Dr.Reddy's Laboratories Ltd
Parent Company Dr.Reddy's Laboratories Ltd
Sector Health care
Tagline/ Slogan Life. Research. Hope
Strong vertically integrated portfolio of products,
businesses & geographies
Active Pharmaceutical Ingredients (APIs), Custom
Pharmaceutical Services (CPS), generics, biosimiler,
differentiated formulations and News Chemical Entities
Target Group Healthcare professionals, retail outlets
Committed to providing affordable and innovative
medicines for healthier lives
1. Company launched Peg-grafeelTM, an inexpensive variety
of pegfilgrastim, used to fight infection in chemotherapy
where company has sold some 1.5 million units of it.
2. Dowpharma/Chirotech acquisition provided proprietary
chiral and biocatalysis technology
3.The acquisition of Beta pharma helped to introduce an
array of generic products and show its presence in the
4. Has a strong workforce of over 15,000 employees
1. Discovery of drugs is a highly unpredictable business
2. Strict govt regulations and policies affects operational
1. Leverage Biologics & Cytotoxic Infrastructure to deal
with the need of Oncology Market
2.New partnerships to develop Biosimiler business
3. Develop cost effective ways of new drug development to
improve business in emerging markets.
1.Preliminary investment for Drug discovery is very high
2. long gestational period for new drug development
3. increasingly stringent regulations for new drug
Bargaining Power of Suppliers
The more diverse distribution channels become
the less bargaining power a single distributor
High levels of competition among suppliers acts
to reduce prices to producers.
"Low Concentration Of Suppliers (Dr Reddys
Lab)" is an easy qualitative factor to overcome,
so the investment will not have to spend much
time trying to overcome this issue.
The easier it is to switch suppliers, the less
bargaining power they have.
Bargaining Power of Customers
When buyers are less sensitive to prices, prices
can increase and buyers will still buy the
When buyers have limited information, they are
at a disadvantage in negotiations with sellers.
When customers cherish particular products
they end up paying more for that one product.
When there are large numbers of customers, no
one customer tends to have bargaining
Intensity of Existing Rivalry
When industries are growing revenue quickly, they
are less likely to compete, because the total
industry size is also growing.
Government policies and regulations can dictate
the level of competition within the industry. When
they limit competition, this is a positive for Dr
reddys lab. …
Large industries allow multiple firms and produces
to prosper without having to steal market share
from each other.
When exit barriers are low, weak firms are more
likely to leave the market, which will increase the
profits for the remaining firms.
Threat of Substitutes
• Substitute is lower quality
• Substantial product differentiation
• Limited number of substitutes
Threat of New Competitors
• High sunk costs limit competition
• Strong brand names are important
• Customers are loyal to existing brands
• Patents limit new competition
• Revenue from sales of active pharmaceutical ingredients and
intermediates in India is recognized on delivery of products
to customers from the factories of the Company.
• Revenue from sales of formulation products in India is
recognized upon delivery of products to distributors by
clearing and forwarding agents of the Company.
• Revenue from export sales is recognized when the
significant risks and rewards of ownership of products are
transferred to the customers, which is based upon the terms
of the applicable contract
Sources of revenue
Changes in general economic conditions.
Company’s ability to successfully implement their strategy.
The market acceptance of and demand for products.
Company’s growth and expansion.
Exposure to market risks.
Financial policy of DR Reddy’s Laboratories
Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
ratio 0.16 0.18 0.19 0.086 0.1
Cover 29.55 25.22 220.9 250.76 53.32
Ratio 0.50 0.65 0.59 0.39 0.57
2013 Net Debt/Equity ratio: 0.20
In 2012 it is running high risk with
debt ratios above 0.5, this company’s financial
growth is more from the borrower’s money, so
it’s not completely safe over the long run. Then
their assets and equity are not sufficient to
fund the total liabilities.
So company increased share capital by issuing
new shares through the various policy’s under
the “Dr. Reddy’s Employees Stock Option Plan"
and it paid long term debt about 38 million.
Debt assets ratio: 0.16
Company has less than 1 debt assets ratio so its
assets are less financed by debt company can
utilize its borrowings the Indian pharmaceutical
industry is more dependent on foreign exports
so the currency exchange rate plays more
important role in generating profits so company
has gone for less debt to protect itself from
Interest Coverage ratio: 29.55
The company having amazing interest coverage
ratio that is 29.55 more than 1.5 company can
borrow money it can enjoy its credit worthiness.
But it is a pharmaceutical industry where they
has lot of regulatory issues from its export
country’s the foreign country may cancel their
licenses because of small faults like Ranbaxy case.
So it’s not good for the company to depend upon
May be the company patented drug alternative
produced by its competitors then it leads to
decrease in revenues.
Dividend policy of Dr.Reddy’s laboratories:
According to dr. reddy’s dividend policy they announce dividends every year from
Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
dividend rate 300 275 225 225 125
Ratio 0.201312 0.255541 0.21315 0.224507 0.187725
dividend yield 0.56 0.83 0.71 0.98 1.5
Dividend rate: 300%
• The company has a good dividend track report and has
consistently declared dividends for the last 15 years.
• On 2013 march Company paid dividend of Rs15 on
every equity share of Rs5 each (300%) for FY2013 that is
2,708 million still companies has 76,564 million reserves
and surplus for its growth and for its R&D operations. The
dividend paid to those shareholders whose names appear
on the register of members of the Company as on 16 July
• Dividend rate: DPS/FVPS or TOTAL Dividend /Share
Dividend payout: 0.2013
Company paid dividend of 0.2% from its
earnings Rs1677. The reason behind that
company focusing on future expansion of its
business in Global Generics,
Pharmaceutical Services and Active
Ingredients, Proprietary Products. To enter
into these markets it has to increase
investments in R&D.
DPS/EPS or TOTAL dividends/PAT
Future plan of action
Commercialization of new products for which the
products are under trials at development stage.
Several new products have been identified after a
thorough study of the market and the processes to
manufacture these products will be developed in
the R&D lab. Total R&D expenditure as a
percentage of total turnover is 8.37% R&D total
expenditure is 6900
Compare to other pharmaceutical company’s
Dr.Reddy paid more dividends even though the
dividend payout is very low.
Dividend yielded: 0.56%
Pharmaceutical industry average dividend
Compare to Indian pharmaceutical industry
average dividend yield is more than DR Reddy’s
dividend yield DR Reddy’s market price of share
is increasing more than the other
pharmaceutical company’s this is the main
reason behind these to have less dividend yield
compared to other companies.
DPS/MVPS or TOTAL dividends/ MARKET cap
Share holding pattern
Shareholding Pattern as on February
PROMOTERS HOLDING: No. of Shares % of Shares
Individuals 36,88,528 2.17
Companies 397,29,284 23.36
Indian Financial Institutions 23,19,877 1.36
Banks 78,972 0.05
Mutual Funds 91,55,830 5.38
Foreign Institutional Investors 582,72,564 34.26
NRIs 22,78,120 1.34
ADRs/Foreign Nationals 294,84,715 17.33
Indian Public & Corporates 251,00,978 14.76
TOTAL 1701,08,868 100
There is a stock split in the year 2001 for
increasing the liquidity in the secondary
market. As the stock price is very high the
company took that decision.
There is a bonus issue of 1:1 in the year 2006
because the previous decision dint changes
the market value of the share this made a
desirable change in the market price.
Year 2013 2012 2011 2010 2009
Management Efficiency Ratio
Inventory Turnover Ratio 5.552504 5.325561 4.929197 5.228936 5.634878
Fixed asset turnover ratio 2.07 1.94 1.75 1.86 1.91
Total Asset turnover ratio 0.84684 0.832986 0.807399 0.86562 0.819032
Number of Days In Working Capital 178.52 174.4 190.22 144.48 217.13
Liquidity and solvency ratio
current ratio 1.518166 1.524372 1.144113 1.449349 1.280006
Quick ratio 1.558352 1.599316 1.206392 1.454345 1.35883
Debt Equity Ratio 0.2 0.23 0.24 0.1 0.12
Gross profit margin (%) 19.83 23.34 18.72 19.7 14.11
Net profit margin 14.75 13.51 16.84 18.48 13.2
operating profit margin 23.54 27.84 23.5 24.76 18.95 23
Working capital and Investing policy
Inventory turnover ratio: Company efficiently and consistently
replenished its inventory more than 5 times every year for the past 5 years.
Fixed Asset turnover ratio: For each rupee of fixed assets company
generates 2.07 rupees of sales which is higher for past 5 years.
Total Asset turnover ratio: For each rupee of total assets company
generates 0.8 rupees of sales which is consistent for past 5 years.
Days in Working capital: Company generates cash from its assets within
178 days in 2013. It is minimum (144) in 2010 and maximum (217) in
Liquidity and Solvency
Current ratio: In 2013, for each one rupee of current liability company has
1.5 rupees of current assets to cover its short term debt.
Quick ratio: In 2013, for each one rupee of current liabilities company has
1.5 rupees of liquid assets to cover short term obligations.
Debt equity ratio: Company has 1 rupee of debt for each 5 rupees of
equity in 2013.
Gross profit margin: In 2013 Gross profit margin percentage tells us that
company uses 19.83% of its revenue to pay for the direct costs of making
goods. The rest are used for operating expenses, interest, taxes and dividend
Net profit margin: In 2013 14.5 % of revenues translated into profits.
Operating profit margin: Net profit of 0.23 rupees is made on each rupee
of sales. Profitability decreases from 2012-2013.