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Company Information

Home » Market » Company Information

Dr. Reddy's Laboratories Ltd.

May 19
3928.05 +19.95 (+ 0.51 %)
 
VOLUME : 79507
Prev. Close 3908.10
Open Price 3850.00
TODAY'S LOW / HIGH
3831.85
 
 
 
4014.20
Bid PRICE (QTY.) 0.00 (0)
Offer PRICE (Qty.) 0.00 (0)
52 WK LOW / HIGH
3655.00
 
 
 
5613.65
May 19
3929.45 +23.65 (+ 0.61 %)
 
VOLUME : 1825811
Prev. Close 3905.80
Open Price 3886.00
TODAY'S LOW / HIGH
3829.05
 
 
 
4014.75
Bid PRICE (QTY.) 0.00 (0)
Offer PRICE (Qty.) 0.00 (0)
52 WK LOW / HIGH
3654.00
 
 
 
5614.60
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Market Cap. ( ₹ ) 65396.21 Cr. P/BV 3.71 Book Value ( ₹ ) 1,060.03
52 Week High/Low ( ₹ ) 5615/3654 FV/ML 5/1 P/E(X) 33.51
Bookclosure 15/07/2021 TTM EPS ( ₹ ) 158.80 Div Yield (%) 0.64
AUDITOR'S REPORT
You can view full text of the latest Director's Report for the company.
Year End :2021-03 

Report on the Audit of the Standalone Ind AS Financial Statements Opinion

We have audited the accompanying standalone Ind AS financial statements of Dr. Reddy’s Laboratories Limited (“the Company”), which comprise the Balance sheet as at 31 March 2021, the Statement of Profit and Loss, including the statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the standalone Ind AS financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Companies Act, 2013, as amended (“the Act”) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2021, its profit including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone Ind AS financial statements in accordance with the Standards on Auditing (SAs), as specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the ‘Auditor’s Responsibilities for the Audit of the standalone Ind AS financial statements’ section of our report. We are independent of the Company in accordance with the ‘Code of Ethics’ issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone Ind AS financial statements for the financial year ended 31 March 2021. These matters were addressed in the context of our audit of the standalone Ind AS financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to be communicated in our report. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the standalone Ind AS financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone Ind AS financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying standalone Ind AS financial statements.

Key audit matters

How our audit addressed the key audit matter

Business transfer agreement with Wockhardt Limited (as described in note 1.3(d) of the significant accounting policies and note 2.38 of the

standalone Ind AS financial statements)

During the current year, the Company completed the

Our audit procedures, among others included the following:

acquisition of select divisions of the branded generics business of Wockhardt Limited in India and the territories

We evaluated the design and tested the operating effectiveness of the controls

of Nepal, Sri Lanka, Bhutan and Maldives. The transaction

over the Company’s calculation of the estimated fair values of the intangible

was accounted for as a business combination.

a ssets and the contingent consideration.

The Company’s accounting for the acquisition included determining the fair value of the assets acquired, which

We assessed the competence and independence of the third-party valuer by

primarily included product related intangibles.

refe re nce to their qualifications and experience.

In connection with the acquisition, the Company

We tested the estimated fair value of the intangible assets and the contingent

recognized a contingent consideration liability for

consideration liability, evaluated Company's selected valuation methods and

acquisition consideration that is payable based on a

tested the significant assumptions used in the models. In testing the valuation of

multiple of incremental revenue targets subject to a maximum amount.

contingent consideration, we assessed, among others, the terms of the arrangement and the conditions met for the amounts to become payable.

The accounting for the business combination was complex due to the significant estimation required by

We compared the significant assumptions to current industry, market and

management to determine the fair value of the intangible

economic trends, assumptions used to value similar assets, and to the historical

assets and the contingent consideration. The significant

results of the acquired business.

estimation uncertainty was primarily due to the sensitivity of the respective fair values to the underlying assumptions utilized in the measurement of the fair value

We involved valuation specialist to assist in evaluating the appropriateness of the valuation model, key assumptions used in the valuation models and to test

of the intangible assets and contingent consideration. The Company used a discounted cash flow model to measure the fair value of the intangible assets, which

the model’s computational accuracy.

We tested the arithmetical accuracy of the models.

included significant assumptions such as the discount

We also tested the completeness and accuracy of the underlying data used in the

rate, useful life, and long-term growth rate. The Company measured the contingent consideration at its estimated fair value, and the significant assumptions used to determine the fair value of contingent consideration included forecasted revenue projections, revenue volatility and a risk adjusted discount rate. Considering the above, this has been included as a Key Audit Matter.

model.

Assessment of carrying value of intangible assets, intangible assets under development and goodwill (as described in note 1.3(f) and 1.3(i) of the significant accounting policies, and note 2.2, 2.3 and 2.4 for details and movement in goodwill, other intangible assets and intangible assets under development respectively in the standalone Ind AS financial statements)

As at 31 March 2021, the Company has intangible assets,

Our audit procedures, among others included the following:

including intangible assets under development, of Rs. 22,035 million and goodwill of Rs. 853 million.

• We evaluated the design and tested the operating effectiveness of the

The carrying value of these intangible assets are based

Company's controls in assessing the recoverable value of goodwill, intangible

on future cash flows and there is a risk that the assets may

assets and intangible assets under development.

be impaired if cash flows are not in line with projections.

• We assessed the Company’s methodology applied in determining the CGUs to

Valuation of goodwill and intangible assets is subject to

which these assets are allocated.

management's assessment of recoverable amount, being

• We tested the estimated recoverable value of these assets and assessed the

the higher of the value in use and fair value less costs to

methodologies used by management in deriving the recoverable value and

sell, involving significant judgment and are based on

tested the significant assumptions and the underlying data used by the Company

number of variables and estimates including projection

in its analyses.

of future sales, operating costs and profit margins; appropriate discount rate and terminal value growth

• We compared the significant assumptions to current industry, market and

rate; and probability of technical and regulatory success

economic trends, to the Company's historical data.

factors in applying discounted cash flow valuation

• We performed sensitivity analyses of the significant assumptions to evaluate the

methodology. As the assessment of recoverable amount

potential change in the recoverable values of these assets resulting from

involves significant degree of management judgement,

hypothetical changes in underlying assumptions. We also assessed the

we have identified this a key audit matter.

recoverable value headroom by performing sensitivity testing of key assumptions used.

• We tested the arithmetical accuracy of the models.

• We involved valuation specialist to assist in evaluating the methodologies used and significant assumptions and inputs used to determine the recoverable value of certain intangible assets.

Contingencies, including litigations and tax (as described in note 1.3(k) of the significant accounting policies, and note 2.29 (A) containing details of contingencies in the standalone Ind AS financial statements)

The Company is involved in disputes, lawsuits, claims,

Our audit procedures, among others included the following:

anti-trust, governmental and / or regulatory inspections,

• We evaluated the design and tested the operating effectiveness of controls

inquiries, investigations and proceedings, including

relating to identification and evaluation of claims, proceedings and

patent, tax and commercial matters that arise from time to time in the ordinary course of business. Most of the

investigations at different levels in the Company, and the measurement of

claims involve complex issues. The Company assisted by

provisions for disputes, potential claims and litigation, contingent liabilities and disclosures.

their external legal counsel assesses the need to make

provision or disclose a contingency on a case- to-case

• We obtained a list of ongoing litigations from the Company’s in-house legal

basis considering the underlying facts of each litigation.

counsel. We selected a sample of litigations based on materiality and performed

This area is significant to our audit, since the accounting

inquiries with the said counsel on the legal evaluation of these litigations.

and disclosure for contingent legal and tax liabilities is

We compared the evaluation with the provision or disclosure in the standalone

complex and judgmental (due to the difficulty in

Ind AS financial statements. We tested the underlying computation of the

predicting the outcome of the matter and estimating the

management in relation to the measurement of provision or the contingency.

potential impact if the outcome is unfavourable), and the

• We obtained legal letters from the Company’s external legal advisors with

amounts involved are, or can be, material to the

respect to the matters included in the summary. Where appropriate, we

standalone Ind AS financial statements.

examined correspondences connected with the cases.

• We inspected relevant communication with tax authorities.

• We involved tax experts in assessing the nature and amount of material indirect tax positions and assessed the technical merits based on the correspondence and assessments from the relevant tax authorities.

• We also evaluated the disclosures made in the standalone Ind AS financial statements.

Key audit matters How our audit addressed the key audit matter

Rebates, discounts and other deductions in Revenue (as described in note 1.3(1) of the significant accounting policies of standalone Ind AS financial statements and note 2.12 of the standalone Ind AS financial statements)

Revenue is recognised net of accrual for chargeback, rebates, sales returns and discounts, etc. The estimates relating to the accruals are important given the significance of revenue and also considering the distinctive terms of arrangement with customers. These estimates are complex and requires significant judgement and estimation by the Company for establishing an appropriate accrual. Accuracy of revenues may deviate on account of change in judgements and estimates. Accordingly, the same has been considered as a key audit matter.

Our audit procedures, among others included the following:

• We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the sales deduction processes.

• We also tested management’s controls over the accuracy and completeness of the estimates used to calculate the sales deductions.

• We tested management’s estimated sales deductions and obtained management’s calculations for the respective estimates. We tested management’s estimates over the determination of sales deductions accruals by comparing the rates used in management’s estimate to rates in the underlying contracts and historical sales deductions data.

• We compared the assumptions to contracted prices, historical rebates, discounts, allowances and returns, as applicable to current payment trends.

• We also considered the historical accuracy of the management’s estimates in prior years and assessed the estimated amounts, we evaluated trends in actual sales and discount accrual balances.

• We also tested the underlying data used in management's calculations for accuracy and completeness and verified source data supporting the inventory levels, rebate claims paid subsequent to period end, and volume discounts settled during the period.

• We tested recording of revenue in appropriate period which included the following procedures:

• Performed trend analysis over sales levels as compared to previous periods;

• Verified sample sales transactions near period-end.

Other Information

The Company’s Board of Directors is responsible for the other information. The other information comprises the Statutory reports, Management discussion and analysis, corporate governance and Board’s report included in the Annual report, which we obtained prior to the date of this auditor’s report, and Corporate Overview and letter from Chairman and Co-Chairman included in the Annual report, which is expected to be made available to us after that date. The other information does not include the standalone Ind AS financial statements and our auditor’s report thereon.

Our opinion on the standalone Ind AS financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone Ind AS financial statements, our responsibility is to read the other information and, in doing so, consider whether such other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management for the standalone Ind AS Financial Statements

The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone Ind AS financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the standalone Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone Ind AS Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone Ind AS financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the standalone Ind AS financial statements, including the disclosures, and whether the standalone Ind AS financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone Ind AS financial statements for the financial year ended 31 March 2021 and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the “Annexure 1” a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143(3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

c) The Balance Sheet, the Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;

d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;

e) On the basis of the written representations received from the directors as on 31 March 2021 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2021 from being appointed as a director in terms of Section 164 (2) of the Act;

f) With respect to the adequacy of the internal financial controls with reference to these standalone Ind AS financial statements and the operating effectiveness of such controls, refer to our separate Report in “Annexure 2” to this report;

g) In our opinion, the managerial remuneration for the year ended March 31, 2021 has been paid / provided by the Company to its directors in accordance with the provisions of section 197 read with Schedule V to the Act;

h) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements-Refer Note 2.29(A) to the standalone Ind AS financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts - Refer Note 2.27 to the standalone Ind AS financial statements;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

for S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004 per S Balasubrahmanyam

Partner

Membership Number: 53315 UDIN: 21053315AAAABK8303

Place: Chennai Date : 14 May 2021