issued subpoenas to our U.S. subsidiary, Dr. Reddy’s Laboratories, Inc. (“DRLI”) In March 2008, the Attorney General of the State of Michigan and two other states issued a Civil Investigative Demand (“CID”) to DRLI. These subpoenas and the CID generally required the production of documents and information relating to the development, sales and marketing of the products ranitidine, fluoxetine and buspirone, all of which were sold by Par Pharmaceuticals Inc. (“Par”) pursuant to an agreement between Par and DRLI. On July 8, 2011, we were notified that the Attorneys Generals’ offices intended to conclude their respective investigations concerning us, and that we would be voluntarily dismissed without prejudice from the legal action. We have been discharged from the investigation.

Additionally, we and our affiliates are involved in other disputes, lawsuits, claims, governmental and/or regulatory inspections, inquiries, investigations and proceedings, including patent and commercial matters that arise from time to time in the ordinary course of business. We do not believe that there are any such pending matters that will have any material adverse effect on its financial position, results of operations or cash flows in any given accounting period.

In the years ended March 31, ~~2010, 2011~~2013, 2014 and ~~2012,~~2015, we paid cash dividends of ~~6.25, 11.25~~ Rs. 13.75, Rs.15.00 and ~~11.25~~ Rs. 18.00 respectively, per equity share. Every year our Board of Directors recommends the amount of dividends to be paid to shareholders, if any, based upon conditions then existing, including our earnings, financial condition, capital requirements and other factors. In our Board of Directors’ meeting held on May ~~11, 2012,~~12, 2015, the Board of Directors proposed a dividend inper share of Rs.20 and aggregating to Rs.3,408 million plus an additional amount of Rs.694 million, which is intended to equal the ~~aggregate amount of 2,331 million (including an aggregate amount of 378 million to pay the~~applicable dividend tax, ~~imposed on the distribution~~all of ~~such dividends),~~ which ~~would amount to a total dividend per share of 13.75. The Board’s dividend proposal~~ is subject to the approval of our shareholders.

Holders of our ADSs are entitled to receive dividends payable on equity shares represented by such ADSs. Cash dividends on equity shares represented by our ADSs are paid to the depositary in Indian rupees and are converted by the depositary into U.S. dollars and distributed, net of depositary fees, taxes, if any, and expenses, to the holders of such ~~ADSs.~~ADSs

On March 31, 2010, our Board of Directors approved a scheme for the issuance ~~of bonus debentures~~ (“in-kind”, i.e., for no cash consideration) to our shareholders of 9.25% unsecured, non-convertible, redeemable debentures (sometimes referred to as our “bonus debentures”), to be effected by way of capitalization of our retained earnings. The scheme was subject to the successful receipt of necessary approvals of our shareholders, the High Court of Andhra Pradesh, India and other identified regulatory authorities as mentioned in the scheme. All necessary approvals to effectuate the scheme, including that of the High Court, were received during the year ended March 31, 2011. Accordingly, on March 24, 2011, we issued these bonus debentures to ~~the shareholders of~~ our ~~Company. A summary of the terms of the issuance is as follows:~~

~~The bonus debentures are unsecured and are not convertible into our equity shares.~~

We delivered cash in the aggregate value of the bonus debentures into an escrow account of a merchant banker in India appointed by our Board of Directors. The merchant banker received such amount for and on behalf of and in trust for the shareholders who are entitled to receive bonus debentures. Upon receipt of such amount, the merchant banker paid the amount to us, for and on behalf of the shareholders as consideration for the allotment of debentures to them.

shareholders. These bonus debentures ~~carry~~matured on March 24, 2014 and were redeemed by us for cash in an ~~interest rate of 9.25% per annum, payable at the end of every 12, 24 and 36 months from the date of issue.~~

~~These bonus debentures were listed on stock exchanges in India so as~~amount equal to ~~provide liquidity for the holders.~~

Issuance of these bonus debentures was treated as a “deemed dividend” under section 2 (22) (b) of the Indian Income Tax Act, 1961 and accordingly, we were required to pay a dividend distribution tax.

Under Indian Corporate Law and as per the terms of the approved bonus debenture scheme, we have created a statutory reserve (the “Debenture Redemption Reserve”) in which we are required to deposit a portion of our profits made during each year prior to the maturity date of the bonus debentures until the aggregate amount retained in such reserve equals 50% of thetheir face value of ~~the debentures then issued and outstanding. The funds in the Debenture Redemption Reserve shall be used only to redeem the debentures for so long as they are issued and outstanding.~~

We have accounted for the issuance of such debentures as a pro-rata distribution to the owners acting in their capacity as owners on a collective basis. Accordingly, we have measured the value of such financial instrument at fair value on the date of issuance which corresponds to the value of the bonus debentures issued on March 24, 2011. We have disclosed the issuances as a reduction from retained earnings in the consolidated statement of changes in equity with a corresponding credit to “loans and borrowings” for the value of the financial liability recognized. Furthermore, in relation to the above mentioned scheme, we incurred costs of 51 million in directly attributable transaction costs payable to financial advisors. This amount has been accounted for as a reduction from the bonus debenture liability on the date of issuance of the bonus debentures and is being amortized over a period of three years using the effective interest rate method. The associated cash flows for the delivery of cash to the merchant banker and the subsequent receipt of the same for and on behalf of the shareholders upon issuance of the bonus debentures has been disclosed separately in the consolidated statement of cash flows as part of financing activities.

Further, the dividend distribution tax paid by us on behalf of the owners in the amount of 843 million has been recorded as part of a reduction from retained earnings in the consolidated statement of changes in equity for the year ended March 31, 2011. We have set aside a total amount of 865 million in debenture redemption reserves as of March 31, 2012 and have recorded such transfer in the consolidated statement of changes in equity.

The regulatory framework in India governing issuance of ADRs by an Indian company does not permit the issuance of ADRs with any debt instrument (including non-convertible rupee denominated debentures) as the underlying security. Therefore, the depositary of our ADRs (the “Depositary”) cannot issue depositary receipts (such as ADRs) with respect to the bonus debentures issued under our scheme. Therefore, in accordanceRs. 5 each, along with the ~~deposit agreement between us~~third and ~~the Depositary, the bonus debentures issuable in respect of the shares underlying our ADRs have been distributed to the Depositary, who sold~~final interest payment thereon. The aggregate principal payment for all such bonus debentures on April 8, 2011. The Depositary converted the net proceeds from such sale into U.S. dollars and, on June 23, 2011, distributed all such U.S. dollars, less any applicable taxes, fees and expenses incurred and/or provided for under the Deposit Agreement, to the registered holders of ADRs entitled thereto in the same manner as it would ordinarily distribute cash dividends under the deposit agreement.March 24, 2014 was Rs.5,078 million.

~~During the three months ended June 30, 2012,~~In April 2015, we entered into a ~~collaboration~~definitive agreement with ~~Merck Serono,~~UCB India Private Limited and other UCB group companies (together referred to as “UCB”) to acquire a ~~division of Merck KGaA, Darmstadt, Germany, to co-develop a~~select portfolio of ~~biosimilar compounds~~established products business in ~~oncology, primarily focused~~the territories of India, Nepal, Sri Lanka and Maldives. The purchased business was acquired on ~~monoclonal antibodies (MAbs)~~a slump sale basis (an Indian tax law concept which refers to the transfer of a business as a going concern without values being assigned to individual assets and liabilities). The ~~partnership covers co-development, manufacturing and commercialization~~transaction includes approximately 350 employees engaged in operations of the ~~molecules included~~acquired India business. The acquisition is expected to strengthen our presence in the ~~agreement.~~areas of dermatology, respiratory and pediatric products. The ~~agreement is based~~total purchase consideration was Rs.8,000 million. The acquisition was closed on full research and development cost sharing. Merck Serono will undertake commercialization globally, outside the United States, with the exception of select emerging markets that will be co-exclusive or where we maintain exclusive rights. We will receive royalty payments from Merck Serono upon commercialization by them. In the United States, the parties will co-commercialize the products on a profit-sharing basis.

~~During the three months ended~~ June ~~30, 2012, we discontinued our research on terbinafine nail lacquer, a dermatology product, because the interim analysis of the blinded clinical trial data showed a lack of efficacy.~~16, 2015.

The following tables set forth the price history for our shares on the BSE Limited (formerly known as the Bombay Stock Exchange ~~Limited,~~Limited) (“BSE”) and for our ADSs on the New York Stock Exchange (“NYSE”).

Our equity shares are traded on the BSE Limited (formerly known as the Bombay Stock Exchange ~~Limited~~Limited) (“BSE”) and National Stock Exchange of India Limited (“NSE”), or collectively, the “Indian Stock Exchanges.” Our American Depositary Shares (or “ADSs”), as evidenced by American Depositary Receipts (or “ADRs”), are traded in the United States on the New York Stock Exchange (“NYSE”), under the ticker symbol “RDY.” Each ADS represents one equity share. Our ADSs began trading on the NYSE on April 11, 2001. Our shareholders approved the delisting of our shares from the Hyderabad Stock Exchange Limited, The Stock Exchange, Ahmedabad, The Madras Stock Exchange Limited, and The Calcutta Stock Exchange Association Limited at the general shareholders meeting held on August 25, 2003.

~~Effective as of April 7, 2011 our~~Our unsecured, redeemable, non-convertible, fully paid-up bonus debentures (as described in Section 8.A. above), ~~are~~were traded on the Indian Stock ~~Exchanges.~~Exchanges until February 19, 2014. They were redeemed for cash on March 24, 2014. These bonus debentures ~~are~~were not registered in the United States and ~~are~~were publicly traded solely in India.

Dr. Reddy’s Laboratories Limited was incorporated under the Indian Companies Act, 1956. We are registered with the Registrar of Companies, ~~Andhra Pradesh,~~ Hyderabad, Telangana, India, aswith Company ~~No. 4507 (Company~~ Identification No. ~~L85195AP1984PLC0004507).~~ L85195AP1984PLC004507. Our company’s registration number changed to L85195TG1984PLC004507 effective as of June 2, 2014.

Our registered office is located at 8-2-337, Road No. 3, Banjara Hills, Hyderabad, ~~Andhra Pradesh~~Telangana 500 034, India and the telephone number of our registered office is +91-40-49002900. The summary of our Articles of Association and Memorandum of Association that is included in our registration statement onForm F-1 filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 11, 2001, together with copies of the Articles of Association and Memorandum of Association that are included in our registration statement onForm F-1, are incorporated herein by reference.

The Memorandum and Articles of Association were amended at the 17th Annual General Meeting held on September 24, 2001, 18th Annual General Meeting held on August 26, 2002, the 20th Annual General Meeting held on July 28, 2004 and the 22nd Annual General Meeting held on July 28, 2006. A full description of these amendments was given in the Form 20-F filed with the SEC on September 30, 2003, September 30, 2004 and October 2, 2006, which description is incorporated herein by reference. The Memorandum and Articles of Association were amended at the 22nd Annual General Meeting held on July 28, 2006 to increase the authorized share capital in connection with the stock split effected in the form of a stock dividend that occurred on August 30, 2006.

The Memorandum and Articles of Association were further amended in accordance with the terms of an Order of the High Court of Judicature, Andhra Pradesh, dated June 12, 2009 to effect an increase in our parent company’s authorized share capital pursuant to the amalgamation of Perlecan Pharma Private Limited into our parent company. In a related order dated June 12, 2009, the High Court concluded that there was no need to have a shareholders’ meeting in order to affect such amendment.

The Memorandum and Articles of Association were further amended in accordance with the terms of an Order of the High Court of Judicature, Andhra Pradesh, dated July 19, 2010 to provide for the capitalization or utilization of undistributed profit or retained earnings or security premium account or any other reserve or fund of ours with the approval of our shareholders in connection with our bonus debentures.

Other than the contracts entered into in the ordinary course of business, there are no material contracts to which we or any of our direct and indirect subsidiaries is a party for the two years immediately preceding the date of thisForm 20-F.

Foreign investment in Indian securities, whether in the form of foreign direct investment or in the form of portfolio investment, is governed by the Foreign Exchange Management Act, 1999, as amended (“FEMA”), and the rules, regulations and notifications issued thereunder. Set forth below is a summary of the restrictions on transfers applicable to both foreign direct investments and portfolio investments, including the requirements under Indian law applicable to the issuance and transfer of ADSs.

The Foreign Direct Investment Policy under the Reserve Bank of India’s (“RBI”) Automatic Route enables Indian companies (other than those specifically excluded thereunder) to issue shares to persons who reside outside of India without prior permission from the RBI, except in cases where there are ceilings of investments in certain industry sectors and subject to certain conditions.

The Department of Industrial Policy and Promotion, a part of the Ministry of Commerce and Industry, issued detailed guidelines in January 1997 for consideration of foreign direct investment proposals by the Foreign Investment Promotion Board (the “Guidelines”). The basic objective of the Guidelines is to improve the transparency and objectivity of the Foreign Investment Promotion Board’s consideration of proposals. However, since these are administrative guidelines and have not been codified as either law or regulations, they are not legally binding with respect to any recommendation made by the Foreign Investment Promotion Board or with respect to any decision taken by the Government of India in cases involving foreign direct investment.

Under the Guidelines, sector specific guidelines for foreign direct investment and the levels of permitted equity participation have been established. In February 2000, the Department of Industrial Policy and Promotion issued a notification that foreign ownership of up to 50%, 51%, 74% or 100%, depending on the category of industry, would be allowed without prior permission of the Foreign Investment Promotion Board and, in certain cases, without prior permission of the RBI. Over a period of time, the Government of India has relaxed the restrictions on foreign investment, including the revision of the investment cap to 26% in the insurance sector and 74% subject to RBI guidelines for setting up branches/subsidiaries of foreign banks in the private banking sector.

In May 1994, the Government of India announced that purchases by foreign investors of ADSs, as evidenced by ADRs, and foreign currency convertible bonds of Indian companies would be treated as foreign direct investment in the equity issued by Indian companies for such offerings. Therefore, offerings that involve the issuance of equity that results in Foreign Direct Investors holding more than the stipulated percentage of direct foreign investments (which depends on the category of industry) would require approval from the Foreign Investment Promotion Board.

In addition, offerings by Indian companies of any such securities to foreign investors require Foreign Investment Promotion Board approval, whether or not the stipulated percentage limit would be reached if the proceeds will be used for investment in specified industries.

For investments in the pharmaceutical sector, the Foreign Direct Investment limit is 100%. However, unlike Foreign Direct Investments in new pharmaceutical projects (sometimes called “greenfield” investments), Foreign Direct Investments in existing Indian pharmaceutical companies (sometimes called “brownfield” investments) are nonetheless subject to approval by the Foreign Investment Promotion Board (which can incorporate conditions for its approval at the time of grant). Thus, foreign ownership of up to 100% of our equity shares would be allowed ~~without prior permission of the Foreign Investment Promotion Board and, in~~but would require certain ~~cases, with prior permission of the RBI.~~approvals.

Investments by persons of Indian nationality or origin residing outside of India (also known as Non-Resident Indians or “NRIs”) or registered Foreign Institutional Investors (“FIIs”) made through a stock exchange are known as portfolio investments (“Portfolio Investments”).

A variety of methods for investing in shares of Indian companies are available to NRIs. These methods allow NRIs to make portfolio investments in existing shares and other securities of Indian companies on a basis not generally available to other foreign investors.

The RBI no longer recognizes overseas corporate bodies (“OCBs”) as an eligible class of investment vehicle under various circumstances under the RBI’s foreign exchange regulations.

In September 1992, the Government of India issued guidelines that enable FIIs, including institutions such as pension funds, investment trusts, asset management companies, nominee companies and incorporated/institutional portfolio managers, to invest in all of the securities traded on the primary and secondary markets in India. Under the guidelines, FIIs are required to obtain an initial registration from the Securities and Exchange Board of India (“SEBI”), and a general permission from the RBI to engage in transactions regulated under the Foreign Exchange Management Act. FIIs must also comply with the provisions of the SEBI (Foreign Institutional Investors Regulations) 1995. When it receives the initial registration, the FII also obtains general permission from the RBI to engage in transactions regulated under the Foreign Exchange Management Act. Together, the initial registration and the RBI’s general permission enable the registered FII to: (i) buy (subject to the ownership restrictions discussed below) and sell unrestricted securities issued by Indian companies; (ii) realize capital gains on investments made through the initial amount invested in India; (iii) participate in rights offerings for shares; (iv) appoint a domestic custodian for custody of investments held; and (v) repatriate the capital, capital gains, dividends, interest income and any other compensation received pursuant to rights offerings of shares. The current policy with respect to purchase or sale of securities of an Indian company by an FII is in Schedule 2 and Regulation 5(2) of the Foreign Exchange Management (Transfer or Issue of Securities by a Person Resident Outside India) Regulations, 2000.

The SEBI and the RBI regulations restrict portfolio investments in Indian companies by FIIs, NRIs and OCBs, all of which we refer to as “foreign portfolio investors.” Under current Indian law, FIIs in the aggregate may hold not more than 24.0% of the equity shares of an Indian company, and NRIs in the aggregate may hold not more than 10.0% of the shares of an Indian company through portfolio investments. The 24.0% limit referred to above can be increased to sectoral cap/statutory limits as applicable if a resolution is passed by the board of directors of the company followed by a special resolution passed by the shareholders of the company to that effect. The 10.0% limit referred to above may be increased to 24.0% if the shareholders of the company pass a special resolution to that effect. No single FII may hold more than 10.0% of the shares of an Indian company and no single NRI may hold more than 5.0% of the shares of an Indian company.

Our shareholders have passed a resolution enhancing the limits of portfolio investment by FIIs in the aggregate to 49%. NRIs in the aggregate may hold not more than 10.0% of our equity shares through portfolio investments. Holders of ADSs are not subject to the rules governing FIIs unless they convert their ADSs into equity shares.

As of March 31, ~~2012,~~2015, FIIs held ~~27.42%~~38.86% of our equity shares and NRIs held ~~1.48%~~1.27% of our equity shares.

In September 2011, the Securities and Exchange Board of India (“SEBI”) enacted the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (the “2011 Takeover Code”), which replaces the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

Under the 2011 Takeover Code, upon acquisition of shares or voting rights in a publicly listed Indian company (the “target company”) such that the aggregate shareholding of the acquirer (meaning a person who directly or indirectly, acquires or agrees to acquire shares or voting rights in the target company, or acquires or agrees to acquire control over the target company, either alone or together with any persons acting in concert), is 5% or more of the shares of the target company, the acquirer is required to, within two working days of such acquisition, disclose the aggregate shareholding and voting rights in the target company to the target company and to the stock exchanges in which the shares of the target company are listed.

Furthermore, an acquirer who, together with persons acting in concert with such acquirer, holds shares or voting rights entitling them to 5% or more of the shares or voting rights in a target company must disclose every sale or acquisition of shares representing 2% or more of the shares or voting rights of the target company to the target company and to the stock exchanges in which the shares of the target company are listed within two working days of such acquisition or sale or receipt of intimation of allotment of such shares.

Every acquirer, who together with persons acting in concert with such acquirer, holds shares or voting rights entitling such acquirer to exercise 25% or more of the voting rights in a target company, has to disclose to the target company and to stock exchanges in which the shares of the target company are listed, their aggregate shareholding and voting rights as of the thirty-first day of March, in such target company within seven working days from the end of the financial year of that company.

The acquisition of shares or voting rights that entitles the acquirer to exercise 25% or more of the voting rights in or control over the target company triggers a requirement for the acquirer to make an open offer to acquire additional shares representing at least 26% of the total shares of the target company for an offer price determined as per the provisions of the 2011 Takeover Code. The acquirer is required to make a public announcement for an open offer on the date on which it is agreed to acquire such shares or voting rights. Such open offer shall only be for such number of shares as is required to adhere to the maximum permitted non-public shareholding.

Since we are a listed company in India, the provisions of the 2011 Takeover Code will apply to us and to any person acquiring our ADSs, equity shares or voting rights in our ~~Company.~~company.

We have entered into listing agreements with each of the Indian stock exchanges on which our equity shares are listed, pursuant to which we must report to the stock exchanges any disclosures made to ~~the Company~~us pursuant to the 2011 Takeover Code.

Although the provisions of the listing agreements entered into between us and the Indian stock exchanges on which our equity shares are listed will not apply to equity shares represented by ADSs, holders of ADSs may be required to comply with such notification and disclosure obligations pursuant to the provisions of the Deposit Agreement entered into by such holders, our company and the depositary of our ADRs.

A person resident outside India holding the shares or debentures of an Indian company may transfer the shares or debentures so held by him, in compliance with the conditions specified in the relevant Schedule of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (the “Foreign Exchange Management Regulations”) as follows:

Restrictions for subsequent transfers of shares of Indian companies between residents and non-residents (other than OCBs) were relaxed significantly as of October 2004. As a result, for a transfer between a resident and a non-resident of securities of an Indian company, no prior approval of either the RBI or the Government of India is required, as long as certain conditions are met.

Shares of Indian companies represented by ADSs may be approved for issuance to foreign investors by the Government of India under the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993 (the “1993 Scheme”), as modified from time to time, promulgated by the Government of India. The 1993 Scheme is in addition but without prejudice to the other policies or facilities, as described below, relating to investments in Indian companies by foreign investors. The issuance of ADSs pursuant to the 1993 Scheme also affords to holders of the ADSs the benefits of Section 115AC of the Income Tax Act, 1961 for purpose of the application of Indian tax laws. In March 2001, the RBI issued a notification permitting, subject to certain conditions, two-way fungibility of ADSs. This notification provides that ADSs converted into Indian shares can be converted back into ADSs, subject to compliance with certain requirements and the limits of sectoral caps.

The Ministry of Finance, Government of India, has enacted The Depository Receipts Scheme, 2014 (the “Depository Receipts Scheme”) effective as of December 15, 2014. In order to facilitate the issuance of depository receipts by Indian companies outside India, the Depository Receipts Scheme repeals the former provisions dealing with depository receipts in the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993. The Depository Receipts Scheme now governs the issue or transfer of permissible securities to a foreign depository by eligible persons and defines the rights and duties of a foreign depository and obligations of a domestic custodian.

A registered broker in India can purchase shares of an Indian company that issued ADSs, on behalf of a person residing outside India, for the purposes of converting the shares into ADSs.

The Depository Receipts Scheme states that the aggregate of permissible securities which may be issued or transferred to foreign depositories for issue of depository receipts, along with permissible securities already held by persons resident outside lndia, shall not exceed the limit on foreign holding of such permissible securities under the Foreign Exchange Management Act, 1999. However, ~~such conversion of equity shares into ADSs is possible only if~~ the ~~following conditions are satisfied:~~Depository Receipts Scheme has not yet been fully implemented.

A person resident outside India may transfer ADSs held in Indian companies to another person resident outside India without any permission. A person resident in India is not permitted to hold ADSs of an Indian company, except in connection with the exercise of stock options.

Shareholders resident outside India who intend to sell or otherwise transfer equity shares within India should seek the advice of Indian counsel to understand the requirements applicable at that time.

The RBI placed various restrictions on the eligibility of OCBs to make investments in Indian companies in AP (DIR) Series Circular No. 14 dated September 16, 2003. For further information on these restrictions, the circular is available on www.rbi.org.in for review.

General.The following summary is based on the law and practice of the Income-tax Act, 1961 (the “Income-tax Act”), including the special tax regime contained in Sections 115AC and 115ACA of the Income-tax Act read with the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993 (collectively, the “Income-tax Act Scheme”), as amended on January 19, 2000. The Income-tax Act is amended every year by the Finance Act of the relevant year. Some or all of the tax consequences of Sections 115AC and 115ACA may be amended or changed by future amendments to the Income-tax Act.

We believe this information is materially complete as of the date hereof. However, this summary is not intended to constitute an authoritative analysis of the individual tax consequences to non-resident holders or employees under Indian law for the acquisition, ownership and sale of ADSs and equity shares.

EACH PROSPECTIVE INVESTOR SHOULD CONSULT TAX ADVISORS WITH RESPECT TO TAXATION IN INDIA OR THEIR RESPECTIVE LOCATIONS ON ACQUISITION, OWNERSHIP OR DISPOSING OF EQUITY SHARES OR ADSS.

Residence.For purposes of the Income-tax Act, an individual is considered to be a resident of India during any fiscal year (i.e., April 1 to March 31) if he or she is in India in that year for:

a period or periods of at least 182 days; or

at least 60 days and, within the four preceding fiscal years has been in India for a period or periods amounting to at least 365 days.

The period of 60 days referred to above shall be 182 days in case of a citizen of India or a Person of Indian Origin living outside India for the purpose of employment outside India who is visiting India.

A company is a resident of India under the Income-tax Act if it is formed or registered in India or the control and the management of its affairs is situated wholly in India. Individuals and companies that are not residents of India would be treated as non-residents for purposes of the Income-tax Act.

a)As per Section 10(34) of the Income-tax Act, dividends paid by Indian Companies on or after April 1, 2003 to their shareholders (whether resident in India or not) are not subject to tax in the hands of the shareholders. However, the Indian company paying the dividend is subject to a dividend distribution tax at the rate of 16.22%including applicable surcharges and the special levy called the “Education and Higher Education Cess (education cess)”, on the total amount it distributes, declares or pays as a dividend.

~~b) Any distributions of additional ADSs or equity shares by way of bonus shares (i.e., stock dividends) to resident or non- resident holders will not be subject to Indian tax.~~

Taxation of Capital Gains.The following is a brief summary of capital gains taxation of non-resident holders and resident employees relating to the sale of ADSs and equity shares received upon redemption of ADSs. The relevant provisions are contained mainly in sections 10(36), 10(38), 45, 47(viia), 111A, 115AC and 115ACA, of the Income-tax Act, in conjunction with the Income- tax Scheme.You should consult your own tax advisor concerning the tax consequences of your particular situation.

A non-resident investor transferring our ADS or equity shares, outside India to a non-resident investor, will not be liable for income taxes arising from capital gains on such ADS or equity shares under the provisions of the Income-tax Act in certain circumstances. Equity shares (including equity shares issuable on the conversion of the ADSs) held by the non-resident investor for a period of more than 12 months are treated as long-term capital assets. If the equity shares are held for a period of less than 12 months from the date of conversion of the ADSs, the capital gains arising on the sale thereof is to be treated as short-term capital gains.

gains from a sale of ADSs outside India by a non-resident to another non-resident are not taxable in India;

long-term capital gains realized by a resident from the transfer of the ADSs will be subject to tax at the rate of 10%, plus the applicable surcharge and education cess; short-term capital gains on such a transfer will be taxed at graduated rates with a maximum of 30%, plus the applicable surcharge and education cess;

long-term capital gains realized by a non-resident upon the sale of equity shares obtained from the conversion of ADSs are subject to tax at a rate of 10%, excluding the applicable surcharge and education cess; and short-term capital gains on such a transfer will be taxed at the rate of tax applicable to the ~~seller.~~seller; and

long-term capital gain realized by a non-resident upon the sale of equity shares obtained from the conversion of ADSs is exempt from tax and any short term capital gain is taxed at 15%, excluding the applicable surcharge and education cess, if the sale of such equity shares is settled on a recognized stock exchange and securities transaction tax (“STT”) is paid on such sale.

~~The~~As per the Finance Act, 2013, the rate of surcharge for Indian companies having total taxable income exceeding Rs.10,000,000 but not exceeding Rs.100,000,000 is ~~currently~~ 5% and in the case of ~~domestic~~Indian companies whose total taxable income is greater than ~~Rs.10,000,000.~~Rs.100,000,000, the applicable surcharge is 10%. For foreign companies, the rate of surcharge is 2%, if the total taxable income exceeds ~~Rs.10,000,000.~~Rs.10,000,000 but does not exceed Rs.100,000,000 and it is 5% if the total taxable income of the foreign company exceeds Rs.100,000,000.

As per Section 10(38) of the Income-tax Act, long term capital gains arising from the transfer of equity shares on or after October 1, 2004 in a company completed through a recognized stock exchange in India and on which sale the STT has been paid are exempt from Indian tax.

As per Section 111A of the Income-tax Act, short term capital gains arising from the transfer of equity shares on or after October 1, 2004 in a company completed through a recognized stock exchange in India are subject to tax at a rate of 15%, plus applicable surcharge and education cess.

~~Purchase or~~As per the Finance Act, 2004, as modified by the Finance Act, 2008 and the Finance Act, 2013, in a sale and purchase of ~~equity shares of a company listed on~~securities entered into through a recognized stock exchange, ~~in India is subject~~a Securities Transaction Tax (“STT”) may be imposed upon one or both of the parties as follows:

With respect to a ~~security~~sale and purchase of equity shares (i) both the buyer and seller are required to pay a STT at the rate of 0.1% of the transaction ~~tax~~value of the securities, if the transaction is a delivery based transaction (i.e., the transaction involves actual delivery or transfer of shares); or (ii) the seller of the shares is required to pay a STT at the rate of 0.025% of the transaction value of the securities, if the transaction is a non-delivery based transaction (i.e., the transaction is settled without taking delivery of the shares).

With respect to a sale and purchase of an option with respect to securities (i) upon the sale of the option, the seller is required to pay a STT at the rate of 0.017% of the option premium; and (ii) upon exercise of the option, the buyer is required to pay a STT at the rate of 0.125% of the settlement price.

With respect to a sale and purchase of futures with respect to securities, the seller is required to pay a STT at the rate of 0.01% of the transaction ~~value for any delivery based transaction and 0.025% for any non-delivery based transaction.~~value.

The applicable provisions of the Income Tax Act, in the case of non-residents, may offset the above taxes, except the STT. The capital gains tax is computed by applying the appropriate tax rates to the difference between the sale price and the purchase price of the equity shares or ADSs. Under the Income-tax Scheme, the purchase price of equity shares in an Indian listed company received in exchange for ADSs will be the market price of the underlying shares on the date that the Depositary gives notice to the custodian of the delivery of the equity shares in exchange for the corresponding ADSs, or the “stepped up” basis purchase price. The market price will be the price of the equity shares prevailing on the Stock Exchange, Mumbai or the National Stock Exchange. There is no corresponding provision under the Income-tax Act in relation to the “stepped up” basis for the purchase price of equity shares. However, the tax department in India has not denied this benefit. In the event that the tax department denies this benefit, the original purchase price of ADSs would be considered the purchase price for computing the capital gains tax.

According to the Income-tax Scheme, a non-resident holder’s holding period for the purposes of determining the applicable Indian capital gains tax rate relating to equity shares received in exchange for ADSs commences on the date of the notice of the redemption by the Depositary to the custodian. However, the Income-tax Scheme does not address this issue in the case of resident employees, and it is therefore unclear as to when the holding period for the purposes of determining capital gains tax commences for such a resident employee.

It is unclear as to whether section 115AC of the Income Tax Act and the rest of the Income-tax Scheme are applicable to a non- resident who acquires equity shares outside India from a non-resident holder of equity shares after receipt of the equity shares upon redemption of the ADSs.

It is unclear as to whether capital gains derived from the sale of subscription rights or other rights by a non-resident holder not entitled to an exemption under a tax treaty will be subject to Indian capital gains tax. If such subscription rights or other rights are deemed by the Indian tax authorities to be situated within India, the gains realized on the sale of such subscription rights or other rights will be subject to Indian taxation. The capital gains realized on the sale of such subscription rights or other rights, which will generally be in the nature of short-term capital gains, will be subject to tax (i) at variable rates with a maximum rate of 40%, excluding the prevailing surcharge and education cess, in the case of a foreign company and (ii) at the rate of ~~30.9% including~~30% excluding the ~~applicable~~prevailing surcharge and education cess in the case of resident employees.

Withholding Tax on Capital Gains.Any gain realized by a non-resident or resident employee on the sale of equity shares is subject to Indian capital gains tax, which, in the case of a non-resident is to be withheld at the source by the buyer. However, as per the provisions of Section 196D(2) of the Income-tax Act, no withholding tax is required to be deducted from any income by way of capital gains arising to FIIs (as defined in Section 115AD of the Act) on the transfer of securities (as defined in Section 115AD of the Act).

Buy-back of Securities.Indian companies are not subject to any tax on the buy-back of their shares. However, the shareholders are taxed on any resulting gains. We are required to deduct tax at the source according to the capital gains tax liability of a non-resident shareholder. Furthermore, in the case of a buy-back of unlisted securities as per section 115QA of the Finance Act 2013, unlisted domestic companies are subject to tax on the buy-back of their securities. However, section 10(34A) of the Finance Act 2013 exempts shareholders from the gain, if any, arising from such transaction.

Stamp Duty and Transfer Tax.Upon issuance of the equity shares underlying our ADSs, we are required to pay a stamp duty of ~~0.1%~~Rs.0.3 per share ~~of the issue price of the~~certificate evidencing such underlying equity shares. A transfer of ADSs is not subject to Indian stamp duty. A sale of equity shares in physical form by a non-resident holder is also subject to Indian stamp duty at the rate of 0.25% of the market value of the equity shares on the trade date, although customarily such ~~tax~~duty is borne by the transferee. Shares must be traded in dematerialized form. The issuance or transfer of shares in dematerialized form is currently not subject to stamp duty.

Wealth Tax.The holding of the ADSs and the holding of underlying equity shares by resident and non-resident holders will be exempt from Indian wealth tax. Non-resident holders are advised to consult their own tax advisors regarding the taxation of ADS in their country of residence.

Gift Tax and Estate Duty.Currently, there are no gift taxes or estate duties. These taxes and duties could be restored in future. Non-resident holders are advised to consult their own tax advisors regarding this issue.

Service Tax.Brokerage fees or ~~commission~~commissions paid to stockbrokers in connection with the sale or purchase of shares is subject to a service tax of ~~12.4%~~12.36%. The stockbroker is responsible for collecting the service tax from the shareholder and paying it to the relevant authority. Effective June 1, 2015, the Finance Act 2015 increased the rate of service tax from 12.36% (inclusive of surcharge and cess) to a consolidated rate of 14%. Furthermore, the Finance Act 2015 has also introduced a “Swachh Bharat Cess” on all or certain taxable services (as determined by the revenue department of the Government of India) at a rate of 2% on the value of such taxable services, the notification for which is still awaited.

The following is a summary of the material U.S. federal income and estate tax consequences that may be relevant with respect to the acquisition, ownership and disposition of equity shares or ADSs and is for general information only. This summary addresses the U.S. federal income and estate tax considerations of holders that are U.S. holders. “U.S. holders” are beneficial holders of equity shares or ADSs who are (i) citizens or residents of the United States, (ii) corporations (or other entities treated as corporations for U.S. federal tax purposes) created in or organized in the United States or under the laws of the United States or any state thereof or any political subdivision thereof or therein, (iii) estates, the income of which is subject to U.S. federal income taxation regardless of its source, and (iv) trusts having a valid election to be treated as U.S. persons in effect under U.S. Treasury Regulations or for which a U.S. court exercises primary supervision and a U.S. person has the authority to control all substantial ~~decisions or has a valid election under applicable U.S. Treasury regulations to be treated as a U.S. person.~~ decisions.

This summary is limited to U.S. holders who will hold equity shares or ADSs as capital assets (generally, property held for ~~U.S. federal income tax purposes, generally for investment.~~investment). In addition, this summary is limited to U.S. holders who are not resident in India for purposes of the Convention between the Government of the United States of America and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income. If a partnership, including any entity treated as a partnership for U.S. federal income tax purposes, holds the equity shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. A partner in a partnership holding equity shares or ADSs should consult his, her or its own tax ~~advisor.~~advisor regarding the tax treatment of an investment in the equity shares or ADSs.

This summary does not address tax considerations applicable to holders that may be subject to special tax rules, such as banks, insurance companies, certain financial institutions, regulated investment companies, real estate investment trusts, broker dealers, traders in securities that elect to use the mark–to-market method of accounting, United States expatriates, persons liable for alternative minimum tax, persons holding ADSs or ~~currencies,~~equity shares through partnerships or other pass-through entities, persons that have a “functional currency” other than the U.S. dollars, tax-exempt entities, persons that will hold equity shares or ADSs as a position in a ~~“straddle”~~straddle, hedging, conversion or ~~as part of a “hedging” or “conversion”~~integrated transaction ~~for tax purposes, persons that have a “functional currency” other than the U.S. dollar~~ or holders of 10% or more, by voting power or value, of ~~the shares of~~ our ~~company.~~shares. This summary is based on the U.S. Internal Revenue Code of 1986, as amended and as in effect on the date of this Annual Report on Form 20-F and on United States Treasury Regulations in effect or, in some cases, proposed, as of the date of this Annual Report on Form 20-F, as well as judicial and administrative interpretations thereof available on or before such date, and is based in part on the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms. All of the foregoing ~~are~~is subject to change, which change could apply retroactively, or the Internal Revenue Service may interpret existing authorities differently, any of which could affect the tax consequences described below. This summary does not address the U.S. federal tax laws other than income or estate ortax, and does not address U.S. state or local or ~~non-local U.S.~~non-U.S. tax laws.

EACH PROSPECTIVE INVESTOR SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF ACQUIRING, OWNING OR DISPOSING OF EQUITY SHARES OR ADSS.

Ownership of ADSs. For U.S. federal income tax purposes, holders of ADSs will generally be treated as the holders of equity shares represented by such ADSs. Accordingly, the conversion of ADSs into equity shares will not be subject to United States federal income tax.

Dividends. Subject to the passive foreign investment company rules described below, except for ADSs or equity shares, if any, distributed pro rata to all ~~shareholders~~ of our ~~company,~~shareholders, including holders of ADSs, the gross amount of any distributions of cash or property with respect to ADSs or equity shares (before reduction for any Indian withholding taxes) will generally be included in income by a U.S. holder as foreign source dividend income at the time of receipt, which in the case of a U.S. holder of ADSs generally should be the date of receipt by the Depositary, to the extent such distributions are made from our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Such dividends will not be eligible for the dividends received deduction generally allowed to corporate U.S. ~~holders.~~holders in respect of dividends received from other United States corporations. To the extent, if any, that the amount of any distribution by us exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles) such excess will be treated first as a tax-free return of capital to the extent of the U.S. holder’s tax basis in the equity shares or ADSs, and thereafter as capital gain.

~~Subject~~With respect to certain non-corporate U.S. holders, subject to certain limitations, including certain limitations based on taxable income and filing status, qualifying dividends paid to non-corporate U.S. holders, including individuals, may be eligible for a reduced rate of taxation if we are deemed to be a “qualified foreign corporation” for United States federal income tax purposes and certain holding period requirements are ~~met.~~met (including the requirement that the non-corporate U.S. holder holds the ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date). A qualified foreign corporation includes a foreign corporation if (1) its shares (or, according to legislative history, its ADSs) are readily tradable on an established securities market in the United States or (2) it is eligible for the benefits under a comprehensive income tax treaty with the United States. In addition, a corporation is not a qualified foreign corporation if it is a passive foreign investment company (as discussed below) for either its taxable year in which the dividend is paid or the preceding taxable year. ~~The~~Our ADSs are traded on the New York Stock ~~Exchange.~~Exchange, an established securities market in the United States as identified by Internal Revenue Service guidance. Due to the absence of specific statutory provisions addressing ADSs, however, there can be no assurance that we are a qualified foreign corporation solely as a result of our listing on the New York Stock Exchange. Nonetheless, we may be eligible for benefits under the comprehensive income tax treaty between India and the United States. ~~Absent congressional action to extend these rules, the reduced~~

EACH U.S. HOLDER SHOULD CONSULT ITS OWNS TAX ADVISOR REGARDING THE TREATMENT OF DIVIDENDS AND SUCH HOLDER’S ELIGIBILITY FOR REDCUED RATE OF TAXATION UNDER THE LAW IN EFFECT FOR THE YEAR OF THE DIVIDEND.

Qualifying dividends will generally be taxed at a maximum rate of ~~taxation~~15%. However, (i) individuals with taxable income above $400,000 and (ii) married couples filing joint returns with taxable income above $450,000 will ~~not apply~~be subject to ~~dividends received in~~tax at the rate of 20% on qualifying dividends. Further, individuals with taxable ~~years beginning after December 31, 2012.~~income less than $39,600 and married couple filing joint returns with taxable income less than $73,800 will be subject to tax at the rate of 0% on qualifying dividends. Each U.S. holder should consult its own tax advisor regarding the treatment of dividends and such holder’s eligibility for a reduced rate of taxation.

Subject to certain conditions and limitations, any Indian withholding tax imposed upon distributions paid to a U.S. holder with respect to ADSs or equity shares ~~should~~may be eligible for credit against the U.S. holder’s federal income tax liability. Alternatively, a U.S. holder may claim a deduction for such amount, but only for a year in which a U.S. holder does not claim a credit with respect to any foreign income taxes. The overall limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, distributions on ADSs or equity shares generally will be foreign source income, and will be “passive category income” or “general category income” for purposes of computing the United States foreign tax credit allowable to a U.S. holder. The rules governing the foreign tax credit are complex. You are urged to consult your tax advisors regarding the availability of the foreign tax credit under your particular circumstances.

If dividends are paid in Indian rupees, the amount of the dividend distribution included in the income of a U.S. holder will be in the U.S. dollar value of the payments made in Indian rupees, determined at a spot exchange rate between Indian rupees and U.S. dollars applicable to the date such dividend is included in the income of the U.S. holder, regardless of whether the payment is in fact converted into U.S. dollars. Generally, gain or loss, if any, resulting from currency exchange fluctuations during the period from the date the dividend is paid to the date such payment is converted into U.S. dollars will be treated as U.S. source ordinary income or loss.

Sale or exchange of equity shares or ADSs. Subject to the passive foreign investment company rules described below, a U.S. holder generally will recognize gain or loss on the sale or exchange of equity shares or ADSs equal to the difference between the amount realized on such sale or exchange and the U.S. holder’s adjusted tax basis in the equity shares or ADSs, as the case may be. Such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if the equity shares or ADSs, as the case may be, were held for more than one year. Gain or loss, if any, recognized by a U.S. holder generally will be treated as U.S. source passive category income or loss for U.S. foreign tax credit purposes. In the case of capital losses, a U.S. holder is eligible to claim a capital loss deduction subject to significant limitations. If a U.S. holder is unable to claim these losses on its, his or her U.S. Federal Tax Return, the U.S. holder may be eligible to carryover the amount of the unused capital loss to future years, subject to additional limitations provided under U.S. tax regulations. Capital gains realized by a U.S. holder upon the sale of equity shares (but not ADSs) may be subject to certain tax in India. See “Taxation-Indian Taxation-Taxation of Capital Gains.” Due to limitations on foreign tax credits, however, a U.S. holder may not be able to utilize any such taxes as a credit against the U.S. holder’s federal income tax liability.

Estate taxes. An individual ~~shareholder~~U.S. holder who is a citizen or resident of the United States for U.S. federal estate tax purposes ~~will~~may have the value of the equity shares or ADSs held by such holder included in his or her gross estate for U.S. federal estate tax purposes. An individual holder who actually pays Indian estate tax with respect to the equity shares will, however, be entitled to credit the amount of such tax against his or her U.S. federal estate tax liability, subject to a number of conditions and limitations.

Additional Tax on Investment Income. U.S. holders that are individuals, estates or trusts and whose income exceeds certain thresholds will be subject to a 3.8% Medicare contribution tax on unearned income, including, among other things, dividends on, and capital gains from the sale or other taxable disposition of, equity shares or ADSs, subject to certain limitations and exceptions.

Backup withholding tax and information reporting requirements. Any dividends paid on, or proceeds onfrom a sale of, equity shares or ADSs to or by a U.S. holder may be subject to U.S. information reporting, and a backup withholding tax (currently at a rate of 28%) may apply unless the holder establishes that he, she or it is an exempt recipient or provides a U.S. taxpayer identification number and certifies under penalty of perjury that such number is correct and that such holder is not subject to backup withholding and otherwise complies with any applicable backup withholding requirements. Any amount withheld under the backup withholding rules will be allowed as a refund or credit against the holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the Internal Revenue Service.

~~Recent U.S. legislation has expanded the situations in which~~Certain U.S. holders are required to report ~~certain non-U.S. investments.~~information with respect to their investment in equity shares or ADSs not held through a custodial account with a U.S. ~~holders~~financial institution on Internal Revenue Service Form 8938, which must be attached to the U.S. holder’s annual income tax return. Investors who fail to report required information could become subject to substantial penalties. Each U.S. holder should consult ~~their own advisors regarding any reporting requirements that may arise as a result of their acquiring, owning or disposing of shares or ADSs.~~its tax advisor concerning its obligation to file new Internal Revenue Service Form 8938.

Passive foreign investment company. A non-U.S. corporation will be classified as a passive foreign investment company for U.S. Federal income tax purposes if either:

75% or more of its gross income for the taxable year is passive income; or

~~on average for~~at least 50% of the ~~taxable year by~~total value ~~or, if it is not a publicly traded corporation and so elects, by adjusted basis, if 50% or more~~ of its assets (based on an average of the quarterly values of the assets during such year) is attributable to assets, including cash, which produce passive income or are held for the production of passive income.

We do not believe that we ~~will be treated as a~~satisfy either of the tests for passive foreign investment company status for the current ~~taxable year. Since~~fiscal year ended March 31, 2015. Because this determination is made on an annual basis ~~however,~~and depends on a variety of factors (including the value of the ADS), no assurance can be given that we will not be considered a passive foreign investment company in future taxable years. If we were to be a passive foreign investment company for any taxable year, U.S. ~~holders would be required to either:~~holders:

~~pay an interest charge together with tax calculated at ordinary income rates (which~~ may be ~~higher than the ordinary income rates that otherwise apply~~subject to ~~U.S. holders)~~special tax rules on “excess distributions,” as the term is defined in relevant provisions of the U.S. tax laws, and on any gain on a sale or other disposition of ADSs or equity shares;

ifmay avoid the “excess distribution” rules by making a “qualified electing fund election” (as the term is defined in relevant provisions of the U.S. tax laws) ~~is made to include~~and including in their taxable income their pro rata share of undistributed amounts of our income; or

may avoid the “excess distribution” rules if the equity shares are ~~“marketable stock” and~~“marketable” by making a mark-to-market election, ~~is made, to~~in which case the U.S. holder must mark-to-market the equity shares each taxable year and recognize ordinary gain and, to the extent of prior ordinary gain, ordinary loss for the increase or decrease in market value for such taxable ~~year.~~year; or

may be subject to additional annual return requirements and may be required to file Internal Revenue Service Form 8621.

If we are treated as a passive foreign investment company, we do not plan to provide information necessary for the U.S. holder to make a “qualified electing fund” election.

THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF EQUITY SHARES OR ADSS. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR CONCERNING THE TAX CONSEQUENCES TO YOU BASED ON YOUR PARTICULAR SITUATION.

This report and other information filed or to be filed by us can be inspected and copied at the public reference facilities maintained by the SEC at Room 1200, 450 Fifth Street, Washington, DC, U.S.A. These reports and other information may also be accessed via the SEC’s website atwww.sec.gov.

Additionally, documents referred to in this Form 20-F may be inspected at our corporate office, which is located at 8-2-337, Road No. 3, Banjara Hills, Hyderabad, 500 034, ~~India.~~India

Market risk is the risk of loss of future earnings or fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables and long term debt. We are exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of our investments. Thus, our exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.

Our Board of Directors and its Audit Committee are responsible for overseeing our risk assessment and management policies. Our major market risks of foreign exchange, interest rate and counter-party risk are managed centrally by our group treasury department, which evaluates and exercises independent control over the entire process of market risk management.

We have a written treasury policy, and we do regular reconciliations of our positions with our counter-parties. In addition, internal audits of the treasury function are performed at regular intervals.

Our foreign exchange risk arises from our foreign operations, foreign currency revenues and expenses (primarily in U.S. dollars, ~~U.K. pounds~~Russian roubles, Venezuelan bolivars, British pound sterling and Euros) and foreign currency borrowings in U.S. dollars, Russian roubles and Euros. A significant portion of our revenues are in these foreign currencies, while a significant portion of our costs are in Indian rupees. As a result, if the value of the Indian rupee appreciates relative to these foreign currencies, our revenues measured in Indian rupees may decrease. The exchange rate between the Indian rupee and these foreign currencies has changed substantially in recent periods and may continue to fluctuate substantially in the future. Consequently, we use both derivative and non-derivative financial instruments, such as foreign exchange forward ~~and~~contracts, option contracts, currency swap contracts and foreign currency financial liabilities, to mitigate the risk of changes in foreign currency exchange rates in respect of our highly probable forecasted transactions ~~firm commitments~~ and recognized assets and liabilities. We do not use derivative financial instruments for trading or speculative purposes.

AsWe had the following derivative financial instruments to hedge the foreign exchange rate risk as of March 31, 2012, we had Indian rupee/U.S. dollar and Indian rupee/Euro forward and option contracts to sell in the amount of U.S.$265 million and EUR 10 million respectively. As of March 31, 2012, we also had outstanding Indian rupee/U.S. dollar foreign currency forward and option contracts, which are classified as cash flow hedges, of U.S.$599 million.2015:

~~As a result~~In respect of our forward, option and ~~option~~currency swap contracts, a 10% decrease/increase in the respective exchange rates of each of the currencies underlying such contracts would have resulted in an approximately ~~2,611~~ Rs.1,308/(631) million increase/~~decrease~~(decrease) in our hedging reserve and an approximately ~~1,310~~ Rs.1,598/(1,790) million increase/~~decrease~~(decrease) in our net profit as at March 31, ~~2012.~~2015.

For a detailed analysis of our foreign exchange rate risk, please refer to ~~Note 32~~Notes 29 and 30 in our consolidated financial statements.

Our exposure to market risk with respect to commodity prices primarily arises from the fact that we are a purchaser and seller of active pharmaceutical ingredients and the components for such active pharmaceutical ingredients. These are commodity products whose prices can fluctuate sharply over short periods of time. The prices of our raw materials generally fluctuate in line with commodity cycles, though the prices of raw materials used in our active pharmaceutical ingredients business are generally more volatile. Raw material expense forms the largest portion of our operating expenses. We evaluate and manage our commodity price risk exposure through our operating procedures and sourcing policies.

We dohave not ~~use~~entered into any material derivative ~~financial instruments or futures~~ contracts to hedge our exposure to fluctuations in commodity prices.

As of March 31, ~~2012,~~2015, we had foreign currency loans of ~~23,334~~ Rs.37,419 million carrying a floating interest ~~rate of LIBOR plus 100-150 bps and Euribor plus 135 bps.~~rate. These loans expose us to risks of changes in interest rates. Our treasury department monitors the interest rate movement and manages the interest rate risk based on its policies, which include entering into interest rate swaps as considered necessary. ~~As of March 31, 2012, we had not entered into any interest rate swaps to hedge our interest rate risk.~~

The interest rate profile of our short term borrowings from banks is as follows:

The aggregate maturities of interest-bearing long term loans and borrowings, based on contractual maturities, as of March 31, ~~2012~~2015 are as follows:

Counter-party risk encompasses settlement risk on derivative contracts and credit risk on cash and term deposits (i.e., certificates of deposit). Exposure to these risks is closely monitored and kept within predetermined parameters. Our group treasury department does not expect any losses from non-performance by these counter-parties.

As at March 31, 2012, we had outstanding 1,015,516,392 bonus debentures carrying a face value of 5 each. These debentures mature in March 2014, at which time we must redeem them for cash in an amount equal to the face value of 5 each plus unpaid interest, if any. These debentures are listed and traded in India only on the Bombay Stock Exchange Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”). For additional details, please see Item 8.a. above under the heading “~~Dividend Policy — Bonus Debentures~~”.Not applicable.

J.P. Morgan Chase Bank, N.A., as the depositary for our ADSs (the “Depositary”), collects fees for the issuance and cancellation of ADSs from the holders of our ADSs, or intermediaries acting on their behalf, against the deposit or withdrawal of ordinary shares in the custodian account. The ~~depositary~~Depositary also collects the following fees from holders of ADRs or intermediaries acting in their behalf:


~~Category~~ ~~(as defined by SEC)~~	~~Depositary actions~~	~~Associated Fee~~
(d) Withdrawing an underlying security	Acceptance of ADSs surrendered for withdrawal of deposited shares.	U.S.$5.00 for each 100 ADSs (or portion thereof) evidenced by the shares withdrawn.

(e) Transferring, splitting or grouping receipts	Transfers, combining or grouping of depositary receipts.	U.S.$1.50 per ADS.

(f) General depositary services, particularly those charged on an annual basis.	Other services performed by the depositary in administering the ADSs.	U.S.$0.02 per ADS (or portion thereof) not more than once each calendar year.

(g) Other	Expenses incurred on behalf of holders in connection with:	~~The amount of such expenses incurred by the Depositary.~~

	• compliance with foreign exchange control regulations or any law or regulation relating to foreign investment;

	• the depositary’s or its custodian’s compliance with applicable law, rule or regulation;

	• stock transfer or other taxes and other governmental charges;

	• cable, telex, facsimile transmission/delivery;

	• expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars (which are paid out of such foreign currency); or

	• any other charge payable by depositary or its agents.	The amount of such expenses incurred by the Depositary.

As provided in the Deposit Agreement, the Depositary may charge fees for making cash and other distributions to holders by deduction from distributable amounts or by selling a portion of the distributable property. The Depositary may generally refuse to provide services until its fees for those services are paid.

The Depositary has agreed to reimburse certain reasonable expenses related to our ADS program and incurred by us in connection with the program. In the year ended March 31, ~~2012,~~2015, the Depositary reimbursed us an amount of U.S.$~~304,348.06~~384,380.92 towards such ~~expenses.~~expenses (inclusive of withholding tax of an amount of U.S.$115,314.28). The amounts the Depositary reimburses are not related to the fees collected by the Depositary from ADS holders. Under certain circumstances, including termination of our ADS program prior to May 11, 2015, we are required to repay to the Depositary amounts reimbursed in prior periods. The table below sets forth the types of expenses that the Depositary has agreed to reimburse us for and the amounts reimbursed during the fiscal year ended March 31, ~~2012.~~

As part of its service to us, the Depositary has agreed to waive fees for the standard costs associated with the administration of our ADS program, associated operating expenses and investor relations advice which are estimated to total U.S.$300,000. The Depositary has also paid the following expenses on our behalf: U.S.$~~99,699.12.~~93,985.25. Under certain circumstances, including termination of our ADS program prior to May 11, 2015, we are required to repay to the Depositary amounts waived and/or expenses paid in prior periods. The table below sets forth the fees that the Depositary has agreed to waive and/or expenses that the Depositary has paid during the year ended March 31, ~~2012.~~2015.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

In November 2006, we completed a public offering of our American Depositary Shares (“ADS”) to investors. The offering consisted of 14,300,000 ADSs representing 14,300,000 equity shares having a par value of 5 each, at an offer price of U.S.$16.00 per ADS. The proceeds of the offering (including sales pursuant to the underwriters’ over-allotment option, but prior to the underwriting discount and commissions and expenses of the offering) were U.S.$228.8 million. We paid underwriting discounts and commission of approximately U.S.$4.0 million. Accordingly, the net proceeds from the offering after underwriting discounts and commissions was approximately U.S.$224.8 million. None of the net proceeds from the public offering were paid, directly or indirectly, to any of our directors, officers or general partners or any of their associates, or to any persons owning ten percent or more of any class of our equity securities, or any affiliates.Not applicable.

Out of the total net proceeds of U.S.$224.8 million that was raised, U.S.$23.9 million was utilized in the year ended March 31, 2007. Out of the balance proceeds of U.S.$200.9 million ( 8,733 million), 2,725 million was utilized during the year ended March 31, 2008 to meet our working capital and capital expenditure requirements.

~~The remaining proceeds of 6,008 million were utilized for working capital requirements and funding the business acquisitions made by us during the year ended March 31, 2009.~~

As of the end of the period covered by this Annual Report on Form 20-F, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act).

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective, as of March 31, ~~2012,~~2015, to provide reasonable assurance that the information required to be disclosed in filings and submissions under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions about required disclosure.

~~(b) Management’s Annual Report on Internal Control Over Financial Reporting~~

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. As defined by the SEC, internal control over financial reporting is a process designed under the supervision of our principal executive and principal financial officers, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board.

Our internal control over financial reporting is supported by written policies and procedures, that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of March 31, ~~2012~~2015 based on criteria established in Internal ~~Control—~~Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”).

Based on this assessment, our management has concluded that our internal control over financial reporting was effective as of March 31, ~~2012.~~2015.

The effectiveness of our internal control over financial reporting as of March 31, ~~2012~~2015 has been audited by KPMG, the independent registered public accounting firm that audited our financial statements, as stated in their report, a copy of which is included in this annual report on Form 20-F.

We have audited Dr. Reddy’s Laboratories Limited’s (“the Company”) internal control over financial reporting as of March 31, ~~2012,~~2015, based on criteria established inInternal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). ~~Dr. Reddy’s Laboratories Limited’s~~The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying ~~management’s~~Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS). A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, ~~Dr.Reddy’s Laboratories Limited~~the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, ~~2012,~~2015, based on criteria established inInternal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway ~~Commission.~~Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial position of Dr. Reddy’s Laboratories Limited and subsidiaries as of March 31, ~~2012~~2015 and ~~2011,~~2014, and the related consolidated income ~~statements,~~statement, statements of comprehensive income, changes in equity and cash flows for each of the years in the ~~three year~~three-year period ended March 31, ~~2012,~~2015 and our report dated ~~July~~June 17, ~~2012~~2015 expressed an unqualified opinion on those consolidated financial statements.

There were no changes to our internal control over financial reporting that occurred during the period covered by this Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Audit Committee of our Board of Directors is entirely composed of independent directors and brings in expertise in the fields of finance, economics, human resource development, strategy and management. Please see “Item 6. Directors, Senior Management and Employees” for the experience and qualifications of the members of the Audit Committee of our Board of Directors. Our Board of Directors has determined that Mr. Sridar Iyengar is an audit committee financial expert, as defined in Item 401(h) of Regulation S-K, and is independent pursuant to applicable NYSE rules.

We have adopted a ~~code~~Code of ~~business ethics applicable~~Business Conduct and Ethics (the “CoBE”), which applies to ~~our~~all of the Directors, executive officers ~~directors~~ and employees of our company and its subsidiaries and affiliates. It is the responsibility of all ~~other employees. This code has been revised, updated~~Directors and ~~adopted effective as of May 7, 2008.~~employees to familiarize themselves with the CoBE and comply with its standards. The ~~code~~CoBE is ~~also~~ available on our corporate website athttp://www.drreddys.com/investors/~~pdf/cobe-booklet-2011.pdf~~. Information contained in our website, www.drreddys.com, is not part of this Annual Report and no portion of such information is incorporated herein. Any waivers of this code for executive officers or directors will be disclosed through furnishing a Form 6-K to the SEC. In addition, the Audit Committee of our Board of Directors has approved a whistleblower policy,cobe.html. We have formulated an Ombudsperson Policy which functions in coordination with ~~our code of business ethics~~the CoBE and provides ~~an anonymous means~~guidance for employees and others to ~~communicate~~raise their concerns with ~~various~~stated designated ~~personnel, including the Audit Committee of our Board of Directors.~~personnel. The Ombudsperson Policy includes certain anti-retaliation safeguards designed to protect persons who use its mechanisms to raise concerns in good faith.

The following table sets forth for the years ended March 31, ~~2012, 2011~~2015 and ~~2010,~~2014, the fees paid to our principal accountant and its associated entities for various services they provided us in these periods.

In accordance with the requirement of the charter of the Audit Committee of our Board of Directors, we obtain the prior approval of the Audit Committee on every occasion we engage our principal accountants or their associated entities to provide us any non-audit services. We disclose to the Audit Committee of our Board of Directors the nature of services that are provided and the fees to be paid for the services. The fees listed in the above table as “Tax fees” and “All other fees” were approved by the Audit Committee of our Board of Directors.

We have not sought any exemption from the listing standards for audit committees applicable to us as a foreign private issuer.

ITEM 16.E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

During the year ended March 31, ~~2012,~~2015, there was no purchase made by or on behalf of us or any affiliated purchaser of shares of any class of our securities that are registered by us pursuant to Section 12 of the Exchange Act.

Companies listed on the New York Stock Exchange (“NYSE”) must comply with certain standards regarding corporate governance as codified in Section 303A of the NYSE’s Listed Company Manual. Listed companies that are foreign private issuers (as such term is defined in Rule 3b-4 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are permitted to follow home country practice in lieu of the provisions of Section 303A, except that such companies are required to comply with the requirements of Sections 303A.06, 303A.11 and 303A.12(b) and (c), which are as follows:

The following table compares our principal corporate governance practices to those required of U.S. NYSE listed companies.


Standard for U.S. NYSE Listed Companies		Our practice

The audit committee must have a minimum of three members all being independent directors. The audit committee must have a written charter that is made available on the listed company’s website and that addresses the committee’s purpose and responsibilities, subject to the minimum purpose and responsibilities established by the NYSE, and an annual evaluation of the committee.		We have an Audit Committee composed of four members, all being independent directors. The committee has a written charter that meets these requirements. We also have an internal audit function. We ~~do not~~ have ~~a practice of evaluating~~evaluated the performance of our Audit Committee.

Each listed company must have an internal audit function.		We have an internal audit function.


~~Standard for U.S. NYSE Listed Companies~~		~~Our practice~~
Shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereto, with limited exceptions.		We comply with this standard. Our Employee Stock Option Plans were approved by our shareholders.

Listed companies must adopt and disclose corporate governance guidelines.		We have not adopted corporate governance guidelines.

All listed companies, U.S. and foreign, must adopt and disclose a code of business conduct and ethics for directors, officers and employees that is made available on the listed company’s website and, and promptly disclose any waivers of the code for directors or executive officers.		We comply with this standard. More details on our Code of Business Conduct and Ethics are given under Item 16.B.

Listed companies must solicit proxies for all meetings of shareholders.		We do not solicit proxies because we are prohibited from doing so under Section 105 of the Indian Companies Act, 2013. However, we give each of our shareholders written notices of all of our shareholder meetings.

Listed foreign private issuers must disclose any significant ways in which their corporate governance practices differ from those followed by domestic companies under NYSE listing standards.		This requirement is being addressed by way of this table.

Each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards, qualifying the certification to the extent necessary.		We do not have such a practice.

Each listed company CEO must promptly notify the NYSE in writing after any executive officer of the listed company becomes aware of any non-compliance with any applicable provisions of this Section 303A.		There have been no such instances.

Each listed company must submit an executed Written Affirmation annually to the NYSE. In addition, each listed company must submit an interim Written Affirmation each time that any of the following occurs:		We filed our most recent annual written affirmation, in the form specified by NYSE, on July ~~22, 2011. We also filed an interim written affirmation on September 16, 2011, upon the addition of one member to our Audit Committee.~~2, 2014.

• an audit committee member who was deemed independent is no longer independent;

• a member has been added to the audit committee;

• the listed company or a member of its audit committee is eligible to rely on and is choosing to rely on a Securities Exchange Act Rule 10A-3 (“Rule 10A-3”) exemption;


Standard for U.S. NYSE Listed Companies		Our practice

• the listed company or a member of its audit committee is no longer eligible to rely on or is choosing to no longer rely on a previously applicable Rule 10A-3 exemption;

• a member has been removed from the listed company’s audit committee resulting in the company no longer having a Rule 10A-3 compliant audit committee; or

• the listed company determined that it no longer qualifies as a foreign private issuer and will be considered a domestic company under Section 303A.

The annual and interim Written Affirmations must be in the form specified by the NYSE.

The following financial statement and auditor’s report for the year ended March 31, ~~2012~~2015 are incorporated herein by reference and are included in this Item 18 of this report on Form 20-F:

~~(4)~~

~~Previously filed with the Company’s Form 20-F/A for the fiscal year ended March 31, 2006 pursuant to a request for confidential treatment.~~

~~(5)~~

~~Previously filed with the Company’s Form 20-F for the fiscal year ended March 31, 2006.~~

~~(6)~~

~~Previously filed with the Company’s Form 20-F for the fiscal year ended March 31, 2010.~~

~~(7)~~

~~Previously filed on March 5, 2007 with the SEC along with Form S-8.~~

~~(8)~~

~~Previously filed with the Company’s Form 20-F for the fiscal year ended March 31, 2011.~~

~~The registrant hereby certifies that it meets all of the requirements for filing on Form 20–F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.~~

We have audited the accompanying consolidated statement of financial position of Dr. Reddy’s Laboratories Limited and subsidiaries (“the Company”) as of March 31, ~~2012~~2015 and ~~2011~~2014, and the related consolidated income ~~statements,~~statement, statements of comprehensive income, changes in equity, and cash flows for each of the years in thethree-year period ended March 31, ~~2012.~~2015. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit ~~also~~ includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial ~~statements,~~statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ~~Dr.Reddy’s Laboratories Limited and subsidiaries~~the Company as of March 31, ~~2012~~2015, and ~~2011,~~2014, and the results of ~~its~~their operations and ~~its~~their cash flows for each of the years in thethree-year period ended March 31, ~~2012,~~2015, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Dr. Reddy’s Laboratories ~~Limited~~Limited’s internal control over financial reporting as of March 31, ~~2012,~~2015, based on criteria established inInternal Control ~~–Integrated~~– Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated ~~July~~June 17, ~~2012~~2015 expressed an unqualified opinion on the effectiveness of Dr. Reddy’s Laboratories Limited’s internal control over financial reporting.

The accompanying notes form an integral part of these consolidated financial statements.

(in millions, except share and per share ~~data)~~data and where otherwise stated)

The accompanying notes form an integral part of these consolidated financial statements.

(in millions, except share and per share ~~data)~~data and where otherwise stated)

The accompanying notes form an integral part of these consolidated financial statements.

(in millions, except share and per share ~~data)~~data and where otherwise stated)

~~The accompanying notes form an integral part of these consolidated financial statements.~~

The accompanying notes form an integral part of these consolidated financial statements.

~~Supplemental schedule of non-cash investing~~data and ~~financing activities:~~where otherwise stated)

The accompanying notes form an integral part of these consolidated financial statements.

Dr. Reddy’s Laboratories Limited (“DRL” or the “parent company”), together with its subsidiaries (collectively, the “Company”), is a leading India-based pharmaceutical company headquartered ~~and having its registered office~~ in Hyderabad, ~~Andhra Pradesh,~~Telangana, India. ~~The Company’s principal areas~~Through its three businesses - Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products – the Company offers a portfolio of ~~operation are in pharmaceutical~~products and services, including Active Pharmaceutical Ingredients (“APIs”), Custom Pharmaceutical Services (“CPS”), generics, biosimilars, differentiated formulations and ~~active ingredients, global generics, and proprietary products.~~New Chemical Entities (“NCEs”). The Company’s principal research and development facilities are located in ~~Andhra Pradesh,~~Telangana, India, ~~and~~ Cambridge, United ~~Kingdom;~~Kingdom and Leiden, the Netherlands; its principal manufacturing facilities are located in Telangana, India, Andhra Pradesh, India, Himachal Pradesh, India, Cuernavaca-Cuautla, Mexico, Mirfield, United Kingdom, Louisiana, United States, and Tennessee, United States; and its principal ~~marketing facilities~~markets are ~~located~~ in India, Russia, the United States, the United Kingdom, Venezuela and Germany. The Company’s shares trade on the Bombay Stock Exchange and the National Stock Exchange in India and ~~since April 11, 2001,~~ also on the New York Stock Exchange in the United States. As explained in Note 34 of these consolidated financial statements, during the year ended March 31, 2011, the Company issued bonus debentures. These bonus debentures have been listed on the Bombay Stock Exchange and the National Stock Exchange in India since April 7, 2011.

These consolidated financial statements as at and for the year ended March 31, ~~2012~~2015 have been prepared in accordance with the International Financial Reporting Standards and its interpretations (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

These consolidated financial statements have been prepared for the Company as a going concern on the basis of relevant IFRS that are effective or elected for early adoption at the Company’s annual reporting date, March 31, ~~2012.~~2015. These consolidated financial statements were authorized for issuance by the Company’s Board of Directors on ~~July~~June 17, ~~2012.~~2015.

These consolidated financial statements have been prepared on the historical cost convention and on an accrual basis, except for the ~~following:~~following material items in the statement of financial position:

derivative financial instruments ~~that~~ are measured at fair value;

available-for-sale financial assets are measured at fair value;

employee defined benefit ~~assets~~assets/(liability) are recognized as the net total of the fair value of plan assets, plus ~~unrecognized past service cost and unrecognized~~ actuarial losses, less ~~unrecognized~~ actuarial gains and the present value of the defined benefit obligation;

long term borrowings, except obligations under finance leases, ~~that~~ are measured at amortized cost using the effective interest rate method; and

investments in jointly controlled entities which are accounted for using the equity method.

~~The~~These consolidated financial statements are presented in Indian rupees, which is the functional currency of the parent company. All financial information presented in Indian rupees has been rounded to the nearest million.

In respect of all non-Indian subsidiaries that operate as marketing arms of the parent company in their respective countries/regions, the functional currency has been determined to be the functional currency of the parent company (i.e., the Indian rupee). The operations of these entities are largely restricted to ~~import~~importing of finished goods from the parent company in India, ~~sale~~sales of these products in the foreign country and ~~remittance~~making of ~~the sale proceeds~~import payments to the parent company. The cash flows realized from ~~sale~~sales of goods are ~~readily~~ available for ~~remittance~~making import payments to the parent company and cash is ~~remitted~~paid to the parent company on a regular basis. The costs incurred by these entities are primarily the cost of goods imported from the parent company. The financing of these subsidiaries is done directly or indirectly by the parent company.

In respect of subsidiaries whose operations are self-contained and integrated within their respective countries/regions, the functional currency has been determined to be the local currency of those countries/regions.

~~The accompanying~~These consolidated financial statements have been prepared in Indian rupees. Solely for the convenience of the reader, ~~the~~these consolidated financial statements as of and for the year ended March 31, ~~2012~~2015 have been translated into ~~United States~~U.S. dollars at the certified foreign exchange rate of U.S.$11.00 = ~~50.89,~~ Rs.62.31, as published by the Federal Reserve Board of Governors on March ~~30, 2012.~~31, 2015. No representation is made that the Indian rupee amounts have been, could have been or could be converted into U.S. dollars at such a rate or any other rate. Such convenience translation is ~~unaudited.~~not subject to audit by the Company’s independent auditors.

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements is included in the following notes:

Note 3(b) — Assessment of functional ~~currency for foreign operations~~currency;

Note 3(c) and 3129 — Financial ~~instruments~~instruments;

~~Note~~Notes 3(e) –and (f) — Useful lives of property, plant and equipment and intangible ~~assets~~assets;

Note 3(h) — Valuation of inventories;

Notes ~~3(f)~~3(i), 7 and ~~8 —~~8— Measurement of recoverable amounts of cash-generating ~~units~~units;

Note 3 (j) –and 18 — Assets and obligations relating to employee ~~benefits~~benefits;

Note 3(k) — ~~Provisions~~Provisions;

Note 3(l) — Sales returns, rebates and charge back ~~provisions~~provisions;

Note ~~3(n)~~3(o) — Evaluation of recoverability of deferred tax ~~assets~~assets; and

Note 636 — ~~Business combinations~~Contingencies

During the year ended March 31, 2014, the Company adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of April 1, 2013:

IFRS 10, “Consolidated Financial Statements”;

~~Note 38 — Contingencies~~IFRS 11, “Joint Arrangements”;

IFRS 12, “Disclosure of Interests in Other Entities”;

IFRS 13, “Fair Value Measurement”;

Amendments to IAS 1, “Presentation of Items of Other Comprehensive Income”;

IAS 19, “Employee Benefits (2011)”;

Amendments to IAS 32, “Financial Instruments: Income taxes arising from distribution to equity holders”;

Amendments to IAS 34, “Interim Financial Reporting: Segment information for total assets and ~~litigations~~liabilities”; and

Amendments to IFRS 7, “Financial instruments: Disclosures”.

As a result of IFRS 10, the Company has changed its accounting policy with respect to the basis for determining control. IFRS 10 replaces the guidance on consolidation in IAS 27, “Consolidated and Separate Financial Statements”, and SIC 12, “Consolidation—Special Purpose Entities”.

IFRS 10 introduces a new control model that is applicable to all investees, by focusing on whether the Company has power over an investee, exposure or rights to variable returns from its involvement with the investee and ability to use its power to affect those returns. In particular, IFRS 10 requires the Company to consolidate investees that it controls on the basis of de facto circumstances. Subsidiaries are consolidated from the date control commences until the date control ceases.

In accordance with the transitional provisions of IFRS 10, the Company reassessed the control conclusion at April 1, 2013 and has concluded that there is no change to the scope of the entities to be consolidated as a result of the adoption of IFRS 10.

Under IFRS 11, the Company classifies its interests in joint arrangements as either joint operations or joint ventures, depending on the Company’s rights to the assets and obligations for the liabilities of the arrangements. When making this assessment, the Company considers the structure of the arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements and other facts and circumstances. Previously, under IAS 31, the structure of the arrangement was the sole focus of classification.

The Company has re-evaluated its existing joint arrangements and concluded that adoption of IFRS 11 does not have any impact on the classification of such arrangements into joint operations and joint ventures.

IFRS 12 sets out the required disclosures for entities applying IFRS 10 and 11 and IAS 28 (as amended in 2011). The new standard combines, enhances and replaces the disclosure requirements for subsidiaries, associates, joint arrangements and unconsolidated structured entities. Necessary disclosures have been made in these consolidated financial statements, wherever necessary.

IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other IFRS, and introduces more comprehensive disclosure requirements on fair value measurement. There was no material impact on these consolidated financial statements from the adoption of the measurement requirements of IFRS 13. The Company has provided necessary disclosures as required by IFRS 13 in these consolidated financial statements.

As a result of the amendments to IAS 1, the Company modified the presentation of items of other comprehensive income in its consolidated statement of comprehensive income, to present separately items that would be reclassified to profit or loss in the future from those that would never be reclassified to profit or loss. Comparative information has also been re-presented accordingly.

The adoption of the amendment to IAS 1 had no impact on the recognized assets, liabilities and comprehensive income of the Company.

The Company has adopted revised IAS 19 effective April 1, 2013. The revised standard requires immediate recognition of unrecognized gains and losses through re-measurements of the net defined benefit liability/(asset) through other comprehensive income. As required by the revised standard, the consolidated financial statements as of April 1, 2011 have been retrospectively restated to reflect these changes. Consequently, the Company has recorded a loss of Rs.187 as of April 1, 2011 representing the unrecognized actuarial loss, net of tax, as of that date. Further, amounts of Rs.30 and Rs.(143), representing the actuarial gain/(loss), net of Rs.(14) and Rs.68, representing associated tax (expense)/benefit, have been recorded in the consolidated statement of comprehensive income for the years ended March 31, 2012 and 2013, respectively. Correspondingly, other liabilities were increased by Rs.278, Rs.234 and Rs.445 as on April 1, 2011, 2012 and 2013, respectively. Previously, these amounts were not recorded under the corridor approach specified in IAS 19.

Furthermore, revised IAS 19 also requires the interest expense/(income) on plan assets to be calculated by applying the discount rate used to measure the defined benefit obligation to the net defined benefit liability or asset. The actual return of the portfolio in excess of such yields is recognized through the other comprehensive income. The Company has provided necessary disclosures, as required by revised IAS 19, in these consolidated financial statements.

Revised IAS 19 also requires the effect of any plan amendments to be recognized immediately, through net profit, in the statement of comprehensive income. In addition, the revised standard amends the definitions of “termination benefits” and “settlements”. The effect of these changes is not considered material and, accordingly, no further disclosures have been made in these consolidated financial statements.

The amendments to IAS 32, IAS 34 and IFRS 7 do not have any material impact on these consolidated financial statements of the Company.

Except for the changes explained in Note 2(f), the Company has consistently applied the following accounting policies to all periods presented in these consolidated financial statements.

Subsidiaries are all entities (including special purpose entities) that are controlled by the Company. Control exists when the Company is exposed to, or has the ability to affect those returns through power ~~to govern~~over the ~~financial and operating policies of an entity so as to obtain benefits from its activities.~~entity. In assessing control, potential voting rights ~~that~~ are ~~currently exercisable~~considered only if the rights are ~~taken into account.~~substantive. The financial statements of subsidiaries are included in ~~the~~these consolidated financial statements from the date that control commences until the date that control ceases. ~~The~~For the purpose of preparing these consolidated financial statements, the accounting policies of subsidiaries have been changed ~~when~~where necessary to align them with the policies adopted by the Company.

Associates and ~~jointly controlled entities~~joint arrangements (equity accounted investees)

Associates are those entities inover which the Company has significant influence. Significant influence ~~but not control, over~~is the power to participate in the financial and operating policy decisions of the entities but is not control or joint control of those policies. Significant influence is presumed to exist when the Company holds between 2020% and ~~50 percent~~50% of the voting power of another entity.

Joint ~~ventures~~arrangements are those ~~entities~~arrangements over ~~whose activities~~which the Company has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Investments in associates and jointly controlled entities are accounted for using the equity method (equity accounted investees) and are initially recognized at cost. The carrying value of the Company’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The ~~consolidated financial statements include~~Company does not consolidate entities where the ~~Company’s share~~non-controlling interest (“NCI”) holders have certain significant participating rights that provide for effective involvement in significant decisions in the ordinary course of business of such entities. Investments in such entities are accounted by the ~~income and expenses and~~ equity ~~changes~~method of equity accounted investees, after adjustments to align the accounting policies with those of the Company, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases.accounting. When the Company’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to zero and the recognition of further losses is discontinued except to the extent that the Company has an obligation or has made payments on behalf of the investee.

The Company does not consolidate entities where the non-controlling interest (“NCI”) holders have certain significant participating rights that provide for effective involvement in significant decisions in the ordinary course of business of such entities. Investments in such entities are accounted by the equity method of accounting.

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in full while preparing ~~the~~these consolidated financial statements. Unrealized gains or losses arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Company’s interest in the investee. ~~Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.~~

~~Acquisitions~~Acquisition of some or all of the ~~NCIs are~~non-controlling interest (“NCI”) is accounted for as a transaction with equity holders in their capacity as equity holders. Consequently, the difference arising between the fair value of the purchase consideration paid and the carrying value of the NCI is recorded as an adjustment to retained earnings that is attributable to the parent company. The associated cash flows are classified as financing activities. ~~Therefore, no~~No goodwill is recognized as a result of such transactions.

Upon loss of control, the Company derecognizes the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognized in the consolidated income statement. If the Company retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale financial asset, depending on the level of influence retained.

Transactions in foreign currencies are translated to the respective functional currencies of entities within the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are ~~retranslated to~~translated into the functional currency at the exchange rate at that date. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognized in ~~profit or loss~~the consolidated income statement in the period in which they arise. ~~Non-monetary assets and liabilities denominated in foreign currencies~~

When several exchange rates are available, the rate used is that ~~are measured~~ at ~~fair value are retranslated to~~which the ~~functional currency~~future cash flows represented by the transaction or balance could have been settled if those cash flows had occurred at the ~~exchange rate at the date that the fair value was determined.~~measurement date.

b. Foreign currency ~~differences arising upon retranslation are recognized in profit or loss.~~(continued)

In case of foreign operations whose functional currency is different from the parent company’s functional currency, the assets and liabilities of such foreign operations, including goodwill and fair value adjustments arising upon acquisition, are translated to the reporting currency at exchange rates at the reporting date. The income and expenses of such foreign operations are translated to the reporting currency at the monthly average exchange rates prevailing during the year. Resulting foreign currency differences are recognized in other comprehensive income/(loss) and presented within equity as part of ~~foreign currency translation reserve (“FCTR”) net of applicable taxes, if any.~~FCTR. When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to ~~profit or loss.~~the consolidated income statement.

Cash and cash equivalents consist of cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible ~~in to~~into known amounts of cash and which are subject to insignificant risk of changes in value. For this purpose, “short-term” means investments having maturity of three months or less from the date of investment. Bank overdrafts that are repayable on demand ~~and~~ form an integral part of the Company’s cash management and are included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash flows.

~~The Company’s~~Other investments consist of term deposits with original maturities of more than three months, investments in mutual funds and equity securities.

Investments in mutual funds and equity securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, are recognized in other comprehensive income/(loss) and presented within ~~equity.~~equity under “fair value reserve”. When an investment is derecognized, the cumulative gain or loss in equity is transferred to ~~profit or loss.~~the consolidated income statement.

An instrument is classified at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the Company manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company’s documented risk management or investment strategy. Upon initial recognition, attributable transaction costs are recognized in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.

The Company initially recognizes debt instruments issued on the date that they originate. All other financial liabilities are recognized initially on the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument. These are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method.

Other non-derivative financial instruments are initially recognized at fair value. Subsequent to initial recognition, these assets are measured at amortized cost using the effective interest method, less any impairment losses.

The Company derecognizes a financial asset when the contractual right to the cash flows from that asset expires, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing, at amortized cost, for the proceeds received.

The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired. The difference between the carrying amount of the derecognized financial liability and the consideration paid is recognized as profit or loss.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right and ability to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

The Company is exposed to exchange rate risk which arises from its foreign exchange revenues and expenses, primarily in U.S. dollars, U.K. pounds sterling, Russian roubles, Venezuelan bolivars and Euros, and foreign currency debt in U.S. dollars, Russian roubles and Euros.

The Company uses foreign exchange forward ~~exchange~~contracts, option contracts and ~~option~~swap contracts (derivative financial instruments) to mitigate its risk of changes in foreign currency exchange rates. The Company also uses non-derivative financial instruments as part of its foreign currency exposure risk mitigation strategy.

The Company classifies its ~~option and forward contracts~~derivative financial instruments that hedge foreign currency risk associated with highly probable forecasted transactions as cash flow hedges and measures them at fair value. The effective portion of such cash flow hedges is recorded in the Company’s hedging reserve as a component of equity and re-classified to the consolidated income statement as revenue in the period corresponding to the occurrence of the forecasted transactions. The ineffective portion of such cash flow hedges is recorded in the consolidated income statement as finance costs immediately.

The Company also designates certain non-derivative financial liabilities, such as foreign currency borrowings from banks, as hedging instruments for hedge of foreign currency risk associated with highly probable forecasted transactions. Accordingly, the Company applies cash flow hedge accounting to such relationships. Remeasurement gain/loss on such non-derivative financial liabilities is recorded in the Company’s hedging reserve as a component of equity and reclassified to the consolidated income statement as revenue in the period corresponding to the occurrence of the forecasted transactions.

Upon initial designation of a hedging instrument, the Company formally documents the relationship between the hedging instrument and hedged item, including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Company makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80%~~—125%~~-125% relative to the gain or loss on the hedged items. For cash flow hedges to be “highly effective”, a forecast transaction that is the subject of the hedge must be highly probable and must present an exposure to variations in cash flows that could ultimately affect profit or loss.

~~For forward contracts and option~~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, ~~changes in the fair value of such contracts~~ are recognized in the consolidated income statement. ~~Both the~~The changes in fair value of ~~the forward~~such derivative contracts, ~~and~~as well as the foreign exchange gains and losses relating to the monetary items, are recognized as part of “net finance ~~costs”.~~income/(expense)” in the consolidated income statement.

~~The Company uses forward contracts and option contracts to hedge its exposure to~~ changes in the ~~fair value~~interest rates

Consistent with its risk management policy, the Company uses interest rate swaps to mitigate the risk of ~~firm commitment contracts and measures them at fair value. Any amount representing~~ changes in ~~the fair value of such forward contracts and option contract is recorded in the income statement.~~interest rates. The ~~corresponding gain/loss representing the changes in the fair value of the hedged item attributable to hedged risk is also recognized in the income statement.~~Company does not use them for trading or speculative purposes.

~~Business~~The Company uses the acquisition method of accounting to account for business combinations ~~occurring~~that occurred on or after April 1, 2009 are accounted for by applying the acquisition method. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Company takes into consideration potential voting rights that currently are exercisable.2009. The acquisition date is the date on which control is transferred to the acquirer. Judgment is applied in determining the acquisition date and determining whether control is transferred from one party to another.

Control exists when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through power over the entity. In assessing control, potential voting rights are considered only if the rights are substantive. The Company measures goodwill as of the applicable acquisition date at the fair value of the consideration transferred, including the recognized amount of any non-controlling interest in the acquiree, less the net recognized amount ~~(generally fair value)~~ of the identifiable assets acquired and liabilities assumed. When the fair value of the net identifiable assets acquired and liabilities assumed exceeds the consideration transferred, a bargain purchase gain is recognized immediately in ~~profit or loss.~~the consolidated income statement. Consideration transferred includes the fair values of the assets transferred, liabilities incurred by the Company to the previous owners of the acquiree, and equity interests issued by the Company. Consideration transferred also includes the fair value of any contingent consideration. Consideration transferred does not include amounts related to settlement of pre-existing relationships. Any goodwill that arises on account of such business combination is tested annually for impairment.

A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a present obligation and arises from a past event, and its fair value can be measured reliably. ~~The~~On an acquisition-by-acquisition basis, the Company ~~measures~~recognizes any non-controlling interest ~~at its proportionate interest~~ in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net ~~assets of the acquiree.~~assets. Transaction costs that the Company incurs in connection with a business combination, such as finder’s fees, legal fees, due diligence fees and other professional and consulting fees, are expensed as incurred.

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~Acquisitions of non-controlling interests are accounted for as transactions with equity holders in their capacity as equity holders. The difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity.

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment ~~losses.~~losses, if any. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and other costs directly attributable to bringing the asset to a working condition for its intended use. Borrowing costs that are directly attributable to the construction or production of a qualifying asset are capitalized as part of the cost of that asset.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Gains and losses upon disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized net within “other ~~income/~~(income)/expense, net” in ~~profit or loss.~~the consolidated income statement.

The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The costs of repairs and maintenance are recognized in ~~profit or loss~~the consolidated income statement as incurred.

Depreciation is recognized in ~~profit or loss~~the consolidated income statement on a straight line basis over the estimated useful lives of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful ~~lives, unless it~~lives. The depreciation expense is ~~reasonably certain that~~included in the ~~Company will obtain ownership by the end~~costs of the ~~lease term.~~functions using the asset. Land is not depreciated.

Leasehold improvements are depreciated over period of the lease agreement or the useful life, whichever is shorter.

Depreciation methods, useful lives and residual values are reviewed at each reporting date. The estimated useful lives are as follows:

~~Depreciation methods, useful lives and residual values are reviewed at each reporting date.~~

Software for internal use, which is primarily acquired from third-party vendors and which is an integral part of a tangible asset, including consultancy charges for implementing the software, is ~~capitalized.~~capitalized as part of the related tangible asset. Subsequent costs associated with maintaining such software are ~~charged to the profit or loss~~recognized as expense as incurred. The capitalized costs are amortized over the estimated useful life of the ~~software.~~software or the remaining useful life of the tangible fixed asset, whichever is lower.

Advances paid towards the acquisition of property, plant and equipment outstanding at each ~~statements of financial position~~reporting date and the cost of property, plant and equipment not ~~put~~ready to use before such date are disclosed under capital work-in-progress. Assets not ready for use are not depreciated.

Goodwill ~~arising upon~~represents the ~~acquisition~~excess of ~~subsidiaries represents~~consideration transferred, together with the amount of non-controlling interest in the acquiree, over the fair value of the ~~consideration including the recognized amount~~Company’s share of ~~any non-controlling interest in the acquirer, less the~~identifiable net ~~recognized amount (generally fair value) of the identifiable~~ assets liabilities and contingent liabilities assumed, all measured at the applicable acquisition date. When the fair value of the net identifiable assets acquired and liabilities assumed exceeds the consideration transferred, a bargain purchase gain is recognized immediately in profit or loss.

Acquisitions of non-controlling interests are accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognized as a result of such transactions.

Other intangible assets that are acquired by the Company and that have finite useful lives are measured at cost less accumulated amortization and accumulated impairment losses.

Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate.

Expenditures on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding are recognized in ~~profit or loss~~the consolidated income statement when incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditures are capitalized only if:

development costs can be measured reliably;

the product or process is technically and commercially feasible;

future economic benefits are ~~probable and ascertainable;~~probable; and

the Company intends to and has sufficient resources to complete development and to use or sell the asset.

The expenditures to be capitalized include the cost of materials and other costs directly attributable to preparing the asset for its intended use. Other development expenditures are recognized in ~~profit or loss~~the consolidated income statement as incurred.

(in millions, except share and ~~development activities related to new chemical entities (“NCEs”)~~per share data and proprietary products, the Company seeks to optimize its expenditures and to limit its risk exposures. Most of the Company’s current research and development projects related to NCEs and proprietary products are at an early discovery phase where project costs are insignificant and cannot be directly identified to any specific project, as these costs generally represent staff and common facility costs. These early development stage exploratory projects are numerous and are characterized by uncertainty with respect to timing and cost of completion. At such time as a research and development project related to an NCE or proprietary product progresses into the more costly clinical study phases, where the costs can be tracked separately, such project is considered to be significant if:otherwise stated)

~~Historically, none of the Company’s development projects have met the significance thresholds listed above.~~f. Goodwill and other intangible assets (continued)

Payments to third parties for in-licensed products and compounds are capitalized if the regulatory approval for the products was available from the applicable counterparty or there were other contractual terms providing for a refund should the regulatory approvals not be received. These paymentsthat generally take the form of up-front payments and ~~milestones.~~milestones for in-licensed products, compounds and intellectual property are capitalized. The Company’s criteria for capitalization of such assets are consistent with the guidance given in paragraph 25 of International Accounting Standard 38 (“IAS 38”) (i.e., receipt of economic benefits out of the separately purchased transaction is considered to be probable).

~~If the Company becomes entitled to a refund~~Acquired research and development intangible assets which are under ~~the terms of~~development, are recognized as In-Process Research and Development assets (“IPR&D”). IPR&D assets are not amortized, but evaluated for potential impairment on an ~~in-license contract, the amount is recognized~~annual basis or when ~~the right to receive the refund is established. In such an event, any consequential difference as compared to~~there are indications that the carrying value ~~of the asset~~may not be recoverable. Any impairment charge on such IPR&D assets is ~~recognized~~recorded in the ~~Company’s~~consolidated income ~~statement.~~statement under “Research and Development expenses”.

~~Other intangible assets that are acquired by the Company, which have finite useful lives, are measured at cost less accumulated amortization and accumulated impairment losses.~~

~~Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate.~~

The amortization period and the amortization method for intangible assets with a finite useful life are reviewed at each reporting date.

Intangible assets are de-recognized either on their disposal or where no future economic benefits are expected from their use. Losses arising on such de-recognition are recorded in the consolidated income statement, and are measured as the difference between the net disposal proceeds, if any, and the carrying amount of respective intangible assets as on the date of de-recognition.

~~Each~~At the inception of each lease, the lease arrangement is classified as either a finance lease or an operating lease, ~~at the inception of the lease,~~ based on the substance of the lease arrangement.

A finance lease is recognized as an asset and a liability at the commencement of the lease, at the lower of the fair value of the asset and the present value of the minimum lease payments. Initial direct costs, if any, are also capitalized and, subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Other leases are operating leases, and the leased assets are not recognized on the Company’s statements of financial position. Payments made under operating leases are recognized in ~~profit or loss~~the consolidated income statement on a straight-line basis over the term of the lease.

Operating lease incentives received from the landlord are recognized as a reduction of rental expense on a straight line basis over the lease term.

Inventories consist of raw materials, stores and spares, work in progress and finished goods and are measured at the lower of cost and net realizable value. The cost of all categories of inventories is based on the weighted average method. Stores and spares consists of packing materials, engineering spares (such as machinery spare parts) and consumables (such as lubricants, cotton waste and oils), which are used in operating machines or consumed as indirect materials in the manufacturing process. Cost includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of finished goods and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.

( Stores and spares consists of packing materials, engineering spares (such as machinery spare parts) and consumables (such as lubricants, cotton waste and oils), which are used in ~~millions, except share and per share data and where otherwise stated)~~

operating machines or consumed as indirect materials in the manufacturing process.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

The factors that the Company considers in determining the allowance for slow moving, obsolete and other non-saleable inventory ~~includes~~include estimated shelf life, planned product discontinuances, price changes, ageing of inventory and introduction of competitive new products, to the extent each of these factors impact the Company’s business and markets. The Company considers all these factors and adjusts the inventory provision to reflect its actual experience on a periodic basis.

Effective as of April 1, 2011, the Company changed its policy on valuation of inventory from the first-in first-out method to the weighted average cost method. Under the prior policy, the cost of all categories of inventories, except stores and spares, had been based on the first-in first-out method. Stores and spares consists of packing materials, engineering spares (such as machinery spare parts) and consumables (such as lubricants, cotton waste and oils), which are used in operating machines or consumed as indirect materials in the manufacturing process, had been valued at cost based on a weighted average method. Effective as of April 1, 2011, the cost of all categories of inventory is based on a weighted average cost method. Using the weighted average method will produce more accurate, reasonable and relevant information on the amounts of inventory reported in the statement of financial position and, in turn, more accurate cost of revenues in the income statement. The effect of this change in the methodology of valuation of inventory is immaterial and, accordingly, no further disclosures have been made in these consolidated financial statements.

All impairment ~~losses~~losses/(reversals of impairment losses) are recognized in ~~profit or loss. Any~~the consolidated income statement.

When the fair value of available-for-sale financial assets declines below acquisition cost and there is objective evidence that the asset is impaired, the cumulative loss that has been recognized in ~~respect of an available-for-sale financial asset recognized previously in equity~~other comprehensive income is transferred to ~~profit or loss.~~the statement of income. An impairment loss ismay be reversed in subsequent periods, if the ~~reversal can be related objectively to an event occurring after~~indicators for the impairment ~~loss was recognized. For financial assets measured at amortized cost and available-for-sale financial assets that~~no longer exist. Such reversals are ~~debt securities, the reversal is~~ recognized ~~in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognized directly~~ in other comprehensive ~~income/(loss) and presented within equity.~~income.

The carrying amounts of the Company’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, an impairment test is performed each year at March 31.

The recoverable amount of an asset or cash-generating unit (as defined below) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or the cash-generating unit. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).

The goodwill acquired in a business combination is, for the purpose of impairment testing, allocated to cash-generating units that are expected to benefit from the synergies of the combination.

An impairment loss is recognized in the consolidated income statement if the ~~carrying~~estimated recoverable amount of an asset or its cash-generating unit ~~exceeds~~is lower than its ~~estimated recoverable~~carrying amount. ~~Impairment losses are recognized in profit or loss.~~ Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Goodwill that forms part of the carrying amount of an investment in an associate is not recognized separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired.

An impairment loss in respect of equity accounted investee is measured by comparing the recoverable amount of investment with its carrying amount. An impairment loss is recognized in the consolidated income statement, and reversed if there has been a favorable change in the estimates used to determine the recoverable amount.

Short-term employee benefits are expensed as the related service is provided. A ~~defined contribution plan~~liability is recognized for the amount expected to be paid if the Company has a ~~post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no~~present legal or constructive obligation to pay ~~further amounts. Obligations for contributions to recognized provident funds~~this amount as a result of past service provided by the employee and ~~approved superannuation schemes which are defined contribution plans are recognized as an employee benefit expense in profit or loss as and when~~ the ~~services are received from the employees.~~obligation can be estimated reliably.

~~A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.~~ The ~~Company’s net obligation~~liability in respect of ~~an approved gratuity plan, which is a defined benefit plan, and certain other~~ defined benefit plans and other post-employment benefits is calculated ~~separately for each plan by estimating~~using the ~~amount~~projected unit credit method consistent with the advice of ~~future benefit that employees have earned in return for their service in the current and prior periods. Any unrecognized past service costs and the fair~~qualified actuaries. The present value of ~~any plan assets are deducted from~~the defined benefit obligation is determined by discounting the estimated future ~~benefit. That benefit is discounted to determine its present value. The discount rate is the yield at the reporting date on risk free government~~cash outflows using interest rates of high-quality corporate bonds ~~that have maturity dates approximating the terms of the Company’s obligations and~~ that are denominated in the ~~same~~ currency in which the benefits ~~are expected~~will be paid, and that have terms to ~~be paid. The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit~~maturity approximating to the ~~Company,~~terms of the related defined benefit obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used. The current service cost of the defined benefit plan, recognized ~~asset~~in the income statement in employee benefit expense, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes, curtailments and settlements. Past service costs are recognizedimmediately in income. The net interest cost is ~~limited~~calculated by applying the discount rate to the net ~~total of any cumulative unrecognized net actuarial losses and past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.~~

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognized immediately in profit or loss.

The Company recognizes actuarial gains and losses using the corridor method. Under this method, to the extent that any cumulative unrecognized actuarial gain or loss exceeds 10% of the greater of the present valuebalance of the defined benefit obligation and the fair value of plan ~~assets, that portion~~assets. This cost is ~~recognized~~included in ~~profit or loss over the expected average remaining working lives of the employees participating~~employee benefit expense in the ~~plan. Otherwise,~~income statement. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the ~~actuarial gain or loss is not recognized.~~period in which they arise.

Termination benefits are recognized as an expense when the Company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense if the Company has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably.

~~Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.~~

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

~~Eligible employees of the Company are entitled to payments that are payable twelve months or more after the end of the period in which the employees render the related service.~~ The Company’s net obligation in respect of ~~such plan~~other long term employee benefits is ~~calculated by estimating~~ the amount of future benefit that employees have earned in return for their service in the current ~~period; that~~and previous periods. That benefit is discounted to determine its present value. The fair value of any plan assets is deducted. The discount rate is the yield at the reporting date on a risk free government bond that has a maturity date approximating the term of the obligation and is denominatedRe-measurements are recognized in the ~~same currency~~statement of profit and loss in the period in which they arise.

The Company’s contributions to defined contribution plans are charged to the ~~benefits~~consolidated income statement as and when the services are ~~expected to be paid. The calculation is performed annually by a qualified actuary using~~received from the ~~projected unit credit method. Actuarial losses and past service costs that arise are recognized immediately in profit or loss.~~employees.

~~Eligible~~its employees ~~are entitled~~ to accumulate and carry forward a portion of their unutilized compensated absences ~~up to prescribed limits~~and utilize them in future periods or receive cash in lieu thereof in accordance with the ~~Company’s policy and receive cash in lieu thereof.~~terms of such policies. The Company measures the expected cost of accumulating compensated absences as the additional amount that the Company ~~expects to pay~~incurs as a result of the unused entitlement that has accumulated at the statements of financial position date. Such measurement is based on actuarial valuation as at the statements of financial position date carried out by a qualified actuary.

The grant date fair value of options granted to employees is recognized as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options. The expense is recorded for each separately vesting portion of the award as if the award was, in substance, multiple awards. The increase in equity recognized in connection with a share based payment transaction is presented as a separate component in ~~equity.~~equity under “share based payment reserve”. The amount recognized as an expense is adjusted to reflect the actual number of stock options that vest.

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

A provision for restructuring is recognized when the Company has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating costs are not ~~provided for.~~provided.

A provision for onerous contracts is recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognizes any impairment loss on the assets associated with that contract.

Revenue from sales of generic products in India is recognized upon delivery of products to distributors by clearing and forwarding agents of the Company. Significant risks and rewards in respect of ownership of generic products are transferred by the Company when the goods are delivered to distributors from clearing and forwarding agents. Clearing and forwarding agents are generally compensated on a commission basis as a percentage of sales made by them. Revenue from sales of active pharmaceutical ingredients and intermediates in India is recognized on delivery of products to customers (generally formulation manufacturers), from the factories of the Company. Revenue from export sales and other sales outside of India is recognized when the significant risks and rewards of ownership of products are transferred to the customers, which occurs upon delivery of the products to the customers unless the terms of the applicable contract provide for specific revenue generating activities to be completed, in which case revenue is recognized once all such activities are completed.

(in ~~India are made through clearing~~millions, except share and ~~forwarding agents to distributors.~~per share data and where otherwise stated)

3. Significant risks and rewards in respect of ownership of generic products are transferred by the Company when the goods are delivered to distributors from clearing and forwarding agents. Clearing and forwarding agents are generally compensated on a commission basis as a percentage of sales made by them.accounting policies (continued)

Sales of active pharmaceutical ingredients and intermediates in India are made directly to the end customers (generally formulation manufacturers) from the factories of the Company. Significant risks and rewards in respect of ownership of active pharmaceutical ingredients are transferred by the Company upon delivery of the products to the customers. Sales of active pharmaceutical ingredients and intermediates outside India are made directly to the end customers (generally distributors or formulations manufacturers) from the parent company or its consolidated subsidiaries. Significant risks and rewards in respect of ownership of active pharmaceutical ingredients are transferred by the Company upon delivery of the products to the customers, unless the terms of the applicable contract provide for specific revenue generating activities to be completed, in which case revenue is recognized once all such activities are completed.

During the year ended March 31, 2012, the Company has applied the following accounting policy for the recognition of profit share revenues which have historically been immaterial to its overall financial statements.

The Company from time to time enters into marketing arrangements with certain business partners for the sale of its products in certain markets. Under such arrangements, the Company sells its products to the business partners at a non-refundable base purchase price agreed upon in the arrangement and is also entitled to a profit share which is over and above the base purchase price. The profit share is typically dependent on the business partner’s ultimate net sale proceeds or net profits, subject to any reductions or adjustments that are required by the terms of the arrangement. Such arrangements typically require the business partner to provide confirmation of units sold and net sales or net profit computations for the products covered under the arrangement.

Revenue in an amount equal to the base purchase price is recognized in these transactions upon delivery of products to the business partners. An additional amount representing the profit share component is recognized as revenue in the period which corresponds to the ultimate sales of the products made by business partners only when the collectability of the profit share becomes probable and a reliable measurement of the profit share is available. Otherwise, recognition is deferred to a subsequent period pending satisfaction of such collectability and measurability requirements. In measuring the amount of profit share revenue to be recognized for each period, the Company uses all available information and evidence, including any confirmations from the business partner of the profit share amount owed to the Company, to the extent made available before the date the Company’s Board of Directors authorizes the issuance of its financial statements for the applicable period.

Revenues include amounts derived from product out-licensing agreements. These arrangements typically consist of an initial up-front payment on inception of the license and subsequent payments dependent on achieving certain milestones in accordance with the terms prescribed in the agreement. Non-refundable up-front license fees received in connection with product out-licensing agreements are deferred and recognized over the period in which the Company has continuing ~~substantive~~ performance obligations. Milestone payments which are contingent on achieving certain clinical milestones are recognized as revenues either on achievement of such milestones, if the milestones are considered substantive, or over the period the Company has continuing ~~substantive~~ performance obligations, if the milestones are not considered substantive. If milestone payments are creditable against future royalty payments, the milestones are deferred and released over the period in which the royalties are anticipated to be paid.

Provisions for chargeback, rebates, discounts and medicaid payments are estimated and provided for in the year of sales and recorded as reduction of revenue. A chargeback claim is a claim made by the wholesaler for the difference between the price at which the product is initially invoiced to the wholesaler and the net price at which it is agreed to be procured from the Company. Provisions for such chargebacks are accrued and estimated based on historical average chargeback rate actually claimed over a period of time, current contract prices with wholesalers/other customers and estimated inventory holding by the wholesaler. ~~Such provisions are presented as a reduction of trade receivable.~~

Shelf stock adjustments are credits issued to customers to reflect decreases in the selling price of products sold by the Company ~~and~~ are accrued ~~and paid~~ when the prices of certain products decline as a result of increased competition upon the expiration of limited competition or exclusivity periods. These credits are customary in the pharmaceutical industry, and are intended to reduce the customer inventory cost to better reflect the current market prices. The determination to grant a shelf stock adjustment to a customer is based on the terms of the applicable contract, which may or may not specifically limit the age of the stock on which a credit would be offered.

Returns primarily relate to expired products, which the customer has the right to return for a period of 12 months following the expiration date. Such returned products are destroyed and credit notes are issued to the customer for the products returned. The Company accounts for sales returns accrual by recording an allowance for sales returns concurrent with the recognition of revenue at the time of a product sale. This allowance is based on the Company’s estimate of expected sales returns. The Company deals in various products and operates in various markets. Accordingly, the estimate of sales returns is determined primarily by the Company’s historical experience in the markets in which the Company operates. With respect to established products, the Company

considers its historical experience of sales returns, levels of inventory in the distribution channel, estimated shelf life, product discontinuances, price changes of competitive products, and the introduction of competitive new products, to the extent each of these factors impact the Company’s business and markets. With respect to new products introduced by the Company, such products have historically been either extensions of an existing line of product where the Company has historical experience or in therapeutic categories where established products exist and are sold either by the Company or the Company’s competitors.

Export entitlements from government authorities are recognized in ~~profit or loss~~the consolidated income statement as a reduction from ~~cost~~“Cost of ~~revenues~~Revenues” when the right to receive credit as per the terms of the scheme is established in respect of the exports made by the Company, and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.

Shipping and handling costs incurred to transport products to customers, and internal transfer costs incurred to transport the products from the Company’s factories to its various points of sale, are included in selling, general and administrative expenses.

Finance income consists of interest income on funds invested (including available-for-sale financial assets), dividend income and gains on the disposal of available-for-sale financial assets. Interest income is recognized, in the consolidated income statement, as it accrues ~~in profit or loss,~~ using the effective interest method. Dividend income is recognized in ~~profit or loss~~the consolidated income statement on the date that the Company’s right to receive payment is established. The associated cash flows are classified as investing activities in the statement of cash flows.

Borrowing costs are recognized in ~~profit or loss~~the consolidated income statement using the effective interest method. The associated cash flows are classified as financing activities in the statement of cash flows.

Foreign currency gains and losses are reported on a net ~~basis. This includes~~basis within finance income and expense. These primarily include: exchange differences arising on settlement or translation of monetary items; changes in the fair value of derivative contracts that economically hedge monetary assets and liabilities in foreign ~~exchange derivative instruments~~currencies and for which ~~are not designated in an effective hedging relationship.~~no hedge accounting is applied; and the ineffective portion of cash flow hedges.

Income tax expense consists of current and deferred tax. Income tax expense is recognized in ~~profit or loss~~the consolidated income statement except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Any deferred tax asset or liability arising from deductible or taxable temporary differences in respect of unrealizedinter-company profit or loss on inventories held by the Company in different tax jurisdictions is recognized using the tax rate of the jurisdiction in which such inventories are held.

Withholding tax arising out of payment of ~~dividend~~dividends to shareholders under the Indian Income tax regulations is not considered as tax expense for the Company and all such taxes are recognized in the statement of changes in equity as part of the associated dividend payment.

The Company presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which includes all stock options granted to employees.

The Company recognizes government grants only when there is reasonable assurance that the conditions attached to them will be complied with, and the grants will be received. Government grants received in relation to assets are presented as a reduction to the carrying amount of the related asset. Grants related to income are deducted in reporting the related expense.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief ~~operating decision maker, who~~executive officer of the Company is responsible for allocating resources and assessing performance of the operating segments ~~has been~~and accordingly is identified as the chief ~~executive officer that makes strategic decisions.~~operating decision maker.

Standards issued but not yet effective and not early adopted by the Company

In November 2009, the IASB issued IFRS 9, “Financial instruments”, to introduce certain new requirements for classifying and measuring financial assets. IFRS 9 divides all financial assets that are currently in the scope of IAS 39 into two classifications – those measured at amortized cost and those measured at fair value. The standard, along with proposed expansion of IFRS 9 for classifying and measuring financial liabilities, de-recognition of financial instruments, impairment, and hedge accounting, will be applicable for annual periods beginning on or after January 1, 2015, although entities are permitted to adopt earlier. The Company believes that the adoption of IFRS 9 will not have any material impact on its consolidated financial statements.

~~In May 2011,~~July 2014, the IASB issued the ~~following new standards~~final version of IFRS 9, “Financial instruments”. IFRS 9 significantly differs from IAS 39, “Financial Instruments: Recognition and ~~amendments on consolidated financial statements~~Measurement”, and ~~joint arrangements:~~

~~All of the standards mentioned above are~~includes a logical model for classification and measurement, a single, forward-looking ‘expected loss’ impairment model and a substantially-reformed approach to hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, ~~2013; earlier~~2018, with early application permitted. The Company is ~~permitted as long as each~~in the process of evaluating the impact of the ~~other standards in this group is also early applied. The Company believes that adoption of IFRS 10, 11 and 12 and IAS 27 (revised 2011) and IAS 28 (revised 2011) will not have any material impact~~new standard on its consolidated financial statements.

Amendments to IAS 16 Property, plant and equipment and IAS 38 Intangible assets

In May 2014, the IASB issued limited-scope amendments to IAS 16, “Property, plant and equipment” and IAS 38, “Intangible assets”, to clarify the use of a revenue-based depreciation or amortization method. With respect to ~~IFRS 13,~~property, plant and equipment, the ~~Company~~IASB has clarified that the use of revenue-based methods to calculate the depreciation of an asset is ~~evaluating~~not appropriate because revenue generated by an activity that includes the ~~impact~~use of ~~this new~~an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. With respect to intangible assets, the amended standard incorporates a rebuttable presumption that an amortization method based on the ~~Company’s consolidated financial statements.~~

~~The amended standard requires recognition~~revenue generated by an activity that includes the use of changes in the net defined benefit liability/(asset), including immediate recognition of defined benefit cost, disaggregation of defined benefit cost into components, recognition of re-measurements in other comprehensive income, plan amendments, curtailments and settlements.

an intangible asset is inappropriate. The ~~amended standard introduced enhanced disclosures about defined benefit plans.~~

~~These~~ amendments are effective for annual periods beginning on or after January 1, ~~2013, although earlier~~2016, with early application is permitted. ~~The Company is evaluating the impact of this amendment on its consolidated financial statements.~~

These amendments are effective for annual periods beginning on or after July 1, 2012, although earlier application is permitted. The Company is required to adopt IAS 1 (Amended) by the accounting year commencing April 1, 2013. The Company believes that these amendments will not have any material impact on its consolidated financial statements.

In ~~December, 2011,~~May 2014, the IASB issued ~~an amendment to~~ IFRS ~~7 “Disclosures—offsetting financial assets and financial liabilities”~~15, “Revenue from Contracts with Customers”. The ~~amended~~core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard ~~requires additional~~also will result in enhanced disclosures ~~where financial assets~~about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and ~~financial liabilities are offset in the balance sheet. These disclosures would provide users~~contract modifications) and improve guidance for multiple-element arrangements.

The new revenue recognition standard was issued with ~~information that is useful in (a) evaluating the effect or potential effect~~an effective date of netting arrangements on an entity’s financial position and (b) analyzing and comparing financial statements prepared in accordance with IFRSs and U.S. GAAP. The amendment is effective for fiscal years beginning on or after January 1, ~~2013. Earlier~~2017. However, in April 2015, the IASB voted to defer the effective date of the new revenue recognition standard to January 1, 2018. Early application of the new standard is permitted. The Company is in the process of evaluating the impact ~~these amendments~~of the new standard on its consolidated financial statements.

In December, 2011, the IASB issued an amendment to IAS 32 “Offsetting financial assets and financial liabilities”. The purpose of the amendment is to clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. This includes clarifying the meaning of “currently has a legally enforceable right to set-off” and also the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The amendment is effective retrospectively for fiscal years beginning on or after January 1, 2014. Earlier application is permitted. The Company is in the process of evaluating the impact these amendments on its consolidated financial statements.

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and stock options are recognized as a deduction from equity, net of any tax effects.

The Company’s accounting policies and disclosures require the determination of fair value, for ~~both~~certain financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

~~The fair value of property,~~Property, plant and equipment ~~recognized as a result of~~acquired in a business combination ~~and those acquired~~or through an exchange of non-monetary assets is measured at fair value on the acquisition date. For this purpose, fair value is based on appraised market values and replacement ~~cost determined by an external valuer.~~cost.

The fair value of brands, technology related intangibles, and patents and trademarks acquired in a business combination is based on the discounted estimated royalty payments that have been avoided as a result of these brands, technology related intangibles, patents or trademarks being owned ~~(“relief~~(the “relief of royalty method”). The fair value of customer ~~related, technology~~ related, product related and other intangibles acquired in a business combination has been determined using the multi-period excess earnings method after deduction of a fair return on other assets that are part of creating the related cash flows.

The fair value of inventories acquired in a business combination is determined based on its estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.

The fair value of available-for-sale marketable equity and debt securities is determined by reference to their quoted market price at the reporting date. For debt securities where quoted market prices are not available, fair value is determined using pricing techniques such as discounted cash flow analysis.

In respect of investments in mutual funds, the fair values represent net asset value as stated by the issuers of these mutual fund units in the published statements. Net asset values represent the price at which the issuer will issue further units in the mutual fund and the price at which issuers will redeem such units from the investors.

Accordingly, such net asset values are analogous to fair market value with respect to these investments, as transactions of these mutual funds are carried out at such prices between investors and the issuers of these units of mutual funds.

The fair value of foreign exchange forward ~~exchange~~ contracts is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds). The fair value of foreign currency option and swap contracts and interest rate swap contracts is determined based on the appropriate valuation techniques, considering the terms of the contract.

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases the market rate of interest is determined by reference to similar lease agreements. In respect of the Company’s borrowings that have floating rates of interest, their fair value approximates carrying value.

The fair value of employee stock options is measured using the Black-Scholes-Merton valuation model. Measurement inputs include share price on grant date, exercise price of the instrument, expected volatility (based on weighted average historical volatility), expected life of the instrument (based on historical experience), expected dividends, and the risk free interest rate (based on government bonds).

The Chief Operating Decision Maker (“CODM”) evaluates the Company’s performance and allocates resources based on an analysis of various performance indicators by ~~reportable~~operating segments. The CODM reviews revenue and gross profit as the performance indicator for all of the operating segments, and does not review the total assets and liabilities of an operating segment.

Pharmaceutical Services and Active Ingredients (“PSAI”);

~~Global Generics;~~ and

Proprietary Products.

Global Generics. This segment consists of the Company’s business of manufacturing and marketing prescription and over-the-counter finished pharmaceutical products ready for consumption by the patient, marketed under a brand name (branded formulations) or as generic finished dosages with therapeutic equivalence to branded formulations (generics). This segment includes the operations of the Company’s biologics business.

Pharmaceutical Services and Active Ingredients ~~(“PSAI”):~~. This segment includes the Company’s business of manufacturing and marketing active pharmaceutical ingredients and ~~intermediaries,~~intermediates, also known as ~~active pharmaceutical products~~“API” or bulk drugs, which are the principal ingredients for finished pharmaceutical products. Active pharmaceutical ingredients and ~~intermediaries~~intermediates become finished pharmaceutical products when the dosages are fixed in a form ready for human consumption such as a tablet, capsule or liquid using additional inactive ingredients. This segment also includes the Company’s contract research services business and the manufacture and sale of active pharmaceutical ingredients and steroids in accordance with the specific customer requirements.

~~Global Generics:~~Proprietary Products.This segment consists of ~~finished pharmaceutical products ready for consumption by~~ the ~~patient, marketed under a brand name (branded formulations) or as generic finished dosages with therapeutic equivalence to branded formulations (generics).~~

~~Proprietary Products:~~~~This segment involves the discovery of new chemical entities and differentiated formulations for subsequent commercialization and out-licensing. The~~ Company’s differentiated formulations ~~portfolio consists~~business, New Chemical Entities (“NCEs”) business, and the dermatology focused specialty business operated through Promius™ Pharma.

Others.This includes the operations of ~~new, synergistic combinations and technologies that improve safety and/or efficacy by modifying pharmacokinetics of existing medicines. This segment also involves~~ the Company’s ~~specialty pharmaceuticals business,~~wholly-owned subsidiary, Aurigene Discovery Technologies Limited, a discovery stage biotechnology company developing novel and best-in-class therapies in the fields of oncology and inflammation and which ~~conducts sales~~works with established pharmaceutical and ~~marketing operations for in-licensed and co-developed dermatology products.~~

~~The CODM reviews revenue and gross profit as the performance indicator, and does not review the total assets and liabilities for each reportable segment.~~biotechnology companies in early-stage collaborations, bringing drug candidates from hit generation through Investigational New Drug (“IND”) filing.

The measurement of each segment’s revenues, expenses and assets is consistent with the accounting policies that are used in preparation of the Company’s consolidated financial statements.

The following table shows the distribution of the Company’s revenues by geography, based on the location of the customer:

Analysis of revenue ~~by geography~~ within the Global Generics ~~Segment:~~segment:

The following table shows the distribution of revenues of the Company’s Global Generics segment by geography, based on the location of the customer:

An analysis of revenues by ~~key products~~therapeutic areas in the Company’s Global Generics segment is given below:

The following table shows the distribution of revenues of the Company’s PSAI segment by geography, based on the location of the customer:

An analysis of revenues by ~~key products~~therapeutic areas in the Company’s PSAI segment is given below:

~~The following table shows the distribution of the Company’s assets by geography, based on the location of assets:~~

Analysis of ~~property, plant and equipment and other intangible~~ assets ~~acquired~~ by geography:

The following table shows the distribution of the Company’s ~~acquisitions~~non-current assets, other than financial instruments and deferred tax assets, based on the location of assets:

The following table shows the distribution of the Company’s property, plant and equipment including capital work in progress and ~~other~~ intangible assets acquired during the year (other than goodwill arising on business combination) by geography, based on the location of ~~the property, plant and equipment and other intangible~~ assets:

~~Analysis of property, plant and equipment and other intangible assets acquired by reportable segments:~~

Analysis of depreciation and amortization, included in cost of revenues, by reportable segments:

~~The above depreciation and amortization does not include~~Information about major customers

Revenues from one of the ~~impairment loss on other intangible assets~~customers of 1,040, 0 and 3,456 for the years ended March 31, 2012, 2011 and 2010, respectively, which relates to the Global Generics segment. The above depreciation and amortization also does not include the impairment of goodwill of 0, 0 and 5,147 for the years ended March 31, 2012, 2011 and 2010, respectively, which relates to the Company’s Global Generics ~~segment.~~segment were approximately Rs.17,364 for the year ended March 31, 2015.

~~Acquisition of GSK’s manufacturing facility in Bristol, Tennessee, U.S.A and product rights~~

On November 23, 2010, the Company through its wholly owned subsidiary, Dr. Reddy’s Laboratories Tennessee LLC, entered into an asset purchase agreement with Glaxosmithkline LLC and Glaxo Group Limited (collectively, “GSK”) for the acquisition of GSK’s penicillin-based antibiotics manufacturing facility in Bristol, Tennessee, U.S.A, the U.S. FDA approved product related rights over GSK’s Augmentin^®~~(branded and generic) and Amoxil~~^®(brand) brands of oral penicillin-based antibiotics in the United States (GSK retained the existing rights for these brands outside the United States), certain raw materials and finished goods inventory associated with Augmentin^®, and rights to receive certain transitional services from GSK. The transaction was subsequently consummated on March 29, 2011. The total cash consideration for the transaction amounted to 1,169 (U.S.$26). Through this acquisition, the Company entered the U.S. penicillin-containing antibacterial market segment, thereby broadening its portfolio in North America. The Company has accounted for this transaction as an acquisition of business in accordance with IFRS No. 3, Business Combinations (Revised), as the integrated set of assets acquired constitutes a business as defined in the standard. These consolidated financial statements and the Company’s consolidated financial statements for the year ended March 31, 2011 include the financial results of this acquired business for the period from April 1, 2011 to March 31, 2012 and March 29, 2011 to March 31, 2011, respectively. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition.

~~No proforma information was disclosed in the consolidated financial statements for the year ended March 31, 2011, as the acquisition was immaterial.~~

The following is a summary of the ~~change~~changes in carrying value of property, plant and equipment.

During the years ended March 31, 2012 and 2011, the State of Louisiana approved the Company’s application for certain grants associated with construction of a manufacturing facility in the United States amounting to 54 (U.S.$1.1) and 47 (U.S.$1), respectively. As per the terms of these grants, the State of Louisiana placed certain ongoing conditions on the Company, requiring a minimum cost to be incurred and also requiring employment of a minimum number of people. In proportion to the actual cost incurred, the Company has accrued the proportionate share of each grant as a reduction from the carrying value of property, plant and equipment. As at March 31, 2012, the Company received a total amount of 101 (U.S.$2.1) in respect of grants from the State of Louisiana. As on March 31, 2012, the Company was in compliance with all the conditions attached to these grants.

As of March 31, ~~2012~~2015 and ~~2011,~~2014, the Company was committed to spend ~~approximately 2,351~~Rs.4,173 and ~~3,459,~~ Rs.2,920, respectively, under agreements to purchase property, plant and equipment. This amount is net of capital advances paid in respect of such purchase commitments.

During the years ended March 31, ~~2012~~2015 and ~~2011,~~2014, the Company capitalized interest cost of ~~107~~ Rs.31 and ~~70, respectively.~~ Rs.77, respectively, with respect to qualifying assets. The rate for capitalization of interest cost for the years ended March 31, ~~2012~~2015 and ~~2011~~2014 was approximately ~~2.5%~~2.32% and 1%2.95%, respectively.

Property, plant and equipment include ~~352~~ Rs.739 and ~~302 (including accumulated depreciation of 111 and 80)~~ Rs.973 of assets acquired (net of accumulated depreciation) under finance leases as of March 31, ~~2012~~2015 and ~~2011,~~2014, respectively.

Goodwill arising upon business acquisitions is not amortized but tested for impairment at least annually or more frequently if there is any indication that the cash generating unit to which goodwill is allocated is impaired.

The following table presents the changes in goodwill during the years ended March 31, ~~2012~~2015 and ~~2011:~~2014:

For the purpose of impairment testing, goodwill is allocated to a cash generating unit, ~~(“CGU”)~~ representing the lowest level within the Company at which goodwill is monitored for internal management purposes and which is not higher than the Company’s operating segment. ~~Accordingly,~~

The carrying amount of goodwill ~~has been~~(other than those arising upon investment in an associate) was allocated ~~for impairment testing purposes~~ to ~~the following~~ cash generating units ~~identified by the Company:~~as follows:

~~PSAI- Active Pharmaceutical operations~~

As of March 31,

2015

2014

PSAI- Active Pharmaceutical Operations

Rs.

997

Rs.

997

PSAI- OctoPlus B.V.⁽¹⁾

—

1,370

Global Generics- Complex Injectables⁽¹⁾

1,113

—

Global Generics- North America Operations

~~Global Generics- Italy Operations~~

989

779

Global Generics- Branded Formulations

~~Global Generics- European Operations~~

~~Global Generics- betapharm CGU~~

~~Global Generics- Shreveport Operations~~

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~8. Goodwill (continued)~~

~~The carrying amount of goodwill (other than those arising upon investment in associate) was allocated to cash generating units as follows:~~

   As of March 31,
   2012    2011
PSAI- Active Pharmaceutical operations
   997       997
Global Generics- North America Operations
   762       731
Global Generics- Italy Operations
   175       157
Global Generics- Branded Formulations
   168       168
Others
   106       127




   2,208       2,180

The recoverable amounts of the above cash generating units have been assessed using a value-in-use model. Value in use is calculated as the net present value of the projected post-tax cash flows plus a terminal value of the cash generating unit to which the goodwill is allocated. Initially a post-tax discount rate is applied to calculate the net present value of the post-tax cash flows. Key assumptions on which the Company has based its determinations of value-in-use include:

~~Estimated cash flows for five years based on internal management budgets and estimates.~~

Terminal value arrived by extrapolating last forecasted year cash flows to perpetuity, using a constant long-term growth rate of 0%. This long-term growth rate takes into consideration external macroeconomic sources of data. Such long-term growth rate considered does not exceed that of the relevant business and industry sector.

~~The post-tax discount rates used are based on the Company’s weighted average cost of capital.~~

Value-in-use is calculated using after tax assumptions. The use of after tax assumptions does not result in a value-in-use that is materially different from the value-in-use that would result if the calculation was performed using before tax assumptions. The after tax discount rates used range from 6.7% to 10.3% for various cash generating units. The before tax discount rates range from 6.8% to 10.6%.

The Company believes that any reasonably possible change in the key assumptions on which a recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash-generating unit.

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~9. Other intangible assets~~

~~The following is a summary of changes in carrying value of other intangible assets:~~

   Trademarks with
finite useful life    Product related
intangibles Technology
related intangibles
Gross carrying value/cost

Balance as at April 1, 2010
   8,770       17,355    616
Additions through business combinations
   —         321    —
Other additions
   —         1,777    14
Deletions
   —         (3 ) —
Effect of changes in foreign exchange rates
   301       550    116




Balance as at March 31, 2011
   9,071       20,000    746




Balance as at April 1, 2011
   9,071       20,000    746
Additions through business combinations
   —         —      —
Other additions
   —         —      30
Deletions
   —         (213 ) —
Effect of changes in foreign exchange rates
   462       1,176    87




Balance as at March 31, 2012
   9,533       20,963    863




Amortization/impairment loss

Balance as at April 1, 2010
   4,172       11,027    166
Amortization for the year
   418       573    84
Impairment loss
   —         —      —
Deletions
   —         —      —
Effect of changes in foreign exchange rates
   100       405    5




Balance as at March 31, 2011
   4,690       12,005    255




Balance as at April 1, 2011
   4,690       12,005    255
Amortization for the year
   465       943    108
Impairment loss
   —         1,040    —
Deletions
   —         (87 ) —
Effect of changes in foreign exchange rates
   160       669    33




Balance as at March 31, 2012
   5,315       14,570    396




Net carrying amount

As at April 1, 2010
   4,598       6,328    450
As at March 31, 2011
   4,381       7,995    491
As at March 31, 2012
   4,218       6,393    467

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~9. Other intangible assets (continued)~~

~~[Continued from above table, first column repeated]~~

   Customer
related
intangibles        Others         Total
Gross carrying value/cost

Balance as at April 1, 2010
   668       497    27,906
Additions through business combinations
   —         —      321
Other additions
   13       —      1,804
Deletions
   —         (50 ) (53 )
Effect of changes in foreign exchange rates
   5       (78 ) 894




Balance as at March 31, 2011
   686       369    30,872




Balance as at April 1, 2011
   686       369    30,872
Additions through business combinations
   —         —      —
Other additions
   11       86    127
Deletions
   —         —      (213 )
Effect of changes in foreign exchange rates
   63       11    1,799




Balance as at March 31, 2012
   760       466    32,585




Amortization/impairment loss

Balance as at April 1, 2010
   494       248    16,107
Amortization for the year
   66       45    1,186
Impairment loss
   —         —      —
Deletions
   —         —      —
Effect of changes in foreign exchange rates
   2       1    513




Balance as at March 31, 2011
   562       294    17,806




Balance as at April 1, 2011
   562       294    17,806
Amortization for the year
   57       13    1,586
Impairment loss
   —         —      1,040
Deletions
   —         —      (87 )
Effect of changes in foreign exchange rates
   50       7    919




Balance as at March 31, 2012
   669       314    21,264




Net carrying amount

As at April 1, 2010
   174       249    11,799




As at March 31, 2011
   124       75    13,066




As at March 31, 2012
   91       152    11,321

The selling, general and administrative expenses included 1,586, 1,186 and 1,479 of amortization of other intangible assets for the years ended March 31, 2012, 2011 and 2010, respectively. The weighted average remaining useful life of other intangibles was approximately 7.7 years as at March 31, 2012.

On March 31, 2011, the Company, through its wholly owned subsidiary Promius Pharma LLC, entered into an agreement with Coria Laboratories Limited (a subsidiary of Valeant Pharmaceuticals International, Inc.) (“Coria”) for the right to manufacture, distribute and market its Cloderm^® ~~(clocortolone pivalate 0.1%) product in the United States. Cloderm~~^® is a cream used for treating dermatological inflammation, and is an existing U.S. FDA approved product. In addition to acquiring all relevant U.S. FDA product regulatory approvals and intellectual property rights (other than trademarks) associated with the Cloderm^® ~~product, the Company also acquired an underlying raw material supply contract and an exclusive license to use the trademark “Cloderm~~^®” for a period of 8 years. The rights and ownership of this trademark would get transferred from Coria to the Company at the end of the 8th year, subject to payment of all royalties under the contract by the Company. Considerations for these transactions includes an upfront payment of 1,605 (U.S.$36) in cash and contingent consideration in the form of a royalty equal to 4% of the Company’s net sales of Cloderm^® ~~in the United States during the 8 year trademark license period.~~

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~9. Other intangible assets (continued)~~

Since the integrated set of assets acquired as part of these transactions does not meet the definition of a business, the acquisition was recorded as a purchase of an integrated set of complementary intangible assets with similar economic useful lives. Furthermore, contingent payments associated with future sales were also considered as an element of cost, as they were directly associated with the acquisition of absolute control over the product related intangibles and do not relate to any substantive future activities either by the Company or Coria. Accordingly, an amount of 171 (U.S.$4) was measured as management’s best estimate of the present value for the royalty payments over the 8 year trademark license period.

Product related intangibles acquired during the year ended March 31, 2010 includes an amount of 2,680 (U.S.$57), representing the value of re-acquired rights on the product portfolio that arose upon the exercise by I-VEN Pharma Capital Limited (“I-VEN”) of the portfolio termination value option under its research and development agreement with the Company entered into during the year ended March 31, 2005, as amended. Refer to Note 21 of these consolidated financial statements for further details.

~~Impairment losses recorded for the year ended March 31, 2010~~

Pursuant to the ongoing reforms in the German generic pharmaceutical market, further tenders were announced by several SHI funds during the year ended March 31, 2010. The Company had participated in these tenders through its wholly-owned subsidiary betapharm Arzneimittel GmbH (“betapharm”). The final results of a majority of these tenders were announced during the period ended December 31, 2009, with a lower than anticipated success rate for betapharm.

Due to these results, management had reassessed the impact of these tenders on its future forecasted sales and profits in the German generic pharmaceutical market and had determined it appropriate to significantly revise its estimates for fiscal years ended March 31, 2011 and thereafter. Accordingly, and in light of further deterioration and adverse market conditions in the German generic pharmaceuticals market as at December 31, 2009, the Company had reassessed the recoverable amounts of betapharm’s product- related intangibles, the cash generating unit which comprises these product-related intangibles, its trademark/brand “beta” and the related acquired goodwill (collectively referred to as the “betapharm CGU”). The recoverable amount of both the product-related intangibles and the betapharm CGU was based on their fair value less costs to sell, which was higher than its value in use. As a result of this re-evaluation, the carrying amounts of both the product-related intangibles and the betapharm CGU were determined to be higher than their respective recoverable amounts. Accordingly, an impairment loss of 2,112 for the product related intangibles and 6,358 for goodwill in the betapharm CGU was recognized in the profit or loss. Of the impairment loss pertaining to the betapharm CGU, 5,147 was allocated to the carrying value of goodwill, thereby impairing the entire carrying value and the remaining 1,211 was allocated to the trademark/brand —‘beta’, which forms a significant portion of the betapharm CGU. No further impairment indicators were identified up to March 31, 2010.

~~The above impairment losses relate to the Company’s Global Generics segment.~~

The Company used the discounted cash flow approach to calculate the fair value less cost to sell, with the assistance of independent appraisers. The key assumptions considered in the calculation were as follows:

Revenue projections were based on the approved revised budgets for the fiscal year ended March 31, 2011, based on management’s analysis of current orders booked and the actual performance of betapharm during recent months. These projections took into account the expected long term growth rate in the German generics industry. Accordingly, based on the industry reports and other information, the Company projected a constant 1% decline in revenue on a year-on-year basis for betapharm’s existing products.

~~The net cash flows were discounted based on a post-tax discounting tax rate ranging from 7.44% to 9.34%.~~

During the year ended March 31, 2011, the Company participated in the new tender announced by the AOK (renewal of the tender products which were part of the AOK tender announced during the year ended March 31, 2009). The Company was successful in winning 12 products in the tender. The Company concluded that, due to the inconsequential favorable impact on its net margins, no adjustment to previously recorded impairments losses were necessary.

~~Impairment losses recorded for the year ended March 31, 2012~~

During the three months ended March 31, 2012, there were certain significant changes in the German generics pharmaceutical market that are expected to adversely impact the future operations of the Company’s German subsidiary, betapharm Arzneimittel GmbH (“betapharm”). Among other things, there was a reference pricing review which resulted in a reduction of the government mandated price of certain of betapharm’s products being sold and is expected to adversely affect its sales margins. In addition, one of the key SHI funds, Barmer GEK, announced a large sales tender which is expected to cause significant impact on the price realization of some of the key products of betapharm.

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~9. Other intangible assets (continued)~~

As a result of such adverse market developments, the Company reassessed the recoverable amounts of betapharm’s product-related intangibles, and that of the cash generating unit which comprises these product-related intangibles and its trademark/brand “beta”. The recoverable amount of both the product-related intangibles and the betapharm cash generating unit was based on their fair value less costs to sell, which was higher than its value in use. As a result of this re-evaluation, the carrying amount of certain product-related intangibles was determined to be higher than its recoverable amount. Accordingly, an impairment loss of 1,022 for the product related intangibles was recorded for the year ended March 31, 2012.

~~The above impairment losses relate to the Company’s Global Generics segment.~~

~~The Company used the discounted cash flow approach to calculate the fair value less cost to sell. The key assumptions considered in the calculation are as follows:~~

Revenue projections are based on the revised budgets for the fiscal year ending March 31, 2013, based on management’s analysis of current orders booked and the actual performance of betapharm during recent months. These projections take into account the expected long term growth rate in the German generics industry.

~~The net cash flows have been discounted based on a post-tax discounting tax rate ranging from 6.33% to 8.05%.~~

~~As at March 31, 2012, the carrying amount of the betapharm cash generating unit consisted of intangibles amounting to 6,294.~~

~~De-recognition of intangible assets during the year ended March 31, 2010~~

The Company acquired BASF Corporation’s pharmaceutical contract manufacturing business and manufacturing facility in Shreveport, Louisiana, in April 2008. As part of the purchase price, 482 was allocated to “customer related intangible assets” and “product-related intangibles”. 142 of the above allocation pertains to a contract with Par Pharmaceuticals Inc. (“Par”) relating to sales of ibuprofen to Par. During the year ended March 31, 2010, there was clear evidence of a decline in sales of ibuprofen to Par. Accordingly, as at December 31, 2009 the Company had written off the remaining carrying amount of 133 pertaining to this product and customer, as it expected no economic benefits from the use or disposal of these contracts in future periods. The amount de-recognized was disclosed as part of “impairment loss on other intangible assets” in the Company’s consolidated income statement.

~~De-recognition of intangible assets during the year ended March 31, 2012~~

Based on the recent business performance and evaluation of expected cash flows from certain customer related intangibles pertaining to the Company’s New Zealand business, an impairment loss of 18 was recorded for the year ended March 31, 2012.

~~10. Investment in equity accounted investees~~

~~Reddy Kunshan (Joint venture)~~

Kunshan Rotam Reddy Pharmaceuticals Co. Limited (“Reddy Kunshan”) is engaged in manufacturing and marketing of active pharmaceutical ingredients and intermediaries and formulations in China. The Company’s interest in Reddy Kunshan was 51.3% as of March 31, 2012 and 2011. Three directors of the Company are on the board of directors of Reddy Kunshan, which consists of seven directors. Under the terms of the joint venture agreement, all major decisions with respect to operating activities, significant financing and other activities are taken by the approval of at least five of the seven directors of Reddy Kunshan’s board. As the Company does not control Reddy Kunshan’s board and the other partners have significant participating rights, the Company’s interest in Reddy Kunshan has been accounted for under the equity method of accounting.

~~Summary financial information of Reddy Kunshan, as translated into the reporting currency of the Company and not adjusted for the percentage ownership held by the Company, is as follows:~~

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~10. Investment in equity accounted investees (continued)~~

   As of/for the year ended March 31,
   2012 2011 2010
Ownership
   51.3 % 51.3 % 51.3 %
Total current assets
   830    548    428
Total non-current assets
   251    190    191


Total assets
   1,081    738    619
Equity
   554    379    373
Total current liabilities
   527    359    245
Total non-current liabilities
   —      1    1


Total liabilities
   527    360    246
Revenues
   1,237    818    791
Expenses
   1,133    812    697


Profit for the year
   104    6    94

The Company’s share of profits in Reddy Kunshan for the years ended March 31, 2012, 2011 and 2010 was 54, 3 and 48, respectively. The carrying value of the Company’s investment in Reddy Kunshan as of March 31, 2012 and 2011 was 368 and 313, respectively. The translation adjustment arising out of translation of foreign currency balances amounted to 97 and 63 as of March 31, 2012 and 2011, respectively.

~~11. Other investments~~

Other investments consist of investments in units of mutual funds, equity securities and term deposits (i.e., certificates of deposit) with banks. The details of such investments as of March 31, 2012 were as follows:

   Cost    Gain/(loss)
recognized
directly in
equity    Fair value
Investment in units of mutual funds
   2,070       10       2,080
Investment in equity securities
   3       22       25
Term deposits with banks
   8,668       —         8,668






   10,741       32       10,773

~~The details of such investments as of March 31, 2011 were as follows:~~

   Cost    Gain/(loss)
recognized
directly in
equity    Fair value
Investment in units of mutual funds
   —         —         —
Investment in equity securities
   3       30       33
Term deposits with banks
   —         —         —






   3       30       33

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~12. Inventories~~

~~Inventories consist of the following:~~

   As of March 31,
   2012    2011
Raw materials
   6,472       4,777
Packing materials, stores and spares
   1,311       1,115
Work-in-progress
   4,974       4,220
Finished goods
   6,595       5,947




Total inventories
   19,352       16,059

During the years ended March 31, 2012, 2011 and 2010, the Company recorded inventory write-downs of 1,473, 1,237 and 1,011, respectively. These adjustments were included in cost of revenues. Cost of revenues for March 31, 2012, 2011 and 2010 include raw materials, consumables and changes in finished goods and work in progress recognized in the income statement amounting to 28,918, 22,411 and 23,656, respectively. The above table includes inventories amounting to 766 and 1,045, which are carried at fair value less cost to sell as at March 31, 2012 and 2011, respectively.

~~13. Trade receivables~~

   As of March 31,
   2012 2011
Due from related parties
   214    101
Other trade receivables
   25,626    17,973


   25,840    18,074
Less: Allowance for doubtful trade receivables
   (501 ) (459 )


Trade receivables, net
   25,339    17,615

The Company maintains an allowance for impairment of doubtful accounts based on financial condition of the customer, aging of the customer accounts receivable, historical experience of collections from customers and the current economic environment. The activity in the allowance for impairment of trade account receivables is given below:

   Year Ended March 31,
   2012 2011
Balance at the beginning of the year
   459    416
Provision for doubtful trade receivables
   168    162
Trade receivables written off and charged to allowance
   (126 ) (119 )


Balance at the end of the year
   501    459

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~14. Other assets~~

~~Other assets consist of the following:~~

   As of March 31,
   2012    2011
Current

Prepaid expenses
   341       512
Advance payments to vendors
   787       491
Balances and receivables from statutory authorities (1)
   3,147       3,228
Due from related parties
   —         —
Deposits
   117       118
Advance to employees
   42       44
Export benefits receivable (2)
   967       1,156
Others
   1,117       1,382




   6,518       6,931




Non-current

Deposits
   363       228
Others
   54       48




   417       276




   6,935       7,207

~~(1)~~

Balances and receivables from statutory authorities primarily consist of amounts deposited with the excise authorities of India and the unutilized excise input credits on purchases. These are regularly utilized to offset the Indian excise and service tax liability on goods produced by and services provided by the Company. Accordingly, these balances have been classified as current assets.

~~(2)~~

~~Refer to Note 3.l. for details regarding export entitlements.~~

~~15. Cash and cash equivalents~~

~~Cash and cash equivalents consist of the following:~~

   As of March 31,
   2012    2011
Cash balances
   5       10
Balances with banks
   4,771       5,247
Term deposits with banks
   2,603       472




Cash and cash equivalents on the statement of financial position
   7,379       5,729




Bank overdrafts used for cash management purposes
   —         (69 )




Cash and cash equivalents in the statement of cash flow
   7,379       5,660

~~Balances with banks included restricted cash of 181 and 253, respectively, for the years ended March 31, 2012 and 2011, which consisted of:~~

•

~~30 as of March 31, 2012 and 20 as of March 31, 2011, representing amounts in the Company’s unclaimed dividend and debenture interest accounts;~~

•

0 as of March 31, 2012 and 150 as of March 31, 2011, representing amounts in an escrow account for settlement of the payment due in respect of the Company’s exercise of the portfolio termination value option under its research and development agreement with I-VEN Pharma Capital Limited;

•

94 as of March 31, 2012 and 83 as of March 31, 2011, representing amounts deposited as security for a bond executed for an environmental liability relating to the Company’s site in Mirfield, United Kingdom (Refer to Note 22 for details);

•

~~8 as of March 31, 2012 and 0 as of March 31, 2011, representing amounts deposited in escrow account as partial consideration for acquiring an intangible asset;~~

•

~~4 as of March 31, 2012 and 0 as of March 31, 2011, representing amount lying in escrow account pursuant to a research and cllaboration arrangement entered with Um Pharmauji Sdn. Bhd., Malaysia; and~~

•

~~45 as of March 31, 2012 and 0 as of March 31, 2011, representing amounts deposited with banks, as security, for obtaining bank guarantees.~~

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~16. Equity~~

   Year Ended March 31,
   2012    2011
Par value per share
   5       5
Authorized share capital
   1,200       1,200
Fully paid up share capital

As at April 1
   846       844
Add: Shares issued on exercise of stock options
   2       2




As at March 31
   848       846

The Company presently has only one class of equity shares. For all matters submitted to vote in a shareholders meeting of the Company, every holder of an equity share, as reflected in the records of the Company on the date of the shareholders meeting shall have one vote in respect of each share held.

Indian law mandates that any dividends shall be declared out of the distributable profits only after the transfer of up to 10% of net income (as computed in accordance with then-current regulations) to a general reserve. Should the Company declare and pay any dividends, such dividends will be paid in Indian rupees to each holder of equity shares in proportion to the number of shares held to the total equity shares outstanding as on that date. Indian law on foreign exchange governs the remittance of dividends outside India.

In the event of liquidation of the Company, all preferential amounts, if any, shall be discharged by the Company. The remaining assets of the Company shall be distributed to the holders of equity shares in proportion to the number of shares held to the total equity shares outstanding as on that date.

Final dividends on equity shares (including dividend tax on distribution of such dividends) are recorded as a liability on the date of their approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company’s Board of Directors. The Company paid dividends (including dividend tax thereon) of 2,216, 2,219 and 1,233 during the years ended March 31, 2012, 2011 and 2010, respectively. The dividend paid per share was 11.25, 11.25 and 6.25 during the years ended March 31, 2012, 2011 and 2010, respectively.

At the Company’s Board of Directors’ meeting held on May 11, 2012, the Board proposed a dividend in the aggregate amount of 2,331, including the applicable dividend tax on distribution of such dividends amounting to 378 (the dividend per share amounting to 13.75), all of which is subject to the approval of the Company’s shareholders.

~~17. Earnings/(loss) per share~~

~~Basic earnings/(loss) per share~~

The calculation of basic earnings per share for the years ended March 31, 2012, 2011 and 2010 was based on the profit attributable to equity shareholders of 14,262, 11,040 and 1,068, respectively, and the weighted average number of equity shares outstanding, calculated as follows:

   Year Ended March 31,
   2012    2011    2010
Issued equity shares as of April 1
   169,252,732       168,845,385       168,468,777
Effect of shares issued on exercise of stock options
   217,156       283,264       238,200
Weighted average number of equity shares as of March 31
   169,469,888       169,128,649       168,706,977

~~Diluted earnings/(loss) per share~~

The calculation of diluted earnings per share for the years ended March 31, 2012, 2011 and 2010 was based on the profit attributable to equity shareholders of 14,262, 11,040 and 1,068, respectively, and the weighted average number of equity shares outstanding, calculated as follows:

   Year Ended March 31,
   2012    2011    2010
Weighted average number of equity shares (Basic)
   169,469,888       169,128,649       168,706,977
Dilutive effect of outstanding stock options
   708,056       836,633       908,966
Weighted average number of equity shares (Diluted)
   170,177,944       169,965,282       169,615,943

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~18. Loans and borrowings~~

~~Short term loans and borrowings~~

The Company had net short term borrowings of 15,844 as of March 31, 2012, as compared to 18,220 as of March 31, 2011. The borrowings primarily consist of “packing credit” loans drawn by the parent company and other unsecured loans drawn by its subsidiaries in Switzerland, Germany and the United States.

~~Short term borrowings consist of the following:~~

   As at March 31,
   2012    2011
Packing credit foreign currency borrowings
   9,322       8,417
Other foreign currency borrowings
   5,641       8,097
Borrowings on transfer of receivables
   881       825
Rupee borrowings
   —         950




   15,844       18,289

~~The interest rate profile of short term borrowings from banks is given below:~~

   As at March 31,
   2012    2011
Packing credit foreign currency borrowings
   LIBOR+100 to 150 bps       LIBOR+ 50 to 175bps
Other foreign currency borrowings
   LIBOR+125 bps       LIBOR+ 100 to 120bps
   EURIBOR+135 bps       EURIBOR+50 to 100bps
   8.35% to 20%       5% to 8%
Borrowings on transfer of receivables
   7.75%       LIBOR+75 to 100bps
Rupee borrowings
   —         8.75%

~~Transfer of financial asset~~

During the year ended March 31, 2011, the Company entered into a receivables transfer arrangement with Citibank, India, in which the Company transferred 2,215 (U.S.$49) of short term trade receivables in return for obtaining short term funds. As part of the transaction, the Company provided Citibank, India with credit indemnities over the expected losses of those receivables. Since the Company had retained substantially all of the risks and rewards of ownership of the trade receivables including the contractual rights to the associated cash flows, the Company continued to recognize the full carrying amount of the receivables and had recognized the cash received in respect of the transaction as short term borrowings. As of March 31, 2011, the carrying amount of the transferred short-term receivables that were subject to this arrangement was 838 (U.S.$18.78) and the carrying amount of the associated liability was 825 (U.S.$18.50). During the year ended March 31, 2012 the Company repaid the entire loan outstanding as at March 31, 2011.

In addition, during the year ended March 31, 2012, the Company entered into a similar receivables transfer arrangement with Citibank, India and Deutsche Bank, India, in which the Company transferred 2,198 (U.S.$18.65 and Russian roubles (“RUB”) 810) of short term trade receivables in return for obtaining short term funds. As of March 31, 2012, the carrying amount of the transferred short-term receivables that were subject to this arrangement was 916 (RUB 530) and the carrying amount of the associated liability was 881 (RUB 509).

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~18. Loans and borrowings (continued)~~

~~Long term loans and borrowings~~

~~Long term loans and borrowings consist of the following:~~

   As at March 31,
   2012    2011
Foreign currency loan⁽¹⁾
   11,033       —
Obligations under finance leases
   291 ��    256
Bonus debentures⁽²⁾
   5,042       5,027




   16,366       5,283




Less: Current portion

Foreign currency loan
   —         —
Obligations under finance leases
   31       12




   31       12




Non-current portion

Foreign currency loan
   11,033       —
Obligations under finance leases
   260       244
Bonus debentures
   5,042       5,027




   16,335       5,271

~~(1)~~

~~See the below discussion of the long-term bank loan of the Company’s Swiss Subsidiary.~~

~~(2)~~

~~See the below discussion of the bonus debentures.~~

~~Long-term bank loan of Swiss Subsidiary~~

On September 28, 2011, Dr. Reddy’s Laboratories, SA (one of the Company’s subsidiaries in Switzerland) (the “Swiss Subsidiary”), entered into a loan agreement providing for it to borrow the sum of 10,713 (U.S.$220), arranged by Citigroup Global Markets Asia Limited, The Bank of Tokyo-Mitsubishi Ufj, Ltd., Mizuho Corporate Bank, Ltd., The Bank of Nova Scotia Asia Limited, Australia and New Zealand Banking Group Limited, and Standard Chartered Bank (“Swiss Subsidiary Lenders”).

The term of the loan is for sixty months starting from September 30, 2011. The Swiss Subsidiary is required to repay the loan in eight equal quarterly installments commencing at the end of the 39th month and continuing until the end of the 60th month from September 30, 2011. The loan carries an interest rate of U.S.$ LIBOR + 145 basis points. The parent company has guaranteed all obligations of the Swiss Subsidiary under loan agreement.

The loan agreement imposes various financial covenants on both the parent company and the Swiss Subsidiary, including, without limitation, the following (each capitalized term below is as defined in the loan agreement):

•

~~Net Financial Indebtedness to EBITDA:~~ ~~The Company’s ratio of net financial indebtedness to EBITDA shall not at any time exceed 2.3:1.~~

•

~~Secured Debt to Financial Indebtedness:~~ The Company’s ratio of secured debt to financial indebtedness shall not at any time exceed 0.2:1. However, if the ratio of net financial indebtedness to EBITDA falls below 1.5:1, the ratio of secured debt to financial indebtedness shall not at any time exceed 0.3:1.

•

~~Gearing ratio:~~ ~~The Company’s ratio of financial indebtedness shall not at any time exceed one times tangible net worth.~~

•

~~Interest Cover ratio:~~ The Company’s ratio of EBITDA to interest payable (in relation to any period of 12 months ending on the last day of any financial year or financial half year of the Company) shall not at any time be less than 5:1.

•

~~Net Worth:~~ ~~The Swiss Subsidiary shall at all times maintain a positive net worth.~~

The financial computation for each of the foregoing financial covenants shall be calculated on a semi-annual basis by reference to the consolidated financial statements of the Company, except that the net worth covenant shall be calculated by reference to financial statements of the Swiss Subsidiary prepared based on IFRS. As of March 31, 2012, the Company was in compliance with the foregoing financial covenants.

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~18. Loans and borrowings (continued)~~

As part of this arrangement, the Company incurred an amount of 182 (U.S.$3.73) in arrangement fees and other administrative charges. The Company accounted for these costs as transaction costs under IAS 39 and they will be amortized over the term of the loan using the effective interest method. The carrying amount of this loan, measured at amortized cost using effective interest rate method, as on March 31, 2012 and 2011 was 11,033 and 0 respectively.

~~Issuance of bonus debentures~~


	~~As at March 31, 2011~~
~~Proceeds from issuance of bonus debentures~~		~~5,078~~
~~Issuance cost~~		~~(51~~	)

~~Initial recognized amount~~		~~5,027~~
				168	168

As explained in Note 34 of these consolidated financial statements, the Company during the year ended March 31, 2011 issued unsecured redeemable bonus debentures amounting to 5,078. In relation to the issuance, the Company has incurred directly attributable transaction cost amounting to 51. The bonus debentures do not carry the right to vote or the right to participate in any of the distributable profits or residual assets of the Company, except that the holders of the bonus debentures participate only to the extent of the face value of the instrument plus accrued and unpaid interest thereon. These bonus debentures are mandatorily redeemable at the face value on March 23, 2014 and the Company is obliged to pay the holders of its bonus debentures an annual interest payment equal to 9.25% of the face value thereof on March 24 of each year until (and including upon) maturity. The carrying amount of these bonus debentures, measured at amortized cost using the effective interest rate method, as on March 31, 2012 and 2011 was 5,042 and 5,027, respectively.Others

~~Undrawn lines of credit from bankers~~

The Company has undrawn lines of credit of 14,290 and 13,089 as of March 31, 2012 and 2011, respectively, 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.

~~Non-derivative financial liabilities designated as cash flow hedges~~

The Company has designated some of its foreign currency borrowings from banks (non-derivative financial liabilities) as hedging instruments for hedge of foreign currency risk associated with highly probable forecasted transactions and accordingly, applies cash flow hedge accounting for such relationships. Re-measurement gain/loss on such non-derivative financial liabilities is recorded in the Company’s hedging reserve as a component of equity and re-classified to the income statement as revenue in the period corresponding to the occurrence of the forecasted transactions. The carrying value of such non derivative financial liabilities as of March 31, 2012 and 2011 was 11,634 and 8,398 respectively.

~~The interest rate profile of long-term loans and borrowings (other than obligations under finance leases) is given below:~~

   As at March 31,
   2012 2011
Foreign currency borrowings
   LIBOR+145 bps    —
Bonus debentures
   9.25 % 9.25 %

~~The aggregate maturities of interest-bearing loans and borrowings, based on contractual maturities, as of March 31, 2012 were as follows:~~

Maturing in the year ending
March 31,
   Foreign
currency loan    Obligation under
finance lease    Debentures    Total
2013
   —         31       —         31
2014
   —         16       5,078       5,094
2015
   2,798       11       —         2,809
2016
   5,597       12       —         5,609
2017
   2,798       11       —         2,809
Thereafter
   —         210       —         210








   11,193       291       5,078       16,562

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~18. Loans and borrowings (continued)~~

~~The aggregate maturities of interest-bearing loans and borrowings, based on contractual maturities, as of March 31, 2011 were as follows:~~

Maturing in the year ending
March 31,
   Foreign
currency loan    Obligation under
finance lease    Debentures    Total
2012
   —         12       —         12
2013
   —         10       —         10
2014
   —         10       5,078       5,088
2015
   —         10       —         10
2016
   —         10       —         10
Thereafter
   —         204       —         204








   —         256       5,078       5,334

~~Obligations under finance leases~~

~~The Company has leased buildings and vehicles under finance leases. Future minimum lease payments under finance leases as at March 31, 2012 were as follows:~~

Particulars
   Present value of
minimum lease
payments    Interest    Future minimum
lease payments
Not later than one year
   31       5       36
Between one and five years
   50       9       74
More than five years
   210       1       196






   291       15       306

~~Future minimum lease payments under finance leases as at March 31, 2011 were as follows:~~

Particulars
   Present value of
minimum lease
payments    Interest    Future
minimum lease
Not later than one year
   12       2       14
Between one and five years
   40       6       57
More than five years
   204       1       194






   256       9       265

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~19. Employee benefits~~

~~Gratuity benefits~~

In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit plan (the “Gratuity Plan”) covering certain categories of employees in India. 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 Dr. 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 Indian government-owned corporations.

~~The components of gratuity cost recognized in the income statement for the years ended March 31, 2012, 2011 and 2010 consists of the following:~~

   For the year ended March 31, 2012
   2012 2011 2010
Service cost
   86    63    52
Interest cost
   52    37    30
Expected return on plan assets
   (36 ) (33 ) (25 )
Recognized net actuarial (gain)/loss
   11    2    6


Gratuity cost recognized in income statement
   113    69    63


��

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~19. Employee benefits (continued)~~

~~Details of the employee benefits obligation and plan assets are provided below:~~

   As of March 31,
   2012 2011
Present value of unfunded obligations
   28    25
Present value of funded obligations
   646    585


Total present value of obligations
   674    610
Fair value of plan assets
   (624 ) (490 )


Present value of net obligations
   50    120
Unrecognized actuarial gains and(losses)
   (105 ) (134 )


Recognized(asset)/liability
   (55 ) (14 )

~~Details of changes in the present value of defined benefit obligation are as follows:~~

   As of March 31,
   2012 2011
Defined benefit obligations at the beginning of the year
   610    473
Service cost
   86    63
Interest cost
   52    37
Actuarial(gain)/loss
   (11 ) 81
Benefits paid
   (63 ) (44 )


Defined benefit obligation at the end of the year
   674    610

~~Details of changes in the fair value of plan assets are as follows:~~

   As of March 31,
   2012 2011
Fair value of plan assets at the beginning of the year
   490    449
Expected return on plan assets
   36    33
Employer contributions
   155    47
Benefits paid
   (63 ) (44 )
Actuarial gain/(loss)
   6    5


Plan assets at the end of the year
   624    490

~~Experience adjustments:~~

   Year Ended March 31,
   2012 2011 2010 2009
Defined benefit obligation
   674    610    473    404
Plan assets
   624    490    449    334


Surplus/(deficit)
   (50 ) (120 ) (24 ) (70 )
Experience adjustments on plan liabilities
   23    28    29    18
Experience adjustments on plan assets
   6    5    27    (7 )

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~19. Employee benefits (continued)~~

~~Summary of the actuarial assumptions:~~~~The actuarial assumptions used in accounting for the Gratuity Plan are as follows:~~

~~The assumptions used to determine benefit obligations:~~

   Year Ended March 31,
   2012    2011    2010
Discount rate
   8.60%    7.95%    7.50%
Rate of compensation increase
   9% per annum for first
year and 8% per annum
thereafter    9% per annum for first 2
years and 8% per annum
thereafter    8% per annum for first 2
years and 6% per annum
thereafter
Expected long-term return on plan assets
   8.60%    7.50%    7.50%

~~The assumptions used to determine gratuity cost:~~

   Year Ended March 31,
   2012    2011    2010
Discount rate
   7.95%    7.50%    7.15%
Rate of compensation increase
   9% per annum for first 2
years and 8% per annum
thereafter    8% per annum for first 2
years and 6% per annum
thereafter    8% per annum for first 3
years and 6% per annum
thereafter
Expected long-term return on plan assets
   7.50%    7.50%    7.50%

~~Contributions:~~~~The Company expects to contribute 104 to the Gratuity Plan during the year ending March 31, 2013.~~

~~Plan assets:~~~~The Gratuity Plan’s weighted-average asset allocation at March 31, 2012 and 2011, by asset category, was as follows:~~

   As of March 31,
   2012 2011
Debt securities
   —      —
Funds managed by insurers
   99 % 99 %
Others
   1 % 1 %

~~Pension, seniority and severance plans~~

All employees of the Company’s Mexican subsidiary, Industrias Quimicas Falcon de Mexico (“Falcon”), are entitled to a pension benefit in the form of a defined benefit pension plan. The Falcon pension plan provides for payment to vested employees at retirement or termination of employment. This payment is based on 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 pre-defined formula. Liabilities in respect of the pension plan are determined by an actuarial valuation, based on 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.

Falcon also provides its employees with termination benefits in the form of seniority premiums, paid from a funded defined benefit plan covering certain categories of employees, and severance pay, paid from an unfunded defined benefit plan applicable to the employees who are terminated from the services of Falcon.

~~The components of net pension cost, seniority premium and severance pay recognized in the income statement for the years ended March 31, 2012, 2011 and 2010 consist of the following:~~

   Year Ended March 31,
   2012 2011 2010
Service cost
   18    16    14
Interest cost
   29    25    24
Expected return on plan assets
   (26 ) (27 ) (20 )
Actuarial(gain)/loss
   9    6    8


Pension cost recognized in income statement
   30    20    26

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~19.~~

~~Employee benefits (continued)~~

~~Pension, seniority and severance plans (continued)~~

~~Details of the employee benefits obligation and plan assets are provided below:~~

   As of March 31,
   2012 2011
Present value of unfunded obligations
   29    27
Present value of funded obligations
   287    332


Total present value of obligations
   316    359
Fair value of plan assets
   (197 ) (259 )


Present value of net obligations
   119    100
Unrecognized actuarial losses
   (124 ) (127 )


Recognized asset
   (5 ) (27 )

~~Details of changes in the present value of defined benefit obligation are as follows:~~

   As of March 31,
   2012 2011
Defined benefit obligations at the beginning of the year
   359    310
Service cost
   18    16
Interest cost
   29    25
Actuarial(gain)/loss
   (11 ) 16
Foreign exchange differences
   26    10
Benefits paid
   (105 ) (18 )


Defined benefit obligation at the end of the year
   316    359

~~Details of changes in the fair value of plan assets are as follows:~~

   As of March 31,
   2012 2011
Fair value of plan assets at the beginning of the year
   259    249
Expected return on plan assets
   27    27
Employer contributions
   8    17
Benefits paid
   (105 ) (18 )
Actuarial gain/(loss)
   (10 ) (26 )
Foreign exchange differences
   18    10


Plan assets at the end of the year
   197    259

~~Experience adjustments~~

   Year Ended March 31,
   2012 2011 2010 2009
Defined benefit obligation
   316    359    310    244
Plan assets
   197    259    249    176
Surplus/(deficit)
   (119 ) (100 ) (61 ) (68 )
Experience adjustments on plan liabilities
   (20 ) 12    1    80
Experience adjustments on plan assets
   (9 ) (23 ) 35    (46 )

~~Contributions:~~~~The Company expects to contribute 43 to the Falcon defined benefit plans during the year ending March 31, 2013.~~

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~19. Employee benefits (continued)~~

~~Pensions, seniority and severance plan (continued)~~

~~Summary of the actuarial assumptions:~~~~The actuarial assumptions used in accounting for the Falcon pension plan are as follows:~~

~~Assumptions used to determine pension benefit obligations:~~

   Year Ended March 31,
   2012 2011 2010
Discount rate
   7.50 % 7.75 % 7.91 %
Rate of compensation increase
   4.50 % 4.50 % 4.50 %
Expected long-term return on plan assets
   9.25 % 9.75 % 10.50 %

~~Assumptions used to determine pension cost:~~

   Year Ended March 31,
   2012 2011 2010
Discount rate
   7.75 % 7.91 % 9.50 %
Rate of compensation increase
   4.50 % 4.50 % 4.50 %
Expected long-term return on plan assets
   9.75 % 10.50 % 10.50 %

~~Plan assets:~~~~The Falcon pension plan’s weighted-average asset allocation at March 31, 2012 and 2011, by asset category is as follows:~~

   As of March 31,
   2012 2011
Equity
   53 % 51 %
Others
   47 % 49 %

~~Provident fund benefits~~

In addition to the above benefits, all employees of the Company receive benefits from a provident fund, a defined contribution plan. Both the employee and employer each make monthly contributions to a government administered fund equal to 12% of the covered employee’s qualifying salary. The Company has no further obligations under the plan beyond its monthly contributions. The Company contributed 289, 258 and 195 to the provident fund plan during the years ended March 31, 2012, 2011 and 2010, respectively.

~~Other contribution plans~~

In the United States, the Company sponsors a defined contribution 401(k) retirement savings plan for all eligible employees who meet minimum age and service requirements. The Company contributed 75, 70 and 70 to the 401(k) retirement savings plan during the years ended March 31, 2012, 2011 and 2010, respectively.

In the United Kingdom, certain social security benefits (such as pension, unemployment and disability) are funded by employers and employees through mandatory National Insurance contributions. The contribution amounts are determined based upon the employee’s salary. The Company has no further obligations under the plan beyond its monthly contributions. The Company contributed 101, 80 and 78 to the National Insurance during the years ended March 31, 2012, 2011 and 2010, respectively.

~~Employee benefit expenses, including share based payments, incurred during the years ended March 31, 2012, 2011 and 2010 amounted to 16,927, 14,109 and 12,843, respectively.~~

~~Superannuation benefits~~

The senior officers of the Company participate in superannuation, a defined contribution plan administered by the Life Insurance Corporation. The Company makes annual contributions based on a specified percentage of each covered employee’s salary. The Company has no further obligations under the plan beyond its annual contributions. The Company contributed 52, 49 and 47 to the superannuation plan during the years ended March 31, 2012, March 31, 2011 and 2010, respectively.

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~19. Employee benefits (continued)~~

~~Long service benefit recognition~~

During the year ended March 31, 2010, the Company introduced a new post-employment defined benefit scheme under which all eligible employees of the parent company who have completed the specified service tenure with the Company would be eligible for a “Long Service Cash Award” at the time of their employment separation. The amount of such cash payment would be based on the respective employee’s last drawn salary and the specified number of years of employment with the Company. Accordingly the Company has valued the liability through an independent actuary. During the years ended March 31, 2012, 2011 and 2010, the Company recorded expense of 15, 10 and 53, respectively, under the scheme.

~~The components of such benefit cost recognized in the income statement for the years ended March 31, 2012, 2011 and 2010 consists of the following:~~

   Year Ended March 31,
   2012    2011    2010
Service cost
   9       6       —
Interest cost
   6       4       —
Expected return on plan assets
   —         —         —
Actuarial (gain)/loss
   —         —         —
Past service cost
   —         —         53






Pension cost recognized in income statement
   15       10       53

~~Details of the employee benefits obligation and plan assets are provided below:~~

   As of March 31,
   2012 2011
Present value of unfunded obligations
   76    69
Present value of funded obligations
   —      —
Total present value of obligations
   76    69


Fair value of plan assets
   —      —


Present value of net obligations
   76    69
Unrecognized actuarial losses
   (4 ) (8 )


Recognized Liability
   72    61

~~Details of changes in the present value of defined benefit obligation are as follows:~~

   As of March 31,
   2012 2011
Defined benefit obligations at the beginning of the year
   69    53
Service cost
   9    6
Interest cost
   6    4
Actuarial (gain)/loss
   (4 ) 8
Past service cost
   —      —
Benefits paid
   (4 ) (2 )


Defined benefit obligation at the end of the year
   76    69

~~The Company has not earmarked any specific assets for such defined benefit obligation and, accordingly, it is unfunded.~~

~~Experience adjustments:~~

   Year Ended March 31,
   2012 2011 2010 2009
Defined benefit obligation
   76    69    53    —
Plan assets
   —      —      —      —


Surplus/(deficit)
   (76 ) (69 ) (53 ) —
Experience adjustments on plan liabilities
   —      1    —      —
Experience adjustments on plan assets
   —      —      —      —

~~Contributions:~~~~The Company expects to contribute 10 during the year ending March 31, 2013.~~

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~19. Employee benefits (continued)~~

~~Long service benefit recognition (continued)~~

~~Summary of the actuarial assumptions:~~~~The actuarial assumptions used in accounting for the long service benefit cost are as follows:~~

~~Assumptions used to determine defined benefit obligations:~~

   Year Ended March 31,
   2012 2011 2010
Discount rate
   8.60% 7.95% 7.50%
Rate of compensation increase
   9% per annum for the
first year and 8% per
annum thereafter 9% per annum for first
2 years and 8% per
annum thereafter 8% per annum for first
2 years and 6% per
annum thereafter
Expected long-term return on plan assets
   — — —

~~The assumptions used to determine long service benefit cost:~~

   Year Ended March 31,
   2012 2011 2010
Discount rate
   7.95% 7.50% 7.50%
Rate of compensation increase
   9% per annum for first
2 years and 8% per
annum thereafter 8% per annum for first
2 years and 6% per
annum thereafter 8% per annum for first
2 years and 6% per
annum thereafter
Expected long-term return on plan assets
   — — —

~~Long term incentive plan~~

During the year ended March 31, 2011, Aurigene Discovery Technologies Limited (a 100% subsidiary of the Company) introduced a new long term employment defined benefit scheme under which all eligible employees of Aurigene Discovery Technologies Limited will be incentivized based on the year on year growth in the profitability of Aurigene Discovery Technologies Limited. Payment to all the eligible employees will be made three years after they fall due. Accordingly, the Company has valued the liability through an independent actuary. As of March 31, 2012 and 2011, the Company had liabilities of 21, and 40, respectively, under the scheme.

~~Severance payments of German subsidiaries~~

In Germany, many statutory health insurance funds (“SHI funds”) and other health insurance providers have been announcing new competitive bidding tenders which continue to cause pressure on the Company’s existing level of revenues due to a steep decrease in product prices. The Company believes that this is leading to a business model of “high volumes and low margins” in the German generic pharmaceutical market.

On account of these developments and other significant adverse events in the German generic pharmaceutical market, during the year ended March 31, 2010 the Company implemented workforce reductions and restructuring of the Company’s German subsidiaries, betapharm Arzneimittel GmbH (“betapharm”) and Reddy Holding GmbH, to achieve a more sustainable workforce structure in light of the current situation within the German generic pharmaceuticals industry. Accordingly, during the year ended March 31, 2010, the management and the works councils (i.e., organizations representing workers) of betapharm and Reddy Holding GmbH entered into “reconciliation of interest” agreements that set out the overall termination benefits payable to identified employees. Accordingly, an amount of 885 (Euro 13.2) was recorded as termination benefits included as part of “Selling, general and administrative expenses” in the consolidated income statement for the year ended March 31, 2010.

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~20. Employee stock incentive plans~~

~~Dr. Reddy’s Employees Stock Option Plan -2002 (the “DRL 2002 Plan”):~~

The Company instituted the DRL 2002 Plan for all eligible employees pursuant to the special resolution approved by the shareholders in the Annual General Meeting held on September 24, 2001. The DRL 2002 Plan covers all employees of DRL and its subsidiaries and directors (excluding promoter directors) of DRL and its subsidiaries (collectively, “eligible employees”). The compensation committee of the Board of DRL (the “Compensation Committee”) administers the DRL 2002 Plan and grants stock options to eligible employees. The Compensation Committee determines which eligible employees will receive options, the number of options to be granted, the exercise price, the vesting period and the exercise period. The vesting period is determined for all options issued on the date of grant. The options issued under the DRL 2002 Plan vest in periods ranging between one and four years and generally have a maximum contractual term of five years.

~~The DRL 2002 Plan was amended on July 28, 2004 at the annual general meeting of shareholders to provide for stock option grants in two categories:~~

~~Category A: 1,721,700 stock options out of the total of 2,295,478 options reserved for grant having an exercise price equal to the fair market value of the underlying equity shares on the date of grant; and~~

~~Category B: 573,778 stock options out of the total of 2,295,478 options reserved for grant having an exercise price equal to the par value of the underlying equity shares (i.e., 5 per option).~~

~~The DRL 2002 Plan was further amended on July 27, 2005 at the annual general meeting of shareholders to provide for stock option grants in two categories:~~

~~Category A: 300,000 stock options out of the total of 2,295,478 options reserved for grant having an exercise price equal to the fair market value of the underlying equity shares on the date of grant; and~~

~~Category B: 1,995,478 stock options out of the total of 2,295,478 options reserved for grant having an exercise price equal to the par value of the underlying equity shares (i.e., 5 per option).~~

Under the DRL 2002 Plan, the exercise price of the fair market value options granted under Category A above is determined based on the average closing price for 30 days prior to the grant in the stock exchange where there is highest trading volume during that period. Notwithstanding the foregoing, the Compensation Committee may, after obtaining the approval of the shareholders in the annual general meeting, grant options with a per share exercise price other than fair market value and par value of the equity shares.

~~After the stock split effected in the form of stock dividend issued by the Company in August 2006, the DRL 2002 Plan provides for stock option grants in the above two categories as follows:~~

Particulars
   Number of
Options reserved
under category A    Number of
Options reserved under
category B    Total
Options reserved under original Plan
   300,000       1,995,478       2,295,478
Options exercised prior to stock dividend date (A)
   94,061       147,793       241,854
Balance of shares that can be allotted exercise of options (B)
   205,939       1,847,685       2,053,624
Options arising from stock dividend (C)
   205,939       1,847,685       2,053,624
Options reserved after stock dividend (A+B+C)
   505,939       3,843,163       4,349,102

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~20.~~

~~Employee stock incentive plans (continued)~~

~~Dr. Reddy’s Employees Stock Option Plan -2002 (the “DRL 2002 Plan”) (continued):~~

~~Stock options activity under the DRL 2002 Plan for the two categories of options is as follows:~~

      Year Ended March 31, 2012
Category A — Fair Market Value Options
   Shares arising
out of options Range of exercise
prices    Weighted-
average exercise
price    Weighted-average
remaining contractual
life (months)
Outstanding at the beginning of the period
   21,000    373.50-448.00       444.45       67
Granted during the year
   —      —         —         —
Expired/forfeited during the period
   —      —         —         —
Exercised during the period
   (10,000 ) 448.00       448.00       —






Outstanding at the end of the period
   11,000    373.50-448.00       441.23       65






Exercisable at the end of the period
   1,000    373.50       373.50       19






      Year Ended March 31, 2012
Category B — Par Value Options
   Shares arising
out of options Range of exercise
prices    Weighted-
average exercise
price    Weighted-average
remaining contractual
life (months)
Outstanding at the beginning of the period
   697,161    5.00       5.00       72
Granted during the period
   262,520    5.00       5.00       91
Expired/forfeited during the period
   (61,842 ) 5.00       5.00       —
Exercised during the period
   (254,683 ) 5.00       5.00       —






Outstanding at the end of the period
   643,156    5.00       5.00       70






Exercisable at the end of the period
   70,551    5.00       5.00       38






      Year Ended March 31, 2011
Category A — Fair Market Value Options
   Shares arising
out of options Range of exercise
prices    Weighted-
average exercise
price    Weighted-average
remaining contractual
life (months)
Outstanding at the beginning of the period
   100,000    362.50-531.51       403.02       38
Granted during the year
   —      —       —         —
Expired/forfeited during the period
   (9,000 ) 373.50-531.51       443.73       —
Exercised during the period
   (70,000 ) 362.50-442.50       385.36       —






Outstanding at the end of the period
   21,000    373.50-448       444.45       67






Exercisable at the end of the period
   11,000    373.50-448       441.23       55






      Year Ended March 31, 2011
      Weighted-    Weighted-average
   Shares arising Range of exercise    average exercise    remaining contractual
Category B — Par Value Options
   out of options prices    price    life (months)
Outstanding at the beginning of the period
   785,007    5.00       5.00       72
Granted during the period
   284,070    5.00       5.00       91
Expired/forfeited during the period
   (78,620 ) 5.00       5.00       —
Exercised during the period
   (293,296 ) 5.00       5.00       —






Outstanding at the end of the period
   697,161    5.00       5.00       72






Exercisable at the end of the period
   52,106    5.00       5.00       41

The weighted average grant date fair value of par value options granted under category B above of the DRL 2002 Plan during the years ended March 31, 2012 and 2011 was 1,567 and 920, respectively. The aggregate intrinsic value of options exercised under the DRL 2002 Plan (both category A and B) during the years ended March 31, 2012 and 2011 was 407 and 489, respectively. The weighted average share price on the date of exercise of options during the years ended March 31, 2012 and 2011 was 1,561 and 1,426, respectively. As of March 31, 2012, options outstanding under the DRL 2002 Plan (both category A and B) had an aggregate intrinsic value of 1,146 and options exercisable under the DRL 2002 Plan (both category A and B) had an aggregate intrinsic value of 126.

The term of the DRL 2002 plan expired on January 29, 2012. Consequently, the Board of Directors of the Company, based on the recommendation of the Compensation Committee, resolved to extend the term of the DRL 2002 plan for a period of 10 years with effect from January 29, 2012, subject to the approval of shareholders. A resolution to this effect has been proposed for approval of the shareholders at the Company’s Annual General Meeting to be held on July 20, 2012.

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~20. Employee stock incentive plans (continued)~~

~~Dr. Reddy’s Employees ADR Stock Option Scheme, 2007 (the “DRL 2007 Plan”):~~

The Company instituted the DRL 2007 Plan for all eligible employees in pursuance of the special resolution approved by the shareholders in the Annual General Meeting held on July 27, 2005. The DRL 2007 Plan became effective upon its approval by the Board of Directors on January 22, 2007. The DRL 2007 Plan covers all employees of DRL and its subsidiaries and directors (excluding promoter directors) of DRL and its subsidiaries (collectively, “eligible employees”). The Compensation Committee administers the DRL 2007 Plan and grants stock options to eligible employees. The Compensation Committee determines which eligible employees will receive the options, the number of options to be granted, the exercise price, the vesting period and the exercise period. The vesting period is determined for all options issued on the date of grant. The options issued under the DRL 2007 Plan vest in periods ranging between one and four years and generally have a maximum contractual term of five years.

~~The DRL 2007 Plan provides for option grants in two categories:~~

~~Category A: 382,695 stock options out of the total of 1,530,779 stock options reserved for grant having an exercise price equal to the fair market value of the underlying equity shares on the date of grant; and~~

~~Category B: 1,148,084 stock options out of the total of 1,530,779 stock options reserved for grant having an exercise price equal to the par value of the underlying equity shares (i.e., 5 per option).~~

~~No options have been granted under Category A as of March 31, 2012. Stock options activity for category B options under the DRL 2007 Plan is as follows.~~

~~Year Ended March 31, 2012~~

~~Weighted-~~

~~Weighted-average~~

~~Shares arising~~

~~Range of exercise~~

~~average exercise~~

~~remaining contractual~~

~~Category B — Par Value Options~~

~~out of options~~

~~prices~~

~~price~~

~~life (months)~~

~~Outstanding at the beginning of the period~~

~~124,559~~

~~5.00~~

~~Granted during the period~~

~~56,060~~

~~5.00~~

~~Expired/forfeited during the period~~

~~(19,789~~

)

~~5.00~~

—

~~Exercised during the period~~

~~(42,931~~

)

~~5.00~~

—

~~Outstanding at the end of the period~~

~~117,899~~

~~5.00~~

~~Exercisable at the end of the period~~

~~6,564~~

~~5.00~~

113

114

Rs.

3,380

Rs.

3,428

      Year Ended March 31, 2011
      Weighted-    Weighted-average
   Shares arising Range of exercise    average exercise    remaining contractual
Category B — Par Value Options
   out of options prices    price    life (months)
Outstanding at the beginning of the period
   112,390    5.00       5.00       74
Granted during the period
   58,660    5.00       5.00       89
Expired/forfeited during the period
   (2,440 ) 5.00       5.00       —
Exercised during the period
   (44,051 ) 5.00       5.00       —






Outstanding at the end of the period
   124,559    5.00       5.00       74






Exercisable at the end of the period
   3,364    5.00       5.00       49

⁽¹⁾

~~The weighted average grant date fair value~~Represents goodwill arising on the acquisition of par value options granted under category B of the DRL 2007 Plan during the years ended March 31, 2012 and 2011 was 1569 and 920, respectively. The aggregate intrinsic value of options exercised under the DRL 2007 PlanOctoPlus B.V (formerly OctoPlus N.V.) (“OctoPlus”) during the year ended March 31, ~~2012~~2013. Since its acquisition by the Company, OctoPlus has been engaged in internal drug development projects as well as providing pharmaceutical development services to external customers. During the year ended March 31, 2015, the Company decided to significantly increase the utilization of OctoPlus’s technical know-how, its time and ~~2011was 67~~effort on internal drug development projects and ~~62, respectively.~~ scale-down its external pharmaceutical development services. Such change in the utilization of technical know-how also resulted in the change of composition of cash-generating unit to which the goodwill was allocated and the segment to which such goodwill belongs. Accordingly, the Company reallocated the goodwill to its Global Generics segment and determined that its complex injectables portfolio was the relevant cash generating unit for the purpose of impairment testing.

The recoverable amounts of the above cash generating units have been assessed using a value-in-use model. Value in use is generally calculated as the net present value of the projected post-tax cash flows plus a terminal value of the cash generating unit to which the goodwill is allocated. Initially a post-tax discount rate is applied to calculate the net present value of the post-tax cash flows. Key assumptions on which the Company has based its determinations of value-in-use include:

a)	Estimated cash flows for five years based on management’s budgets and estimates.

c)	The post-tax discount rates used are based on the Company’s weighted average ~~share price on~~cost of capital.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

7. Goodwill (continued)

Value-in-use is calculated using after tax assumptions. The use of after tax assumptions does not result in a value-in-use that is materially different from the ~~date of exercise of options~~value-in-use that would result if the calculation was performed using before tax assumptions. The after tax discount rates used range from 6.73% to 11.06% for various cash generating units. The before tax discount rates range from 9.82% to 18.46%.

8. Other intangible assets

The following is a summary of changes in the carrying value of intangible assets:


	Trademarks with finite useful life			Product related intangibles			Technology related intangibles			Customer related intangibles			Others			Total
Gross carrying amount
Balance as at April 1, 2013	Rs.	9,699		Rs.	21,712		Rs.	1,380		Rs.	1,110		Rs.	654		Rs.	34,555
Acquisitions through business combinations		—			—			—			—			—			—
Other additions		—			653			64			—			26			743
Deletions		—			—			—			—			—			—
Effect of changes in foreign exchange rates		1,350			2,864			273			105			20			4,612

Balance as at March 31, 2014	Rs.	11,049		Rs.	25,229		Rs.	1,717		Rs.	1,215		Rs.	700		Rs.	39,910

Balance as at April 1, 2014	Rs.	11,049		Rs.	25,229		Rs.	1,717		Rs.	1,215		Rs.	700		Rs.	39,910
Acquisitions through business combinations		—			60			—			—			—			60
Other additions⁽¹⁾		—			5,454			54			—			272			5,780
Deletions		—			—			—			—			—			—
Effect of changes in foreign exchange rates		(1,700	)		(3,120	)		(178	)		(50	)		(20	)		(5,068	)

Balance as at March 31, 2015	Rs.	9,349		Rs.	27,623		Rs.	1,593		Rs.	1,165		Rs.	952		Rs.	40,682
																��
Amortization/impairment loss
Balance as at April 1, 2013	Rs.	5,864		Rs.	16,262		Rs.	517		Rs.	720		Rs.	364		Rs.	23,727
Amortization for the year		600			1,384			179			93			45			2,301
Impairment loss/(reversal of impairment loss)		—			(497	)		—			—			—			(497	)
Deletions		—			—			—			—			—			—
Effect of changes in foreign exchange rates		616			2,328			104			43			19			3,110

Balance as at March 31, 2014	Rs.	7,080		Rs.	19,477		Rs.	800		Rs.	856		Rs.	428		Rs.	28,641

Balance as at April 1, 2014	Rs.	7,080		Rs.	19,477		Rs.	800		Rs.	856		Rs.	428		Rs.	28,641
Amortization for the year		541			1,610			152			33			45			2,381
Impairment loss/(reversal of impairment loss)		—			285			95			249			—			629
Deletions		—			—			—			—			—			—
Effect of changes in foreign exchange rates		(933	)		(2,959	)		(87	)		(20	)		(20	)		(4,019	)

Balance as at March 31, 2015	Rs.	6,688		Rs.	18,413		Rs.	960		Rs.	1,118		Rs.	453		Rs.	27,632

Net carrying amount
As at April 1, 2013	Rs.	3,835		Rs.	5,450		Rs.	863		Rs.	390		Rs.	290		Rs.	10,828
As at March 31, 2014	Rs.	3,969		Rs.	5,752		Rs.	917		Rs.	359		Rs.	272		Rs.	11,269
As at March 31, 2015	Rs.	2,661		Rs.	9,210		Rs.	633		Rs.	47		Rs.	499		Rs.	13,050

⁽¹⁾

Other additions during the year ended March 31, ~~2012 and 2011was 1,566 and 1,425, respectively. As of March 31, 2012, options outstanding under~~2015 includes Rs.5,097 towards the ~~DRL 2007 Plan had an aggregate intrinsic value of 207 and options exercisable under the DRL 2007 Plan had an aggregate intrinsic value of 12.~~

~~The fair value of stock options granted under the DRL 2002 Plan and the DRL 2007 Plan has been measured using the Black–Scholes-Merton model at the date~~acquisition from Novartis Consumer Health Inc. of the ~~grant.~~title and rights to its Habitrol^® brand. Refer to Note 38 for further details.

The selling, general and administrative expenses included Rs.2,326, Rs.2,301and Rs.1,691 of amortization of other intangible assets and Rs.509, Rs.(497) and Rs.507 of impairment loss/(reversal of impairment loss) on other intangible assets for the years ended March 31, 2015, 2014 and 2013, respectively. The research and development expenses included Rs.55 of amortization of other intangible assets and Rs.120 of impairment loss on other intangible assets for the year ended March 31, 2015. The weighted average remaining useful life of intangibles was approximately 5.6 years as at March 31, 2015.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

(in millions, except share and per share data and where otherwise stated)

~~20.~~

~~Employee stock incentive plans (continued)~~

8. Other intangible assets (continued)

Impairment losses recorded for the year ended March 31, 2015

For the year ended March 31, 2015, the Company recorded impairment losses of Rs.629 in the consolidated income statement, primarily relating to the following:

Customer related intangibles

Since its acquisition during the year ended March 31, 2013, OctoPlus B.V., a wholly owned subsidiary of the Company, has been engaged in the Company’s internal drug development projects as well as providing pharmaceutical development services to external customers.

During the year ended March 31, 2015, the Company decided to significantly increase the utilization of OctoPlus B.V.’s technical know-how, its time and effort on internal drug development projects and scale-down its external pharmaceutical development services. Consequent to such decision, the Company reassessed the recoverable amounts of associated customer related intangibles and determined that the carrying amount of such customer related intangibles was higher than their recoverable amount. Accordingly, an amount of Rs.249 was recorded as an impairment loss for the year ended March 31, 2015 under “Selling, general and administrative expenses” in the Company’s consolidated income statement.

The above impairment loss relate to the Company’s PSAI segment. As at March 31, 2015, the carrying amount of such customer related intangibles after impairment loss was Rs.0.

Product related intangibles

Based on the performance of and expected cash flows from some of the Company’s product related intangibles pertaining to its Global Generics segment, the Company reassessed the recoverable amounts of such product related intangibles and determined that the carrying amount of such product-related intangibles was higher than their recoverable amount. Accordingly, an amount of Rs.201 was recorded as an impairment loss for the year ended March 31, 2015 under “Selling, general and administrative expenses” in the Company’s consolidated income statement. As at March 31, 2015, the carrying amount of such product related intangibles after impairment loss was Rs.0.

In-process research and development (“IPR&D”) intangibles

Consequent to the Company’s decision to discontinue further development of certain IPR&D assets pertaining to its Proprietary Products segment, an amount of Rs.95 was recorded as impairment loss for the year ended March 31, 2015 under research and development expenses in the Company’s consolidated income statement.

Reversal of impairment losses recorded for the year ended March 31, 2014

Consequent to the increase in expected cash flows of some of the products forming part of the product related intangibles pertaining to the Company’s Global Generics segment, the Company, following the guidance under IAS 36 “Impairment of assets”, estimated the recoverable amount of such intangible asset and assessed that the impairment loss recorded in an earlier period should be reversed. Accordingly, a reversal of impairment loss of Rs.497 for such product related intangibles was recorded for the year ended March 31, 2014 under “Selling, general and administrative expenses” in the consolidated income statement. The expected cash flows increased primarily due to various market dynamics, such as reduced competition and favorable pricing position.

The above reversal of impairment losses relate to the Company’s Global Generics segment. The pre-tax cash flows have been discounted based on a pre-tax discount rate of 5.68%. As at March 31, 2014, the carrying amount of such product related intangibles after reversal of impairment loss was Rs.1,287.

Impairment losses recorded for the year ended March 31, 2013

During the year ended March 31, 2013, the Company determined that there was a decrease in expected cash flows of a product portfolio forming part of certain product related intangibles, primarily due to higher than expected price erosion and increased competition leading to lower volumes. Consequently, the Company reassessed the recoverable amounts of such product-related intangibles using the value in use approach and determined that the carrying amount of such product-related intangibles was higher than its recoverable amount. Accordingly, an impairment loss of Rs.497 for such product related intangibles was recorded for the year ended March 31, 2013 under “Selling, general and administrative expenses” in the consolidated income statement. The above impairment losses relate to the Company’s Global Generics segment.

The pre-tax cash flows have been discounted based on a pre-tax discount rate of 5.52%. As at March 31, 2013, the carrying amount of such product related intangibles after impairment was Rs.1,288.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

9. Investment in equity accounted investees

Kunshan Rotam Reddy Pharmaceuticals Co. Limited (“Reddy Kunshan”) is engaged in manufacturing and marketing of active pharmaceutical ingredients and intermediates and formulations in China. The Company’s interest in Reddy Kunshan was 51.3% as of March 31, 2015 and 2014. Three directors of the Company are on the board of directors of Reddy Kunshan, which consists of seven directors. Under the terms of the joint venture agreement, all major decisions with respect to operating activities, significant financing and other activities are taken by the approval of at least five of the seven directors of Reddy Kunshan’s board. As the Company does not control Reddy Kunshan’s board and the other partners have significant participating rights, the Company’s interest in Reddy Kunshan has been accounted for under the equity method of accounting under IFRS 11.

Summary financial information of Reddy Kunshan, as translated into the reporting currency of the Company and not adjusted for the percentage ownership held by the Company, is as follows:


	As of/for the Year Ended March 31,
	2015			2014			2013
Ownership		51.3	%		51.3	%		51.3	%
Total current assets	Rs.	2,090		Rs.	1,768		Rs.	1,051
Total non-current assets		389			346			305

Total assets	Rs.	2,479		Rs.	2,114		Rs.	1,356

Equity	Rs.	1,656		Rs.	1,213		Rs.	802
Total current liabilities		823			901			554

Total equity and liabilities	Rs.	2,479		Rs.	2,114		Rs.	1,356

Revenues	Rs.	3,377		Rs.	2,794		Rs.	1,914
Expenses		2,998			2,455			1,711

Profit for the year	Rs.	379		Rs.	339		Rs.	203

The Company’s share of profits in Reddy Kunshan for the years ended March 31, 2015, 2014 and 2013 was Rs.195, Rs.174 and Rs.104, respectively. The carrying value of the Company’s investment in Reddy Kunshan as of March 31, 2015 and 2014 was Rs.1,033 and Rs.806, respectively. The translation adjustment arising out of translation of foreign currency balances amounted to Rs.192 and Rs.160 as of March 31, 2015 and 2014, respectively.

10. Other investments

Other investments consist of investments in units of mutual funds, equity securities and term deposits (i.e., certificates of deposit having an original maturity period exceeding 3 months) with banks. The details of such investments as of March 31, 2015 are as follows:


	Cost		Gain recognized directly in equity		Fair value
Investment in units of mutual funds	Rs.	21,237	Rs.	404	Rs.	21,641
Investment in equity securities⁽¹⁾		1,456		1,131		2,587
Term deposits with banks		12,848		—		12,848

	Rs.	35,541	Rs.	1,535	Rs.	37,076

Current portion
Investment in units of mutual funds	Rs.	21,024	Rs.	398	Rs.	21,422
Term deposits with banks		12,837		—		12,837

	Rs.	33,861	Rs.	398	Rs.	34,259

Non-current portion
Investment in units of mutual funds	Rs.	213	Rs.	6	Rs.	219
Investment in equity securities⁽¹⁾		1,456		1,131		2,587
Term deposits with banks		11		—		11

	Rs.	1,680	Rs.	1,137	Rs.	2,817

⁽¹⁾

Primarily represents the shares of Curis, Inc. Refer to Note 33 for further details.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

10. Other investments (continued)

As of March 31, 2014, all of such investments were current, the details of which are as follows:


	Cost		Gain recognized directly in equity		Fair value
Investment in units of mutual funds	Rs.	10,676	Rs.	86	Rs.	10,762
Investment in equity securities		3		20		23
Term deposits with banks		14,298		—		14,298

	Rs.	24,977	Rs.	106	Rs.	25,083

11. Inventories

Inventories consist of the following:


	As of March 31,
	2015		2014
Raw materials	Rs.	6,753	Rs.	6,127
Packing materials, stores and spares		1,981		1,626
Work-in-progress		6,769		6,619
Finished goods		10,026		9,620

	Rs.	25,529	Rs.	23,992

The above table includes inventories amounting to Rs.901 and Rs.612, which were carried at fair value less cost to sell as at March 31, 2015 and 2014, respectively.

During the years ended March 31, 2015, 2014 and 2013, the Company recorded inventory write-downs of Rs.3,635, Rs.1,941 and Rs.1,887, respectively. These adjustments were included in cost of revenues.

Cost of revenues for the years ended March 31, 2015, 2014 and 2013 includes raw materials, consumables and changes in finished goods and work in progress recognized in the income statement amounting to Rs.36,806, Rs.31,711 and Rs.33,775, respectively. Cost of revenues for the years ended March 31, 2015, 2014 and 2013 includes other expenditures recognized in the income statement amounting to Rs.25,980, Rs.24,658 and Rs.21,912, respectively.

12. Trade and other receivables


	As of March 31,
	2015			2014
Trade and other receivables, gross	Rs.	41,422		Rs.	33,720
Less: Allowance for doubtful trade and other receivables		(667	)		(683	)

Trade and other receivables, net	Rs.	40,755		Rs.	33,037

The Company maintains an allowance for impairment of doubtful accounts based on financial condition of the customer, aging of the customer accounts receivable and historical experience of collections from customers. The activity in the allowance for impairment of trade account receivables is given below:


	Year Ended March 31,
	2015			2014
Balance at the beginning of the year	Rs.	683		Rs.	549
Provision for doubtful trade and other receivables		168			162
Trade and other receivables written off and exchange differences		(184	)		(28	)

Balance at the end of the year	Rs.	667		Rs.	683

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

13. Other assets

Other assets consist of the following:


	As of March 31,
	2015		2014
Current
Balances and receivables from statutory authorities⁽¹⁾	Rs.	5,268	Rs.	5,390
Export benefits receivable⁽²⁾		2,572		2,595
Prepaid expenses		695		537
Others		2,747		2,810

	Rs.	11,282	Rs.	11,332

Non-current
Deposits	Rs.	536	Rs.	438
Others		226		57

	Rs.	762	Rs.	495

⁽¹⁾

Balances and receivables from statutory authorities primarily consist of amounts receivable from the excise, value added tax and customs authorities of India and the unutilized excise input credits on purchases. These are regularly utilized to offset the Indian excise and service tax liability on goods produced by and services provided by the Company. Accordingly, these balances have been classified as current assets.

⁽²⁾

Export benefits receivables primarily consist of amounts receivable from various government authorities of India towards incentives on export sales made by the Company.

~~Dr. Reddy’s Employees ADR Stock Option Scheme, 2007 (the “DRL 2007 Plan”) (continued ):~~

14. Cash and cash equivalents

Cash and cash equivalents consist of the following:


	As of March 31,
	2015		2014
Cash balances	Rs.	3	Rs.	3
Balances with banks		3,939		4,580
Term deposits with banks (original maturities up to 3 months)		1,452		3,868

Cash and cash equivalents in the statement of financial position		5,394		8,451
Bank overdrafts used for cash management purposes		—		—

Cash and cash equivalents in the statement of cash flow	Rs.	5,394	Rs.	8,451

Cash and cash equivalents included restricted cash of Rs.1,971 and Rs.343, respectively, as of March 31, 2015 and March 31, 2014, which consisted of:

Rs.57 as of March 31, 2015 and Rs.83 as of March 31, 2014, representing amounts in the Company’s unclaimed dividend and debenture interest accounts;

Rs.1,796 as of March 31, 2015 and Rs.25 as of March 31, 2014, representing cash and cash equivalents of the Company’s subsidiary in Venezuela, which are subject to foreign exchange controls;

Rs.107 as of March 31, 2015 and Rs.115 as of March 31, 2014, representing amounts deposited as security for a bond executed for an environmental liability relating to the Company’s site in Mirfield, United Kingdom;

Rs.0 as of March 31, 2015 and Rs.96 as of March 31, 2014, representing amounts deposited in an escrow account pursuant to a research and collaboration arrangement entered with Um Pharmauji Sdn. Bhd., Malaysia; and

Rs.11 as of March 31, 2015 and Rs.24 as of March 31, 2014, representing other restricted cash amounts.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

15. Equity


	Year Ended March 31,
	2015		2014
Par value per share	Rs.	5	Rs.	5
Authorized share capital		1,200		1,200
Fully paid up share capital
As at April 1	Rs.	851	Rs.	849
Add: Shares issued on exercise of stock options		1		2

As at March 31	Rs.	852	Rs.	851

Should the Company declare and pay any dividends, such dividends will be paid in Indian rupees to each holder of equity shares in proportion to the number of shares held to the total equity shares outstanding as on that date. Indian law on foreign exchange governs the remittance of dividends outside India.

Final dividends on equity shares (including dividend tax on distribution of such dividends) are recorded as a liability on the date of their approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company’s Board of Directors. The Company paid dividends of Rs.3,067, Rs.2,552 and Rs.2,336 and dividend distribution tax thereon of Rs.520, Rs.433 and Rs.378 during the years ended March 31, 2015, 2014 and 2013, respectively. The dividend paid per share was Rs.18, Rs.15 and Rs.13.75 during the years ended March 31, 2015, 2014 and 2013, respectively.

At the Company’s Board of Directors’ meeting held on May 12, 2015, the Board proposed a dividend per share of Rs.20 and aggregating to Rs.3,408 which is subject to the approval of the Company’s shareholders. Upon such approval, there will be an additional cash outflow of Rs.694 for payment of dividend distribution tax thereon.

16. Earnings per share

The calculation of basic and diluted earnings per share for the years ended March 31, 2015, 2014 and 2013 was based on the profit attributable to equity shareholders of Rs.22,179, Rs.21,515 and Rs.16,777, respectively.

The weighted average number of equity shares outstanding, used for calculating the basic earnings per share, are as follows:


	Year Ended March 31,
	2015		2014		2013
Issued equity shares as on April 1		170,108,868		169,836,475		169,560,346
Effect of shares issued on exercise of stock options		205,638		208,043		217,112
Weighted average number of equity shares at March 31		170,314,506		170,044,518		169,777,458
Earnings per share – Basic		Rs.130.22		Rs.126.52		Rs.98.82

The weighted average number of equity shares outstanding, used for calculating the diluted earnings per share, are as follows:


	Year Ended March 31,
	2015		2014		2013
Weighted average number of equity shares (Basic)		170,314,506		170,044,518		169,777,458
Dilutive effect of stock options outstanding		618,927		650,499		655,222
Weighted average number of equity shares (Diluted)		170,933,433		170,695,017		170,432,680
Earnings per share – Diluted		Rs.129.75		Rs.126.04		Rs.98.44

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

17. Loans and borrowings

Short term borrowings

The Company had net short term borrowings of Rs.21,857 as of March 31, 2015, as compared to Rs.20,607 as of March 31, 2014. The borrowings primarily consist of “packing credit” and other rupee loans drawn by the parent company and other foreign currency unsecured loans drawn by the Company’s Swiss subsidiary.

Short term borrowings consist of the following:


	As at March 31,
	2015		2014
Packing credit borrowings	Rs.	20,857	Rs.	17,630
Other foreign currency borrowings		—		2,977
Other rupee borrowings		1,000		—

	Rs.	21,857	Rs.	20,607

The interest rate profile of short term borrowings from banks is given below:

As at March 31,

2015

2014

Currency

Interest Rate

Currency

Interest Rate

Packing credit borrowings

USD

LIBOR + 10 to 40 bps

USD

LIBOR + 25 to 85 bps

EURO

LIBOR + 7.5 to 20 bps

EURO

LIBOR + 20 bps

RUB

9.80% to 22.30%

RUB

7.20% to 7.75%

—

RUB

Mosprime + 60 bps

—

INR

9.50% to 10%

Other foreign currency borrowings

—

EURO

LIBOR + 90 bps

Other rupee borrowings

INR

10%

—

Long term borrowings

Long term borrowings, measured at amortized cost, consist of the following:


	As at March 31
	2015		2014
Foreign currency borrowing by the Company’s Swiss subsidiary	Rs.	10,292	Rs.	13,103
Foreign currency borrowing by the parent company		9,375		8,987
Foreign currency borrowing by the Company’s U.K. subsidiary		740		998
Obligations under finance leases		862		1,047

	Rs.	21,269	Rs.	24,135

Current portion
Foreign currency borrowing by the Company’s Swiss subsidiary	Rs.	6,875	Rs.	3,295
Obligations under finance leases		87		100

	Rs.	6,962	Rs.	3,395

Non-current portion
Foreign currency borrowing by the Company’s Swiss subsidiary	Rs.	3,417	Rs.	9,808
Foreign currency borrowing by the parent company		9,375		8,987
Foreign currency borrowing by the Company’s U.K. subsidiary		740		998
Obligations under finance leases		775		947

	Rs.	14,307	Rs.	20,740

In the above table, the term “Swiss subsidiary” refers to Dr. Reddy’s Laboratories, SA and the term “U.K. Subsidiary” refers to Dr. Reddy’s Laboratories (EU) Limited.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

17. Loans and borrowings (continued)

Long term borrowings (continued)

Long-term bank loan of Swiss Subsidiary

During the year ended March 31, 2012, Dr. Reddy’s Laboratories, SA (one of the Company’s subsidiaries in Switzerland) (the “Swiss Subsidiary”) borrowed the sum of U.S.$220 from certain institutional lenders. The Swiss Subsidiary is required to repay the loan in eight equal quarterly installments commencing at the end of the 39th month and continuing until the end of the 60th month from September 30, 2011. The parent company has guaranteed all obligations of the Swiss Subsidiary under the loan agreement.

As part of this arrangement, the Company incurred an amount of U.S.$3.73 in arrangement fees and other administrative charges. The Company accounted for these costs as transaction costs under IAS 39 and they are being amortized over the term of the loan using the effective interest method. The carrying amount of this loan, measured at amortized cost using the effective interest rate method, as on March 31, 2015 and 2014 was Rs.10,292 and Rs.13,103, respectively.

During the year ended March 31, 2015, the Swiss subsidiary repaid two installments totaling U.S.$55 due under the loan agreement.

The loan agreement imposes various financial covenants on both the parent company and the Swiss Subsidiary. As of March 31, 2015, the Company was in compliance with such financial covenants.

Long-term bank loan of the parent company

During the year ended March 31, 2014, the Company borrowed the sum of U.S.$150. The Company is required to repay the loan in five equal quarterly installments commencing at the end of the 54th month and continuing until the end of the 66th month after August 12, 2013.

The loan agreement imposes various financial covenants on the Company. As of March 31, 2015, the Company was in compliance with such financial covenants.

Undrawn lines of credit from bankers

The Company has undrawn lines of credit of Rs.10,438 and Rs.14,596 as of March 31, 2015 and 2014, respectively, from its bankers for working capital requirements. The Company has the right to draw upon these lines of credit based on its requirements.

Non-derivative financial liabilities designated as cash flow hedges

The Company has designated some of its foreign currency borrowings from banks (non-derivative financial liabilities) as hedging instruments for hedge of foreign currency risk associated with highly probable forecasted transactions and, accordingly, applies cash flow hedge accounting for such relationships. Re-measurement gain/loss on such non-derivative financial liabilities is recorded in the Company’s hedging reserve as a component of equity and re-classified to the income statement as revenue in the period corresponding to the occurrence of the forecasted transactions. The carrying value of such non-derivative financial liabilities as of March 31, 2015 and March 31, 2014 was Rs.10,313 and Rs.13,181, respectively.

The interest rate profile of long-term borrowings (other than obligations under finance leases) is given below:

As at March 31,

2015

2014

Currency

Interest Rate

Currency

Interest Rate

Foreign currency borrowings

USD

GBP

LIBOR+100 to 125 bps

LIBOR+130 bps

USD

GBP

LIBOR+100 to 179 bps

LIBOR+130 bps

The aggregate maturities of long term loans and borrowings, based on contractual maturities, as of March 31, 2015 were as follows:


Maturing in the year ending March 31,	Foreign currency loan		Obligations under finance leases		Total
2016	Rs.	6,875	Rs.	87	Rs.	6,962
2017		4,177		89		4,266
2018		1,875		82		1,957
2019		7,500		48		7,548
2020		—		44		44
Thereafter		—		512		512

	Rs.	20,427	Rs.	862	Rs.	21,289

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

17. Loans and borrowings (continued)

Long term borrowings (continued)

The aggregate maturities of long term loans and borrowings, based on contractual maturities, as of March 31, 2014 were as follows:


Maturing in the year ending March 31,	Foreign currency loan		Obligations under finance leases		Total
2015	Rs.	3,295	Rs.	100	Rs.	3,395
2016		6,591		96		6,687
2017		4,293		69		4,362
2018		1,797		48		1,845
2019		7,190		50		7,240
Thereafter		—		684		684

	Rs.	23,166	Rs.	1,047	Rs.	24,213

Obligations under finance leases

The Company has leased buildings, plant and machinery and vehicles under finance leases. Future minimum lease payments under finance leases as at March 31, 2015 were as follows:


Particulars	Present value of minimum lease payments		Interest		Future minimum lease payments
Not later than one year	Rs.	87	Rs.	117	Rs.	204
Between one and five years		263		249		512
More than five years		512		185		697

	Rs.	862	Rs.	551	Rs.	1,413

Future minimum lease payments under finance leases as at March 31, 2014 were as follows:


Particulars	Present value of minimum lease payments		Interest		Future minimum lease payments
Not later than one year	Rs.	100	Rs.	122	Rs.	222
Between one and five years		263		272		535
More than five years		684		206		890

	Rs.	1,047	Rs.	600	Rs.	1,647

18. Employee benefits

Gratuity benefits provided by the parent company

In accordance with applicable Indian laws, the Company has a defined benefit plan which provides for gratuity payments (the “Gratuity Plan”) and covers certain categories of employees in India. The Gratuity Plan provides a lump sum gratuity payment to eligible employees at retirement or termination of their employment. The amount of the 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 Dr. Reddy’s Laboratories Gratuity Fund (the “Gratuity Fund”) to fund the Gratuity Plan. 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 primarily invested in Indian government bonds and corporate debt securities. A small portion of the fund is also invested in equity securities of Indian companies.

The components of gratuity cost recognized in the income statement for the years ended March 31, 2015, 2014 and 2013 consist of the following:


	For the Year Ended March 31,
	2015		2014		2013
Current service cost	Rs.	148	Rs.	126	Rs.	93
Interest on net defined benefit liability/(asset)		7		9		(2	)

Gratuity cost recognized in income statement	Rs.	155	Rs.	135	Rs.	91

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

18. Employee benefits (continued)

Details of the employee benefits obligations and plan assets are provided below:


	As of March 31,
	2015			2014
Present value of funded obligations	Rs.	1,236		Rs.	1,040
Fair value of plan assets		(1,157	)		(909	)

Net defined benefit liability recognized	Rs.	79		Rs.	132

Details of changes in the present value of defined benefit obligations are as follows:


	As of March 31,
	2015			2014
Defined benefit obligations at the beginning of the year	Rs.	1,040		Rs.	875
Current service cost		148			126
Interest on defined obligations		87			65
Re-measurements due to:
Actuarial loss/(gain) due to change in financial assumptions		12			3
Actuarial loss/(gain) due to demographic assumptions		6			—
Actuarial loss/(gain) due to experience changes		27			42
Benefits paid		(84	)		(70	)

Defined benefit obligations at the end of the year	Rs.	1,236		Rs.	1,040

Details of changes in the fair value of plan assets are as follows:


	As of March 31,
	2015			2014
Fair value of plan assets at the beginning of the year	Rs.	909		Rs.	707
Employer contributions		209			201
Interest on plan assets		80			56
Re-measurements due to:
Return on plan assets excluding interest on plan assets		43			15
Benefits paid		(84	)		(70	)

Plan assets at the end of the year	Rs.	1,157		Rs.	909

Sensitivity Analysis:


	As of March 31, 2015
~~The Black-Scholes-Merton model includes assumptions regarding dividend yields, expected volatility, expected terms and risk free interest rates. In respect~~Defined benefit obligation without effect of ~~par value options granted under category B, the expected term~~projected salary growth	Rs.	676
Add: Effect of an option (or “option life”) is estimated based on the vesting term, contractual term, as well as expected exercise behavior of the employees receiving the option. In respect of fair market value options granted under category A, the option life is estimated based on the simplified method. Expected volatility of the option is based on historical volatility, during a period equivalent to the option life, of the observed market prices of the Company’s publicly traded equity shares. Dividend yield of the options is based on recent dividend activity. Risk-free interest rates are based on the government securities yield in effect at the time of the grant. These assumptions reflect management’s best estimates, but these assumptions involve inherent market uncertainties based on market conditions generally outside of the Company’s control. As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially impacted. Further, if management uses different assumptions in future periods, stock based compensation expense could be materially impacted in future years.salary growth		560
~~The estimated fair value of stock options is charged to income on a straight-line~~Defined benefit obligation with projected salary growth		1,236
Defined benefit obligation, using discount rate minus 50 basis ~~over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards.~~points		1,284
~~The weighted average inputs used in computing the fair value of options granted~~Defined benefit obligation, using salary growth rate plus 50 basis points		1,283

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

18. Employee benefits (continued)

Summary of the actuarial assumptions:The actuarial assumptions used in accounting for the Gratuity Plan are as follows:

The assumptions used to determine benefit obligations:


	Year Ended March 31,
	2015		2014		2013
Discount rate		8.00%		9.00%		7.95%
Rate of compensation increase		10% per annum for first 2 years and 9% per annum thereafter		11% per annum for first 2 years and 10% per annum thereafter		10% per annum for first 2 years and 9% per annum thereafter

The assumptions used to determine gratuity cost:


	Year Ended March 31,
	2015		2014		2013
Discount rate		9.00%		7.95%		8.60%
Rate of compensation increase		11% per annum for first 2 years and 10% per annum thereafter		10% per annum for first 2 years and 9% per annum thereafter		9% per annum for first year and 8% per annum thereafter

Contributions:The Company expects to contribute Rs.100 to the Gratuity Plan during the year ending March 31, 2016.

Disaggregation of plan assets:The Gratuity Plan’s weighted-average asset allocation at March 31, 2015 and 2014, by asset category, was as follows:


	As of March 31,
	2015			2014
Funds managed by insurers		99	%		99	%
Others		1	%		1	%

The expected future cash flows in respect of gratuity as at March 31, 2015 were as follows:

   Year Ended
March 31, 2012 Year Ended
March 31, 2011
Expected volatility
   28.92 % 34.34 %
Exercise price
   5    5
Option life
   2.42 years    2.43 years
Risk-free interest rate
   8.34 % 6.04 %
Expected dividends
   0.7 % 0.4 %
Grant date share price
   1,598.57    1,242.55


Expected contribution	Amount
During the year ended March 31, 2016 (estimated)	Rs.	100
Expected future benefit payments
March 31, 2016		151
March 31, 2017		161
March 31, 2018		172
March 31, 2019		193
March 31, 2020		223
Thereafter		1,231

Pension plan of the Company’s subsidiary, Industrias Quimicas Falcon de Mexico

All employees of the Company’s Mexican subsidiary, Industrias Quimicas Falcon de Mexico (“Falcon”), are entitled to a pension benefit in the form of a defined benefit pension plan. The Falcon pension plan provides for payment to vested employees at retirement or termination of employment. Liabilities in respect of the pension plan are determined by an actuarial valuation, based on 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.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

18. Employee benefits (continued)

The components of net pension cost recognized in the income statement for the years ended March 31, 2015, 2014 and 2013 consist of the following:


	For the Year Ended March 31,
	2015		2014		2013
Current service cost	Rs.	13	Rs.	18	Rs.	16
Interest on net defined benefit liability/(asset)		9		11		5

Total cost recognized in income statement	Rs.	22	Rs.	29	Rs.	21

Details of the employee benefits obligation and plan assets are provided below:


	As of March 31,
	2015			2014
Present value of funded obligations	Rs.	252		Rs.	252
Fair value of plan assets		(68	)		(110	)

Net defined benefit liability recognized	Rs.	184		Rs.	142

Details of changes in the present value of defined benefit obligations are as follows:


	As of March 31,
	2015			2014
Defined benefit obligations at the beginning of the year	Rs.	252		Rs.	301
Current Service cost		13			18
Interest on defined obligations		18			20
Re-measurements due to:
Actuarial loss/(gain) due to change in financial assumptions		13			(45	)
Actuarial loss/(gain) due to experience changes		25			(28	)
Benefits paid		(42	)		(29	)
Foreign exchange differences		(27	)		15

Defined benefit obligations at the end of the year	Rs.	252		Rs.	252

Details of changes in the fair value of plan assets are as follows:


	As of March 31,
	2015			2014
Fair value of plan assets at the beginning of the year	Rs.	110		Rs.	125
Employer contributions		3			—
Interest on plan assets		9			10
Re-measurements due to:
Return on plan assets excluding interest on plan assets		(2	)		(2	)
Benefits paid		(42	)		(29	)
Foreign exchange differences		(11	)		6

Plan assets at the end of the year	Rs.	68		Rs.	110

Sensitivity Analysis:


	As ~~explained~~of March 31, 2015
Defined benefit obligation without effect of projected salary growth	Rs.	159
Plus effect of salary growth		94
Defined benefit obligation with projected salary growth		252
Defined benefit obligation, using discount rate minus 50 basis points		266
Defined benefit obligation, using salary growth rate plus 50 basis points		266

Contributions:The Company expects to contribute Rs.41 to the Falcon defined benefit plans during the year ending March 31, 2016.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

18. Employee benefits (continued)

Summary of the actuarial assumptions:The actuarial assumptions used in accounting for the Falcon defined benefit plans are as follows:

Assumptions used to determine defined benefit obligations:


	Year Ended March 31,
	2015			2014			2013
Discount rate		7.50	%		8.00	%		6.50	%
Rate of compensation increase		4.50	%		4.50	%		4.50	%

Assumptions used to determine defined benefit cost:


	Year Ended March 31,
	2015			2014			2013
Discount rate		8.00	%		6.50	%		7.50	%
Rate of compensation increase		4.50	%		4.50	%		4.50	%

Plan assets:The Falcon pension plan’s weighted-average asset allocation at March 31, 2015 and 2014, by asset category is as follows:


	As of March 31,
	2015			2014
Corporate bonds		51	%		51	%
Others		49	%		49	%

The expected future cash flows in respect of post-employment benefit plans in Mexico as at March 31, 2015 were as follows:


Expected contribution	Amount
During the year ended March 31, 2016 (estimated)	Rs.	41
Expected future benefit payments
March 31, 2016		4
March 31, 2017		4
March 31, 2018		6
March 31, 2019		9
March 31, 2020		12
Thereafter		119

Provident fund benefits

Certain categories of employees of the Company receive benefits from a provident fund, a defined contribution plan. Both the employee and employer each make monthly contributions to a government administered fund equal to 12% of the covered employee’s qualifying salary. The Company has no further obligations under the plan beyond its monthly contributions. The Company contributed Rs.492, Rs.411 and Rs.349 to the provident fund plan during the years ended March 31, 2015, 2014 and 2013, respectively.

Superannuation benefits

Certain categories of employees of the Company participate in superannuation, a defined contribution plan administered by the Life Insurance Corporation of India. The Company makes annual contributions based on a specified percentage of each covered employee’s salary. The Company has no further obligations under the plan beyond its annual contributions. The Company contributed Rs.68, Rs.63 and Rs.56 to the superannuation plan during the years ended March 31, 2015, 2014 and 2013, respectively.

Other contribution plans

In the United States, the Company sponsors a defined contribution 401(k) retirement savings plan for all eligible employees who meet minimum age and service requirements. The Company contributed Rs.195, Rs.162 and Rs.125 to the 401(k) retirement savings plan during the years ended March 31, 2015, 2014 and 2013, respectively. The Company has no further obligations under the plan beyond its annual matching contributions.

In the United Kingdom, certain social security benefits (such as pension, unemployment and disability) are funded by employers and employees through mandatory National Insurance contributions. The contribution amounts are determined based upon the employee’s salary. The Company has no further obligations under the plan beyond its monthly contributions. The Company contributed Rs.151, Rs.151 and Rs.128 to the National Insurance during the years ended March 31, 2015, 2014 and 2013, respectively.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

18. Employee benefits (continued)

Compensated absences

The Company provides for accumulation of compensated absences by certain categories of its employees. These employees can carry forward a portion of the unutilized compensated absences and utilize it in future periods or receive cash in lieu thereof as per the Company’s policy. The Company records a liability for compensated absences in the period in which the employee renders the services that increases this entitlement. The total liability recorded by the Company towards this obligation was Rs.616 and Rs.463 as at March 31, 2015 and 2014, respectively.

Long term incentive plan

Certain senior management employees of the Company participate in a long term incentive plan which is aimed at rewarding the individual, based on performance of such individual, their business unit/function and the Company as a whole, with significantly higher rewards for superior performances. The total liability recorded by the Company towards this benefit was Rs.323 as of March 31, 2015.

Total employee benefit expenses, including share based payments, incurred during the years ended March 31, 2015, 2014 and 2013 amounted to Rs.28,967, Rs.24,937 and Rs.20,413, respectively.

19. Employee stock incentive plans

Dr. Reddy’s Employees Stock Option Plan -2002 (the “DRL 2002 Plan”):

The Company instituted the DRL 2002 Plan for all eligible employees pursuant to the special resolution approved by the shareholders in the Annual General Meeting held on September 24, 2001. The DRL 2002 Plan covers all employees of DRL and its subsidiaries and directors (excluding promoter directors) of DRL and its subsidiaries (collectively, “eligible employees”). The Nomination, Governance and Compensation Committee of the Board of DRL (the “Committee”) administers the DRL 2002 Plan and grants stock options to eligible employees. The Committee determines which eligible employees will receive options, the number of options to be granted, the exercise price, the vesting period and the exercise period. The vesting period is determined for all options issued on the date of grant. The options issued under the DRL 2002 Plan vest in periods ranging between one and four years and generally have a maximum contractual term of five years.

The DRL 2002 Plan, as amended at annual general meetings of shareholders held on July 28, 2004 and on July 27, 2005, provides for stock option grants in two categories:

Category A: 300,000 stock options out of the total of 2,295,478 options reserved for grant having an exercise price equal to the fair market value of the underlying equity shares on the date of grant; and

Category B: 1,995,478 stock options out of the total of 2,295,478 options reserved for grant having an exercise price equal to the par value of the underlying equity shares (i.e., Rs.5 per option).

Under the DRL 2002 Plan, the exercise price of the fair market value options granted under Category A above is determined based on the average closing price for 30 days prior to the grant in the stock exchange where there is highest trading volume during that period. Notwithstanding the foregoing, the Committee may, after obtaining the approval of the shareholders in the annual general meeting, grant options with a per share exercise price other than fair market value and par value of the equity shares.

After the stock split effected in the form of stock dividend issued by the Company in August 2006, the DRL 2002 Plan provides for stock option grants in the above two categories as follows:


Particulars	Number of options reserved under category A		Number of options reserved under category B		Total
Options reserved under original Plan		300,000		1,995,478		2,295,478
Options exercised prior to stock dividend date (A)		94,061		147,793		241,854
Balance of shares that can be allotted on exercise of options (B)		205,939		1,847,685		2,053,624
Options arising from stock dividend (C)		205,939		1,847,685		2,053,624
Options reserved after stock dividend (A+B+C)		505,939		3,843,163		4,349,102

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

19. Employee stock incentive plans (continued)

Dr. Reddy’s Employees Stock Option Plan -2002 (the “DRL 2002 Plan”) (continued)

Stock option activity under the DRL 2002 Plan for the two categories of options during the years ended March 31, 2015 and 2014 is as follows:


	Year Ended March 31, 2015
	Shares arising out of options			Range of exercise prices		Weighted average exercise price		Weighted average remaining useful life (months)
Category A — Fair Market Value Options
Outstanding at the beginning of the period		10,000		Rs.	448	Rs.	448		44
Granted during the period		—			—		—		—
Expired/forfeited during the period		—			—		—		—
Exercised during the period		(10,000	)	Rs.	448	Rs.	448		—

Outstanding at the end of the period		—			—		—		—

Exercisable at the end of the period		—			—		—		—


	Year Ended March 31, 2015
	Shares arising out of options			Range of exercise prices		Weighted average exercise price		Weighted average remaining useful life (months)
Category B — Par Value Options
Outstanding at the beginning of the period		641,674		Rs.	5.00	Rs.	5.00		78
Granted during the period		230,840			5.00		5.00		90
Expired/forfeited during the period		(59,148	)		5.00		5.00		—
Exercised during the period		(227,912	)		5.00		5.00		—

Outstanding at the end of the period		585,454		Rs.	5.00	Rs.	5.00		71

Exercisable at the end of the period		43,425		Rs.	5.00	Rs.	5.00		40


	Year Ended March 31, 2014
	Shares arising out of options			Range of exercise prices		Weighted average exercise price		Weighted average remaining useful life (months)
Category A — Fair Market Value Options
Outstanding at the beginning of the period		11,000		Rs.	373.50-448	Rs.	441.23		52
Granted during the period		—			—		—		—
Expired/forfeited during the period		(1,000	)		373.50		373.50		—
Exercised during the period		—			—		—		—

Outstanding at the end of the period		10,000		Rs.	448	Rs.	448		44

Exercisable at the end of the period		10,000		Rs.	448	Rs.	448		44


	Year Ended March 31, 2014
	Shares arising out of options			Range of exercise prices		Weighted average exercise price		Weighted average remaining useful life (months)
Category B — Par Value Options
Outstanding at the beginning of the period		684,259		Rs.	5.00	Rs.	5.00		71
Granted during the period		258,870			5.00		5.00		90
Expired/forfeited during the period		(60,315	)		5.00		5.00		—
Exercised during the period		(241,140	)		5.00		5.00		—

Outstanding at the end of the period		641,674		Rs.	5.00	Rs.	5.00		78

Exercisable at the end of the period		50,818		Rs.	5.00	Rs.	5.00		42

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

19. Employee stock incentive plans (continued)

Dr. Reddy’s Employees Stock Option Plan -2002 (the “DRL 2002 Plan”) (continued)

The weighted average grant date fair value of par value options granted under category B above of the DRL 2002 Plan during the years ended March 31, 2015 and 2014 was Rs.2,318 and Rs.2,036 per option, respectively. The weighted average share price on the date of exercise of options during the years ended March 31, 2015 and 2014 was Rs.2,525 and Rs.2,143 per share, respectively.

The aggregate intrinsic value of options exercised under the DRL 2002 Plan (both category A and B) during the years ended March 31, 2015 and 2014 was Rs.595 and Rs.516, respectively. As of March 31, 2015, options outstanding under the DRL 2002 Plan (both category A and B) had an aggregate intrinsic value of Rs.2,040 and options exercisable under the DRL 2002 Plan (both category A and B) had an aggregate intrinsic value of Rs.151.

The term of the DRL 2002 plan was extended for a period of 10 years effective as of January 29, 2012 by the shareholders at the Company’s Annual General Meeting held on July 20, 2012.

Dr. Reddy’s Employees ADR Stock Option Plan, 2007 (the “DRL 2007 Plan”)

The Company instituted the DRL 2007 Plan for all eligible employees in pursuance of the special resolution approved by the shareholders in the Annual General Meeting held on July 27, 2005. The DRL 2007 Plan became effective upon its approval by the Board of Directors on January 22, 2007. The DRL 2007 Plan covers all employees and directors (excluding promoter directors) of DRL and its subsidiaries (collectively, “eligible employees”). The Committee administers the DRL 2007 Plan and grants stock options to eligible employees. The Committee determines which eligible employees will receive the options, the number of options to be granted, the exercise price, the vesting period and the exercise period. The vesting period is determined for all options issued on the date of grant. The options issued under the DRL 2007 Plan vest in periods ranging between one and four years and generally have a maximum contractual term of five years.

The DRL 2007 Plan provides for option grants in two categories:

Category A: 382,695 stock options out of the total of 1,530,779 stock options reserved for grant having an exercise price equal to the fair market value of the underlying equity shares on the date of grant; and

Category B: 1,148,084 stock options out of the total of 1,530,779 stock options reserved for grant having an exercise price equal to the par value of the underlying equity shares (i.e., Rs.5 per option).

No options have been granted under Category A as of March 31, 2015. Stock options activity for category B options under the DRL 2007 Plan during the years ended March 31, 2015 and 2014 is as follows:


	Year Ended March 31, 2015
	Shares arising out of options			Range of exercise prices		Weighted average exercise price		Weighted average remaining useful life (months)
Category B — Par Value Options
Outstanding at the beginning of the period		97,463			Rs.5.00		Rs.5.00		79
Granted during the period		45,796			5.00		5.00		90
Expired/forfeited during the period		(10,515	)		5.00		5.00		—
Exercised during the period		(34,394	)		5.00		5.00		—

Outstanding at the end of the period		98,350			Rs.5.00		Rs.5.00		72

Exercisable at the end of the period		6,730			Rs.5.00		Rs.5.00		42


	Year Ended March 31, 2014
	Shares arising out of options			Range of exercise prices		Weighted average exercise price		Weighted average remaining useful life (months)
Category B — Par Value Options
Outstanding at the beginning of the period		98,608		Rs.	5.00	Rs.	5.00		73
Granted during the period		44,240			5.00		5.00		90
Expired/forfeited during the period		(14,132	)		5.00		5.00		—
Exercised during the period		(31,253	)		5.00		5.00		—

Outstanding at the end of the period		97,463		Rs.	5.00	Rs.	5.00		79

Exercisable at the end of the period		7,265		Rs.	5.00	Rs.	5.00		44

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

19. Employee stock incentive plans (continued)

Dr. Reddy’s Employees ADR Stock Option Plan, 2007 (the “DRL 2007 Plan”) (continued)

The weighted average grant date fair value of par value options granted under category B of the DRL 2007 Plan during the years ended March 31, 2015 and 2014 was Rs.2,283 and Rs.2,036, respectively. The weighted average share price on the date of exercise of options during the year ended March 31, 2015 and 2014 was Rs.2,604 and Rs.2,122, respectively.

The aggregate intrinsic value of options exercised under the DRL 2007 Plan during the year ended March 31, 2015 and 2014 was Rs.89 and Rs.66, respectively. As of March 31, 2015, options outstanding under the DRL 2007 Plan had an aggregate intrinsic value of Rs.343 and options exercisable under the DRL 2007 Plan had an aggregate intrinsic value of Rs.23.

Valuation of stock options:

The fair value of stock options granted under the DRL 2002 Plan and the DRL 2007 Plan has been measured using the Black–Scholes-Merton model at the date of the grant.

The Black-Scholes-Merton model includes assumptions regarding dividend yields, expected volatility, expected terms and risk free interest rates. In respect of par value options granted under category B, the expected term of an option (or “option life”) is estimated based on the vesting term, contractual term, as well as expected exercise behavior of the employees receiving the option. In respect of fair market value options granted under category A, the option life is estimated based on the simplified method. Expected volatility of the option is based on historical volatility, during a period equivalent to the option life, of the observed market prices of the Company’s publicly traded equity shares. Dividend yield of the options is based on recent dividend activity. Risk-free interest rates are based on the government securities yield in effect at the time of the grant. These assumptions reflect management’s best estimates, but these assumptions involve inherent market uncertainties based on market conditions generally outside of the Company’s control. As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially impacted. Further, if management uses different assumptions in future periods, stock based compensation expense could be materially impacted in future years.

The estimated fair value of stock options is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards.

The weighted average inputs used in computing the fair value of options granted were as follows:


	Grants made on
	July 14, 2014			June 15, 2014			May 25, 2014			May 13, 2013
Expected volatility		23.20	%		23.15	%		22.52	%		20.50	%
Exercise price	Rs.	5.00		Rs.	5.00		Rs.	5.00		Rs.	5.00
Option life		2.5 Years			2.5 Years			2.5 Years			2.5 Years
Risk-free interest rate		8.55	%		8.38	%		8.50	%		7.43	%
Expected dividends		0.67	%		0.74	%		0.78	%		0.72	%
Grant date share price	Rs.	2,695.00		Rs.	2,445.15		Rs.	2,308.70		Rs.	2,077.30

In addition to the above, during the year ended March 31, 2015, the Company adopted a new program to grant performance linked stock options to certain employees under the DRL 2002 Plan and the DRL 2007 Plan. Under this program, performance targets are measured each year against pre-defined interim targets over the three year period ending on March 31, 2017 and eligible employees are granted stock options upon meeting such targets. The stock options so granted are ultimately vested with the employees who meet subsequent service vesting conditions which range from 1 to 4 years. After vesting, such stock options generally have a maximum contractual term of five years.

The fair value of services received in return for stock options granted to employees is measured by reference to the fair value of stock options granted. The fair value of stock options has been measured using the Black-Scholes-Merton valuation model at the date of the grant.

Share-based payment expense

For the years ended March 31, 2015, 2014 and 2013, the Company recorded employee share based payment expense of Rs.498, Rs.436 and Rs.390, respectively. As of March 31, 2015, there was approximately Rs.558 of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of 3.60 years.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

20. Provisions

The details of changes in provisions during the year ended March 31, 2015 are as follows:


Particulars	Allowance for sales return(1)			Environmental liability(2)			Legal and others			Total
Balance as at April 1, 2014	Rs.	2,504		Rs.	58		Rs.	349		Rs.	2,911
Provision made during the year		3,535			—			12			3,547
Provision used or reversed during the year		(2,184	)		—			(35	)		(2,219	)
Effect of changes in foreign exchange rates		50			(5	)		—			45

Balance as at March 31, 2015	Rs.	3,905		Rs.	53		Rs.	326		Rs.	4,284

Current	Rs.	3,905		Rs.	—		Rs.	326		Rs.	4,231
Non-current		—			53			—			53

	Rs.	3,905		Rs.	53		Rs.	326		Rs.	4,284

⁽¹⁾

Provision for sales returns is accounted by recording a provision based on the Company’s estimate of expected sales returns. See Note 3(l) for the Company’s accounting policy on sales returns.

⁽²⁾

As a result of the acquisition of a unit of The Dow Chemical Company in ~~Note 34, during~~April 2008, the Company assumed a liability for contamination of the Mirfield site acquired amounting to Rs.39 (carrying value Rs.53). The seller is required to indemnify the Company for this liability. Accordingly, a corresponding asset has also been recorded in the statements of financial position. During the year ended March 31, 2011, the Company ~~effected a scheme~~was required to provide security for ~~issuance of bonus debentures to the shareholders of the Company. Per the terms of this approved scheme, the Compensation Committee of the Board of Directors of~~such environmental liabilities and, accordingly, the Company has ~~been authorized to reduce~~deposited Rs.83 (carrying value Rs.107) as additional security and recorded the ~~existing exercise price of category A fair market value options by 30 per option~~same as ~~and when considered appropriate. The Compensation Committee resolved not to reduce the existing exercise price at its meeting held on May 12, 2011.~~restricted cash.

21. Trade and other payables

Trade and other payables consist of the following:


	As at March 31,
	2015		2014
Due to related parties	Rs.	4	Rs.	1
Others		10,656		10,502

	Rs.	10,660	Rs.	10,503

22. Other liabilities

Other liabilities consist of the following:


	As at March 31,
	2015		2014
Current
Advance from customers	Rs.	280	Rs.	306
Statutory dues payable		596		451
Accrued expenses		12,529		11,138
Deferred revenue		776		372
Others		3,136		2,975

	Rs.	17,317	Rs.	15,242

Non-current
Statutory dues payable	Rs.	8	Rs.	8
Deferred revenue		2,112		959
Others		1,206		816

	Rs.	3,326	Rs.	1,783

23. Revenue

Revenue consists of the following:


	Year Ended March 31,
	2015		2014		2013
Sales	Rs.	146,131	Rs.	130,287	Rs.	113,917
Services		1,689		1,632		2,070
License fees		369		251		279

	Rs.	148,189	Rs.	132,170	Rs.	116,266

Revenue includes excise duties of Rs.829, Rs.820 and Rs.718 for the years ended March 31, 2015, 2014 and 2013, respectively.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~Aurigene Discovery Technologies Ltd. Employee Stock Option Plan 2003 (the “Aurigene ESOP Plan”):~~

Aurigene Discovery Technologies Limited (“Aurigene”), a consolidated subsidiary, adopted the Aurigene ESOP Plan to provide for issuance of stock options to employees of Aurigene and its subsidiary, Aurigene Discovery Technologies Inc. (“Aurigene Discovery”), who have completed one full year of service with Aurigene and Aurigene Discovery. Aurigene reserved 4,550,000 of its ordinary shares for issuance under the Aurigene ESOP Plan. Under the Aurigene ESOP Plan, stock options were granted at an exercise price as determined by Aurigene’s compensation committee. The options issued under the Aurigene ESOP Plan vested in periods ranging from one to three years, including certain options which vested immediately on grant, and generally had a maximum contractual term of three years.

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

(in millions, except share and per share data and where otherwise stated)

~~20.~~

~~Employee stock incentive plans (continued)~~

~~Aurigene Discovery Technologies Ltd. Employee Stock Option Plan 2003 (the “Aurigene ESOP Plan”) (continued):~~

24. Other (income)/expense, net

Other (income)/expense, net consists of the following:


	Year Ended March 31,
	2015			2014			2013
Loss/(profit) on sale of property, plant and equipment and intangibles, net	Rs.	144		Rs.	(53	)	Rs.	(143	)
Sale of spent chemical		(521	)		(481	)		(588	)
Miscellaneous income⁽¹⁾		(540	)		(882	)		(1,580	)
Provision/(reversal of provision) for expected claim from an innovator⁽²⁾		—			—			(168	)

	Rs.	(917	)	Rs.	(1,416	)	Rs.	(2,479	)

⁽¹⁾

Miscellaneous income for the year ended March 31, 2014 includes Rs.415 (CAD6.75) from the resolution of litigation associated with the sale of one of the Company’s generic products in North America.

Miscellaneous income for the year ended March 31, 2013, includes Rs.1,112 towards settlement of the Company’s ongoing litigation with Nordion Inc. (formerly known as MDS Inc.). During March 2013, the Company entered into an agreement with Nordion Inc. to settle its ongoing litigation for alleged breach of service obligations by Nordion Inc. during the years 2000 to 2004. As part of the settlement, the Company received a total amount of Rs.1,220 (U.S.$22.5) from Nordion Inc., out of which Rs.108 (U.S.$2) was towards reimbursement of research and development cost and was recorded as a reduction in such cost. The balance of Rs.1,112 (U.S.$20.5) was compensation for lost profits and was recorded as part of other income.

⁽²⁾

This reversal of provision of Rs.168 for expected claim from an innovator pertains to the resolution of litigation surrounding the Company’s sales of olanazapine in Canada.

25. Finance (expense)/income, net

Finance (expense)/income, net consists of the following:


	Year Ended March 31,
	2015			2014			2013
Interest income	Rs.	1,061		Rs.	1,085		Rs.	900
Dividend and profit on sale of other investments⁽¹⁾		755			217			213
Foreign exchange gain, net⁽²⁾		958			372			365
Interest expense		(1,092	)		(1,274	)		(1,018	)

	Rs.	1,682		Rs.	400		Rs.	460

⁽¹⁾

Profit on sale of other investments primarily represents amounts reclassified from other comprehensive income to the income statement on redemption of the Company’s “available for sale” financial instruments.

⁽²⁾

During the year ended March 31, 2008, the Aurigene ESOP Plan was amended to increase the total number of options reserved for issuance to 7,500,000 and to provide for Aurigene’s recovery of the Fringe Benefit Tax from employees upon the exercise of their stock options.

      Year Ended March 31, 2012
      Shares arising
of options Range of exercise
prices    Weighted-
average exercise
price    Weighted-average
remaining contractual out
life (months)
Outstanding at the beginning of the period
   1,009,090    10-14.99       11.94       21
Granted during the year
   —      —         —         —
Exercised during the year
   —      —         —         —
Expired/forfeited during the period
   (1,009,090 ) 10-14.99       11.94       —






Outstanding at the end of the period
   —      —         —         —






Exercisable at the end of the period
   —      —         —         —

      Year Ended March 31, 2011
      Shares arising
of options Range of exercise
prices    Weighted-
average exercise
price    Weighted-average
remaining contractual out
life (months)
Outstanding at the beginning of the period
   1,012,331    10-14.99       11.95       34
Granted during the year
   —      —         —         —
Exercised during the year
   —      —         —         —
Expired/forfeited during the period
   (3,241 ) 10-14.99       11.63       —






Outstanding at the end of the period
   1,009,090    10-14.99       11.94       21






Exercisable at the end of the period
   1,009,090    10-14.99       11.94       21

During the three months ended September 30, 2011, the Company cancelled all 1,009,090 stock options which were fully vested and outstanding under the Aurigene ESOP Plan, upon surrender of the options by the employees, and the Aurigene ESOP Plan was closed by a resolution of the shareholders. Accordingly, there were no stock options outstanding under the Aurigene ESOP Plan as of March 31, 2012.

~~Share-based payment expense~~

For the years ended March 31, 2012, 2011 and 2010, 326, 265 and 226, respectively, has been recorded as employee share-based payment expense under all employee stock incentive plans of the Company. As of March 31, 2011, there was approximately 268 of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted- average period of 2.77 years.

~~21. Research and development arrangements~~

During the year ended March 31, 2005, the Company entered into an agreement with I-VEN Pharma Capital Limited (“I-VEN”) for the joint development and commercialization of a portfolio of 36 generic drug products. As per the terms of the agreement, I-VEN had a right to fund up to 50% of the project costs (development, registration and legal costs) related to these products and the related U.S. Abbreviated New Drug Applications (“ANDA”) filed or to be filed, subject to a maximum contribution of U.S.$56. Upon successful commercialization of these products, the Company was required to pay I-VEN a royalty on net sales at agreed rates for a period of 5 years from the date of commercialization of each product.

The first tranche of 985(U.S.$23) was funded by I-VEN on March 28, 2005. This amount received from I-VEN was initially recorded as an advance and subsequently credited in the income statement as a reduction of research and development expenses upon completion of specific milestones as detailed in the agreement. A milestone (i.e., a product filing as per the terms of the agreement) was considered to be completed once the appropriate ANDA was submitted by the Company to the U.S. FDA. Achievement of a milestone entitled the Company to reduce the advance and credit research and development expenses in a fixed amount equal to I-VEN’s share of the research and development costs of the product (which varied depending on whether the ANDA was a Paragraph III or Paragraph IV filing). Accordingly, based on product filings made by the Company through March 31, 2007, an aggregate amount of 933 was credited to research and development expense during the years ended March 31, 2005, 2006 and 2007.

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~21. Research and development arrangements (continued)~~

As per the agreement, in April 2010 and upon successful achievement of certain performance milestones specified in the agreement (e.g., successful commercialization of a specified number of products, and achievement of specified sales milestones), I-VEN had a one-time right to require the Company to pay I-VEN a portfolio termination value amount for such portfolio of products. In the event I-VEN exercised this portfolio termination value option, then it would not be entitled to the sales-based royalty payment for the remaining contractual years.

During the year ended March 31, 2010, the Company and I-VEN reached an agreement for I-VEN to exercise the portfolio termination value option for a portfolio termination value amount of 2,680 (U.S.$57). Accordingly,2015, the Company recorded ~~an asset~~a foreign exchange loss of ~~2,680 (U.S.$57) (in the form~~ Rs.843 on translation of ~~a portfolio product related intangibles essentially representing a relief from future royalty costs payable~~certain monetary assets and liabilities of its subsidiary in Venezuela. Refer to ~~I-VEN) and an equivalent liability representing consideration payable to I-VEN.~~

On October 1, 2010, the Company, DRL Investments Limited (a wholly-owned subsidiary of Dr. Reddy’s) and I-VEN’s beneficial interest holders consummated and settled the transaction by restructuring it as a purchase of the controlling interest in I-VEN by DRL Investments Limited in exchangeNote 39 for payment to the I-VEN beneficial interest holders of 2,680, including an amount of 150 set aside in an escrow fund for a period of 15 months for the purpose of funding certain indemnification obligations of such beneficial interest holders. Upon the completion of the 15 month period, the aforesaid set aside amount of 150 was paid out during the year ended March 31, 2012.

~~22. Provisions~~

~~Provisions consist of the following:~~

   As at March 31,
   2012    2011
Sales returns
   1,339       980
Environmental liability
   47       41
Legal
   392       334
Others
   195       —




   1,973       1,355

~~The details of changes in provisions during the year ended March 31, 2012 are as follows:~~

Particulars
   Allowance for
sales return ⁽¹⁾ Environmental
Liability⁽²⁾    Legal    Others    Total
Balance as at April 1, 2011
   980    41       334       —         1,355
Provision made during the year
   1,335    6       58       195       1,594
Provision used during the year
   (976 ) —         —         —         (976 )








Balance as at March 31, 2012
   1,339    47       392       195       1,973








Current
   1,339    —         392       195       1,926
Non-current
   —    47       —         —         47








   1,339    47       392       195       1,973

~~(1)~~

~~Provision for sales returns is accounted by recording a provision based on the Company’s estimate of expected sales returns. See Note 3.k. for~~further details.

~~(2)~~

As a result of the acquisition of a unit of The Dow Chemical Company, the Company assumed a liability for contamination of the Mirfield site acquired amounting to 39 (carrying value 47). Because the seller is required to indemnify the Company for this liability, a corresponding asset has also been recorded in the statements of financial position. During the year ended March 31, 2011, the Company was required to provide security for such environmental liabilities and, accordingly, the Company has deposited 83 (carrying value 94) as additional security.

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

(in millions, except share and per share data and where otherwise stated)

26. Income taxes

a. Income tax (expense)/benefit recognized in the income statement

Income tax (expense)/benefit recognized in the income statement consists of the following:


	Year Ended March 31,
	2015			2014			2013
Current taxes
Domestic	Rs.	(4,461	)	Rs.	(5,090	)	Rs.	(4,310	)
Foreign		(2,545	)		(1,472	)		(2,141	)

	Rs.	(7,006	)	Rs.	(6,562	)	Rs.	(6,451	)

Deferred taxes (expense)/benefit
Domestic	Rs.	637		Rs.	(294	)	Rs.	(257	)
Foreign		385			1,762			1,808

	Rs.	1,022		Rs.	1,468		Rs.	1,551

Total income tax expense recognized in the income statement	Rs.	(5,984	)	Rs.	(5,094	)	Rs.	(4,900	)

b. Income tax (expense)/benefit recognized directly in equity

Income tax (expense)/benefit recognized directly in equity consist of the following:


	Year Ended March 31,
	2015			2014			2013
Tax effect on changes in fair value of other investments	Rs.	(366	)	Rs.	(14	)	Rs.	(12	)
Tax effect on foreign currency translation differences		174			(2	)		(7	)
Tax effect on effective portion of change in fair value of cash flow hedges		96			80			(722	)
Tax effect on actuarial gains/losses on defined benefit obligations		16			(20	)		68

	Rs.	(80	)	Rs.	44		Rs.	(673	)

c.Reconciliation of effective tax rate

The following is a reconciliation of the Company’s effective tax rates for the years ended March 31, 2015, 2014 and 2013:


	Year Ended March 31,
	2015			2014			2013
Profit before income taxes	Rs.	28,163		Rs.	26,606			Rs.21,676
Enacted tax rate in India		33.99	%		33.99	%		32.45	%
Computed expected tax benefit/(expense)	Rs.	(9,572	)	Rs.	(9,043	)	Rs.	(7,034	)
Effect of:
Differences between Indian and foreign tax rates	Rs.	566		Rs.	1,003		Rs.	1,207
Impairment of product related intangibles and goodwill		—			169			(214	)
(Unrecognized)/recognition of previously unrecognized deferred tax assets, net		18			(687	)		(332	)
Expenses not deductible for tax purposes		(110	)		(117	)		(203	)
Share-based payment expense		—			684			(105	)
Interest expense not deductible for tax purposes		—			—			(25	)
Income exempt from income taxes		794			661			412
Foreign exchange differences		(380	)		230			(131	)
Incremental deduction allowed for research and development costs		2,265			2,026			1,311
Qualified domestic production activities deduction in the United States		4			9			51
Effect of change in tax rate		(25	)		—			(60	)
Investment allowance deduction		251			67			—
Others		205			(96	)		223

Income tax benefit/(expense)	Rs.	(5,984	)	Rs.	(5,094	)	Rs.	(4,900	)

Effective tax rate		21	%		19	%		23	%

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

26. Income taxes (continued)

The Company’s consolidated weighted average tax rates for the years ended March 31, 2015 and 2014 were 21% and 19%, respectively. Income tax expense was Rs.5,984 for the year ended March 31, 2015, as compared to income tax expense of Rs.5,094 for the year ended March 31, 2014. The effective tax rate for the year ended March 31, 2014 was lower primarily as a result of a favorable order from the Income Tax Appellate Tribunal, Hyderabad, India on a previously litigated tax matter relating to deductibility of share-based payment expense.

The rate of weighted deduction on the Company’s eligible research and development expenditure was equal to 200% for the years ended March 31, 2015 and 2014, respectively.

d. Unrecognized deferred tax assets and liabilities

The details of unrecognized deferred tax assets and liabilities are summarized below:


	As at March 31,
	2015		2014
Deductible temporary differences, net	Rs.	590	Rs.	1,055
Operating tax loss carry forward		2,391		2,745

	Rs.	2,981	Rs.	3,800

During the year ended March 31, 2015, the Company, based on probable future taxable profit, has recognized previously unrecognized deferred tax assets of Rs.485 pertaining primarily to interest loss carry forward in Reddy Holding GmbH, Germany.

During the year ended March 31, 2015, the Company did not recognize deferred tax assets on tax losses of Rs.313 pertaining primarily to Dr. Reddy’s Laboratories New York, Inc. The above tax losses expire at various dates ranging from 2016 through 2036.

Deferred income taxes are not provided on undistributed earnings of Rs.43,921 and Rs.34,156 as at March 31, 2015 and 2014, respectively, of subsidiaries outside India, where it is expected that earnings of the subsidiaries will not be distributed in the foreseeable future. The Company indefinitely reinvests all the accumulated undistributed earnings of subsidiaries, and accordingly, has not recorded any deferred taxes in relation to such undistributed earnings of its foreign subsidiaries. It is impracticable to determine the taxes payable when these earnings are remitted.

e. Deferred tax assets and liabilities

The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities and a description of the items that created these differences is given below:


	Year Ended March 31,
	2015			2014
*Deferred tax assets/(liabilities):*
Inventory	Rs.	3,477		Rs.	3,875
Minimum Alternate Tax*		644			—
Trade and other receivables		1,275			970
Operating tax loss and interest loss carry-forward		810			909
Other current assets		308			237
Property, plant and equipment		(1,230	)		(1,141	)
Other intangible assets		(1,145	)		(1,717	)
Others		(126	)		177

Net deferred tax assets	Rs.	4,013		Rs.	3,310

~~22. Provisions (continued)~~

~~The details of changes in provisions during the year ended March 31, 2011 are as follows:~~

Particulars
   Allowance for
sales return Environmental
Liability    Legal    Total
Balance as at April 1, 2010
   839    39       255       1,133
Provision made during the year
   731    2       79       812
Provision used during the year
   (590 ) —         —         (590 )






Balance as at March 31, 2011
   980    41       334       1,355






Current
   980    —         334       1,314
Non-current
   —      41       —         41






   980    41       334       1,355

~~23. Trade payables~~

~~Trade payables consist of the following:~~

   As at March 31,
   2012    2011
Due to related parties
   95       82
Others
   9,407       8,398




   9,502       8,480

~~24. Other liabilities~~

~~Other liabilities consist of the following:~~

   As at March 31,
   2012    2011
Current

Advance from customers
   242       399
Statutory dues payable
   339       235
Accrued expenses
   10,568       7,140
Deferred revenue
   207       104
Others
   2,290       3,811




   13,646       11,689




Non-current

Statutory dues payable
   40       45
Deferred revenue
   267       328
Others
   752       293




   1,059       666




   14,705       12,355

~~25. Revenue~~

~~Revenue consists of the following:~~

   Year Ended March 31,
   2012    2011    2010
Sales
   94,401       72,952       68,616
Services
   2,336       1,741       1,661






   96,737       74,693       70,277

~~Revenue includes excise duties of 405, 356 and 316 for the years ended March 31, 2012, 2011 and 2010, respectively.~~

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~26. Other (income)/expense, net~~

~~Other (income)/expense, net consists of the following:~~

   Year Ended March 31,
   2012 2011 2010
Loss/(Profit) on sale of property, plant and equipment and intangibles, net
   9    (271 ) 24
Sale of spent chemical
   (382 ) (255 ) (209 )
Negative goodwill on acquisition of business
   —      (73 ) —
Miscellaneous income
   (402 ) (596 ) (432 )
Settlement of legal claim from innovator (1)
   10    80    48


   (765 ) (1,115 ) (569 )

~~(1)~~

During the year ended March 31, 2012 and March 31, 2011, the Company recorded an amount of 10 and 80, respectively, as its best estimate of the probable liability arising out of the Company’s olanzapine litigation in Canada (Refer to Note 38 for details). As at March 31, 2012, the total provision on this matter was 162.

~~27. Finance (expense)/income, net~~

~~Finance (expense)/income, net consists of the following:~~

   Year Ended March 31,
   2012 2011 2010
Interest income
   377    105    249
Dividend and profit on sale of investments, net
   161    68    48
Foreign exchange gain, net
   689    —    72


   1,227    173    369


Foreign exchange loss, net
   —    (57 ) —
Interest expense on borrowings
   (1,067 ) (232 ) (372 )
Loss on extinguishment of debt
   —    (73 ) —


   (1,067 ) (362 ) (372 )


Finance (expense)/income, net
   160    (189 ) (3 )

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~28. Income taxes~~

~~a. Income tax (expense)/benefit recognized in the income statement~~

~~Income tax (expense)/benefit recognized in the income statement consists of the following:~~

   Year Ended March 31,
   2012 2011 2010
Current taxes (expense)/benefit

Domestic
   (3,621 ) (2,253 ) (2,552 )
Foreign
   (733 ) (673 ) (684 )


   (4,354 ) (2,926 ) (3,236 )


Deferred taxes (expense)/benefit

Domestic
   (424 ) 698    79
Foreign
   574    825    2,172


   150    1,523    2,251


Total income tax (expense)/benefit in income statement
   (4,204 ) (1,403 ) (985 )

~~b. Income tax (expense)/benefit recognized directly in equity~~

~~Income tax (expense)/benefit recognized directly in equity consist of the following:~~

   Year Ended March 31,
   2012 2011 2010
Tax effect on changes in fair value of other investments
   (3 ) —      —
Tax effect on foreign currency translation differences
   106    (59 ) 150
Tax effect on effective portion of change in fair value of cash flow hedges
   757    —      (252 )


   860    (59 ) (102 )

c.~~Reconciliation of effective tax rate~~

~~The following is a reconciliation of the Company’s effective tax rates for the years ended March 31, 2012, 2011 and 2010:~~

   Year Ended March 31,
   2012 2011 2010
Income/(loss) before income taxes and non-controlling interest
   18,466    12,443    2,053
Enacted tax rate in India
   32.45 % 33.22 % 33.99 %
Computed expected tax benefit/(expense)
   (5,992 ) (4,134 ) (698 )
Effect of:

Differences between Indian and foreign tax rates
   1,089    791    562
Impairment of goodwill
   —      —      (1,598 )
Unrecognized deferred tax assets
   (563 ) (230 ) (134 )
Expenses not deductible for tax purposes
   (459 ) (207 ) (87 )
Share-based payment expense not deductible for tax purposes
   (88 ) (72 ) (55 )
Interest expense not deductible for tax purposes
   (34 ) (18 ) (32 )
Income exempt from income taxes
   168    714    746
Foreign exchange differences
   236    105    (142 )
Incremental deduction allowed for research and development costs
   1,332    1,422    409
Effect of change in tax rate
   (13 ) 103    (77 )
Others
   120    123    121


Income tax benefit/(expense)
   (4,204 ) (1,403 ) (985 )


Effective tax rate
   23 % 11 % 48 %

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~28. Income Taxes (continued)~~

~~The increase in the Company’s effective tax rate during the year ended March 31, 2012 was primarily attributable to the following factors:~~

reduced tax incentives, as well as expiration of a tax holiday period, under Indian laws which applied to certain of the company’s facilities located in India, amounting to an increase in the effective tax rate by 4%.

~~higher revenues from the launch of Company’s product olanzapine in the United States, amounting to an increase in the effective tax rate by approximately 3%; and~~

the unfavorable impact of changes in the profit mix of the Company’s subsidiaries (i.e. a decrease in the proportion of profit from subsidiaries with lower tax rates and an increase in the proportion of profit from subsidiaries with higher tax rates) coupled with an increase in expenses not deductible for tax purposes.

The rate of weighted deduction on the Company’s eligible research and development expenditure was equal to 200% for the years ended March 31, 2012 and 2011. Decrease in our eligible research and development expenditure did not cause any significant impact on the effective tax rate.

During the year ended March 31, 2010, the German tax authorities concluded their preliminary tax audits for betapharm, covering the fiscal years 2001 to 2004, and objected to certain tax positions taken in those years’ income tax returns filed by betapharm. The Company’s best estimate of the additional tax liability that could arise on conclusion of the tax audits, was 302 (EUR 5). Accordingly, the Company recorded such amount as additional current tax expense in the income statement for the year ended March 31, 2010. Included as part of the Company’s acquisition of betapharm during the year ended March 31, 2006 were certain preexisting income tax liabilities pertaining to betapharm for the fiscal periods prior to the date of the closing of the acquisition (in March 2006). Accordingly, the terms of the Sale and Purchase Agreement provided that a certain portion of the purchase consideration amounting to 324 (EUR 6) would be set aside in an escrow account, to be set off against certain indemnity claims by the Company in respect of legal and tax matters that may arise covering such pre-acquisition periods. The right to make tax related indemnity claims would lapse and be time barred at the end of the seven year anniversary of the closing of the acquisition (in March 2013). Upon receipt of such preliminary tax demands, the management of betapharm initiated the process of exercising such indemnity rights against the sellers of betapharm and had concluded that as of March 31, 2010 the Company’s recovery of the full tax amounts demanded by the German tax authorities was virtually certain. Accordingly, a separate asset amounting to 302 (EUR 5) representing such indemnity rights against the sellers was recorded as part of “other assets” in the statement of financial position, with a corresponding credit to the current tax expense for the year ended March 31, 2010.

During the year ended March 31, 2012, the aforesaid German tax audits for the period 2001 to 2004 were completed and a portion of the liability was determined and the payments were made accordingly. The sellers of betapharm paid the Company a corresponding amount pursuant to the Company’s indemnity rights described above.

There are certain income-tax related legal proceedings that are pending against the Company. Potential liabilities, if any, have been adequately provided for, and the Company does not currently estimate any material incremental tax liability in respect of these matters.

~~d. Unrecognized deferred tax assets and liabilities~~

~~Changes in unrecognized deferred tax assets and liabilities during the years ended March 31, 2012 and 2011 are summarized below:~~

   As at
April 1,
2010    Additions    Recognition    As at
March 31,
2011    Additions    Recognition/
expired    As at
March 31,
2012
Deductible temporary differences, net
   124       10       —         134       268       —         402
Operating tax loss carry forward
   1,131       220       (176)       1,175       295       (304)       1,166














   1,255       230       (176)       1,309       563       (304)       1,568

During the year ended March 31, 2012, the Company did not recognize deferred tax assets on tax losses of 295 pertaining primarily to Dr. Reddy's Laboratories New York, Inc., Aurigene Discovery Technologies Inc., Dr. Reddy’s Laboratories (Australia) Pty Ltd. and Dr. Reddy's SRL. Based on future projections, the Company believes that it is not probable that future taxable profits will be available against which the Company can utilize these benefits. The above tax losses expire at various dates ranging from 2015 through 2032.

During the year ended March 31, 2012, 304 in tax losses in certain tax jurisdictions expired. This primarily represents tax losses in APR LLC and Dr. Reddys SRL carried forward from past fiscal years.

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~28. Income Taxes (continued)~~

Deferred tax liabilities amounting to 6,208 and 5,183 have not been recognized on temporary differences as at March 31, 2012 and 2011, respectively, related to investments in subsidiaries because it is probable that the temporary differences will not reverse in the foreseeable future.

~~e. Deferred tax assets and liabilities~~

~~The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities and a description of the items that created these differences is given below:~~

   As of March 31,
   2012    2011
Deferred tax assets:

Inventory
   1,130       819
Minimum alternate tax
   —         862
Trade receivables
   350       174
Operating tax loss carry-forward
   1,152       1,233
Other current liabilities
   890       137
Others
   269       286




Total deferred tax assets
   3,791       3,511




Deferred tax liabilities:

Property, plant and equipment
   (694)       (700)
Other intangible assets
   (2,065)       (2,463)
Others
   (199)       (435)




Total deferred tax liabilities
   (2,958)       (3,598)




Net deferred tax asset/(liability)
   833       (87)

In assessing the realizability of the deferred income tax assets, management considers whether some portion or all of the deferred income tax assets will not be realized. The ultimate realization of the deferred income tax assets and tax loss carry forwards is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategy in making this assessment. Based on the level of historical taxable income and projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes that the Company will realize the benefits of those recognized deductible differences and tax loss carry forwards. The amount of deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced.

Operating loss carry forward consists of business losses, unabsorbed depreciation and unabsorbed interest carry-forwards. A portion of this total loss can be carried indefinitely and the remaining amounts expire at various dates ranging from 2015 through 2032.

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~28. Income Taxes (continued)~~

~~f. Movement in temporary differences during the years ended March 31, 2012 and 2011.~~

   As at April 1,
2010 Movement Recognized
in equity Acquired in
business
combination As at March
31, 2011
Deferred tax assets:

Inventory
   602    217    —      —      819
Minimum alternate tax
   —      862    —      —      862
Trade receivables
   233    (59 ) —      —      174
Operating tax loss carry-forward
   950    283    —      —      1,233
Other current liabilities
   100    37    —      —      137
Others
   294    (8 ) —      —      286


Total deferred tax assets
   2,179    1,332    —      —      3,511


Deferred tax liabilities

Property, plant and equipment
   (589 ) (111 ) —      —      (700 )
Intangible assets
   (2,464 ) 46    —      (45 ) (2,463 )
Others
   (564 ) 198    (69 ) —      (435 )


Total deferred tax liabilities
   (3,617 ) 133    (69 ) (45 ) (3,598 )


Net deferred tax assets/(liabilities)
   (1,438 ) 1,465    (69 ) (45 ) (87 )

~~[Continued from above table, first column(s) repeated]~~

   As at March 31,
2011 Movement Recognized
in equity Acquired in
business
combination    As at March 31,
2012
Deferred tax assets:

Inventory
   819    311    —      —         1,130
Minimum alternate tax
   862    (862 ) —      —         —
Trade receivables
   174    176    —      —         350
Operating tax loss carry-forward
   1,233    (81 ) —      —         1,152
Other current liabilities
   137    (4 ) 757    —         890
Others
   286    (44 ) 27    —         269




Total deferred tax assets
   3,511    (504 ) 784    —         3,791




Deferred tax liabilities

Property, plant and equipment
   (700 ) 6    —      —         (694 )
Intangible assets
   (2,463 ) 398    —      —         (2,065 )
Others
   (435 ) 239    (3 ) —         (199 )




Total deferred tax liabilities
   (3,598 ) 643    (3 ) —         (2,958 )




Net deferred tax assets/(liabilities)
   (87 ) 139    781    —         833

~~(1)~~

~~Movement during the year ended March 31, 2012 and 2011 includes the amounts of (11) and (58), respectively, which represent exchange differences arising due to foreign currency translations.~~

As per Indian tax laws, companies are liable for a Minimum ~~Alternative~~Alternate Tax (“MAT” tax) when current tax, as computed under the provisions of the Income Tax Act, 1961 (“Tax Act”), is determined to be below the MAT tax computed under section 115JB of the Tax Act. The excess of MAT tax over current tax is eligible to be carried forward and set-off in the future against the current tax liabilities over a period of 10 years.

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

(in millions, except share and per share data and where otherwise stated)

26. Income taxes (continued)

In assessing the realizability of the deferred income tax assets, management considers whether some portion or all of the deferred income tax assets will not be realized. The ultimate realization of the deferred income tax assets and tax loss carry forwards is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategy in making this assessment. Based on the level of historical taxable income and projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes that the Company will realize the benefits of those recognized deductible differences and tax loss carry forwards. Recoverability of deferred tax assets is based on estimates of future taxable income. Any changes in such future taxable income would impact the recoverability of deferred tax assets.

f. Movement in deferred tax assets and liabilities during the years ended March 31, 2015 and 2014.


	As at March 31, 2013			Recognized in income statement			Recognized in equity			Acquired in business combination		As at March 31, 2014
Deferred tax assets/(liabilities)
Inventory	Rs.	2,250		Rs.	1,625		Rs.	—		Rs.	—	Rs.	3,875
Minimum Alternate Tax		—			—			—			—		—
Trade and other receivables		711			259			—			—		970
Operating tax loss and interest loss carry-forward		1,393			(484	)		—			—		909
Other current liabilities		352			(235	)		120			—		237
Property, plant and equipment		(1,004	)		(137	)		—			—		(1,141	)
Intangible assets		(1,962	)		245			—			—		(1,717	)
Others		74			117			(14	)		—		177

Net deferred tax assets/(liabilities)	Rs.	1,814		Rs.	1,390		Rs.	106		Rs.	—	Rs.	3,310

[Continued from above table, first column(s) repeated]


	As at March 31, 2014			Recognized in income statement			Recognized in equity			Acquired in business combination		As at March 31, 2015
Deferred tax assets/(liabilities)
Inventory	Rs.	3,875		Rs.	(398	)	Rs.	—		Rs.	—	Rs.	3,477
Minimum Alternate Tax		—			644			—			—		644
Trade and other receivables		970			305			—			—		1,275
Operating tax loss and interest loss carry-forward		909			(99	)		—			—		810
Other current liabilities		237			179			(108	)		—		308
Property, plant and equipment		(1,141	)		(89	)		—			—		(1,230	)
Intangible assets		(1,717	)		572			—			—		(1,145	)
Others		177			(40	)		(263	)		—		(126	)

Net deferred tax assets/(liabilities)	Rs.	3,310		Rs.	1,074		Rs.	(371	)	Rs.	—	Rs.	4,013

The amounts recognized in the income statement during the year ended March 31, 2015 and 2014 includes the amounts of Rs.52 and Rs.(79), respectively, which represent exchange differences arising due to foreign currency translations.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

27. Operating leases

The Company has leased offices and vehicles under various operating lease agreements that are renewable on a periodic basis at the option of both the lessor and the lessee. Rental expense under these leases was Rs.822, Rs.749 and Rs.603 for the years ended March 31, 2015, 2014 and 2013, respectively.

The schedule of future minimum rental payments in respect of non-cancellable operating leases is set out below:


	As of March 31,
	2015		2014		2013
Less than one year	Rs.	384	Rs.	359	Rs.	209
Between one and five years		1,259		1,007		244
More than five years		852		937		121

	Rs.	2,495	Rs.	2,303	Rs.	574

During the year ended March 31, 2014, the Company entered into a non-cancellable operating lease for an office and laboratory facility in the United States. The future minimum rental payments in respect of this lease are Rs.1,458 (U.S.$23) and Rs.1,556 (U.S.$26) as of March 31, 2015 and March 31, 2014, respectively.

28. Related parties

The Company has entered into transactions with the following related parties:

Green Park Hotel and Resorts Limited for hotel services;

Dr. Reddy’s Foundation towards contributions for social development;

Pudami Educational Society towards contributions for social development;

Dr. Reddy’s Institute of Life Sciences for research and development services;

Ecologic Chemicals Limited for purchases and sales of active pharmaceutical ingredients and other assets; and

Stamlo Hotels Private Limited for hotel services.

These are enterprises over which key management personnel have control or significant influence. “Key management personnel” consists of the Company’s Directors and members of the Company’s Management Council.

The Company has also entered into cancellable operating lease transactions with key management personnel and their relatives.

Further, the Company contributes to the Dr. Reddy’s Laboratories Gratuity Fund, which maintains the plan assets of the Company’s Gratuity Plan for the benefit of its employees. See Note 18 for information on transactions between the Company and the Gratuity Fund.

The following is a summary of significant related party transactions:


	Year Ended March 31,
	2015		2014		2013
Purchases of raw materials⁽¹⁾	Rs.	5	Rs.	91	Rs.	1,356
Purchases of assets⁽²⁾		—		1,264		—
Sales of raw materials⁽¹⁾		—		49		728
Sales of assets		—		14		—
Research and development services provided		—		—		0
Research and development services received		92		141		—
Contributions towards social development		237		170		173
Hotel expenses paid		41		31		24
Lease rentals paid under cancellable operating leases to key management personnel and their relatives		36		36		31

⁽¹⁾

~~28. Income Taxes (continued)~~

~~During~~The figures for the year ended March 31, ~~2011,~~2013 include balances/transactions with A.R. Life Sciences Private Limited (“ARLS”). ARLS is not a related party of the Company ~~paid a MAT tax, as~~for the ~~current tax was lower than the MAT tax.Accordingly, the Company was carrying the excess tax paid of 862 as a MAT credit in its books. During the year~~years ended March 31, ~~2012,~~2014 and 2015. Accordingly, the ~~entire MAT credit~~transactions with ARLS during such periods are not included in the above summary.

⁽²⁾

Towards assets acquired from Ecologic Chemicals Limited. Refer to Note 31 for further details.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

28. Related parties (continued)

The Company has the following amounts due from related parties:


	As at March 31,
	2015		2014
Key management personnel (towards rent deposits)	Rs.	8		8

The Company has the following amounts due to related parties:


	As at March 31,
	2015		2014
Due to related parties	Rs.	4	Rs.	1

The following table describes the components of compensation paid or payable to key management personnel for the services rendered during the year ended:


	March 31,
	2015		2014		2013
Salaries and other benefits⁽¹⁾	Rs.	300	Rs.	261	Rs.	267
Contributions to defined contribution plans		16		15		14
Commission to directors		285		280		255
Share-based payments expense		72		64		49

Total	Rs.	673	Rs.	620	Rs.	585

⁽¹⁾

In addition to the above, the Company has accrued an amount of ~~862 was utilized, since current tax computed under~~ Rs.67 towards a long term incentive plan, for the ~~Indian tax provisions was higher than the MAT tax.~~

~~As explained in Note 6 of these consolidated financial statements,~~services rendered by key management personnel during the year ended March 31, ~~2011 the Company consummated a business combination involving certain~~2015. Refer to Note 18 for further details.

Some of the key management personnel of the Company are also covered under the Company’s Gratuity Plan along with the other employees of the Company. Proportionate amounts of gratuity accrued under the Company’s Gratuity Plan have not been separately computed or included in the above disclosure.

29. Financial instruments

Financial instruments by category

The carrying value and fair value of financial instruments by each category as at March 31, 2015 were as follows:


	Note	Loans and receivables		Available for sale		Other financial liabilities		Derivative financial instruments		Total carrying value		Total fair value
Assets:
Cash and cash equivalents	14	Rs.	5,394	Rs.	—	Rs.	—	Rs.	—	Rs.	5,394	Rs.	5,394
Other investments	10		12,848		24,228		—		—		37,076		37,076
Trade and other receivables	12		40,755		—		—		—		40,755		40,755
Derivative financial instruments			—		—		—		800		800		800
Other assets⁽¹⁾	13		1,585		—		—		—		1,585		1,585

Total		Rs.	60,582	Rs.	24,228	Rs.	—	Rs.	800	Rs.	85,610	Rs.	85,610

Liabilities:
Trade and other payables	21	Rs.	—	Rs.	—	Rs.	10,660	Rs.	—	Rs.	10,660	Rs.	10,660
Derivative financial instruments			—		—		—		462		462		462
Long-term borrowings	17		—		—		21,289		—		21,289		21,289
Short-term borrowings	17		—		—		21,857		—		21,857		21,857
Other liabilities and provisions⁽²⁾	20 & 22		—		—		19,440		—		19,440		19,440

Total		Rs.	—	Rs.	—	Rs.	73,246	Rs.	462	Rs.	73,708	Rs.	73,708

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

29. Financial instruments (continued)

The carrying value and fair value of financial instruments by each category as at March 31, 2014 were as follows:


	Note	Loans and receivables		Available for sale		Other financial liabilities		Derivative financial instruments		Total carrying value		Total fair value
Assets:
Cash and cash equivalents	14	Rs.	8,451	Rs.	—	Rs.	—	Rs.	—	Rs.	8,451	Rs.	8,451
Other investments	10		14,298		10,785		—		—		25,083		25,083
Trade and other receivables	12		33,037		—		—		—		33,037		33,037
Derivative financial instruments			—		—		—		554		554		554
Other assets⁽¹⁾	13		1,853		—		—		—		1,853		1,853

Total		Rs.	57,639	Rs.	10,785	Rs.	—	Rs.	554	Rs.	68,978	Rs.	68,978

Liabilities:
Trade and other payables	21	Rs.	—	Rs.	—	Rs.	10,503	Rs.	—	Rs.	10,503	Rs.	10,503
Derivative financial instruments			—		—		—		305		305		305
Long-term borrowings	17		—		—		24,213		—		24,213		24,213
Short-term borrowings	17		—		—		20,607		—		20,607		20,607
Other liabilities and provisions⁽²⁾	20 & 22		—		—		16,463		—		16,463		16,463

Total		Rs.	—	Rs.	—	Rs.	71,786	Rs.	305	Rs.	72,091	Rs.	72,091

⁽¹⁾

Other assets of Glaxosmithkline LLC and Glaxo Group Limited. As part of the purchase price allocation, the Company recognized a deferred tax liability arising on account of acquired intangible assets amounting to 45.

~~29. Operating leases~~

~~The Company leases offices, residential facilities and vehicles under operating lease agreements~~ that are ~~renewable on a periodic basis at the option~~not financial assets (such as receivables from statutory authorities, export benefit receivables, prepaid expenses, advances paid and certain other receivables) amounting to Rs.12,278 and Rs.11,273 as of ~~both the lessor and the lessee. Some of these leases include rent escalation clauses. Rental expense under these leases was 523, 419 and 519 for the years ended~~ March 31, ~~2012, 2011~~2015 and ~~2010, respectively.~~

~~The schedule of future minimum rental payments in respect of non-cancellable operating leases is set out below:~~

   As of March 31,
   2012    2011    2010
Less than one year
   236       216       162
Between one and five years
   403       415       318
More than five years
   —         —         —






   639       631       480

~~Deferred rental obligations under these leases were 0, 7 and 55 as at~~ March 31, ~~2012, 2011 and 2010, respectively.~~

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~30. Related parties~~

~~The Company has entered into transactions with the following related parties:~~

~~Green Park Hotel and Resorts Limited (formerly known as Diana Hotels Limited) for hotel services;~~

~~A.R. Life Sciences Private Limited for availing processing services of raw materials and intermediates;~~

~~Dr. Reddy’s Foundation for Human and Social Development towards contributions for social development;~~

~~Institute of Life Science towards contributions for social development;~~

~~K.K. Enterprises for availing packaging services for formulation products;~~

~~Ecologics Technologies Limited for providing analytical services;~~

~~SR Enterprises for transportation services; and~~

~~Dr. Reddy’s Laboratories Gratuity Fund.~~

~~These~~2014, respectively, are enterprises over which key management personnel have control or significant influence (“significant interest entities”). “Key management personnel” consists of the Company’s Directors and Management council members.

~~The Company has also entered into cancellable operating lease transactions with key management personnel and their relatives.~~

The Company contributes to the Dr. Reddy’s Laboratories Gratuity Fund (the “Gratuity Fund”), which maintains the plan assets of the Company’s Gratuity Plan for the benefit of its employees. See Note 19 for information on transactions between the Company and the Gratuity Fund.

~~The following is a summary of significant related party transactions:~~

   Year Ended March 31,
   2012    2011    2010
Purchases from significant interest entities
   1,020       486       275
Sales to significant interest entities
   640       391       156
Services to significant interest entities
   1       —         4
Contribution to a significant interest entity towards social development and research and development
   127       125       151
Hotel expenses paid to significant interest entities
   19       20       13
Advances paid to significant interest entities for purchase of land
   —         —         367
Lease rental paid to key management personnel and their relatives
   31       29       27

~~The above table does~~ not ~~include the following transactions between key management personnel and the Company:~~

During the year ended March 31, 2010, the Company exchanged a parcel of land owned by it for another parcel of land of equivalent size that adjoins its research facility, owned by the Company’s key management personnel. The Company concluded that this exchange transaction lacks commercial substance and has accordingly recorded the land acquired at the carrying amount of the land transferred, with no profit or loss being recorded.

•

~~During the year ended March 31, 2010, the Company purchased land from a significant interest entity for a purchase price of 21.~~included.

⁽²⁾

~~The following table describes the components of compensation paid to key management personnel:~~

   Year Ended March 31,
   2012    2011    2010
Salaries and other benefits
   197       161       228
Contributions to defined contribution plans
   12       10       7
Commission to directors
   299       267       240
Share-based payments
   57       56       36






Total
   565       494       511

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~30. Related parties (continued)~~

~~The Company has the following amounts due from related parties:~~

   As at March 31,
   2012    2011
Significant interest entities⁽¹⁾
   214       114
Key management personnel
   5       5

~~(1)~~

~~Primarily consists of trade receivables for sales of the Company’s products to significant interest entities in the ordinary course of business.~~

As at March 31, 2010, the Company had advanced 1,447 for the purchase of land from a significant interest entity, which was disclosed as part of capital work-in-progress and included in the property, plant and equipment in the Company’s audited consolidated financial statements for the year ended March 31, 2010. The acquisition of such land was expected to be consummated through the acquisition of shares of a special purpose entity that was formed through a court approved scheme of arrangement during the year ended March 31, 2010.

During the year ended March 31, 2011, the Company completed the acquisition of this special purpose entity and has therefore obtained control over the land. Consequently, an amount of 1,447 has been classified out of “capital work-in-progress” and included as cost of land acquired as at March 31, 2011.

~~The Company has the following amounts due to related parties:~~

   As at March 31,
   2012    2011
Significant interest entities
   95       81
Key management personnel
   0       1

~~31. Financial instruments~~

~~Financial instruments by category~~

~~The carrying value and fair value of financial instruments by each category as at March 31, 2012 were as follows:~~

   Note    Loans and
receivables    Available
for sale    Trade
and other
payables    Derivate
financial
instruments    Total
carrying
value    Total fair value
Assets:

Cash and cash equivalents
   15       7,379       —         —         —         7,379       7,379
Other investments
   11       8,668       2,105       —         —         10,773       10,773
Trade receivables
   13       25,339       —         —         —         25,339       25,339
Derivative financial asset
      —         —         —         7       7       7
Other assets
   14       2,285       —         —         —         2,285       2,285












Total
      43,671       2,105       —         7       45,783       45,783












Liabilities:

Trade payables
   23       —         —         9,502       —         9,502       9,502
Derivative financial liability
      —         —         —         1,830       1,830       1,830
Long-term loans and borrowings
   18       —         —         16,366       —         16,366       16,132
Bank overdraft, short-termloans and borrowings
   15 & 18       —         —         15,844       —         15,844       15,844
Other liabilities and provisions
   22 & 24       —         —         14,622       —         14,622       14,622












Total
      —         —         56,334       1,830       58,164       57,930

~~DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in millions, except share and per share data and where otherwise stated)~~

~~31. Financial instruments (continued)~~

~~The carrying value and fair value of financial instruments by each category as at March 31, 2011 were as follows:~~

            Trade    Derivate    Total
      Loans and    Available    and other    financial    carrying
   Note    receivables    for sale    payables    instruments    value    Total fair value
Assets:

Cash and cash equivalents
   15       5,729       —         —         —         5,729       5,729
Other investments
   11       —         33       —         —         33       33
Trade receivables
   13       17,615       —         —         —         17,615       17,615
Derivative financial asset
      —         —         —         784       784       784
Other assets
   14       1,820       —         —         —         1,820       1,820












Total
      25,164       33       —         784       25,981       25,981












Liabilities:

Trade payables
   23       —         —         8,480       —         8,480       8,480
Derivative financial liability
      —         —         —         —         —         —
Long-term loans and borrowings
   18       —         —         5,283       —         5,283       5,283
Bank overdraft, short-term loans and borrowings
      —         —         18,289       —         18,289       18,289
Other liabilities and provisions
   22 & 24       —         —         12,315       —         12,315       12,315












Total
      —         —         44,367       —         44,367       44,367

~~Fair value hierarchy~~

~~Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities.~~

~~Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).~~

~~Level 3 — Inputs for the assets or~~Other liabilities that are not ~~based on observable market data (unobservable inputs).~~

~~The following table presents the fair value hierarchy of assets~~financial liabilities (such as statutory dues payable, deferred revenue, advances from customers and ~~liabilities measured at fair value on a recurring basis~~certain other accruals) amounting to Rs.7,993 and Rs.4,665 as of March 31, ~~2012:~~2015 and March 31, 2014, respectively, are not included.

Fair value hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

Particulars
   Level 1    Level 2 Level 3    Total
Available for sale — Financial asset—Investments in units of mutual funds
   2,080       —      —         2,080
Available for sale — Financial asset—Investment in equity securities
   25       —      —         25
Derivative financial instruments—gain/(loss) on outstanding foreign exchange forward and option contracts
   —         (1,823 ) —         (1,823 )

The following table presents the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of March 31, 2015:


Particulars	Level 1		Level 2		Level 3		Total
Available for sale - Financial asset - Investments in units of mutual finds	Rs.	21,641	Rs.	—	Rs.	—	Rs.	21,641
Available for sale - Financial asset - Investment in equity securities		2,587		—		—		2,587
Derivative financial instruments - gain/(loss) on outstanding foreign exchange forward, option and swap contracts and interest rate swap contracts⁽¹⁾		—		338		—		338

The following table presents the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of March 31, 2014:


Particulars	Level 1		Level 2		Level 3		Total
Available for sale - Financial asset - Investments in units of mutual finds	Rs.	10,762	Rs.	—	Rs.	—	Rs.	10,762
Available for sale - Financial asset - Investment in equity securities		23		—		—		23
Derivative financial instruments - gain/(loss) on outstanding foreign exchange forward, option and swap contracts and interest rate swap contracts⁽¹⁾		—		249		—		249

⁽¹⁾

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 option and swap contracts. The most frequently applied valuation techniques include forward pricing, swap models and Black-Scholes-Merton models (for option valuation), using present value calculations.

The models incorporate various inputs including foreign exchange spot and forward rates, interest rate curves and forward rate curves. As at March 31, 2015, the changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognized at fair value.

DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data and where otherwise stated)

29. Financial instruments (continued)

Derivative financial instruments

The Company is exposed to exchange rate risk that arises from its foreign exchange revenues and expenses, primarily in U.S. dollars, U.K. pounds sterling, Russian roubles, Venezuelan bolivars and Euros, and foreign currency debt in U.S. dollars, Russian roubles and Euros. The Company uses forward contracts, option contracts and currency swap contracts (collectively, “derivatives”) to mitigate its risk of changes in foreign currency exchange rates.

The counterparty for these contracts is generally a bank or a financial institution. The Company had a derivative financial asset and derivative financial liability of Rs.800 and Rs.462, respectively, as of March 31, 2015 as compared to derivative financial asset and derivative financial liability of Rs.554 and Rs.305, respectively, as of March 31, 2014 towards these derivative financial instruments.

Further, in respect of these foreign exchange derivative contracts, the Company has recorded, as part of finance costs, a net gain of Rs.2,226, a net loss of Rs.426, and a net gain of Rs.506, for the years ended March 31, 2015, 2014, and 2013, respectively.

Hedges of highly probable forecasted transactions

The Company classifies its derivative contracts that hedge foreign exchange risk associated with its highly probable forecasted transactions as cash flow hedges and measures them at fair value. The effective portion of such cash flow hedges is recorded as a component of equity within the Company’s “hedging reserve”, and re-classified in the income statement as revenue in the period corresponding to the occurrence of the forecasted transactions. The ineffective portion of such cash flow hedges is immediately recorded in the income statement as a finance cost.

The Company also designates certain non-derivative financial liabilities, such as foreign currency borrowings from banks, as hedging instruments for the hedge of foreign exchange risk associated with highly probable forecasted transactions and, accordingly, applies cash flow hedge accounting for such relationships. Re-measurement gain/loss on such non-derivative financial liabilities is recorded as a component of equity within the Company’s “hedging reserve”, and re-classified in the income statement as revenue in the period corresponding to the occurrence of the forecasted transactions.

In respect of the aforesaid hedges of highly probable forecasted transactions, the Company recorded, as a component of equity, a net gain of Rs.99, a net loss of Rs.1,650 and a net gain of Rs.1,697 for the years ended March 31, 2015, 2014 and 2013, respectively.

The Company also recorded a net gain of Rs.300, a net loss of Rs.1,093 and Rs.2,576 as part of revenue during the years ended March 31, 2015, 2014 and 2013, respectively.

The net carrying amount of the Company’s “hedging reserve” as a component of equity before adjusting for tax impact was a loss of Rs.1,805 as at March 31, 2015, as compared to a loss of Rs.1,903 as at March 31, 2014.

Hedges of recognized assets and liabilities

Changes in the fair value of forward contracts and option contracts that economically hedge monetary assets and liabilities in foreign currencies, and for which no hedge accounting is applied, are recognized in the income statement. The changes in fair value of the forward contracts and option contracts, as well as the foreign exchange gains and losses relating to the monetary items, are recognized as part of “net finance costs”.

Outstanding foreign exchange derivative contracts

The following table gives details in respect of the notional amount of outstanding foreign exchange derivative contracts as of March 31, 2015.


Title of Each Class		Name of Each Exchange on which Registered
American depositary shares, each representing one equity share		New York Stock Exchange


~~U.S. GAAP~~ ¨	~~International Financial Reporting Standards as issued~~ x	~~Other~~ ¨
	~~by the International Accounting Standards Board~~


PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		54

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE		54

ITEM 3. KEY INFORMATION		54

ITEM 4. INFORMATION ON THE COMPANY		2327

ITEM 4A. UNRESOLVED STAFF COMMENTS		5461

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS		5462

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		9399

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		~~107~~114

ITEM 8. FINANCIAL INFORMATION		~~110~~115

ITEM 9. THE OFFER AND LISTING	~~116~~

~~ITEM 10. ADDITIONAL INFORMATION~~	117

ITEM 10. ADDITIONAL INFORMATION	118

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		~~126~~129

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		~~128~~131

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		~~132~~133

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		~~132~~133

ITEM 15. CONTROLS AND PROCEDURES		~~132~~134

ITEM 16. [RESERVED]		~~135~~136

ITEM 16.A. AUDIT COMMITTEE FINANCIAL EXPERT		~~135~~136

ITEM 16.B. CODE OF ETHICS		~~135~~136

ITEM 16.C. PRINCIPAL ACCOUNTANT FEES AND SERVICES		~~135~~136

ITEM 16.D. EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES		~~135~~136

ITEM 16.E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	~~135~~

~~ITEM 16.F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT~~	136

ITEM ~~16.G. CORPORATE GOVERNANCE~~16.F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT		~~136~~



~~PART III~~

~~ITEM 17. FINANCIAL STATEMENTS~~	~~138~~137

ITEM ~~18. FINANCIAL STATEMENTS~~16.G. CORPORATE GOVERNANCE		~~138~~137

ITEM ~~19. EXHIBITS~~16.H. MINE SAFETY DISCLOSURE	139

PART III

ITEM 17. FINANCIAL STATEMENTS	139

ITEM 18. FINANCIAL STATEMENTS	139

ITEM 19. EXHIBITS	140

SIGNATURES	141


	For the Year Ended March 31,																		For the Year Ended March 31,
	2012			2012			2011			2010			2009			2008			2015			2015			2014			2013			2012			2011
				( in millions, U.S.$ in millions, both except share and per share data)															(Rs. in millions, U.S.$ in millions, both except share and per share data)
	Convenience translation into U.S.$																		Convenience translation into U.S.$
Revenues	U.S.$	1,901			96,737			74,693			70,277			69,441			50,006		U.S.$	2,378			Rs.148,189			Rs.132,170			Rs.116,266			Rs.96,737			Rs.74,693
Cost of revenues		853			43,432			34,430			33,937			32,941			24,598			1,008			62,786			56,369			55,687			43,432			34,430
Gross profit	U.S.$	1,047			53,305			40,263			36,340			36,500			25,408			1,371			85,403			75,801			60,579			53,305			40,263
Selling, general and administrative expenses		567			28,867			23,689			22,505			21,020			16,835			683			42,585			38,783			34,272			29,907			23,689
Research and development expenses		116			5,911			5,060			3,793			4,037			3,533			280			17,449			12,402			7,674			5,911			5,060
Impairment loss on other intangible assets		20			1,040			—			3,456			3,167			3,011
Impairment loss on goodwill		—			—			—			5,147			10,856			90
Other (income)/expense, net		(15	)		(765	)		(1,115	)		(569	)		254			(402	)		(15	)		(917	)		(1,416	)		(2,479	)		(765	)		(1,115	)
Results from operating activities, net	U.S.$	359			18,252			12,629			2,008			(2,834	)		2,341
Results from operating activities																				422			26,286			26,032			21,112			18,252			12,629
Finance (expense)/income, net		3			160			(189	)		(3	)		(1,186	)		521			27			1,682			400			460			160			(189	)
Share of profit of equity accounted investees, net of income tax		1			54			3			48			24			2
Profit/(loss) before income tax	U.S.$	363			18,466			12,443			2,053			(3,996	)		2,864
Income tax (expense)/benefit		(83	)		(4,204	)		(1,403	)		(985	)		(1,172	)		972
Share of profit of equity accounted investees, net of tax																				3			195			174			104			54			3
Profit/(loss) before tax																				452			28,163			26,606			21,676			18,466			12,443
Tax expense																				(96	)		(5,984	)		(5,094	)		(4,900	)		(4,204	)		(1,403	)
Profit/(loss) for the year																				356			22,179			21,512			16,776			14,262			11,040
Attributable to:
Equity holders of the Company																				356			22,179			21,515			16,777			14,262			11,040
Non-controlling interests																				—			—			(3	)		(1	)		—			—
Profit/(loss) for the year		280			14,262			11,040			1,068			(5,168	)		3,836		U.S.$	356			Rs.22,179			Rs.21,512			Rs.16,776			Rs.14,262			Rs.11,040
Earnings/(loss) per share
Basic	U.S.$	1.65			84.16			65.28			6.33			(30.69	)		22.88		U.S.$	2.09			Rs.130.22			Rs.126.52			Rs.98.82			Rs.84.16			Rs.65.28
Diluted	U.S.$	1.65			83.81			64.95			6.30			(30.69	)		22.80		U.S.$	2.08			Rs.129.75			Rs.126.04			Rs.98.44			Rs.83.81			Rs.64.95
Weighted average number of equity shares used in computing earnings/(loss) per equity share*
Basic					169,469,888			169,128,649			168,706,977			168,349,139			168,075,840						170,314,506			170,044,518			169,777,458			169,469,888			169,128,649
Diluted					170,177,944			169,965,282			169,615,943			168,349,139			168,690,774						170,933,433			170,695,017			170,432,680			170,177,944			169,965,282
Cash dividend per equity share ( )**		0.22			11.25			11.25			6.25			3.75			3.75
Cash dividend per equity share**																			U.S.$	0.29			Rs.18			Rs.15			Rs.13.75			Rs.11.25			Rs.11.25


Year Ended March 31,	Period End		Average		High		Low		Period End		Average		High		Low
2008		40.02		40.00		43.05		38.48
2009		50.87		46.32		51.96		39.73
2010		44.95		47.36		50.48		44.94
2011		44.54		45.49		47.49		43.90		44.54		45.49		47.49		43.90
2012		50.89		48.01		53.71		44.00		50.89		48.01		53.71		44.00
2013										54.52		54.48		57.13		50.64
2014										60.00		60.35		68.80		53.65
2015										62.31		61.34		63.67		58.30


Month	High		Low
October 2011		49.86		48.63
November 2011		52.48		48.94
December 2011		53.71		50.50
January 2012		53.11		49.39
February 2012		49.48		48.65
March 2012		51.38		49.14


Month	High		Low
October 2014		61.81		60.92
November 2014		62.20		61.38
December 2014		63.67		61.78
January 2015		63.57		61.32
February 2015		62.41		61.67
March 2015		63.06		61.76


	Year Ended March 31,														Year Ended March 31,
Segment	2010				2011				2012						2015					2014				2013
	( in millions, U.S.$ in millions)														(Rs. in millions, U.S.$ in millions)
Global Generics		48,606	69	%		53,340	71	%		70,243	72	%	U.S.$	.1,380	U.S.$	1,935	Rs.120,556	81	%		Rs.105,164	80	%		Rs.82,563	71	%
Pharmaceutical Services and Active Ingredients		20,404	29	%		19,648	26	%		23,812	25	%		468		409	25,456	17	%		23,974	18	%		30,702	26	%
Proprietary Products		513	1	%		532	1	%		1,078	1	%		21		16	1,013	1	%		1,778	1	%		1,468	1	%
Others		754	1	%		1,173	2	%		1,604	2	%		32		19	1,164	1	%		1,254	1	%		1,533	2	%

Total Revenue		70,227	100	%		74,693	100	%		96,737	100	%	U.S.$	.1,901	U.S.$	2,378	Rs.148,189	100	%		Rs.132,170	100	%		Rs.116,266	100	%


Compound	~~Therapeutic Area~~	~~Status~~	~~Remarks~~
~~DRL 17822~~	~~Metabolic disorders/cardiovascular disorders~~	~~Phase II~~	~~Targeting dyslipidemia / atherosclerosis~~
DRL-NAB-P2*DFN-02 (previously DFP-02)	~~Onchomycosis~~ DFD-01	DFD-06
Therapeutic Area	Migraine	Psoriasis	Psoriasis

Indication	For treatment of migraines, with or without aura.	For treatment of moderate plaque psoriasis.	For treatment of moderate psoriasis affecting up to 20% of the body surface area in patients 18 years of age or older.

Significant developments during the period	Pivotal bioequivalence studies were completed. Patient safety study initiated.	Phase III studies have been completed and U.S. NDA application has been filed in April 2015.	Non clinical activities are in progress, Phase II studies have been completed and Phase III studies have been initiated. Registration batches have been made.

Significant patents associated with the compound	Patents (including those granted to the development partner) expiring in: U.S. – 2026; Australia and New Zealand – 2029, and South Africa – 2030. Patent applications are pending in certain other countries.	No patents granted. Patent applications are pending in certain countries.	No patents granted.

Current status/ expected NDA filing*	Phase III / 2018	In U.S. NDA submitted.	Phase III ~~clinical testing for onchomycosis~~/ 2016


Category	USPTO⁽¹⁾ (# Filed)		USPTO⁽¹⁾ (# Granted)		PCT⁽²⁾ (# Filed)		India (# Filed)		India (# Granted)		USPTO⁽¹⁾ (# Filed)		USPTO⁽¹⁾ (# Granted)		PCT⁽²⁾ (# Filed)		India (# Filed)		India (# Granted)
Anti-diabetic		85		17		62		117		45		85		17		62		117		45
Anti-cancer		18		11		14		45		15		18		11		14		45		15
Anti-bacterial		8		7		10		22		4		8		7		10		22		4
Anti-inflammation/cardiovascular		40+2(provisional)		20		29		21		3		43		23		35		24		3
Anti-ulcerant		1		1		—		1		—		1		1		—		1		—
Miscellaneous		4		1		3		23		8		11		3		3		26		8
Differentiated formulations		3+5(provisional)		—		6		2+7(provisional)		—		16		1		13		12		—

TOTAL		166		57		124		238		75		182		63		137		247		75


Stage of Development		Description
Preclinical		Animal studies and laboratory tests to evaluate safety and efficacy, demonstrate activity of a product candidate and identify its chemical and physical properties.

Phase I		Clinical studies to test safety and pharmacokinetic profile of a drug in humans.

Phase II		Clinical studies conducted with groups of patients to determine preliminary efficacy, dosage and expanded evidence of safety.

Phase III		Larger scale clinical studies conducted in patients to provide sufficient data for statistical proof of efficacy and safety.


Sl. No.	Location	Approximate Area (Square feet)	Built up Area (Square feet)	Certifications	Installed Capacity	Actual Production
	Within India
1	API Hyderabad Plant 1, Telangana, India⁽²¹⁾	734,013	405,920	U.S. FDA and EUGMP	4,723^(8)(11)	3,214^(8)(11)
2	API Hyderabad Plant 2, Telangana, India⁽²¹⁾	725,274	400,981	U.S. FDA and EUGMP	See above⁽¹¹⁾	See above⁽¹¹⁾
3	API Hyderabad Plant 3, Telangana, India⁽²¹⁾	715,610	217,515	U.S. FDA and EUGMP	See above⁽¹¹⁾	See above⁽¹¹⁾
4	API Hyderabad Plant 4, Telangana, India⁽²¹⁾	228,033	141,035	U.S. FDA and EUGMP	See above⁽¹¹⁾	See above⁽¹¹⁾
5	API Nalgonda Plant, Telangana, India⁽²¹⁾	3,402,907	609,025	U.S. FDA and EUGMP	See above⁽¹¹⁾	See above⁽¹¹⁾
6	API Srikakulam Plant, Andhra Pradesh, India⁽²¹⁾	4,047,595	1,528,075	U.S. FDA and EUGMP	See above⁽¹¹⁾	See above⁽¹¹⁾
7	API Srikakulam Plant (SEZ), Andhra Pradesh, India⁽²²⁾	11,001,863	414,351	—	N/A	N/A
8	Technology Development Centre Hyderabad 1, Telangana, India⁽²³⁾	113,256	96,445	ISO 27001: 2005 Information Security Management System	N/A	N/A
9	Technology Development Centre Hyderabad 2, Telangana, India⁽²³⁾	68,825	23,538	ISO 27001: 2005 Information Security Management System	N/A	N/A
10	Formulations Hyderabad Plant 1, Telangana, India⁽²²⁾	217,729	195,348	(2)	8,221^(6)(13)(15)	4,831^(6)(13)
11	Formulations Hyderabad Plant 2, Telangana, India⁽²²⁾	3,202,862	987,765	(3)	See above⁽¹³⁾	See above⁽¹³⁾
12	Formulations Yanam Plant, Pondicherry, India⁽²²⁾	457,000	63,738	—	See above⁽¹³⁾	See above⁽¹³⁾
13	Formulations Baddi Plant 1, Himachal Pradesh, India⁽²²⁾	728,234	304,185	(19)	See above⁽¹³⁾	See above⁽¹³⁾
14	Formulations Baddi Plant 2, Himachal Pradesh, India⁽²²⁾	381,342	205,204	—	See above⁽¹³⁾	See above⁽¹³⁾
15	Biologics Hyderabad, Telangana, India⁽²²⁾	789,727	213,002	(2)	125,122^(9)(14)	31,856⁽⁹⁾
16	Formulations Hyderabad Plant 3, Telangana, India⁽²²⁾	1,539,098	906,030	(4)	11,600^(6)(10)	5,897⁽⁶⁾
17	Formulations Srikakulam Plant 1 (SEZ), Andhra Pradesh, India^(17)(22)	878,054	255,247	U.S. FDA	800⁽⁶⁾	N/A
18	Formulations Srikakulam Plant 2 (SEZ), Andhra Pradesh, India^(17)(22)	328,912	103,964	—	N/A	N/A
19	Formulations Visakhapatnam Plant 1 (SEZ), Andhra Pradesh, India⁽²²⁾	581,880	163,552	U.S. FDA and BfARM, Germany	127⁽⁶⁾⁽⁷⁾	11⁽⁶⁾
20	Formulations Visakhapatnam Plant 2 (SEZ), Andhra Pradesh, India⁽²²⁾	528,529	133,424	—	N/A	N/A
21	ADTL Hyderabad, Telangana, India⁽⁷⁾	187,308	114,512	—	N/A	N/A
22	ADTL Bengaluru, Karnataka, India⁽⁷⁾	718,455	266,408	—	N/A	N/A
	Outside India
23	API Cuernavaca Plant, Mexico⁽²³⁾	2,361,840	689,719	(1)	3,500⁽⁸⁾	2,041⁽⁸⁾
24	API Mirfield Plant, United Kingdom⁽²³⁾	1,785,960	653,400	(20)	(12)	(12)
25	API Middleburgh Plant, New York, United States^(5)(22)	292,000	26,000	—	50-100⁽¹⁶⁾	N/A
26	Technology Development Centre, Cambridge, United Kingdom^(5)(23)	32,966	32,966	—	N/A	N/A
27	Technology Development Centre, OctoPlus N.V., Leiden, the Netherlands^(5)(21)	56,500	18,700	EUGMP	2⁽⁷⁾⁽⁸⁾	0.07⁽⁷⁾⁽⁸⁾
28	Formulations Beverley Plant, East Yorkshire, United Kingdom⁽²²⁾	81,000	32,500	U.K. MHRA cGMP	700^(6)(14)(15)	400^(6)(15)
29	Formulations Shreveport Plant, Louisiana, United States⁽²²⁾	1,817,123	335,000	U.S. FDA	5,875^(6)(10)	3,291⁽⁶⁾
30	Formulations Bristol Plant, TN, United States⁽²²⁾	1,742,400	390,000	U.S. FDA	2,460^(6)(10)	193⁽⁶⁾


Particulars	Chargebacks			Rebates			Medicaid			Sales Returns			Chargebacks			Rebates			Medicaid			Sales Returns
	(All values in U.S.$ millions)												(All values in U.S. $millions)
Beginning Balance: April 1, 2009		58			30			6			8
Beginning Balance: April 1, 2012														124			60			7			14
Current provisions relating to sales in current year		578			57			9			5			1,162			246			14			19
Provisions and adjustments relating to sales in prior years		*			2			(3	)		(1	)		*			1			1			—
Credits and payments**		(580	)		(68	)		(9	)		(4	)		(1,119	)		(194	)		(10	)		(13	)
Ending Balance: March 31, 2010		56			21			3			8

Beginning Balance: April 1, 2010		56			21			3			8
Ending Balance: March 31, 2013														167			113			12			20

Beginning Balance: April 1, 2013														167			113			12			20
Current provisions relating to sales in current year		644			104			6			6			1,029			355			17			24
Provisions and adjustments relating to sales in prior years		*			2			1			—			*			2			0			—
Credits and payments**		(620	)		(87	)		(6	)		(5	)		(1,070	)		(340	)		(14	)		(16	)
Ending Balance: March 31, 2011		80			40			4			9

Beginning Balance: April 1, 2011		80			40			4			9
Current provisions relating to sales in current year		886			158			8			13
Ending Balance: March 31, 2014														126			130			15			28

Beginning Balance: April 1, 2014														126			130			15			28
Current provisions relating to sales in current year⁽¹⁾														1,939			635			24			32
Provisions and adjustments relating to sales in prior years		*			4			0			0			*			—			0			—
Credits and payments**		(842	)		(142	)		(5	)		(8	)		(1,871	)		(543	)		(22	)		(20	)
Ending Balance: March 31, 2012		124			60			7			14

Ending Balance: March 31, 2015														194			222			17			40


Buildings
– Factory and administrative buildings		20 – 50 years
– Ancillary structures		3 – 15 years
Plant and equipment		3 – 15 years
Furniture, fixtures and office equipment		4 – 10 years
Vehicles		4 – 5 years
Computer equipment		3 – 5 years


	Percentage of sales
	For the Year Ended March 31,									Percentage Increase/Decrease
	2010			2011			2012			2010 to 2011			2011 to 2012
Revenues		100	%		100	%		100	%		6	%		30	%
Gross profit		52	%		54	%		55	%
Selling, general, and administrative expenses		32	%		32	%		30	%		5	%		22	%
Research and development expenses		5	%		7	%		6	%		33	%		17	%
Impairment loss on other intangible assets		5	%		—			1	%		NC			NC
Impairment loss on goodwill		7	%		—			—			NC			NC
Other (income/expense) net		(1	%)		(2	%)		(1	%)		96	%		31	%
Results from operating activities		4	%		17	%		19	%		NC			45	%
Finance income/(expense), net		—			—			—			NC			NC
Profit/(loss) before income taxes		4	%		17	%		19	%		NC			48	%
Income tax (expense)/benefit, net		(1	%)		(2	%)		(4	%)		42	%		200	%
Profit/(loss) for the period		3	%		15	%		15	%		NC			29	%


	Percentage of Sales For the year ended March 31,									Percentage Increase/ (Decrease)
	2015			2014			2013			2014 to 2015			2013 to 2014
Revenues		100.0	%		100.0	%		100.0	%		12.1	%		13.7	%
Gross profit		57.6	%		57.4	%		52.1	%		12.7	%		25.1	%
Selling, general, and administrative expenses		28.7	%		29.3	%		29.5	%		9.8	%		13.2	%
Research and development expenses		11.8	%		9.4	%		6.6	%		40.7	%		61.6	%
Other (income)/expense, net		(0.6	%)		(1.1	%)		(2.1	%)		(35.3	%)		(42.9	%)
Results from operating activities		17.7	%		19.8	%		18.2	%		1.0	%		23.3	%
Finance (expense)/income, net		1.1	%		0.3	%		0.4	%		320.4	%		(13.0	%)
Share of profit of equity accounted investees, net of tax		0.1	%		0.1	%		0.1	%		12.1	%		67.3	%
Profit before income taxes		19.0	%		20.1	%		18.6	%		5.9	%		22.7	%
Tax expense		(4.0	%)		(3.9	%)		(4.2	%)		17.5	%		4.0	%
Profit for the period		15.0	%		16.3	%		14.4	%		3.1	%		28.2	%


~~Product~~	~~Innovator’s Brand~~	Total annual market size* ~~(U.S.$ Billions)~~
~~Donepezil HCL~~	~~Aricept~~^®	~~U.S.$ 2.10~~
~~Venlafaxine-XR~~	~~Effexor XR~~^®	~~2.50~~
~~Letrozole~~	~~Femara~~^®	~~0.70~~
~~Levofloxacin~~	~~Levaquin~~^®	~~1.70~~
~~Topotecan injection~~	~~Hycamtin~~^®	~~0.10~~
~~Fondaparinux sodium injection~~	~~Arixtra~~^®	~~0.32~~
~~Amlodipine besylate and Benazepril hydrochloride (5/40 mg)~~	~~Lotrel~~^®	~~0.02~~
~~Rivastigmine tartrate~~	~~Exelon~~^®	~~0.10~~
~~Gemcitabine for injection~~	~~Gemzar~~^®	~~0.70~~
~~Fexofenadine-pseudoephedrine HCL OTC~~	~~Allegra-D24~~^®	~~N/A~~
~~Amoxicillin clavulanic acid (oral suspension and tablets)~~	~~Augmentin~~^®	~~0.46~~
~~Olanzapine~~	~~Zyprexa~~^®	~~3.60~~
~~Olanzapine ODT~~	~~Zyprexa Zydis~~^®	~~0.40~~
~~Ziprasidone~~	~~Geodon~~^®	~~1.34~~
~~Quetiapine fumarate~~	~~Seroquel~~^®	~~4.60~~


Product	Innovator’s Brand	Innovator
eszopiclone	Lunesta^®	Seprocor
fenofibrate capsules	Antara^®	Ethypharm
paricalcitol	Zemplar^®	Abbott
duloxetine delayed release capsules	Cymbalta^®	Eli Lilly
levalbuterol hydrochloride	Xopenex^®	Sunovion Pharmaceuticals
sirolimus	Rapamune^®	Pfizer
docetaxel	Taxotere^®	Sanofi
fexofenadine pseudophedrine HCL OTC	Allegra D12^®	Sanofi
fluconazole	Diflucan^®	Pfizer
valganciclovir	Valcyte^®	Roche
isotretinoin 30 mg	Zenatane^®	Roche


	Year ended March 31, 2015
	Dr. Reddy’s						Russian pharmaceutical market
	Sales value			Volume			Sales value			Volume
Prescription (Rx)		6.62	%		-5.67	%		12.29	%		0.27	%
Over-the-counter (OTC)		16.86	%		7.28	%		12.30	%		-1.84	%
Total (Rx + OTC)		10.10	%		-2.66	%		12.29	%		-1.26	%


Product	Innovator’s Brand	Innovator
Zoledronic acid (5mg/100ml)	Reclast^®	Novartis AG
Lamotrigine Extended Release	Lamictal^® XR	GlaxoSmithKline
Azacitidine	Vidaza^®	Celgene Corporation
Divalproex Extended Release	Depakote^® ER	GlaxoSmithKline
Donepezil 23 mg	Aricept^® 23 mg	Eisai Inc.
Decitabine	Dacogen^®	Eisai Inc.
Amlodipine besylate and atorvastatin calcium	Caduet^®	Pfizer Inc.
Sumatriptan Auto Injector	Imitrex STATdose Pen^®	Pfizer Inc.
Moxifloxacin	Avelox^®	Bayer AG

	•
Product		~~5,147 million towards the carrying value of goodwill;~~Therapeutic Category	Innovator’s Brand
Olanzapine (other than 20 mg)		Antipsychotic	Zyprexa^®
Lansoprazole OTC		Gastro-intestinal	Prevacid^®
Clopidogrel		Cardiovascular	Plavix^®
Ropinirole hydrochloride XR		Central nervous system	Requip XL^®
Atorvastatin		Cardiovascular	Lipitor^®
Ibandronate sodium		Calcium regulator	Boniva^®
Montelukast sodium, Montelukast sodium chewable, and Montelukast sodium oral granules		Respiratory	Singulair^®
Metoprolol succinate ER		Cardiovascular	Toprol – XL^®
Amoxicillin (tablets, capsules and oral suspension)		Anti-infective	Amoxil^®
Sildenafil		Cardiovascular	Revatio^®
Finasteride		Alopecia agent	Propecia^®
Desloratadine ODT		Anti-infective	Clarinex^® Reditabs^®
Zoledronic acid injection		Calcium regulator	Zometa^®
Zenatane^TM		Dermatology	Accutane^®


	Payments due by period
							More
			Less than				than		Payments due by period
Financial Contractual Obligations	Total		1 year		1-5 years		5 years		Total		Less than 1 year		1-5 years		More than 5 years
			( in millions)						(Rs. in millions)
Short-term borrowings from banks		15,844		15,844		—		—	Rs.	21,857	Rs.	21,857	Rs.	—	Rs.	—
Long term debt
Bonus debentures		5,078		—		5,078		—
Foreign currency loan		11,193		—		11,193		—
Long term debt in foreign currency										20,427		6,875		13,552		—

Total obligations		32,115		15,844		16,271		—	Rs.	42,284	Rs.	28,732	Rs.	13,552	Rs.	—


	As at March 31, 2011
	Outstanding balance		Weighted average interest rate	Average amount outstanding		Maximum amount outstanding
	(All amounts in millions)
Packing credit foreign currency borrowings		8,417	LIBOR + 50 to 175 bps		5,955		8,089
Borrowings on transfer of receivables		825	LIBOR + 75 to 100 bps		387		978
Other foreign currency borrowings		8,097	LIBOR + 100 to 175 bps EURIBOR + 50 to 100 bps 5% to 8%		6,067		8,971
Rupee borrowings		950	8.75%		238		950


											Payments due by period
	Payments Due by Period ( in millions)										(Rs. in millions)
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Total		Less than 1 year		2-3 years		4-5 years		More than 5 years
Operating lease obligations		639		236		277		126		—	Rs.	2,495	Rs.	384	Rs.	690	Rs.	569	Rs.	852
Capital lease obligations		291		31		27		23		210		862		87		171		92		512
Purchase obligations
Agreements to purchase property and equipment and other capital commitments⁽¹⁾		2,351		2,351		—		—		—		4,173		4,173		—		—		—
Short-term debt		15,844		15,844		—		—		—
Short term debt obligations												21,857		21,857		—		—		—
Long term debt obligations		16,271		—		7,876		8,395		—		20,427		6,875		6,052		7,500		—
Estimated interest payable on long-term debt⁽²⁾		1,746		695		903		148		—		584		242		289		53		—
Post retirement benefits obligations⁽³⁾		1,308		100		199		244		765		2,398		163		362		459		1,414

Total contractual obligations		38,450		19,257		9,282		8,936		975	Rs.	52,796	Rs.	33,781	Rs.	7,564	Rs.	8,673	Rs.	2,778


~~Name~~⁽¹⁾	~~Age (in yrs)~~		~~Position~~

~~Dr. K. Anji Reddy~~Directors Name⁽²⁾⁽¹⁾	73Age (in yrs.)			Position
Mr. Satish Reddy^(2)(3)(5)		48		Chairman
Mr. G.V. Prasad^{(2),(3)(4)(5)}	52	55		Co-Chairman, Managing Director and Chief Executive Officer ~~and Vice Chairman~~
~~Mr. Satish Reddy~~^(2),(4)	45		~~Chief Operating Officer and Managing Director~~
Mr. Anupam Puri	66	69		Director
Dr. J.P. Moreau	64	67		Director
Ms. Kalpana Morparia	63	66		Director
Dr. Omkar Goswami	55	58		Director
Mr. Ravi Bhoothalingam	66	69		Director
Dr. Bruce ~~L. A.~~L.A. Carter	69	71		Director
Dr. Ashok S. Ganguly	77	80		Director
Mr. Sridar Iyengar⁽⁵⁾	64	67		Director


	(Amounts in millions, except number of stock options)
Name of Directors	Attendance fees		Commission		Salary		Perquisites		Total		Number of Stock Options⁽¹⁾

Dr. K. Anji Reddy		—		100		8		3		111		—

Mr. G.V. Prasad		—		73		6		2		81		—

Mr. Satish Reddy		—		73		3		3		79		—

Mr. Anupam Puri		*		7		—		—		7		2,400

Dr. J.P. Moreau		*		7		—		—		7		2,400

Ms. Kalpana Morparia		*		7		—		—		7		2,400

Dr. Omkar Goswami		*		7		—		—		8		2,400

Mr. Ravi Bhoothalingam		*		7		—		—		7		2,400

Dr. Bruce L. A. Carter		*		8		—		—		8		2,400

Dr. Ashok S. Ganguly		*		7		—		—		7		2,400

Mr. Sridar Iyengar		*		4		—		—		4		2,400


Name	Compensation⁽¹⁾⁽³⁾ (Rs. in millions)		No. of Options⁽²⁾
Abhijit Mukherjee		41.9		5,000
Alok Sonig		22.1		3,200
Dr. Cartikeya Reddy		21.8		3,500
Saumen Chakraborty		26.1		3,500
Umang Vohra		36.5		3,500
Dr. Raghav Chari		38.8		3,500
M.V. Ramana		23.2		3,500
Samiran Das		20.3		3,000
Dr. Amit Biswas		18.0		2,800
Dr. K.V.S. Ram Rao		14.6		2,500
Dr. S. Chandrasekhar		19.7		2,500
Dr. R. Ananthanarayanan (until November 30, 2014)		12.3		2,800

⁽¹⁾
~~Name~~	~~Compensation~~ (These compensation amounts do not include share based payment expense arising from stock options. However, the number of options granted during the year are mentioned separately in ~~millions)~~		~~No. of~~ ~~Options held~~		~~Fiscal Year~~ ~~Of Grant~~		~~Exercise~~ ~~Price ( )~~		~~Expiration~~ ~~Date~~ ~~(See note no.)~~
~~Abhijit Mukherjee~~the above table.		~~21.4~~		~~2,000~~		~~2009~~		5		(1	)
				~~2,000~~		~~2010~~		5		(1	)
				~~2,000~~		~~2010~~		5		(2	)
				~~2,000~~		~~2011~~		5		(1	)
				~~2,000~~		~~2011~~		5		(2	)
				~~2,000~~		~~2011~~		5		(3	)
				~~1,750~~		~~2012~~		5		(1	)
				~~1,750~~		~~2012~~		5		(2	)
				~~1,750~~		~~2012~~		5		(3	)
				~~1,750~~		~~2012~~		5		(4	)

~~Amit Patel~~		~~23.5~~		~~1,250~~		~~2009~~		5		(1	)
				~~1,500~~		~~2010~~		5		(1	)
				~~1,500~~		~~2010~~		5		(2	)
				~~1,250~~		~~2011~~		5		(1	)
				~~1,250~~		~~2011~~		5		(2	)
				~~1,250~~		~~2011~~		5		(3	)
				~~1,125~~		~~2012~~		5		(1	)
				~~1,125~~		~~2012~~		5		(2	)
				~~1,125~~		~~2012~~		5		(3	)
				~~1,125~~		~~2012~~		5		(4	)

~~Dr. Cartikeya Reddy~~		~~11.9~~		~~1,250~~		~~2009~~		5		(1	)
				~~1,250~~		~~2010~~		5		(1	)
				~~1,250~~		~~2010~~		5		(2	)
				~~1,125~~		~~2011~~		5		(1	)
				~~1,125~~		~~2011~~		5		(2	)
				~~1,125~~		~~2011~~		5		(3	)
				~~1,000~~		~~2012~~		5		(1	)
				~~1,000~~		~~2012~~		5		(2	)
				~~1,000~~		~~2012~~		5		(3	)
				~~1,000~~		~~2012~~		5		(4	)

~~Saumen Chakraborty~~		~~18.0~~		~~2,000~~		~~2009~~		5		(1	)
				~~2,000~~		~~2010~~		5		(1	)
				~~2,000~~		~~2010~~		5		(2	)
				~~1,625~~		~~2011~~		5		(1	)
				~~1,625~~	��	~~2011~~		5		(2	)
				~~1,625~~		~~2011~~		5		(3	)
				~~1,500~~		~~2012~~		5		(1	)
				~~1,500~~		~~2012~~		5		(2	)
				~~1,500~~		~~2012~~		5		(3	)
				~~1,500~~		~~2012~~		5		(4	)


Name	Compensation ( in millions)		No. of Options held		Fiscal Year Of Grant		Exercise Price ( )		Expiration Date (See note no.)
Umang Vohra		12.7		875		2009		5		(1	)
				1,250		2010		5		(1	)
				1,250		2010		5		(2	)
				1,125		2011		5		(1	)
				1,125		2011		5		(2	)
				1,125		2011		5		(3	)
				1,125		2012		5		(1	)
				1,125		2012		5		(2	)
				1,125		2012		5		(3	)
				1,125		2012		5		(4	)

Dr. Raghav Chari		22.5		750		2009		5		(1	)
				1,000		2010		5		(1	)
				1,000		2010		5		(2	)
				1,125		2011		5		(1	)
				1,125		2011		5		(2	)
				1,125		2011		5		(3	)
				1,000		2012		5		(1	)
				1,000		2012		5		(2	)
				1,000		2012		5		(3	)
				1,000		2012		5		(4	)

Dr. R. Ananthanarayanan		17.0		—		—		—		—
				875		2012		5		(1	)
				875		2012		5		(2	)
				875		2012		5		(3	)
				875		2012		5		(4	)

M.V. Ramana		13.4		750		2009		5		(1	)
				875		2010		5		(1	)
				875		2010		5		(2	)
				750		2011		5		(1	)
				750		2011		5		(2	)
				750		2011		5		(3	)
				650		2012		5		(1	)
				650		2012		5		(2	)
				650		2012		5		(3	)
				650		2012		5		(4	)

Samiran Das		10.5		—		—		—		—

Dr. Amit Biswas		6.1		—		—		—		—

K. B. Sankara Rao (Retired on January 31, 2012)		20.3		—		—		—		—

Vilas M. Dholye (Retired on September 16, 2011)		11.2		—		—		—		—


Name	Expiration of Current Term of Office	Term of Office	Period of Service
~~Dr. K. Anji Reddy~~Mr. G.V. Prasad⁽¹⁾	~~July 12,~~January 29, 2016	5 years	2829 years

Mr. Satish Reddy^{(1) (4)}	September 30, 2017	5 years	1922 years

Mr. ~~G.V. Prasad~~Anupam Puri^{(1)(2) (3)}	~~January 29, 2016~~July 31, 2018	4 years	13 years
Dr. J. P. Moreau^{(2) (3)}	July 31, 2015	1 year	8 years
Ms. Kalpana Morparia^{(2) (3)}	July 31, 2019	5 years	268 years

~~Mr. Anupam Puri~~Dr. Omkar Goswami^{(2) (3)}	~~Retirement by rotation~~	~~Due for retirement by~~ ~~rotation in 2014~~	~~10 years~~

~~Dr. J. P. Moreau~~⁽²⁾	~~Retirement by rotation~~	~~Due for retirement by~~ ~~rotation in 2013~~July 31, 2019	5 years
		14.5 years
~~Ms. Kalpana Morparia~~Mr. Ravi Bhoothalingam^{(2) (3)}	~~Retirement by rotation~~July 31, 2016	~~Due for retirement by~~ ~~rotation in 2014~~2 years	14.5 years
Dr. Bruce L.A. Carter^{(2) (3)}	July 31, 2019	5 years
		7 years
Dr. ~~Omkar Goswami~~Ashok S. Ganguly^{(2) (3)}	~~Retirement by rotation~~July 31, 2017	~~Due for retirement by~~ ~~rotation in 2012~~3 years	~~11.5~~5.5 years

Mr. ~~Ravi Bhoothalingam~~Sridar Iyengar^{(2) (3)}	~~Retirement by rotation~~July 31, 2019	~~Due for retirement by~~ ~~rotation in 2012~~	~~11.5~~5 years

~~Dr. Bruce L. A. Carter~~^{(2) (3)}	~~Retirement by rotation~~	~~Due for retirement by~~ ~~rotation in 2015~~	4 years


	As at March 31, 2012										As at March 31, 2015
	India		North America		Europe		Rest of World		Total		India		North America		Europe		Rest of World		Total
Manufacturing⁽¹⁾		6,100		269		92		100		6,561		9,442		420		155		285		10,302
Sales and marketing⁽²⁾		3,656		109		87		980		4,832		4,953		137		35		1,375		6,500
Research and development(3)		1,306		12		42		586		1,946		2,202		45		120		46		2,413
Others⁽³⁾⁽⁴⁾		1,131		82		145		503		1,861		727		104		94		233		1,158

Total		12,193		472		366		2,169		15,200		17,324		706		404		1,939		20,373


	As at March 31, 2010										As at March 31, 2013
	India		North America		Europe		Rest of World		Total		India		North America		Europe		Rest of World		Total
Manufacturing⁽¹⁾		5,413		163		53		111		5,740		7,084		389		179		154		7,806
Sales and marketing⁽²⁾		3,212		102		88		661		4,063		3,559		119		85		1,057		4,820
Research and development(3)		1,305		6		27		448		1,786		1,939		21		69		43		2,072
Others⁽³⁾⁽⁴⁾		1,069		44		231		522		1,866		1,143		87		139		550		1,919

Total		10,999		315		399		1,742		13,455		13,725		616		472		1,804		16,617


Name	No. of Shares Held^{(1), (3)}		% of Outstanding Capital			No. of Options Held
Dr. K. Anji Reddy^{(2), (4)}		—		—			—
Mr. G.V. Prasad⁽⁴⁾		1,365,840		0.81	%		—
Mr. Satish Reddy⁽⁴⁾		1,205,832		0.71	%		—
Mr. Anupam Puri (ADRs)⁽⁵⁾		16,498		0.01	%		4,802
Dr. J.P.Moreau (ADRs)⁽⁵⁾		2,400		—			2,400
Dr. Omkar Goswami⁽⁵⁾		20,400		0.01	%		2,400
Ms. Kalpana Morparia⁽⁵⁾		8,400		—			2,400
Mr. Ravi Bhoothalingam⁽⁵⁾		20,400		0.01	%		2,400
Dr. Bruce L.A. Carter (ADRs)⁽⁵⁾		9,400		—			2,400
Dr. Ashok S. Ganguly⁽⁵⁾		2,400		—			2,400
Mr. Sridar Iyengar		—		—			—
Abhijit Mukherjee		21,093		0.01	%		19,000
Amit Patel		—		—			12,500
Cartikeya Reddy		4,625		—			11,125
R. Ananthanarayanan		—		—			3500
Saumen Chakraborty		24,884		0.01	%		16,875
Umang Vohra		7,440		—			11,250
Dr. Raghav Chari		—		—			10,125
Mr. M.V. Ramana		16,046		0.01	%		7,350
Mr. Samiran Das		—		—			—
Dr. Amit Biswas		—		—			—

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