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The information in this preliminary prospectus is not complete and may be changed. This preliminary prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any state where the offer or sale is not permitted. |
Per ADS | Total | |||||||
Public offering price | U.S.$ | U.S.$ | ||||||
Underwriting discounts and commissions | U.S.$ | U.S.$ | ||||||
Proceeds to us before expenses | U.S.$ | U.S.$ |
Citigroup | Merrill Lynch & Co. |
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• | Our core businesses of active pharmaceutical ingredients and intermediates and formulations are well established with a track record of growth and profitability. We are focused on cost competitiveness and improving our position in existing markets and expanding into selected new markets in an effort to continue this growth and profitability. | |
• | In our global generics business, we are building a pipeline of products that will help us drive growth in the medium-term in the United States and Europe. We are focusing on key markets in Europe, including Germany, Spain, Italy, France and Poland in order to build a dominant presence in these markets. | |
• | We are also actively pursuing external business development opportunities to supplement our internal growth initiatives, including acquisitions and alliances. | |
• | We are also focused on positioning our custom pharmaceutical services business as partner of choice for the strategic outsourcing needs of innovator pharmaceutical companies. |
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• | In addition, we are focusing our investments on innovation led businesses, including drug discovery with a goal of building our drug discovery pipeline, and our most recent business focus, specialty pharmaceuticals, which is currently in the research and development phase. These businesses, while being investment intensive and having long lead times, have the potential to provide significant growth as well as sustained revenues and profitability for much longer periods due to patent protected franchises. |
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Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||
September 30, 2006 | September 30, 2005 | |||||||||||||||||||||||||||
Convenience | Convenience | |||||||||||||||||||||||||||
Translation | Translation | |||||||||||||||||||||||||||
(Rs.) | Into U.S.$ | %(1) | (Rs.) | Into U.S.$ | %(1) | Growth %(2) | ||||||||||||||||||||||
In millions (except per share data) | In millions (except per share data) | |||||||||||||||||||||||||||
Total revenues | 20,038.5 | 436.1 | 100.0 | 5,803.7 | 126.3 | 100.0 | 245.3 | |||||||||||||||||||||
Cost of revenues | 11,750.3 | 255.7 | 58.6 | 2,806.9 | 61.1 | 48.4 | 318.6 | |||||||||||||||||||||
Gross profit | 8,288.2 | 180.4 | 41.4 | 2,996.8 | 65.2 | 51.6 | 176.6 | |||||||||||||||||||||
Selling, general and administrative expenses | 3,667.5 | 79.8 | 18.3 | 1,766.7 | 38.4 | 30.4 | 107.6 | |||||||||||||||||||||
Research and development expenses, net | 401.5 | 8.7 | 2.0 | 443.5 | 9.7 | 7.6 | (9.5 | ) | ||||||||||||||||||||
Amortization expenses | 402.4 | 8.8 | 2.0 | 76.4 | 1.7 | 1.3 | 426.7 | |||||||||||||||||||||
Other operating (income)/expenses net | (1.8 | ) | 0.0 | 0.0 | 23.9 | 0.5 | 0.4 | |||||||||||||||||||||
Operating income before foreign exchange loss/(gain) | 3,818.6 | 83.1 | 19.1 | 686.3 | 14.9 | 11.8 | 456.4 | |||||||||||||||||||||
Foreign exchange loss/ (gain) | (54.8 | ) | (1.2 | ) | (0.3 | ) | 13.0 | 0.3 | 0.2 | 35.4 | ||||||||||||||||||
Operating income | 3,873.4 | 84.3 | 19.3 | 673.3 | 14.7 | 11.6 | 475.3 | |||||||||||||||||||||
Equity in loss of affiliates | 21.4 | 0.5 | 0.1 | 15.8 | 0.3 | 0.3 | ||||||||||||||||||||||
Other expenses/(income) net | 321.2 | 7.0 | 1.6 | (191.2 | ) | (4.2 | ) | (3.3 | ) | |||||||||||||||||||
Income before income taxes and minority interest | 3,530.8 | 76.8 | 17.6 | 848.7 | 18.5 | 14.6 | 316.0 | |||||||||||||||||||||
Income tax (benefit)/expense | 737.1 | 16.0 | 3.7 | (39.5 | ) | (0.9 | ) | (0.7 | ) | |||||||||||||||||||
Minority interest | 4.0 | 0.1 | 0.0 | 1.4 | 0.0 | 0.0 | ||||||||||||||||||||||
Net income | 2,797.7 | 60.9 | 14.0 | 889.6 | 19.4 | 15.3 | 214.5 | |||||||||||||||||||||
Basic earnings per share (Rs.) | 18.23 | 5.81 | ||||||||||||||||||||||||||
Diluted earnings per share (Rs.) | 18.15 | 5.81 |
(1) | As a percentage of our total revenues. | |
(2) | Growth in three months ended September 30, 2006 as compared to three months ended September 30, 2005. |
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Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||
September 30, 2006 | September 30, 2005 | |||||||||||||||||||||||||||
Convenience | Convenience | |||||||||||||||||||||||||||
Translation Into | Translation Into | |||||||||||||||||||||||||||
(Rs.) | U.S.$ | %(1) | (Rs.) | U.S.$ | %(1) | Growth %(2) | ||||||||||||||||||||||
In millions | In millions | |||||||||||||||||||||||||||
Active pharmaceutical ingredients and intermediates | 2,905.9 | 63.2 | 14.5 | 2,130.3 | 46.4 | 36.7 | 36.4 | |||||||||||||||||||||
India | 501.6 | 10.9 | 17.3 | (3) | 579.0 | 12.6 | 27.2 | (3) | (13.4 | ) | ||||||||||||||||||
Outside India | 2,404.3 | 52.3 | 82.7 | (3) | 1,551.3 | 33.8 | 72.8 | (3) | 55.0 | |||||||||||||||||||
Formulations | 3,055.7 | 66.5 | 15.3 | 2,576.0 | 56.1 | 44.4 | 18.6 | |||||||||||||||||||||
India | 1,743.2 | 37.9 | 57.0 | (4) | 1,507.5 | 32.8 | 58.5 | (4) | 15.6 | |||||||||||||||||||
Outside India | 1,312.5 | 28.6 | 43.0 | (4) | 1,068.5 | 23.3 | 41.5 | (4) | 22.8 | |||||||||||||||||||
Generics | 12,112.5 | 263.6 | 60.4 | 772.8 | 16.8 | 13.3 | 1,467.2 | |||||||||||||||||||||
Critical care and biotechnology | 226.9 | 4.9 | 1.1 | 203.0 | 4.4 | 3.5 | 11.8 | |||||||||||||||||||||
Custom pharmaceutical services | 1,668.1 | 36.3 | 8.3 | 121.6 | 2.6 | 2.1 | 1,271.8 | |||||||||||||||||||||
Others | 69.4 | 1.5 | 0.4 | 0.0 | 0.0 | 0.0 | ||||||||||||||||||||||
Total | 20,038.5 | 436.1 | 100.0 | 5,803.7 | 126.3 | 100.0 | 245.3 | |||||||||||||||||||||
(1) | As a percentage of our total revenues. | |
(2) | Growth in three months ended September 30, 2006 as compared to three months ended September 30, 2005. | |
(3) | As a percentage of our revenues from active pharmaceutical ingredients and intermediates segment. | |
(4) | As a percentage of our revenues from formulations segment. |
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||
September 30, 2006 | September 30, 2005 | |||||||||||||||||||||||||||
Convenience | Convenience | |||||||||||||||||||||||||||
Translation Into | Translation Into | |||||||||||||||||||||||||||
(Rs.) | U.S.$ | %(1) | (Rs.) | U.S.$ | %(1) | Growth %(2) | ||||||||||||||||||||||
In millions | In millions | |||||||||||||||||||||||||||
India | 2,429.7 | 52.9 | 12.1 | 2,216.1 | 48.2 | 38.2 | 9.6 | |||||||||||||||||||||
North America | 10,195.6 | 221.9 | 50.9 | 878.8 | 19.1 | 15.1 | 1,060.2 | |||||||||||||||||||||
Russia and other countries of the former Soviet Union | 1,023.9 | 22.3 | 5.1 | 890.7 | 19.4 | 15.4 | 15.0 | |||||||||||||||||||||
Europe | 3,848.0 | 83.7 | 19.2 | 873.1 | 19.0 | 15.0 | 340.7 | |||||||||||||||||||||
Others | 2,541.3 | 55.3 | 12.7 | 945.0 | 20.6 | 16.3 | 168.9 | |||||||||||||||||||||
Total | 20,038.5 | 436.1 | 100.0 | 5,803.7 | 126.3 | 100.0 | 245.3 | |||||||||||||||||||||
(1) | As a percentage of our total revenues. | |
(2) | Growth in three months ended September 30, 2006 as compared to three months ended September 30, 2005. |
• | Revenues were Rs.20,038.5 million for the three months ended September 30, 2006 as compared to Rs.5,803.7 million for the three months ended September 30, 2005, representing an increase of 245.3%. |
• | Revenues from markets outside India increased by 390.8% to Rs.17,608.8 million for the three months ended September 30, 2006 as compared to the three months ended September 30, 2005. |
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• | Markets outside India contributed 87.9% to total revenues for the three months ended September 30, 2006 as compared to 61.8% for the three months ended September 30, 2005. |
• | Revenues from authorized generic products contributed 39.0% whereas revenues from acquisition of beta Holding GmbH, or betapharm and Industrias Quimicas Falcon de Mexico, S.A. de C.V., or Falcon businesses and products acquired in Spain contributed 20.0% of the total revenues for the three months ended September 30, 2006. |
• | Revenues excluding contribution from authorized generic products, business and product acquisitions increased by 41.1% to Rs.8,229.9 million for the three months ended September 30, 2006 from Rs.5,803.7 million for the three months ended September 30, 2005. | |
• | Revenues in our active pharmaceutical ingredients and intermediates business increased by 36.4% to Rs.2,905.9 million for the three months ended September 30, 2006 from Rs.2,130.3 million for the three months ended September 30, 2005 primarily driven by sales of sertraline. | |
• | Revenues in our branded formulations business increased by 18.6% to Rs.3,055.7 million for the three months ended September 30, 2006 from Rs.2,576.0 million for the three months ended September 30, 2005 driven by growth across key countries as mentioned below. |
• | Revenues outside India increased by 22.8% for the three months ended September 30, 2006 to Rs.1,312.5 million as compared to Rs.1,068.5 million for the three months ended September 30, 2005, driven by growth in Russia and other countries of the former Soviet Union. | |
• | Revenues from India increased by 15.6% for the three months ended September 30, 2006 to Rs.1,743.2 million as compared to Rs.1,507.5 million for the three months ended September 30, 2005, driven by growth in key brands. As per ORG IMS August MAT figures, our volume growth was 17% as compared to industry average volume growth of 15% and our value growth tracked industry growth. |
• | Revenues in our generics segment were Rs.12,112.5 million for the three months ended September 30, 2006 as compared to Rs.772.8 million for the three months ended September 30, 2005. | |
• | Revenues in our North American generics business increased to Rs.9,082.3 million for the three months ended September 30, 2006 as compared to Rs.299.4 million for the three months ended September 30, 2005. This growth was primarily driven by: |
• | Combined revenues of Rs.7,808.0 million from sales of simvastatin and finasteride. Both of these products were launched as authorized generic versions of Merck’s Zocor® and Proscar®, respectively, in June 2006. Sales of these products contributed 39.0% to total revenues for the three months ended September 30, 2006. | |
• | Excluding these authorized generics, growth in North America was primarily driven by sales of fexofenadine, which contributed revenues of Rs.806.7 million for the three months ended September 30, 2006. |
• | Revenues in our European generics business were Rs.3,026.2 million for the three months ended September 30, 2006 as compared to Rs.473.4 million for the three months ended September 30, 2005. |
• | Revenues from the acquisition of betapharm in Germany were Rs.2,554.5 million for the three months ended September 30, 2006 as compared to revenues of Rs.1,997.6 million for the three months ended June 30, 2006. The gross profit margin at betapharm for the three months ended September 30, 2006 was 57.9% as compared to 52.5% for the three months ended June 30, 2006. betapharm was acquired by us on March 3, 2006 and accordingly, the corresponding previous quarter ended September 30, 2005 did not have any revenues from betapharm. | |
• | Excluding contributions from business and products acquisitions in betapharm and Spain, revenues in the Europe declined to Rs.454.8 million for the three months ended September 30, 2006 from Rs.473.4 million for the three months ended September 30, 2005 primarily on account of a decline in |
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price of omeprazole and amlopidine maleate in the United Kingdom. Revenues from products acquired in Spain contributed Rs.16.9 million for the three months ended September 30, 2006. |
• | Revenues from our custom pharmaceutical services business increased to Rs.1,668.1 million for the three months ended September 30, 2006 from Rs.121.6 million for the three months ended September 30, 2005. |
• | Revenues from the acquired Falcon business in Mexico were Rs.1,429.2 million for the three months ended September 30, 2006 as compared to Rs.1,241.0 million for the three months ended June 30, 2006. Falcon was acquired by us on December 30, 2005 and accordingly, the corresponding previous quarter ended September 30, 2005 did not have any revenues from Falcon. | |
• | Excluding revenues from the acquired Falcon business, revenues increased from Rs.121.6 million for the three months ended September 30, 2005 to Rs.238.9 million for the three months ended September 30, 2006, driven by growth in our customer base and their product portfolio. |
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||
September 30, 2006 | September 30, 2005 | |||||||||||||||||||||||||||
Convenience | Convenience | |||||||||||||||||||||||||||
Translation Into | Translation Into | |||||||||||||||||||||||||||
(Rs.) | U.S.$ | %(1) | (Rs.) | U.S.$ | %(1) | Growth%(2) | ||||||||||||||||||||||
In millions | In millions | |||||||||||||||||||||||||||
North America | 437.5 | 9.5 | 15.0 | 489.9 | 10.7 | 23.0 | (10.7 | ) | ||||||||||||||||||||
India | 501.6 | 10.9 | 17.3 | 578.9 | 12.6 | 27.2 | (13.4 | ) | ||||||||||||||||||||
Europe | 535.6 | 11.7 | 18.4 | 337.6 | 7.3 | 15.8 | 58.6 | |||||||||||||||||||||
Others | 1,431.2 | 31.1 | 49.3 | 723.9 | 15.8 | 34.0 | 97.7 | |||||||||||||||||||||
Total | 2,905.9 | 63.2 | 100.0 | 2,130.3 | 46.4 | 100.0 | 36.4 | |||||||||||||||||||||
(1) | Refers to our revenues from API sales in the applicable geography expressed as a percentage of our total revenues from API sales. | |
(2) | Growth in three months ended September 30, 2006 as compared to three months ended September 30, 2005. |
• | Revenues were Rs.2,905.9 million for the three months ended September 30, 2006 as compared to Rs.2,130.3 million for the three months ended September 30, 2005, representing an increase of 36.4%. | |
• | Revenues outside India were Rs.2,404.3 million for the three months ended September 30, 2006 as compared to Rs.1,551.4 million for the three months ended September 30, 2005, representing an increase of 55.0%. These revenues contributed 82.7% of the total segment revenues for the three months ended September 30, 2006 as compared to 72.8% for the three months ended September 30, 2005. | |
• | Revenues in Europe grew by 58.6% to Rs.535.6 million for the three months ended September 30, 2006 from Rs.337.6 million for the three months ended September 30, 2005 primarily led by growth of sales of our key products ramipril and sertraline. | |
• | Revenues in the rest of the world markets increased by 97.7% to Rs.1,431.2 million for the three months ended September 30, 2006 from Rs.723.8 million for the three months ended September 30, 2005, primarily driven by growth in sales in Israel, Turkey and South Korea. | |
• | Revenues in North America decreased by 10.7% to Rs.437.5 million for the three months ended September 30, 2006 as compared to Rs.489.9 million for the three months ended September 30, 2005. This decline was primarily due to a decrease in revenues from sertraline and ibuprofen partially offset by an increase in sales of development products. |
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• | Revenues in India were Rs.501.6 million for the three months ended September 30, 2006 as compared to Rs.578.9 million for the three months ended September 30, 2005, representing a decrease of 13.4%, primarily on account of a decline in sales volumes in key products. | |
• | We filed three Drug Master Files, or DMFs in the United States during the quarter, bringing our total DMF filings in the U.S. to 86. We also filed three DMFs in Canada. |
• | Revenues in this segment were Rs.12,112.5 million for the three months ended September 30, 2006 as compared to Rs.772.8 million for the three months ended September 30, 2005. | |
• | North America contributed 75.0% and Europe contributed 25.0% to the segment revenues. | |
• | In North America, revenues increased to Rs.9,082.3 million for the three months ended September 30, 2006 from Rs.299.4 million for the three months ended September 30, 2005. Combined revenues of simvastatin and finasteride launched as generic versions of Zocor® and Proscar® respectively, for the three months ended September 30, 2006 were Rs.7,808.0 million. Fexofenadine, which we launched in April, 2006, contributed Rs.806.7 million in revenues for the three months ended September 30, 2006. | |
• | In Europe, revenues increased to Rs.3,026.2 million for the three months ended September 30, 2006 from Rs.473.4 million for the three months ended September 30, 2005. |
• | Revenues from the acquired betapharm business in Germany were Rs.2,554.5 million for the three months ended September 30, 2006 as compared to Rs.1,997.6 million for the three months ended June 30, 2006. betapharm was acquired by us on March 3, 2006 and accordingly, the corresponding previous quarter ended September 30, 2005 did not have any revenues from betapharm. | |
• | Revenues from the United Kingdom (U.K.) declined to Rs.454.8 million for the three months ended September 30, 2006 from Rs.473.4 million for the three months ended September 30, 2005. This decline was primarily on account of a decline in prices of key products of amlopidine and omeprazole in the U.K. Revenues from acquired products in Spain contributed Rs.16.9 million for the three months ended September 30, 2006. |
• | During the three months ended September 30, 2006, we filed eight ANDAs with the U.S. FDA, five of which were Paragraph IVs. As of September 30, 2006, we had a total of 56 ANDAs pending at the U.S. FDA. |
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||
September 30, 2006 | September 30, 2005 | |||||||||||||||||||||||||||
Convenience | Convenience | |||||||||||||||||||||||||||
Translation | Translation | |||||||||||||||||||||||||||
Country | (Rs.) | Into U.S.$ | %(1) | (Rs.) | Into U.S.$ | %(1) | Growth %(2) | |||||||||||||||||||||
In millions | In millions | |||||||||||||||||||||||||||
Russia and other countries of the former Soviet Union | 984.8 | 21.4 | 75.0 | 846.3 | 18.4 | 79.2 | 29.4 | |||||||||||||||||||||
Europe | 99.9 | 2.2 | 7.6 | 51.0 | 1.1 | 4.8 | 95.9 | |||||||||||||||||||||
Others | 227.8 | 5.0 | 17.4 | 171.3 | 3.7 | 16.0 | 33.0 | |||||||||||||||||||||
Total | 1,312.5 | 28.6 | 100.0 | 1,068.6 | 23.3 | 100.0 | 22.8 | |||||||||||||||||||||
(1) | Refers to our revenues from formulations sales in the applicable country expressed as a percentage of our total revenues from formulations sales throughout the world. | |
(2) | Growth in three months ended September 30, 2006 as compared to three months ended September 30, 2005. |
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• | Revenues were Rs.1,312.5 million for the three months ended September 30, 2006, which represents an increase of 22.8% from the three months ended September 30, 2005. The growth was primarily driven by the sales in Russia, Uzbekistan, Romania and Venezuela. | |
• | Revenues in Russia increased by 18.0% to Rs.759.2 million for the three months ended September 30, 2006 as compared to Rs.643.7 million for the three months ended September 30, 2005. This growth was primarily driven by an increase in sales from key brands of Nise, Cetrine and Keterol. During the three months ended September 30, 2006, we launched four new products including twoover-the-counter (OTC) products. We improved our ranking to eight in the retail prescription market from nine for the same period last year. (April — June Pharmexpert). |
• | Revenues in the markets of the former countries of the Soviet Union, or CIS increased by 11.4% to Rs.225.6 million for the three months ended September 30, 2006 as compared to Rs.202.6 million for the three months ended September 30, 2005. This growth was primarily driven by an increase in sales in Ukraine, Belarus and Uzbekistan. | |
• | Revenues outside India markets excluding Russia, other countries of the former Soviet Union and Europe increased by 33.0% to Rs.227.8 million for the three months ended September 30, 2006 from Rs.171.3 million for the three months ended September 30, 2005. The growth was primarily driven by an increase in sales in Venezuela, South Africa, Myanmar and Vietnam. | |
• | Revenues in Europe grew by 95.9% to Rs.99.9 million for the three months ended September 30, 2006 as compared to Rs.51.0 million for the three months ended September 30, 2005. This growth was mainly on account of a growth of sales in Romania and Albania. |
• | Revenues were Rs. 1.743.2 million for the three months ended September 30, 2006, representing an increase of 15.6%, as compared to Rs.1,507.5 million for the three months ended September 30, 2006. | |
• | Growth was primarily driven by growth in our key brands of Omez, Nise and Reclimet. | |
• | We have launched 12 new products during the six months ended September 30, 2006. These products contributed Rs.62.9 million to revenues for the three months ended September 30, 2006. | |
• | New launches of Omez-D and Razo-D rank among the 10 most successful launches of 2006 as per August 2006 ORG IMS MAT. | |
• | As per August MAT ORG IMS: |
• | We recorded volume growth of 17% as compared to industry volume growth of 15%. | |
• | We recorded value growth of 16%, in line with industry growth. |
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Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||
September 30, 2006 | September 30, 2005 | |||||||||||||||||||||||||||
Convenience | Convenience | |||||||||||||||||||||||||||
Translation Into | Translation Into | |||||||||||||||||||||||||||
Therapeutic Segment(1) | (Rs.) | U.S.$ | %(2) | (Rs.) | U.S.$ | %(2) | Growth %(3) | |||||||||||||||||||||
In millions | In millions | |||||||||||||||||||||||||||
Cardiovascular | 294.0 | 6.4 | 16.8 | 276.9 | 6.0 | 18.4 | 6.2 | |||||||||||||||||||||
Gastro-intestinal | 347.4 | 7.6 | 19.9 | 281.0 | 6.1 | 18.6 | 23.6 | |||||||||||||||||||||
Pain | 289.2 | 6.3 | 16.6 | 224.5 | 4.9 | 14.9 | 28.9 | |||||||||||||||||||||
Diabetic care | 127.0 | 2.8 | 7.3 | 122.7 | 2.7 | 8.1 | 3.6 | |||||||||||||||||||||
Paediatrics | 189.5 | 4.1 | 10.9 | 154.1 | 3.4 | 10.2 | 23.1 | |||||||||||||||||||||
Neutraceuticals | 84.7 | 1.8 | 4.9 | 85.6 | 1.9 | 5.7 | (1.0 | ) | ||||||||||||||||||||
Dermatology | 73.0 | 1.6 | 4.2 | 71.9 | 1.6 | 4.8 | 1.6 | |||||||||||||||||||||
Anti-infectives | 111.4 | 2.4 | 6.4 | 86.7 | 1.9 | 5.8 | 28.4 | |||||||||||||||||||||
Dental | 60.9 | 1.3 | 3.5 | 60.0 | 1.3 | 4.0 | 1.4 | |||||||||||||||||||||
Urology | 59.0 | 1.3 | 3.4 | 40.1 | 0.9 | 2.7 | 47.2 | |||||||||||||||||||||
Women’s health care | 30.5 | 0.7 | 1.8 | 34.7 | 0.8 | 2.3 | (11.9 | ) | ||||||||||||||||||||
Surgery | 33.0 | 0.7 | 1.9 | 30.9 | 0.7 | 2.0 | 6.6 | |||||||||||||||||||||
Respiratory | 42.8 | 0.9 | 2.4 | 38.4 | 0.8 | 2.5 | 11.3 | |||||||||||||||||||||
Nephrology | 0.8 | 0.0 | 0.0 | — | — | — | — | |||||||||||||||||||||
Total | 1,743.2 | 37.9 | 100.0 | 1,507.5 | 32.8 | 100.0 | 15.7 | |||||||||||||||||||||
(1) | Due to revised therapeutic segments, revenues for the previous year have been regrouped. | |
(2) | Refers to the therapeutic category’s revenues from sales in India expressed as a percentage of our total revenues from sales in all of our therapeutic categories in India. | |
(3) | Growth in three months ended September 30, 2006 as compared to three months ended September 30, 2005. |
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||
September 30, 2006 | September 30, 2005 | |||||||||||||||||||||||||||
Convenience | Convenience | |||||||||||||||||||||||||||
translation into | translation into | |||||||||||||||||||||||||||
Brand | (Rs.) | U.S.$ | %(1) | (Rs.) | U.S.$ | %(1) | Growth%(2) | |||||||||||||||||||||
In millions | In millions | |||||||||||||||||||||||||||
Nise | 274.1 | 6.0 | 15.7 | % | 227.6 | 4.9 | 15.1 | % | 20.4 | % | ||||||||||||||||||
Omez | 223.9 | 4.9 | 12.8 | % | 182.3 | 4.0 | 12.1 | % | 22.8 | % | ||||||||||||||||||
Stamlo | 88.3 | 1.9 | 5.1 | % | 83.3 | 1.8 | 5.5 | % | 6.0 | % | ||||||||||||||||||
Stamlo beta | 66.2 | 1.4 | 3.8 | % | 69.3 | 1.5 | 4.6 | % | (4.5 | )% | ||||||||||||||||||
Razo | 56.8 | 1.2 | 3.3 | % | 34.7 | 0.8 | 2.3 | % | 63.7 | % | ||||||||||||||||||
Atocor | 45.5 | 1.0 | 2.6 | % | 43.2 | 0.9 | 2.9 | % | 5.3 | % | ||||||||||||||||||
Enam | 42.6 | 0.9 | 2.4 | % | 43.8 | 1.0 | 2.9 | % | (2.7 | )% | ||||||||||||||||||
Clamp | 42.5 | 0.9 | 2.4 | % | 33.3 | 0.7 | 2.2 | % | 27.6 | % | ||||||||||||||||||
Reclimet | 39.6 | 0.9 | 2.3 | % | 32.1 | 0.7 | 2.1 | % | 23.4 | % | ||||||||||||||||||
Ketorol | 32.7 | 0.7 | 1.9 | % | 24.3 | 0.5 | 1.6 | % | 34.6 | % | ||||||||||||||||||
Others | 831.0 | 18.1 | 47.7 | % | 733.6 | 16.0 | 48.7 | % | 13.3 | % | ||||||||||||||||||
Total | 1,743.2 | 37.9 | 100.0 | 1,507.5 | 32.8 | 100.0 | 15.7 | % | ||||||||||||||||||||
(1) | Refers to the brand’s revenues from sales in India expressed as a percentage of our total revenues from sales in all of our therapeutic categories in India. |
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(2) | Growth in three months ended September 30, 2006 as compared to three months ended September 30, 2005. |
• | Revenues from CPS increased to Rs.1,668.1 million for the three months ended September 30, 2006 from Rs.121.6 million for the three months ended September 30, 2005. |
• | Revenues from the acquired Falcon business in Mexico were Rs.1,429.2 million for the three months ended September 30, 2006 as compared to Rs.1,241.0 million for the three months ended June 30, 2006. Falcon was acquired by us on December 30, 2005 and accordingly, the corresponding previous quarter ended September 30, 2005 did not have any revenues from Falcon. | |
• | Excluding the contribution from the acquired Falcon business in Mexico, revenues increased from Rs.121.6 million for the three months ended September 30, 2005 to Rs.238.9 million for the three months ended September 30, 2006, driven by growth in our customer base and their product portfolio. |
• | Revenues in our critical care and biotechnology segment were Rs.226.9 million for the three months ended September 30, 2006, representing an increase of 11.8% as compared to the three months ended September 30, 2005. |
• | Gross profits increased to Rs.8,288.2 million for the three months ended September 30, 2006 from Rs.2,996.8 million for the three months ended September 30, 2005. Gross profit margins on total revenues were 41.4% as compared to 51.6% for the three months ended September 30, 2005. Revenues from authorized generics contributed 39.0% to total revenues and earned gross margins which were significantly below our average gross margins. | |
• | Selling, general and administrative, or SG&A expenses increased by 107.6% from the three months ended September 30, 2005 to Rs.3,667.5 million for the three months ended September 30, 2006. This increase was primarily on account of SG&A relating to our acquired businesses, betapharm and Falcon. | |
• | Research and development expenses, net, was 2.0% of total revenues for the three months ended September 30, 2006 as compared to 7.6% for the three months ended September 30, 2005. Gross research and development expenses increased by 24.2% to Rs.743.5 million as compared to Rs.598.8 million for the three months ended September 30, 2005. Under the terms of our research and development partnership agreement with I-VEN Pharma Capital Limited, or I-VEN, we received U.S.$22.5 million in March 2005 to be applied to research and development costs in our generics segment, of which U.S.$5.0 million was recognized as a reduction in research and development expense for the three months ended September 30, 2006, as compared to U.S.3.6 million recognized for the three months ended September 30, 2005. Further, during the three months ended September 30, 2006, our research and development expenses in our drug discovery segment were lower on account of the reimbursement of expenses incurred by us on the development of NCEs assigned to Perlecan Pharma Private Limited, or Perlecan, in terms of our research and development arrangement entered into during the year ended March 31, 2006. | |
• | Amortization expense was Rs.402.4 million for the three months ended September 30, 2006 as compared to Rs.76.4 million for the three months ended September 30, 2005. This includes amortization expense of Rs.323.9 million relating to intangibles in betapharm and Falcon. | |
• | Other expense/(income), net was Rs.321.2 million for the three months ended September 30, 2006 as compared to other expense/(income), net of (Rs.191.2) million for the three months ended September 30, 2005. This movement from a net income to a net expense position was primarily on account of net interest expense of Rs.369.2 million incurred for the three months ended September 30, 2006 as compared to net interest income of Rs.140.3 million for the three months ended September 30, 2005. |
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The increase in interest expense during three months ended September 30, 2006 was due to the long term debt taken to fund the betapharm acquisition. |
• | Net income for the three months ended September 30, 2006 was Rs.2,797.7 million (14.0% of total revenues) as compared to Rs.889.6 million (15.3% of total revenues) for the three months ended September 30, 2005. This translates to basic and diluted earnings per share of Rs.18.23 and Rs.18.15, respectively, for the three months ended September 30, 2006 as compared to Rs.5.81 and Rs.5.81, respectively, for the three months ended September 30, 2005. | |
• | During the three months ended September 30, 2006, we incurred capital expenditure (net) of Rs.1,012.0 million. |
Six Months Ended | Six Months Ended | |||||||||||||||||||||||||||
September 30, 2006 | September 30, 2005 | |||||||||||||||||||||||||||
Convenience | Convenience | |||||||||||||||||||||||||||
Translation Into | Translation Into | Growth | ||||||||||||||||||||||||||
(Rs.) | U.S.$ | %(1) | (Rs.) | U.S.$ | %(1) | %(2) | ||||||||||||||||||||||
In millions (except per share data) | In millions (except per share data) | |||||||||||||||||||||||||||
Income Statement: | ||||||||||||||||||||||||||||
Total Revenues | 34,088.0 | 741.8 | 100.0 | 11,391.0 | 247.9 | 100.0 | 199.3 | % | ||||||||||||||||||||
Cost of revenues | 19,710.8 | 429.0 | 57.8 | 5,469.8 | 119.0 | 48.0 | 260.4 | % | ||||||||||||||||||||
Gross profit | 14,377.2 | 312.9 | 42.2 | 5,921.2 | 128.9 | 52.0 | 142.8 | % | ||||||||||||||||||||
Selling, general and administrative expenses | 7,013.6 | 152.6 | 20.6 | 3,720.5 | 81.0 | 32.7 | 88.5 | % | ||||||||||||||||||||
Research and development expenses, net | 934.4 | 20.3 | 2.7 | 958.2 | 20.9 | 8.4 | (2.5 | )% | ||||||||||||||||||||
Amortization expenses | 790.2 | 17.2 | 2.3 | 172.0 | 3.7 | 1.5 | 359.4 | % | ||||||||||||||||||||
Other operating (income)/expense net | (71.3 | ) | (1.6 | ) | (0.2 | ) | 60.9 | 1.3 | 0.5 | (217.1 | )% | |||||||||||||||||
Operating income before forex loss/(gain) | 5,710.3 | 124.3 | 16.8 | 1,009.6 | 22.0 | 8.9 | 465.6 | % | ||||||||||||||||||||
Forex loss/ (gain) | 19.7 | 0.4 | 0.1 | 78.7 | 1.7 | 0.7 | (75.0 | )% | ||||||||||||||||||||
Operating income/(loss) | 5,690.6 | 123.8 | 16.7 | 930.9 | 20.3 | 8.2 | 511.3 | % | ||||||||||||||||||||
Equity in loss of affiliates | 36.7 | 0.8 | 0.1 | 30.3 | 0.7 | 0.3 | 21.1 | % | ||||||||||||||||||||
Other expenses/(income) net | 517.9 | 11.3 | 1.5 | (368.0 | ) | (8.0 | ) | (3.2 | ) | |||||||||||||||||||
Income before income taxes and minority interest | 5,136.0 | 111.8 | 15.1 | 1,268.6 | 27.6 | 11.1 | 304.9 | % | ||||||||||||||||||||
Income tax (benefit)/expense | 944.6 | 20.6 | 2.8 | 33.0 | 0.7 | 0.3 | 2,762.4 | % | ||||||||||||||||||||
Minority interest | 3.9 | 0.1 | 0.0 | 1.3 | 0.0 | 0.0 | 200.0 | % | ||||||||||||||||||||
Net income | 4,195.3 | 91.3 | 12.3 | 1,236.9 | 26.9 | 10.9 | 239.2 | % | ||||||||||||||||||||
Basic earnings per share (Rs.) | 27.34 | 8.08 | ||||||||||||||||||||||||||
Diluted earnings per share (Rs.) | 27.23 | 8.07 |
(1) | As a percentage of our total revenues. | |
(2) | Growth in six months ended September 30, 2006 as compared to six months ended September 30, 2005. |
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• | Revenues were Rs.34,088.0 million for the six months ended September 30, 2006 as compared to Rs.11,391.0 million for the six months ended September 30, 2005, representing an increase of 199.3%. |
• | Revenues from markets outside India were Rs.29,265.8 million for the six months ended September 30, 2006, contributing 85.9% to total revenues as compared to 62.2% for the six months ended September 30, 2005. Revenues from markets outside India have increased significantly over the last five years and contributed 49% in the year ended March 31, 2001. | |
• | Revenues from India increased for the six months ended September 30, 2006 by 12.1% to Rs.4,822.2 million as compared to the six months ended September 30, 2005. |
• | Gross profits increased to Rs.14,377.2 million for the six months ended September 30, 2006 from Rs.5,921.2 million for the six months ended September 30, 2005. Gross profit margins on total revenues were 42.2% for the six months ended September 30, 2006 as compared to 52.0% for the six months ended September 30, 2005. Revenues from authorized generics contributed 32.7% to our total revenues and earned gross margin for the six months ended September 30, 2006. Gross margin associated with sales of authorized generics products were significantly below our average gross margin. | |
• | Selling, general and administrative, or SG&A expenses increased by 88.5% to Rs.7,013.6 million for the six months ended September 30, 2006. This increase was primarily on account of SG&A expenses relating to our acquired businesses, betapharm and Falcon. | |
• | Research and development expenses, net was 2.7% of total revenues for the six months ended September 30, 2006 as compared to 8.4% for the six months ended September 30, 2005. In absolute terms, research and development expenses increased by 27.2% to Rs.1,514.3 million for the six months ended September 30, 2006 as compared to Rs.1,190.5 million for the six months ended September 30, 2005. Under the terms of our research and development partnership agreement with I-VEN, we received U.S.$22.5 million in March 2005 to be applied to research and development costs in our generics segment, of which U.S.$8.4 million was recognized as a reduction in research and development expense for the six months ended September 30, 2006, as compared to U.S.5.3 million recognized for the six months ended September 30, 2005. Further, during the six months ended September 30, 2006, our research and development expenses in our drug discovery segment were lower on account of the reimbursement of expenses incurred by us on the development of NCE assigned to Perlecan in terms of our research and development arrangement entered into during the year ended March 31, 2006. | |
• | Amortization expense was Rs.790.2 million for the six months ended September 30, 2006 as compared to Rs.172.0 million for the six months ended September 30, 2005. This includes amortization expense of Rs.641.8 million relating to intangibles in betapharm and Falcon. | |
• | Other expense/(income), net was Rs.517.9 million for the six months ended September 30, 2006 as compared to other expense/(income), net of (Rs.368.0) million for the six months ended September 30, 2005. This was primarily on account of net interest expense of Rs.622.8 million for the six months ended September 30, 2006 as compared to net interest income of Rs.293.0 million for the six months ended September 30, 2005. The increase in interest expense during three months ended September 30, 2006 was due to the long term debt taken to fund the betapharm acquisition. | |
• | Net income was Rs.4,195.3 million (12.3% of total revenues) for the six months ended September 30, 2006 as compared to Rs.1,236.9 million (10.9% of total revenues) for the six months ended September 30, 2005. This translates to basic and diluted earnings per share of Rs.27.34 and Rs.27.23, respectively,for the six months ended September 30, 2006 as compared to Rs.8.08 and Rs.8.07, respectively, for the six months ended September 30, 2005. This compares with basic and diluted earnings per share of Rs.10.64 and Rs.10.62, respectively, for the year ended March 31, 2006. | |
• | During the six months ended September 30, 2006, we incurred capital expenditure (net) of Rs.1,833.6 million. |
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American Depositary Shares offered by us | up to 13,500,000 ADSs. | |
ADSs | Each ADS represents one equity share, par value Rs.5 per share. The ADSs will be evidenced by American Depositary Receipts. See “Description of American Depositary Shares.” | |
ADSs outstanding before this offering | 21,289,255 ADSs. | |
ADSs outstanding after this offering | up to 34,789,255 ADSs (assuming no exercise of the underwriters’ option to purchase additional ADSs). | |
Equity shares outstanding before this offering | 153,515,604 equity shares. | |
Equity shares outstanding after this offering | up to 167,015,604 equity shares (assuming no exercise of the underwriters’ option to purchase additional ADSs). | |
Use of proceeds | We estimate that the net proceeds from this offering without exercise of the over-allotment option will be approximately U.S.$ million. We currently intend to use the net proceeds from the offering under this prospectus for general corporate purposes. These purposes may include geographic expansion, potential acquisitions of, or investments in, companies and technologies that complement our business, capital expenditures for increasing production capacities, addition of new capabilities, additions to our working capital and advances to or investments in our subsidiaries/ joint ventures. Net proceeds may be temporarily invested in bank term deposits prior to use. See “Use of Proceeds.” | |
Over-allotment option | We have granted to the underwriters an option to purchase up to 1,500,000 additional ADSs at the public offering price less the underwriting discounts and commission. The underwriters may exercise this option for 30 days from the date of this document solely to cover any over-allotments. | |
Dividends | 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. The dividends are paid after approval of shareholders in the general meeting. | |
Holders of ADSs will be entitled to receive dividends payable on equity shares represented by such ADSs. Cash dividends on equity shares represented by ADSs are paid to the Depositary in Indian rupees and are converted by the Depositary into U.S.$ and distributed, net of depositary fees, taxes, if any, and expenses, to the |
Risk factors | See “Risk Factors” and other information incorporated by reference into this document for a discussion of factors you should carefully consider before deciding to invest in our ADSs. | |
Listing | We will list the ADSs offered by this prospectus supplement and the accompanying prospectus on the NYSE. Our Equity Shares are |
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principally traded in India on the National Stock Exchange of India Limited and the Bombay Stock Exchange Limited. | ||
NYSE symbol | “RDY” | |
Depositary | JPMorgan Chase Bank, N.A. |
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Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||
2002(2) | 2003(2) | 2004 | 2005 | 2006 | 2005 | 2006 | ||||||||||||||||||||||||||||||
Convenience | Convenience | |||||||||||||||||||||||||||||||||||
Translation | Translation Into | |||||||||||||||||||||||||||||||||||
Into U.S.$ | U.S.$ | |||||||||||||||||||||||||||||||||||
(Rs. in millions, U.S.$ in thousands, except share and per share data) | ||||||||||||||||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||||||||||||||
Product sales | Rs. | 16,408.8 | Rs. | 18,069.8 | Rs. | 20,081.2 | Rs. | 19,126.2 | Rs. | 24,077.2 | U.S.$ | 541,304 | Rs. | 5,573.8 | Rs. | 13,918.2 | U.S.$ | 303,427 | ||||||||||||||||||
License fees | 124.8 | — | — | 345.7 | 47.5 | 1,068 | 13.4 | 23.0 | 502 | |||||||||||||||||||||||||||
Services income | 89.1 | 3.9 | 22.3 | 47.5 | 142.3 | 3,200 | 4.2 | 108.2 | 2,359 | |||||||||||||||||||||||||||
Total revenues | 16,622.7 | 18,073.7 | 20,103.5 | 19,519.4 | 24,267.0 | 545,572 | 5,591.4 | 14,049.4 | 306,287 | |||||||||||||||||||||||||||
Cost of revenues | 6,869.0 | 7,744.9 | 9,337.3 | 9,385.9 | 12,417.4 | 279,168 | 2,662.9 | 7,960.5 | 173,544 | |||||||||||||||||||||||||||
Gross profit | 9,753.7 | 10,328.8 | 10,766.2 | 10,133.5 | 11,849.6 | 266,404 | 2,928.5 | 6,088.9 | 132,744 | |||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||
Selling, general and administrative expenses | 3,674.1 | 5,103.2 | 6,542.5 | 6,774.6 | 8,028.9 | 180,505 | 1,953.8 | 3,346.1 | 72,948 | |||||||||||||||||||||||||||
Research and development expenses, net | 742.4 | 1,411.8 | 1,991.6 | 2,803.3 | 2,153.0 | 48,403 | 514.7 | 532.9 | 11,617 | |||||||||||||||||||||||||||
Amortization expenses | 487.7 | 419.5 | 382.9 | 349.9 | 419.9 | 9,439 | 95.6 | 387.8 | 8,455 | |||||||||||||||||||||||||||
Foreign exchange (gain)/loss | (209.0 | ) | 70.1 | (282.5 | ) | 488.8 | 126.3 | 2,840 | 65.7 | 74.4 | 1,624 | |||||||||||||||||||||||||
Other operating (income) / expenses, net | 27.1 | 0.2 | 83.2 | 6.0 | (320.4 | ) | (7,202 | ) | 36.9 | (69.5 | ) | (1,516 | ) | |||||||||||||||||||||||
Total operating expenses | 4,722.3 | 7,004.8 | 8,717.7 | 10,422.6 | 10,407.7 | 233,988 | 2,666.7 | 4,271.7 | 93,127 | |||||||||||||||||||||||||||
Operating income/(loss) | 5,031.4 | 3,324.0 | 2,048.5 | (289.1 | ) | 1,441.9 | 32,418 | 261.8 | 1,817.2 | 39,616 | ||||||||||||||||||||||||||
Equity in loss of affiliates | (130.5 | ) | (92.1 | ) | (44.4 | ) | (58.1 | ) | (88.2 | ) | (1,984 | ) | (14.5 | ) | (15.3 | ) | (335 | ) | ||||||||||||||||||
Other (expense) / income, net | 1,81.6 | 576.8 | 535.9 | 454.2 | 533.6 | 11,997 | 172.6 | (196.7 | ) | (4,287 | ) | |||||||||||||||||||||||||
Income before income taxes and minority interest | 5,082.5 | 3,808.7 | 2,540.0 | 107.0 | 1,887.3 | 42,431 | 419.9 | 1,605.2 | 34,995 | |||||||||||||||||||||||||||
Income taxes (expense)/benefit | (153.8 | ) | (398.1 | ) | (69.2 | ) | 94.3 | (258.3 | ) | (5,809 | ) | (72.5 | ) | (207.6 | ) | (4,525 | ) | |||||||||||||||||||
Minority interest | (14.9 | ) | (6.7 | ) | 3.4 | 9.9 | (0.1 | ) | (2 | ) | (0.1 | ) | — | (1 | ) | |||||||||||||||||||||
Net income | Rs. | 4,913.8 | Rs. | 3,403.9 | Rs. | 2,474.2 | Rs. | 211.2 | Rs. | 1,628.9 | U.S.$ | 36,620 | Rs. | 347.3 | Rs. | 1,397.6 | U.S.$ | 30,469 | ||||||||||||||||||
Earnings per equity share: | ||||||||||||||||||||||||||||||||||||
Basic(3) | Rs. | 32.32 | Rs. | 22.24 | Rs. | 16.17 | Rs. | 1.38 | Rs. | 10.64 | U.S.$ | 0.24 | Rs. | 2.27 | Rs. | 9.11 | U.S.$ | 0.20 | ||||||||||||||||||
Diluted(3) | Rs. | 32.26 | Rs. | 22.24 | Rs. | 16.16 | Rs. | 1.38 | Rs. | 10.62 | U.S.$ | 0.24 | Rs. | 2.27 | Rs. | 9.07 | U.S.$ | 0.20 | ||||||||||||||||||
Weighted average number of equity shares used in computing earnings per equity share:(1) | ||||||||||||||||||||||||||||||||||||
Basic(3) | 152,055,130 | 153,031,896 | 153,027,528 | 153,037,898 | 153,093,316 | 153,093,316 | 153,065,150 | 153,397,582 | 153,397,582 | |||||||||||||||||||||||||||
Diluted(3) | 152,299,136 | 153,031,896 | 153,099,196 | 153,119,602 | 153,403,846 | 153,403,846 | 153,324,350 | 154,023,870 | 154,023,870 | |||||||||||||||||||||||||||
Cash dividend per share (excluding dividend tax) | Rs. | 7.00 | Rs. | 2.50 | Rs. | 5.00 | Rs. | 5.00 | Rs. | 5.00 | U.S.$ | 0.11 | — | — | — |
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(1) | Each ADS represents one equity share. | |
(2) | Effective as of fiscal year 2003, we selected the retroactive modified method of adoption described in Statement of Financial Accounting Standards No. 148Accounting for Stock Based Compensation — Transition and Disclosure. Accordingly, the operating results for the fiscal year ended March 31, 2002 and 2003, which are the only prior periods impacted, have been modified in accordance with the retroactive modified method of adoption. | |
The Company has reclassified certain expense/income for the fiscal years ended March 31, 2002, 2003, 2004 and 2005, between cost of revenues, operating expenses, revenues, other expense / income and other operating expense/income, to conform to the current year presentation. These reclassifications increased the previously reported gross profit of fiscal year 2002, 2003, 2004 and 2005 by Rs.Nil, Rs.106.6 million, Rs. 31.1 million and Rs. 47.4 million respectively and increased / (reduced) the previously reported operating income of fiscal years 2002, 2003 and 2004 by Rs.(27.1) million, Rs.106.4 million and Rs.(31.7) million respectively and reduced the operating loss for the fiscal year 2005 by Rs.77.3 million. There is however no change in the previously reported net income for the fiscal years 2002, 2003, 2004 and 2005. | ||
(3) | On August 30, 2006, we distributed a stock dividend of one equity share for each equity share and ADS issued and outstanding as of August 29, 2006. The number of equity shares presented in the summary consolidated financial data reflect this stock dividend for all periods presented. |
Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2005 | 2006 | ||||||||||||||||||||||||||||||
Convenience | Convenience | |||||||||||||||||||||||||||||||||||
Translation Into | Translation | |||||||||||||||||||||||||||||||||||
U.S.$ | Into U.S.$ | |||||||||||||||||||||||||||||||||||
(Rs. in millions, U.S.$ in thousands, except share and per share data) | ||||||||||||||||||||||||||||||||||||
Other Data: | �� | |||||||||||||||||||||||||||||||||||
Net cash provided by / (used in): | ||||||||||||||||||||||||||||||||||||
Operating activities | Rs. | 4,652.8 | Rs. | 4,366.7 | Rs. | 3,999.2 | Rs. | 2,291.6 | Rs. | 1,643.1 | U.S.$ | 36,941 | Rs. | 202.2 | Rs. | 599.9 | U.S.$ | 13,079 | ||||||||||||||||||
Investing activities | (1,532.9 | ) | (1,954.7 | ) | (6,506.1 | ) | 632.9 | (34,524.4 | ) | (776,179 | ) | (224.3 | ) | 325.7 | 7,100 | |||||||||||||||||||||
Financing activities | 1,421.8 | (153 | ) | (376.1 | ) | 1,931.3 | 27,210.9 | 611,757 | 1,134.2 | 289.9 | 6,320 | |||||||||||||||||||||||||
Effect of exchange rate changes on cash | 88.8 | (95 | ) | (14.2 | ) | 55.8 | 95.1 | 2,138 | (36.0 | ) | (291.0 | ) | (6,345 | ) | ||||||||||||||||||||||
Expenditures on property, plant and equipment | (1,090.3 | ) | (1,515.7 | ) | (2,415.6 | ) | (1,749.2 | ) | (1,873.3 | ) | (42,115 | ) | (294.8 | ) | (887.3 | ) | (19,343 | ) |
As of March 31, | As of June 30, | |||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2006 | |||||||||||||||||||||||||||
Convenience | Convenience | |||||||||||||||||||||||||||||||
Translation Into | Translation Into | |||||||||||||||||||||||||||||||
U.S.$ | U.S.$ | |||||||||||||||||||||||||||||||
(Rs. in millions, U.S.$ in thousands, except share and per share data) | ||||||||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | Rs. | 5,109.4 | Rs. | 7,273.4 | Rs. | 4,376.2 | Rs. | 9,287.9 | Rs. | 3,712.6 | U.S.$ | 83,468 | Rs. | 3,437.3 | U.S.$ | 74,935 | ||||||||||||||||
Working capital | 9,518.6 | 12,023.5 | 11,103.3 | 10,770.9 | 1,345.1 | 30,242 | 978.4 | 21,329 | ||||||||||||||||||||||||
Total assets | 18,967.0 | 23,091.7 | 26,619.3 | 29,288.4 | 68,768.1 | 1,546,045 | 77,492.5 | 1,689,394 | ||||||||||||||||||||||||
Total long-term debt, excluding current portion | 47.0 | 40.91 | 31.0 | 25.1 | 20,937.1 | 470,709 | 21,724.9 | 473,619 | ||||||||||||||||||||||||
Net assets | 15,457.4 | 18,831.8 | 21,039.4 | 20,953.2 | 22,271.7 | 500,713 | 24,046.8 | 524,238 | ||||||||||||||||||||||||
Total stockholders’ equity | 15,457.4 | 18,831.8 | 21,039.4 | 20,953.2 | 22,271.7 | 500,713 | 24,046.8 | 524,238 |
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• | We may fail to successfully integrate our acquisitions in accordance with our business strategy. | |
• | Integration of acquisitions may divert management’s attention away from our primary product offerings, resulting in the loss of key customersand/or personnel, and may expose us to unanticipated liabilities. | |
• | 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. | |
• | Our acquisition strategy may require us to obtain additional debt or equity financing, resulting in additional leverage, or increased debt obligations as compared to equity, and dilution of ownership. |
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• | 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. |
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• | fluctuations in our operating results, | |
• | the aftermath of our public announcements, | |
• | concern as to safety of drugs, and | |
• | general market conditions. |
• | our dependence on drug research and development to drive future operating results, | |
• | the inclusion of our shares in the BSE Sensex Index and NSE CNX NIFTY Index, and | |
• | the absence of comparable companies in the markets. |
• | general economic and business conditions in India and the other jurisdictions in which we operate; | |
• | the ability to successfully implement our strategy, our research and development efforts, growth and expansion plans and technological changes; | |
• | changes in the value of the Indian rupee and the currencies of the other jurisdictions in which we operate; | |
• | changes in the Indian and international interest rates; | |
• | allocations of funds by the governments of the jurisdictions in which we operate; | |
• | changes in laws and regulations that apply to our customers, suppliers, and the pharmaceutical industry in all the jurisdictions in which we operate; |
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• | increasing competition in and the conditions of our customers, suppliers and the pharmaceutical industry; and | |
• | changes in political conditions in India and the other jurisdictions in which we operate. |
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• | the reported high and low equity shares closing prices, quoted in Indian rupees for the shares on the BSE and the reported high and low ADS closing prices, quoted in U.S.$ for the ADSs on the NYSE, for the five most recent fiscal years ended March 31; | |
• | the reported high and low equity shares closing prices, quoted in Indian rupees for the shares on the BSE and the reported high and low ADS closing prices, quoted in U.S.$ for the ADSs on the NYSE, for the 8 most recent quarters; and | |
• | the reported high and low equity shares closing prices, quoted in Indian rupees for the shares on the BSE and the reported high and low ADS closing prices, quoted in U.S.$ for the ADSs on the NYSE, for the six most recent months. |
BSE | NYSE | |||||||||||||||
Fiscal Year | Price Per Equity Share | Price Per Ads | ||||||||||||||
Ended March 31, | High (Rs.) | Low (Rs.) | High ($) | Low ($) | ||||||||||||
2006 | 1,513.00 | 613.00 | 33.34 | 14.91 | ||||||||||||
2005 | 1,002.90 | 652.50 | 24.80 | 15.05 | ||||||||||||
2004 | 1,470.00 | 808.00 | 33.05 | 17.58 | ||||||||||||
2003 | 1,149.90 | 675.00 | 24.00 | 13.30 | ||||||||||||
2002 | 1,120.00 | 432.00 | (1) | 25.64 | 10.04 |
BSE | NYSE | |||||||||||||||
Price Per Equity Share | Price Per Ads | |||||||||||||||
Three Months Ended | High (Rs.) | Low (Rs.) | High ($) | Low ($) | ||||||||||||
December 31, 2004 | 879.00 | 703.00 | 19.90 | 16.18 | ||||||||||||
March 31, 2005 | 890.00 | 690.00 | 19.89 | 16.56 | ||||||||||||
June 30, 2005 | 762.00 | 613.00 | 17.59 | 14.91 | ||||||||||||
September 30, 2005 | 865.00 | 725.00 | 19.69 | 17.00 | ||||||||||||
December 31, 2005 | 990.00 | 781.50 | 22.20 | 17.61 | ||||||||||||
March 31, 2006 | 1,513.00 | 950.00 | 33.34 | 21.79 | ||||||||||||
June 30, 2006 | 1,754.00 | 1,158.00 | 38.12 | 24.61 | ||||||||||||
September 30, 2006 | 751.50 | (2) | 700.00 | 16.06 | (2) | 15.05 | (2) |
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BSE | NYSE | |||||||||||||||
Price Per Equity Share | Price Per Ads | |||||||||||||||
Month Ended | High (Rs.) | Low (Rs.) | High ($) | Low ($) | ||||||||||||
May 31, 2006 | 1,754.00 | 1,282.10 | 38.12 | 27.89 | ||||||||||||
June 30, 2006 | 1,451.50 | 1,158.00 | 29.21 | 24.61 | ||||||||||||
July 31, 2006 | 1,454.80 | 1,195.00 | 31.40 | 26.31 | ||||||||||||
August 30, 2006 | 751.50 | (2) | 711.70 | (2) | 32.11 | (3) | 29.76 | (3) | ||||||||
September 30, 2006 | 773.50 | 700.00 | 16.58 | 15.05 | ||||||||||||
October 31, 2006 | 774.00 | 701.00 | 17.25 | 15.25 |
(1) | Stock prices per share have been restated to reflect a two for one stock split, effective on October 25, 2001. | |
(2) | Adjusted for stock dividend for comparison purpose. | |
(3) | The stock dividend and subsequent price adjustment was effective on the NYSE on September 7, 2006. Therefore, there is no adjustment in the ADS price at the NYSE for August 2006. The prices at the BSE and the NYSE are not comparable as of August 30, 2006. |
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• | an actual basis; and | |
• | an adjusted basis giving effect to the sale by us of up to 13,500,000 ADSs (representing up to 13,500,000 equity shares) in the offering and after deducting underwriting discounts, commission and estimated offering expenses payable by us. |
As of September 30, 2006 | ||||||||||||||||
Actual | As Adjusted | |||||||||||||||
(Rs. in million, U.S.$ in thousand) | ||||||||||||||||
Cash and cash equivalents | Rs.4,875,531 | U.S.$ | 106,105 | Rs. | U.S.$ | |||||||||||
Borrowings from banks | 8,817,947 | 191,903 | 8,817,947 | 191,903 | ||||||||||||
Current portion of long term debt | 2,935,199 | 63,878 | 2,935,199 | 63,878 | ||||||||||||
Total short term debt and current portion of long term debt | 11,753,146 | 255,781 | 11,753,146 | 255,781 | ||||||||||||
Total long term debt, excluding current portion | 20,607,472 | 448,476 | 20,607,472 | 448,476 | ||||||||||||
Stockholders’ equity: | ||||||||||||||||
Equity shares at Rs.5 par value: 200,000,000 shares authorized; | ||||||||||||||||
Issued and outstanding: 153,515,604 shares actual, shares as adjusted | 767,578 | 16,705 | ||||||||||||||
Additional paid in capital | 9,930,832 | 216,123 | ||||||||||||||
Equity options outstanding | 492,210 | 10,712 | ||||||||||||||
Retained earnings | 14,959,592 | 325,562 | ||||||||||||||
Equity shares held by a controlled trust: 82,800 shares | (4,882 | ) | (106 | ) | ||||||||||||
Accumulated and other comprehensive income | 361,054 | 7,858 | ||||||||||||||
Total stockholders’ equity | 26,506,384 | 576,853 | ||||||||||||||
Total capitalization | 58,867,002 | 1,281,110 |
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Fiscal Year Ended | ||||||||||||||||
March 31, | Period End | Average | High | Low | ||||||||||||
2002 | 48.83 | 47.80 | 48.83 | 46.88 | ||||||||||||
2003 | 47.53 | 48.43 | 49.07 | 47.53 | ||||||||||||
2004 | 43.40 | 45.96 | 47.46 | 43.40 | ||||||||||||
2005 | 43.62 | 44.86 | 46.45 | 43.27 | ||||||||||||
2006 | 44.48 | 44.17 | 46.26 | 43.05 |
Month | High | Low | ||||||
May 2006 | 44.81 | 46.22 | ||||||
June 2006 | 46.25 | 45.50 | ||||||
July 2006 | 46.83 | 45.84 | ||||||
August 2006 | 46.61 | 46.32 | ||||||
September 2006 | 46.38 | 45.74 | ||||||
October 2006 | 45.97 | 44.90 |
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Equity | ||||||||
Shares | ADSs(2) | |||||||
Assumed initial public offering price per ADS | Rs. | U.S.$ | ||||||
Net tangible book value per ADS at , 2006 | ||||||||
Increase in net tangible book value per equity share or ADS attributable to new investors | ||||||||
Pro forma net tangible book value per equity share or ADS after the global offering | ||||||||
Dilution per equity share or ADS to new investors | Rs. | U.S.$ | ||||||
Percentage of dilution in net tangible book value per equity share or ADS for new investors(1) | % | % |
(1) | Percentage of dilution for new investors is calculated by dividing the dilution in net tangible book value for new investors by the price of the offering. | |
(2) | Translated for convenience only based on the noon buying rate in the City of New York on November 9, 2006 for cable transfers in Indian rupees as certified for customs purposes by the Federal Reserve Bank of New York, which was Rs.44.46 per U.S.$1.00 and the ratio of one equity share to one ADS. |
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Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||
2002(2) | 2003(2) | 2004 | 2005 | 2006 | 2005 | 2006 | ||||||||||||||||||||||||||||||
Convenience | Convenience | |||||||||||||||||||||||||||||||||||
translation into | translation into | |||||||||||||||||||||||||||||||||||
U.S.$ | U.S.$ | |||||||||||||||||||||||||||||||||||
(Rs. in millions, U.S.$ in thousands, except share and per share data) | ||||||||||||||||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||||||||||||||
Product sales | Rs. | 16,408.8 | Rs. | 18,069.8 | Rs. | 20,081.2 | Rs. | 19,126.2 | Rs. | 24,077.2 | U.S.$ | 541,304 | Rs. | 5,573.8 | Rs. | 13,918.2 | U.S.$ | 303,427 | ||||||||||||||||||
License fees | 124.8 | — | — | 345.7 | 47.5 | 1,068 | 13.4 | 23.0 | 502 | |||||||||||||||||||||||||||
Services income | 89.1 | 3.9 | 22.3 | 47.5 | 142.3 | 3,200 | 4.2 | 108.2 | 2,359 | |||||||||||||||||||||||||||
Total revenues | 16,622.7 | 18,073.7 | 20,103.5 | 19,519.4 | 24,267.0 | 545,572 | 5,591.4 | 14,049.4 | 306,287 | |||||||||||||||||||||||||||
Cost of revenues | 6,869.0 | 7,744.9 | 9,337.3 | 9,385.9 | 12,417.4 | 279,168 | 2,662.9 | 7,960.5 | 173,544 | |||||||||||||||||||||||||||
Gross profit | 9,753.7 | 10,328.8 | 10,766.2 | 10,133.5 | 11,849.6 | 266,404 | 2,928.5 | 6,088.9 | 132,744 | |||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||
Selling, general and administrative expenses | 3,674.1 | 5,103.2 | 6,542.5 | 6,774.6 | 8,028.9 | 180,505 | 1,953.8 | 3,346.1 | 72,948 | |||||||||||||||||||||||||||
Research and development expenses, net | 742.4 | 1,411.8 | 1,991.6 | 2,803.3 | 2,153.0 | 48,403 | 514.7 | 532.9 | 11,617 | |||||||||||||||||||||||||||
Amortization expenses | 487.7 | 419.5 | 382.9 | 349.9 | 419.9 | 9,439 | 95.6 | 387.8 | 8,455 | |||||||||||||||||||||||||||
Foreign exchange (gain)/loss | (209.0 | ) | 70.1 | (282.5 | ) | 488.8 | 126.3 | 2,840 | 65.7 | 74.4 | 1,624 | |||||||||||||||||||||||||
Other operating (income) / expenses, net | 27.1 | 0.2 | 83.2 | 6.0 | (320.4 | ) | (7,202 | ) | 36.9 | (69.5 | ) | (1,516 | ) | |||||||||||||||||||||||
Total operating expenses | 4,722.3 | 7,004.8 | 8,717.7 | 10,422.6 | 10,407.7 | 233,988 | 2,666.7 | 4,271.7 | 93,127 | |||||||||||||||||||||||||||
Operating income/(loss) | 5,031.4 | 3,324.0 | 2,048.5 | (289.1 | ) | 1,441.9 | 32,418 | 261.8 | 1,817.2 | 39,616 | ||||||||||||||||||||||||||
Equity in loss of affiliates | (130.5 | ) | (92.1 | ) | (44.4 | ) | (58.1 | ) | (88.2 | ) | (1,984 | ) | (14.5 | ) | (15.3 | ) | (335 | ) | ||||||||||||||||||
Other (expense) / income, net | 1,81.6 | 576.8 | 535.9 | 454.2 | 533.6 | 11,997 | 172.6 | (196.7 | ) | (4,287 | ) | |||||||||||||||||||||||||
Income before income taxes and minority interest | 5,082.5 | 3,808.7 | 2,540.0 | 107.0 | 1,887.3 | 42,431 | 419.9 | 1,605.2 | 34,995 | |||||||||||||||||||||||||||
Income taxes (expense)/benefit | (153.8 | ) | (398.1 | ) | (69.2 | ) | 94.3 | (258.3 | ) | (5,809 | ) | (72.5 | ) | (207.6 | ) | (4,525 | ) | |||||||||||||||||||
Minority interest | (14.9 | ) | (6.7 | ) | 3.4 | 9.9 | (0.1 | ) | (2 | ) | (0.1 | ) | — | (1 | ) | |||||||||||||||||||||
Net income | Rs. | 4,913.8 | Rs. | 3,403.9 | Rs. | 2,474.2 | Rs. | 211.2 | Rs. | 1,628.9 | U.S.$ | 36,620 | Rs. | 347.3 | Rs. | 1,397.6 | U.S.$ | 30,469 | ||||||||||||||||||
Earnings per equity share: | ||||||||||||||||||||||||||||||||||||
Basic3 | Rs. | 32.32 | Rs. | 22.24 | Rs. | 16.17 | Rs. | 1.38 | Rs. | 10.64 | U.S.$ | 0.24 | Rs. | 2.27 | Rs. | 9.11 | U.S.$ | 0.20 | ||||||||||||||||||
Diluted3 | Rs. | 32.26 | Rs. | 22.24 | Rs. | 16.16 | Rs. | 1.38 | Rs. | 10.62 | U.S.$ | 0.24 | Rs. | 2.27 | Rs. | 9.07 | U.S.$ | 0.20 | ||||||||||||||||||
Weighted average number of equity shares used in computing earnings per equity share:(1) | ||||||||||||||||||||||||||||||||||||
Basic(3) | 152,055,130 | 153,031,896 | 153,027,528 | 153,037,898 | 153,093,316 | 153,093,316 | 153,065,150 | 153,397,582 | 153,397,582 | |||||||||||||||||||||||||||
Diluted(3) | 152,299,136 | 153,031,896 | 153,099,196 | 153,119,602 | 153,403,846 | 153,403,846 | 153,324,350 | 154,023,870 | 154,023,870 | |||||||||||||||||||||||||||
Cash dividend per share (excluding dividend tax) | Rs. | 7.00 | Rs. | 2.50 | Rs. | 5.00 | Rs. | 5.00 | Rs. | 5.00 | U.S.$ | 0.11 | — | — | — |
(1) | Each ADS represents one equity share. |
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(2) | Effective as of fiscal year 2003, we selected the retroactive modified method of adoption described in Statement of Financial Accounting Standards No. 148Accounting for Stock Based Compensation — Transition and Disclosure. Accordingly, the operating results for the fiscal year ended March 31, 2002 and 2003, which are the only prior periods impacted, have been modified in accordance with the retroactive modified method of adoption. The Company has reclassified certain expense/income for the fiscal years ended March 31, 2002, 2003, 2004 and 2005, between cost of revenues, operating expenses, revenues, other expense / income and other operating expense/income, to conform to the current year presentation. These reclassifications increased the previously reported gross profit of fiscal year 2002, 2003, 2004 and 2005 by Rs.Nil, Rs.106.6 million, Rs. 31.1 million and Rs. 47.4 million respectively and increased/(reduced) the previously reported operating income of fiscal years 2002, 2003 and 2004 by Rs.(27.1) million, Rs.106.4 million and Rs.(31.7) million respectively and reduced the operating loss for the fiscal year 2005 by Rs.77.3 million. There is however no change in the previously reported net income for the fiscal years 2002, 2003, 2004 and 2005. | |
(3) | On August 30, 2006, we distributed a stock dividend of one equity share for each equity share and ADS issued and outstanding as of August 29, 2006. The number of equity shares presented in the selected consolidated financial data reflect this stock dividend for all periods presented. |
Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2005 | 2006 | ||||||||||||||||||||||||||||||
Convenience | Convenience | |||||||||||||||||||||||||||||||||||
translation into | translation into | |||||||||||||||||||||||||||||||||||
U.S.$ | U.S.$ | |||||||||||||||||||||||||||||||||||
(Rs. in millions, U.S.$ in thousands, except share and per share data) | ||||||||||||||||||||||||||||||||||||
Other Data: | ||||||||||||||||||||||||||||||||||||
Net cash provided by / (used in): | ||||||||||||||||||||||||||||||||||||
Operating activities | Rs. | 4,652.8 | Rs. | 4,366.7 | Rs. | 3,999.2 | Rs. | 2,291.6 | Rs. | 1,643.1 | U.S.$ | 36,941 | Rs. | 202.2 | Rs. | 599.9 | U.S.$ | 13,079 | ||||||||||||||||||
Investing activities | (1,532.9 | ) | (1,954.7 | ) | (6,506.1 | ) | 632.9 | (34,524.4 | ) | (776,179 | ) | (224.3 | ) | 325.7 | 7,100 | |||||||||||||||||||||
Financing activities | 1,421.8 | (153 | ) | (376.1 | ) | 1,931.3 | 27,210.9 | 611,757 | 1,134.2 | 289.9 | 6,320 | |||||||||||||||||||||||||
Effect of exchange rate changes on cash | 88.8 | (95 | ) | (14.2 | ) | 55.8 | 95.1 | 2,138 | (36.0 | ) | (291.0 | ) | (6,345 | ) | ||||||||||||||||||||||
Expenditures on property, plant and equipment | (1,090.3 | ) | (1,515.7 | ) | (2,415.6 | ) | (1,749.2 | ) | (1,873.3 | ) | (42,115 | ) | (294.8 | ) | (887.3 | ) | (19,343 | ) |
As of March 31, | As of June 30, | |||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2006 | |||||||||||||||||||||||||||
Convenience | Convenience | |||||||||||||||||||||||||||||||
translation into | translation into | |||||||||||||||||||||||||||||||
U.S.$ | U.S.$ | |||||||||||||||||||||||||||||||
(Rs. in millions, U.S.$ in thousands, except share and per share data) | ||||||||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | Rs. | 5,109.4 | Rs. | 7,273.4 | Rs. | 4,376.2 | Rs. | 9,287.9 | Rs. | 3,712.6 | U.S.$ | 83,468 | Rs. | 3,437.3 | U.S.$ | 74,935 | ||||||||||||||||
Working capital | 9,518.6 | 12,023.5 | 11,103.3 | 10,770.9 | 1,345.1 | 30,242 | 978.4 | 21,329 | ||||||||||||||||||||||||
Total assets | 18,967.0 | 23,091.7 | 26,619.3 | 29,288.4 | 68,768.1 | 1,546,045 | 77,492.5 | 1,689,394 | ||||||||||||||||||||||||
Total long-term debt, excluding current portion | 47.0 | 40.91 | 31.0 | 25.1 | 20,937.1 | 470,709 | 21,724.9 | 473,619 | ||||||||||||||||||||||||
Net assets | 15,457.4 | 18,831.8 | 21,039.4 | 20,953.2 | 22,271.7 | 500,713 | 24,046.8 | 524,238 | ||||||||||||||||||||||||
Total stockholders’ equity | 15,457.4 | 18,831.8 | 21,039.4 | 20,953.2 | 22,271.7 | 500,713 | 24,046.8 | 524,238 |
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• | Formulations. In this segment we derive revenues from the sale of finished dosage forms, primarily in India and other emerging markets. Key drivers of profitability in this segment are the volume and price of products sold, which in turn are dependent upon the popularity of our branded products in the relevant markets. Increases in this segment in recent periods have tended to flow from increased marketing efforts and expansion of our markets, as opposed to price increases. | |
• | Active pharmaceutical ingredients and intermediates. In this segment we derive revenues from our sales to third parties of the principal ingredients for finished dosages. Our principal markets are Europe, the United States and India. Revenues in this segment are dependent upon the number of products that lose patent protection in any given period, and the price of those products, which tends to decline over time. These being commoditized products, our ability to set prices is limited, while the cost of revenues generally remains stable. Thus, in any given period, different products will contribute varying amounts to our revenues and our gross profits. Recent increases in revenues from this segment have generally been due to increased sales volumes. | |
• | Generics. In this segment we derive revenues from the sale of therapeutic equivalents of branded drugs, primarily in Europe and the United States. Revenues from beta Holding GmbH (“betapharm”), our recently acquired business in Germany, are included in this segment from March 3, 2006 and thus will tend to increase revenues from this segment in future periods. Revenues from our sale of generics are highly cyclical. In the event that we obtain180-day exclusivity for a particular product, we generally experience significantly increased revenues for this period, particularly at the beginning of the period, with sales prices decreasing toward the end of the 180 days as other manufacturers enter the market. Cost of sales remains generally constant, however, and thus products coming off patent contribute significantly to gross margins for a limited period, tending to increase volatility in this segment. Subsequent to March 31, 2006, we launched two products pursuant to an agreement for “authorized generics,” pursuant to which the innovator company licensed us to distribute generic versions of their branded product and sell it in competition with the companies that have180-day exclusivity. In these cases, while sales volumes increase significantly (again, more significantly in the early part of the180-day period), profit-sharing agreements with the innovator company mean that gross margins are much lower than would be the case if we were distributing the product under180-day exclusivity. Additionally, the existence of “authorized generic” arrangements (a relatively new development) by innovator companies with other manufacturers in cases where we have obtained180-day exclusivity could adversely affect overall sales revenues during the180-day period. |
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• | Critical care and biotechnology. In this segment we derive revenues from the sale of our critical care and biotechnology products, primarily to hospitals in India. Revenues are driven by the volume of products sold, and the price of those products. These are generally low-volume, higher gross margin products, although pricing pressure in key products has recently reduced gross margins. | |
• | Drug discovery. Revenues in this segment are derived from licensing fees for new molecules that we discover. Thus, revenues are dependent upon the success of our research activities, and may vary significantly from period to period depending upon whether specified milestones in licensing agreements are reached. In September, 2005, we formed Perlecan Pharma Private Limited, or Perlecan as a joint venture with Citigroup Venture Capital International Growth Partnership Mauritius Limited and ICICI Venture Funds Management Company and contributed capital and four New Chemical Entities, or NCE assets to Perlecan. Perlecan has continued development of these NCE assets. | |
• | Custom pharmaceutical services. In this segment we derive revenues from service fees for process development and manufacturing services provided to innovator pharmaceutical and biotechnology companies. Revenues from our newly acquired business Falcon are included in this segment from December 30, 2005 and thus would tend to increase revenues from this segment in future periods. The key driver of revenue in this segment is likely to be the increasing outsourcing of late-stage and off-patent molecules by large pharmaceutical companies to compete with generics. |
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• | the useful life of property, plant and equipment and intangible assets; | |
• | impairment of long-lived assets, including identifiable intangibles and goodwill; | |
• | our future obligations under employee retirement and benefit plans; | |
• | allowances for doubtful accounts receivable; | |
• | inventory write-downs; | |
• | allowances for sales returns; and |
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• | valuation allowance against deferred tax assets. |
• | Persuasive evidence of an arrangement exists; | |
• | The price to the buyer is fixed and determinable; and | |
• | Collectibility of the sales price is reasonably assured. |
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Three Months | ||||||||||||||||
Fiscal Year Ended March 31, | Ended June 30, | |||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||
Dividend yield | 0.5% | 0.5% | 0.5% | 0.5% | ||||||||||||
Expected life | 42 - 78 months | 12 - 78 months | 12 - 78 months | 12 - 78 months | ||||||||||||
Risk free interest rates | 5.2 - 6.8% | 4.5 - 6.7% | 5.7 - 7.5% | 4.5 - 7.5% | ||||||||||||
Volatility | 45.7 - 50.7% | 39.4 - 44.6% | 23.4 - 36.9% | 23.4 - 50.7% |
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Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||
Segment | 2004 | 2005 | 2006 | 2006 | 2005 | 2006 | 2006 | |||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||
(Rs. in millions, U.S.$ in thousands) | ||||||||||||||||||||||||||||
Formulations | Rs. | 7,507.5 | Rs. | 7,822.9 | Rs. | 9,925.9 | U.S.$ | 223,155.5 | Rs. | 2,578.4 | Rs. | 3,336.8 | U.S.$ | 72,745 | ||||||||||||||
Active pharmaceutical ingredients and intermediates | 7,628.5 | 6,944.5 | 8,238.0 | 185,208.1 | 1,909.7 | 2,300.8 | 50,159 | |||||||||||||||||||||
Generics | 4,337.5 | 3,577.4 | 4,055.8 | 91,181.7 | 878.2 | 6,737.2 | 146,876 | |||||||||||||||||||||
Diagnostics, critical care and biotechnology | 411.0 | 527.1 | 691.1 | 15,536.7 | 153.4 | 198.0 | 4,317 | |||||||||||||||||||||
Drug discovery | — | 288.4 | — | — | — | 25.3 | 551 | |||||||||||||||||||||
Custom pharmaceuticals services | 113.1 | 311.6 | 1,326.8 | 29,829.8 | 71.7 | 1,418.3 | 30,920 | |||||||||||||||||||||
Others | 105.9 | 47.5 | 29.4 | 660.3 | — | 33.0 | 719 | |||||||||||||||||||||
Total revenues | Rs. | 20,103.5 | Rs. | 19,519.4 | Rs. | 24,267.0 | U.S.$ | 545,572.1 | Rs. | 5,591.4 | Rs. | 14,049.4 | U.S.$ | 306,287 | ||||||||||||||
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Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||
Segment | 2004 | 2005 | 2006 | 2006 | 2005 | 2006 | 2006 | |||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||
(Rs. in millions, U.S.$ in thousands) | ||||||||||||||||||||||||||||
Formulations | Rs. | 2,577.7 | Rs. | 2,492.8 | Rs. | 3,084.1 | U.S.$ | 69,337.6 | Rs. | 755.7 | Rs. | 985.6 | U.S.$ | 21,487 | ||||||||||||||
Active pharmaceutical ingredients and intermediates | 5,102.4 | 5,013.5 | 5,916.5 | 133,107.1 | 1,347.8 | 1,687.5 | 36,789 | |||||||||||||||||||||
Generics | 1,324.4 | 1,620.3 | 2,168.8 | 48,759.0 | 448.8 | 4,139.2 | 90,238 | |||||||||||||||||||||
Diagnostics, critical care and biotechnology | 206.9 | 176.5 | 235.9 | 5,302.8 | 74.1 | 79.1 | 1,724 | |||||||||||||||||||||
Drug discovery | — | — | — | — | — | 25.3 | 552 | |||||||||||||||||||||
Custom pharmaceuticals services | 57.6 | 82.6 | 999.4 | 22,469.3 | 36.4 | 999.1 | 21,781 | |||||||||||||||||||||
Others | 68.3 | 0.1 | 12.6 | 282.6 | 0.1 | 44.7 | 974 | |||||||||||||||||||||
Total cost of revenues | Rs. | 9,337.3 | Rs. | 9,385.8 | Rs. | 12,417.3 | U.S.$ | 279,168 | Rs. | 2,662.9 | Rs. | 7,960.5 | U.S.$ | 173,545 | ||||||||||||||
Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||
Segment | 2004 | 2005 | 2006 | 2006 | 2005 | 2006 | 2006 | |||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||
(Rs. in millions, U.S.$ in thousands) | ||||||||||||||||||||||||||||
Formulations | Rs. | 4,929.8 | Rs. | 5,330.1 | Rs. | 6,841.8 | U.S.$ | 153,817.8 | Rs. | 1,822.7 | Rs. | 2,351.2 | U.S.$ | 51,258 | ||||||||||||||
Active pharmaceutical ingredients and intermediates | 2,526.1 | 1,931.0 | 2,321.5 | 52,191.0 | 561.9 | 613.3 | 13,371 | |||||||||||||||||||||
Generics | 3,013.1 | 1,957.1 | 1,887.0 | 42,422.8 | 429.4 | 2,598.0 | 56,638 | |||||||||||||||||||||
Diagnostics, critical care and biotechnology | 204.1 | 350.6 | 455.2 | 10,233.9 | 79.3 | 118.9 | 2,592 | |||||||||||||||||||||
Drug discovery | — | 288.4 | — | — | — | — | — | |||||||||||||||||||||
Custom pharmaceuticals services | 55.5 | 229.0 | 327.4 | 7,360.5 | 35.3 | 419.2 | 9,139 | |||||||||||||||||||||
Others | 37.6 | 47.4 | 16.8 | 377.6 | — | (11.7 | ) | (255 | ) | |||||||||||||||||||
Total gross profit | Rs. | 10,766.2 | Rs. | 10,133.6 | Rs. | 11,849.7 | U.S.$ | 266,403.6 | Rs. | 2,928.6 | Rs. | 6,088.9 | U.S.$ | 132,743 | ||||||||||||||
Percentage | ||||||||||||||||||||||||||||||||
Increase | ||||||||||||||||||||||||||||||||
Percentage of Total Revenue | Percentage Increase (Decrease) | Percentage of Total Revenue | (Decrease) | |||||||||||||||||||||||||||||
Fiscal Year Ended March 31, | 2004 to | 2005 to | Three Months Ended June 30, | June 2005 to | ||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | June 2006 | |||||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||||||||||
Revenues by segment: | ||||||||||||||||||||||||||||||||
Formulations | 37.3 | 40.1 | 40.9 | 4.2 | 26.9 | 46.1 | 23.7 | 29.4 | ||||||||||||||||||||||||
Active pharmaceutical ingredients and intermediates | 37.9 | 35.6 | 33.9 | (9.0 | ) | 18.6 | 34.2 | 16.4 | 20.5 | |||||||||||||||||||||||
Generics | 21.6 | 18.3 | 16.7 | (17.5 | ) | 13.4 | 15.7 | 48.0 | 667.2 | |||||||||||||||||||||||
Diagnostics, critical care and biotechnology | 2.0 | 2.7 | 2.8 | 28.2 | 31.1 | 2.7 | 1.4 | 29.1 | ||||||||||||||||||||||||
Drug discovery | — | 1.5 | — | (100.0 | ) | 0.0 | 0.2 | — | ||||||||||||||||||||||||
Custom pharmaceutical services | 0.6 | 1.6 | 5.5 | 175.5 | 325.8 | 1.3 | 10.1 | 1,879.0 | ||||||||||||||||||||||||
Other | 0.6 | 0.2 | 0.2 | (55.2 | ) | (38.1 | ) | 0.0 | 0.2 | — | ||||||||||||||||||||||
Total revenues | 100.0 | 100.0 | 100.0 | (2.9 | ) | 24.3 | 100.0 | 100.0 | 151.3 |
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Percentage | ||||||||||||||||||||||||||||||||
Increase | ||||||||||||||||||||||||||||||||
Percentage of Total Revenue | Percentage Increase (Decrease) | Percentage of Total Revenue | (Decrease) | |||||||||||||||||||||||||||||
Fiscal Year Ended March 31, | 2004 to | 2005 to | Three Months Ended June 30, | June 2005 to | ||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | June 2006 | |||||||||||||||||||||||||
Cost of revenues by segment: | ||||||||||||||||||||||||||||||||
Formulations | 34.3 | 31.9 | 31.1 | (3.3 | ) | 23.7 | 29.3 | 29.5 | 30.4 | |||||||||||||||||||||||
Active pharmaceutical ingredients and intermediates | 66.9 | 72.2 | 71.8 | (1.7 | ) | 18.0 | 70.6 | 73.3 | 25.2 | |||||||||||||||||||||||
Generics | 30.5 | 45.3 | 53.5 | 22.3 | 33.8 | 51.1 | 61.4 | 822.2 | ||||||||||||||||||||||||
Diagnostics, critical care and biotechnology | 50.4 | 33.5 | 34.1 | (14.7 | ) | 33.6 | 48.3 | 40.0 | 6.9 | |||||||||||||||||||||||
Drug discovery | — | — | — | — | — | — | 100.0 | — | ||||||||||||||||||||||||
Custom pharmaceutical services | 50.9 | 26.5 | 75.3 | 43.4 | 1110.6 | 50.9 | 70.4 | 2,643.1 | ||||||||||||||||||||||||
Other | 64.4 | — | 42.8 | (100.0 | ) | — | — | 135.4 | — | |||||||||||||||||||||||
Total cost of revenues | 46.4 | 48.1 | 51.2 | 0.5 | 32.3 | 47.6 | 56.7 | 198.9 | ||||||||||||||||||||||||
Gross profit by segment: | ||||||||||||||||||||||||||||||||
Formulations | 65.7 | 68.1 | 68.9 | 8.1 | 28.4 | 70.7 | 70.5 | 29.0 | ||||||||||||||||||||||||
Active pharmaceutical ingredients and intermediates | 33.1 | 27.8 | 28.2 | (23.6 | ) | 20.2 | 29.4 | 26.7 | 9.1 | |||||||||||||||||||||||
Generics | 69.5 | 54.7 | 46.5 | (35.0 | ) | (3.6 | ) | 48.9 | 38.6 | 505.1 | ||||||||||||||||||||||
Diagnostics, critical care and biotechnology | 49.6 | 66.5 | 65.9 | 71.8 | 29.8 | 51.7 | 60.0 | 49.9 | ||||||||||||||||||||||||
Drug discovery | — | 100.0 | — | — | (100.0 | ) | 0.0 | 0.0 | — | |||||||||||||||||||||||
Custom pharmaceutical services | 49.1 | 73.5 | 24.7 | 312.3 | 43.0 | 49.2 | 29.6 | 1,089.3 | ||||||||||||||||||||||||
Other | 35.6 | 100.0 | 57.2 | 26.0 | (64.6 | ) | 0.0 | (35.3 | ) | — | ||||||||||||||||||||||
Total gross profit | 53.5 | 51.8 | 48.8 | (5.9 | ) | 16.9 | 52.4 | 43.3 | 107.9 | |||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Selling, general and administrative expenses | 32.5 | 34.7 | 33.1 | 3.5 | 18.5 | 34.9 | 23.8 | 71.3 | ||||||||||||||||||||||||
Research and development expenses | 9.9 | 14.4 | 8.9 | 40.8 | (23.2 | ) | 9.2 | 3.8 | 3.5 | |||||||||||||||||||||||
Amortization expenses | 1.9 | 1.8 | 1.7 | (8.6 | ) | 20.0 | 1.7 | 2.8 | 305.7 | |||||||||||||||||||||||
Foreign exchange (gain)/loss | (1.4 | ) | 2.5 | 0.5 | — | (74.2 | ) | 1.2 | 0.5 | 13.3 | ||||||||||||||||||||||
Other operating expense/(income) | 0.4 | 0.0 | (1.3 | ) | (92.8 | ) | — | 0.7 | (0.5 | ) | (288.4 | ) | ||||||||||||||||||||
Total operating expenses | 43.4 | 53.4 | 42.9 | 19.6 | (0.1 | ) | 47.7 | 30.4 | 60.2 | |||||||||||||||||||||||
Operating income/(loss) | 10.2 | (1.5 | ) | 5.9 | — | — | 4.7 | 12.9 | 594.0 | |||||||||||||||||||||||
Equity in loss of affiliates | (0.2 | ) | (0.3 | ) | (0.4 | ) | 31.0 | 51.9 | (0.3 | ) | (0.1 | ) | 5.8 | |||||||||||||||||||
Other (expense)/income, net | 2.7 | 2.3 | 2.2 | (15.2 | ) | 17.5 | 3.1 | (1.4 | ) | (213.9 | ) | |||||||||||||||||||||
Income before income taxes and minority interest | 12.6 | 0.5 | 7.8 | (95.8 | ) | 1663.4 | 7.5 | 11.4 | 282.3 | |||||||||||||||||||||||
Income tax benefit/(expenses) | (0.3 | ) | 0.5 | (1.1 | ) | — | — | (1.3 | ) | (1.5 | ) | 186.2 | ||||||||||||||||||||
Minority interest | — | 0.1 | — | 195.5 | (100.8 | ) | 0.0 | 0.0 | (53.7 | ) | ||||||||||||||||||||||
Net income | 12.3 | 1.1 | 6.7 | (91.5 | ) | 671.1 | 6.2 | 9.9 | 302.4 |
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Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2005 | 2006 | 2006 | ||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||
(Rs. in million, U.S.$ in thousands) | ||||||||||||||||||||||||||||
Net cash provided by/(used in): | ||||||||||||||||||||||||||||
Operating activities | Rs. | 3,999.2 | Rs. | 2,291.6 | Rs. | 1,643.1 | U.S.$ | 36,941 | Rs. | 202.2 | Rs. | (757.1 | ) | U.S.$ | (16,505 | ) | ||||||||||||
Investing activities | (6,506.1 | ) | 632.9 | (34,524.4 | ) | (776,179 | ) | (224.3 | ) | 482.8 | 10,526 | |||||||||||||||||
Financing activities | (376.1 | ) | 1,931.3 | 27,210.9 | 611,757 | 1,134.2 | 289.9 | 6,320 | ||||||||||||||||||||
Effect of exchange rate changes on cash | (14.2 | ) | 55.8 | 95.1 | 2,138 | (36.0 | ) | (291.0 | ) | (6,345 | ) | |||||||||||||||||
Net increase/(decrease) in cash and cash Equivalents | Rs. | (2,897.2 | ) | Rs. | 4,911.6 | Rs. | (5,575.2 | ) | U.S.$ | (125,342 | ) | Rs. | 1,076.1 | Rs. | (275.4 | ) | U.S.$ | (6,004 | ) | |||||||||
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Debt | Principal Amount | Interest Rate | ||||||||
(Rs. in millions, U.S.$ in thousands) | ||||||||||
Working capital loans | Rs. | 9,590.1 | U.S$ | 209,070 | LIBOR + 50 — 65bps for FC denominated loans and 10.25% for INR borrowings | |||||
Long term loan | 23,698.1 | (1) | 516,637 | EURIBOR + 150 Bps | ||||||
Total | Rs. | 33,288.2 | U.S$ | 725,707 | ||||||
(1) | Includes loan of Rs.23.6 million received at a subsidized rate of interest of 2% from Indian Renewable Energy Development Agency Limited promoting use of alternative sources of energy. |
• | Formulations, where our research and development activities are directed at the development of product formulations, process validation, bioequivalency testing and other data needed to prepare a growing list of drugs that are equivalent to numerous brand name products for sale in the emerging markets. | |
• | Active pharmaceutical ingredients and intermediates, where our research and development activities concentrate on development of chemical processes for the synthesis of active pharmaceutical ingredients for use in our generics and formulations segments and for sales in the emerging and developed markets to third parties. | |
• | Generics, where our research and development activities are directed at the development of product formulations, process validation, bioequivalency testing and other data needed to prepare a growing list of drugs that are equivalent to numerous brand name products whose patents and regulatory exclusivity |
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periods have expired or are nearing expiration in the regulated markets of the United States and Europe. |
• | Critical care and biotechnology, where research and development activities are directed at the development of oncology and biotechnology products for the emerging as well as regulated markets. Our new biotechnology research and development facility caters to the highest development standards, including current good manufacturing practices, or cGMP, Good Laboratory Practices and bio-safety level IIA. We are in the process of building our bio-generics pipeline. During fiscal 2005, we entered into an agreement with a U.S. based biotechnology company for the development of a bio-generics portfolio. | |
• | Drug discovery, where we are actively pursuing discovery and development of NCEs. Our research programs focus on the following therapeutic areas: |
• | Metabolic disorders | |
• | Cardiovascular disorders | |
• | Bacterial infections | |
• | Inflammation | |
• | Cancer |
• | Custom pharmaceutical services, where we intend to leverage the strength of our process chemistry and finished dosage development expertise to target innovator as well as emerging pharmaceutical companies. The research and development is directed toward providing services to support the entire pharmaceutical value chain — from discovery all the way to the market. |
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• | for drugs sold under generic names for more than Rs.3 per tablet, the wholesalers’ margin cannot exceed 35% of the manufacturers’ selling price and the retailers’ margin cannot exceed 15% of the manufacturers’ selling price; | |
• | for drugs sold under brand names for more than Rs.3 per tablet, the wholesalers’ margin cannot exceed 10% of the manufacturers’ selling price and the retailers’ margin cannot exceed 20% of the manufacturers’ selling price; and | |
• | drugs priced at Rs.3 per tablet or less would be exempt from price controls. |
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Payments Due by Period | ||||||||||||||||||||
Less Than | After | |||||||||||||||||||
Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
(Rs. in millions) | ||||||||||||||||||||
Financial contractual obligations | ||||||||||||||||||||
Operating lease obligations | Rs. | 537.6 | 87.4 | 205.6 | 129.6 | 115.0 | ||||||||||||||
Capital lease obligations | 259.5 | 16.1 | 42.8 | 42.8 | 157.8 | |||||||||||||||
Current portion | 16.1 | 16.1 | — | — | — | |||||||||||||||
Non-current portion | 243.4 | — | 42.8 | 42.8 | 157.8 | |||||||||||||||
Purchase obligations | ||||||||||||||||||||
Agreements to purchase property and equipment and other capital commitments(1) | 1,276.3 | 1,276.3 | — | — | — | |||||||||||||||
Borrowings from banks | 9,590.1 | 9,590.1 | — | — | — | |||||||||||||||
Long term debt | 23,438.7 | 1,957.2 | 7,816.8 | 13,664.7 | — | |||||||||||||||
Current portion | 1,957.2 | 1,957.2 | — | — | — | |||||||||||||||
Non-current portion | 21,481.5 | — | 7,816.8 | 13,664.7 | — | |||||||||||||||
Total contractual obligations | 35,102.2 | 12,927.1 | 8,065.2 | 13,837.1 | 272.8 | |||||||||||||||
(1) | These amounts are net of capital advances paid in respect of such purchases and are expected to be funded from internally generated funds. |
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Description | Apr-06 | May-06 | June-06 | July-06 | Aug-06 | Total | ||||||||||||||||||
Contracts outstanding (U.S.$ million) | 40 | 30 | 20 | 5 | 10 | 105 | ||||||||||||||||||
Average contractual exchange rate (U.S.$/Rs.) | 44.4569 | 44.192 | 44.9405 | 44.5775 | 44.9713 |
Description | Apr-06 | May-06 | June-06 | Total | ||||||||||||
Contracts Outstanding (U.S.$ million) | 49.5 | 25 | 5 | 79.5 | ||||||||||||
Average Contractual Exchange Rate (U.S.$/Rs.) | 44.8722 | 46.5119 | 46.45 |
Description | June-06 | |||
Contracts Outstanding (€ million) | 36 | |||
Average Contractual Exchange Rate (€/U.S.$) | 1.22134 |
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Amount of Long Term Loans as at March 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Rupee Term Loans* | Rs. | 25.1 million | Rs.31.1 million | Rs.183.7 million | ||||||||
Foreign Currency Loans | € | 400 million | — | — |
* | Loan received at a subsidized rate of interest from Indian Renewable Energy Development Agency Limited promoting use of alternative sources of energy. |
For the Fiscal Year Ended March 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Foreign Currency Loans | 1-month Euribor + 150 bps | — | — | |||||||||
Rupee Term Loans* | 2 | % | 2 | % | 2 | % |
* | Loan received at a subsidized rate of interest from Indian Renewable Energy Development Agency Limited promoting use of alternative sources of energy. |
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Maturing in Year Ending March 31, | Rupee Term Loans | Foreign Currency Loans | ||||||
(Rs. in thousands) | (Euro in thousands) | |||||||
2007 | 5,920 | 16,667 | ||||||
2008 | 5,920 | 66,667 | ||||||
2009 | 5,920 | 66,666 | ||||||
2010 | 5,920 | 116,667 | ||||||
Thereafter | 1,465 | 133,333 | ||||||
25,145 | 400,000 | |||||||
For the Fiscal Year Ended March 31, | ||||||||||||||||||||||||
2006 | 2005 | |||||||||||||||||||||||
U.S. $ million | EURO million | Rs. | U.S. $ million | GBP million | Rs. | |||||||||||||||||||
million | million | |||||||||||||||||||||||
Currency related instruments | ||||||||||||||||||||||||
Forward foreign exchange rate contracts (sell) | 105 | 36 | — | 30 | 2 | — | ||||||||||||||||||
Forward foreign exchange rate contracts (buy) | 79.5 | — | — | 40 | — | — | ||||||||||||||||||
Over the Counter currency options | — | — | — | — | — | — | ||||||||||||||||||
Currency related derivatives | 184.5 | 36 | — | 70 | 2 | — | ||||||||||||||||||
Interest rate related instruments | ||||||||||||||||||||||||
Interest rate swaps | — | 75 | — | — | — | — | ||||||||||||||||||
Forward rate agreements | — | — | — | — | — | — | ||||||||||||||||||
Interest rate options | — | — | — | — | — | — | ||||||||||||||||||
Interest rate related derivatives | — | — | — | — | — | — |
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(in thousands, except share data and where otherwise indicated)
• | accompanying notes to the unaudited pro forma combined statement of operations; | |
• | our separate historical audited financial statements as of and for the year ended March 31, 2006 which is included and incorporated by reference in this document; | |
• | separate historical audited financial statements of betapharm for the year ended 30 November 2005 included in this prospectus supplement taking into consideration the fact that such year end date is within 93 days of the date when the acquisition was consummated as indicated above. |
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(in thousands, except share data and where otherwise stated)
Current assets: | ||||
Cash and cash equivalents | Rs. | 1,357,395 | ||
Inventories | 538,860 | |||
Other current assets | 552,938 | |||
Property, plant and equipment | 372,377 | |||
Intangibles: | ||||
Trademarks | 5,546,314 | |||
Product related intangibles | 13,684,867 | |||
Beneficial toll manufacturing contract | 621,058 | |||
Other assets | 142,541 | |||
Goodwill | 12,848,428 | |||
Total assets | 35,664,778 | |||
Deferred tax liability, net | (7,241,686 | ) | ||
Liabilities assumed | (2,359,771 | ) | ||
Purchase cost | Rs. | 26,063,321 | ||
Products related intangibles | 14.5 years | |||
Beneficial toll manufacturing contract at betapharm | 58 months |
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(in thousands, except share data and where otherwise stated)
Dr. Reddy’s | ||||||||||||||||||||
fiscal year ended | betapharm | betapharm | ||||||||||||||||||
March 31, 2006 | (From December 1, 2004 | (From March 3, 2006 | Pro forma | Pro forma | ||||||||||||||||
as reported | to November 30, 2005) | to March 31, 2006) | Adjustments | Combined | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Product sales | Rs.24,077,209 | Rs.7,695,281 | Rs.(704,915 | ) | — | Rs.31,067,575 | ||||||||||||||
License fees | 47,521 | — | — | — | 47,521 | |||||||||||||||
Service income | 142,317 | — | — | — | 142,317 | |||||||||||||||
24,267,047 | 7,695,281 | (704,915 | ) | — | 31,257,413 | |||||||||||||||
Cost of revenues | 12,417,413 | 2,471,825 | (315,534 | ) | — | 14,573,704 | ||||||||||||||
Gross profit | 11,849,634 | 5,223,456 | (389,381 | ) | — | 16,683,709 | ||||||||||||||
Operating Expenses: | ||||||||||||||||||||
Selling, general and administrative expenses | 8,028,884 | 3,058,818 | (294,272 | ) | 42,828 | (a) | 10,836,258 | |||||||||||||
Research and development expenses, net | 2,152,950 | — | — | — | 2,152,950 | |||||||||||||||
Amortization expenses | 419,867 | 148,646 | (87,217 | ) | 977,035 | (b) | 1,458,331 | |||||||||||||
Foreign exchange loss | 126,342 | — | 14 | — | 126,356 | |||||||||||||||
Other operating (income) / expenses, net | (320,361 | ) | (84,555 | ) | — | — | (404,916 | ) | ||||||||||||
Total operating expenses | 10,407,682 | 3,122,909 | (381,475 | ) | 1,019,863 | 14,168,979 | ||||||||||||||
Operating Income / (loss) | 1,441,952 | 2,100,547 | (7,906 | ) | (1,019,863 | ) | 2,514,730 | |||||||||||||
Equity loss in affiliates | (88,235 | ) | — | — | — | (88,235 | ) | |||||||||||||
Other (expense) / income, net | 533,606 | (904,636 | ) | 8,035 | (299,786 | )(c) | (662,781 | ) | ||||||||||||
Income before taxes and minority interest | 1,887,323 | 1,195,911 | 129 | (1,319,649 | ) | 1,763,714 | ||||||||||||||
Income taxes (expense)/benefit | (258,390 | ) | (519,473 | ) | 29,861 | 463,085 | (d) | (284,917 | ) | |||||||||||
Minority interest | (76 | ) | — | — | — | (76 | ) | |||||||||||||
Net Income | Rs. 1,628,857 | Rs. 676,438 | Rs. 29,990 | Rs.(856,564 | ) | Rs. 1,478,721 | ||||||||||||||
Earnings per equity share | ||||||||||||||||||||
Basic | Rs.10.64 | Rs.9.66 | ||||||||||||||||||
Diluted | Rs.10.62 | Rs.9.64 | ||||||||||||||||||
Weighted average number of equity shares used in computing earnings per share | ||||||||||||||||||||
Basic | 153,093,316 | * | 153,093,316 | * | ||||||||||||||||
Diluted | 153,403,846 | * | 153,403,846 | * |
* | These numbers have been retroactively restated to give effect to the stock dividend distributed on August 30, 2006. |
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Note 1: | General — Basis of pro forma presentation |
Note 2: | Pro forma adjustments |
(a) | Represents the incremental depreciation charge on the fair valued property, plant and equipment of betapharm. |
(b) | Represents the amortization expense on the intangibles of betapharm amortized over a weighted average useful life of 14.5 years based on management’s estimate of fair values. |
(c) | Represents the incremental interest expense pursuant to the acquisition which primarily represents interest at the rate of 4.65% (being the floating LIBOR rate) on the Euro 400 million loan taken for funding the acquisition of betapharm, the decrease in interest income at the rate of 6.5% (average rate of interest income) resulting from the use of internal funds towards the acquisition of betapharm. However, such incremental interest expense has been partially offset due to a reduction in betapharm’s interest expense pursuant to repayment of certain pre-acquisition debt out of the proceeds of the purchase price related to the acquisition. |
(d) | Represents the tax impact on the above adjustments. |
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• | multiple branded drug patent expirations in the short term; | |
• | increasing consumer confidence in generics because of the involvement of large pharmaceutical companies and campaigns to heighten consumer awareness of the availability of cheaper drugs; |
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• | a pro generic sentiment from healthcare authorities driven by the pressure to contain rising healthcare cost; | |
• | an aging population fuelling demand for low cost therapies across the world; and | |
• | global healthcare crisis such as AIDS in the developing world, like sub-Saharan countries, necessitating affordable medication for the masses. |
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Year | Key Products Going Off-Patent | Approx. sales value | ||||||
(US$ billion) | ||||||||
2006 | Zoloft, Pravastatin, Zithromax, Protonix, Actos, Concerta | 22 | ||||||
2007 | Norvasc, Ambien, Zyrtec, Zofran, Clarinex, Lotrel, Coreg | 13 | ||||||
2008 | Risperdal, Fosamax, Imitrax, Altace, Effexor, Lamictal | 10 |
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• | a full NDA; | |
• | a 505(b)(2) NDA; and | |
• | an ANDA. |
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• | the applicant fails to obtain tentative approval within 30 months after the application is filed; | |
• | the applicant fails to market its drug by the later of two dates calculated as follows: (a) 75 days after approval or 30 months after submission of the ANDA, whichever comes first, or (b) 75 days after each patent for which the first applicant is qualified for180-day exclusivity is either (i) the subject of a final court decision holding that the patent is invalid, not infringed, or unenforceable or (ii) withdrawn from listing with the U.S. FDA (court decisions, including settlements, 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 applicant withdraws the ANDA or amends each of the Paragraph IV certifications; | |
• | the applicant enters into an agreement found to be in violation of antitrust laws; or | |
• | all the patents that earned the applicant eligibility for the exclusivity expire. |
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• | Product patents. Pharmaceutical product patents protect a particular molecular structure, compound, combination, composition, product, formulation, dosage form, kit or the like and in most jurisdictions prevent everyone else from making, using, offering for sale and selling a pharmaceutical product that embodies the patented molecular structure, compound, combination, composition, product, formulation, dosage form, kit or the like without permission. | |
• | Process patents. Pharmaceutical process patents protect only the method by which a product is made, not the molecular structure of the product itself. If someone can make the same product by a different non-infringing process, the holder of a process patent cannot prevent the product from being reproduced. | |
• | Use/utility patents. Patents to protect the use of a product or NCE for particular therapeutic indications. |
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• | Our core businesses of active pharmaceutical ingredients and intermediates and formulations are well established with a track record of growth and profitability. We are focused on cost competitiveness and improving our position in existing markets and expanding into selected new markets in an effort to continue this growth and profitability. | |
• | In our global generics business, we are building a pipeline of products that will help us drive growth in the medium-term in the United States and Europe. We are focusing on key markets in Europe, including Germany, Spain, Italy, France and Poland in order to build a dominant presence in these markets. | |
• | We are also actively pursuing external business development opportunities to supplement our internal growth initiatives, including acquisitions and alliances. | |
• | We are also focused on positioning our custom pharmaceutical services business as partner of choice for the strategic outsourcing needs of innovator pharmaceutical companies. | |
• | In addition, we are focusing our investments on innovation led businesses, including drug discovery with a goal of building our drug discovery pipeline, and our most recent business focus, specialty pharmaceuticals, which is currently in the research and development phase. These businesses, while being investment intensive and having long lead times, have the potential to provide significant growth as well as sustained revenues and profitability for much longer periods due to patent protected franchises. |
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Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||
Segment | 2004 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||||||||||||
(Rs. in millions, U.S.$ in thousands) | ||||||||||||||||||||||||||||||||||||||||
Formulations | Rs. | 7,507.5 | 37.3 | % | Rs. | 7,822.9 | 40.1 | % | Rs. | 9,925.9 | 40.9 | % | U.S.$ | 223,155.5 | Rs. | 3,336.8 | 23.7 | % | U.S.$ | 72,745 | ||||||||||||||||||||
Active pharmaceutical | ||||||||||||||||||||||||||||||||||||||||
ingredients and intermediates | 7,628.5 | 38.0 | 6,944.5 | 35.6 | 8,238.0 | 34.0 | 185,208.1 | 2,300.8 | 16.4 | % | 50,159 | |||||||||||||||||||||||||||||
Generics | 4,337.5 | 21.6 | 3,577.4 | 18.3 | 4,055.8 | 16.7 | 91,181.7 | 6,737.2 | 48.0 | % | 146,876 | |||||||||||||||||||||||||||||
Critical care and biotechnology | 411.0 | 2.0 | 527.1 | 2.7 | 691.1 | 2.8 | 15,536.7 | 198.0 | 1.4 | % | 4,317 | |||||||||||||||||||||||||||||
Drug discovery | — | — | 288.4 | 1.5 | — | 25.3 | 0.2 | % | 551 | |||||||||||||||||||||||||||||||
Custom pharmaceutical services | 113.1 | 0.6 | 311.6 | 1.6 | 1,326.8 | 5.5 | 29,829.8 | 1,418.3 | 10.1 | % | 30,920 | |||||||||||||||||||||||||||||
Other | 105.9 | 0.5 | 47.5 | 0.2 | 29.4 | 0.1 | 660.3 | 33.0 | 0.2 | % | 719 | |||||||||||||||||||||||||||||
Total revenues | Rs. | 20,103.5 | 100.0 | % | Rs. | 19,519.4 | 100.0 | % | Rs. | 24,267.0 | 100.0 | % | U.S.$ | 545,572.1 | Rs. | 14,049.4 | 100.0 | % | U.S.$ | 306,287 | ||||||||||||||||||||
Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||||||||||||||||||||||||||
Country | Revenues | % Total(1) | Revenues | % Total(1) | Revenues | % Total(1) | Revenues | % Total(1) | ||||||||||||||||||||||||||||||||
(In millions) | (In millions) | (In millions) | (In millions) | |||||||||||||||||||||||||||||||||||||
India | Rs. | 4,729.3 | 63.0 | % | Rs. | 4,360.2 | 55.7 | % | Rs. | 5,525.7 | U.S.$ | 124.2 | 55.7 | % | Rs. | 1,615.1 | U.S.$ | 35.2 | 48.4 | % | ||||||||||||||||||||
Russia | 1,781.8 | 23.7 | 2,107.2 | 26.9 | 2,583.2 | 58.1 | 26.0 | 1,097.2 | 23.9 | 32.9 | ||||||||||||||||||||||||||||||
Ukraine | 184.2 | 2.5 | 257.8 | 3.3 | 413.4 | 9.3 | 4.2 | 215.0 | 4.7 | 6.4 | ||||||||||||||||||||||||||||||
Kazakhstan | 154.5 | 2.1 | 183.7 | 2.3 | 239.4 | 5.4 | 2.4 | 49.2 | 1.1 | 1.5 | ||||||||||||||||||||||||||||||
Romania | 82.0 | 1.1 | 102.6 | 1.3 | 192.3 | 4.3 | 1.9 | 100.5 | 2.2 | 3.0 | ||||||||||||||||||||||||||||||
Belarus | 100.2 | 1.3 | 140.1 | 1.8 | 156.4 | 3.5 | 1.6 | 51.2 | 1.1 | 1.5 | ||||||||||||||||||||||||||||||
South Africa | — | — | 52.1 | 0.7 | 142.0 | 3.2 | 1.4 | 45.3 | 1.0 | 1.4 | ||||||||||||||||||||||||||||||
Vietnam | 56.7 | 0.8 | 73.5 | 0.9 | 95.0 | 2.1 | 1.0 | 16.5 | 0.4 | 0.5 | ||||||||||||||||||||||||||||||
Venezuela | 70.4 | 0.9 | 96 | 1.2 | 55.6 | 1.3 | 0.6 | 37.2 | 0.8 | 1.1 | ||||||||||||||||||||||||||||||
Myanmar | 47.6 | 0.6 | 68.1 | 0.9 | 81.4 | 1.8 | 0.8 | — | — | — | ||||||||||||||||||||||||||||||
Others | 300.8 | 4 | 381.6 | 4.9 | 441.5 | 9.9 | 4.4 | 109.6 | 2.4 | 3.3 | ||||||||||||||||||||||||||||||
Total | Rs. | 7,507.5 | 100.00 | % | Rs. | 7,822.9 | 100.00 | % | Rs. | 9,925.9 | U.S.$ | 223.1 | 100.00 | % | Rs. | 3,336.80 | U.S.$ | 72.7 | 100.0 | % | ||||||||||||||||||||
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(1) | Refers to our revenues from formulations sales in the applicable country expressed as a percentage of our total revenues from formulations sales throughout the world. |
Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Number | Number | Number | Number | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Therapeutic | of our | of Our | of Our | of Our | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Category(1) | Products | Revenues | %(2) | Products | Revenues | %(2) | Products(3) | Revenues | %(2) | Products(3) | Revenues | %(2) | ||||||||||||||||||||||||||||||||||||||||||||
(In millions) | (In millions) | (In millions) | (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Cardiovascular | 35 | Rs. | 928.3 | 19.6 | 35 | Rs. | 937.6 | 21.5 | 32 | Rs. | 1,094.1 | U.S.$ | 24.6 | 19.8 | 35 | Rs. | 324.66 | U.S.$ | 7.08 | 20.10 | % | |||||||||||||||||||||||||||||||||||
Gastro-intestinal | 36 | 1,015.00 | 21.5 | 38 | 902 | 20.7 | 33 | 1,037.50 | 23.3 | 18.8 | 33 | 325.20 | 7.09 | 20.13 | ||||||||||||||||||||||||||||||||||||||||||
Pain management | 36 | 783.6 | 16.6 | 19 | 713.7 | 16.4 | 19 | 781.6 | 17.6 | 14.1 | 19 | 234.05 | 5.10 | 14.49 | ||||||||||||||||||||||||||||||||||||||||||
Diabetes management | 23 | 301.1 | 6.4 | 21 | 297.9 | 6.8 | 24 | 458.5 | 10.3 | 8.3 | 25 | 124.65 | 2.72 | 7.72 | ||||||||||||||||||||||||||||||||||||||||||
Neutraceuticals | 20 | 301.3 | 6.4 | 16 | 243.9 | 5.6 | 14 | 313.8 | 7.1 | 5.7 | 14 | 85.63 | 1.87 | 5.30 | ||||||||||||||||||||||||||||||||||||||||||
Anti-infectives | 30 | 439.1 | 9.3 | 19 | 324.1 | 7.4 | 16 | 295.9 | 6.7 | 5.4 | 21 | 93.18 | 2.03 | 5.77 | ||||||||||||||||||||||||||||||||||||||||||
Dermatology | 19 | 206.1 | 4.4 | 16 | 206.5 | 4.7 | 18 | 253.5 | 5.7 | 4.6 | 17 | 63.26 | 1.38 | 3.92 | ||||||||||||||||||||||||||||||||||||||||||
Dental | 23 | 173.2 | 3.7 | 22 | 177.3 | 4.1 | 21 | 220.4 | 5 | 4 | 21 | 62.91 | 1.37 | 3.89 | ||||||||||||||||||||||||||||||||||||||||||
Urology | 10 | 96.6 | 2 | 17 | 131.5 | 3 | 14 | 148.7 | 3.3 | 2.7 | 18 | 50.96 | 1.11 | 3.16 | ||||||||||||||||||||||||||||||||||||||||||
Respiratory | 19 | 206.6 | 4.4 | 14 | 177.5 | 4.1 | 11 | 140.2 | 3.2 | 2.5 | 12 | 36.16 | 0.79 | 2.24 | ||||||||||||||||||||||||||||||||||||||||||
Gynecology | 10 | 116 | 2.5 | 7 | 110.9 | 2.5 | 8 | 124.1 | 2.8 | 2.2 | 9 | 38.14 | 0.83 | 2.36 | ||||||||||||||||||||||||||||||||||||||||||
Others | 14 | 162.4 | 3.4 | 10 | 137.3 | 3.1 | 25 | 657.4 | 14.8 | 11.9 | 35 | 176.34 | 3.84 | 10.92 | ||||||||||||||||||||||||||||||||||||||||||
Total | 275 | Rs. | 4,729.3 | 100 | % | 234 | Rs. | 4,360.2 | 100 | % | 235 | Rs. | 5,525.7 | U.S.$ | 124.4 | 100 | % | 259 | Rs. | 1,615.14 | U.S.$ | 35.21 | 100 | % | ||||||||||||||||||||||||||||||||
(1) | The categorization into therapeutic segments is based on current marketing practice and focuses on therapies. | |
(2) | Refers to the therapeutic category’s revenues from sales in India expressed as a percentage of our total revenues from sales in all of our therapeutic categories in India. | |
(3) | Products of the same strength sold in different packs have been re-grouped as one product in fiscal 2006. |
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Rank of our Brand | Market Share of | |||||||||||||||
Therapeutic | TherapeuticSub- | Within Product | Our Brand Within | Brand | ||||||||||||
Brand | Category | Category(1) | Category(1) | Product Category(2) | Growth(3) | |||||||||||
Nise | Pain management | Non-steroidal anti-inflammatory | 1 | 23.9 | % | 6.98 | % | |||||||||
Omez | Gastro-intestinal | Anti-ulcerant | 1 | 45.2 | 12.6 | |||||||||||
Stamlo | Cardiovascular | Anti-hypertensive | 1 | 24.2 | 4.1 | |||||||||||
Stamlo beta | Cardiovascular | Anti-hypertensive | 2 | 14.0 | 12.4 | |||||||||||
Enam | Cardiovascular | Anti-hypertensive | 2 | 26.0 | (3.6 | ) | ||||||||||
Atocor | Cardiovascular | Lipid lowering agent | 3 | 8.8 | 26.8 | |||||||||||
Razo | Gastro-intestinal | Anti-ulcerant | 3 | 9.5 | 42.6 | |||||||||||
Reclimet | Diabetes management | Sulphonylurea anti-diabetic | 4 | 7.9 | 12.3 | |||||||||||
Clamp | Anti-infectives | Anti-infectives | 4 | 12.8 | 0.4 | |||||||||||
Mintop | Dermatology | Alopecia | 1 | 73.9 | 1.2 |
(1) | Therapeutic sub-categories are the specific groups within each therapeutic category and product categories are the compound groups within each therapeutic sub-category. Source: Operations Research Group March 2006. | |
(2) | Refers to the brand’s revenues from sales in India expressed as a percentage of our total revenues from sales in all of our therapeutic categories in India for fiscal 2006. | |
(3) | Revenue growth determined based on retail sales over the corresponding12-month period for the previous year. Source: Operations Research Group March 2006. |
Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||
Brand | 2004 | 2005 | 2006 | %Total(1) | 2006 | %Total(1) | ||||||||||||||||||||||||||
(In millions) | (In millions) | |||||||||||||||||||||||||||||||
Nise | Rs. | 655.6 | Rs. | 537.9 | Rs. | 736.0 | U.S.$ | 16.5 | 13.3 | % | Rs. | 214.83 | U.S.$ | 4.68 | 13.3 | % | ||||||||||||||||
Omez | 622.6 | 528.1 | 690.8 | 15.5 | 12.5 | 213.85 | 4.66 | 13.2 | ||||||||||||||||||||||||
Stamlo | 293.2 | 298.2 | 339.7 | 7.6 | 6.1 | 107.94 | 2.35 | 6.7 | ||||||||||||||||||||||||
Stamlo Beta | 187.7 | 186.7 | 262.8 | 5.9 | 4.8 | 69.36 | 1.51 | 4.3 | ||||||||||||||||||||||||
Enam | 163.9 | 162.1 | 172.7 | 3.9 | 3.1 | 47.10 | 1.03 | 2.9 | ||||||||||||||||||||||||
Atocor | 100.6 | 115.8 | 167.2 | 3.8 | 3 | 44.98 | 0.98 | 2.8 | ||||||||||||||||||||||||
Razo | 49.7 | 65.2 | 127.3 | 2.9 | 2.3 | 50.81 | 1.11 | 3.1 | ||||||||||||||||||||||||
Reclimet | 73.3 | 79.1 | 123.7 | 2.8 | 2.2 | 34.42 | 0.75 | 2.1 | ||||||||||||||||||||||||
Clamp | 106.5 | 100.6 | 118.3 | 2.7 | 2.1 | 26.74 | 0.58 | 1.7 | ||||||||||||||||||||||||
Mintop | 99.1 | 98.4 | 109.1 | 2.5 | 2 | 27.77 | 0.61 | 1.7 | ||||||||||||||||||||||||
Total | Rs. | 2,352.2 | Rs. | 2,172.1 | Rs. | 2,847.6 | U.S.$ | 64.1 | 51.4 | % | Rs. | 837.80 | U.S.$ | 18.26 | 51.9 | % | ||||||||||||||||
(1) | Refers to the brand’s revenues from sales in India expressed as a percentage of our total revenues from sales in all of our therapeutic categories in India. |
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Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Number | Number | Number | Number | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Therapeutic | of | % | of | % | of | % | of | % | ||||||||||||||||||||||||||||||||||||||||||||||||
Category | Products | Revenues | Total(1) | Products | Revenues | Total(1) | Products | Revenues | Total(1) | Products | Revenues | Total(1) | ||||||||||||||||||||||||||||||||||||||||||||
(In millions) | (In millions) | (In millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pain management | 9 | Rs. | 477.4 | 26.80 | % | 9 | Rs. | 660.3 | 31.30 | % | 9 | Rs. | 929.6 | U.S.$ | 20.9 | 36.00 | % | 9 | Rs. | 395.1 | U.S.$ | 8.61 | 36.01 | % | ||||||||||||||||||||||||||||||||
Anti-infectives | 7 | 435.4 | 24.4 | 7 | 505.1 | 24 | 6 | 546.5 | 12.3 | 21.2 | 6 | 198.7 | 4.33 | 18.11 | ||||||||||||||||||||||||||||||||||||||||||
Gastro-intestinal | 2 | 400.2 | 22.5 | 2 | 493 | 23.4 | 3 | 608.6 | 13.7 | 23.6 | 3 | 268.2 | 5.85 | 24.44 | ||||||||||||||||||||||||||||||||||||||||||
Cardiovascular | 4 | 338.2 | 19 | 4 | 306.2 | 14.5 | 4 | 288.9 | 6.5 | 11.2 | 4 | 107.9 | 2.35 | 9.83 | ||||||||||||||||||||||||||||||||||||||||||
Dermatology | 4 | 92.7 | 5.2 | 4 | 96.4 | 4.6 | 4 | 142.4 | 3.2 | 5.5 | 4 | 76.6 | 1.67 | 6.98 | ||||||||||||||||||||||||||||||||||||||||||
Others | 6 | 37.9 | 2.1 | 7 | 46.2 | 2.2 | 6 | 67.1 | 1.5 | 2.6 | 6 | 50.7 | 1.11 | 4.64 | ||||||||||||||||||||||||||||||||||||||||||
Total | 32 | Rs. | 1,781.8 | 100.00 | % | 33 | Rs. | 2,107.2 | 100.00 | % | 32 | Rs. | 2,583.1 | U.S.$ | 58.1 | 100.00 | % | 32 | 1,097.2 | 23.92 | 100.00 | % | ||||||||||||||||||||||||||||||||||
(1) | Refers to the therapeutic category’s revenues from sales in Russia expressed as a percentage of our total revenues from sales in all of our therapeutic categories in Russia. |
Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||||||||||||||||||||||||||||
Brand | Therapeutic Category | Revenues | %Total(1) | Revenues | %Total(1) | Revenues | %Total(1) | Revenues | %Total(1) | |||||||||||||||||||||||||||||||||
(In millions) | (In millions) | (In millions) | (In millions) | |||||||||||||||||||||||||||||||||||||||
Omez | Gastro-intestinal | Rs.394.6 | 22.10 | % | Rs.488.7 | 23.20 | % | Rs.603.5 | U.S.$ | 13.6 | 23.40 | % | Rs.262.61 | U.S.$ | 5.73 | 23.93 | % | |||||||||||||||||||||||||
Ciprolet | Anti-infectives | 385 | 21.60 | % | 450.2 | 21.40 | % | 484.7 | 10.9 | 18.80 | % | 168.98 | 3.68 | 15.40 | ||||||||||||||||||||||||||||
Ketorol | Pain management | 263.1 | 14.80 | % | 339.3 | 16.10 | % | 511.9 | 11.5 | 19.80 | % | 188.21 | 4.10 | 17.15 | ||||||||||||||||||||||||||||
Nise | Pain management | 185.6 | 10.40 | % | 296.8 | 14.10 | % | 379.2 | 8.5 | 14.70 | % | 196.47 | 4.28 | 17.91 | ||||||||||||||||||||||||||||
Total | 1,228.30 | 68.90 | % | 1,575.00 | 74.70 | % | 1,979.30 | 44.5 | 76.60 | % | Rs.816.27 | U.S.$ | 17.80 | 74.39 | % | |||||||||||||||||||||||||||
(1) | Refers to the brand’s revenues from sales in Russia expressed as a percentage of our total revenues from all formulation sales in Russia. |
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• | Introduction of the product patent regime, effective as of January 1, 2005; | |
• | Implementation of the Value Added Tax (“VAT”) system, effective as of April 1, 2005; | |
• | Introduction of the Maximum Retail Price (“MRP”)-based excise duty structure for the pharmaceutical industry; | |
• | Higher investments by Indian companies in research and development, as well as an increase in the number of new product launches by Indian companies; and |
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• | Improvement in sales of multinational corporations and increasing interest of global multinationals in India. |
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Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||||||||||||||||||||||||||
Revenues | % Total(1) | Revenues | % Total(1) | Revenues | % Total(1) | Revenues | % Total(1) | |||||||||||||||||||||||||||||||||
(In millions) | (In millions) | (In millions) | (In millions) | |||||||||||||||||||||||||||||||||||||
Emerging markets | Rs. | Rs. | Rs. | U.S.$ | Rs. | U.S.$ | ||||||||||||||||||||||||||||||||||
India | 2,115.1 | 27.7 | 1,972.1 | 28.4 | 2,296.4 | 51.6 | 27.8 | 625.1 | 13.6 | 27.2 | ||||||||||||||||||||||||||||||
Bangladesh | 94.1 | 1.2 | 127.4 | 1.8 | 265.7 | 6.0 | 3.2 | 61.7 | 1.4 | 2.7 | ||||||||||||||||||||||||||||||
Other countries | 1,847.5 | 24.2 | 1,841.8 | 26.5 | 2,558.9 | 57.5 | 31.1 | 739.6 | 16.1 | 32.1 | ||||||||||||||||||||||||||||||
Total emerging markets | 4,056.7 | 53.2 | 3,941.3 | 56.8 | 5,121.0 | 115.1 | 62.1 | 1,426.4 | 31.1 | 62.0 | ||||||||||||||||||||||||||||||
Developed markets | ||||||||||||||||||||||||||||||||||||||||
North America | 1,902.9 | 24.9 | 1,849.0 | 26.6 | 1,655.0 | 37.2 | 20.1 | 420.4 | 9.2 | 18.3 | ||||||||||||||||||||||||||||||
Europe | 1,626.9 | 21.3 | 1,091.1 | 15.7 | 1,420.9 | 31.9 | 17.3 | 439.1 | 9.6 | 19.1 | ||||||||||||||||||||||||||||||
Japan | 42.0 | 0.6 | 63.1 | 0.9 | 41.1 | 0.9 | 0.5 | 14.9 | 0.3 | 0.6 | ||||||||||||||||||||||||||||||
Total developed markets | 3,571.8 | 46.8 | 3,003.2 | 43.2 | 3,117.0 | 70.1 | 37.9 | 874.4 | 19.1 | 38.0 | ||||||||||||||||||||||||||||||
Total | 7,628.5 | 100.0 | 6,944.5 | 100.0 | 8,238.0 | 185.2 | 100.0 | 2,300.8 | 50.2 | 100.0 | ||||||||||||||||||||||||||||||
(1) | Refers to our revenues from API sales in the applicable country expressed as a percentage of our total revenues from API sales throughout the world. |
Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||||||||||||||||||||||||||||||
Revenues | %Total(1) | Revenues | %Total(1) | Revenues | %Total(1) | Revenues | %Total(1) | |||||||||||||||||||||||||||||||||||||
(In millions) | (In millions) | (In millions) | (In millions) | |||||||||||||||||||||||||||||||||||||||||
Product | Category | Sub-Category | ||||||||||||||||||||||||||||||||||||||||||
Ciprofloxacin HCL | Anti-infective | Anti-bacterial | Rs. | 959.8 | 12.6 | Rs. | 619.1 | 8.9 | Rs. | 778.5 | U.S.$ | 17.4 | 9.5 | Rs. | 303.3 | U.S.$ | 6.6 | 13.2 | ||||||||||||||||||||||||||
Ramipril | Cardiovascular | Anti-hypertensive | 1314.2 | 17.2 | 783.4 | 11.3 | 642.5 | 14.4 | 7.8 | 187.1 | 4.1 | 8.1 | ||||||||||||||||||||||||||||||||
Ranitidine HCL | Gastro-intestinal | Anti-ulcerant | 711.4 | 9.3 | 734.3 | 10.6 | 552.8 | 12.4 | 6.7 | 126.7 | 2.8 | 5.5 | ||||||||||||||||||||||||||||||||
Terbinafine HCL | Anti-infective | Anti-fungal | 124.9 | 1.6 | 194.5 | 2.8 | 537.2 | 12.0 | 6.5 | 105.2 | 2.3 | 4.6 | ||||||||||||||||||||||||||||||||
Ibuprofen | Pain management | Analgesic | 394.6 | 5.2 | 460.5 | 6.6 | 502.3 | 11.3 | 6.1 | 76.5 | 1.7 | 3.3 | ||||||||||||||||||||||||||||||||
Sertraline HCL | Cardiovascular | Anti-hypertensive | 178.4 | 2.3 | 138.2 | 2.0 | 494.1 | 11.1 | 6.0 | 225.1 | 4.9 | 9.8 | ||||||||||||||||||||||||||||||||
Naproxen sodium | Pain management | Anti-inflammatory | 437.3 | 5.7 | 470.0 | 6.8 | 380.4 | 8.5 | 4.6 | 141.9 | 3.1 | 6.2 | ||||||||||||||||||||||||||||||||
Naproxen | Pain management | Anti-inflammatory | 233.8 | 3.1 | 229.6 | 3.3 | 375.0 | 8.4 | 4.6 | 80.4 | 1.8 | 3.5 | ||||||||||||||||||||||||||||||||
Atorvastatin | Cardiovascular | Lipid-lowering agent | 211.2 | 2.8 | 252.5 | 3.6 | 321.1 | 7.2 | 3.9 | 28.2 | 0.6 | 1.2 | ||||||||||||||||||||||||||||||||
Montelukast | Respiratory | Anti-allergic | 29.8 | 0.4 | 52.6 | 0.8 | 241.1 | 5.4 | 2.9 | 58.6 | 1.3 | 2.5 | ||||||||||||||||||||||||||||||||
Losartan potassium | Cardiovascular | Anti-hypertensive | 214.2 | 2.8 | 180.5 | 2.6 | 172.7 | 3.9 | 2.1 | 52.5 | 1.1 | 2.3 | ||||||||||||||||||||||||||||||||
Sparfloxacin | Anti-infective | Anti-bacterial | 197.1 | 2.6 | 117.5 | 1.7 | 168.2 | 3.8 | 2.0 | 29.3 | 0.6 | 1.3 | ||||||||||||||||||||||||||||||||
Nizatidine | Gastro-intestinal | Anti-ulcerant | 159.6 | 2.1 | 216.8 | 3.1 | 160.9 | 3.6 | 2.0 | 36.8 | 0.8 | 1.6 | ||||||||||||||||||||||||||||||||
Clopidogrel | Cardiovascular | Anti-platelet agent | 140.3 | 1.8 | 79.6 | 1.1 | 139.9 | 3.1 | 1.7 | 56.0 | 1.2 | 2.4 | ||||||||||||||||||||||||||||||||
Dextromethorphan | Respiratory | Anti-allergic | 182.8 | 2.4 | 165.8 | 2.4 | 134.9 | 3.0 | 1.6 | 35.2 | 0.8 | 1.5 |
(1) | Refers to our revenues from key API sales expressed as a percentage of our total API revenues. |
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Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||
Therapeutic | Therapeutic | 2004 | 2005 | 2006 | 2006 | |||||||||||||||||||||||||||||||||||||||
Region/Product | Category | Sub-Category | Revenues | % Total(1) | Revenues | % Total(1) | Revenues | Revenues | % Total(1) | Revenues | Revenues | % Total(1) | ||||||||||||||||||||||||||||||||
(In millions) | (In millions) | (In millions) | (In millions) | (In millions) | (In millions) | |||||||||||||||||||||||||||||||||||||||
North America Fluoxetine capsules | Central nervous system | Anti-psychotic | Rs.1,898.4 | 43.8 | Rs.928.5 | 26.0 | Rs.373.8 | U.S.$ | 8.4 | 9.2 | Rs.100.79 | U.S.$ | 2.20 | 1.5 | ||||||||||||||||||||||||||||||
Ibuprofen tablets | Pain management | Analgesic | 184 | 4.2 | 198.7 | 5.6 | 235.1 | 5.3 | 5.8 | 27.70 | 0.60 | 0.4 | ||||||||||||||||||||||||||||||||
Ranitidine tablets | Gastro-intestinal | Anti-ulcerant | 205.8 | 4.7 | 194.0 | 5.4 | 225.9 | 5.1 | 5.6 | 65.95 | 1.44 | 1.0 | ||||||||||||||||||||||||||||||||
Famotidine tablets | Gastro-intestinal | Anti-ulcerant | 143.4 | 3.3 | 141.1 | 3.9 | 156.1 | 3.5 | 3.9 | 37.10 | 0.81 | 0.6 | ||||||||||||||||||||||||||||||||
Citalopram tablets | Central nervous system | Anti-psychotic | — | 0.0 | 201.6 | 5.6 | 143.4 | 3.2 | 3.5 | 59.28 | 1.29 | 0.9 | ||||||||||||||||||||||||||||||||
Ciproflaxacin tablets | Anti-infective | Anti-bacterial | 1.6 | 0.0 | 166.1 | 4.6 | 135.3 | 3.0 | 3.3 | 40.87 | 0.89 | 0.6 | ||||||||||||||||||||||||||||||||
Tizanidine tablets | Spasticity | Muscle relaxant | 591.1 | 13.6 | 206.2 | 5.8 | 62.8 | 1.4 | 1.6 | 33.73 | 0.74 | 0.5 | ||||||||||||||||||||||||||||||||
Ranitidine capsules | Gastro-intestinal | Anti-ulcerant | 167.3 | 3.9 | 84.9 | 2.4 | 27.9 | 0.6 | 0.7 | 10.17 | 0.22 | 0.2 | ||||||||||||||||||||||||||||||||
Simvastatin tablets | Cardio-vascular | Lipid lowering | — | — | — | — | — | — | — | 2,984.5 | 65.1 | 44.3 | ||||||||||||||||||||||||||||||||
Fexofenadine tablets | Respiratory | Anti-allergic | — | — | — | — | — | — | — | 368.8 | 8.0 | 5.5 | ||||||||||||||||||||||||||||||||
Finastaride tablets | Urology | Benign prostatic hyperplacia | — | — | — | — | — | — | — | 503.1 | 11.0 | 7.5 | ||||||||||||||||||||||||||||||||
Total | 3,191.6 | 73.5 | 2,121.1 | 59.3 | 1,360.3 | 30.5 | 33.6 | 4,232.0 | 92.3 | 62.8 | ||||||||||||||||||||||||||||||||||
Europe | ||||||||||||||||||||||||||||||||||||||||||||
Omeprazole capsules | Gastro-intestinal | Anti-ulcerant | 325.3 | 7.5 | 434.1 | 12.1 | 786.3 | 17.7 | 19.4 | 189.39 | 4.13 | 2.81 | ||||||||||||||||||||||||||||||||
Amlodipine maleate tablets | Cardiovascular | Anti-hypertensive | 17.7 | 0.4 | 219.9 | 6.1 | 371.5 | 8.4 | 9.2 | 91.89 | 2.00 | 1.36 | ||||||||||||||||||||||||||||||||
Total | 343.0 | 7.9 | 654.0 | 18.2 | 1,157.8 | 26.1 | 28.6 | 281.28 | 6.13 | 4.18 | ||||||||||||||||||||||||||||||||||
(1) | Refers to our revenues from generics sales in the applicable region expressed as a percentage of our total revenues from generics sales throughout the world. |
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IMS December 2005 | ||||
Innovator Sales, | ||||
Generic Innovator Brand | U.S.$ Million | Current Status | ||
Olanzapine (Eli Lilly’s Zyprexa®) | 816 (20 mg & ODT) | District court decision in favor of Eli Lilly; Awaiting decision of Federal Circuit | ||
Ondansetron (GSK’s Zofran®) | 614 | Awaiting FDA approval; MOU Patent expires in December 2006 | ||
Sumatriptan (GSK’s Imitrex®) | 836 | Settled Para IV with GSK, awaiting FTC clearance; Authorized Generic launch in late Q4CY08 ahead of patent expiry in Feb 2009 | ||
Finasteride tablets 1 mg (Merck’s Propecia®) | 138 | Final approval received; patent expiry in Nov 2013. Settlement with Merck for early entry launch | ||
Risperidone tablets (Janssen’s Risperdal®) | 2,218 | District Court upheld patent validity. Appeal process under evaluation | ||
Levetiracetam tablets (UCB’s Keppra®) | 492 | Sued in April 2004; Discovery in progress | ||
Rosiglitazone Maleate (GSK’s Avandia®) | 1,870 | Sued in September 2003 (shared exclusivity); Awaiting a trial date | ||
Rabeprazole Sodium (Eisai’s Aciphex®) | 1,198 | Sued in November 2003 (shared exclusivity) Motion for summary judgment denied on certain arguments of Teva; Trial scheduled for March 2007 | ||
Moxifloxacin HCI (Bayer’s Avelox®) | 261 | Awaiting District Court decision | ||
Rivastigmine Tartrate (Novartis’ Exelon®) | 216 | Sued in August 2004 (shared exclusivity) |
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Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||||||||||||||||||||||||||
Division | Revenues | % Total | Revenues | Revenues | Revenues | % Total | Revenues | % Total | ||||||||||||||||||||||||||||||||
(In millions) | (In millions) | (In millions) | (In millions) | (In millions) | ||||||||||||||||||||||||||||||||||||
Critical Care | Rs.325.2 | 79.1 | Rs.407.9 | Rs.77.4 | Rs.517.5 | U.S.$ | 11.6 | 74.9 | Rs.145.2 | U.S.$ | 3.2 | 73.3 | ||||||||||||||||||||||||||||
Diagnostics | 9.1 | 2.2 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Biotechnology | 76.7 | 18.7 | 119.2 | 22.6 | 173.6 | 3.9 | 25.1 | 52.8 | 1.1 | 26.7 | ||||||||||||||||||||||||||||||
Total | Rs.411.0 | 100.0 | Rs.527.1 | 100.0 | Rs.691.1 | U.S.$ | 15.5 | 100.00 | Rs.198.0 | U.S.$ | 4.3 | 100.0 | ||||||||||||||||||||||||||||
Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||||||||||||||||||||||||||
Division | Revenues | % Total(1) | Revenues | % Total(1) | Revenues | % Total(1) | Revenues | % Total(1) | ||||||||||||||||||||||||||||||||
(In millions) | (In millions) | (In millions) | (In millions) | (In millions) | ||||||||||||||||||||||||||||||||||||
India | Rs.259.5 | 63.1 | Rs.360.7 | 68.4 | Rs.450.4 | U.S.$ | 10.1 | 65.2 | Rs.127.1 | U.S.$ | 2.8 | 64.2 | ||||||||||||||||||||||||||||
Russia | 39.5 | 9.6 | 62.3 | 11.8 | 93.0 | 2.1 | 13.4 | 22.9 | 0.5 | 11.6 | ||||||||||||||||||||||||||||||
Other countries of the former Soviet Union | 12.2 | 3.0 | 19.4 | 3.7 | 56.5 | 1.3 | 8.2 | 18.7 | 0.4 | 9.4 | ||||||||||||||||||||||||||||||
Other | 99.8 | 24.3 | 84.7 | 16.1 | 91.2 | 2.0 | 13.2 | 29.3 | 0.6 | 14.8 | ||||||||||||||||||||||||||||||
Total | Rs.411.0 | 100.0 | Rs.527.1 | 100.0 | Rs.691.1 | U.S.$ | 15.5 | 100.0 | Rs.198.0 | U.S.$ | 4.3 | 100.0 | ||||||||||||||||||||||||||||
(1) | Refers to our revenues from market sales in the applicable country expressed as a percentage of our total revenues throughout the world. |
Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||
Therapeutic | 2004 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||||||||||||||
Product | Category | Revenues | % Total(1) | Revenues | % Total(1) | Revenues | % Total(1) | Revenues | % Total(1) | |||||||||||||||||||||||||||||||||
(In millions) | (In millions) | (In millions) | (In millions) | |||||||||||||||||||||||||||||||||||||||
Rs. | Rs. | Rs. | U.S.$ | U.S.$ | ||||||||||||||||||||||||||||||||||||||
Mitotax | Ovarian/breast/lung cancer | 123.8 | 30.1 | 178.8 | 33.9 | 231.8 | 5.2 | 33.5 | 50.5 | 1.1 | 25.5 | |||||||||||||||||||||||||||||||
Docetere | Breast/lung cancer | 77.0 | 18.7 | 73.2 | 13.9 | 81.6 | 1.8 | 11.8 | 18.7 | 0.4 | 9.4 | |||||||||||||||||||||||||||||||
Cytogem | Lung/pancreatic cancer | 63.3 | 15.4 | 59.1 | 11.2 | 55.7 | 1.3 | 8.1 | 35.2 | 0.8 | 17.8 | |||||||||||||||||||||||||||||||
Dacotin | Colorectal cancer | 16.4 | 4.0 | 25.9 | 4.9 | 43.8 | 1.0 | 6.3 | 13.2 | 0.3 | 6.7 | |||||||||||||||||||||||||||||||
Grafeel | Supportive therapeutic | 71.8 | 17.5 | 119.2 | 22.6 | 173.6 | 3.9 | 25.1 | 52.8 | 1.2 | 26.7 | |||||||||||||||||||||||||||||||
Total | 352.3 | 85.7 | 456.2 | 86.5 | 586.5 | 13.2 | 84.9 | 170.4 | 3.8 | 86.1 | ||||||||||||||||||||||||||||||||
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(1) | Refers to our revenues from sales of the applicable product expressed as a percentage of the total revenues of our critical care and biotechnology segment. |
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• | Metabolic disorders | |
• | Cardiovascular disorders | |
• | Bacterial infections | |
• | Inflammation | |
• | Cancer |
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Compound | Therapeutic Area | Status | Development partner | Remarks | ||||
DRF 2593 | Metabolic disorders | Phase II completed | Rheoscience | • Long-term carcinogenicity studies completed. Results expected by end of calendar year. | ||||
DRF 10945 | Metabolic disorders | Phase II in progress | Assigned to Perlecan | • Non-fibrate predominantly PPAR alpha agonist for the treatment of dyslipidemia. | ||||
• Phase II safety and efficacy studies in patients commercially in Canada. | ||||||||
RUS 3108 | Cardiovascular | Phase I in progress | Assigned to Perlecan | • Perlecan inducer for the treatment of atherosclerosis. | ||||
• Phase I studies (U.K.) have shown good tolerability and safety profile for the drug. | ||||||||
DRL 11605 | Metabolic disorders | Phase I initiated | Assigned to Perlecan | • Pan PPAR (,,) agonist for the treatment of obesity. | ||||
• Initiated Phase I in Canada. | ||||||||
DRL 16536 | Metabolic disorders | Pre-clinical | Assigned to Perlecan | • AMPK modulator for the treatment of diabetes. | ||||
• Regulatory toxicity studies initiated. | ||||||||
DRF 1042 | Oncology | Phase I | Assigned to ClinTec | • Single isomer in Phase I trials in India completed. | ||||
DRL 12424 | Cardiovascular | Pre-clinical | Developed in-house | • Pre-clinical development. | ||||
DRL 16805 | Atherosclerosis | Pre-clinical | Developed in-house | • Orally active agent being developed for treatment of atherosclerosis by reverse cholestrol trasport and HDL elevation. | ||||
• Animal testing of molecule safety is in process. | ||||||||
• Noval orally active cytokine modulator for disease modification in rheomatoid arthritis and osteoarthritis. | ||||||||
DRL 15725 | Rheomatoid Arthritis | Pre-clinical | Developed in-house | • Animal testing of molecule safety is in process. |
USPTO(1) | USPTO(1) | PCT(2) | India | India | ||||||||||||||||
Category | (Filed) | (Granted) | (Filed) | (Filed) | (Granted) | |||||||||||||||
Metabolic Disorders | 62 | 35 | 59 | 103 | 24 | |||||||||||||||
Anti-cancer | 12 | 7 | 12 | 43 | 12 | |||||||||||||||
Anti-bacterial | 8 | 1 | 7 | 21 | 1 | |||||||||||||||
Anti-inflammation/Cardiovascular | 31 | 3 | 13 | 11 | 1 | |||||||||||||||
Anti-ulcerant | 1 | 1 | — | — | ||||||||||||||||
Miscellaneous | — | — | 3 | 22 | 5 | |||||||||||||||
TOTAL | 115 | 47 | 94 | 202 | 43 |
(1) | The United States Patent and Trademark Office. |
(2) | The Patent Cooperation Treaty, an international treaty that facilitates foreign patent filings for residents of member countries when obtaining patents in other member countries. |
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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. |
Dr. K. Anji Reddy | Chairman, Dr. Reddy’s Laboratories Limited | |
Dr. R. Rajagopalan | President, Discovery Research, Dr. Reddy’s Laboratories Limited | |
Dr. V. Mohan | Managing Director, M.V. Diabetes Specialties Center (P) Limited, Madras | |
Dr. K. Janardhan Reddy | Professor and Chairman, Department of Pathology, Northwestern University Medical School, Chicago, Illinois, U.S.A. | |
Dr. Sampath Parthasarthy | Director, Division of Research, Emory University School of Medicine, Atlanta, Georgia, U.S.A. | |
Dr. Henry Ginsberg | Herbert Irving Professor of Medicine, Division of Preventive Medicine, Presbyterian Hospital, New York, U.S.A. | |
Dr. Ira J. Goldberg | Professor of Medicine, Division of Preventive Medicine and Nutrition Columbia University College of Physicians and Surgeons, New York, U.S.A. | |
Dr. Uday Saxena | Chief Scientific Officer, Dr. Reddy’s Laboratories Limited | |
Dr. Daniel Rader | Faculty in the Department of Medicine and the Director of Cardiovascular Metabolism unit atthe Institute for Diabetes, Obesity and Metabolism, University of Pennsylvania |
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Percentage of | ||||||
Direct/ Indirect | ||||||
Country of | Ownership | |||||
Name of Subsidiary | Incorporation | Interest | ||||
DRL Investments Limited | India | 100 | % | |||
Reddy Pharmaceuticals Hong Kong Limited | Hong Kong | 100 | % | |||
OOO JV Reddy Biomed Limited | Russia | 100 | % | |||
Reddy Antilles N.V. | Netherlands | 100 | % | |||
Reddy Netherlands B.V | Netherlands | 100 | %(1) | |||
Reddy US Therapeutics, Inc. | U.S.A. | 100 | %(1) | |||
Dr. Reddy’s Laboratories, Inc. | U.S.A. | 100 | % | |||
Dr. Reddy’s Farmaceutica do Brasil Ltda | Brazil | 100 | % | |||
Cheminor Investments Limited | India | 100 | % | |||
Aurigene Discovery Technologies Limited | India | 100 | % | |||
Aurigene Discovery Technologies, Inc. | U.S.A. | 100 | %(3) | |||
Kunshan Rotam Reddy Pharmaceutical Co. Limited | China | 51.2 | %(4) | |||
Dr. Reddy’s Laboratories (EU) Limited | United Kingdom | 100 | % | |||
Dr. Reddy’s Laboratories (U.K.) Limited | United Kingdom | 100 | %(5) | |||
Dr. Reddy’s Laboratories (Proprietary) Limited | South Africa | 60 | % | |||
Reddy Cheminor S.A.(2) | France | 100 | %(2) | |||
OOO Dr. Reddy’s Laboratories Limited | Russia | 100 | % | |||
Dr. Reddy’s Bio-sciences Limited | India | 100 | % | |||
Reddy Pharmaceuticals, LLC | U.S.A. | 100 | %(6) | |||
Trigenesis Therapeutics, Inc. | U.S.A. | 100 | % | |||
Industrias Quimicas Falcon de Mexico, SA de CV | Mexico | 100 | % | |||
Reddy Holding GmbH | Germany | 100 | %(7) | |||
Lacock Holdings Limited | Cyprus | 100 | % | |||
beta Holding GmbH(10) | Germany | 100 | %(8) | |||
beta Healthcare GmbH & Co. KG(10) | Germany | 100 | %(9) | |||
beta Healthcare Verwaltungs GmbH(10) | Germany | 100 | %(9) | |||
betapharm Arzneimittel GmbH | Germany | 100 | %(9) | |||
beta Healthcare Solutions GmbH | Germany | 100 | %(9) | |||
beta institut fur sozialmedizinische Forschung und Entwicklung GmbH | Germany | 100 | %(9) | |||
Reddy Pharma Iberia, S.A. | Spain | 100 | % |
(1) | Indirectly owned through Reddy Antilles N.V. | |
(2) | Subsidiary under liquidation. | |
(3) | Indirectly owned through Aurigene Discovery Technologies Limited. | |
(4) | Kunshan Rotam Reddy is a subsidiary as we hold a 51.2% stake in it; however, we account for this investment by the equity method and do not consolidate it in our financial statements. | |
(5) | Indirectly owned through Dr. Reddy’s Laboratories (EU) Limited. | |
(6) | Indirectly owned through Dr. Reddy’s Laboratories Inc. | |
(7) | Indirectly owned through Lacock Holdings Limited. | |
(8) | Indirectly owned through Reddy Holding GmbH. | |
(9) | Indirectly owned through beta Holding GmbH. |
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(10) | Merged with Reddy Holding GmbH in July 2006. |
Approximate | Built up | |||||||||||||||||
Area | Area | Installed | Actual | |||||||||||||||
Location | (Square feet) | (Square feet) | Certification | Capacity(14) | Production(14) | |||||||||||||
Formulations | 2,807 | (6)(7) | 3,716 | (6)(8) | ||||||||||||||
Bollaram, Andhra Pradesh, India | 217,729 | 207,959 | (1) | |||||||||||||||
Bachupally, Andhra Pradesh, India | 1,306,372 | 175,388 | (2) | |||||||||||||||
Yanam, Pondicherry, India | 457,000 | 26,226 | None | |||||||||||||||
Baddi, Himachal Pradesh(13) | 728,562 | 182,147 | None | |||||||||||||||
Active Pharmaceutical Ingredients and Intermediates | 3,833 | (9) | 3,101 | (9) | ||||||||||||||
Bollaram, Andhra Pradesh, India | 734,013 | 172,879 | U.S. FDA | |||||||||||||||
Bollaram, Andhra Pradesh, India | 648,173 | 282,220 | U.S. FDA | |||||||||||||||
Bollaram, Andhra Pradesh, India | 285,235 | 210,630 | U.S. FDA | |||||||||||||||
Jeedimetla, Andhra Pradesh, India | 228,033 | 74,270 | U.S. FDA | |||||||||||||||
Miryalguda, Andhra Pradesh, India | 2,787,840 | 261,734 | U.S. FDA | |||||||||||||||
Pydibheemavaram, Andhra Pradesh, India | 8,523,466 | 905,612 | U.S. FDA | |||||||||||||||
Pydibheemavaram, Andhra Pradesh, India(4) | 737,134 | 53,854 | ||||||||||||||||
Generics | 5,500 | (6) | 1,939 | (6) | ||||||||||||||
Bachupally, Andhra Pradesh, India(4) | 783,823 | 200,134 | (3) | |||||||||||||||
Battersea, London, United Kingdom (5)(15) | 17,000 | 10,000 | U.K. Medicine Control Agency | |||||||||||||||
Beverley, East Yorkshire, United Kingdom | 64,904 | 15,179 | U.K. Medicine Control Agency, ISO 9001: 2000 | |||||||||||||||
Critical Care and Biotechnology | ||||||||||||||||||
Bachupally, Andhra Pradesh, India | 174,183 | 114,588 | (1) | 370 | (10) | 73 | (10) | |||||||||||
Bollaram, Andhra Pradesh, India | 20,089 | 20,089 | U.S. FDA | |||||||||||||||
Pydibheemavaram, Andhra Pradesh, India | 15,494 | 15,494 | U.S. FDA | |||||||||||||||
Drug Discovery(11) | ||||||||||||||||||
Miyapur, Andhra Pradesh, India | 576,941 | 234,591 | None | |||||||||||||||
Georgia, United States(5) | 24,733 | 24,733 | None | |||||||||||||||
Custom Pharmaceutical Services | 3,428(10 | ) (12) | 1,832 | (10)(12) | ||||||||||||||
Miyapur, Andhra Pradesh, India | 113,211 | 73,587 | None | |||||||||||||||
Cuernavaca, Mexico | 2,793,665 | 1,345,488 | None |
(1) | Ministry of Health, Sudan; Ministry of Health, Uganda; ANVISA, Brazil; National Medicines Agency, Romania. | |
(2) | Medicine Control Council, Republic of South Africa; The State Company for Marketing Drugs and Medical Appliances, Ministry of Health, Iraq; Sultanate of Oman, Ministry of Health, Muscat; Ministry of Health, Sudan; Ministry of Health, State of Bahrain; State Pharmaceutical Inspection, Republic of Latvia; Pharmaceutical and Herbal Medicines, Registration and Control Administrations, Ministry of Health, Kuwait; National Medicines Agency, Romania; ANVISA, Brazil; Medicines and Health Care Products Regulatory Agencies (MHRA), U.K. | |
(3) | U.S. FDA; Medicines and Healthcare Products Regulatory Agency, U.K.; Ministry of Health, UAE; Medicines Control Council, South Africa; ANVISA, Brazil ; Environmental Management System ISO 14001; Occupational Health and Safety Management System — OHSAS 18001; Quality Management System-ISO 9001:2000. | |
(4) | 100% Export Oriented Unit. | |
(5) | Leased facilities. | |
(6) | Million units. | |
(7) | On a single shift basis. | |
(8) | During the year ended March 31, 2006, we sold one of our formulations manufacturing plants in Goa, India. |
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(9) | Tonnes. | |
(10) | Grams. | |
(11) | Laboratories only. | |
(12) | Mexico only. | |
(13) | This facility was commissioned in April 2006. Installed capacity of formulations includes the installed capacity of this facility and the actual production in formulations indicates the actual production in fiscal 2006 plus installed capacity of the Baddi facility. | |
(14) | Installed capacity and actual production in fiscal 2006 with adjustment to the installed capacity and actual production of the Baddi formulations facility. | |
(15) | We are in the process of transferring the manufacturing of products from the Battersea facility to our facilities in India and we intend to close the Battersea facility in fiscal 2007. |
North America | Europe(4) | Rest of the World | Total | |||||||||||||
Manufacturing(1) | — | 56 | 2,987 | 3,043 | ||||||||||||
Sales and Marketing(2) | 27 | 291 | 2,395 | 2,713 | ||||||||||||
Research and Development | 18 | 7 | 1,351 | 1,376 | ||||||||||||
Others(3) | 35 | 132 | 852 | 1,019 | ||||||||||||
Total | 80 | 486 | 7,585 | 8,151 | ||||||||||||
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North America | Europe(4) | Rest of the World | Total | |||||||||||||
Manufacturing(1) | — | 56 | 2,841 | 2,897 | ||||||||||||
Sales and Marketing(2) | 27 | 291 | 2,268 | 2,586 | ||||||||||||
Research and Development | 19 | — | 1,167 | 1,186 | ||||||||||||
Others(3) | 32 | 129 | 695 | 856 | ||||||||||||
Total | 78 | 476 | 6,971 | 7,525 | ||||||||||||
North America | Europe | Rest of the World | Total | |||||||||||||
Manufacturing(1) | — | 45 | 2,517 | 2,562 | ||||||||||||
Sales and Marketing(2) | 21 | 4 | 1,833 | 1,858 | ||||||||||||
Research and Development | 15 | 2 | 1,106 | 1,123 | ||||||||||||
Others(3) | 45 | 13 | 534 | 592 | ||||||||||||
Total | 81 | 64 | 5,990 | 6,135 | ||||||||||||
North America | Europe | Rest of the World | Total | |||||||||||||
Manufacturing(1) | — | 52 | 2,270 | 2,322 | ||||||||||||
Sales and Marketing(2) | 25 | 4 | 2,193 | 2,222 | ||||||||||||
Research and Development | 17 | — | 876 | 893 | ||||||||||||
Others(3) | 33 | 3 | 682 | 718 | ||||||||||||
Total | 75 | 59 | 6,021 | 6,155 | ||||||||||||
(1) | Includes quality, technical services and warehouse. | |
(2) | Includes business development. | |
(3) | Includes shared services, corporate business development and the intellectual property management team. | |
(4) | Includes 397 employees of betapharm at Germany. |
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Name(1) | Age (In yrs) | Position | ||||
Dr. K. Anji Reddy(2) | 67 | Chairman | ||||
Mr. G.V. Prasad(2),(3) | 45 | Chief Executive Officer and Executive Vice Chairman | ||||
Mr. Satish Reddy(2),(4) | 39 | Chief Operating Officer and Managing Director | ||||
Mr. Anupam Puri | 61 | Director | ||||
Prof. Krishna G. Palepu | 51 | Director | ||||
Dr. Omkar Goswami | 49 | Director | ||||
Mr. P.N. Devarajan | 71 | Director | ||||
Mr. Ravi Bhoothalingam | 60 | Director | ||||
Dr. V. Mohan(5) | 51 | Director |
(1) | Except for Dr. K. Anji Reddy, Mr. G.V. Prasad and Mr. Satish Reddy, all of the directors are independent directors under the corporate governance rules of the New York Stock Exchange. | |
(2) | Full-time director. | |
(3) | Son-in-law of Dr. K Anji Reddy. | |
(4) | Son of Dr. K. Anji Reddy. | |
(5) | Retired on July 28, 2006. |
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Name | Age (In yrs) | Position | ||||
Mr. G.V. Prasad(1) | 45 | Chief Executive Officer and Executive Vice Chairman | ||||
Mr. Satish Reddy(2) | 39 | Chief Operating Officer and Managing Director | ||||
Mr. V.S. Vasudevan | 55 | Head of Europe Generics(5) | ||||
Mr. Abhijit Mukherjee | 47 | President — Developing Businesses | ||||
Mr. Alan Shepard | 58 | Executive Vice President — Europe | ||||
Mr. Andrew Miller | 50 | Executive Vice President and General Counsel(4) | ||||
Mr. Arun Sawhney | 51 | President — Global API | ||||
Mr. Ashwani Kumar Malhotra | 50 | Executive Vice President — Formulations Technical Operations | ||||
Mr. Jaspal Singh Bajwa | 53 | President — Branded Formulations (Rest of the World)(3) | ||||
Mr. Jeffrey Wasserstein | 48 | Executive Vice President — North America Specialty | ||||
Mr. K.B. Sankara Rao | 52 | Executive Vice President — Integrated Product Development | ||||
Mr. Mark Hartman | 47 | Executive Vice President — North America Generics | ||||
Dr. R. Rajagopalan | 56 | President — Discovery Research | ||||
Mr. Raghu Cidambi | 55 | Advisor and Head — Corporate Intellectual Property Management and Strategic Planning | ||||
Mr. Saumen Chakraborty | 44 | Chief Financial Officer and Executive Vice President — IT and Business Process Excellence | ||||
Dr. Uday Saxena | 36 | Chief Scientific Officer |
(1) | Son-in-law of Dr. K. Anji Reddy. | |
(2) | Son of Dr. K. Anji Reddy. | |
(3) | Does not include North America and Europe. | |
(4) | Term of employment expired effective July 31, 2006. | |
(5) | Has stepped down as Chief Financial Officer and assumed the responsibility of Head of Europe Generics effective July 28, 2006. |
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Attendance | Stock | |||||||||||||||||||||||
Name of Directors | Fees | Commission | Salary | Perquisites | Total | Options(1) | ||||||||||||||||||
Amount Rs. | ||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Dr. K. Anji Reddy | — | 23,051 | 1,800 | 144 | 24,995 | — | ||||||||||||||||||
Mr. G.V. Prasad | — | 12,488 | 1,514 | 195 | 14,197 | — | ||||||||||||||||||
Mr. Satish Reddy | — | 12,457 | 1,500 | 195 | 14,152 | — | ||||||||||||||||||
Mr. Anupam Puri | 75 | 1,785 | — | — | 1,860 | 3,000 | ||||||||||||||||||
Prof. Krishna G. Palepu | 50 | 1,785 | — | — | 1,835 | 3,000 | ||||||||||||||||||
Dr. Omkar Goswami | 80 | 1,785 | — | — | 1,865 | 3,000 | ||||||||||||||||||
Mr. P.N. Devarajan | 60 | 1,785 | — | — | 1,845 | 3,000 | ||||||||||||||||||
Mr. Ravi Bhoothalingam | 75 | 1,785 | — | — | 1,860 | 3,000 | ||||||||||||||||||
Dr. V. Mohan | 20 | 892 | — | — | 912 | 2,000 |
(1) | On August 30, 2006, we distributed a stock dividend to our shareholders of one equity share for each equity share held. Consequently, as per our stock option plan the stock option holders were also given one stock option for each stock option held. The stock options referenced in this table do not include the additional stock options received by the directors as a result of this stock dividend. |
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Stock Options | ||||||||||||||||||||
Compensation | Fiscal Year | No. of | Exercise | Expiration | ||||||||||||||||
Name | Rs. | of Grant | Options(3) | Price(4) | Date | |||||||||||||||
Mr. V.S. Vasudevan | 7,844,918 | 2003 | 5,740 | Rs.1,063.02 | (1 | ) | ||||||||||||||
2004 | 10,000 | 883.00 | (1 | ) | ||||||||||||||||
2005 | 10,000 | 885.00 | (1 | ) | ||||||||||||||||
2006 | 25,000 | 725.00 | (1 | ) | ||||||||||||||||
Mr. Abhijit Mukherjee | 6,358,655 | 2005 | 2,400 | 5.00 | (1 | ) | ||||||||||||||
2006 | 5,000 | 5.00 | (1 | ) | ||||||||||||||||
Mr. Alan Sheppard | 8,853,803 | — | — | — | — | |||||||||||||||
Mr. Andrew Miller(2) | 21,359,871 | 2005 | 6,800 | 5.00 | (1 | ) | ||||||||||||||
2006 | 2,400 | 5.00 | (1 | ) | ||||||||||||||||
Mr. Arun Sawhney | 9,053,022 | 2005 | 6,855 | 5.00 | (1 | ) | ||||||||||||||
2006 | 4,000 | 5.00 | (1 | ) | ||||||||||||||||
Mr. Ashwani Kumar Malhotra | 5,645,643 | 2005 | 4,503 | 5.00 | (1 | ) | ||||||||||||||
2006 | 3,500 | 5.00 | (1 | ) | ||||||||||||||||
Mr. Jaspal Singh Bajwa | 8,763,583 | 2005 | 8,000 | 5.00 | (1 | ) | ||||||||||||||
2006 | 5,000 | 5.00 | (1 | ) | ||||||||||||||||
Mr. Jeffrey Wasserstein | 20,359,739 | 2005 | 10,000 | 5.00 | (1 | ) | ||||||||||||||
Mr. K.B. Sankara Rao | 5,527,308 | 2005 | 4,620 | 5.00 | (1 | ) | ||||||||||||||
2006 | 4,000 | 5.00 | (1 | ) | ||||||||||||||||
Mr. Mark Hartman | 32,044,189 | 2004 | 10,000 | 883.00 | (1 | ) | ||||||||||||||
2005 | 6,000 | 885.00 | (1 | ) | ||||||||||||||||
2006 | 6,000 | 5.00 | (1 | ) | ||||||||||||||||
Dr. R. Rajagopalan | 5,627,265 | 2005 | 5,430 | 5.00 | (1 | ) | ||||||||||||||
2006 | 3,000 | 5.00 | (1 | ) | ||||||||||||||||
Mr. Raghu Cidambi | 8,200,000 | 2005 | 5,250 | 5.00 | (1 | ) | ||||||||||||||
2006 | 5,000 | 5.00 | (1 | ) | ||||||||||||||||
Mr. Saumen Chakraborty | 7,435,692 | 2004 | 5,000 | 883.00 | (1 | ) | ||||||||||||||
2005 | 3,825 | 5.00 | (1 | ) | ||||||||||||||||
2006 | 5,000 | 5.00 | (1 | ) | ||||||||||||||||
Dr. Uday Saxena | 12,209,541 | 2005 | 5,250 | 5.00 | (1 | ) | ||||||||||||||
2006 | 4,000 | 5.00 | (1 | ) |
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(1) | The expiration date is five years from the date of vesting. The options vest in annual increments over a period of four years. | |
(2) | Term of employment expired effective July 31, 2006. | |
(3) | On August 30, 2006, we issued a stock dividend to our shareholders of one equity share for each equity share held. Consequently, as per our stock option plan the stock option holders were also given one stock option for each stock option held. The stock options referenced in this table do not include the additional stock options received by the executive officers as a result of this stock dividend. | |
(4) | As a result of the stock dividend we issued on August 30, 2006, the exercise price of outstanding stock options (other than those having an exercise price of Rs.5) was reduced to half. The exercise price referenced in this table does not reflect the revised exercise price. |
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Expiration of Current | ||||||
Name | Term of Office | Term of Office | Period of Service | |||
Dr. K. Anji Reddy(1) | July 13, 2006 | 5 years | 22 years | |||
Mr. Satish Reddy(1) | September 30, 2007 | 5 years | 13 years | |||
Mr. G.V. Prasad(1) | January 30, 2011 | 5 years | 20 years | |||
Mr. Anupam Puri(2) | Retirement by rotation | Due for retirement by rotation in 2007 | 4 years | |||
Dr. Krishna G. Palepu(2) | Retirement by rotation | Due for retirement by rotation in 2008 | 4 years | |||
Mr. P.N. Devarajan(3) | Retirement by rotation | Due for retirement by rotation in 2009 | 5.5 years | |||
Dr. Omkar Goswami(2) | Retirement by rotation | Due for retirement by rotation in 2007 | 5.5 years | |||
Dr. Ravi Bhoothalingam(2) | Retirement by rotation | Due for retirement by rotation in 2008 | 5.5 years |
(1) | Full time director. | |
(2) | Non-full time independent director. | |
(3) | Reappointed at the 22nd Annual General Meeting of Shareholders held on July 28, 2006. |
• | Audit Committee. | |
• | Compensation Committee. | |
• | Nomination Committee. | |
• | Shareholders’ Grievance Committee. | |
• | Management Committee. | |
• | Investment Committee. | |
• | Strategy Committee. |
• | Dr. Omkar Goswami (Chairman) |
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• | Mr. Anupam Puri | |
• | Prof. Krishna G. Palepu | |
• | Mr. P. N. Devarajan | |
• | Mr. Ravi Bhoothalingam |
• | Supervise the financial reporting process; | |
• | Review the 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 statutory auditors 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 external auditors and their fees; | |
• | Review the independence of our auditors; | |
• | Ensure that adequate safeguards have been taken for legal compliance both for us and for our Indian and foreign subsidiaries; | |
• | Review related party transactions; and | |
• | Review the functioning of our whistle blower policies and procedures. |
• | Mr. Ravi Bhoothalingam (Chairman) | |
• | Mr. Anupam Puri | |
• | Prof. Krishna G. Palepu | |
• | Dr. Omkar Goswami | |
• | Mr. P. N. Devarajan |
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• | Mr. Anupam Puri (Chairman) | |
• | Prof. Krishna G. Palepu | |
• | Dr. Omkar Goswami | |
• | Mr. P. N. Devarajan | |
• | Mr. Ravi Bhoothalingam |
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Fiscal | ||||||||||||||||||||||||
No. of | % of | No. of | Year | |||||||||||||||||||||
Shares | Outstanding | Options | of the | Exercise | Expiration | |||||||||||||||||||
Name | Held(1),(3) | Capital | Held(8) | Grant | Price(9) | Date | ||||||||||||||||||
Dr. K. Anji Reddy(2),(4) | 400,478 | 0.52 | % | — | — | — | — | |||||||||||||||||
Mr. G.V. Prasad(4) | 675,720 | 0.88 | % | — | — | — | — | |||||||||||||||||
Mr. Satish Reddy(4) | 602,916 | 0.78 | % | — | — | — | — | |||||||||||||||||
Mr. Anupam Puri | 2,750 | — | 3,000 | 2006 | Rs.5.00 | (5 | ) | |||||||||||||||||
1,500 | 2007 | 5.00 | (6 | ) | ||||||||||||||||||||
Prof. Krishna G. Palepu | 1,000 | — | 3,000 | 2006 | 5.00 | (5 | ) | |||||||||||||||||
1,500 | 2007 | 5.00 | (6 | ) | ||||||||||||||||||||
Dr. Omkar Goswami | 750 | — | 3,000 | 2006 | 5.00 | (5 | ) | |||||||||||||||||
1,500 | 2007 | 5.00 | (6 | ) | ||||||||||||||||||||
Mr. P.N. Devarajan | 750 | — | 3,000 | 2006 | 5.00 | (5 | ) | |||||||||||||||||
1,500 | 2007 | 5.00 | (6 | ) | ||||||||||||||||||||
Mr. Ravi Bhoothalingam | 750 | — | 3,000 | 2006 | 5.00 | (5 | ) | |||||||||||||||||
1,500 | 2007 | 5.00 | (6 | ) | ||||||||||||||||||||
Dr. V. Mohan | — | — | 2,000 | 2006 | 5.00 | (5 | ) | |||||||||||||||||
1,500 | 2007 | 5.00 | (6 | ) | ||||||||||||||||||||
Mr. V.S. Vasudevan | — | — | 5,740 | 2003 | 1,063.02 | (5 | ) | |||||||||||||||||
10,000 | 2004 | 883.00 | (5 | ) | ||||||||||||||||||||
10,000 | 2005 | 885.00 | (5 | ) | ||||||||||||||||||||
25,000 | 2006 | 725.00 | (5 | ) | ||||||||||||||||||||
4,000 | 2007 | 5.00 | (5 | ) | ||||||||||||||||||||
Mr. Abhijit Mukherjee | 800 | — | 2,400 | 2005 | 5.00 | (5 | ) | |||||||||||||||||
5,000 | 2006 | 5.00 | (5 | ) | ||||||||||||||||||||
4,000 | 2007 | 5.00 | (5 | ) | ||||||||||||||||||||
Mr. Andrew Miller(7) | — | 4,575 | 2005 | 5.00 | (5 | ) | ||||||||||||||||||
2,400 | 2006 | 5.00 | (5 | ) | ||||||||||||||||||||
Mr. Alan Shephard | — | — | 3,200 | 2007 | 5.00 | (5 | ) | |||||||||||||||||
Mr. Arun Sawhney | 5,025 | 0.01 | % | 6,855 | 2005 | 5.00 | (5 | ) | ||||||||||||||||
4,000 | 2006 | 5.00 | (5 | ) | ||||||||||||||||||||
3,200 | 2007 | 5.00 | (5 | ) | ||||||||||||||||||||
Mr. Ashwani Kumar Malhotra | 2,905 | — | 4,503 | 2005 | 5.00 | (5 | ) | |||||||||||||||||
3,500 | 2006 | 5.00 | (5 | ) | ||||||||||||||||||||
2,500 | 2007 | 5.00 | (5 | ) | ||||||||||||||||||||
Mr. Jaspal Singh Bajwa | — | — | 8,000 | 2005 | 5.00 | (5 | ) | |||||||||||||||||
5,000 | 2006 | 5.00 | (5 | ) | ||||||||||||||||||||
4,000 | 2007 | 5.00 | (5 | ) | ||||||||||||||||||||
Mr. Jeffrey Wasserstein | 2,500 | 7,500 | 2005 | 5.00 | (5 | ) | ||||||||||||||||||
4,000 | 2007 | 5.00 | (5 | ) | ||||||||||||||||||||
Mr. K.B. Sankara Rao | 18,622 | 0.02 | % | 4,620 | 2005 | 5.00 | (5 | ) | ||||||||||||||||
4,000 | 2006 | 5.00 | (5 | ) | ||||||||||||||||||||
3,200 | 2007 | 5.00 | (5 | ) | ||||||||||||||||||||
Mr. Mark Hartman | — | — | 10,000 | 2004 | 883.00 | (5 | ) | |||||||||||||||||
6,000 | 2005 | 885.00 | (5 | ) | ||||||||||||||||||||
6,000 | 2006 | 5.00 | (5 | ) | ||||||||||||||||||||
4,000 | 2007 | 5.00 | (5 | ) | ||||||||||||||||||||
Dr. R. Rajagopalan | 4,250 | 0.01 | % | 5,430 | 2005 | 5.00 | (5 | ) | ||||||||||||||||
3,000 | 2006 | 5.00 | (5 | ) | ||||||||||||||||||||
2,500 | 2007 | 5.00 | (5 | ) | ||||||||||||||||||||
Mr. Raghu Cidambi | 2,750 | — | 5,250 | 2005 | 5.00 | (5 | ) | |||||||||||||||||
5,000 | 2006 | 5.00 | (5 | ) | ||||||||||||||||||||
2,500 | 2007 | 5.00 | (5 | ) | ||||||||||||||||||||
Mr. Saumen Chakraborty | 5,875 | 0.01 | % | 5,000 | 2004 | 883.00 | (5 | ) | ||||||||||||||||
3,825 | 2005 | 5.00 | (5 | ) | ||||||||||||||||||||
5,000 | 2006 | 5.00 | (5 | ) | ||||||||||||||||||||
4,000 | 2007 | 5.00 | (5 | ) | ||||||||||||||||||||
Dr. Uday Saxena | — | — | 5,250 | 2005 | 5.00 | (5 | ) | |||||||||||||||||
4,000 | 2006 | 5.00 | (5 | ) | ||||||||||||||||||||
3,200 | 2007 | 5.00 | (5 | ) |
(1) | Shares held in their individual name only. | |
(2) | Does not include shares held beneficially. |
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(3) | All shares have voting rights. | |
(4) | Not eligible for grant of Stock Options. | |
(5) | The expiration date is five years from the date of vesting. The options vest in annual increments over a period of four years. | |
(6) | The expiration date is five years from the date of vesting. The options vest at the end of one year. | |
(7) | Term of employment expired effective July 31, 2006. | |
(8) | On August 30, 2006, we issued a stock dividend to our shareholders of one equity share for each equity share held. Consequently, as per our stock option plan the stock option holders were also given one stock option for each stock option held. The stock options referenced in this table do not include the additional stock options received by the directors and executive officers as a result of this stock dividend. | |
(9) | As a result of the stock dividend we issued on August 30, 2006, the exercise price of outstanding stock options (other than those having an exercise price of Rs.5) was reduced to half. The exercise price referenced in this table does not reflect the revised exercise price. |
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Number of | Number of | |||||||||||
Options | Options | |||||||||||
Granted | Granted | |||||||||||
Under | Under | |||||||||||
Particulars | Category A | Category B | Total | |||||||||
Options earmarked 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 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 earmarked after stock dividend(A+B+C) | 505,939 | 3,843,163 | 4,349,102 |
Three Months Ended June 30, 2005 | ||||||||||||||||
Weighted- | ||||||||||||||||
Shares | Weighted- | Average | ||||||||||||||
Arising | Range of | Average | Remaining | |||||||||||||
Out of | Exercise | Exercise | Contractual | |||||||||||||
Category A — Fair Market Value Options | Options | Prices | Price | Life (Months) | ||||||||||||
Outstanding at the beginning of the period | 597,900 | Rs.373.5-574.5 | Rs.488.66 | 50 | ||||||||||||
Granted during the period | 65,000 | 362.5 | 362.50 | 90 | ||||||||||||
Expired / forfeited during the period | (63,400 | ) | 373.5-574.5 | 526.50 | — | |||||||||||
Surrendered by employees during the period | (180,000 | ) | 488.65-531.51 | 517.00 | — | |||||||||||
Exercised during the period | — | — | — | — | ||||||||||||
Outstanding at the end of the period | 419,500 | 362.5-574.5 | 451.15 | 58 | ||||||||||||
Exercisable at the end of the period | 234,764 | Rs.441.5-574.5 | Rs.474.19 | 37 | ||||||||||||
Three Months Ended June 30, 2005 | ||||||||||||||||
Weighted- | ||||||||||||||||
Shares | Weighted- | Average | ||||||||||||||
Arising | Range of | Average | Remaining | |||||||||||||
Out of | Exercise | Exercise | Contractual | |||||||||||||
Category B — Par Value Options | Options | Prices | Price | Life (Months) | ||||||||||||
Outstanding at the beginning of the period | 759,098 | Rs.5 | Rs.5 | 84 | ||||||||||||
Granted during the period | 417,120 | 5 | 5 | 90 | ||||||||||||
Forfeited during the period | (15,086 | ) | 5 | 5 | — | |||||||||||
Exercised during the period | (40,000 | ) | 5 | 5 | — | |||||||||||
Outstanding at the end of the period | 1,121,132 | Rs.5 | Rs.5 | 85 | ||||||||||||
Exercisable at the end of the period | — | — | — | — | ||||||||||||
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Three Months Ended June 30, 2006 | ||||||||||||||||
Weighted- | ||||||||||||||||
Shares | Weighted- | Average | ||||||||||||||
Arising | Range of | Average | Remaining | |||||||||||||
Out of | Exercise | Exercise | Contractual | |||||||||||||
Category A — Fair Market Value Options | Options | Prices | Price | Life (Months) | ||||||||||||
Outstanding at the beginning of the period | 234,500 | Rs.362.5-531.51 | Rs.439.43 | 64 | ||||||||||||
Expired / forfeited during the period | (10,000 | ) | 442.5-574.5 | 541.50 | — | |||||||||||
Outstanding at the end of the period | 224,500 | 362.5-531.51 | 434.88 | 62 | ||||||||||||
Exercisable at the end of the period | 130,550 | Rs.362.5-531.51 | Rs.456.11 | 47 | ||||||||||||
Three Months Ended June 30, 2006 | ||||||||||||||||
Weighted- | ||||||||||||||||
Shares | Weighted- | Average | ||||||||||||||
Arising | Range of | Average | Remaining | |||||||||||||
Out of | Exercise | Exercise | Contractual | |||||||||||||
Category B — Par Value Options | Options | Prices | Price | Life (Months) | ||||||||||||
Outstanding at the beginning of the period | 729,968 | Rs.5 | Rs.5 | 81 | ||||||||||||
Granted during the period | 416,260 | 5 | 5 | 90 | ||||||||||||
Forfeited during the period | (4,332 | ) | 5 | 5 | — | |||||||||||
Exercised during the period | (15,366 | ) | 5 | 5 | — | |||||||||||
Outstanding at the end of the period | 1,126,530 | 5 | 5 | 82 | ||||||||||||
Exercisable at the end of the period | 112,292 | Rs.5 | Rs.5 | 59 | ||||||||||||
Three Months Ended June 30, 2005 | ||||||||||||||||
Weighted- | ||||||||||||||||
Shares | Weighted- | Average | ||||||||||||||
Arising | Range of | Average | Remaining | |||||||||||||
Out of | Exercise | Exercise | Contractual | |||||||||||||
Options | Prices | Price | Life (Months) | |||||||||||||
Outstanding at the beginning of the period | 197,178 | Rs.10 | Rs.10 | 59 | ||||||||||||
Forfeited during the period | (46,979 | ) | 10 | 10 | — | |||||||||||
Outstanding at the end of the period | 150,199 | Rs.10 | Rs.10 | 56 | ||||||||||||
Exercisable at the end of the period | — | — | — | — |
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Three Months Ended June 30, 2006 | ||||||||||||||||
Weighted- | ||||||||||||||||
Shares | Weighted- | Average | ||||||||||||||
Arising | Range of | Average | Remaining | |||||||||||||
Out of | Exercise | Exercise | Contractual | |||||||||||||
Options | Prices | Price | Life (Months) | |||||||||||||
Outstanding at the beginning of the period | 528,907 | Rs.10 | Rs.10 | 67 | ||||||||||||
Granted during the period | 135,000 | 10 | 10 | 73 | ||||||||||||
Forfeited during the period | (66,824 | ) | 10 | 10 | — | |||||||||||
Outstanding at the end of the period | 597,083 | Rs.10 | Rs.10 | 69 | ||||||||||||
Exercisable at the end of the period | — | — | — | — |
Three Months Ended June 30, 2005 | ||||||||||||||||
Weighted- | ||||||||||||||||
Weighted- | Average | |||||||||||||||
Shares | Range of | Average | Remaining | |||||||||||||
Arising Out | Exercise | Exercise | Contractual | |||||||||||||
of Options | Prices | Price | Life (Months) | |||||||||||||
Outstanding at the beginning of the period | 100,000 | Rs.10 | Rs.10 | 65 | ||||||||||||
Forfeited during the period | (100,000 | ) | Rs.10 | Rs.10 | — | |||||||||||
Outstanding at the end of the period | — | — | — | — | ||||||||||||
Exercisable at the end of the period | — | — | — | — |
• | Dr. K. Anji Reddy (Chairman), | |
• | Mr. G .V. Prasad (Executive Vice Chairman and CEO), | |
• | Mr. Satish Reddy (Managing Director and COO), | |
• | Mrs. K. Samrajyam, wife of Dr. K. Anji Reddy, and Mrs. G. Anuradha, wife of Mr. G.V. Prasad (hereafter collectively referred as the “Family Members”), and | |
• | Dr. Reddy’s Holdings Private Limited (a company in which Dr. K. Anji Reddy owns 40% of the equity and remainder is owned by Mr. G. V. Prasad, Mr. Satish Reddy and the Family Members). |
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Equity Shares Beneficially Owned(1) | ||||||||
Number | Percentage | |||||||
Name | of Shares | of Shares | ||||||
Dr. K. Anji Reddy(2) | 18,993,723 | 24.76 | % | |||||
Mr. G.V. Prasad | 675,720 | 0.88 | % | |||||
Mr. Satish Reddy | 602,916 | 0.79 | % | |||||
Family Members | 558,428 | 0.73 | % | |||||
Subtotal | 20,830,787 | 27.16 | % | |||||
Others/public float | 55,871,466 | 72.84 | % | |||||
Total number of shares outstanding | 76,702,253 | 100.00 | % | |||||
(1) | Beneficial ownership is determined in accordance with rules of the U.S. Securities and Exchange Commission, which provide that shares are beneficially owned by any person who has or shares voting or investment power with respect to the shares. All information with respect to the beneficial ownership of any principal shareholder has been furnished by that shareholder and, unless otherwise indicated below, we believe that persons named in the table have sole voting and sole investment power with respect to all shares shown as beneficially owned, subject to community property laws where applicable. | |
(2) | Dr. Reddy’s Holdings Private Limited owns 18,593,245 shares of Dr. Reddy’s Laboratories Limited. Dr. K. Anji Reddy owns 40% of Dr. Reddy’s Holdings Private Limited. The remainder is owned by Mr. G.V. Prasad, Mr. Satish Reddy and the Family Members. The entire amount beneficially owned by Dr. Reddy’s Holdings Private Limited is included in the amount shown as beneficially owned by Dr. K. Anji Reddy. |
June 30, 2006 | March 31, 2006 | March 31, 2005 | March 31, 2004 | |||||||||||||||||||||||||||||
No. of | % of | No. of | % of | No. of | % of | No. of | % of | |||||||||||||||||||||||||
Equity | Equity | Equity | Equity | Equity | Equity | Equity | Equity | |||||||||||||||||||||||||
Shares | Shares | Shares | Shares | Shares | Shares | Shares | Shares | |||||||||||||||||||||||||
Name | Held* | Held | Held* | Held | Held* | Held | Held* | Held | ||||||||||||||||||||||||
Dr. Reddy’s Holdings Pvt. Limited | 18,593,245 | 24.24 | 18,893,245 | 24.64 | 17,877,730 | 23.36 | 17,461,730 | 22.82 | ||||||||||||||||||||||||
Life Insurance Corporation of India | 5,848,581 | 7.63 | 5,156,011 | 6.72 | 7,355,048 | 9.61 | 5,295,128 | 6.92 |
* | ADRs not included |
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• | Diana Hotels Limited for hotel services; | |
• | AR Chlorides for processing services of raw materials and intermediates; | |
• | Dr. Reddy’s Holdings Private Limited for purchase and sale of active pharmaceutical ingredients and intermediates; | |
• | Madras Diabetes Research Foundation for undertaking research on our behalf; | |
• | Dr. Reddy’s Heritage Foundation for purchase of services; | |
• | SR Enterprises for transportation services; and | |
• | Manava Seva Dharma Samvardhani Trust for social contribution to which we have made contributions. |
Three Months | ||||||||||||||||
Ended | ||||||||||||||||
Fiscal Year Ended March 31, | June 30, | |||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||
(Thousands) | ||||||||||||||||
Purchases from: | ||||||||||||||||
Significant interest entities | Rs. | 59,889 | Rs. | 45,239 | Rs. | 182,870 | Rs. | 43,898 | ||||||||
Affiliates | 107,801 | 39,278 | 5,410 | — | ||||||||||||
Sales to: | ||||||||||||||||
Significant interest entities | 1,185 | 1,055 | 32,255 | 8,206 | ||||||||||||
Lease rental paid under cancelable operating leases to: | ||||||||||||||||
Directors and their relatives | 16,891 | 17,144 | 18,927 | 4,903 | ||||||||||||
Administrative expenses paid to: | ||||||||||||||||
Significant interest entities | 4,793 | 4,649 | 7,401 | 1,153 |
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Ended | ||||||||||||
As of March 31, | June 30, | |||||||||||
2005 | 2006 | 2006 | ||||||||||
(Thousands) | ||||||||||||
Significant interest entities | — | Rs. | 6,084 | Rs. | 1,671 | |||||||
Directors and their relatives | Rs. | 3,680 | 4,380 | 4,380 | ||||||||
Employee loans (interest free) | 18,199 | 7,537 | 5,811 | |||||||||
Affiliates | — | 234,541 | 344,848 | |||||||||
Rs. | 21,879 | Rs. | 252,542 | Rs. | 356,710 | |||||||
Three Months | ||||||||||||
Ended | ||||||||||||
As of March 31, | June 30, | |||||||||||
2005 | 2006 | 2006 | ||||||||||
(Thousands) | ||||||||||||
Significant interest entities | Rs. | 16,397 | Rs. | 18,958 | Rs. | 25,505 | ||||||
Payable towards legal fees | 123,106 | 131,392 | 120,760 | |||||||||
Directors and their relatives | — | 1,328 | 1,328 | |||||||||
Rs. | 139,503 | Rs. | 151,678 | Rs. | 147,593 | |||||||
Repayable in the Year Ending March 31: | (Thousands) | |||
2007 | Rs. | 5,735 | ||
2008 | 1,448 | |||
2009 | 296 | |||
2010 | 58 | |||
2011 | — | |||
Thereafter | — | |||
Rs. | 7,537 | |||
Repayable in the Year Ending June 30: | (Thousands) | |||
2007 | Rs. | 4,579 | ||
2008 | 985 | |||
2009 | 197 | |||
2010 | 50 | |||
2011 | — | |||
Thereafter | — | |||
Rs. | 5,811 | |||
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• | the rate of dividend to be declared may not exceed 10% of its paid up capital or the average of the rate at which dividends were declared by the company in the prior five years, whichever is less; | |
• | the total amount to be drawn from the accumulated profits earned in the previous years and transferred to the reserves may not exceed an amount equivalent to 10% of the sum of its paid up capital and free reserves, and the amount so drawn is to be used first to set off the losses incurred in the fiscal year before any dividends in respect of preference or equity shares are declared; and |
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• | the balance of reserves after such withdrawals shall not fall below 15% of the company’s paid up capital. |
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• | amendments of the memorandum of association to alter the objects of the company and to change the registered office of the company under section 146 of the Companies Act; | |
• | the issuance of shares with differential rights with respect to voting, dividend or other provisions of the Companies Act; | |
• | the sale of the whole or substantially the whole of an undertaking or facilities of the company; | |
• | providing loans, extending guarantees or providing a security in excess of the limits allowed under Section 372A of the Companies Act; | |
• | varying the rights of the holders of any class of shares or debentures; | |
• | the election of a director by minority shareholders; and | |
• | the buy-back of shares. |
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• | sell the rights if practicable and distribute the net proceeds as cash, or | |
• | allow the rights to lapse, in which case ADR holders will receive nothing. |
• | distribute those securities or property in any manner it deems equitable and practicable, | |
• | to the extent the depositary deems distribution of such securities or property not to be equitable and practicable, sell those securities and distribute any net proceeds in the same way it distributes cash, or | |
• | hold the distributed property, in which case the ADSs will also represent the distributed property. |
• | shares issued as a dividend or free distribution in respect of deposited securities, |
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• | shares subscribed for or acquired by holders from us through the exercise of rights distributed by us to such persons in respect of shares, and | |
• | securities issued by us as a result of any change in par value, subdivision, consolidation and other reclassification of deposited securities or otherwise. |
• | temporary delays caused by closing our transfer books or those of the depositary or the deposit of shares in connection with voting at a shareholders’ meeting, or the payment of dividends, | |
• | the payment of fees, taxes and similar charges, or | |
• | compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of deposited securities. |
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• | to receive a dividend, distribution or rights, | |
• | to give instructions for the exercise of voting rights at a meeting of holders of ordinary shares or other deposited securities, | |
• | for the determination of the registered holders who shall be responsible for the fee assessed by the depositary for administration of the ADR program and for any expenses as provided for in the ADR, or | |
• | to receive any notice or to act in respect of other matters all subject to the provisions of the deposit agreement. |
• | to the extent not prohibited by the rules of any stock exchange or interdealer quotation system upon which the ADSs are traded, a fee of $1.50 per ADR or ADRs for transfers of certificated or direct registration ADRs; | |
• | a fee of U.S.$0.02 or less per ADS (or portion thereof) for any Cash distribution made pursuant to the Deposit Agreement; | |
• | a fee of U.S.$0.02 per ADS (or portion thereof) per calendar year for services performed, by the depositary in administering our ADR program (which fee shall be assessed against holders of ADRs as |
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of the record date set by the depositary not more than once each calendar year and shall be payable in the manner described in the next succeeding provision); |
• | any other charge payable by any of the depositary, any of the depositary’s agents, including, without limitation, the custodian, or the agents of the depositary’s agents in connection with the servicing of our shares or other deposited securities (which charge shall be assessed against registered holders of our ADRs as of the record date or dates set by the depositary and shall be payable at the sole discretion of the depositary by billing such registered holders or by deducting such charge from one or more cash dividends or other cash distributions); | |
• | a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities (treating all such securities as if they were shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the depositary to those holders entitled thereto; | |
• | stock transfer or other taxes and other governmental charges; | |
• | cable, telex and facsimile transmission and delivery charges incurred at your request; | |
• | transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities; | |
• | expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars; and | |
• | such fees and expenses as are incurred by the depositary (including without limitation expenses incurred in connection with compliance with foreign exchange control regulations or any law or regulation relating to foreign investment) in delivery of deposited securities or otherwise in connection with the depositary’s or its custodian’s compliance with applicable law, rule or regulation. |
• | deduct the amount thereof from any cash distributions, or | |
• | sell deposited securities and deduct the amount owing from the net proceeds of such sale. |
• | amend the form of ADR, |
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• | distribute additional or amended ADRs, | |
• | distribute cash, securities or other property it has received in connection with such actions, | |
• | sell any securities or property received and distribute the proceeds as cash, or | |
• | take no action. |
• | a change in law or regulation governing the deposited securities, an act of God, war or other circumstance beyond our control prevent, delay or subject to any civil or criminal penalty any act which the deposit agreement or the ADRs provide shall be done or performed by any one of us, | |
• | we exercise or fail to exercise any discretion under the deposit agreement or the ADR, | |
• | we perform our obligations without gross negligence or bad faith, | |
• | we take any action or inaction in reliance upon the advice of or information from legal counsel, accountants, any person presenting shares for deposit, any registered holder of ADRs, or any other person believed by it to be competent to give such advice or information, or | |
• | it relies upon any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties. |
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• | the capacity in which you and other holders and beneficial owners own or owned ADSs, | |
• | the identity of any other persons then or previously interested in such ADSs, and | |
• | the nature of such interest and various other matters. |
• | issue, register or transfer an ADR or ADRs; | |
• | effect asplit-up or combination of ADRs; | |
• | deliver distributions on any such ADRs; or | |
• | permit the withdrawal of deposited securities (unless the deposit agreement provides otherwise), until the following conditions have been met: |
• | the holder has paid all taxes, governmental charges, and fees and expenses as required in the deposit agreement; | |
• | the holder has provided the depositary with any information it may deem necessary or proper, including, without limitation, proof of identity and the genuineness of any signature; and | |
• | the holder has complied with such regulations as the depositary may establish under the deposit agreement. |
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• | the depositary has received collateral for the full market value of the pre-released ADSs; and | |
• | each recipient of pre-released ADSs represents in writing that he or she: |
• | owns the underlying shares, | |
• | assigns all rights in such shares to the depositary, | |
• | holds such shares for the account of the depositary, and | |
• | will promptly deliver such shares to the custodian as soon as practicable, if the depositary so demands. |
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• | investments in excess of specified sectoral caps or investments in sectors in which FDI is not permitted or in sectors which specifically require approval of the FIPB; | |
• | investments by any foreign investor who had on January 12, 2005, an existing joint venture or a technology transfer/trade mark agreement in the same field as the Indian company in which the FDI is proposed. However, no prior approval is required if: (a) the investor is a venture capital funds registered with SEBI, or (b) the existing joint venture, investment by either of the parties is less than 3%, or (c) the existing joint venture or collaboration is now defunct or sick; | |
• | foreign investment of more than 24% in the equity capital of units manufacturing items reserved for small scale industries; | |
• | all proposals for manufacturing activities requiring a license under the Industries (Development and Regulation) Act, 1951 and that are proposed to be located outside a radius of 25 kilometers of the standard urban area limits; and | |
• | all proposals relating to the acquisition of shares of an Indian company by a foreign investor (including an individual of Indian nationality or origin residing outside India and corporations established and incorporated outside India) which are not under the automatic route. |
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• | the shares of the Indian company are purchased on a recognized stock exchange in India; | |
• | the shares of the Indian company are purchased on a recognized stock exchange with the permission of the domestic custodian for the ADSs issued by the Indian company and such shares are deposited with the custodian after purchase; | |
• | the Indian company has authorized the custodian to accept shares from non-resident investors for re-issuance of ADSs; | |
• | the number of shares of the Indian company so purchased does not exceed the ADSs converted into underlying shares and shall be subject to sectoral caps, as applicable; and | |
• | compliance with the provisions of the ADR Scheme and the guidelines issued thereunder. |
• | the facility to sell the shares would be availablepari passuto all categories of shareholders; | |
• | the sponsoring company whose shareholders propose to divest existing shares in the overseas market through the issue of ADSs will give an option to all its shareholders indicating the number of shares to be divested and the mechanism of determining the price under the applicable ADS norms. If the shares offered for divestment are more than the pre-specified number to be divested, shares would be accepted from the existing shareholders in proportion to their existing shareholdings; | |
• | the proposal for divestment of the shares would have to be approved by a special resolution of the Indian company; | |
• | the proceeds of the ADS issue raised abroad shall be repatriated to India within a period of one month from the closing of the issue. However, the proceeds of the ADS offering can also be retained abroad to meet the future foreign exchange requirements of the company; and | |
• | the issue-related expenses in relation to the public issue of ADSs under this scheme would be subject to a ceiling of 7% of the issue size, in the case of public issues, and 2% of the issue size, in the case of |
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private placements. Issue-related expenses would include underwriting commissions and charges, legal expenses and reimbursable expenses. Issue-related expenses shall be passed on to shareholders participating in the sponsored issue on a pro-rata basis. Issue-related expenses beyond the ceiling would require the approval of the RBI. |
• | a public offer, where the price of the equity shares to be issued is not less than the price at which the equity shares are issued to Indian residents; or | |
• | a private placement, where the price of the equity shares to be issued is not less than the price set out in the relevant SEBI guidelines or the guidelines issued by the former Controller of Capital Issues, as applicable. |
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• | the average of the weekly high and low of the closing prices of the related equity shares quoted on the stock exchange during the six months preceding the relevant date; or | |
• | the average of the weekly high and low of the closing prices of the related equity shares quoted on a stock exchange during the two weeks preceding the relevant date. |
• | full details of the ADS issue including details of our equity capital structure, the number of ADSs issued, the ratio of ADSs to the underlying shares, amount raised by this issue and amount repatriated with the Reserve Bank of India in the form specified in Annexure C of the Regulations, within 30 days from the date of closing of the ADS issue; | |
• | a quarterly return with the RBI in the form specified in Annexure D of the Regulations within 15 days of the close of the calendar quarter; and | |
• | a return of allotment with the Registrar of Companies, at the time of issuance of the new equity shares. |
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• | 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. |
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• | 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%, plus the applicable surcharge and education cess; and short-term capital gains on such transfer will be taxed at the maximum marginal rate of tax applicable to the seller, plus the applicable surcharge and education cess, if the sale of such equity shares is settled outside of a recognized stock exchange in India; | |
• | 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 10%, plus 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 rate of surcharge in the case of individuals whose taxable income is greater than Rs.1,000,000 is 10%; and | |
• | short-term capital gains realized upon the sale of equity shares obtained from the redemption of ADSs will be taxed at variable rates with a maximum of (i) 41.82%, including the prevailing surcharge and education cess, in case of foreign companies and (ii) 10%, in the case of resident employees or non-resident individuals. An additional surcharge of 10% will be charged if the aggregate taxable income of an individual exceeds Rs.1,000,000 during the relevant fiscal year. An education cess of 2% will be charged on tax and surcharge. |
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• | citizens or residents of the United States, | |
• | (ii) corporations (or other entities treated as corporations for U.S. federal tax purposes) created in or under the laws of the United States or any state thereof or the District of Columbia, | |
• | (iii) estates, the income of which is subject to U.S. federal income taxation regardless of its source, and | |
• | (iv) trusts for which a U.S. court exercises primary supervision and a U.S. person has the authority to control all substantial decisions. |
• | banks, | |
• | insurance companies, | |
• | financial institutions, | |
• | dealers in securities or currencies, | |
• | tax-exempt entities, | |
• | persons that will hold equity shares or ADSs as a position in a “straddle” or as part of a “hedging” or “conversion” transaction for tax purposes, | |
• | persons liable for the alternative minimum tax, | |
• | 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. |
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• | 75% or more of its gross income for the taxable year is passive income; or | |
• | on average for the taxable year by value, 50% or more of its assets produce or are held for the production of passive income. |
• | pay an interest charge together with tax calculated at ordinary income rates (which may be higher than the ordinary income rates that otherwise apply to U.S. holders) 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; | |
• | if a “qualified electing fund election” (as the term is defined in relevant provisions of the U.S. tax laws) is made, include in their taxable income their pro rata share of undistributed amounts of our income; or | |
• | if the equity shares or ADSs are “marketable stock” (as the term is defined in relevant provisions of the U.S. tax laws) and amark-to-market election is made,mark-to-market the equity shares or ADSs 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. |
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Number of | ||||
Underwriters | ADSs up to | |||
Citigroup Global Markets Inc. | ||||
Merrill Lynch, Pierce, Fenner & Smith Incorporated | ||||
Total | 13,500,000 | |||
No Exercise | Full Exercise | |||||||
Per ADS | U.S.$ | U.S.$ | ||||||
Total | U.S.$ | U.S.$ |
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• | a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or | |
• | a trust (where the trustee is not an accredited investor whose sole purpose is to hold investments and each beneficiary is an accredited investor, equity shares, debentures and units of equity shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired our ADSs under Section 275 except: |
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• | we adhere to certain corporate governance requirements including ensuring the minimum number of independent directors on the board, and composition of various committees such as audit committees and remuneration committees; | |
• | we are subject to continuing disclosure requirements and must publish unaudited financial statements on a quarterly basis that have been subject to a limited review by our auditors and immediately inform the stock exchanges of any unpublished price sensitive information; | |
• | we maintain a minimum level of shares held by the public; | |
• | if any person acquires more than 5% of our equity shares or voting rights, we and the acquiror shall comply with the provisions of the Takeover Code; |
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• | no person shall acquire, or agree to acquire, 15% or more of our equity shares or voting rights, unless the provisions of the Takeover Code are complied with; and | |
• | if any takeover offer is made or if there is any change in management control, then we and the persons securing management control of us need to comply with the Takeover Code. |
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• | Market Wide Circuit Breakers. In order to restrict abnormal price volatility in any particular stock, SEBI has instructed stock exchanges to apply daily circuit breakers, which do not allow transactions beyond certain price volatility. An index based market-wide (equity and equity derivatives) circuit breaker system has been implemented and the circuit breakers are applied to the market for movement by 10%, 15% and 20% for two prescribed market indices: the BSE Sensex for the BSE and the Nifty for the NSE, or the NSE Nifty, whichever is breached earlier. If any of these circuit breaker thresholds are reached, trading in all equity and equity derivatives markets nationwide is halted. | |
• | Price Bands. Price bands are circuit filters of 20% movements either up or down, and are applied to most securities traded in the markets, excluding securities included in the BSE Sensex and the NSE Nifty and derivatives products. In addition to the market-wide index based circuit breakers, there are currently in place varying individual scrip wise bands (except for scrips on which derivative products are available or scrips included in indices on which derivative products are available) of 20% either ways for all scrips in the compulsory rolling settlement. |
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• | the negotiated price under the agreement for the acquisition of shares in the company; | |
• | the highest price paid by the acquiror or persons acting in concert with him for any acquisitions, including through an allotment in a public, preferential or rights issue, during the26-week period prior to the date of public announcement; | |
• | the average of the weekly high and low of the closing prices of the shares of the company quoted on the stock exchange where the shares of the company are most frequently traded during the26-week period prior to the date of public announcement, or the average of the daily high and low of the prices of the shares as quoted on the stock exchange where the shares of the company are most frequently traded during the two weeks preceding the date of public announcement, whichever is higher. |
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• | the receipt of intimation of allotment of shares; or | |
• | the acquisition of the shares or voting rights, as the case may be. |
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• | the receipt of intimation of allotment of shares; or | |
�� | the acquisition or sale of shares or voting rights, as the case may be. |
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Page | ||||
Dr. Reddy’s Laboratories Limited and subsidiaries | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-29 | ||||
F-31 | ||||
F-32 | ||||
F-33 | ||||
F-34 | ||||
beta Holding GmbH Consolidated Financial Statements for the periods ended November 30, 2005 and 2004 | ||||
F-86 | ||||
Consolidated Financial Statements for the periods ended November 30, 2004 and 2005 | ||||
F-87 | ||||
F-88 | ||||
F-89 | ||||
F-90 | ||||
Betapharm Arzneimittel GmbH Financial Statements for the period ended December 31, 2003 | ||||
F-107 | ||||
Financial Statements for the period ended December 31, 2003 | ||||
F-108 | ||||
F-109 | ||||
F-110 | ||||
F-111 | ||||
Pro Forma Financial Statements | ||||
F-117 |
F-1
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As of | ||||||||||||
March 31, | As of June 30, | |||||||||||
2006 | 2006 | 2006 | ||||||||||
Convenience | ||||||||||||
translation into | ||||||||||||
U.S.$ | ||||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | Rs. | 3,712,637 | Rs. | 3,437,251 | U.S.$ | 74,935 | ||||||
Investment securities | 14,703 | 14,886 | 325 | |||||||||
Restricted cash | 1,606,245 | 21,894 | 477 | |||||||||
Accounts receivable, net of allowances | 4,801,794 | 9,650,933 | 210,397 | |||||||||
Inventories | 6,894,712 | 8,785,740 | 191,536 | |||||||||
Deferred income taxes and deferred charges | 173,750 | 351,097 | 7,654 | |||||||||
Due from related parties | 246,360 | 353,852 | 7,714 | |||||||||
Other current assets | 2,639,818 | 2,968,523 | 64,716 | |||||||||
Total current assets | 20,090,019 | 25,584,176 | 557,754 | |||||||||
Property, plant and equipment, net | 9,086,331 | 9,738,939 | 212,316 | |||||||||
Due from related parties | 6,182 | 5,612 | 122 | |||||||||
Investment securities | 1,090,202 | 1,087,890 | 23,717 | |||||||||
Goodwill | 16,634,509 | 17,903,853 | 390,317 | |||||||||
Intangibles assets, net | 17,034,555 | 18,203,086 | 396,841 | |||||||||
Restricted cash | 4,468,840 | 4,468,840 | 97,424 | |||||||||
Other assets | 357,431 | 500,094 | 10,902 | |||||||||
Total assets | Rs. | 68,768,069 | Rs. | 77,492,490 | U.S.$ | 1,689,394 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Borrowings from banks | 9,132,462 | 9,590,060 | 209,070 | |||||||||
Current portion of long-term debt | 925,761 | 1,973,233 | 43,018 | |||||||||
Trade accounts payable | 3,639,217 | 7,721,213 | 168,328 | |||||||||
Due to related parties | 151,678 | 147,593 | 3,218 | |||||||||
Accrued expenses | 3,083,120 | 3,200,755 | 69,779 | |||||||||
Other current liabilities | 1,812,623 | 1,972,951 | 43,012 | |||||||||
Total current liabilities | 18,744,861 | 24,605,805 | 536,425 | |||||||||
Long-term debt, excluding current portion | 20,937,132 | 21,724,915 | 473,619 | |||||||||
Deferred income taxes | 6,346,174 | 6,764,538 | 147,472 | |||||||||
Other liabilities | 468,169 | 350,428 | 7,640 | |||||||||
Total liabilities | Rs. | 46,496,336 | Rs. | 53,445,686 | U.S.$ | 1,165,156 | ||||||
Stockholders’ equity: | ||||||||||||
Equity shares at Rs.5 par value: | ||||||||||||
200,000,000 shares authorized; Issued and outstanding: | ||||||||||||
153,389,140 shares and 153,404,506 shares as of March 31, 2006 and June 30, 2006 respectively | 383,473 | 383,511 | 8,361 | |||||||||
Additional paid-in capital | 10,261,783 | 10,267,212 | 223,833 | |||||||||
Equity options outstanding | 463,128 | 473,927 | 10,332 | |||||||||
Retained earnings | 11,201,794 | 12,599,406 | 274,676 | |||||||||
Equity shares held by a controlled trust: 82,800 shares | (4,882 | ) | (4,882 | ) | (106 | ) | ||||||
Accumulated other comprehensive income | (33,563 | ) | 327,630 | 7,143 | ||||||||
Total stockholders’ equity | 22,271,733 | 24,046,804 | 524,238 | |||||||||
Total liabilities and stockholders’ equity | Rs. | 68,768,069 | Rs. | 77,492,490 | U.S.$ | 1,689,394 | ||||||
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Three Months Ended June 30, | ||||||||||||
2005 | 2006 | 2006 | ||||||||||
Convenience | ||||||||||||
translation into | ||||||||||||
U.S.$ | ||||||||||||
Revenues: | ||||||||||||
Product sales, net of allowances for sales returns (includes excise duties of Rs.300,124 and Rs.648,459 for the three months ended June 30, 2005 and 2006 respectively) | Rs. | 5,573,819 | Rs. | 13,918,192 | U.S.$ | 303,427 | ||||||
License fees | 13,383 | 23,016 | 502 | |||||||||
Service income | 4,232 | 108,198 | 2,359 | |||||||||
5,591,434 | 14,049,406 | 306,287 | ||||||||||
Cost of revenues | 2,662,865 | 7,960,457 | 173,544 | |||||||||
Gross profit | 2,928,569 | 6,088,949 | 132,744 | |||||||||
Operating expenses: | ||||||||||||
Selling, general and administrative expenses | 1,953,773 | 3,346,121 | 72,948 | |||||||||
Research and development expenses, net | 514,694 | 532,874 | 11,617 | |||||||||
Amortization expenses | 95,599 | 387,809 | 8,455 | |||||||||
Foreign exchange loss | 65,756 | 74,474 | 1,624 | |||||||||
Other operating (income)/expense s, net | 36,913 | (69,534 | ) | (1,516 | ) | |||||||
Total operating expenses | 2,666,735 | 4,271,744 | 93,127 | |||||||||
Operating income | 261,834 | 1,817,205 | 39,616 | |||||||||
Equity in loss of affiliates | (14,504 | ) | (15,345 | ) | (335 | ) | ||||||
Other (expense)/income, net | 172,602 | (196,658 | ) | (4,287 | ) | |||||||
Income before income taxes and minority interest | 419,932 | 1,605,202 | 34,995 | |||||||||
Income taxes | (72,507 | ) | (207,540 | ) | (4,525 | ) | ||||||
Minority interest | (108 | ) | (50 | ) | (1 | ) | ||||||
Net income | Rs. | 347,317 | Rs. | 1,397,612 | U.S.$ | 30,469 | ||||||
Earnings per equity share | ||||||||||||
Basic | Rs. | 2.27 | Rs. | 9.11 | U.S.$ | 0.20 | ||||||
Diluted | Rs. | 2.27 | Rs. | 9.07 | U.S.$ | 0.20 | ||||||
Weighted average number of equity shares used in computing earnings per equity share | ||||||||||||
Basic | 153,065,150 | 153,397,582 | 153,397,582 | |||||||||
Diluted | 153,324,350 | 154,023,870 | 154,023,870 |
F-3
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Accumulated | ||||||||||||||||||||||||||||||||||||||||
Equity Shares | Additional | Other | Equity Shares held by a Controlled Trust | Equity | Total | |||||||||||||||||||||||||||||||||||
No. of | Paid In | Comprehensive | Comprehensive | No. of | Options | Retained | Stockholders’ | |||||||||||||||||||||||||||||||||
Shares | Amount | Capital | Income | Income | Shares | Amount | Outstanding | Earnings | Equity | |||||||||||||||||||||||||||||||
Balance as of March 31, 2005 | 153,037,898 | Rs. | 382,595 | Rs. | 10,089,152 | Rs. | 76,240 | — | 82,800 | Rs. | (4,882 | ) | Rs. | 400,749 | Rs. | 10,009,305 | Rs. | 20,953,159 | ||||||||||||||||||||||
Issuance of equity shares on exercise of options | 40,000 | 100 | 14,471 | — | — | — | — | (14,471 | ) | — | 100 | |||||||||||||||||||||||||||||
Stock based compensation | 43,390 | 43,390 | ||||||||||||||||||||||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | Rs. | 347,317 | — | — | — | 347,317 | 347,317 | |||||||||||||||||||||||||||||
Translation adjustment | — | — | — | (19,550 | ) | (19,550 | ) | — | — | — | — | (19,550 | ) | |||||||||||||||||||||||||||
Unrealized gain on investments, net of tax | — | — | — | 11,358 | 11,358 | — | — | — | — | 11,358 | ||||||||||||||||||||||||||||||
Comprehensive income | — | — | — | — | Rs. | 339,125 | — | — | — | — | — | |||||||||||||||||||||||||||||
Balance as of June 30, 2005 | 153,077,898 | Rs. | 382,695 | Rs. | 10,103,623 | Rs. | 68,048 | — | 82,800 | Rs. | (4,882 | ) | Rs. | 429,668 | Rs. | 10,356,622 | Rs. | 21,335,774 | ||||||||||||||||||||||
Balance as of March 31, 2006 | 153,389,140 | Rs. | 383,473 | Rs. | 10,261,783 | Rs. | (33,563 | ) | — | 82,800 | Rs. | (4,882 | ) | Rs. | 463,128 | Rs. | 11,201,794 | Rs. | 22,271,733 | |||||||||||||||||||||
Issuance of equity shares on exercise of options | 15,366 | 38 | 5,429 | — | — | — | — | (5,429 | ) | — | 38 | |||||||||||||||||||||||||||||
Stock based compensation | — | — | — | — | — | — | 31,034 | — | 31,034 | |||||||||||||||||||||||||||||||
Cumulative effect adjustment on adoption of SFAS 123R | — | — | — | — | — | — | — | (14,806 | ) | — | (14,806 | ) | ||||||||||||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | Rs. | 1,397,612 | — | — | — | 1,397,612 | 1,397,612 | |||||||||||||||||||||||||||||
Translation adjustment | — | — | — | 363,684 | 363,684 | — | — | — | — | 363,684 | ||||||||||||||||||||||||||||||
Unrealized loss on investments, net of tax | — | — | — | (2,491 | ) | (2,491 | ) | — | — | — | — | (2,491 | ) | |||||||||||||||||||||||||||
Comprehensive income | — | — | — | — | Rs. | 1,758,805 | — | — | — | — | — | |||||||||||||||||||||||||||||
Balance as of June 30, 2006 | 153,404,506 | Rs. | 383,511 | Rs. | 10,267,212 | Rs. | 327,630 | — | 82,800 | Rs. | (4,882 | ) | Rs. | 473,927 | Rs. | 12,599,406 | Rs. | 24,046,804 | ||||||||||||||||||||||
Convenience translation into U.S.$ | — | U.S.$ | 8,361 | U.S.$ | 223,833 | U.S.$ | 7,143 | — | — | U.S.$ | (106 | ) | U.S.$ | 10,332 | U.S.$ | 274,676 | U.S.$ | 524,238 | ||||||||||||||||||||||
F-4
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Three Months Ended June 30, | ||||||||||||
2005 | 2006 | 2006 | ||||||||||
Convenience | ||||||||||||
translation into | ||||||||||||
U.S.$ | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | Rs. | 347,317 | Rs. | 1,397,612 | U.S.$ | 30,469 | ||||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||||||
Deferred tax expense/(benefit) | 72,507 | (245,519 | ) | (5,352 | ) | |||||||
Gain on sale of available for sale securities, net | (13,164 | ) | — | — | ||||||||
Depreciation and amortization | 369,692 | 729,995 | 15,914 | |||||||||
Loss/(profit ) on sale of property, plant and equipment | 36,913 | (62,615 | ) | (1,365 | ) | |||||||
Equity in loss of affiliates | 14,504 | 15,345 | 335 | |||||||||
Unrealized exchange (gain)/loss | 51,018 | 497,652 | 10,849 | |||||||||
Interest receivable on investment | (4,937 | ) | — | |||||||||
Stock based compensation | 43,390 | 16,228 | 354 | |||||||||
Minority interest | 108 | 50 | 1 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | (421,178 | ) | (4,648,504 | ) | (101,341 | ) | ||||||
Inventories | (192,687 | ) | (1,790,729 | ) | (39,039 | ) | ||||||
Other assets | (259,031 | ) | (278,765 | ) | (6,077 | ) | ||||||
Due to/from related parties, net | (68,604 | ) | (111,010 | ) | (2,420 | ) | ||||||
Trade accounts payable | 492,604 | 3,768,859 | 82,164 | |||||||||
Accrued expenses | 95,279 | 60,899 | 1,328 | |||||||||
Other liabilities | (361,562 | ) | (106,570 | ) | (2,323 | ) | ||||||
Net cash provided by/(used in) operating activities | 202,169 | (757,072 | ) | (16,505 | ) | |||||||
Cash flows from investing activities: | ||||||||||||
Restricted cash | — | 1,584,351 | 34,540 | |||||||||
Expenditure on property, plant and equipment | (297,828 | ) | (887,280 | ) | (19,343 | ) | ||||||
Proceeds from sale of property, plant and equipment | 3,062 | 65,730 | 1,433 | |||||||||
Purchase of investment securities, net of proceeds from sale | 161,320 | (84,361 | ) | (1,839 | ) | |||||||
Expenditure on intangible assets | (90,814 | ) | (195,611 | ) | (4,264 | ) | ||||||
Net cash provided by/(used in) in investing activities | (224,260 | ) | 482,829 | 10,526 | ||||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of equity shares on exercise of options | — | 38 | 1 | |||||||||
Proceeds from borrowing from banks, net | 1,135,649 | 291,428 | 6,353 | |||||||||
Repayment of long-term debt | (1,480 | ) | (1,572 | ) | (34 | ) | ||||||
Net cash provided by financing activities | 1,134,169 | 289,894 | 6,320 | |||||||||
Effect of exchange rate changes on cash and cash equivalents | (35,993 | ) | (291,037 | ) | (6,345 | ) | ||||||
Net increase / (decrease) in cash and cash equivalents during the period | 1,076,085 | (275,386 | ) | (6,004 | ) | |||||||
Cash and cash equivalents at the beginning of the period | 9,287,864 | 3,712,637 | 80,938 | |||||||||
Cash and cash equivalents at the end of the period | Rs. | 10,363,949 | Rs. | 3,437,251 | U.S.$ | 74,935 | ||||||
Supplemental disclosures: | ||||||||||||
Cash paid for: | ||||||||||||
Interest | Rs. | 98,337 | Rs. | 401,678 | U.S.$ | 8,757 | ||||||
Income taxes | — | 111,382 | 2,428 | |||||||||
Supplemental schedule of non-cash investing activities: | ||||||||||||
Property, plant and equipment purchased on credit during the period | 8,012 | 71,095 | 1,550 |
F-5
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1. | Basis of preparation of financial statements |
2. | Interim information |
3. | Convenience translation |
4. | Stock based compensation |
F-6
Table of Contents
Three Months Ended June 30, | ||||||||
2005 | 2006 | |||||||
Dividend yield | 0.5 | % | 0.5 | % | ||||
Expected life | 12-78 months | 12-78 months | ||||||
Risk free interest rates | 4.5 - 7.1 | % | 4.5 - 7.5 | % | ||||
Volatility | 26.4 - 50.7 | % | 23.4 - 50.7 | % |
5. | Business combinations |
F-7
Table of Contents
Three Months | ||||
Ended | ||||
June 30, | ||||
2005 | ||||
Revenues | Rs. | 8,003,738 | ||
Net income | Rs. | 278,947 | ||
Earning per equity share | ||||
Basic | Rs. | 1.82 | ||
Diluted | Rs. | 1.82 | ||
Weighted average number of equity shares used in computing earnings per share | ||||
Basic | 153,065,150 | |||
Diluted | 153,324,350 |
6. | Restricted Cash |
7. | Incorporation of Reddy Pharma Iberia, S.A. |
F-8
Table of Contents
Description | Amount (Rs.) | |||
Cash | 193,310 | |||
Contingent consideration | 25,610 |
Description | Amount (Rs.) | |||
Inventory | 22,864 | |||
Product related intangibles | 170,446 |
8. | Goodwill |
Three Months | ||||||||
Year Ended | Ended | |||||||
March 31, | June 30, | |||||||
2006 | 2006 | |||||||
Balance at the beginning of the period(1) | Rs. | 1,743,442 | Rs. | 16,816,452 | ||||
Acquired during the period | 15,073,010 | 13,893 | ||||||
Translation of goodwill arising on acquisition of betapharm | — | 1,255,451 | ||||||
Balance at the end of the period(1) | Rs. | 16,816,452 | Rs. | 18,085,796 | ||||
F-9
Table of Contents
Three Months | ||||||||
Year Ended | Ended | |||||||
March 31, | June 30, | |||||||
2006 | 2006 | |||||||
Cash paid towards contingent consideration in purchase business combinations | Rs. | 114,244 | Rs. | 13,893 | ||||
Excess of fair value over carrying value of the acquired net assets, in a purchase business combination (betapharm) | 14,958,766 | — | ||||||
Rs. | 15,073,010 | Rs. | 13,893 | |||||
As of | As of | |||||||
March 31, | June 30, | |||||||
2006 | 2006 | |||||||
Formulations(1) | Rs. | 349,774 | Rs. | 349,774 | ||||
Active pharmaceutical ingredients and intermediates | 997,025 | 997,025 | ||||||
Generics | 15,379,216 | 16,648,560 | ||||||
Drug discovery | 90,437 | 90,437 | ||||||
Rs. | 16,816,452 | Rs. | 18,085,796 | |||||
(1) | Includes goodwill arising on investment in an affiliate amounting to Rs.181,943. |
9. | Intangible assets, net. |
As of March 31, 2006 | As of June 30, 2006 | |||||||||||||||
Gross Carrying | Accumulated | Gross Carrying | Accumulated | |||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
Trademarks | Rs. | 2,575,224 | Rs. | 2,113,374 | Rs. | 2,593,249 | Rs. | 2,187,794 | ||||||||
Trademarks not subject to amortization | 3,970,118 | — | 4,303,320 | — | ||||||||||||
Product related intangibles | 11,759,317 | 77,326 | 12,933,732 | 362,872 | ||||||||||||
Beneficial toll manufacturing contract | 621,058 | 10,708 | 673,181 | 46,426 | ||||||||||||
Core technology rights and licenses | 132,753 | — | 132,753 | — | ||||||||||||
Non-competition arrangements | 128,883 | 105,019 | 131,536 | 110,350 | ||||||||||||
Marketing rights | 94,369 | 9,222 | 95,068 | 11,440 | ||||||||||||
Customer related intangibles including customer contracts | 167,233 | 98,799 | 177,851 | 118,722 | ||||||||||||
Others | 7,556 | 7,508 | 8,238 | 8,238 | ||||||||||||
Rs. | 19,456,511 | Rs. | 2,421,956 | Rs. | 21,048,928 | Rs. | 2,845,842 | |||||||||
F-10
Table of Contents
For the nine month period ending March 31, 2007 | Rs. | 1,198,422 | ||
For the years ending March 31, | ||||
2008 | 1,510,498 | |||
2009 | 1,374,584 | |||
2010 | 1,310,499 | |||
2011 | 1,289,595 | |||
Thereafter | 7,216,168 | |||
Total | Rs. | 13,899,766 | ||
Custom | ||||||||||||||||
Pharmaceutical | ||||||||||||||||
Formulations | Generics | Services | Total | |||||||||||||
Trademarks | Rs. | 363,997 | Rs. | 41,458 | — | Rs. | 405,455 | |||||||||
Trademarks not subject to amortization | — | 4,303,320 | — | 4,303,320 | ||||||||||||
Product related intangibles | — | 12,570,860 | — | 12,570,860 | ||||||||||||
Beneficial toll manufacturing contract | — | 626,755 | — | 626,755 | ||||||||||||
Core technology rights and licenses | — | 132,753 | — | 132,753 | ||||||||||||
Non-competition arrangements | — | 4,997 | 16,189 | 21,186 | ||||||||||||
Marketing rights | — | 83,628 | — | 83,628 | ||||||||||||
Customer related intangibles including customer contracts | — | 19,862 | 39,268 | 59,129 | ||||||||||||
Rs. | 363,997 | Rs. | 17,783,633 | Rs. | 55,457 | Rs. | 18,203,086 | |||||||||
F-11
Table of Contents
Custom | ||||||||||||||||
Pharmaceutical | ||||||||||||||||
Formulations | Generics | Services | Total | |||||||||||||
Trademarks | Rs. | 412,346 | Rs. | 49,504 | — | Rs. | 461,850 | |||||||||
Trademarks not subject to amortization | — | 3,970,118 | — | 3,970,118 | ||||||||||||
Product related intangibles | — | 11,681,991 | — | 11,681,991 | ||||||||||||
Beneficial toll manufacturing contract | — | 610,350 | — | 610,350 | ||||||||||||
Core-technology rights and licenses | — | 132,753 | — | 132,753 | ||||||||||||
Non-competition arrangements | — | 6,052 | 17,812 | 23,864 | ||||||||||||
Marketing rights | — | 85,147 | — | 85,147 | ||||||||||||
Customer related intangibles including customer contracts | — | 24,082 | 44,352 | 68,434 | ||||||||||||
Others | — | 48 | — | 48 | ||||||||||||
Rs. | 412,346 | Rs. | 16,560,045 | Rs. | 62,164 | Rs. | 17,034,555 | |||||||||
10. | Property, plant and equipment, net |
As of | As of | |||||||
March 31, | June 30, | |||||||
2006 | 2006 | |||||||
Land | Rs. | 861,951 | Rs. | 874,086 | ||||
Buildings | 2,470,029 | 2,798,085 | ||||||
Plant and machinery | 7,966,645 | 8,516,749 | ||||||
Furniture, fixtures and equipment | 826,370 | 858,347 | ||||||
Vehicles | 288,162 | 292,857 | ||||||
Computer equipment | 514,935 | 553,820 | ||||||
Capitalwork-in-progress | 1,135,905 | 1,172,995 | ||||||
14,063,997 | 15,066,939 | |||||||
Accumulated depreciation | (4,977,666 | ) | (5,328,000 | ) | ||||
Rs. | 9,086,331 | Rs. | 9,738,939 | |||||
F-12
Table of Contents
11. | Inventories |
As of | As of | |||||||
March 31, | June 30, | |||||||
2006 | 2006 | |||||||
Raw materials | Rs. | 2,002,246 | Rs. | 2,570,737 | ||||
Stores and spares | 450,658 | 534,153 | ||||||
Work-in-process | 1,421,151 | 1,571,926 | ||||||
Finished goods | 3,020,657 | 4,108,924 | ||||||
Rs. | 6,894,712 | Rs. | 8,785,740 | |||||
12. | Employee stock incentive plans |
F-13
Table of Contents
Number of Options | Number of Options | |||||||||||
Granted Under | Granted Under | |||||||||||
Particulars | Category A | Category B | Total | |||||||||
Options earmarked 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 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 earmarked after stock dividend (A+B+C) | 505,939 | 3,843,163 | 4,349,102 |
Three Months Ended June 30, 2005 | ||||||||||||||||
Weighted- | ||||||||||||||||
Average | ||||||||||||||||
Shares | Range of | Weighted- | Remaining | |||||||||||||
Arising Out | Exercise | Average | Contractual Life | |||||||||||||
Category A — Fair Market Value Options | of Options | Prices | Exercise Price | (Months) | ||||||||||||
Outstanding at the beginning of the period | 597,900 | Rs. | 373.5-574.5 | Rs. | 488.66 | 50 | ||||||||||
Granted during the period | 65,000 | 362.5 | 362.50 | 90 | ||||||||||||
Expired/forfeited during the period | (63,400 | ) | 373.5-574.5 | 526.50 | — | |||||||||||
Surrendered by employees during the period | (180,000 | ) | 488.65-531.51 | 517.00 | — | |||||||||||
Exercised during the period | — | — | — | — | ||||||||||||
Outstanding at the end of the period | 419,500 | 362.5-574.5 | 451.15 | 58 | ||||||||||||
Exercisable at the end of the period | 234,764 | Rs. | 441.5-574.5 | Rs. | 474.19 | 37 | ||||||||||
F-14
Table of Contents
Three Months Ended June 30, 2005 | ||||||||||||||||
Weighted- | ||||||||||||||||
Average | ||||||||||||||||
Shares | Range of | Weighted- | Remaining | |||||||||||||
Arising Out | Exercise | Average | Contractual Life | |||||||||||||
Category B — Par Value Options | of Options | Prices | Exercise Price | (Months) | ||||||||||||
Outstanding at the beginning of the period | 759,098 | Rs. | 5 | Rs. | 5 | 84 | ||||||||||
Granted during the period | 417,120 | 5 | 5 | 90 | ||||||||||||
Forfeited during the period | (15,086 | ) | 5 | 5 | — | |||||||||||
Exercised during the period | (40,000 | ) | 5 | 5 | — | |||||||||||
Outstanding at the end of the period | 1,121,132 | Rs. | 5 | Rs. | 5 | 85 | ||||||||||
Exercisable at the end of the period | — | — | — | — | ||||||||||||
Three Months Ended June 30, 2006 | ||||||||||||||||
Weighted- | ||||||||||||||||
Average | ||||||||||||||||
Shares | Range of | Weighted- | Remaining | |||||||||||||
Arising Out | Exercise | Average | Contractual Life | |||||||||||||
Category A — Fair Market Value Options | of Options | Prices | Exercise Price | (Months) | ||||||||||||
Outstanding at the beginning of the period | 234,500 | Rs. | 362.5 - 531.51 | Rs. | 439.43 | 64 | ||||||||||
Expired/forfeited during the period | (10,000 | ) | 442.5 - 574.5 | 541.50 | — | |||||||||||
Outstanding at the end of the period | 224,500 | 362.5 - 531.51 | 434.88 | 62 | ||||||||||||
Exercisable at the end of the period | 130,550 | Rs. | 362.5 - 531.51 | Rs. | 456.11 | 47 | ||||||||||
Three Months Ended June 30, 2006 | ||||||||||||||||
Weighted- | ||||||||||||||||
Weighted- | Average | |||||||||||||||
Shares | Range of | Average | Remaining | |||||||||||||
Arising Out | Exercise | Exercise | Contractual Life | |||||||||||||
Category B — Par Value Options | of Options | Prices | Price | (Months) | ||||||||||||
Outstanding at the beginning of the period | 729,968 | Rs. | 5 | Rs. | 5 | 81 | ||||||||||
Granted during the period | 416,260 | 5 | 5 | 90 | ||||||||||||
Forfeited during the period | (4,332 | ) | 5 | 5 | — | |||||||||||
Exercised during the period | (15,366 | ) | 5 | �� | 5 | — | ||||||||||
Outstanding at the end of the period | 1,126,530 | 5 | 5 | 82 | ||||||||||||
Exercisable at the end of the period | 112,292 | Rs. | 5 | Rs. | 5 | 59 | ||||||||||
F-15
Table of Contents
Three Months Ended June 30, 2005 | ||||||||||||||||
Weighted- | ||||||||||||||||
Shares | Range of | Average Remaining | ||||||||||||||
Arising Out | Exercise | Weighted-Average | Contractual Life | |||||||||||||
of Options | Prices | Exercise Price | (Months) | |||||||||||||
Outstanding at the beginning of the period | 197,178 | Rs. | 10 | Rs. | 10 | 59 | ||||||||||
Forfeited during the period | (46,979 | ) | 10 | 10 | — | |||||||||||
Outstanding at the end of the period | 150,199 | Rs. | 10 | Rs. | 10 | 56 | ||||||||||
Exercisable at the end of the period | — | — | — | — |
Three Months Ended June 30, 2006 | ||||||||||||||||
Weighted- | ||||||||||||||||
Shares | Range of | Average Remaining | ||||||||||||||
Arising Out | Exercise | Weighted-Average | Contractual Life | |||||||||||||
of Options | Prices | Exercise Price | (Months) | |||||||||||||
Outstanding at the beginning of the period | 528,907 | Rs. | 10 | Rs. | 10 | 67 | ||||||||||
Granted during the period | 135,000 | 10 | 10 | 73 | ||||||||||||
Forfeited during the period | (66,824 | ) | 10 | 10 | — | |||||||||||
Outstanding at the end of the period | 597,083 | Rs. | 10 | Rs. | 10 | 69 | ||||||||||
Exercisable at the end of the period | — | — | — | — |
F-16
Table of Contents
Three Months Ended June 30, 2005 | ||||||||||||||||
Weighted- Average | ||||||||||||||||
Shares | Range of | Remaining | ||||||||||||||
Arising Out | Exercise | Weighted-Average | Contractual Life | |||||||||||||
of Options | Prices | Exercise Price | (Months) | |||||||||||||
Outstanding at the beginning of the period | 100,000 | Rs. | 10 | Rs. | 10 | 65 | ||||||||||
Forfeited during the period | (100,000 | ) | Rs. | 10 | Rs. | 10 | — | |||||||||
Outstanding at the end of the period | — | — | — | — | ||||||||||||
Exercisable at the end of the period | — | — | — | — |
13. | Employee benefit plans |
Three Months Ended June 30, | ||||||||
2005 | 2006 | |||||||
Service cost | Rs. | 6,731 | Rs. | 6,774 | ||||
Interest cost | 3,814 | 3,972 | ||||||
Expected return on plan assets | (2,303 | ) | (4,048 | ) | ||||
Amortization of transition obligation/(assets) | 156 | — | ||||||
Recognized net actuarial (gain)/loss | 1,804 | 1,182 | ||||||
Net amount recognized | Rs. | 10,202 | Rs. | 7,880 | ||||
F-17
Table of Contents
Three Months | ||||
Ended | ||||
June 30, | ||||
2006 | ||||
Service cost | Rs. | 4,205 | ||
Interest cost | 3,588 | |||
Expected return on plan assets | (3,787 | ) | ||
Unrecognized net transition obligation/(asset) | 1,070 | |||
Unrecognized net (gain)/loss | (38 | ) | ||
Cost price inflation index adjustment | 189 | |||
Net amount recognized | Rs. | 5,227 | ||
14. | Commitments and Contingencies |
F-18
Table of Contents
F-19
Table of Contents
Three Months Ended June 30, | ||||||||
2005 | 2006 | |||||||
Basic earnings per equity share — weighted average number of equity shares outstanding | 153,065,150 | 153,397,582 | ||||||
Effect of dilutive equivalent shares-stock options outstanding | 259,200 | 626,288 | ||||||
Diluted earnings per equity share — weighted average number of equity shares outstanding | 153,324,350 | 154,023,870 | ||||||
16. | Segment reporting and related information |
• | Formulations — revenues by therapeutic product category and gross profit; | |
• | Active pharmaceutical ingredients and intermediates — gross profit, revenues by geography and revenues by key products; | |
• | Generics — Revenue by geography and gross profit: | |
• | Critical care and biotechnology — gross profit; | |
• | Drug discovery — revenues and expenses; and | |
• | Custom pharmaceutical services — gross profit |
F-20
Table of Contents
Three Months | ||||||||
Ended June 30, | ||||||||
2005 | 2006 | |||||||
Gastro intestinal | Rs. | 586,927 | Rs. | 768,978 | ||||
Pain control | 509,529 | 563,715 | ||||||
Cardiovascular | 488,239 | 504,004 | ||||||
Anti-infectives | 299,510 | 366,691 | ||||||
Dermatology | 124,212 | 124,845 | ||||||
Others | 713,071 | 765,125 | ||||||
2,721,488 | 3,093,358 | |||||||
Intersegment revenues(1) | 9,213 | 8,385 | ||||||
Adjustments(2) | (152,273 | ) | 235,054 | |||||
Total revenues | 2,578,428 | 3,336,797 | ||||||
Cost of revenues | 767,055 | 830,129 | ||||||
Intersegment cost of revenues(3) | 72,441 | 92,731 | ||||||
Adjustments(2) | (83,807 | ) | 62,678 | |||||
755,689 | 985,538 | |||||||
Gross profit | 1,891,205 | 2,178,883 | ||||||
Adjustments(2) | (68,466 | ) | 172,376 | |||||
Rs. | 1,822,739 | Rs. | 2,351,259 | |||||
(1) | Intersegment revenues comprises transfers from the formulations segment to the active pharmaceutical ingredients and intermediates segment, and is accounted for at cost to the transferring segment. | |
(2) | The adjustments represent reconciling items to conform the segment information to U.S. GAAP. Such adjustments primarily relate to elimination of sales made to subsidiaries and other adjustments. | |
(3) | Intersegment cost of revenues comprises transfers from the active pharmaceutical ingredients and intermediates segment to the formulations segment and is accounted for at cost to the transferring segment. |
F-21
Table of Contents
Three Months Ended June 30, | ||||||||
2005 | 2006 | |||||||
Revenues from external customers | Rs. | 1,856,588 | Rs. | 2,097,290 | ||||
Intersegment revenues(1) | 224,968 | 370,160 | ||||||
Adjustments(2) | (171,819 | ) | (166,678 | ) | ||||
Total revenues | 1,909,737 | 2,300,772 | ||||||
Cost of revenues | 1,374,245 | 1,549,738 | ||||||
Intersegment cost of revenues | 9,213 | 8,385 | ||||||
Adjustments(2) | (35,628 | ) | 129,340 | |||||
1,347,830 | 1,687,463 | |||||||
Gross profit | 698,098 | 909,327 | ||||||
Adjustments(2) | (136,191 | ) | (296,018 | ) | ||||
Rs. | 561,907 | Rs. | 613,309 | |||||
(1) | Intersegment revenues comprises transfers from the active pharmaceuticals and intermediates segment to the formulations, generics and custom pharmaceutical services segments and are accounted for at cost to the transferring segment. | |
(2) | The adjustments represent reconciling items to conform the segment information to U.S. GAAP. Such adjustments primarily relate to elimination of sales made to subsidiaries and other adjustments. |
Three Months Ended June 30, | ||||||||
2005 | 2006 | |||||||
North America | Rs. | 335,591 | Rs. | 420,391 | ||||
India | 625,537 | 660,797 | ||||||
Europe | 362,257 | 439,143 | ||||||
Others | 641,341 | 816,117 | ||||||
1,964,726 | 2,336,448 | |||||||
Adjustments(1) | (54,989 | ) | (35,676 | ) | ||||
Rs. | 1,909,737 | Rs. | 2,300,772 | |||||
(1) | The adjustments represent reconciling items to conform the segment information to U.S. GAAP. Such adjustments primarily relate to elimination of sales made to subsidiaries and other adjustments. |
F-22
Table of Contents
Three Months Ended June 30, | ||||||||
2005 | 2006 | |||||||
Ciprofloxacin hydrochloride | Rs. | 252,882 | Rs. | 303,325 | ||||
Sertraline hydrochloride | 36,238 | 225,079 | ||||||
Ramipril | 160,031 | 187,061 | ||||||
Naproxen sodium | 22,912 | 141,878 | ||||||
Ranitidine hydrochloride Form 2 | 69,453 | 118,154 | ||||||
Terbinafine hydrochloride | 151,346 | 105,190 | ||||||
Naproxen | 76,597 | 80,360 | ||||||
Ibuprofen | 118,931 | 76,482 | ||||||
Olanzapine | 21,320 | 75,937 | ||||||
Montelukast | 33,917 | 58,603 | ||||||
Clopidogrel | 40,358 | 56,008 | ||||||
Losartan potassium | 34,029 | 52,460 | ||||||
Moxifloxacine | — | 51,593 | ||||||
Doxazosin mesylate | 30,538 | 40,818 | ||||||
Sumatriptan | 9,452 | 40,510 | ||||||
Others | 851,733 | 687,314 | ||||||
Rs. | 1,909,737 | Rs. | 2,300,772 | |||||
Three Months Ended June 30, | ||||||||
2005 | 2006 | |||||||
Revenues | Rs. | 878,201 | Rs. | 6,737,186 | ||||
Less: | ||||||||
Cost of revenues | 329,936 | 3,904,777 | ||||||
Intersegment cost of revenues(1) | 118,889 | 234,410 | ||||||
448,825 | 4,139,187 | |||||||
Gross Profit | Rs. | 429,376 | Rs. | 2,597,999 | ||||
(1) | Intersegment cost of revenues comprises transfers from the active pharmaceutical ingredients and intermediates segment to the generics segment and are accounted for at cost to the transferring segment. |
F-23
Table of Contents
Three Months Ended June 30, | ||||||||
2005 | 2006 | |||||||
North America | 306,761 | 4,304,103 | ||||||
Europe | 571,285 | 2,432,881 | ||||||
Others | 155 | 202 | ||||||
Rs. | 878,201 | Rs. | 6,737,186 | |||||
Three Months Ended June 30, | ||||||||
2005 | 2006 | |||||||
Revenues | Rs. | 153,398 | Rs. | 198,037 | ||||
Less: | ||||||||
Cost of revenues | 74,097 | 79,183 | ||||||
Gross profit | Rs. | 79,301 | Rs. | 118,854 | ||||
Three Months Ended June 30, | ||||||||
2005 | 2006 | |||||||
Revenues | — | Rs. | 25,322 | |||||
Less: | ||||||||
Cost of revenues | — | 25,322 | ||||||
Gross profit | — | — | ||||||
Research and development expenses | Rs. | 182,784 | Rs. | 170,364 | ||||
F-24
Table of Contents
Three Months Ended June 30, | ||||||||
2005 | 2006 | |||||||
Revenues | Rs. | 71,670 | Rs. | 1,418,315 | ||||
Less: | ||||||||
Cost of revenues | 2,786 | 956,116 | ||||||
Intersegment cost of revenue(s)(1) | 33,638 | 43,020 | ||||||
36,424 | 999,136 | |||||||
Gross Profit | Rs. | 35,246 | Rs. | 419,179 | ||||
(1) | Intersegment cost of revenues comprises transfers from the active pharmaceutical ingredients and intermediates segment to the custom pharmaceutical services and are accounted for at cost to the transferring segment. |
Three Months Ended June 30, 2005 | Three Months Ended June 30, 2006 | |||||||||||||||
Revenues | Gross profit | Revenues | Gross profit | |||||||||||||
Formulations | Rs. | 2,578,428 | Rs. | 1,822,739 | Rs. | 3,336,797 | Rs. | 2,351,259 | ||||||||
Active pharmaceutical ingredients and intermediates | 1,909,737 | 561,907 | 2,300,772 | 613,309 | ||||||||||||
Generics | 878,201 | 429,376 | 6,737,186 | 2,597,999 | ||||||||||||
Critical care and biotechnology | 153,398 | 79,301 | 198,037 | 118,854 | ||||||||||||
Drug discovery | — | — | 25,322 | — | ||||||||||||
Custom pharmaceutical | ||||||||||||||||
services | 71,670 | 35,246 | 1,418,315 | 419,179 | ||||||||||||
Others | — | — | 32,977 | (11,651 | ) | |||||||||||
Rs. | 5,591,434 | Rs. | 2,928,569 | Rs. | 14,049,406 | Rs. | 6,088,949 | |||||||||
Three Months Ended June 30, | ||||||||
2005 | 2006 | |||||||
India | Rs. | 2,084,776 | Rs. | 2,392,514 | ||||
North America | 661,107 | 4,856,454 | ||||||
Russia and other countries of the former Soviet Union | 1,004,010 | 1,464,007 | ||||||
Europe | 1,032,887 | 3,247,030 | ||||||
Others | 808,654 | 2,089,401 | ||||||
Rs. | 5,591,434 | Rs. | 14,049,406 | |||||
F-25
Table of Contents
As of March 31, | As of June 30, | |||||||
2006 | 2006 | |||||||
India | Rs. | 7,063,595 | Rs. | 7,502,341 | ||||
North America | 1,511,068 | 1,669,230 | ||||||
Russia and other countries of the former Soviet Union | 30,118 | 28,858 | ||||||
Europe | 468,314 | 525,978 | ||||||
Others | 13,236 | 12,532 | ||||||
Rs. | 9,086,331 | Rs. | 9,738,939 | |||||
17. | Profit share arrangements |
18. | Recently issued accounting pronouncements |
F-26
Table of Contents
19. | Subsequent event |
F-27
Table of Contents
F-28
Table of Contents
F-29
Table of Contents
F-30
Table of Contents
As of March 31, | ||||||||||||
2005 | 2006 | 2006 | ||||||||||
Convenience | ||||||||||||
translation | ||||||||||||
into U.S.$ | ||||||||||||
(Unaudited) | ||||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | Rs. | 9,287,864 | Rs. | 3,712,637 | U.S.$ | 83,468 | ||||||
Investment securities | 310,887 | 14,703 | 331 | |||||||||
Restricted cash | 57,866 | 1,606,245 | 36,112 | |||||||||
Accounts receivable, net of allowances | 3,587,289 | 4,801,794 | 107,954 | |||||||||
Inventories | 3,499,606 | 6,894,712 | 155,007 | |||||||||
Deferred income taxes and deferred charges | 236,931 | 173,750 | 3,906 | |||||||||
Due from related parties | 10,812 | 246,360 | 5,539 | |||||||||
Other current assets | 1,361,578 | 2,639,818 | 59,348 | |||||||||
Total current assets | 18,352,833 | 20,090,019 | 451,664 | |||||||||
Property, plant and equipment, net | 7,058,308 | 9,086,331 | 204,279 | |||||||||
Due from related parties | 11,067 | 6,182 | 139 | |||||||||
Investment securities | 995,431 | 1,090,202 | 24,510 | |||||||||
Investment in affiliates | 180,894 | 132,659 | 2,982 | |||||||||
Goodwill | 1,561,499 | 16,634,509 | 373,977 | |||||||||
Intangible assets, net | 1,026,882 | 17,034,555 | 382,971 | |||||||||
Restricted cash | — | 4,468,840 | 100,469 | |||||||||
Other assets | 101,446 | 224,772 | 5,053 | |||||||||
Total assets | Rs. | 29,288,360 | Rs. | 68,768,069 | U.S.$ | 1,546,045 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Borrowings from banks | 2,796,330 | 9,132,462 | 205,316 | |||||||||
Current portion of long-term debt | 5,920 | 925,761 | 20,813 | |||||||||
Trade accounts payable | 1,415,648 | 3,639,217 | 81,817 | |||||||||
Due to related parties | 139,503 | 151,678 | 3,410 | |||||||||
Accrued expenses | 2,375,087 | 3,083,120 | 69,315 | |||||||||
Other current liabilities | 849,434 | 1,812,623 | 40,751 | |||||||||
Total current liabilities | 7,581,922 | 18,744,861 | 421,422 | |||||||||
Long-term debt, excluding current portion | 25,145 | 20,937,132 | 470,709 | |||||||||
Deferred revenue | 58,255 | 56,466 | 1,269 | |||||||||
Deferred income taxes | 551,789 | 6,346,174 | 142,675 | |||||||||
Other liabilities | 118,090 | 411,703 | 9,256 | |||||||||
Total liabilities | Rs. | 8,335,201 | Rs. | 46,496,336 | U.S.$ | 1,045,331 | ||||||
Stockholders’ equity: | ||||||||||||
Equity shares at Rs.5 par value; 200,000,000 shares authorized; Issued and outstanding; 153,037,898 shares and 153,389,140 shares as of March 31, 2005 and 2006 respectively | 382,595 | 383,473 | 8,621 | |||||||||
Additional paid-in capital | 10,089,152 | 10,261,783 | 230,706 | |||||||||
Equity options outstanding | 400,749 | 463,128 | 10,412 | |||||||||
Retained earnings | 10,009,305 | 11,201,794 | 251,839 | |||||||||
Equity shares held by a controlled trust: 82,800 shares | (4,882 | ) | (4,882 | ) | (110 | ) | ||||||
Accumulated other comprehensive income | 76,240 | (33,563 | ) | (755 | ) | |||||||
Total stockholders’ equity | 20,953,159 | 22,271,733 | 500,713 | |||||||||
Total liabilities and stockholders’ equity | Rs. | 29,288,360 | Rs. | 68,768,069 | U.S.$ | 1,546,045 | ||||||
F-31
Table of Contents
For the Years Ended March 31, | ||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||
Convenience | ||||||||||||||||
translation | ||||||||||||||||
into U.S.$ | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Revenues: | ||||||||||||||||
Product sales, net of allowances for sales returns (includes excise duties of Rs.870,079, Rs.815,007, and Rs.1,153,273 for the years ended March 31, 2004, 2005 and 2006 respectively) | Rs. | 20,081,249 | Rs. | 19,126,188 | Rs. | 24,077,209 | U.S.$ | 541,304 | ||||||||
Service income | 22,273 | 47,441 | 142,317 | 3,200 | ||||||||||||
License fees | — | 345,737 | 47,521 | 1,068 | ||||||||||||
20,103,522 | 19,519,366 | 24,267,047 | 545,572 | |||||||||||||
Cost of revenues | 9,337,255 | 9,385,820 | 12,417,413 | 279,168 | ||||||||||||
Gross profit | 10,766,267 | 10,133,546 | 11,849,634 | 266,404 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative expenses | 6,542,501 | 6,774,563 | 8,028,884 | 180,505 | ||||||||||||
Research and development expenses, net | 1,991,629 | 2,803,311 | 2,152,950 | 48,403 | ||||||||||||
Amortization expenses | 382,857 | 349,991 | 419,867 | 9,439 | ||||||||||||
Foreign exchange (gain)/loss | (282,419 | ) | 488,819 | 126,342 | 2,840 | |||||||||||
Other operating (income)/expenses, net | 83,208 | 5,969 | (320,361 | ) | (7,202 | ) | ||||||||||
Total operating expenses: | 8,717,776 | 10,422,653 | 10,407,682 | 233,988 | ||||||||||||
Operating income/(loss) | 2,048,491 | (289,107 | ) | 1,441,952 | 32,418 | |||||||||||
Equity in loss of affiliates | (44,362 | ) | (58,101 | ) | (88,235 | ) | (1,984 | ) | ||||||||
Other income, net | 535,909 | 454,237 | 533,606 | 11,997 | ||||||||||||
Income before income taxes and minority interest | 2,540,038 | 107,029 | 1,887,323 | 42,431 | ||||||||||||
Income taxes (expense)/benefit | (69,249 | ) | 94,277 | (258,390 | ) | (5,809 | ) | |||||||||
Minority interest | 3,364 | 9,942 | (76 | ) | (2 | ) | ||||||||||
Net income | Rs. | 2,474,153 | Rs. | 211,248 | Rs. | 1,628,857 | U.S.$ | 36,620 | ||||||||
Earnings per equity share | ||||||||||||||||
Basic | 16.17 | 1.38 | 10.64 | 0.24 | ||||||||||||
Diluted | 16.16 | 1.38 | 10.62 | 0.24 | ||||||||||||
Weighted average number of equity shares used in computing earnings per equity share | ||||||||||||||||
Basic | 153,027,528 | 153,037,898 | 153,093,316 | 153,093,316 | ||||||||||||
Diluted | 153,099,196 | 153,119,602 | 153,403,846 | 153,403,846 |
F-32
Table of Contents
Accumulated | Equity Shares Held | |||||||||||||||||||||||||||
Equity Shares | Additional | Other | by a Controlled Trust | |||||||||||||||||||||||||
No. of | Paid in | Comprehensive | Comprehensive | No. of | ||||||||||||||||||||||||
Shares | Amount | Capital | Income | Income | Shares | Amount | ||||||||||||||||||||||
Balance as of March 31, 2003 | 153,031,896 | Rs. | 382,580 | Rs. | 10,085,004 | Rs. | 46,328 | 82,800 | (4,882 | ) | ||||||||||||||||||
Issuance of equity shares on exercise of options | 6,002 | 15 | 4,148 | — | — | — | — | |||||||||||||||||||||
Dividends | — | — | — | — | — | — | — | |||||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | — | |||||||||||||||||||||
Net income | — | — | — | Rs. | 2,474,153 | — | — | — | ||||||||||||||||||||
Translation adjustment | — | — | — | 24,725 | 24,725 | — | — | |||||||||||||||||||||
Unrealized gain on investments, net of tax | — | — | — | 15,020 | 15,020 | — | — | |||||||||||||||||||||
Comprehensive income | — | — | — | Rs. | 2,513,898 | — | — | — | ||||||||||||||||||||
Stock based compensation | — | — | — | — | — | — | ||||||||||||||||||||||
Balance as of March 31, 2004 | 153,037,898 | Rs. | 382,595 | Rs. | 10,089,152 | — | Rs. | 86,073 | 82,800 | Rs. | (4,882 | ) | ||||||||||||||||
Dividends | — | |||||||||||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | — | |||||||||||||||||||||
Net income | — | Rs. | 211,248 | |||||||||||||||||||||||||
Translation adjustment | — | — | — | 13,512 | 13,512 | — | ||||||||||||||||||||||
Unrealized loss on investments, net of tax | — | — | — | (23,345 | ) | (23,345 | ) | — | ||||||||||||||||||||
Comprehensive income | — | — | — | Rs. | 201,415 | — | — | — | ||||||||||||||||||||
Stock based compensation | — | — | — | — | — | — | — | |||||||||||||||||||||
Balance as of March 31, 2005 | 153,037,898 | Rs. | 382,595 | Rs. | 10,089,152 | Rs. | 76,240 | 82,800 | Rs. | (4,882 | ) | |||||||||||||||||
Issuance of equity shares on exercise of options | 351,242 | 878 | 172,631 | — | — | — | — | |||||||||||||||||||||
Dividend | — | — | — | — | — | — | — | |||||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | ||||||||||||||||||||||
Net income | — | — | — | Rs. | 1,628,857 | — | — | — | ||||||||||||||||||||
Translation adjustment | — | — | — | 11,041 | 11,041 | — | — | |||||||||||||||||||||
Unrealized loss on investments, net of tax | — | — | — | (120,844 | ) | (120,844 | ) | — | — | |||||||||||||||||||
Comprehensive income | — | — | — | Rs. | 1,519,054 | — | — | — | ||||||||||||||||||||
Stock based compensation | ||||||||||||||||||||||||||||
Balance as of March 31, 2006 | 153,389,140 | Rs. | 383,473 | Rs. | 10,261,783 | Rs. | (33,563 | ) | 82,800 | Rs. | (4,882 | ) | ||||||||||||||||
Convenience translation into U.S. $ (unaudited) | U.S.$ | 8,621 | U.S.$ | 230,706 | U.S.$ | (755 | ) | U.S.$ | (110 | ) | ||||||||||||||||||
F-33
Table of Contents
Equity- | Total | |||||||||||
Options | Retained | Stockholders’ | ||||||||||
Outstanding | Earnings | Equity | ||||||||||
Balance as of March 31, 2003 | Rs. | 135,694 | Rs. | 8,187,117 | Rs. | 18,831,841 | ||||||
Issuance of equity shares on exercise of options | (1,123 | ) | 3,040 | |||||||||
Dividends | — | (431,598 | ) | (431,598 | ) | |||||||
Comprehensive income | — | — | — | |||||||||
Net income | — | 2,474,153 | 2,474,153 | |||||||||
Translation adjustment | — | — | 24,725 | |||||||||
Unrealized gain on investments, net of tax | — | — | 15,020 | |||||||||
Comprehensive income | — | — | — | |||||||||
Stock based compensation | 122,177 | — | 122,177 | |||||||||
Balance as of March 31, 2004 | Rs. | 256,748 | Rs. | 10,229,672 | Rs. | 21,039,358 | ||||||
Dividends | (431,615 | ) | (431,615 | ) | ||||||||
Comprehensive income | — | — | ||||||||||
Net income | 211,248 | 211,248 | ||||||||||
Translation adjustment | — | — | 13,512 | |||||||||
Unrealized loss on investments, net of tax | — | — | (23,345 | ) | ||||||||
Comprehensive income | — | — | — | |||||||||
Stock based compensation | 144,001 | — | 144,001 | |||||||||
Balance as of March 31, 2005 | Rs. | 400,749 | Rs. | 10,009,305 | Rs. | 20,953,159 | ||||||
Issuance of equity shares on exercise of options | (99,870 | ) | 73,639 | |||||||||
Dividend paid | — | (436,368 | ) | (436,368 | ) | |||||||
Comprehensive income | — | — | — | |||||||||
Net income | 1,628,857 | 1,628,857 | ||||||||||
Translation adjustment | — | — | 11,041 | |||||||||
Unrealized loss on investments, net of tax | — | — | (120,844 | ) | ||||||||
Comprehensive income | — | — | — | |||||||||
Stock based compensation | 162,249 | 162,249 | ||||||||||
Balance as of March 31, 2006 | Rs. | 463,128 | Rs. | 11,201,794 | Rs. | 22,271,733 | ||||||
Convenience translation into U.S.$ (unaudited) | U.S.$ | 10,412 | U.S.$ | 251,839 | U.S.$ | 500,713 | ||||||
F-34
Table of Contents
For the Year Ended March 31, | ||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||
Convenience | ||||||||||||||||
translation | ||||||||||||||||
into U.S.$ | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | Rs. | 2,474,153 | Rs. | 211,248 | Rs. | 1,628,857 | U.S.$ | 36,620 | ||||||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||||||||||
Deferred tax benefit | (134,867 | ) | (95,580 | ) | (55,157 | ) | (1,240 | ) | ||||||||
(Gain)/loss on sale of available for sale securities, net | (24,786 | ) | (64,997 | ) | 3,924 | 88 | ||||||||||
Depreciation and amortization | 1,128,453 | 1,309,290 | 1,567,090 | 35,231 | ||||||||||||
In-process research and development expensed | — | 277,343 | — | — | ||||||||||||
Loss/(gain) on sale of property, plant and equipment | 29,319 | (1,810 | ) | (320,361 | ) | (7,202 | ) | |||||||||
Provision for doubtful accounts receivable | 19,871 | 79,442 | 33,629 | 756 | ||||||||||||
Allowance for sales returns | 169,511 | 105,245 | 239,462 | 5,384 | ||||||||||||
Inventory write-downs | 31,898 | 52,692 | 100,783 | 2,266 | ||||||||||||
Equity in loss of affiliates | 44,362 | 58,101 | 88,235 | 1,984 | ||||||||||||
Unrealized exchange (gain)/loss | (109,602 | ) | 105,227 | 67,650 | 1,521 | |||||||||||
Stock based compensation | 122,177 | 144,001 | 162,249 | 3,648 | ||||||||||||
Loss on sale of subsidiary interest | 58,473 | 8,122 | — | — | ||||||||||||
Minority interest | (3,364 | ) | (9,942 | ) | 76 | 2 | ||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | (379,413 | ) | 77,368 | (781,607 | ) | (17,572 | ) | |||||||||
Inventories | (335,092 | ) | (514,187 | ) | (1,851,724 | ) | (41,630 | ) | ||||||||
Other assets | (276,467 | ) | 142,486 | (1,123,076 | ) | (25,249 | ) | |||||||||
Due to/from related parties, net | 148,576 | (40,249 | ) | 15,223 | 342 | |||||||||||
Trade accounts payable | 690,182 | (763,523 | ) | 1,511,074 | 33,972 | |||||||||||
Accrued expenses | 510,768 | 1,094,768 | 243,625 | 5,477 | ||||||||||||
Deferred revenue | — | (247,604 | ) | (16,277 | ) | (366 | ) | |||||||||
Taxes payable | (115,375 | ) | 42,513 | 84,794 | 1,906 | |||||||||||
Other liabilities | (49,547 | ) | 321,657 | 44,684 | 1,005 | |||||||||||
Net cash provided by operating activities | 3,999,230 | 2,291,611 | 1,643,153 | 36,941 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Restricted cash | (67,221 | ) | 49,304 | (6,017,219 | ) | (135,279 | ) | |||||||||
Expenditure on property, plant and equipment | (2,415,638 | ) | (1,749,172 | ) | (1,873,268 | ) | (42,115 | ) | ||||||||
Proceeds from sale of property, plant and equipment | 33,558 | 44,673 | 691,273 | 15,541 | ||||||||||||
Investment in affiliate | (63,238 | ) | (49,935 | ) | (100,800 | ) | (2,266 | ) | ||||||||
Purchase of investment securities | (13,178,735 | ) | (10,226,471 | ) | (5,074,184 | ) | (114,078 | ) | ||||||||
Proceeds from sale of investment securities | 9,167,150 | 13,079,463 | 5,274,899 | 118,590 | ||||||||||||
Expenditure on intangible assets | (105 | ) | (8,299 | ) | (41,517 | ) | (933 | ) | ||||||||
Cash paid towards contingent consideration | — | — | (114,244 | ) | (2,568 | ) | ||||||||||
Proceeds from sale of subsidiary | 81,464 | 29,000 | — | — | ||||||||||||
Cash paid for acquisition, net of cash acquired | (63,290 | ) | (535,665 | ) | (27,269,382 | ) | (613,071 | ) | ||||||||
Net cash provided by/(used in) in investing activities | (6,506,055 | ) | 632,898 | (34,524,442 | ) | (776,179 | ) | |||||||||
Cash flows from financing activities: | ||||||||||||||||
Proceeds from issuance of equity | 3,040 | — | 73,639 | 1,656 | ||||||||||||
Proceeds from issuance of equity, in subsidiary | 2,435 | — | — | — | ||||||||||||
Purchase of treasury stock | (115,990 | ) | — | — | — | |||||||||||
Proceeds from borrowing from banks, net | 177,071 | 2,520,409 | 6,322,206 | 142,136 | ||||||||||||
Proceeds from issuance from long-term debt | — | — | 21,598,301 | 485,573 | ||||||||||||
Repayment of long-term debt | (11,072 | ) | (157,476 | ) | (6,577 | ) | (148 | ) | ||||||||
Debt issuance costs | — | — | (340,243 | ) | (7,649 | ) | ||||||||||
Dividends | (431,598 | ) | (431,615 | ) | (436,368 | ) | (9,810 | ) | ||||||||
Net cash provided by/(used in) financing activities | (376,114 | ) | 1,931,318 | 27,210,958 | 611,757 | |||||||||||
Effect of exchange rate changes on cash and cash equivalents | (14,224 | ) | 55,802 | 95,104 | 2,138 | |||||||||||
Net increase/(decrease) in cash and cash equivalents during the year | (2,897,163 | ) | 4,911,629 | (5,575,227 | ) | (125,342 | ) | |||||||||
Cash and cash equivalents at the beginning of the year | 7,273,398 | 4,376,235 | 9,287,864 | 208,810 | ||||||||||||
Cash and cash equivalents at the end of the year | Rs. | 4,376,235 | Rs. | 9,287,864 | Rs. | 3,712,637 | U.S.$ | 83,468 | ||||||||
F-35
Table of Contents
Year Ended March 31, | ||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||
Convenience | ||||||||||||||||
translation | ||||||||||||||||
into U.S.$ | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Supplemental disclosures: | ||||||||||||||||
Cash paid for: | ||||||||||||||||
Interest | Rs. | 11,234 | Rs. | 98,337 | Rs. | 225,284 | U.S.$ | 5,065 | ||||||||
Income taxes | 425,144 | — | .223,000 | 5,013 | ||||||||||||
Supplemental schedule of non-cash investing activities: | ||||||||||||||||
Property, plant and equipment purchased on credit during the year | 36,710 | 22,827 | 54,276 | 1,220 | ||||||||||||
Property, plant and equipment purchased under capital lease | — | — | 222,701 | 5,007 | ||||||||||||
Treasury stock issued on acquisition of minority interest including compensation cost | 115,990 | — | — | — | ||||||||||||
Promissory notes issued on acquisition | — | — | 209,456 | 4,708 |
F-36
Table of Contents
1. | Overview |
• DRL Investments Limited (“DRL Investments”) | • OOO JV Reddy Biomed Limited (“Reddy Biomed” or “RBL”) | |
• Reddy Pharmaceuticals Hong Kong Limited (“RPHL”) | • Reddy Netherlands B.V. (“RNBV”) | |
• Reddy Antilles N.V. (“RANV”) | • Reddy Cheminor SA (“RCSA”) | |
• Reddy US Therapeutics Inc. (“Reddy US”) | • Aurigene Discovery Technologies Inc. (“ADTI”) | |
• Dr. Reddy’s Laboratories Inc. (“DRLI”) | • Dr. Reddy’s Laboratories (U.K.) Limited (“DRL U.K.”) | |
• Dr. Reddy’s Farmaceutica Do Brazil Ltda. (“DRFBL”) | • Cheminor Investment Limited (“CIL”) | |
• Aurigene Discovery Technologies Limited (“ADTL”) | • Dr. Reddy’s Bio-sciences Limited (“RBSL”) | |
• Dr. Reddy’s Laboratories (EU) Limited (“DRL EU”) | • Trigenesis Therapeutics Inc. (“Trigenesis”) | |
• Dr. Reddy’s Laboratories (Proprietary) Limited (“DRSA”) | • Industrias Quimicas Falcon De Mexico S.A.de.C.V. (“FALCON”) | |
• Reddy Pharmaceuticals, Inc. USA (“RPI”) | • beta Healthcare Verwaltungs GmbH (“Beta HVG”) | |
• Reddy Holding GmbH (“RHG”) | • beta Holding GmbH (“Beta HG”) | |
• beta Healthcare GmbH & Co KG (“Beta KG”) | • betapharm Arzneimittel GmbH (“Beta AG”) | |
• beta Healthcare Solutions GmbH (“Beta HSG”) | • beta institut fur sozialmedizinische Forschung und Entwicklung GmbH (“Beta IG”) | |
• OOO Dr. Reddy’s Laboratories Limited, Russia (“OOO DRL”) | • Lacock Holdings Limited (“LHL”) |
2. | Significant accounting policies |
F-37
Table of Contents
Functional | ||
Name of the Subsidiary | Currency | |
DRL Investments, RPHL, RANV, DRLI, DRFBL, ADTL, DRSA, RPI, OOO DRL, RBL, RNBV, RCSA, CIL, RBSL, Trigenesis | Indian Rupee | |
Reddy US and ADTI | U.S. Dollar | |
DRL EU and DRL U.K. | Pound Sterling | |
FALCON | Mexican Peso | |
RHG, Beta KG, Beta HSG, Beta HG, Beta AG, Beta HVG, Beta IG and LHL | Euro |
F-38
Table of Contents
• | Persuasive evidence of an arrangement exists; | |
• | The price to the buyer is fixed and determinable; and | |
• | Collectibility of the sales price is reasonably assured. |
F-39
Table of Contents
F-40
Table of Contents
F-41
Table of Contents
Buildings | ||
— Factory and administrative buildings | 25 to 40 years | |
— Ancillary structures | 3 to 15 years | |
Plant and machinery | 3 to 15 years | |
Furniture, fixtures and office equipment | 4 to 10 years | |
Vehicles | 4 to 5 years | |
Computer equipment | 3 to 5 years |
F-42
Table of Contents
Trademarks | ||
— Trademarks with indefinite life | Tested for impairment at least annually | |
— Trademarks with definite life | 3 to 10 years | |
Core technology rights and licenses | 10 to 15 years | |
Product related intangibles | 12 to 14 years | |
Marketing rights | 11 to 16 years | |
Non-competition arrangements | 1.5 to 10 years | |
Marketing know-how | 6 months | |
Customer-related intangibles including customer contracts | 2 to 5 years | |
Beneficial toll manufacturing contract | 58 months | |
Other intangibles | 5 to 15 years |
F-43
Table of Contents
Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Dividend yield | 0.5% | 0.5% | 0.5% | |||||||||
Expected life | 42 - 78 months | 12-78 months | 12-78 months | |||||||||
Risk free interest rates | 5.2 - 6.8% | 4.5 - 6.7% | 5.7 - 7.5% | |||||||||
Volatility | 45.7 - 50.7% | 39.4 - 44.6% | 23.4 - 36.9% |
F-44
Table of Contents
3. | Business combinations |
• | Property, plant and equipment and intangible assets by third party valuer and | |
• | Others based on management’s estimates. |
F-45
Table of Contents
Current assets | ||||
Cash and cash equivalents | Rs. | 217 | ||
Accounts receivable | 39,736 | |||
Inventories | 1,150,730 | |||
Other current assets | 259,465 | |||
Property, plant and equipment | 1,418,799 | |||
Intangible assets | ||||
Customer contracts | 51,493 | |||
Non-competition agreement | 20,242 | |||
Total assets | 2,940,682 | |||
Liabilities assumed | (40,613 | ) | ||
Deferred tax liability | (126,943 | ) | ||
Purchase cost | Rs. | 2,773,126 | ||
Customer contracts | 2.6 years | |||
Non competition agreement | 3 years |
F-46
Table of Contents
Current assets | ||||
Cash and cash equivalent | Rs. | 1,357,395 | ||
Inventories | 538,860 | |||
Other current assets | 552,938 | |||
Property , plant and equipment | 372,382 | |||
Intangibles | ||||
Trademarks | 3,970,118 | |||
Product related intangibles | 11,734,422 | |||
Beneficial toll manufacturing contract | 621,058 | |||
Other assets | 142,541 | |||
Goodwill | 14,958,766 | |||
Total assets | 34,248,480 | |||
Deferred tax liability, net | (5,825,388 | ) | ||
Liabilities assumed | (2,359,771 | ) | ||
Purchase cost | Rs. | 26,063,321 | ||
Products related intangibles | 11.6 years | |||
Beneficial toll manufacturing contract | 58 months |
Fiscal Year Ended March 31, | ||||||||
2005 | 2006 | |||||||
(Unaudited) | (Unaudited) | |||||||
Revenues | Rs. | 28,658,645 | Rs. | 33,766,668 | ||||
Net income | 1,227,528 | 1,991,090 | ||||||
Earning per equity share | ||||||||
Basic | 8.02 | 13.01 | ||||||
Diluted | 8.02 | 12.98 | ||||||
Weighted average number of equity shares used in computing earnings per share | ||||||||
Basic | 153,037,898 | 153,083,316 | ||||||
Diluted | 153,119,602 | 153,403,846 |
F-47
Table of Contents
4. | Asset Purchase |
Core-technology rights and licenses | Rs. | 132,753 | ||
Marketing rights | 86,619 | |||
In-process technology | 277,343 | |||
Rs. | 496,715 | |||
Inventories | Rs. | 115,845 | ||
Registered trademarks | 6,846 | |||
Rs. | 122,691 | |||
F-48
Table of Contents
5. | Goodwill |
Fiscal Year Ended March 31, | ||||||||
2005 | 2006 | |||||||
Balance at the beginning of the year(1) | Rs. | 1,704,492 | Rs. | 1,743,442 | ||||
Acquired during the year | 38,950 | 15,073,010 | ||||||
Balance at the end of the year(1) | Rs. | 1,743,442 | Rs. | 16,816,452 | ||||
Fiscal Year Ended March 31, | ||||||||
2005 | 2006 | |||||||
Cash paid towards contingent consideration in purchase business combinations | Rs. | 38,950 | Rs. | 114,244 | ||||
Excess of fair value over carrying value of acquired net assets, in a purchase business combination (beta Holding GmbH) | — | 14,958,766 | ||||||
Rs. | 38,950 | Rs. | 15,073,010 | |||||
As of March 31, | ||||||||
2005 | 2006 | |||||||
Formulations(1) | Rs. | 349,774 | Rs. | 349,774 | ||||
Active Pharmaceutical Ingredients and Intermediates | 997,025 | 997,025 | ||||||
Generics | 306,206 | 15,379,216 | ||||||
Drug Discovery | 90,437 | 90,437 | ||||||
Rs. | 1,743,442 | Rs. | 16,816,452 | |||||
(1) | includes goodwill arising on investment in an affiliate amounting to Rs.181,943. |
6. | Intangible assets, net |
F-49
Table of Contents
As of March 31, 2005 | As of March 31, 2006 | |||||||||||||||
Gross Carrying | Accumulated | Gross Carrying | Accumulated | |||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
Trademarks | Rs. | 2,570,242 | Rs. | 1,833,303 | Rs. | 2,575,224 | Rs. | 2,113,374 | ||||||||
Trademarks not subject to amortization | — | — | 3,970,118 | — | ||||||||||||
Product related intangibles | — | — | 11,759,317 | 77,326 | ||||||||||||
Beneficial toll manufacturing contract | — | — | 621,058 | 10,708 | ||||||||||||
Core-technology rights and licenses | 132,753 | — | 132,753 | — | ||||||||||||
Non-competition arrangements | 111,289 | 98,602 | 128,883 | 105,019 | ||||||||||||
Marketing know-how | 80,000 | 80,000 | 80,000 | 80,000 | ||||||||||||
Marketing rights | 94,852 | 3,659 | 94,369 | 9,222 | ||||||||||||
Customer related intangibles including customer contracts | 125,156 | 73,908 | 167,233 | 98,799 | ||||||||||||
Others | 8,027 | 5,965 | 7,556 | 7,508 | ||||||||||||
Rs. | 3,122,319 | Rs. | 2,095,437 | Rs. | 19,536,511 | Rs. | 2,501,956 | |||||||||
For the fiscal year ended March 31, | ||||
2007 | Rs. | 1,463,808 | ||
2008 | 1,358,792 | |||
2009 | 1,239,464 | |||
2010 | 1,175,376 | |||
2011 | 1,159,714 | |||
Thereafter | 6,667,283 | |||
Total | Rs. | 13,064,437 | ||
F-50
Table of Contents
Custom | ||||||||||||||||
Pharmaceutical | ||||||||||||||||
Formulations | Generics | Services | Total | |||||||||||||
Trademarks | Rs. | 412,346 | Rs. | 4,019,622 | — | Rs. | 4,431,968 | |||||||||
Product related intangibles | — | 11,681,991 | — | 11,681,991 | ||||||||||||
Benefical toll manufacturing contract | — | 610,350 | — | 610,350 | ||||||||||||
Core-technology rights and licenses | — | 132,753 | — | 132,753 | ||||||||||||
Non-competition arrangements | — | 6,052 | 17,812 | 23,864 | ||||||||||||
Customer related intangibles | — | 24,082 | 44,352 | 68,434 | ||||||||||||
Marketing rights | — | 85,147 | — | 85,147 | ||||||||||||
Others | — | 48 | — | 48 | ||||||||||||
Rs. | 412,346 | Rs. | 16,560,045 | Rs. | 62,164 | Rs. | 17,034,555 | |||||||||
Formulations | Generics | Total | ||||||||||
Trademarks | Rs. | 647,369 | Rs. | 89,570 | Rs. | 736,939 | ||||||
Core-technology rights and licenses | — | 132,753 | 132,753 | |||||||||
Non-competition arrangements | — | 12,687 | 12,687 | |||||||||
Customer related intangibles | — | 51,248 | 51,248 | |||||||||
Marketing rights | — | 91,193 | 91,193 | |||||||||
Others | — | 2,062 | 2,062 | |||||||||
Rs. | 647,369 | Rs. | 379,513 | Rs. | 1,026,882 | |||||||
7. | Formation of Perlecan Pharma Private Limited |
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8. | Cash, cash equivalents and restricted cash |
As of March 31, | ||||||||
2005 | 2006 | |||||||
Restricted cash — current | ||||||||
Against performance guarantees issued by the Company | Rs. | 16,157 | Rs. | 1,394 | ||||
Against short term loan from State Bank of India | — | 1,584,600 | ||||||
Against unclaimed dividend | 11,831 | 12,633 | ||||||
Against other obligations | 29,878 | 7,618 | ||||||
Rs. | 57,866 | Rs. | 1,606,245 | |||||
Restricted cash — non current | ||||||||
Against long term loan from Citibank | — | 4,468,840 | ||||||
Total restricted cash | Rs. | 57,866 | Rs. | 6,075,085 | ||||
9. | Accounts receivable |
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Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Balance at the beginning of the year | Rs. | 141,949 | Rs. | 139,569 | Rs. | 171,154 | ||||||
Additional provision | 19,871 | 79,442 | 33,629 | |||||||||
Bad debts charged to provision | (22,251 | ) | (47,857 | ) | (16,782 | ) | ||||||
Balance at the end of the year | Rs. | 139,569 | Rs. | 171,154 | Rs. | 188,001 | ||||||
10. | Inventories |
As of March 31, | ||||||||
2005 | 2006 | |||||||
Raw materials | Rs. | 1,008,729 | Rs. | 2,002,246 | ||||
Stores and spares | 316,915 | 450,658 | ||||||
Work-in-process | 1,068,115 | 1,421,151 | ||||||
Finished goods | 1,105,847 | 3,020,657 | ||||||
Rs. | 3,499,606 | Rs. | 6,894,712 | |||||
11. | Other assets |
As of March 31, | ||||||||
2005 | 2006 | |||||||
Prepaid expenses | Rs. | 124,972 | Rs. | 432,680 | ||||
Advances to suppliers | 135,352 | 367,485 | ||||||
Balances with statutory authorities | 193,806 | 928,423 | ||||||
Deposits | 99,896 | 223,409 | ||||||
Export benefits receivable | 215,750 | 291,210 | ||||||
Others | 693,248 | 621,383 | ||||||
1,463,024 | 2,864,591 | |||||||
Less: Current assets | 1,361,578 | 2,639,818 | ||||||
Rs. | 101,446 | Rs. | 224,772 | |||||
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12. | Property, plant and equipment, net |
As of March 31, | ||||||||
2005 | 2006 | |||||||
Land | Rs. | 519,902 | Rs. | 861,951 | ||||
Buildings | 2,064,956 | 2,470,029 | ||||||
Plant and machinery | 6,947,490 | 7,966,645 | ||||||
Furniture, fixtures and equipment | 734,721 | 826,370 | ||||||
Vehicles | 238,556 | 288,162 | ||||||
Computer equipment | 429,266 | 514,935 | ||||||
Capitalwork-in-progress | 567,974 | 1,135,905 | ||||||
11,502,865 | 14,063,997 | |||||||
Accumulated depreciation | (4,444,557 | ) | (4,977,666 | ) | ||||
Rs. | 7,058,308 | Rs. | 9,086,331 | |||||
13. | Investment securities |
As of March 31, 2005 | As of March 31, 2006 | |||||||||||||||||||||||||||||||
Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | Unrealized | |||||||||||||||||||||||||||||
Carrying | Holding | Holding | Fair | Carrying | Holding | Holding | Fair | |||||||||||||||||||||||||
Value | Gains | Losses | Value | Value | Gains | Losses | value | |||||||||||||||||||||||||
Equity securities | Rs. | 3,096 | Rs. | 4,787 | — | Rs. | 7,883 | Rs. | 3,096 | Rs. | 8,520 | — | Rs. | 11,617 | ||||||||||||||||||
Debt securities | 1,009,785 | — | (24,965 | ) | 984,820 | 1,250,020 | — | (174,163 | ) | 1,075,857 | ||||||||||||||||||||||
1,012,881 | 4,787 | (24,965 | ) | 992,703 | 1,253,116 | 8,520 | (174,163 | ) | 1,087,474 | |||||||||||||||||||||||
Non-marketable equity securities | 2,728 | — | — | 2,728 | 2,728 | — | — | 2,728 | ||||||||||||||||||||||||
Rs. | 1,015,609 | Rs. | 4,787 | Rs. | (24,965 | ) | Rs. | 995,431 | Rs. | 1,255,844 | Rs. | 8,520 | Rs. | (174,163 | ) | Rs. | 1,090,202 | |||||||||||||||
Current Mutual fund units | 300,000 | 10,887 | — | 310,887 | 14,703 | — | — | 14,703 | ||||||||||||||||||||||||
Rs. | 300,000 | Rs. | 10,887 | — | Rs. | 310,887 | Rs. | 14,703 | — | — | Rs. | 14,703 | ||||||||||||||||||||
14. | Leases |
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Fiscal Year ended March 31, | ||||
2007 | Rs. | 150,051 | ||
2008 | 133,844 | |||
2009 | 95,699 | |||
2010 | 78,482 | |||
2011 | 65,207 | |||
Thereafter | 154,033 | |||
Rs. | 677,316 | |||
15. | Investment in affiliates |
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16. | Variable interest entities |
17. | Financial instruments and concentration of risk |
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As of March 31, | ||||||||
2005 | 2006 | |||||||
Forward exchange contracts (U.S.$-Rs.) (sell) | U.S.$ | 30,000 | U.S.$ | 105,000 | ||||
Forward exchange contracts (U.S.$-Rs.) (buy) | U.S.$ | 40,000 | U.S.$ | 79,500 | ||||
Forward exchange contracts (GBP/U.S.$) (sell) | GBP | 2,000 | — | |||||
Forwards exchange contracts (EUR/U.S.$) (sell) | — | EUR | 36,000 | |||||
Interest rate swap | — | EUR | 75,000 |
18. | Research and development arrangement |
19. | Borrowings from banks |
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20. | Long-term debt |
As of March 31, | ||||||||
2005 | 2006 | |||||||
Rupee term loan | Rs. | 31,065 | Rs. | 25,145 | ||||
Euro loan | — | 21,602,000 | ||||||
Obligation under capital lease | — | 235,748 | ||||||
31,065 | 21,862,893 | |||||||
Less: Current portion | ||||||||
— Rupee term loan | 5,920 | 5,920 | ||||||
— Euro loan | — | 900,083 | ||||||
— Obligation under capital lease | — | 19,758 | ||||||
5,920 | 925,761 | |||||||
Non Current Portion | ||||||||
— Rupee term loan | 25,145 | 19,225 | ||||||
— Euro Loan | — | 20,701,917 | ||||||
— Obligation under capital lease transaction | — | 215,990 | ||||||
Rs. | 25,145 | Rs. | 20,937,132 | |||||
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Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Foreign currency loan notes | 4 | % | 4.8 | % | — | |||||||
Rupee term loan | 2 | % | 2.0 | % | 2.0 | % | ||||||
Euro loan | — | — | EURIBOR+ 150 bps |
Maturing in the Year Ending March 31, | Rupee Loan | Euro Loan | Capital Lease | Total | ||||||||||||
2007 | 5,920 | 900,083 | 19,758 | 925,761 | ||||||||||||
2008 | 5,920 | 3,600,333 | 19,761 | 3,626,014 | ||||||||||||
2009 | 5,920 | 3,600,333 | 19,761 | 3,626,014 | ||||||||||||
2010 | 5,920 | 6,300,583 | 19,761 | 6,326,264 | ||||||||||||
2011 | 1,465 | 7,200,668 | 19,761 | 7,221,894 | ||||||||||||
Thereafter | — | — | 136,946 | 136,946 | ||||||||||||
25,145 | 21,602,000 | 235,748 | 21,862,893 | |||||||||||||
21. | Shareholders equity |
22. | Deferred revenue |
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23. | Employee stock incentive plans |
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Fiscal Year Ended March 31, 2004 | ||||||||||||||||
Weighted- | ||||||||||||||||
Weighted- | Average | |||||||||||||||
Average | Remaining | |||||||||||||||
Shares Arising | Range of Exercise | Exercise | Contractual | |||||||||||||
Category A — Fair Market Value Options | Out of Options | Prices | Price | Life (Months) | ||||||||||||
Outstanding at the beginning of the year | 1,087,742 | Rs. | 442-553.51 | Rs. | 497.71 | 56 | ||||||||||
Granted during the year | 846,600 | 441.5-698 | 467.22 | 62 | ||||||||||||
Expired/forfeited during the year | (106,264 | ) | 441.5-531.51 | 481.27 | — | |||||||||||
Exercised during the year | (6,002 | ) | 455.5-531.51 | 506.56 | — | |||||||||||
Outstanding at the end of the year | 1,822,076 | 441.5-698 | 484.48 | 66 | ||||||||||||
Exercisable at the end of the year | 630,136 | Rs. | 442-531.51 | Rs. | 488.08 | 45 | ||||||||||
Fiscal Year Ended March 31, 2005 | ||||||||||||||||
Weighted- | ||||||||||||||||
Weighted- | Average | |||||||||||||||
Average | Remaining | |||||||||||||||
Shares Arising | Range of Exercise | Exercise | Contractual | |||||||||||||
Category A — Fair Market Value Options | Out of Options | Prices | Price | Life (Months) | ||||||||||||
Outstanding at the beginning of the year | 1,822,076 | Rs. | 441.5-698 | Rs. | 484.48 | 66 | ||||||||||
Granted during the year | 933,000 | 373.5-442.5 | 436.41 | 82 | ||||||||||||
Expired/forfeited during the year | (705,314 | ) | 382.5-531.51 | 459.42 | — | |||||||||||
Surrendered by employees during the year in exchange of category B options | (1,451,862 | ) | 373.5-698 | 464.04 | — | |||||||||||
Exercised during the year | — | — | — | — | ||||||||||||
Outstanding at the end of the year | 597,900 | 373.5-574.5 | 488.66 | 50 | ||||||||||||
Exercisable at the end of the year | 377,076 | Rs. | 441.5-574.5 | Rs. | 498.27 | 35 | ||||||||||
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Fiscal Year Ended March 31, 2006 | ||||||||||||||||
Weighted- | ||||||||||||||||
Weighted- | Average | |||||||||||||||
Average | Remaining | |||||||||||||||
Shares Arising | Range of Exercise | Exercise | Contractual | |||||||||||||
Category A — Fair Market Value Options | Out of Options | Prices | Price | Life (Months) | ||||||||||||
Outstanding at the beginning of the year | 597,900 | Rs. | 373.5-574.5 | Rs. | 488.66 | 50 | ||||||||||
Granted during the year | 65,000 | 362.5 | 362.5 | 81 | ||||||||||||
Expired/forfeited during the year | (93,400 | ) | 362.5-574.5 | 472.18 | — | |||||||||||
Surrendered by employees during the year | (180,000 | ) | 488.65-531.51 | 517.23 | — | |||||||||||
Exercised during the year | (155,000 | ) | 441.5-488.65 | 471.92 | — | |||||||||||
Outstanding at the end of the year | 234,500 | 362.5-531.51 | 439.43 | 64 | ||||||||||||
Exercisable at the end of the year | 75,764 | Rs. | 362.5-531.51 | Rs. | 471.93 | 45 | ||||||||||
Fiscal Year Ended March 31, 2005 | ||||||||||||||||
Weighted- | ||||||||||||||||
Weighted- | Average | |||||||||||||||
Average | Remaining | |||||||||||||||
Shares Arising | Range of Exercise | Exercise | Contractual | |||||||||||||
Category B — Par Value Options | Out of Options | Prices | Price | Life (Months) | ||||||||||||
Outstanding at the beginning of the year | — | — | — | — | ||||||||||||
Granted during the year | ||||||||||||||||
In exchange for category A surrendered options | 561,746 | Rs. | 5 | Rs. | 5 | 84 | ||||||||||
New options | 205,300 | 5 | 5 | 84 | ||||||||||||
Forfeited during the year | (7,948 | ) | 5 | 5 | — | |||||||||||
Exercised during the year | — | — | — | — | ||||||||||||
Outstanding at the end of the year | 759,098 | Rs. | 5 | Rs. | 5 | 84 | ||||||||||
Exercisable at the end of the year | — | — | — | — | ||||||||||||
Fiscal Year Ended March 31, 2006 | ||||||||||||||||
Weighted- | ||||||||||||||||
Weighted- | Average | |||||||||||||||
Average | Remaining | |||||||||||||||
Shares Arising | Range of Exercise | Exercise | Contractual | |||||||||||||
Category B — Par Value Options | Out of Options | Prices | Price | Life (Months) | ||||||||||||
Outstanding at the beginning of the year | 759,098 | Rs. | 5 | Rs. | 5 | 84 | ||||||||||
Granted during the year | 433,720 | 5 | 5 | 81 | ||||||||||||
Forfeited during the year | (266,608 | ) | 5 | 5 | — | |||||||||||
Exercised during the year | (196,242 | ) | 5 | 5 | — | |||||||||||
Outstanding at the end of the year | 729,968 | 5 | 5 | 81 | ||||||||||||
Exercisable at the end of the year | 36,272 | Rs. | 5 | Rs. | 5 | 59 | ||||||||||
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Fiscal Year Ended March 31, 2004 | ||||||||||||||||
Weighted- | ||||||||||||||||
Average | ||||||||||||||||
Remaining | ||||||||||||||||
Shares Arising | Range of | Weighted-Average | Contractual Life | |||||||||||||
Out of Options | Exercise Prices | Exercise Price | (Months) | |||||||||||||
Outstanding at the beginning of the year | — | — | — | — | ||||||||||||
Granted during the year | 200,000 | Rs. | 10 | Rs. | 10 | 65 | ||||||||||
Expired/forfeited during the year | (30,812 | ) | 10 | 10 | — | |||||||||||
Outstanding at the end of the year | 169,188 | Rs. | 10 | Rs. | 10 | 65 | ||||||||||
Exercisable at the end of the year | — | — | — | — | ||||||||||||
Fiscal Year Ended March 31, 2005 | ||||||||||||||||
Weighted- | ||||||||||||||||
Average | ||||||||||||||||
Remaining | ||||||||||||||||
Shares Arising | Range of | Weighted-Average | Contractual Life | |||||||||||||
Out of Options | Exercise Prices | Exercise Price | (Months) | |||||||||||||
Outstanding at the beginning of the year | 169,188 | Rs. | 10 | Rs. | 10 | 65 | ||||||||||
Granted during the year | 342,381 | 10 | 10 | 61 | ||||||||||||
Expired/forfeited during the year | (314,391 | ) | 10 | 10 | — | |||||||||||
Outstanding at the end of the year | 197,178 | Rs. | 10 | Rs. | 10 | 59 | ||||||||||
Exercisable at the end of the year | — | — | — | — |
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Fiscal Year Ended March 31, 2006 | ||||||||||||||||
Weighted- | ||||||||||||||||
Average | ||||||||||||||||
Remaining | ||||||||||||||||
Shares Arising | Range of | Weighted-Average | Contractual Life | |||||||||||||
Out of Options | Exercise Prices | Exercise Price | (Months) | |||||||||||||
Outstanding at the beginning of the year | 197,178 | Rs. | 10 | Rs. | 10 | 59 | ||||||||||
Granted during the year | 500,000 | 10 | 10 | 70 | ||||||||||||
Expired/forfeited during the year | (168,271 | ) | 10 | 10 | — | |||||||||||
Outstanding at the end of the year | 528,907 | Rs. | 10 | Rs. | 10 | 67 | ||||||||||
Exercisable at the end of the year | — | — | — | — |
Fiscal Year Ended March 31, 2004 | ||||||||||||||||
Weighted- | ||||||||||||||||
Average | ||||||||||||||||
Remaining | ||||||||||||||||
Shares Arising | Range of | Weighted-Average | Contractual Life | |||||||||||||
Out of Options | Exercise Prices | Exercise Price | (Months) | |||||||||||||
Outstanding at the beginning of the year | — | — | — | — | ||||||||||||
Granted during the year | 783,333 | Rs. | 10 | Rs. | 10 | 77 | ||||||||||
Expired during the year | (166,667 | ) | 10 | 10 | — | |||||||||||
Outstanding at the end of the year | 616,666 | Rs. | 10 | Rs. | 10 | 77 | ||||||||||
Exercisable at the end of the year | 616,666 | Rs. | 10 | Rs. | 10 | 77 |
Fiscal Year Ended March 31, 2005 | ||||||||||||||||
Weighted- | ||||||||||||||||
Average | ||||||||||||||||
Remaining | ||||||||||||||||
Shares Arising | Range of | Weighted-Average | Contractual Life | |||||||||||||
Out of Options | Exercise Prices | Exercise Price | (Months) | |||||||||||||
Outstanding at the beginning of the year | 616,666 | Rs. | 10 | Rs. | 10 | 77 | ||||||||||
Granted during the year | 616,667 | 10 | 10 | 73 | ||||||||||||
Expired during the year | (1,133,333 | ) | 10 | 10 | — | |||||||||||
Outstanding at the end of the year | 100,000 | Rs. | 10 | Rs. | 10 | 65 | ||||||||||
Exercisable at the end of the year | 100,000 | Rs. | 10 | Rs. | 10 | 65 |
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Fiscal Year Ended March 31, 2006 | ||||||||||||||||
Weighted- | ||||||||||||||||
Average | ||||||||||||||||
Remaining | ||||||||||||||||
Shares Arising | Range of | Weighted-Average | Contractual Life | |||||||||||||
Out of Options | Exercise Prices | Exercise Price | (Months) | |||||||||||||
Outstanding at the beginning of the year | 100,000 | Rs. | 10 | Rs. | 10 | 65 | ||||||||||
Granted during the year | — | — | — | — | ||||||||||||
Expired during the year | (100,000 | ) | 10 | 10 | — | |||||||||||
Outstanding at the end of the year | — | — | — | — | ||||||||||||
Exercisable at the end of the year | — | — | — | — |
24. | Allowances for sales returns |
Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Balance at the beginning of the year | Rs. | 89,026 | Rs. | 99,919 | Rs. | 95,123 | ||||||
Acquired during the year | — | — | 51,251 | |||||||||
Additional provision | 169,511 | 105,245 | 239,462 | |||||||||
Sales returns charged to the provision | (158,618 | ) | (110,041 | ) | (217,480 | ) | ||||||
Balance at the end of the year | Rs. | 99,919 | Rs. | 95,123 | Rs. | 168,356 | ||||||
Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Interest expense | Rs. | (14,970 | ) | Rs. | (103,027 | ) | Rs. | (298,603 | ) | |||
Interest income | 421,763 | 374,928 | 717,410 | |||||||||
Gain/(loss) on sale of available for sale securities, net | 24,786 | 64,997 | (3,924 | ) | ||||||||
Other | 104,330 | 117,339 | 118,723 | |||||||||
Rs. | 535,909 | Rs. | 454,237 | Rs. | 533,606 | |||||||
26. | Shipping costs |
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27. | Income taxes |
Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Pre-tax income | ||||||||||||
Domestic | Rs. | 3,021,098 | Rs. | 562,343 | Rs. | 2,144,176 | ||||||
Foreign | (481,060 | ) | (455,314 | ) | (256,853 | ) | ||||||
Rs. | 2,540,038 | Rs. | 107,029 | Rs. | 1,887,323 | |||||||
Income tax benefit/(expense) attributable to continuing operations: | ||||||||||||
Current taxes: | ||||||||||||
Domestic | Rs. | (202,364 | ) | Rs. | (250 | ) | Rs. | (279,466 | ) | |||
Foreign | (1,752 | ) | (1,053 | ) | (34,081 | ) | ||||||
(204,116 | ) | (1,303 | ) | (313,547 | ) | |||||||
Deferred taxes: | ||||||||||||
Domestic | 20,126 | 190,087 | (48,503 | ) | ||||||||
Foreign | 114,741 | (94,507 | ) | 103,660 | ||||||||
134,867 | 95,580 | 55,157 | ||||||||||
Rs. | (69,249 | ) | Rs. | 94,277 | Rs. | (258,390 | ) | |||||
Deferred tax benefit/(expense) attributable to other comprehensive income | Rs. | (3,873 | ) | Rs. | 5,206 | Rs. | 35,079 | |||||
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Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Income before income taxes and minority interest | Rs. | 2,540,038 | Rs. | 107,029 | Rs. | 1,887,323 | ||||||
Enacted tax rate in India | 35.875 | % | 36.5925 | % | 33.66 | % | ||||||
Computed expected tax benefit/(expense) | Rs. | (911,239 | ) | Rs. | (39,164 | ) | Rs. | (635,272 | ) | |||
Effect of: | ||||||||||||
Differences between Indian and foreign tax rates | (2,325 | ) | 13,362 | (8,546 | ) | |||||||
Valuation allowance | (149,805 | ) | (254,243 | ) | (142,206 | ) | ||||||
In-process technology written-off | — | (110,771 | ) | — | ||||||||
Expenses not deductible for tax purposes | (39,149 | ) | (36,552 | ) | (67,403 | ) | ||||||
ESOP cost not deductible for tax purpose | (43,831 | ) | (52,694 | ) | (54,614 | ) | ||||||
Income exempt from income taxes | 856,317 | 333,310 | 538,151 | |||||||||
Foreign exchange (loss)/gain | 64,008 | (5,300 | ) | 8,335 | ||||||||
Incremental deduction allowed for research and development expenses | 172,259 | 254,245 | 166,308 | |||||||||
Indexation of capital assets | 907 | 8,275 | 1,413 | |||||||||
Tax rate change | 12,111 | (9,466 | ) | 12,534 | ||||||||
Minimum alternate tax | (639 | ) | (3,910 | ) | (3,019 | ) | ||||||
Resolution of prior period tax matters | — | — | (73,970 | ) | ||||||||
Others | (27,863 | ) | (2,815 | ) | (101 | ) | ||||||
Income tax benefit/(expense) | Rs. | (69,249 | ) | Rs. | 94,277 | Rs. | (258,390 | ) | ||||
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As of March 31, | ||||||||
2005 | 2006 | |||||||
Deferred tax assets: | ||||||||
Inventory | Rs. | 62,644 | 47,407 | |||||
Deferred revenue | 5,868 | 7,957 | ||||||
Minimum Alternate Tax | — | 140,400 | ||||||
Accounts payable | 46,300 | 47,655 | ||||||
Investments | 93,762 | 169,737 | ||||||
Operating loss carry-forward | 874,187 | 1,320,961 | ||||||
Capital loss carry forward | 36,890 | 44,622 | ||||||
Expenses deferred for tax purposes | ||||||||
Research and development expenses | 52,026 | 47,787 | ||||||
Employee costs | 62,009 | 34,062 | ||||||
Legal costs | 66,647 | 33,269 | ||||||
Start-up costs | 42,138 | 37,460 | ||||||
Others | 31,824 | 15,464 | ||||||
Other current liabilities | 96,265 | 179,178 | ||||||
1,470,560 | 2,125,959 | |||||||
Less: Valuation allowance | (781,392 | ) | (923,598 | ) | ||||
Deferred tax assets | 689,168 | 1,202,361 | ||||||
Deferred tax liabilities | ||||||||
Property, plant and equipment | (876,483 | ) | (824,174 | ) | ||||
Intangible assets | (134,054 | ) | (6,425,661 | ) | ||||
Investment securities | (14,094 | ) | (12,964 | ) | ||||
Others | (45,518 | ) | (162,691 | ) | ||||
Deferred tax liabilities | (1,070,149 | ) | (7,425,490 | ) | ||||
Net deferred tax assets/(liabilities) | (380,981 | ) | (6,223,129 | ) | ||||
Deferred charges | 66,123 | 50,705 | ||||||
Rs. | (314,858 | ) | Rs. | (6,172,424 | ) | |||
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Expiring in the Year Ending March 31, | Rs.’000 | |||
2007 | 21,931 | |||
2008 | 217,651 | |||
2009 | 14,576 | |||
2010 | — | |||
2011 | — | |||
Thereafter (2012 — 2024) | 1,007,767 | |||
Thereafter (indefinite) | 2,296,883 | |||
Rs. | 3,558,808 | |||
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28. | Earnings per share |
Fiscal Year ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Basic earnings per equity share — weighted average number of equity shares outstanding | 153,027,528 | 153,037,898 | 153,093,316 | |||||||||
Effect of dilutive equivalent shares-stock options outstanding | 71,558 | 81,708 | 310,530 | |||||||||
Diluted earnings per equity share — weighted average number of equity shares outstanding | 153,099,196 | 153,119,602 | 153,403,846 | |||||||||
29. | Employee benefit plans |
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As of March 31, | ||||||||
2005 | 2006 | |||||||
Change in the benefit obligations | ||||||||
Projected Benefit Obligations (PBO) at the beginning of the year | Rs. | 147,309 | Rs. | 200,039 | ||||
Service cost | 20,379 | 26,926 | ||||||
Interest cost | 10,217 | 15,255 | ||||||
Actuarial (gain)/ loss | 34,362 | (14,384 | ) | |||||
Benefits paid | (12,228 | ) | (19,800 | ) | ||||
PBO at the end of the year | Rs. | 200,039 | Rs. | 208,036 | ||||
Change in plan assets | ||||||||
Fair value of plan assets at the beginning of the year | Rs. | 130,939 | Rs. | 127,122 | ||||
Actual return on plan assets | (26,003 | ) | 11,066 | |||||
Employer contributions | 34,414 | 101,882 | ||||||
Benefits paid | (12,228 | ) | (19,800 | ) | ||||
Plan assets at the end of the year | Rs. | 127,122 | Rs. | 220,270 | ||||
Funded status | Rs. | (72,917 | ) | 12,234 | ||||
Unrecognized actuarial loss | 92,014 | 68,560 | ||||||
Unrecognized transitional obligation | 12,146 | — | ||||||
Net amount recognized | Rs. | 31,243 | Rs. | 80,794 | ||||
Fiscal Year Ended March 31, | ||||||||
2005 | 2006 | |||||||
Prepaid benefit cost | Rs. | 35,231 | Rs. | 85,991 | ||||
Accrued benefit liability | (3,988 | ) | (5,197 | ) | ||||
Net amount recognized | Rs. | 31,243 | Rs. | 80,794 | ||||
Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Service cost | Rs. | 16,061 | Rs. | 20,379 | Rs. | 26,926 | ||||||
Interest cost | 8,992 | 10,217 | 15,255 | |||||||||
Expected return on plan assets | (8,831 | ) | (10,468 | ) | (9,211 | ) | ||||||
Amortization of transition obligation / (assets) | 770 | 770 | 12,146 | |||||||||
Recognized net actuarial (gain) / loss | 881 | 288 | 7,215 | |||||||||
Net amount recognized | Rs. | 17,873 | Rs. | 21,186 | Rs. | 52,331 | ||||||
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As at March 31, | ||||||
2005 | 2006 | |||||
Discount rate | 8.0% | 8% | ||||
Rate of compensation increase | 7.0% | 8% per annum for first 5 years and 6% per annum thereafter. |
Fiscal Year Ended March 31, | ||||||||
2004 | 2005 | 2006 | ||||||
Discount rate | 8.0% | 8.0% | 8.0% | |||||
Rate of compensation increase | 12.0% for first | 7.0% | 8.0% per annum for | |||||
year and 7.0% | first 5 years and | |||||||
thereafter | 6.0% per annum thereafter | |||||||
Expected long-term return on plan assets | 8.0% | 7.5% | 7.5% |
Fiscal Year Ended March 31, | ||||||||
2005 | 2006 | |||||||
Debt | 100 | % | 63 | % | ||||
Funds managed by LIC | — | �� | 37 | % |
Fiscal Year ended March 31, | ||||
2007 | Rs. | 18,828 | ||
2008 | 20,166 | |||
2009 | 25,495 | |||
2010 | 23,692 | |||
2011 | 27,513 | |||
2012 to 2015 | 174,756 |
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As of March 31, | ||||
2006 | ||||
Change in the benefit obligations | ||||
Projected Benefit Obligations (PBO) as on January 1, 2006 | Rs. | 275,001 | ||
Service cost | 4,173 | |||
Interest cost | 3,490 | |||
Actuarial (gain)/ loss | 892 | |||
Benefits paid | — | |||
Inflationary effect over initial balance | 2,383 | |||
PBO at the end of the year | 285,939 | |||
Change in plan assets | ||||
Fair value of plan assets at the beginning of the year | 246,173 | |||
Actual return on plan assets | 2,947 | |||
Employer contributions | — | |||
Benefits paid | — | |||
Inflationary effect over initial balance | 2,134 | |||
Plan assets at the end of the year | 251,254 | |||
Funded status | (34,685 | ) | ||
Unrecognized actuarial gain | (711 | ) | ||
Net amount recognized | Rs. | (35,396 | ) | |
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As of March 31, | ||||
2006 | ||||
Accrued benefit liability | Rs. | (35,396 | ) | |
Net amount recognized | Rs. | (35,396 | ) | |
Fiscal Year Ended | ||||
March 31, | ||||
2006 | ||||
Service cost | Rs. | 4,137 | ||
Interest cost | 3,460 | |||
Expected return on plan assets | (3,725 | ) | ||
Cost price inflation index adjustment over net periodic pension cost | 43 | |||
Net periodic pension cost adjusted by cost price inflation index | Rs. | 3,915 | ||
As at | ||||
March 31, | ||||
2006 | ||||
Discount rate | 5.25 | % | ||
Rate of compensation increase | 0.75 | % |
Fiscal Year Ended | ||||
March 31, | ||||
2006 | ||||
Discount rate | 5.25 | % | ||
Rate of compensation increase | 2.00 | % | ||
Expected long-term return on plan assets | 7.75 | % | ||
Inflation rate of fiscal year | 0.87 | % |
Fiscal Year Ended | ||||
March 31, | ||||
2006 | ||||
Equity | 27 | % | ||
Debt | 73 | % |
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Fiscal Year ended March 31, | ||||
2007 | Rs. | 23,473 | ||
2008 | 28,118 | |||
2009 | 28,490 | |||
2010 | 26,143 | |||
2011 | 28,391 | |||
2012 to 2017 | 150,502 |
30. | Related party transactions |
• | Diana Hotels Limited for availing hotel services | |
• | AR Chlorides for availing processing services of raw materials and intermediates | |
• | Dr. Reddy’s Holdings Private Limited for purchase and sale of active pharmaceutical ingredients and intermediates | |
• | Madras Diabetes Research Foundation for undertaking research on behalf of the Company | |
• | Dr. Reddy’s Heritage Foundation for purchase of services | |
• | SR Enterprises for transportation services | |
• | Manava Seva Dharma Samvardhani Trust for social contribution to which the Company has made contribution. |
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Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Purchases from: | ||||||||||||
Significant interest entities | Rs. | 59,889 | Rs. | 45,239 | Rs. | 182,870 | ||||||
Affiliates | 107,801 | 39,278 | 5,410 | |||||||||
Sales to: | ||||||||||||
Significant interest entities | 1,185 | 1,055 | 32,255 | |||||||||
Lease rental paid under cancelable operating leases to: | ||||||||||||
Directors and their relatives | 16,891 | 17,144 | 18,927 | |||||||||
Administrative expenses paid to: | ||||||||||||
Significant interest entities | 4,793 | 4,649 | 7,401 |
As of March 31, | ||||||||
2005 | 2006 | |||||||
Significant interest entities | — | Rs. | 6,084 | |||||
Directors and their relatives | Rs. | 3,680 | 4,380 | |||||
Employee loans (interest free) | 18,199 | 7,537 | ||||||
Affiliates | — | 234,541 | ||||||
Rs. | 21,879 | Rs. | 252,542 | |||||
As of March 31, | ||||||||
2005 | 2006 | |||||||
Significant interest entities | Rs. | 16,397 | Rs. | 18,958 | ||||
Payable towards legal fees | 123,106 | 131,392 | ||||||
Directors and their relatives | — | 1,328 | ||||||
Rs. | 139,503 | Rs. | 151,678 | |||||
Repayable in the year ending March 31: | ||||
2007 | Rs. | 5,735 | ||
2008 | 1,448 | |||
2009 | 296 | |||
2010 | 58 | |||
2011 | — | |||
Thereafter | — | |||
Rs. | 7,537 | |||
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• | Formulations — Revenues by therapeutic product category; Gross profit | |
• | Active pharmaceutical ingredients and intermediates — Gross profit, revenues by geography and revenues by key products; | |
• | Generics — Gross profit; | |
• | Critical care and biotechnology — Gross profit; | |
• | Drug discovery — Revenues and expenses. | |
• | Custom pharmaceutical services — Gross profit; and |
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Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Gastro-intestinal | Rs. | 1,624,811 | Rs. | 1,740,087 | Rs. | 2,252,528 | ||||||
Pain control | 1,386,362 | 1,540,665 | 1,873,921 | |||||||||
Cardiovascular | 1,444,055 | 1,494,701 | 1,707,223 | |||||||||
Anti-infectives | 1,013,595 | 1,001,797 | 1,118,631 | |||||||||
Dermatology | 313,076 | 338,016 | 427,165 | |||||||||
Others | 1,732,039 | 1,526,753 | 2,535,664 | |||||||||
Rs. | 7,513,938 | Rs. | 7,642,019 | Rs. | 9,915,132 | |||||||
Intersegment revenues(1) | 19,519 | 17,702 | 40,426 | |||||||||
Adjustments(2) | (25,979 | ) | 163,192 | (29,603 | ) | |||||||
Total revenues | Rs. | 7,507,478 | Rs. | 7,822,913 | Rs. | 9,925,955 | ||||||
Cost of revenues | 2,450,906 | 2,280,473 | 3,024,070 | |||||||||
Intersegment cost of revenues(3) | 211,182 | 259,727 | 242,080 | |||||||||
Adjustments(2) | (84,424 | ) | (47,397 | ) | (182,012 | ) | ||||||
Rs. | 2,577,664 | Rs. | 2,492,803 | Rs. | 3,084,138 | |||||||
Gross profit | 4,871,369 | 5,119,521 | 6,689,408 | |||||||||
Adjustments(2) | 58,445 | 210,589 | 152,409 | |||||||||
Rs. | 4,929,814 | Rs. | 5,330,110 | Rs. | 6,841,817 | |||||||
(1) | Intersegment revenues comprises transfers to the active pharmaceutical ingredients and intermediates segment and is accounted for at cost to the transferring segment. | |
(2) | The adjustments represent reconciling items to conform the segment information to U.S. GAAP. Such adjustments primarily relate to elimination of sales made to subsidiaries and other adjustments. | |
(3) | Intersegment cost of revenues is comprised of transfers from the active pharmaceutical ingredients and intermediates segment to formulations and is accounted for at cost to the transferring segment. |
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Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Revenues from external customers | Rs. | 6,973,891 | Rs. | 5,946,765 | Rs. | 7,448,681 | ||||||
Intersegment revenues(1) | 602,060 | 742,294 | 1,064,816 | |||||||||
Adjustments(2) | 52,552 | 255,469 | (275,440 | ) | ||||||||
Total revenues | Rs. | 7,628,503 | Rs. | 6,944,528 | Rs. | 8,238,057 | ||||||
Cost of revenues | Rs. | 4,666,757 | Rs. | 4,499,140 | 5,462,935 | |||||||
Intersegment cost of revenues(3) | 19,519 | 17,702 | 40,426 | |||||||||
Adjustments(2) | 416,082 | 496,713 | 413,239 | |||||||||
Rs. | 5,102,358 | Rs. | 5,013,555 | Rs. | 5,916,600 | |||||||
Gross profit | Rs. | 2,889,675 | Rs. | 2,172,217 | Rs. | 3,010,135 | ||||||
Adjustments(2) | (363,530 | ) | (241,244 | ) | (688,679 | ) | ||||||
Rs. | 2,526,145 | Rs. | 1,930,973 | Rs. | 2,321,456 | |||||||
(1) | Intersegment revenues comprises transfers to formulations, generics and custom pharamaceutical services and is accounted for at cost to the transferring segment. | |
(2) | The adjustments represent reconciling items to conform the segment information to U.S. GAAP. Such adjustments primarily relate to elimination of sales made to subsidiaries and other adjustments. | |
(3) | Intersegment cost of revenues is comprised of transfers from the formulations segment to active pharmaceutical ingredients and intermediates segment and is accounted for at cost to the transferring segment. |
Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
North America | Rs. | 1,902,922 | Rs. | 1,848,963 | Rs. | 1,654,953 | ||||||
India | 2,160,297 | 1,988,134 | 2,302,434 | |||||||||
Europe | 1,626,890 | 1,091,190 | 1,420,930 | |||||||||
Others | 1,983,551 | 2,032,258 | 2,865,743 | |||||||||
7,673,660 | 6,960,545 | 8,244,060 | ||||||||||
Adjustments(1) | (45,157 | ) | (16,017 | ) | (6,003 | ) | ||||||
Rs. | 7,628,503 | Rs. | 6,944,528 | Rs. | 8,238,057 | |||||||
(1) | The adjustments represent reconciling items to conform the segment information to U.S. GAAP. Such adjustments primarily relate to elimination of sales made to subsidiaries and other adjustments. |
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Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Ciprofloxacin hydrochloride | Rs. | 959,773 | Rs. | 619,112 | Rs. | 778,458 | ||||||
Ramipril | 1,314,164 | 783,362 | 642,538 | |||||||||
Terbinafine HCl | 124,923 | 194,482 | 537,155 | |||||||||
Ibuprofen | 394,634 | 460,490 | 502,263 | |||||||||
Sertraline hydrochloride | 178,537 | 138,158 | 494,101 | |||||||||
Ranitidine HCl Form 1 & 2 | 711,445 | 734,265 | 552,845 | |||||||||
Naproxen sodium | 437,339 | 470,044 | 380,409 | |||||||||
Naproxen | 233,835 | 229,553 | 374,997 | |||||||||
Atorvastatin | 211,192 | 252,466 | 321,139 | |||||||||
Montelukast | 29,825 | 52,626 | 241,090 | |||||||||
Losartan potassium | 214,231 | 180,528 | 172,682 | |||||||||
Sparfloxacin | 197,055 | 117,520 | 168,200 | |||||||||
Nizatidine | 159,592 | 216,757 | 160,857 | |||||||||
Clopidogrel | 140,310 | 79,586 | 139,941 | |||||||||
Dextromethorphan HBr | 182,775 | 165,836 | 134,884 | |||||||||
Others | 2,138,873 | 2,249,743 | 2,636,498 | |||||||||
Total | Rs. | 7,628,503 | Rs. | 6,944,528 | Rs. | 8,238,057 | ||||||
Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Revenues | Rs. | 4,337,525 | Rs. | 3,577,421 | Rs. | 4,055,764 | ||||||
Less: | ||||||||||||
Cost of revenues | 989,125 | 1,222,401 | 1,464,479 | |||||||||
Intersegment cost of revenues(1) | 335,342 | 397,969 | 704,321 | |||||||||
1,324,467 | 1,620,370 | 2,168,800 | ||||||||||
Gross Profit | Rs. | 3,013,058 | Rs. | 1,957,051 | Rs. | 1,886,964 | ||||||
(1) | Intersegment cost of revenues comprises transfers from the active pharmaceutical ingredients and intermediates segment to the generics segment and is accounted for at cost to the transferring segment. |
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Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Omeprazole | Rs. | 325,304 | Rs. | 434,090 | Rs. | 786,341 | ||||||
Fluoxetine | 1,825,546 | 857,927 | 381,265 | |||||||||
Amlodipine | 7,797 | 200,459 | 384,411 | |||||||||
Ranitidine | 205,799 | 194,003 | 235,621 | |||||||||
Ibuprofen | 183,973 | 198,666 | 251,430 | |||||||||
Ciprofloxacin | 28,057 | 196,010 | 158,158 | |||||||||
Others | 1,761,049 | 1,496,266 | 1,858,538 | |||||||||
Rs. | 4,337,525 | Rs. | 3,577,421 | Rs. | 4,055,764 | |||||||
Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Revenues | Rs. | 411,028 | Rs. | 527,108 | Rs. | 691,074 | ||||||
Cost of revenues(1) | 206,974 | 176,534 | 235,869 | |||||||||
Gross profit | Rs. | 204,054 | Rs. | 350,574 | Rs. | 455,205 | ||||||
(1) | Intersegment cost of revenues comprises transfers from the active pharmaceutical ingredients and intermediates segment to the critical care and biotechnology segment and is accounted for at cost to the transferring segment. |
Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Revenues | Rs. | — | Rs. | 288,382 | — | |||||||
— | Rs. | 288,382 | — | |||||||||
Research and development expenses | Rs. | 729,434 | Rs. | 868,992 | Rs. | 814,485 | ||||||
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Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Revenues | Rs. | 113,094 | Rs. | 311,574 | Rs. | 1,326,828 | ||||||
Less: | ||||||||||||
Cost of revenues | 2,213 | — | 829,302 | |||||||||
Intersegment cost of revenues(1) | 55,339 | 82,559 | 118,415 | |||||||||
Adjustments(2) | — | — | 51,717 | |||||||||
57,552 | 82,559 | 999,434 | ||||||||||
Gross Profit | Rs. | 55,542 | Rs. | 229,015 | Rs. | 327,394 | ||||||
(1) | Intersegment cost of revenues comprises transfers from the active pharmaceutical ingredients and intermediates segment to the custom pharmaceutical services and is accounted for at cost to the transferring segment. | |
(2) | The adjustments represent reconciling items to conform the segment information with U.S. GAAP. Such adjustments primarily relate to deferral of up-front non-refundable license fees. |
Fiscal Year Ended | Fiscal Year Ended | Fiscal Year Ended | ||||||||||||||||||||||
March 31, 2004 | March 31, 2005 | March 31, 2006 | ||||||||||||||||||||||
Revenues | Gross Profit | Revenues | Gross Profit | Revenues | Gross Profit | |||||||||||||||||||
Formulations | Rs. | 7,507,478 | Rs. | 4,929,814 | Rs. | 7,822,913 | Rs. | 5,330,110 | Rs. | 9,925,955 | Rs. | 6,841,817 | ||||||||||||
Active pharmaceutical ingredients and intermediates | 7,628,503 | 2,526,145 | 6,944,528 | 1,930,973 | 8,238,057 | 2,321,456 | ||||||||||||||||||
Generics | 4,337,525 | 3,013,058 | 3,577,421 | 1,957,051 | 4,055,764 | 1,886,964 | ||||||||||||||||||
Critical care and biotechnology | 411,028 | 204,054 | 527,108 | 350,574 | 691,074 | 455,205 | ||||||||||||||||||
Drug discovery | — | 288,382 | 288,382 | — | — | |||||||||||||||||||
Custom pharmaceutical services | 113,094 | 55,542 | 311,573 | 229,015 | 1,326,828 | 327,394 | ||||||||||||||||||
Others | 105,894 | 37,654 | 47,441 | 47,441 | 29,369 | 16,798 | ||||||||||||||||||
Rs. | 20,103,522 | Rs. | 10,766,267 | Rs. | 19,519,366 | Rs. | 10,133,546 | Rs. | 24,267,047 | Rs. | 11,849,634 | |||||||||||||
Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
India | Rs. | 7,143,798 | Rs. | 6,693,042 | Rs. | 8,272,468 | ||||||
North America | 5,319,160 | 4,349,191 | 3,983,860 | |||||||||
Russia and other countries of the former Soviet Union | 2,285,838 | 2,782,171 | 3,559,477 | |||||||||
Europe | 2,788,648 | 2,868,233 | 4,326,366 | |||||||||
Others | 2,566,078 | 2,826,729 | 4,124,876 | |||||||||
Rs. | 20,103,522 | Rs. | 19,519,366 | Rs. | 24,267,047 | |||||||
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As of March 31, | ||||||||
2005 | 2006 | |||||||
India | Rs. | 6,723,966 | Rs. | 7,063,595 | ||||
North America | 157,549 | 1,511,068 | ||||||
Russia and other countries of the former Soviet Union | 34,681 | 30,118 | ||||||
Europe | 122,449 | 468,314 | ||||||
Others | 19,663 | 13,236 | ||||||
Rs. | 7,058,308 | Rs. | 9,086,331 | |||||
Fiscal Year Ended March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
(Profit)/loss on sale of property, plant and equipment | Rs. | 29,319 | Rs. | (1,810 | ) | Rs. | (320,361 | ) | ||||
Loss on sale of subsidiary interest | 58,473 | 8,122 | — | |||||||||
Other | (4,584 | ) | (343 | ) | — | |||||||
Rs. | 83,208 | Rs. | 5,969 | Rs. | (320,361 | ) | ||||||
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Augsburg
F-85
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As at | AS at | As at | As at | |||||||||||||||||||
30 Nov. 2004 | 30 Nov. 2005 | 30 Nov. 2004 | 30 Nov. 2005 | |||||||||||||||||||
EUR’000 | EUR’000 | EUR’000 | EUR’000 | |||||||||||||||||||
Assets | Equity and Liabilities | |||||||||||||||||||||
A. | Fixed assets | A. | Equity | |||||||||||||||||||
I. | Intangible assets | I. | Subscribed capital | 150 | 150 | |||||||||||||||||
1. | Drug licences, brand name and software | 117,557 | 103,962 | |||||||||||||||||||
2. | Goodwill | 100,602 | 93,505 | II. | Additional paid-in capital | 67,889 | 67,889 | |||||||||||||||
3. | Payments on account | 158 | 926 | |||||||||||||||||||
218,317 | 198,393 | III. | Losses carried forward | (42,614 | ) | |||||||||||||||||
II. | Tangible assets | |||||||||||||||||||||
1. | Land | 589 | 584 | IV. | Net loss for the year | (42,614 | ) | (4,985 | ) | |||||||||||||
2. | Office equipment | 1,209 | 1,102 | |||||||||||||||||||
3. | Payments on account | 88 | ||||||||||||||||||||
1,886 | 1,686 | 25,425 | 20,440 | |||||||||||||||||||
II. | Financial assets | |||||||||||||||||||||
Shares in affiliated enterprises | 100 | 100 | B. | Accruals | ||||||||||||||||||
220,303 | 200,179 | 1. | Tax accruals | 3,774 | 6,834 | |||||||||||||||||
2. | Other accruals | 6,908 | 10,835 | |||||||||||||||||||
B. | Current assets | 10,682 | 17,669 | |||||||||||||||||||
I. | Inventories | C. | Liabilities | |||||||||||||||||||
1. | Raw materials and supplies | 22 | 1. | Liabilities to banks | 61,721 | 51,161 | ||||||||||||||||
2. | Work in process | 62 | 2. | Trade payables | 7,167 | 6,187 | ||||||||||||||||
3. | Finished goods and merchandise | 9,325 | 8,609 | 3. | Payables to affiliated enterprises | 857 | ||||||||||||||||
4. | Payments on account | 60 | 4. | Payables to enterprises in which participations are held | 57,176 | 62,258 | ||||||||||||||||
9,325 | 8,753 | |||||||||||||||||||||
5. | Sundry liabilities from financing of share acquisition | 88,203 | 90,951 | |||||||||||||||||||
II. | Receivables and other assets | Other liabilities | 2,378 | 2,797 | ||||||||||||||||||
1. | Trade receivables | 3,511 | 8,207 | 216,645 | 214,211 | |||||||||||||||||
2. | Receivables from affiliated enterprises | 143 | 510 | |||||||||||||||||||
3. | Other assets | 3,891 | 1,822 | D. | Deferred income | 7 | ||||||||||||||||
7,545 | 10,539 | |||||||||||||||||||||
III. | Securities | |||||||||||||||||||||
Other securities | 26,683 | |||||||||||||||||||||
IV. | Cash on hand and bank balances | 12,057 | 2,967 | |||||||||||||||||||
28,927 | 48,942 | |||||||||||||||||||||
C. | Prepaid expenses | 3,529 | 3,199 | |||||||||||||||||||
252,759 | 252,320 | 252,759 | 252,320 | |||||||||||||||||||
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03 Dec. 2003 to | 01 Dec. 2004 to | |||||||||||
30 Nov. 2004 | 30 Nov. 2005 | |||||||||||
EUR’000 | EUR’000 | |||||||||||
1. | Sales | 83,342 | 136,878 | |||||||||
2. | Cost of sales | 39,264 | 43,967 | |||||||||
3. | Gross profit on sales | 44,078 | 92,911 | |||||||||
4. | Selling expenses | 37,501 | 48,114 | |||||||||
5. | General administration expenses | 26,396 | 21,362 | |||||||||
6. | Other operating income | 707 | 1,942 | |||||||||
7. | Other operating expenses | 5,762 | 7,497 | |||||||||
8. | Income/(loss) from operations | (24,874 | ) | 17,880 | ||||||||
9. | Other interest and similar income | 190 | 240 | |||||||||
10. | Interest and similar expenses | 17,790 | 16,331 | |||||||||
11. | Income/(loss) from ordinary activities | (42,474 | ) | 1,789 | ||||||||
12. | Taxes on income | 140 | 6,774 | |||||||||
13. | Net loss | (42,614 | ) | (4,985 | ) | |||||||
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For the Period 3 Dec. 2003 | For the Period 1 Dec. 2004 | |||||||||||||||
to 30 Nov. 2004 | to 30 Nov. 2005 | |||||||||||||||
EUR’000 | EUR’000 | EUR’000 | EUR’000 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net Loss | (42,614 | ) | (4,985 | ) | ||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||||||
Depreciation and amortization | 16,983 | 22,904 | ||||||||||||||
Loss on sale of equipment | 0 | 10 | ||||||||||||||
Change in assets and liabilities net of effects from purchase of acquired companies: | ||||||||||||||||
Increase in receivables and other assets | (4,263 | ) | (2,957 | ) | ||||||||||||
Decrease in inventory | 10,265 | 572 | ||||||||||||||
Increase(−)/Decrease in prepaid expenses | 157 | 332 | ||||||||||||||
Decrease (−)/Increase of provisions | (1,903 | ) | 6,986 | |||||||||||||
Increase/Decrease (−) in accounts payable and accrued expenses | 2,332 | (130 | ) | |||||||||||||
Increase in interest payable | 11,323 | 8,511 | ||||||||||||||
Increase in other liabilities | 744 | 419 | ||||||||||||||
Total adjustments | 35,638 | 36,646 | ||||||||||||||
Net cash (used in) provided by operating activities | (6,977 | ) | 31,661 | |||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Proceeds from sale of fixed assets | 113 | 3 | ||||||||||||||
Purchases of fixed assets | (528 | ) | (236 | ) | ||||||||||||
Purchases of intangible assets | (2,291 | ) | (2,594 | ) | ||||||||||||
Purchase of other securities | 0 | (26,683 | ) | |||||||||||||
Purchase of acquired companies: | ||||||||||||||||
Payment for purchases of acquired companies, net of cash acquired | (188,255 | ) | ||||||||||||||
Net cash used in investing activities | (190,961 | ) | (29,510 | ) | ||||||||||||
Cash flows from financing activities: | ||||||||||||||||
Cash proceeds due to capital increase | 7,201 | 0 | ||||||||||||||
Cash dividends | 0 | 0 | ||||||||||||||
Proceeds from long-term debt | 210,316 | 0 | ||||||||||||||
Debt Issue Costs | (3,522 | ) | ||||||||||||||
Repayments of long-term debt and capital lease obligations | (4,000 | ) | (11,241 | ) | ||||||||||||
Net cash provided by (used in) financing activities | 209,995 | (11,241 | ) | |||||||||||||
Net increase (decrease) in cash | 12,057 | (9,090 | ) | |||||||||||||
Cash at beginning of period | 0 | 12,057 | ||||||||||||||
Cash at end of period | 12,057 | 2,967 | ||||||||||||||
Supplemental disclosures of cash flow information: | ||||||||||||||||
Cash paid during the period for: | ||||||||||||||||
Interest and similar expenses | 5,809 | 6,968 | ||||||||||||||
Income taxes | 4,407 | 3,850 |
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I. | General Information and Notes to Consolidated Financial Statements |
Share | Nominal Value of Share | |||||||||||||||
Company | % | Currency | 2004 | 2005 | ||||||||||||
beta Healthcare GmbH & Co.KG, Augsburg | 100 | EUR’000 | 67,890 | 67,890 | ||||||||||||
betapharm Arzneimittel GmbH, Augsburg | 100 | EUR’000 | 244,304 | 244,267 | ||||||||||||
beta Healthcare Verwaltungs GmbH, Augsburg | 100 | EUR’000 | 25 | 25 | ||||||||||||
beta Healthcare Solutions GmbH, Augsburg | 100 | EUR’000 | 25 | 25 |
III. | Notes to Consolidation Methods |
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IV. | Accounting and Valuation Rules |
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V. | Notes to the Consolidated Balance Sheet |
03 March 2004 | ||||
EUR’000 | ||||
Intangible assets | ||||
Drug licenses, brand name and software | 1,042 | |||
Payments on account | 310 | |||
1,352 | ||||
Tangible assets | ||||
Land | 575 | |||
Factory and office equipment | 1,063 | |||
Payments on account | 10 | |||
1,648 | ||||
Financial assets | ||||
Shares in affiliated enterprises | 100 | |||
3,100 | ||||
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Total/Residual | Fair Value | |||||||
Useful Life | Adjustment | |||||||
In years | EUR’000 | |||||||
“betapharm” brand name | 15 | 79,518 | ||||||
Drug licenses | 5 | 46,054 | ||||||
125,572 | ||||||||
EUR’000 | ||||
Equity as at 03 December 2003 | 0 | |||
Increase of subscribed capital | 150 | |||
Additional paid-in capital, thereof kEURO 60,839 via a conversion of debt to equity | 67,889 | |||
Net loss for the period | (42,614 | ) | ||
Equity as at 30 November 2004 | 25,425 | |||
EUR’000 | ||||
Equity as at 01 December 2004 | 25,425 | |||
Net loss for the year | (4,985 | ) | ||
Equity as at 30 November 2005 | 20,440 | |||
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30 Nov. 2004 | 30 Nov. 2005 | |||||||
EUR’000 | EUR’000 | |||||||
Sales deductions | 1,544 | 2,193 | ||||||
BfArM (German Institute for Drugs and Medical Products) charges | 1,596 | 1,692 | ||||||
Special payments and bonuses to employees | 599 | 1,546 | ||||||
Health insurers’ rebates | 0 | 1,339 | ||||||
Cost of Alendronat sales | 0 | 655 | ||||||
Retention of business records | 0 | 609 | ||||||
Vacation commitments and flexitime credits | 464 | 506 | ||||||
Outstanding invoices | 801 | 490 | ||||||
Cost of auditing the financial statements | 270 | 239 | ||||||
Licences | 75 | 221 | ||||||
Consulting fees | 155 | 154 | ||||||
Fees for matters of law | 86 | 144 | ||||||
Contributions to professional associations | 166 | 137 | ||||||
Travel expenses fieldstaff | 0 | 113 | ||||||
Contributions to Chamber of Industry and Commerce | 0 | 108 | ||||||
Insurance premiums | 1 | 98 | ||||||
Severance pay | 179 | 87 | ||||||
SHI rebates*) | 675 | 62 | ||||||
Sundry (includes deferred maintenance of kEURO 153 in 2004 and 2005) | 297 | 441 | ||||||
6,908 | 10,835 | |||||||
*) | Statutory Health Insurance rebates (2004: 16%/ 2005: 6%) to be paid in accordance with § 130a SGB V |
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Residual Term of | ||||||||||||
Total | Residual Term | More Than | ||||||||||
Amount | of up to 1 Year | 5 Years | ||||||||||
EUR’000 | EUR’000 | EUR’000 | ||||||||||
Liabilities to banks | 61,721 | 8,269 | 53,452 | |||||||||
Trade payables | 7,167 | 7,167 | 0 | |||||||||
Payables to enterprises in which participations are held | 57,176 | 0 | 57,176 | |||||||||
Liabilities from financing of share acquisition | 88,203 | 1,410 | 86,793 | |||||||||
Other liabilities | 2,378 | 2,378 | 0 | |||||||||
thereof taxes: EUR 1,549 thousand | ||||||||||||
thereof relating to social security and similar obligations: EUR 633 thousand | ||||||||||||
216,645 | 19,224 | 197,421 | ||||||||||
Residual Term of | ||||||||||||
Total | Residual Term | More Than | ||||||||||
Amount | of up to 1 Year | 5 Years | ||||||||||
EUR’000 | EUR’000 | EUR’000 | ||||||||||
Liabilities to banks | 51,161 | 8,323 | 16,078 | |||||||||
Trade payables | 6,187 | 6,187 | 0 | |||||||||
Payables to affiliated enterprises | 857 | 857 | 0 | |||||||||
Payables to enterprises in which participations are held | 62,258 | 0 | 62,258 | |||||||||
Liabilities from financing of share acquisition | 90,951 | 1,610 | 89,341 | |||||||||
Other liabilities | 2,797 | 2,797 | 0 | |||||||||
thereof taxes: EUR 1,957 thousand thereof relating to social security and similar obligations: EUR 674 thousand | ||||||||||||
214,211 | 19,774 | 167,677 | ||||||||||
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30 Nov. 2004 | 30 Nov. 2005 | |||||||
EUR’000 | EUR’000 | |||||||
3i Group Investments LP, London | 38,675 | 31,790 | ||||||
3i Europartners IVa LP, London | 5,929 | 6,457 | ||||||
3i Europartners IVb LP, London | 5,455 | 5,941 | ||||||
3i Europartners IVc LP, London | 5,456 | 5,943 | ||||||
3i Europartners IVk LP, London | 1,661 | 1,810 | ||||||
Teachers Insurance and Annuity Association, New York | 0 | 10,317 | ||||||
57,176 | 62,258 | |||||||
30 Nov. 2004 | 30 Nov. 2005 | |||||||
EUR’000 | EUR’000 | |||||||
Indigo Capital Ltd., London | 36,882 | 39,635 | ||||||
Santo Holding (Deutschland) GmbH, Stuttgart | 51,321 | 51,316 | ||||||
88,203 | 90,951 | |||||||
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VI. | Notes to the Consolidated Profit and Loss Statement |
3 Dec. 2003 to | 1 Dec. 2004 to | |||||||
30 Nov. 2004 | 30 Nov. 2005 | |||||||
EUR’000 | EUR’000 | |||||||
Cost of raw materials, consumables and supplies and of purchased merchandise | 36,554 | 40,388 | ||||||
Cost of purchased services | 2,727 | 3,786 | ||||||
39,281 | 44,174 | |||||||
3 Dec. 2003 to | 1 Dec. 2004 to | |||||||
30 Nov. 2004 | 30 Nov. 2005 | |||||||
EUR’000 | EUR’000 | |||||||
Wages and salaries | 13,057 | 19,167 | ||||||
Social security and other pension costs (of which in respect to individual employee saving plans: | ||||||||
kEURO 531; 2004: kEURO 394) | 2,332 | 3,388 | ||||||
15,389 | 22,555 | |||||||
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VII. | Other Required Disclosures |
• | Pledging of shares in the following companies: |
• | betapharm Arzneimittel GmbH; | |
• | beta Healthcare Verwaltungs GmbH; | |
• | beta Healthcare Solutions GmbH; | |
• | beta Institut für sozialmedizinische Forschung und Entwicklung GmbH. |
• | Blanket assignment for all present and future |
• | Trade receivables; | |
• | Receivables from affiliated enterprises; | |
• | Claims under insurance policies; | |
• | Receivables from Hexal AG and Salutas Pharma GmbH which result from service agreements concluded with these companies; | |
• | Other rights and claims; |
• | Pledging of industrial rights; | |
• | Pledging of all bank balances; | |
• | Creation of a land charge in the amount of kEURO 600. |
30 Nov. 2004 | 30 Nov. 2005 | |||||||
EUR’000 | EUR’000 | |||||||
Rent payable under real estate lease concluded at the end of 1999 with a residual term of 18.75 years (2004: 19,75 years) | 8,893 | 8,488 | ||||||
Commitments under sponsoring agreements (of which to affiliated enterprises: kEURO 2,237; 2004: kEURO 844) | 1,029 | 2,637 | ||||||
Commitments under motor vehicle leases | 2,013 | 2,403 | ||||||
Sundry commitments under tenancy agreements and leases and accounts payable to suppliers | 857 | 1,462 | ||||||
12,792 | 14,990 | |||||||
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• | Transformation of beta Holding GmbH, of beta Healthcare GmbH & Co. KG or of betapharm Arzneimittel GmbH into a public limited company with subsequent going public; | |
• | Disposal of a majority of shares in one of the three above-mentioned companies; disposal of one or several subsidiaries of these three companies if this subsidiary includes / these subsidiaries include all or the majority of beta Group’s assets. |
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3 Dec. 2004 to | 1 Dec. 2004 to | |||||||
30 Nov. 2004 | 30 Nov. 2005 | |||||||
Industrial employees | 3 | 3 | ||||||
Salaried employees | 332 | 326 | ||||||
335 | 329 | |||||||
VIII. | Reconciliation to U.S. GAAP |
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As of | As of | |||||||||||
Note | 30 Nov. 2004 | 30 Nov. 2005 | ||||||||||
EUR’000 | EUR’000 | |||||||||||
Shareholders’ equity as reported in the Consolidated Balance Sheets under German GAAP | 25,425 | 20,440 | ||||||||||
Adjustments required to conform with U.S. GAAP | ||||||||||||
Capital Lease | (a | ) | (201 | ) | (253 | ) | ||||||
Increase of useful life for drug licenses | (b | ) | 5,769 | 12,335 | ||||||||
Maintenance and other provisions | (c | ) | 153 | 762 | ||||||||
Goodwill and Trademark amortization | (d | ) | 9,281 | 21,642 | ||||||||
Deferred taxes | (e | ) | 8,981 | 6,515 | ||||||||
Shareholders’ equity in accordance with U.S. GAAP | 49,409 | 61,441 |
3 March 2004 | 30 Nov. 2004 | |||||||||||
Note | to 30 Nov. 2004 | to 30 Nov. 2005 | ||||||||||
EUR’000 | EUR’000 | |||||||||||
Net loss as reported in the Consolidated Statements of Profit and Loss under German GAAP | (42,614 | ) | (4,985 | ) | ||||||||
Adjustments required to conform with U.S. GAAP | ||||||||||||
Capital Lease | (a | ) | (42 | ) | (52 | ) | ||||||
Increase of useful life for drug licenses | (b | ) | 4,860 | 6,565 | ||||||||
Maintenance and other provisions | (c | ) | 153 | 609 | ||||||||
Goodwill and Trademark amortization | (d | ) | 9,281 | 12,361 | ||||||||
Deferred taxes | (e | ) | 9,284 | (2,466 | ) | |||||||
Net loss (−)/income in accordance with U.S. GAAP | (19,078 | ) | 12,032 |
(a) | Capital Lease |
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(b) | Increase of useful life for drug licenses |
(c) | Maintenance and retention accruals |
(d) | Goodwill and brand name amortisation |
(e) | Deferred taxes |
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Net book | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition or Production Cost | Accumulated Amortization/Depreciation | values | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance | Additions | Balance | Balance | Additions | Balance | Balance | ||||||||||||||||||||||||||||||||||||||||||||||||||
as at | as at | as at | as at | as at | as at | as at | ||||||||||||||||||||||||||||||||||||||||||||||||||
3 Dec | 03 March | 30 Nov. | 3 Dec | 03 March | 30 Nov. | 30 Nov. | ||||||||||||||||||||||||||||||||||||||||||||||||||
2003 | 2004 | Additions | Reclassifications | Disposals | 2004 | 2003 | 2004 | Additions | Disposals | 2004 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||
EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | |||||||||||||||||||||||||||||||||||||||||||||
I. | Intangible assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
1. | Drugs licenses, brand name and software | 128,361 | 2,291 | 152 | (280 | ) | 130,524 | 1,747 | 11,393 | (173 | ) | 12,967 | 117,557 | |||||||||||||||||||||||||||||||||||||||||||
2. | Goodwill | 106,107 | (200 | ) | 105,907 | 5,305 | 5,306 | 100,602 | ||||||||||||||||||||||||||||||||||||||||||||||||
3. | Payments on account | 310 | (152 | ) | 158 | 158 | ||||||||||||||||||||||||||||||||||||||||||||||||||
234,778 | 2,291 | — | (480 | ) | 236,589 | 1,747 | 16,699 | (173 | ) | 18,273 | 218,317 | |||||||||||||||||||||||||||||||||||||||||||||
II. | Tangible assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
1. | Land | 588 | 10 | 10 | (7 | ) | 608 | 13 | 7 | 20 | 588 | |||||||||||||||||||||||||||||||||||||||||||||
2. | Factory and office equipment | 1,890 | 430 | 2,313 | 827 | 277 | (1 | ) | 1,103 | 1,210 | ||||||||||||||||||||||||||||||||||||||||||||||
3. | Payments on account | 10 | 88 | (10 | ) | 88 | 88 | |||||||||||||||||||||||||||||||||||||||||||||||||
2,488 | 528 | — | (7 | ) | 3,009 | 840 | 284 | (1 | ) | 1,123 | 1,886 | |||||||||||||||||||||||||||||||||||||||||||||
III. | Financial assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
1. | Shares in affiliated enterprises | 100 | 100 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
237,366 | 2,819 | — | (487 | ) | 239,698 | 2,587 | 16,983 | (174 | ) | 19,396 | 220,303 | |||||||||||||||||||||||||||||||||||||||||||||
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Net book | ||||||||||||||||||||||||||||||||||||||||||||
Acquisition or Production Cost | Accumulated Amortization/Depreciation | values | ||||||||||||||||||||||||||||||||||||||||||
Balance | Balance | Balance | Balance | Balance | ||||||||||||||||||||||||||||||||||||||||
as at | as at | as at | as at | as at | ||||||||||||||||||||||||||||||||||||||||
1 Dec | 30 Nov. | 1 Dec | 30 Nov. | 30 Nov. | ||||||||||||||||||||||||||||||||||||||||
2004 | Additions | Reclassifications | Disposals | 2005 | 2004 | Additions | Disposals | 2005 | 2005 | |||||||||||||||||||||||||||||||||||
EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | |||||||||||||||||||||||||||||||||||
I. | Intangible assets | |||||||||||||||||||||||||||||||||||||||||||
1. | Drugs licenses, brand name and software | 130,524 | 1,826 | 57 | (38 | ) | 132,370 | 12,967 | 15,469 | (29 | ) | 28,408 | 103,962 | |||||||||||||||||||||||||||||||
2. | Goodwil | 105,907 | (37 | ) | 105,870 | 5,305 | 7,060 | 12,365 | 93,505 | |||||||||||||||||||||||||||||||||||
3. | Payments on account | 158 | 768 | 926 | 926 | |||||||||||||||||||||||||||||||||||||||
236,589 | 2,594 | 57 | (75 | ) | 239,166 | 18,273 | 22,529 | (29 | ) | 40,773 | 198,393 | |||||||||||||||||||||||||||||||||
II. | Tangible assets | |||||||||||||||||||||||||||||||||||||||||||
1. | Land | 608 | 5 | 613 | 19 | 10 | 30 | 583 | ||||||||||||||||||||||||||||||||||||
2. | Factory and office equipment | 2,313 | 231 | 31 | (216 | ) | 2,359 | 1,103 | 365 | (212 | ) | 1,256 | 1,103 | |||||||||||||||||||||||||||||||
3. | Payments on account | 88 | (88 | ) | ||||||||||||||||||||||||||||||||||||||||
3,009 | 236 | (57 | ) | (216 | ) | 2,972 | 1,123 | 375 | (212 | ) | 1,286 | 1,686 | ||||||||||||||||||||||||||||||||
III. | Financial assets | |||||||||||||||||||||||||||||||||||||||||||
1. | Shares in affiliated enterprises | 100 | 100 | 100 | ||||||||||||||||||||||||||||||||||||||||
239,698 | 2,830 | (507 | ) | 242,238 | 19,396 | 22,904 | (241 | ) | 42,059 | 200,179 | ||||||||||||||||||||||||||||||||||
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31 Dec. 2003 | 31 Dec. 2003 | |||||||||||||||||
000 EUR | 000 EUR | |||||||||||||||||
A. | Fixed assets | A. | Equity | |||||||||||||||
I. | Intangible assets | I. | Subscribed capital | 1,023 | ||||||||||||||
1. | Drug licenses and software | 1,112 | ||||||||||||||||
2. | Payments on account | 310 | II. | Capital reserves | ||||||||||||||
1,422 | ||||||||||||||||||
II. | Tangible assets | III. | Net retained profits | 219 | ||||||||||||||
1. | Land, land rights and buildings including buildings on third party land | 577 | 1,242 | |||||||||||||||
2. | Other equipment, factory and office equipment | 1,062 | B. | Accruals | ||||||||||||||
3. | Payments on account | 7 | 1. | Tax accruals | 7,940 | |||||||||||||
1,646 | 2. | Other accruals | 3,188 | |||||||||||||||
III. | Financial assets | 11,128 | ||||||||||||||||
1. | Shares in affiliated enterprises | 100 | C. | Liabilities | ||||||||||||||
2. | Other loans | 1. | Liabilities to banks | 301 | ||||||||||||||
100 | 2. | Trade payables | 6,202 | |||||||||||||||
3,168 | 3. | Payables to affiliated enterprises | 130 | |||||||||||||||
B. | Current assets | 4. | Other liabilities | 4,662 | ||||||||||||||
11,295 | ||||||||||||||||||
I. | Inventories | |||||||||||||||||
Merchandise | 8,754 | |||||||||||||||||
II. | Receivables and other assets | |||||||||||||||||
1. | Trade receivables | 3,232 | ||||||||||||||||
2. | Receivables from affiliated enterprises | |||||||||||||||||
3. | Other assets | 353 | ||||||||||||||||
3,585 | ||||||||||||||||||
III. | Cash on hand, bank balances | 8,006 | ||||||||||||||||
20,344 | ||||||||||||||||||
C. | Prepaid expenses | 152 | ||||||||||||||||
23,665 | 23,665 | |||||||||||||||||
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1 Jan. to | ||||||||
31 Dec. 2003 | ||||||||
000 EUR | ||||||||
1. | Sales | 106,546 | ||||||
2. | Cost of sales | 32,790 | ||||||
3. | Gross profit on sales | 73,756 | ||||||
4. | Selling expenses | 54,671 | ||||||
5. | General administration expenses | 767 | ||||||
6. | Other operating income | 5,585 | ||||||
7. | Other operating expenses | 2,282 | ||||||
8. | Other interest and similar income | 130 | ||||||
9. | Interest and similar expenses | 63 | ||||||
10. | Income from ordinary activities | 21,688 | ||||||
11. | Taxes on income | 7,974 | ||||||
12. | Net income | 13,714 | ||||||
13. | Losses carried forward from prior year | 2,472 | ||||||
14. | Withdrawals from capital reserves | 2,377 | ||||||
15. | Distributions | 13,400 | ||||||
16. | Net retained profits | 219 | ||||||
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EUR’000 | EUR’000 | |||||||
Cash flows from operating activities: | ||||||||
Net income | 13,714 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization | 716 | |||||||
Gain on sale of fixed assets | (55 | ) | ||||||
Change in assets and liabilities: | ||||||||
Increase in receivables and other assets | (2,524 | ) | ||||||
Increase in inventory | (1,618 | ) | ||||||
Decrease in prepaid expenses | 171 | |||||||
Decrease of provisions | (127 | ) | ||||||
Increase in accounts payable and accrued expenses | 5,046 | |||||||
Decrease in other liabilities | (599 | ) | ||||||
Total adjustments | 1,010 | |||||||
Net cash provided by operating activities | 14,724 | |||||||
Cash flows from investing activities: | ||||||||
Proceeds from sale of fixed assets | 4,136 | |||||||
Purchases of fixed assets | (375 | ) | ||||||
Purchases of intangible assets | (603 | ) | ||||||
Net cash provided by investing activities | 3,157 | |||||||
Cash flows from financing activities: | ||||||||
Cash dividends | (10,573 | ) | ||||||
Bank borrowings | 301 | |||||||
Net cash used in financing activities | (10,272 | ) | ||||||
Net increase in cash and cash equivalents | 7,609 | |||||||
Cash at beginning of year | 397 | |||||||
Cash at end of year | 8,006 | |||||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest and similar expenses | 63 | |||||||
Income taxes | 9 |
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A. | General Information and Notes to Financial Statements |
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Residual Term | ||||||||||||
Residual Term | of More than | |||||||||||
Total Amount | of up to 1 Year | 5 Years | ||||||||||
EUR’000 | EUR’000 | EUR’000 | ||||||||||
Liabilities to banks | 301 | 301 | 0 | |||||||||
Trade payables | 6,202 | 6,202 | 0 | |||||||||
Payables to affiliated enterprises | 130 | 130 | 0 | |||||||||
Other liabilities | 4,662 | 4,662 | 0 | |||||||||
Of which taxes: EUR 645 Thousand Of which relating to social security and similar obligations: EUR 504 Thousand | ||||||||||||
11,295 | 11,295 | 0 | ||||||||||
EUR’000 | ||||
Rentals payable under a real property lease concluded at the end of 1999 with a residual term of 21.5 years | 9,344 | |||
Commitments under sponsoring agreement (Of which to affiliated enterprises: kEUR 1,534) | 1,747 | |||
Commitments under motor vehicle leases | 2,238 | |||
Sundry rental commitments, such as accounts payable to suppliers | 1,631 | |||
14,960 | ||||
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2003 | ||||
Industrial labour | 3 | |||
Salaried employees | 314 | |||
Total | 317 | |||
2003 | ||||
EUR ’000 | ||||
Legal costs | 12 | |||
BfArM (German Institute for Drugs and Medical Products) charges | 491 | |||
Returns and sales bonus commitments | 897 | |||
Special and bonus payments to employees | 901 | |||
Vacation not taken and flexitime credits | 264 | |||
Insurance premiums | 142 | |||
Workmen’s compensation board contributions | 167 | |||
Sundry | 314 | |||
3,188 | ||||
Participation | Net Income/Loss | |||||||||||
Quota | Equity | for Last Business | ||||||||||
% | kEUR | Year kEUR | ||||||||||
beta Institut für sozialmedizinische Forschung und Entwicklung gGmbH, Augsburg | 100 | 100 | 0 | |||||||||
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As of 31 | ||||||||
Dec. 2003 | ||||||||
Note | EUR’000 | |||||||
Shareholders’ equity as reported in the Balance Sheets under German GAAP | 1,242 | |||||||
Adjustments required to conform with U.S. GAAP | ||||||||
Capital Lease | (a | ) | (149 | ) | ||||
Increase of useful life for drug licenses | (b | ) | 879 | |||||
Deferred taxes | (c | ) | (292 | ) | ||||
Shareholders’ equity in accordance with U.S. GAAP | 1,680 |
1 Jan. 2003 | ||||||||
to 31 Dec. 2003 | ||||||||
Note | EUR’000 | |||||||
Net income as reported in the Statement of Profit and Loss under German GAAP | 13,714 | |||||||
Adjustments required to conform with U.S. GAAP | ||||||||
Capital Lease | (a | ) | (63 | ) | ||||
Increase of useful life for drug licenses | (b | ) | 178 | |||||
Deferred taxes | (c | ) | (555 | ) | ||||
Net income in accordance with U.S. GAAP | 13,274 |
(a) | Capital Lease |
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(b) | Increase of useful life for drug licenses |
(c) | Deferred taxes |
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Acquisition or Productions Costs | Accumulated Amortization/depreciation | Book values | ||||||||||||||||||||||||||||||||||||||||||
Balance | Balance | Balance | Balance | Balance | ||||||||||||||||||||||||||||||||||||||||
as at | as at | as at | as at | as at | ||||||||||||||||||||||||||||||||||||||||
1 Jan. | 31 Dec. | 1 Jan. | 31 Dec. | 31 Dec. | ||||||||||||||||||||||||||||||||||||||||
2003 | Additions | Reclassifications | Disposals | 2003 | 2003 | Additions | Disposals | 2003 | 2003 | |||||||||||||||||||||||||||||||||||
EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | |||||||||||||||||||||||||||||||||||
I. | Intangible assets Concessions, industrial and similar rights and assets and licenses in such rights and assets | |||||||||||||||||||||||||||||||||||||||||||
- Drugs licenses | 2,150 | 334 | 38 | 2,521 | 1,242 | 336 | 1,578 | 943 | ||||||||||||||||||||||||||||||||||||
- Other | 72 | 196 | 1 | 268 | 44 | 55 | 99 | 169 | ||||||||||||||||||||||||||||||||||||
- Payments on account | 275 | 73 | (38 | ) | 310 | 310 | ||||||||||||||||||||||||||||||||||||||
2,497 | 603 | 1 | 3,099 | 1,286 | 391 | 1,677 | 1,422 | |||||||||||||||||||||||||||||||||||||
II. | Tangible assets | |||||||||||||||||||||||||||||||||||||||||||
1. | Land, land rights and buildings including buildings on third party land | 558 | 30 | 588 | 3 | 8 | 11 | 577 | ||||||||||||||||||||||||||||||||||||
2. | Other equipment, factory and office equipment | 1,544 | 338 | 51 | 1,831 | 502 | 317 | 50 | 769 | 1,062 | ||||||||||||||||||||||||||||||||||
3. | Payments on account and assets under construction | 7 | 7 | 7 | ||||||||||||||||||||||||||||||||||||||||
2,102 | 375 | 51 | 2,426 | 505 | 325 | 50 | 780 | 1,646 | ||||||||||||||||||||||||||||||||||||
III. | Financial assets | |||||||||||||||||||||||||||||||||||||||||||
1. | Shares in affiliated enterprises | 879 | 779 | 100 | 100 | |||||||||||||||||||||||||||||||||||||||
2. | Other loans | 3,300 | 3,300 | |||||||||||||||||||||||||||||||||||||||||
4,179 | 4,079 | 100 | 100 | |||||||||||||||||||||||||||||||||||||||||
8,778 | 979 | 4,131 | 5,625 | 1,791 | 716 | 50 | 2,457 | 3,168 | ||||||||||||||||||||||||||||||||||||
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(in thousands, except share data and where otherwise stated)
• | accompanying notes to the unaudited pro forma combined statement of operations; | |
• | separate historical audited financial statements of DRL as of and for the year ended March 31, 2006 which is included and incorporated by reference in this document; | |
• | separate historical audited financial statements of betapharm for the year ended 30 November 2005 included in this document taking into consideration the fact that such year end date is within 93 days of the date when the acquisition was consummated as indicated above. |
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(in thousands, except share data and where otherwise stated)
Current assets: | ||||
Cash and cash equivalents | Rs.1,357,395 | |||
Inventories | 538,860 | |||
Other current assets | 552,938 | |||
Property, plant and equipment | 372,377 | |||
Intangibles: | ||||
Trademarks | 5,546,314 | |||
Product related intangibles | 13,684,867 | |||
Beneficial toll manufacturing contract | 621,058 | |||
Other assets | 142,541 | |||
Goodwill | 12,848,428 | |||
Total assets | 35,664,778 | |||
Deferred tax liability, net | (7,241,686 | ) | ||
Liabilities assumed | (2,359,771 | ) | ||
Purchase cost | Rs.26,063,321 | |||
Products related intangibles | 14.5 years | |||
Beneficial toll manufacturing contract at betapharm | 58 months |
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(in thousands, except share data and where otherwise stated)
Dr. Reddy’s | ||||||||||||||||||||
fiscal year ended | betapharm | betapharm | ||||||||||||||||||
March 31, 2006 | (From December 1, 2004 | (From March 3, 2006 | Pro forma | Pro forma | ||||||||||||||||
as reported | to November 30, 2005) | to March 31, 2006) | Adjustments | Combined | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Product sales | Rs. | 24,077,209 | Rs. | 7,695,281 | Rs. | (704,915 | ) | — | Rs. | 31,067,575 | ||||||||||
License fees | 47,521 | — | — | ��� | 47,521 | |||||||||||||||
Service income | 142,317 | — | — | — | 142,317 | |||||||||||||||
24,267,047 | 7,695,281 | (704,915 | ) | — | 31,257,413 | |||||||||||||||
Cost of revenues | 12,417,413 | 2,471,825 | (315,534 | ) | — | 14,573,704 | ||||||||||||||
Gross profit | 11,849,634 | 5,223,456 | (389,381 | ) | — | 16,683,709 | ||||||||||||||
Operating Expenses: | ||||||||||||||||||||
Selling, general and administrative expenses | 8,028,884 | 3,058,818 | (294,272 | ) | 42,828 | (a) | 10,836,258 | |||||||||||||
Research and development expenses, net | 2,152,950 | — | — | — | 2,152,950 | |||||||||||||||
Amortization expenses | 419,867 | 148,646 | (87,217 | ) | 977,035 | (b) | 1,458,331 | |||||||||||||
Foreign exchange loss | 126,342 | — | 14 | — | 126,356 | |||||||||||||||
Other operating (income) / expenses, net | (320,361 | ) | (84,555 | ) | — | — | (404,916 | ) | ||||||||||||
Total operating expenses | 10,407,682 | 3,122,909 | (381,475 | ) | 1,019,863 | 14,168,979 | ||||||||||||||
Operating Income / (loss) | 1,441,952 | 2,100,547 | (7,906 | ) | (1,019,863 | ) | 2,514,730 | |||||||||||||
Equity loss in affiliates | (88,235 | ) | — | — | — | (88,235 | ) | |||||||||||||
Other (expense) / income, net | 533,606 | (904,636 | ) | 8,035 | (299,786 | )(c) | (662,781 | ) | ||||||||||||
Income before taxes and minority interest | 1,887,323 | 1,195,911 | 129 | (1,319,649 | ) | 1,763,714 | ||||||||||||||
Income taxes (expense)/benefit | (258,390 | ) | (519,473 | ) | 29,861 | 463,085 | (d) | (284,917 | ) | |||||||||||
Minority interest | (76 | ) | — | — | — | (76 | ) | |||||||||||||
Net Income | Rs. | 1,628,857 | Rs. | 676,438 | Rs. | 29,990 | Rs. | (856,564 | ) | Rs. | 1,478,721 | |||||||||
Earnings per equity share | ||||||||||||||||||||
Basic | Rs.10.64 | Rs.9.66 | ||||||||||||||||||
Diluted | Rs.10.62 | Rs.9.64 | ||||||||||||||||||
Weighted average number of equity shares used in computing earnings per share | ||||||||||||||||||||
Basic | 153,093,316 | * | 153,093,316 | * | ||||||||||||||||
Diluted | 153,403,846 | * | 153,403,846 | * |
* | These numbers have been retroactively restated to give effect to the stock dividend distributed on August 30, 2006. |
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Note 1: | General — Basis of pro forma presentation |
Note 2: | Pro forma adjustments |
(a) | Represents the incremental depreciation charge on the fair valued property, plant and equipment of betapharm. |
(b) | Represents the amortization expense on the intangibles of betapharm amortized over a weighted average useful life of 14.5 years based on management’s estimate of fair values. |
(c) | Represents the incremental interest expense pursuant to the acquisition which primarily represents interest at the rate of 4.65% (being the floating LIBOR rate) on the Euro 400 million loan taken for funding the acquisition of betapharm, the decrease in interest income at the rate of 6.5% (average rate of interest income) resulting from the use of internal funds towards the acquisition of betapharm. However, such incremental interest expense has been partially offset due to a reduction in betapharm’s interest expense pursuant to repayment of certain pre-acquisition debt out of the proceeds of the purchase price related to the acquisition. |
(d) | Represents the tax impact on the above adjustments. |
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1 | ||||
3 | ||||
3 | ||||
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3 | ||||
4 | ||||
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• | the names of the those underwriters or agents; | |
• | applicable fees, discounts and commissions to be paid to them; | |
• | details regarding over-allotment options, if any; and | |
• | the net proceeds to us. |
American Depositary Shares | ADSs, from time to time under this prospectus, at prices and on terms to be determined by market conditions at the time of offering. | |
ADSs | Each ADS represents one equity share, par value Rs.5 per share. The ADSs will be evidenced by American Depositary Receipts. | |
Dividends | 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. The dividends are paid after approval of the shareholders in our general meeting. |
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Holders of ADSs will be entitled to receive dividends payable on equity shares represented by such ADSs. Cash dividends on equity shares represented by 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. | ||
Risk factors | See “Risk Factors” and other information incorporated by reference into this document for a discussion of factors you should carefully consider before deciding to invest in our ADSs. | |
NYSE symbol | “RDY” |
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3
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• | Annual Report onForm 20-F for the year ended March 31, 2006, filed with the SEC on October 2, 2006; | |
• | Form 6-K for the three months ended June 30, 2006 furnished to the SEC on November 13, 2006; | |
• | Form 6-K containing certain information regarding our financial performance for the three months and six months ended September 30, 2006 furnished to the SEC on November 13, 2006; and | |
• | Form 8-A filed with the SEC on April 3, 2001. | |
• | In addition, we may incorporate by reference into this prospectus our reports on Form 6-K furnished after the date of this prospectus (and before the time that all of the securities offered by this prospectus have been sold or de-registered) if we identify in the report that it is being incorporated by reference in this prospectus. |
7-1-27, Ameerpet
Hyderabad, Andhra Pradesh 500 016
India
Tel.: +91-40-23731946
Attention: V. Viswanath, Company Secretary
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Page | ||||
beta Holding GmbH Consolidated Financial Statements for the periods ended November 30, 2005 and 2004 | ||||
F-3 | ||||
Consolidated Financial Statements for the periods ended November 30, 2005 and 2004 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
betapharm Arzneimittel GmbH Financial Statements for the period ended December 31, 2003 | ||||
F-24 | ||||
Financial Statements for the period ended December 31, 2003 | ||||
F-25 | ||||
F-26 | ||||
F-27 | ||||
F-28 | ||||
F-34 |
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Augsburg
F-2
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F-3
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As at | AS at | As at | As at | |||||||||||||||||||
30 Nov. 2004 | 30 Nov. 2005 | 30 Nov. 2004 | 30 Nov. 2005 | |||||||||||||||||||
EUR’000 | EUR’000 | EUR’000 | EUR’000 | |||||||||||||||||||
Assets | Equity and Liabilities | |||||||||||||||||||||
A. | Fixed assets | A. | Equity | |||||||||||||||||||
I. | Intangible assets | I. | Subscribed capital | 150 | 150 | |||||||||||||||||
1. | Drug licences, brand name and software | 117,557 | 103,962 | |||||||||||||||||||
2. | Goodwill | 100,602 | 93,505 | II. | Additional paid-in capital | 67,889 | 67,889 | |||||||||||||||
3. | Payments on account | 158 | 926 | |||||||||||||||||||
218,317 | 198,393 | III. | Losses carried forward | (42,614 | ) | |||||||||||||||||
II. | Tangible assets | |||||||||||||||||||||
1. | Land | 589 | 584 | IV. | Net loss for the year | (42,614 | ) | (4,985 | ) | |||||||||||||
2. | Office equipment | 1,209 | 1,102 | |||||||||||||||||||
3. | Payments on account | 88 | ||||||||||||||||||||
1,886 | 1,686 | 25,425 | 20,440 | |||||||||||||||||||
II. | Financial assets | |||||||||||||||||||||
Shares in affiliated enterprises | 100 | 100 | B. | Accruals | ||||||||||||||||||
220,303 | 200,179 | 1. | Tax accruals | 3,774 | 6,834 | |||||||||||||||||
2. | Other accruals | 6,908 | 10,835 | |||||||||||||||||||
B. | Current assets | 10,682 | 17,669 | |||||||||||||||||||
I. | Inventories | C. | Liabilities | |||||||||||||||||||
1. | Raw materials and supplies | 22 | 1. | Liabilities to banks | 61,721 | 51,161 | ||||||||||||||||
2. | Work in process | 62 | 2. | Trade payables | 7,167 | 6,187 | ||||||||||||||||
3. | Finished goods and merchandise | 9,325 | 8,609 | 3. | Payables to affiliated enterprises | 857 | ||||||||||||||||
4. | Payments on account | 60 | 4. | Payables to enterprises in which participations are held | 57,176 | 62,258 | ||||||||||||||||
9,325 | 8,753 | |||||||||||||||||||||
5. | Sundry liabilities from financing of share acquisition | 88,203 | 90,951 | |||||||||||||||||||
II. | Receivables and other assets | Other liabilities | 2,378 | 2,797 | ||||||||||||||||||
1. | Trade receivables | 3,511 | 8,207 | 216,645 | 214,211 | |||||||||||||||||
2. | Receivables from affiliated enterprises | 143 | 510 | |||||||||||||||||||
3. | Other assets | 3,891 | 1,822 | D. | Deferred income | 7 | ||||||||||||||||
7,545 | 10,539 | |||||||||||||||||||||
III. | Securities | |||||||||||||||||||||
Other securities | 26,683 | |||||||||||||||||||||
IV. | Cash on hand and bank balances | 12,057 | 2,967 | |||||||||||||||||||
28,927 | 48,942 | |||||||||||||||||||||
C. | Prepaid expenses | 3,529 | 3,199 | |||||||||||||||||||
252,759 | 252,320 | 252,759 | 252,320 | |||||||||||||||||||
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03 Dec. 2003 to | 01 Dec. 2004 to | |||||||||||
30 Nov. 2004 | 30 Nov. 2005 | |||||||||||
EUR’000 | EUR’000 | |||||||||||
1. | Sales | 83,342 | 136,878 | |||||||||
2. | Cost of sales | 39,264 | 43,967 | |||||||||
3. | Gross profit on sales | 44,078 | 92,911 | |||||||||
4. | Selling expenses | 37,501 | 48,114 | |||||||||
5. | General administration expenses | 26,396 | 21,362 | |||||||||
6. | Other operating income | 707 | 1,942 | |||||||||
7. | Other operating expenses | 5,762 | 7,497 | |||||||||
8. | Income/(loss) from operations | (24,874 | ) | 17,880 | ||||||||
9. | Other interest and similar income | 190 | 240 | |||||||||
10. | Interest and similar expenses | 17,790 | 16,331 | |||||||||
11. | Income/(loss) from ordinary activities | (42,474 | ) | 1,789 | ||||||||
12. | Taxes on income | 140 | 6,774 | |||||||||
13. | Net loss | (42,614 | ) | (4,985 | ) | |||||||
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For the Period 3 Dec. 2003 | For the Period 1 Dec. 2004 | |||||||||||||||
to 30 Nov. 2004 | to 30 Nov. 2005 | |||||||||||||||
EUR’000 | EUR’000 | EUR’000 | EUR’000 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net Loss | (42,614 | ) | (4,985 | ) | ||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||||||
Depreciation and amortization | 16,983 | 22,904 | ||||||||||||||
Loss on sale of equipment | 0 | 10 | ||||||||||||||
Change in assets and liabilities net of effects from purchase of acquired companies: | ||||||||||||||||
Increase in receivables and other assets | (4,263 | ) | (2,957 | ) | ||||||||||||
Decrease in inventory | 10,265 | 572 | ||||||||||||||
Increase(−)/Decrease in prepaid expenses | 157 | 332 | ||||||||||||||
Decrease (−)/Increase of provisions | (1,903 | ) | 6,986 | |||||||||||||
Increase/Decrease (−) in accounts payable and accrued expenses | 2,332 | (130 | ) | |||||||||||||
Increase in interest payable | 11,323 | 8,511 | ||||||||||||||
Increase in other liabilities | 744 | 419 | ||||||||||||||
Total adjustments | 35,638 | 36,646 | ||||||||||||||
Net cash (used in) provided by operating activities | (6,977 | ) | 31,661 | |||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Proceeds from sale of fixed assets | 113 | 3 | ||||||||||||||
Purchases of fixed assets | (528 | ) | (236 | ) | ||||||||||||
Purchases of intangible assets | (2,291 | ) | (2,594 | ) | ||||||||||||
Purchase of other securities | 0 | (26,683 | ) | |||||||||||||
Purchase of acquired companies: | ||||||||||||||||
Payment for purchases of acquired companies, net of cash acquired | (188,255 | ) | ||||||||||||||
Net cash used in investing activities | (190,961 | ) | (29,510 | ) | ||||||||||||
Cash flows from financing activities: | ||||||||||||||||
Cash proceeds due to capital increase | 7,201 | 0 | ||||||||||||||
Cash dividends | 0 | 0 | ||||||||||||||
Proceeds from long-term debt | 210,316 | 0 | ||||||||||||||
Debt Issue Costs | (3,522 | ) | ||||||||||||||
Repayments of long-term debt and capital lease obligations | (4,000 | ) | (11,241 | ) | ||||||||||||
Net cash provided by (used in) financing activities | 209,995 | (11,241 | ) | |||||||||||||
Net increase (decrease) in cash | 12,057 | (9,090 | ) | |||||||||||||
Cash at beginning of period | 0 | 12,057 | ||||||||||||||
Cash at end of period | 12,057 | 2,967 | ||||||||||||||
Supplemental disclosures of cash flow information: | ||||||||||||||||
Cash paid during the period for: | ||||||||||||||||
Interest and similar expenses | 5,809 | 6,968 | ||||||||||||||
Income taxes | 4,407 | 3,850 |
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I. | General Information and Notes to Consolidated Financial Statements |
Share | Nominal Value of Share | |||||||||||||||
Company | % | Currency | 2004 | 2005 | ||||||||||||
beta Healthcare GmbH & Co.KG, Augsburg | 100 | EUR’000 | 67,890 | 67,890 | ||||||||||||
betapharm Arzneimittel GmbH, Augsburg | 100 | EUR’000 | 244,304 | 244,267 | ||||||||||||
beta Healthcare Verwaltungs GmbH, Augsburg | 100 | EUR’000 | 25 | 25 | ||||||||||||
beta Healthcare Solutions GmbH, Augsburg | 100 | EUR’000 | 25 | 25 |
III. | Notes to Consolidation Methods |
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IV. | Accounting and Valuation Rules |
F-8
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V. | Notes to the Consolidated Balance Sheet |
03 March 2004 | ||||
EUR’000 | ||||
Intangible assets | ||||
Drug licenses, brand name and software | 1,042 | |||
Payments on account | 310 | |||
1,352 | ||||
Tangible assets | ||||
Land | 575 | |||
Factory and office equipment | 1,063 | |||
Payments on account | 10 | |||
1,648 | ||||
Financial assets | ||||
Shares in affiliated enterprises | 100 | |||
3,100 | ||||
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Total/Residual | Fair Value | |||||||
Useful Life | Adjustment | |||||||
In years | EUR’000 | |||||||
“betapharm” brand name | 15 | 79,518 | ||||||
Drug licenses | 5 | 46,054 | ||||||
125,572 | ||||||||
EUR’000 | ||||
Equity as at 03 December 2003 | 0 | |||
Increase of subscribed capital | 150 | |||
Additional paid-in capital, thereof kEURO 60,839 via a conversion of debt to equity | 67,889 | |||
Net loss for the period | (42,614 | ) | ||
Equity as at 30 November 2004 | 25,425 | |||
EUR’000 | ||||
Equity as at 01 December 2004 | 25,425 | |||
Net loss for the year | (4,985 | ) | ||
Equity as at 30 November 2005 | 20,440 | |||
F-10
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30 Nov. 2004 | 30 Nov. 2005 | |||||||
EUR’000 | EUR’000 | |||||||
Sales deductions | 1,544 | 2,193 | ||||||
BfArM (German Institute for Drugs and Medical Products) charges | 1,596 | 1,692 | ||||||
Special payments and bonuses to employees | 599 | 1,546 | ||||||
Health insurers’ rebates | 0 | 1,339 | ||||||
Cost of Alendronat sales | 0 | 655 | ||||||
Retention of business records | 0 | 609 | ||||||
Vacation commitments and flexitime credits | 464 | 506 | ||||||
Outstanding invoices | 801 | 490 | ||||||
Cost of auditing the financial statements | 270 | 239 | ||||||
Licences | 75 | 221 | ||||||
Consulting fees | 155 | 154 | ||||||
Fees for matters of law | 86 | 144 | ||||||
Contributions to professional associations | 166 | 137 | ||||||
Travel expenses fieldstaff | 0 | 113 | ||||||
Contributions to Chamber of Industry and Commerce | 0 | 108 | ||||||
Insurance premiums | 1 | 98 | ||||||
Severance pay | 179 | 87 | ||||||
SHI rebates*) | 675 | 62 | ||||||
Sundry (includes deferred maintenance of kEURO 153 in 2004 and 2005) | 297 | 441 | ||||||
6,908 | 10,835 | |||||||
*) | Statutory Health Insurance rebates (2004: 16%/ 2005: 6%) to be paid in accordance with § 130a SGB V |
F-11
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Residual Term of | ||||||||||||
Total | Residual Term | More Than | ||||||||||
Amount | of up to 1 Year | 5 Years | ||||||||||
EUR’000 | EUR’000 | EUR’000 | ||||||||||
Liabilities to banks | 61,721 | 8,269 | 53,452 | |||||||||
Trade payables | 7,167 | 7,167 | 0 | |||||||||
Payables to enterprises in which participations are held | 57,176 | 0 | 57,176 | |||||||||
Liabilities from financing of share acquisition | 88,203 | 1,410 | 86,793 | |||||||||
Other liabilities | 2,378 | 2,378 | 0 | |||||||||
thereof taxes: EUR 1,549 thousand/ thereof relating to social security and similar obligations: EUR 633 thousand | ||||||||||||
216,645 | 19,224 | 197,421 | ||||||||||
Residual Term of | ||||||||||||
Total | Residual Term | More Than | ||||||||||
Amount | of up to 1 Year | 5 Years | ||||||||||
EUR’000 | EUR’000 | EUR’000 | ||||||||||
Liabilities to banks | 51,161 | 8,323 | 16,078 | |||||||||
Trade payables | 6,187 | 6,187 | 0 | |||||||||
Payables to affiliated enterprises | 857 | 857 | 0 | |||||||||
Payables to enterprises in which participations are held | 62,258 | 0 | 62,258 | |||||||||
Liabilities from financing of share acquisition | 90,951 | 1,610 | 89,341 | |||||||||
Other liabilities | 2,797 | 2,797 | 0 | |||||||||
thereof taxes: EUR 1,957 thousand thereof relating to social security and similar obligations: EUR 674 thousand | ||||||||||||
214,211 | 19,774 | 167,677 | ||||||||||
F-12
Table of Contents
30 Nov. 2004 | 30 Nov. 2005 | |||||||
EUR’000 | EUR’000 | |||||||
3i Group Investments LP, London | 38,675 | 31,790 | ||||||
3i Europartners IVa LP, London | 5,929 | 6,457 | ||||||
3i Europartners IVb LP, London | 5,455 | 5,941 | ||||||
3i Europartners IVc LP, London | 5,456 | 5,943 | ||||||
3i Europartners IVk LP, London | 1,661 | 1,810 | ||||||
Teachers Insurance and Annuity Association, New York | 0 | 10,317 | ||||||
57,176 | 62,258 | |||||||
30 Nov. 2004 | 30 Nov. 2005 | |||||||
EUR’000 | EUR’000 | |||||||
Indigo Capital Ltd., London | 36,882 | 39,635 | ||||||
Santo Holding (Deutschland) GmbH, Stuttgart | 51,321 | 51,316 | ||||||
88,203 | 90,951 | |||||||
F-13
Table of Contents
VI. | Notes to the Consolidated Profit and Loss Statement |
3 Dec. 2003 to | 1 Dec. 2004 to | |||||||
30 Nov. 2004 | 30 Nov. 2005 | |||||||
EUR’000 | EUR’000 | |||||||
Cost of raw materials, consumables and supplies and of purchased merchandise | 36,554 | 40,388 | ||||||
Cost of purchased services | 2,727 | 3,786 | ||||||
39,281 | 44,174 | |||||||
3 Dec. 2003 to | 1 Dec. 2004 to | |||||||
30 Nov. 2004 | 30 Nov. 2005 | |||||||
EUR’000 | EUR’000 | |||||||
Wages and salaries | 13,057 | 19,167 | ||||||
Social security and other pension costs (of which in respect to individual employee saving plans: | ||||||||
kEURO 531; 2004: kEURO 394) | 2,332 | 3,388 | ||||||
15,389 | 22,555 | |||||||
F-14
Table of Contents
VII. | Other Required Disclosures |
• | Pledging of shares in the following companies: |
• | betapharm Arzneimittel GmbH; | |
• | beta Healthcare Verwaltungs GmbH; | |
• | beta Healthcare Solutions GmbH; | |
• | beta Institut für sozialmedizinische Forschung und Entwicklung GmbH. |
• | Blanket assignment for all present and future |
• | Trade receivables; | |
• | Receivables from affiliated enterprises; | |
• | Claims under insurance policies; | |
• | Receivables from Hexal AG and Salutas Pharma GmbH which result from service agreements concluded with these companies; | |
• | Other rights and claims; |
• | Pledging of industrial rights; | |
• | Pledging of all bank balances; | |
• | Creation of a land charge in the amount of kEURO 600. |
30 Nov. 2004 | 30 Nov. 2005 | |||||||
EUR’000 | EUR’000 | |||||||
Rent payable under real estate lease concluded at the end of 1999 with a residual term of 18.75 years (2004: 19,75 years) | 8,893 | 8,488 | ||||||
Commitments under sponsoring agreements (of which to affiliated enterprises: kEURO 2,237; 2004: kEURO 844) | 1,029 | 2,637 | ||||||
Commitments under motor vehicle leases | 2,013 | 2,403 | ||||||
Sundry commitments under tenancy agreements and leases and accounts payable to suppliers | 857 | 1,462 | ||||||
12,792 | 14,990 | |||||||
F-15
Table of Contents
• | Transformation of beta Holding GmbH, of beta Healthcare GmbH & Co. KG or of betapharm Arzneimittel GmbH into a public limited company with subsequent going public; | |
• | Disposal of a majority of shares in one of the three above-mentioned companies; disposal of one or several subsidiaries of these three companies if this subsidiary includes / these subsidiaries include all or the majority of beta Group’s assets. |
F-16
Table of Contents
3 Dec. 2004 to | 1 Dec. 2004 to | |||||||
30 Nov. 2004 | 30 Nov. 2005 | |||||||
Industrial employees | 3 | 3 | ||||||
Salaried employees | 332 | 326 | ||||||
335 | 329 | |||||||
VIII. | Reconciliation to U.S. GAAP |
F-17
Table of Contents
As of | As of | |||||||||||
Note | 30 Nov. 2004 | 30 Nov. 2005 | ||||||||||
EUR’000 | EUR’000 | |||||||||||
Shareholders’ equity as reported in the Consolidated Balance Sheets under German GAAP | 25,425 | 20,440 | ||||||||||
Adjustments required to conform with U.S. GAAP | ||||||||||||
Capital Lease | (a | ) | (201 | ) | (253 | ) | ||||||
Increase of useful life for drug licenses | (b | ) | 5,769 | 12,335 | ||||||||
Maintenance and other provisions | (c | ) | 153 | 762 | ||||||||
Goodwill and Trademark amortization | (d | ) | 9,281 | 21,642 | ||||||||
Deferred taxes | (e | ) | 8,981 | 6,515 | ||||||||
Shareholders’ equity in accordance with U.S. GAAP | 49,409 | 61,441 |
3 March 2004 | 30 Nov. 2004 | |||||||||||
Note | to 30 Nov. 2004 | to 30 Nov. 2005 | ||||||||||
EUR’000 | EUR’000 | |||||||||||
Net loss as reported in the Consolidated Statements of Profit and Loss under German GAAP | (42,614 | ) | (4,985 | ) | ||||||||
Adjustments required to conform with U.S. GAAP | ||||||||||||
Capital Lease | (a | ) | (42 | ) | (52 | ) | ||||||
Increase of useful life for drug licenses | (b | ) | 4,860 | 6,565 | ||||||||
Maintenance and other provisions | (c | ) | 153 | 609 | ||||||||
Goodwill and Trademark amortization | (d | ) | 9,281 | 12,361 | ||||||||
Deferred taxes | (e | ) | 9,284 | (2,466 | ) | |||||||
Net loss (−)/income in accordance with U.S. GAAP | (19,078 | ) | 12,032 |
(a) | Capital Lease |
F-18
Table of Contents
(b) | Increase of useful life for drug licenses |
(c) | Maintenance and retention accruals |
(d) | Goodwill and brand name amortisation |
(e) | Deferred taxes |
F-19
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F-20
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Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||
book | ||||||||||||||||||||||||||||||||||||||||||||||||||||
values | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition or Production Cost | Accumulated Amortization/Depreciation | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance | Additions | Balance | Balance | Additions | Balance | Balance | ||||||||||||||||||||||||||||||||||||||||||||||
as at | as at | as at | as at | as at | as at | as at | ||||||||||||||||||||||||||||||||||||||||||||||
3 Dec | 03 March | 30 Nov. | 3 Dec | 03 March | 30 Nov. | 30 Nov. | ||||||||||||||||||||||||||||||||||||||||||||||
2003 | 2004 | Additions | Reclassifications | Disposals | 2004 | 2003 | 2004 | Additions | Disposals | 2004 | 2004 | |||||||||||||||||||||||||||||||||||||||||
EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | |||||||||||||||||||||||||||||||||||||||||
I. | Intangible assets | |||||||||||||||||||||||||||||||||||||||||||||||||||
1. | Drugs licenses, brand name and software | 128,361 | 2,291 | 152 | (280 | ) | 130,524 | 1,747 | 11,393 | (173 | ) | 12,967 | 117,557 | |||||||||||||||||||||||||||||||||||||||
2. | Goodwill | 106,107 | (200 | ) | 105,907 | 5,305 | 5,306 | 100,602 | ||||||||||||||||||||||||||||||||||||||||||||
3. | Payments on account | 310 | (152 | ) | 158 | 158 | ||||||||||||||||||||||||||||||||||||||||||||||
234,778 | 2,291 | — | (480 | ) | 236,589 | 1,747 | 16,699 | (173 | ) | 18,273 | 218,317 | |||||||||||||||||||||||||||||||||||||||||
II. | Tangible assets | |||||||||||||||||||||||||||||||||||||||||||||||||||
1. | Land | 588 | 10 | 10 | (7 | ) | 608 | 13 | 7 | 20 | 588 | |||||||||||||||||||||||||||||||||||||||||
2. | Factory and office equipment | 1,890 | 430 | 2,313 | 827 | 277 | (1 | ) | 1,103 | 1,210 | ||||||||||||||||||||||||||||||||||||||||||
3. | Payments on account | 10 | 88 | (10 | ) | 88 | 88 | |||||||||||||||||||||||||||||||||||||||||||||
2,488 | 528 | — | (7 | ) | 3,009 | 840 | 284 | (1 | ) | 1,123 | 1,886 | |||||||||||||||||||||||||||||||||||||||||
III. | Financial assets | |||||||||||||||||||||||||||||||||||||||||||||||||||
1. | Shares in affiliated enterprises | 100 | 100 | |||||||||||||||||||||||||||||||||||||||||||||||||
237,366 | 2,819 | — | (487 | ) | 239,698 | 2,587 | 16,983 | (174 | ) | 19,396 | 220,303 | |||||||||||||||||||||||||||||||||||||||||
F-21
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�� | ||||||||||||||||||||||||||||||||||||||||||||
Net | ||||||||||||||||||||||||||||||||||||||||||||
book | ||||||||||||||||||||||||||||||||||||||||||||
values | ||||||||||||||||||||||||||||||||||||||||||||
Acquisition or Production Cost | Accumulated Amortization/Depreciation | |||||||||||||||||||||||||||||||||||||||||||
Balance | Balance | Balance | Balance | Balance | ||||||||||||||||||||||||||||||||||||||||
as at | as at | as at | as at | as at | ||||||||||||||||||||||||||||||||||||||||
1 Dec | 30 Nov. | 1 Dec | 30 Nov. | 30 Nov. | ||||||||||||||||||||||||||||||||||||||||
2004 | Additions | Reclassifications | Disposals | 2005 | 2004 | Additions | Disposals | 2005 | 2005 | |||||||||||||||||||||||||||||||||||
EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | |||||||||||||||||||||||||||||||||||
I. | Intangible assets | |||||||||||||||||||||||||||||||||||||||||||
1. | Drugs licenses, brand name and software | 130,524 | 1,826 | 57 | (38 | ) | 132,370 | 12,967 | 15,469 | (29 | ) | 28,408 | 103,962 | |||||||||||||||||||||||||||||||
2. | Goodwil | 105,907 | (37 | ) | 105,870 | 5,305 | 7,060 | 12,365 | 93,505 | |||||||||||||||||||||||||||||||||||
3. | Payments on account | 158 | 768 | 926 | 926 | |||||||||||||||||||||||||||||||||||||||
236,589 | 2,594 | 57 | (75 | ) | 239,166 | 18,273 | 22,529 | (29 | ) | 40,773 | 198,393 | |||||||||||||||||||||||||||||||||
II. | Tangible assets | |||||||||||||||||||||||||||||||||||||||||||
1. | Land | 608 | 5 | 613 | 19 | 10 | 30 | 583 | ||||||||||||||||||||||||||||||||||||
2. | Factory and office equipment | 2,313 | 231 | 31 | (216 | ) | 2,359 | 1,103 | 365 | (212 | ) | 1,256 | 1,103 | |||||||||||||||||||||||||||||||
3. | Payments on account | 88 | (88 | ) | ||||||||||||||||||||||||||||||||||||||||
3,009 | 236 | (57 | ) | (216 | ) | 2,972 | 1,123 | 375 | (212 | ) | 1,286 | 1,686 | ||||||||||||||||||||||||||||||||
III. | Financial assets | |||||||||||||||||||||||||||||||||||||||||||
1. | Shares in affiliated enterprises | 100 | 100 | 100 | ||||||||||||||||||||||||||||||||||||||||
239,698 | 2,830 | (507 | ) | 242,238 | 19,396 | 22,904 | (241 | ) | 42,059 | 200,179 | ||||||||||||||||||||||||||||||||||
F-22
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F-23
Table of Contents
F-24
Table of Contents
31 Dec. 2003 | 31 Dec. 2003 | |||||||||||||||||
000 EUR | 000 EUR | |||||||||||||||||
A. | Fixed assets | A. | Equity | |||||||||||||||
I. | Intangible assets | I. | Subscribed capital | 1,023 | ||||||||||||||
1. | Drug licenses and software | 1,112 | ||||||||||||||||
2. | Payments on account | 310 | II. | Capital reserves | ||||||||||||||
1,422 | ||||||||||||||||||
II. | Tangible assets | III. | Net retained profits | 219 | ||||||||||||||
1. | Land, land rights and buildings including buildings on third party land | 577 | 1,242 | |||||||||||||||
2. | Other equipment, factory and office equipment | 1,062 | B. | Accruals | ||||||||||||||
3. | Payments on account | 7 | 1. | Tax accruals | 7,940 | |||||||||||||
1,646 | 2. | Other accruals | 3,188 | |||||||||||||||
III. | Financial assets | 11,128 | ||||||||||||||||
1. | Shares in affiliated enterprises | 100 | C. | Liabilities | ||||||||||||||
2. | Other loans | 1. | Liabilities to banks | 301 | ||||||||||||||
100 | 2. | Trade payables | 6,202 | |||||||||||||||
3,168 | 3. | Payables to affiliated enterprises | 130 | |||||||||||||||
B. | Current assets | 4. | Other liabilities | 4,662 | ||||||||||||||
11,295 | ||||||||||||||||||
I. | Inventories | |||||||||||||||||
Merchandise | 8,754 | |||||||||||||||||
II. | Receivables and other assets | |||||||||||||||||
1. | Trade receivables | 3,232 | ||||||||||||||||
2. | Receivables from affiliated enterprises | |||||||||||||||||
3. | Other assets | 353 | ||||||||||||||||
3,585 | ||||||||||||||||||
III. | Cash on hand, bank balances | 8,006 | ||||||||||||||||
20,344 | ||||||||||||||||||
C. | Prepaid expenses | 152 | ||||||||||||||||
23,665 | 23,665 | |||||||||||||||||
F-25
Table of Contents
1 Jan. to | ||||||||
31 Dec. 2003 | ||||||||
000 EUR | ||||||||
1. | Sales | 106,546 | ||||||
2. | Cost of sales | 32,790 | ||||||
3. | Gross profit on sales | 73,756 | ||||||
4. | Selling expenses | 54,671 | ||||||
5. | General administration expenses | 767 | ||||||
6. | Other operating income | 5,585 | ||||||
7. | Other operating expenses | 2,282 | ||||||
8. | Other interest and similar income | 130 | ||||||
9. | Interest and similar expenses | 63 | ||||||
10. | Income from ordinary activities | 21,688 | ||||||
11. | Taxes on income | 7,974 | ||||||
12. | Net income | 13,714 | ||||||
13. | Losses carried forward from prior year | 2,472 | ||||||
14. | Withdrawals from capital reserves | 2,377 | ||||||
15. | Distributions | 13,400 | ||||||
16. | Net retained profits | 219 | ||||||
F-26
Table of Contents
EUR’000 | EUR’000 | |||||||
Cash flows from operating activities: | ||||||||
Net income | 13,714 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization | 716 | |||||||
Gain on sale of fixed assets | (55 | ) | ||||||
Change in assets and liabilities: | ||||||||
Increase in receivables and other assets | (2,524 | ) | ||||||
Increase in inventory | (1,618 | ) | ||||||
Decrease in prepaid expenses | 171 | |||||||
Decrease of provisions | (127 | ) | ||||||
Increase in accounts payable and accrued expenses | 5,046 | |||||||
Decrease in other liabilities | (599 | ) | ||||||
Total adjustments | 1,010 | |||||||
Net cash provided by operating activities | 14,724 | |||||||
Cash flows from investing activities: | ||||||||
Proceeds from sale of fixed assets | 4,136 | |||||||
Purchases of fixed assets | (375 | ) | ||||||
Purchases of intangible assets | (603 | ) | ||||||
Net cash provided by investing activities | 3,157 | |||||||
Cash flows from financing activities: | ||||||||
Cash dividends | (10,573 | ) | ||||||
Bank borrowings | 301 | |||||||
Net cash used in financing activities | (10,272 | ) | ||||||
Net increase in cash and cash equivalents | 7,609 | |||||||
Cash at beginning of year | 397 | |||||||
Cash at end of year | 8,006 | |||||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest and similar expenses | 63 | |||||||
Income taxes | 9 |
F-27
Table of Contents
A. | General Information and Notes to Financial Statements |
F-28
Table of Contents
Residual Term | ||||||||||||
Residual Term | of More than | |||||||||||
Total Amount | of up to 1 Year | 5 Years | ||||||||||
EUR’000 | EUR’000 | EUR’000 | ||||||||||
Liabilities to banks | 301 | 301 | 0 | |||||||||
Trade payables | 6,202 | 6,202 | 0 | |||||||||
Payables to affiliated enterprises | 130 | 130 | 0 | |||||||||
Other liabilities | 4,662 | 4,662 | 0 | |||||||||
Of which taxes: EUR 645 Thousand Of which relating to social security and similar obligations: EUR 504 Thousand | ||||||||||||
11,295 | 11,295 | 0 | ||||||||||
EUR’000 | ||||
Rentals payable under a real property lease concluded at the end of 1999 with a residual term of 21.5 years | 9,344 | |||
Commitments under sponsoring agreement (Of which to affiliated enterprises: kEUR 1,534) | 1,747 | |||
Commitments under motor vehicle leases | 2,238 | |||
Sundry rental commitments, such as accounts payable to suppliers | 1,631 | |||
14,960 | ||||
F-29
Table of Contents
2003 | ||||
Industrial labour | 3 | |||
Salaried employees | 314 | |||
Total | 317 | |||
2003 | ||||
EUR ’000 | ||||
Legal costs | 12 | |||
BfArM (German Institute for Drugs and Medical Products) charges | 491 | |||
Returns and sales bonus commitments | 897 | |||
Special and bonus payments to employees | 901 | |||
Vacation not taken and flexitime credits | 264 | |||
Insurance premiums | 142 | |||
Workmen’s compensation board contributions | 167 | |||
Sundry | 314 | |||
3,188 | ||||
Participation | Net Income/Loss | |||||||||||
Quota | Equity | for Last Business | ||||||||||
% | kEUR | Year kEUR | ||||||||||
beta Institut für sozialmedizinische Forschung und Entwicklung gGmbH, Augsburg | 100 | 100 | 0 | |||||||||
F-30
Table of Contents
As of 31 | ||||||||
Dec. 2003 | ||||||||
Note | EUR’000 | |||||||
Shareholders’ equity as reported in the Balance Sheets under German GAAP | 1,242 | |||||||
Adjustments required to conform with U.S. GAAP | ||||||||
Capital Lease | (a | ) | (149 | ) | ||||
Increase of useful life for drug licenses | (b | ) | 879 | |||||
Deferred taxes | (c | ) | (292 | ) | ||||
Shareholders’ equity in accordance with U.S. GAAP | 1,680 |
1 Jan. 2003 | ||||||||
to 31 Dec. 2003 | ||||||||
Note | EUR’000 | |||||||
Net income as reported in the Statement of Profit and Loss under German GAAP | 13,714 | |||||||
Adjustments required to conform with U.S. GAAP | ||||||||
Capital Lease | (a | ) | (63 | ) | ||||
Increase of useful life for drug licenses | (b | ) | 178 | |||||
Deferred taxes | (c | ) | (555 | ) | ||||
Net income in accordance with U.S. GAAP | 13,274 |
(a) | Capital Lease |
F-31
Table of Contents
(b) | Increase of useful life for drug licenses |
(c) | Deferred taxes |
F-32
Table of Contents
Acquisition or Productions Costs | Accumulated Amortization/depreciation | Book values | ||||||||||||||||||||||||||||||||||||||||||
Balance | Balance | Balance | Balance | Balance | ||||||||||||||||||||||||||||||||||||||||
as at | as at | as at | as at | as at | ||||||||||||||||||||||||||||||||||||||||
1 Jan. | 31 Dec. | 1 Jan. | 31 Dec. | 31 Dec. | ||||||||||||||||||||||||||||||||||||||||
2003 | Additions | Reclassifications | Disposals | 2003 | 2003 | Additions | Disposals | 2003 | 2003 | |||||||||||||||||||||||||||||||||||
EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | EUR’000 | |||||||||||||||||||||||||||||||||||
I. | Intangible assets Concessions, industrial and similar rights and assets and licenses in such rights and assets | |||||||||||||||||||||||||||||||||||||||||||
- Drugs licenses | 2,150 | 334 | 38 | 2,521 | 1,242 | 336 | 1,578 | 943 | ||||||||||||||||||||||||||||||||||||
- Other | 72 | 196 | 1 | 268 | 44 | 55 | 99 | 169 | ||||||||||||||||||||||||||||||||||||
- Payments on account | 275 | 73 | (38 | ) | 310 | 310 | ||||||||||||||||||||||||||||||||||||||
2,497 | 603 | 1 | 3,099 | 1,286 | 391 | 1,677 | 1,422 | |||||||||||||||||||||||||||||||||||||
II. | Tangible assets | |||||||||||||||||||||||||||||||||||||||||||
1. | Land, land rights and buildings including buildings on third party land | 558 | 30 | 588 | 3 | 8 | 11 | 577 | ||||||||||||||||||||||||||||||||||||
2. | Other equipment, factory and office equipment | 1,544 | 338 | 51 | 1,831 | 502 | 317 | 50 | 769 | 1,062 | ||||||||||||||||||||||||||||||||||
3. | Payments on account and assets under construction | 7 | 7 | 7 | ||||||||||||||||||||||||||||||||||||||||
2,102 | 375 | 51 | 2,426 | 505 | 325 | 50 | 780 | 1,646 | ||||||||||||||||||||||||||||||||||||
III. | Financial assets | |||||||||||||||||||||||||||||||||||||||||||
1. | Shares in affiliated enterprises | 879 | 779 | 100 | 100 | |||||||||||||||||||||||||||||||||||||||
2. | Other loans | 3,300 | 3,300 | |||||||||||||||||||||||||||||||||||||||||
4,179 | 4,079 | 100 | 100 | |||||||||||||||||||||||||||||||||||||||||
8,778 | 979 | 4,131 | 5,625 | 1,791 | 716 | 50 | 2,457 | 3,168 | ||||||||||||||||||||||||||||||||||||
F-33
Table of Contents
(in thousands, except share data and where otherwise stated)
• | accompanying notes to the unaudited pro forma combined statement of operations; | |
• | separate historical audited financial statements of DRL as of and for the year ended March 31, 2006 which is included and incorporated by reference in this document; | |
• | separate historical audited financial statements of betapharm for the year ended 30 November 2005 included in this document taking into consideration the fact that such year end date is within 93 days of the date when the acquisition was consummated as indicated above. |
F-34
Table of Contents
(in thousands, except share data and where otherwise stated)
Current assets: | ||||
Cash and cash equivalents | Rs.1,357,395 | |||
Inventories | 538,860 | |||
Other current assets | 552,938 | |||
Property, plant and equipment | 372,377 | |||
Intangibles: | ||||
Trademarks | 5,546,314 | |||
Product related intangibles | 13,684,867 | |||
Beneficial toll manufacturing contract | 621,058 | |||
Other assets | 142,541 | |||
Goodwill | 12,848,428 | |||
Total assets | 35,664,778 | |||
Deferred tax liability, net | (7,241,686 | ) | ||
Liabilities assumed | (2,359,771 | ) | ||
Purchase cost | Rs.26,063,321 | |||
Products related intangibles | 14.5 years | |||
Beneficial toll manufacturing contract at betapharm | 58 months |
F-35
Table of Contents
Dr. Reddy’s | ||||||||||||||||||||
Fiscal Year | ||||||||||||||||||||
Ended | betapharm | betapharm | ||||||||||||||||||
March 31, 2006 | (From December 1, 2004 | (From March 3, 2006 | Pro forma | Pro forma | ||||||||||||||||
as reported | to November 30, 2005) | to March 31, 2006) | Adjustments | Combined | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Product sales | Rs. | 24,077,209 | Rs. | 7,695,281 | Rs. | (704,915 | ) | — | Rs. | 31,067,575 | ||||||||||
License fees | 47,521 | — | — | — | 47,521 | |||||||||||||||
Service income | 142,317 | — | — | — | 142,317 | |||||||||||||||
24,267,047 | 7,695,281 | (704,915 | ) | — | 31,257,413 | |||||||||||||||
Cost of revenues | 12,417,413 | 2,471,825 | (315,534 | ) | — | 14,573,704 | ||||||||||||||
Gross profit | 11,849,634 | 5,223,456 | (389,381 | ) | — | 16,683,709 | ||||||||||||||
Operating Expenses: | ||||||||||||||||||||
Selling, general and administrative expenses | 8,028,884 | 3,058,818 | (294,272 | ) | 42,828 | (a) | 10,836,258 | |||||||||||||
Research and development expenses, net | 2,152,950 | — | — | — | 2,152,950 | |||||||||||||||
Amortization expenses | 419,867 | 148,646 | (87,217 | ) | 977,035 | (b) | 1,458,331 | |||||||||||||
Foreign exchange loss | 126,342 | — | 14 | — | 126,356 | |||||||||||||||
Other operating (income) / expenses, net | (320,361 | ) | (84,555 | ) | — | — | (404,916 | ) | ||||||||||||
Total operating expenses | 10,407,682 | 3,122,909 | (381,475 | ) | 1,019,863 | 14,168,979 | ||||||||||||||
Operating Income/(loss) | 1,441,952 | 2,100,547 | (7,906 | ) | (1,019,863 | ) | 2,514,730 | |||||||||||||
Equity loss in affiliates | (88,235 | ) | — | — | — | (88,235 | ) | |||||||||||||
Other (expense) / income, net | 533,606 | (904,636 | ) | 8,035 | (299,786 | )(c) | (662,781 | ) | ||||||||||||
Income before taxes and minority interest | 1,887,323 | 1,195,911 | 129 | (1,319,649 | ) | 1,763,714 | ||||||||||||||
Income taxes (expense)/benefit | (258,390 | ) | (519,473 | ) | 29,861 | 463,085 | (d) | (284,917 | ) | |||||||||||
Minority interest | (76 | ) | — | — | — | (76 | ) | |||||||||||||
Net Income | Rs. | 1,628,857 | Rs. | 676,438 | Rs. | 29,990 | Rs. | (856,564 | ) | Rs. | 1,478,721 | |||||||||
Earnings per equity share | ||||||||||||||||||||
Basic | Rs.10.64 | Rs.9.66 | ||||||||||||||||||
Diluted | Rs.10.62 | Rs.9.64 | ||||||||||||||||||
Weighted average number of equity shares used in computing earnings per share | ||||||||||||||||||||
Basic | 153,093,316 | * | 153,093,316 | * | ||||||||||||||||
Diluted | 153,403,846 | * | 153,403,846 | * |
* | These numbers have been retroactively restated to give effect to the stock dividend distributed on August 30, 2006. |
F-36
Table of Contents
Note 1: | General — Basis of pro forma presentation |
Note 2: | Pro forma adjustments |
(a) | Represents the incremental depreciation charge on the fair valued property, plant and equipment of betapharm. |
(b) | Represents the amortization expense on the intangibles of betapharm amortized over a weighted average useful life of 14.5 years based on management’s estimate of fair values. |
(c) | Represents the incremental interest expense pursuant to the acquisition which primarily represents interest at the rate of 4.65% (being the floating LIBOR rate) on the Euro 400 million loan taken for funding the acquisition of betapharm, the decrease in interest income at the rate of 6.5% (average rate of interest income) resulting from the use of internal funds towards the acquisition of betapharm. However, such incremental interest expense has been partially offset due to a reduction in betapharm’s interest expense pursuant to repayment of certain pre-acquisition debt out of the proceeds of the purchase price related to the acquisition. |
(d) | Represents the tax impact on the above adjustments. |
F-37