Dr Reddys Laboratories Ltd Management Discussions

Note:

(1) FY2024 repres ents fiscal year 2023-24, i.e., from April 1, 2023, to March 31, 2024, and is used analogously for FY2023 and previously such labelled years.

(2) Unless otherwise stated, financia l data given in this Management Discussion and Analysis is based on our Companys consolidated results, prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. (3) Our reporting currency is in Indian rupees (Rs). In instances where we have also given numbers in United States dollars (US$), we have used an exchange rate of Rs 83.34 = US$ 1 for FY2024. To maintain comparability and to eliminate losses/gains purely on account of exchange rate fluctuations vis-a-vis the previous accounting year, we have used the same exchange rate (i.e., Rs 83.34 = US$ 1) for FY2023, purely for comparison purposes.

Global Pharmaceutical Market Outlook1

The global pharmaceutical market was estimated at around US$ 1.6 tn in CY2023, a US$ 100 bn more than CY2022. In the post pandemic era, pharmaceutical companies have been refreshing their portfolio strategies to continue their growth trajectory, with a combination of mergers and acquisitions (M&A), investments in research and development (R&D), including novel therapies and a higher adoption of digital capabilities. Most of these companies continue to be resilient in the face of increasing competition, the ever-evolving regulatory landscape, pricing and reimbursement pressures, looming patent expirations and growing demands from patients and health care providers for more effective medications and experiences. Recent trends observed in the sector are articulated below.

According to a recent report by IQVIA on use of medicines, the global medicine market is expected to grow more than

US$ 600 bn to reach a size of around US$ 2.3 tn by CY2028 - indicating a compounded annual growth rate (CAGR) of 5%-8%. Availability of innovative therapeutics in developed markets, offset by losses of exclusivity and the lower costs of generics and biosimilars will drive this growth.

Losses of exclusivity (LOE) provide growth opportunities for Generics and Biosimilars

Across the top 10 developed markets, the impact of brand losses of exclusivity between CY2024 and CY2028 is expected to double to around US$ 192 bn versus

US$ 81 bn in the previous five years (See Figure 1). 30% of this is on account of availability of biosimilars. Global biotech spending is set to exceed US$ 890 bn by CY2028, with growth slowing to 9.5%-12.5% due to the impact of biosimilars. The LOE events will provide opportunities for generic and biosimilar players to grow, and also reduce healthcare spends for the patient.

Source: IQVIA Market Prognosis, Sep 2023; IQVIA Institute, Nov 2023.

1. The outlook and the key trends discussed in this section are primarily from ‘The Global Use of Medicines 2024 and ‘Global Trends in R&D 2024 by IQVIA Institute, ‘2023 Global Life Sciences Outlook by Deloitte, ‘World Preview 2023 by Evaluate Pharma and from various other publicly available sources.

Collaborations on Novel Therapies driving growth in medicine use and spends

Pharmaceutical companies are further focussing on innovation and collaboration for creating value. After the post-pandemic pullback in CY2022, biopharmas R&D spending is set to return to growth, albeit at a moderate rate of acceleration (See Figure 2). As per another recent report by IQVIA on R&D trends, large pharma companies spent a record total of US$ 161 bn in R&D in CY2023, an increase of almost 50% since 2018. An average of 65-75 new innovator brand launches per year in the top 10 developed markets are expected over the next five years.

Pharmaceutical companies are looking to augment their traditional drug portfolios with R&D in next-generation therapies. While they are keen to invest in platforms like cell and gene therapy, messenger RNA (mRNA), biologics, antibody drug conjugates (ADCs), they increasingly realise they cannot do it alone. Hence, they are more willing than before to collaborate with other stakeholders in the healthcare ecosystem to share knowledge, expertise, and resources.

Oncology and Immunology continue to be leading Therapy Areas

Oncology and immunology are expected to grow, respectively, at 14%-17% and 2%-5% CAGR through CY2028, respectively. Oncology is projected to add 100 new treatments over the next five years.

Glucagon-like peptide-1 (GLP-1) agonist drugs have seen an uptake since the approvals for obesity indications in the United States (U.S.) in CY2021 and are expected to accelerate further, if insurers and governments support reimbursement. New therapies in Alzheimers and anxiety/depression are expected to drive growth in neurology and mental health spending. Next-generation bio-therapeutics, including cell, gene, and RNA therapies, are expected to grow threefold in the next five years, with an addition of

50 new therapies.

Technology to bring in efficiencies in R&D and

Supply Chain

Companies are expected to build on advances in big data analytics as well as digital innovations to improve R&D efficiencies and enhance the patient outcomes and experiences. With the pandemic accelerating virtual trials, R&D can be transformed from drug discovery and development to regulatory approval through real-world evidence (RWE), new approaches to clinical trials and partnerships, and AI.

Likewise, the volatility of the pandemic and geopolitical concerns affecting logistics as well as the complexity of next-generation treatments such as personalised cell and gene therapies have compelled pharmaceutical companies to streamline their manufacturing processes, make their supply chains agile and sustainable, and enhance real-time tracking through advanced digital systems. To enable this, pharmaceutical companies are now integrating technology with business through the use of AI, Internet of Things (IoT), blockchain, etc.

Taking Patient-Centricity beyond the Pill

Companies are expanding their patient-centric approaches beyond drug and medical device manufacturing to create a digital ecosystem, with the intent of better understanding patient experience and needs. Prescription-based digital therapeutics, decentralised diagnostics and virtual clinical trials using wearable devices are creating an interoperable ecosystem, contributing to patient-centricity.

Preventive health solutions and use of digital tools have the potential to be transformative in the way that healthcare is delivered and managed.

Increasing need for Responsible Leadership

Pharmaceutical companies can make a significant difference with their approaches towards their people, patient and planet. Improving clinical trial diversity, tailoring products specifications to diverse needs (e.g. multilingual packaging) and improving access to affordable, quality medication and innovative solutions can help reduce health equities. Companies need to continue to be mindful of the environmental impacts of their operations including their supply chains as well as antimicrobial resistance issues. Last but not the least, responsible leadership extends to the inclusiveness of their people practices as well as the culture of integrity and high standard of business ethics. Sustainability can provide opportunities for market differentiation, operational efficiency, talent revenue streams, and improved financial performance and can create value for the organisation.

About our Company

Driven by ‘Good Health Cant Wait, Dr. Reddys

Laboratories Ltd (‘Dr. Reddys, ‘DRL, or ‘our Company) is committed to accelerating access to affordable and innovative medicines to help patients lead healthier lives, creating healthy ecosystems and strong communities.

In addition, our wholly-owned subsidiary, Aurigene Oncology Limited (AOL), focussed on the drug discovery business, is reported under the ‘Others segment.

We operate 23 manufacturing facilities and 8 R&D facilities worldwide. We are present in 76 countries with the key geographies being the US, Europe, India, Russia, Commonwealth of Independent States (CIS) countries, Brazil, South Africa, China, Australia, among other markets.

We believe our efforts towards strengthening our core businesses and building businesses of the future will together take us closer to our aspirations (See Figure 3) of consistently delivering double-digit growth, 25% margins on earnings before interest, tax, depreciation and amortisation (EBITDA) as well as the return on capital employed (RoCE), while eventually serving over 1.5 bn patients and creating significant value for the organisation.

Consolidated revenues in FY2024 was Rs 279.2 bn, a growth of 14% compared to the previous year. This was driven by increase in base business volumes, new product launches across our businesses, and the benefit of foreign exchange rate gains. It was partially offset by price erosion in our global generics segment markets in North America and Europe as well as the divestment of some of our non-core brands from India in the previous year.

Global Generics

Revenue from GG in FY2024 was Rs 245.5 bn, a growth of 15% versus the previous year. This was driven by strong performances witnessed in North America, Europe, and Emerging Markets.

In FY2024, GG contributed to around 88% of our Companys overall sales. Some key highlights of the segment for the year were: y Partnered with Shanghai Junshi Biosciences for the development and commercialisation of the anti-PD-1 monoclonal antibody, Toripalimab, in 21 countries y Entered an exclusive development and commercialisation deal with U.S.-based Coya Therapeutics for their product COYA 302, an investigational combination biologic for treatment of the neuro-degenerative disease, ALS (Lou Gehrigs disease) y A total of 181 products were launched across geographies in FY2024 y A total of 241 global filings were done in FY2024

North America Generics (NAG)

In FY2024, our largest market, NAG, contributed to around

53% of our Companys GG sales and 47% of overall sales.

Revenue from the region for FY2024 was Rs 129.9 bn or approximately US$ 1.6 bn, representing an impressive growth of 28% over the previous year. The growth was largely on account of increased volumes in the base business, including Lenalidomide as well as revenues from new products launched in FY2024. The US generic prescription product portfolio which was acquired from Mayne Pharma last year was successfully integrated this year. Growth was further aided by the strengthening of the US dollar against the Indian rupee.

Some key highlights of the segment for the year were: y Forayed into the OTC wellness space in the U.S. with the relaunch of Premama?, an acquired portfolio of dietary supplements y Acquired a leading womens health and dietary supplements portfolio, MenoLabs? y Collaborated with Mark Cuban Cost Plus Drug Company, aimed at increasing access to essential medications for Wilson disease patients y Entered into an in-licensing agreement with Tenshi Kaizen for launch of Loratadine for private label OTC business y Launched 20 new products, including Treprostinil Injection, Regadenoson Injection in the U.S. as well as products acquired from Mayne Pharma y Filed 17 new Abbreviated New Drug Applications (ANDAs) with the US Food and Drug Administration (USFDA) y Cumulative ANDA filings as of March 31, 2024 is 325 y As of March 31, 2024, we had 86 generic filings pending approval from the USFDA. These comprise

81 ANDAs and five New Drug filed under the Section 505(b)(2) route of the U.S Federal Food, Drug, and Cosmetic Act. Of the 86 ANDAs,

50 are Paragraph IV applications, and we believe that 24 of these have the ‘First to File status

Over the last 25 years, our biosimilars business has developed into a fully integrated organisation, with capabilities across development, manufacture and commercialisation of a range of biosimilar products in oncology and immunology. Our current portfolio comprises six commercial products marketed in India, with some products marketed in more than 25 other countries. One of our products, Pegfilgrastim, has been commercialised in the U.S. and in Europe through our partner. In addition, we have a pipeline of products in oncology and auto-immune diseases, in various stages of development for global launches, including a biosimilar Abatacept candidate as well as a biosimilar Rituximab candidate. The USFDA completed a Pre-Approval Inspection

(PAI) at our biologics manufacturing facility in Bachupally for our proposed Rituximab biosimilar candidate, after which we received a Form 483 with nine observations. In April 2024, the USFDA has issued a Complete Response Letter (CRL) to our

Biologics License Application (BLA). The CRL is in reference to ongoing resolution of the afore-mentioned observations, as well as certain aspects pertaining to the BLA. We are currently working on addressing these within stipulated timelines.

We expect approval from the USFDA in the next fiscal.

We are also ramping up manufacturing capacity to support our global expansion plans.

Europe

Revenue from Europe in FY2024 was Rs 20.5 bn, representing a growth of 17% over the previous year.

Applications (NDAs)

The increase in revenues was propelled by high volume growth

. and new product launches across our major markets, which was partially offset by price erosion in some of our products In FY2024, Europe contributed to 8% of our global generics sales and 7% of our overall sales. Some key highlights of the segment for the year were: y Entered the consumer health space in the United Kingdom (UK) through the launch of anti-hay fever medicine Histallay? as an OTC product y Received approval from the Medicines and Healthcare products Regulatory Agency (MHRA) in UK for our proposed bevacizumab biosimilar y Launched the drug-free migraine management device, Nerivio?, in Germany y Launched 42 new products across countries within the segment

Emerging Markets

Revenue from Emerging Markets for FY2024 was Rs 48.6 bn, an increase of 7% as compared to the previous year. The growth was driven by new launches as well as market share expansion, which more than offset the impact of unfavourable forex. In FY2024, Emerging Markets contributed to 20% of our global generics sales and 17% of our overall sales. We launched a total of 106 new products across various countries within the segment this year.

Rs 48.6bn

Revenue from Emerging Markets

Revenue from Russia for FY2024 was Rs 22.3 bn, representing an increase of 5% over the previous year. However, in local currency (Russian Rouble) terms, there was an increase of 16% over the previous year. This growth was largely attributable to higher sales prices and volumes. IQVIA ranked us 15th in terms of sales in Russia for the twelve months ended March 31, 2024, and we continue to outperform the market growth in terms of volumes in Russia during the same period.

Revenue from CIS countries and Romania for FY2024 was Rs 8.6 bn, which remained broadly flat as compared to the previous year. The benefit of higher sales prices was offset by decreases in sales volumes.

Revenue from our Rest of the World markets (which includes Brazil, China, South Africa, Australia, and certain other markets) for FY2024 was Rs 17.7 bn, representing an increase of 13% over the previous year. The increase is largely attributable to new products launched during the year as well as increase in sales volumes in Brazil, South Africa and Colombia partially offset by price erosion

Outlook

Our focus is to improve the market share in the chosen therapy areas through growth in the existing products as well as new product launches, supported by sales and marketing excellence. Our medium-term strategy for the segment is to build a healthy portfolio pipeline, including oncology products, coupled with the expansion of biosimilars. We are also focussed on growing ‘Mega

Brands both in prescription and OTC segments. We will further scale up in our major markets, which include Russia, China, Brazil, and South Africa and add new geographies by leveraging our in-house global portfolio of generics and biosimilars and seeking in-licensing opportunities. In the longer term, our focus would be to build a differentiated portfolio including nutritional solutions, biologics,

NCEs/NBEs as well as offerings like Disease management & Direct-to-Customer.

India

Revenue from India in FY2024 was Rs 46.4 bn, a decline of 5% compared to the previous year. In FY2024, India contributed to 19% of our global generics sales and 17% of our overall sales. This decline in revenues was largely due to the divestment of a few non-core brands in the previous year, offset by revenues from new product launches and higher sales prices. Excluding divestment income from base business; India market grew in mid-single digit for the year. We continued to strategically collaborate to further strengthen our position in the Indian Pharmaceutical Market (IPM) as well as to progress on the future growth levers of consumer healthcare, novel molecules, and digital therapeutics. As of March 31, 2024, we had a total of 391 branded products in India and a field force of over 8,600 sales representatives to detail our product portfolio.

According to IQVIA in its report for the 12-month period ended March 31, 2024, our secondary sales grew by 7.3%. Our market rank was 10th as per Moving quarterly total (MQT) March 2024 and 11th as per Moving Annual Total (MAT) in terms of sales value. Some key highlights of the segment during the year were: y Became the 2nd largest vaccines player in India, through an exclusive partnership with Sanofi to distribute vaccine brands in India y Launched drug-free migraine management device, Nerivio?, our first digital therapeutic product in India y Forayed into trade generics to increase our participation in the retail pharmaceutical market y Entered into a licensing agreement with U.S.-based biopharma, Pharmazz, to market first-in-class Centhaquine

(Lyfaquin?) for treatment of hypovolemic shock in India y Partnered with Bayer to distribute the second brand for heart failure management drug, Vericiguat, in India y Partnered with Jiangsu Hengrui Pharmaceuticals Co. Ltd. to promote its oral breast cancer NCE, Pyrotinib, in India y Entered into an exclusive licence agreement with Wellington Zhaotai Therapies Limited to develop and commercialise a Chimeric antigen receptor - T (CAR-T) cell therapy asset, ‘WL-002 in India y CAR-T asset ‘DRL-1801 was approved for clinical trial in India y 14 brands are among the top 300 brands of the Indian pharmaceuticals market such as Omez, Voveran, Atarax, Econorm, Ketorol, Razo-D, Zedex, and the like y 22 of our brands had revenues in excess of Rs 1 bn in

FY2024 as per IPM data y Launched 13 new brands in the country

Pharmaceutical Services and Active Ingredients (PSAI)

The PSAI business recorded revenues of Rs 29.8 bn in FY2024, an increase of 3% compared to the previous year. In FY2024, PSAI contributed to 11% of our overall sales. This increase was largely on account of new products launched during the year and benefits from favourable currency rate fluctuations, partially offset by lower sales volumes and price erosion. In FY2024, we filed 133 drug master files (DMFs) globally , of which 11 were in the U.S.

Cumulatively, our total active DMFs filed worldwide as of March 31, 2024 were 1,861, including 251 active DMFs filed in the U.S.

The PSAI segment primarily consists of our business of manufacturing and marketing active pharmaceutical ingredients (APIs) and intermediates, which are the principal ingredients for finished pharmaceutical products. APIs become finished pharmaceutical products when the dosages are fixed in a form ready for human consumption, such as a tablet, capsule, or liquid, using additional inactive ingredients. We also serve our customers with incremental value-added products, including semi-finished and formulations. This year, we entered into an agreement with the Bill & Melinda Gates Foundation to develop injectable contraception drug for low and middle-income countries in Asia and Sub-Saharan Africa, including India. This initiative will strengthen our portfolio in the women healthcare space.

Our PSAI segment also includes our pharmaceutical services business, under the entity, Aurigene Pharmaceutical Services Limited. Our objective is to be the preferred partner for innovator pharmaceutical companies, providing a complete range of services that are necessary to support their innovations to bring a new drug to the market quickly and efficiently.

Others

Others segment recorded revenues of Rs 3.9 bn in FY2024, an increase of 29% compared to the previous year.

In FY2024, this segment contributed to 1% of our overall sales. 84% of the segments revenues is contributed by Aurigene Oncology Limited (AOL), which is our wholly-owned subsidiary and is a clinical stage biotech company committed to bringing novel therapeutics for the treatment of cancer and inflammation. It recorded arevenue of Rs 3.3 bn in

FY2024, an impressive growth of 30% compared to the previous year.

Quality Update

Our culture of quality is demonstrated in our relentless focus on building a quality mindset, as well as our continued investment in people and systems at each of our plants. We have a robust quality processes and systems in place at our developmental and manufacturing facilities to ensure that every product is safe and of high quality. In addition, we have integrated ‘Quality by Design to build quality into all processes and use quality tools to minimise process risks. We continue to invest in the training of our quality professionals to enable them to follow the high standards of quality that we are committed to. Our finished products undergo rigorous levels of testing before they are brought to the market. We also have a global pharmacovigilance programme to monitor the safety of our products.

We continuously undertake operational improvements, such as shop floor supervision and process walks, engineering, implementation of electronic batch records, and Laboratory Information Management Systems (LIMS) in quality control to eliminate manual errors and focus on the robustness of our processes. We continue to focus on simplifying and systematising standard operating procedures and batch records on the shop floor, strengthening controls with respect to Information Technology (IT) and shop-floor training programmes, standardisation of instrument calibrations and improving the rigour of investigations and document control systems. We strive towards continually strengthening our quality management systems and processes, in line with our commitment to producing safe and efficacious products of the highest product quality to the patient.

Our facilities are fully compliant with USFDA regulations and are maintained to be ‘inspection ready for any regulator at all times. Currently, the status for all our other facilities is either ‘NAI, which means ‘No Action Indicated or ‘VAI, which means ‘Voluntary Action Indicated.

Digital Transformation Update

Our pursuit of result-oriented digitalisation follows an integrated approach, aligned with broader organisational objectives, to drive productivity at scale within the Company and to enhance patient outcomes. We continue to collaborate with industry experts in our digital journey.

Our digital strategy has three areas of focus:

People Update

In FY2024, our initiatives aimed at enhancing people productivity, talent development, and organisational effectiveness, leveraging automation and digitalisation to reduce human intervention. We continue to take proactive steps to hire, retain talent and ensure continuity of business delivery through talent acquisition, talent management and succession planning initiatives.

Productivity enhancement, successful transition to role-based organisation and appropriate organisational structure has supported improved business performance. Emphasis was placed on capability building initiatives and personalised learning journeys aimed at equipping our talent with the requisite skills to effectively navigate forthcoming business challenges and thrive in evolving landscapes. Unpinning our people practices is our value of ‘respect for the individual, which has enabled us to create a fair and inclusive workplace for our employees.

To read more about our detailed people practices and initiatives, please refer to page 36 of our Integrated Report.

Financial Update

Table 1 gives the abridged IFRS consolidated revenue performance of Dr. Reddys for FY2024 compared to FY2023.

Table 2 gives the consolidated income statement.

Particulars		FY2024			FY2023		Growth %
	(US$)	Rs	%	(US$)	Rs	%
Global Generics	2,945	245,453	87.9	2,565	213,768	86.9	15
North America		129,895			101,704		28
Europe*		20,511			17,603		17
India		46,407			48,932		(5)
Emerging Markets#		48,640			45,529		7
PSAI	358	29,801	10.7	349	29,069	11.8	3
Others	47	3,910	1.4	37	3,042	1.2	29
Total	3,350	279,164	100	2,951	245,879	100	14

*Europe primarily includes Germany, the UK, Italy, France and Spain.

#Emerging markets refer to Russia, other CIS countries, Romania and Rest of the World markets.

TABLE 2 CONSOLIDATED INCOME STATEMENT (IN MN)

Particulars		FY2024			FY2023		Growth %
	(US$)	Rs	%	(US$)	Rs	%
Revenues	3,350	279,164	100.0	2,950	245,879	100.0	14
Cost of Revenues	1,387	115,557	41.4	1,278	106,536	43.3	8
Gross Profit	1,963	163,607	58.6	1,672	139,343	56.7	17
Operating Expenses
Selling, General & Administrative expenses	926	77,201	27.7	816	68,026	27.7	13
Research and Development expenses	274	22,873	8.2	233	19,381	7.9	18
Impairment of non-current assets	0	3	0.0	8	699	0.3	(100)
Other operating expenses/ (income)	(50)	(4,199)	(1.5)	(71)	(5,907)	(2.4)	(29)
Results from operating activities	813	67,729	24.3	686	57,144	23.2	19
Finance expense/(income), net	(48)	(3,994)	(1.4)	(34)	(2,853)	(1.2)	40
Share of loss/(profit) of equity accounted	(2)	(147)	(0.1)	(4)	(370)	(0.2)	(60)
investees, net of income tax
Profit before income tax 862 71,870 25.7 724	60,367	24.6	19
Income tax expense	194	16,186	5.8	184	15,300	6.2	6
Profit for the period	668	55,684	19.9	541	45,067	18.3	24
Diluted Earnings Per Share (EPS)	4.01	334.02		3.25	270.85		23

Revenues

Total revenues grew by 14% to Rs 279,164 mn in FY2024. This was driven by increase in base business volumes, new product launches across our businesses, and the benefit from foreign exchange rate gains. It was partially offset by price erosion in our GG segment markets of NAG and Europe as well as the divestment of some of our non-core brands from India in the previous year.

Gross

Gross profit increased by 17% toRs 163,607 mn in FY2024. This led to a gross profit margin of 58.6% in FY2024, representing an increase of 193 basis points compared to the previous year. The gross profit margin for GG was 62.9%. This increase was on account of favourable product mix, higher government incentive, productivity cost savings, partially offset by price erosion in select markets like U.S. and Europe and brand divestment income during previous period. For the PSAI business, the gross profit margin was 23.2%. The improvement in gross margin is on account of leverage in overall manufacturing overheads due to higher sales, favourable forex and higher government benefits.

Selling, General, and Administrative (SG&A) Expenses

SG&A expenses increased by 14% to Rs 77,201 mn in FY2024. The increase is largely on account of higher investments in sales and marketing activities to strengthen our existing brands, new business initiatives including scaling up OTC and consumer health and wellness business, digitalisation initiatives and building strong commercial capabilities.

SG&A accounted for 27.7% of sales in FY2024 in line with last year.

Research and Development (R&D) expenses

R&D expenses for FY2024 were Rs 22,873 mn, or 8.2% of revenue, versus 7.9% in FY2023. The YoY increase by 18% is primarily on account of increase in number of filings and our developmental efforts to build a healthy pipeline of complex products across our markets for both small molecules and biosimilars.

We are committed to building, safeguarding and strengthening our research skills and stimulating innovative thinking throughout our organisation, which allows us to pursue operational excellence and value creation.

Impairment of Non-Current Assets

In FY2024, there has been a charge of Rs 3 mn on impairment of non-current assets, in comparison to Rs 699 mn in the previous year. The charge in the previous year was related to the medical cannabis-based business acquired from

Nimbus Health GmbH and an impairment of the Companys product-related intangibles due to adverse market conditions.

Net Other Operating Income

In FY2024, Net Other Operating Income was Rs 4,199 mn, versus Rs 5,907 mn in the previous year. The net other income was lower for FY2024, primarily on account of higher net other income recognised in the previous year from a settlement agreement with Indivior Inc., Indivior UK Limited, and Aquestive Therapeutics Inc. as well as gain on sale of other intangible assets.

Net Finance Income

Net Finance Income was Rs 3,994 mn in FY2024, versus Rs 2,853 mn in FY2023. The increase was largely on account of higher profits from sale of investments, partially offset by lower gain on currency exchange rate fluctuations.

Net Profit

Net Profit increased by 24% toRs 55,684 mn in FY2024, versus Rs 45,067 mn in the previous year. This represents a

PAT margin of 19.9% of revenues versus 18.3% in FY2024. The effective tax rate was lower for full fiscal FY2024 due to adoption of corporate tax rate under section 115BAA of the Income Tax Act of India.

Liquidity and Capital Resources

The data is given in Tables 3 and 4. Net Cash generated from operating activities in FY2024 was Rs 45,433 mn. Investing activities net outflow amounting toRs 40,283 mn in FY2024 includes net investment in property, plant, equipment, and intangibles to build capacity and capabilities for future business growth. Cash outflow from financing activities the fiscal wasRs 3,763 mn. Closing cash and cash equivalents on March 31, 2024, was Rs 7,107 mn.

TABLE 3 CONSOLIDATED CASH FLOW

ACCORDING TO IFRS

( mn)

Particulars	FY2024	FY2023
Opening Cash and Cash Equivalents	5,779	14,852
Cash flows from:
(a) operating activities	45,433	58,875
(b) investing activities	(40,283)	(41,373)
(c) financing activities	(3,763)	(26,861)
Effect of exchange rate changes	(59)	286
Closing Cash and Cash Equivalents	7,107	5,779

TABLE 4 CONSOLIDATED WORKING CAPITAL ( MN)

Particulars	As on March 31, 2024	As on March 31, 2023	Change
Trade Receivables (A)	80,298	72,486	7,812
Inventories (B)	63,552	48,670	14,882
Trade Payables (C)	30,919	26,444	4,475
Working Capital (A+B-C)	112,931	94,712	18,219
Other Current Assets (D)	104,199	85,784	18,415
Total Current Assets (A+B+D)	=RIGHT>248,049	206,940	41,109
Short & Long-term loans and borrowings, current portion (E)	14,030	12,194	1,836
Other Current Liabilities (F)	51,090	47,207	3,883
Total Current Liabilities (C+E+F)	96,039	85,845	10,194

Debt-equity

In FY2024, long-term borrowings, including the current and non-current portion, increased by Rs 1,215 mn as compared to FY2023. On March 31, 2024, our Companys debt-to-equity ratio was 0.07, which is marginally higher than that on March 31,

2023, which was at 0.06. Table 5 gives the data. The net debt-to-equity position was at (0.23) versus (0.21) last year.

TABLE 5 DEBT AND EQUITY POSITION ( MN)

Particulars	As on March 31, 2024	As on March 31, 2023	Change
Total Shareholders Equity	280,550	230,991	49,559
Long-term debt (current portion)	1,307	4,804	(3,497)
Long-term debt (non-current portion)	5,990	1,278	4,712
Short-term borrowings	12,723	7,390	5,333
Total Debt	20,020	13,472	6,548

Internal Controls

Our Companys corporate governance framework includes well-developed systems of internal controls, designed to provide reasonable assurance on achievement of organisational objectives.

The effectiveness of these controls are ensured through clear policies and procedures, process automation, training and development of employees and segregation of responsibilities. Our internal audit team is an independent assurance and advisory function, responsible for evaluating and improving the effectiveness of risk management, control and governance processes. The Audit Committee of the Board monitors the performance of the internal audit team on a periodic basis through review of audit plans, audit findings and issue resolution.

To read more about our internal control systems, please refer to pages 88 and 177 of our Integrated Annual Report.

Enterprise-wide Risk Management (ERM) Update

Our ERM function focusses on the identification, assessment and mitigation of key sectoral, business, operational and strategic risks. Towards this end, the team collaborates with businesses as well as functions such as quality assurance, compliance, information security, safety, HR, internal audit, and other assurance teams. It also monitors external trends on liabilities and risks related to the industry.

The Integrated Assurance Forum and the Executive Risk Management Committee are management-level committees that help the ERM function to prioritise organisation-wide risks and steer mitigation efforts, in line with our risk appetite.

Mitigation work carried out by the ERM team is regularly reviewed, and the progress of key risks is discussed with the Executive Risk Management Committee and senior management, as well as at the Risk Management Committee of the Board of Directors.

During FY2024, risk mitigation efforts included review of risks and mitigations related to risks identified (See Figure Figure 4: Risks Identified

Environmental, Social and Governance (ESG) Update

In 2022, we announced our ESG vision for 2030 in line with our commitment to make a positive impact in society and to ensure long-term business continuity. We have in place a strong, multi-level governance structure across our Company to advance our sustainability agenda. We continue to embed and integrate sustainability into our decision-making and strategy, identify tangible actions with defined timelines

Outlook

In line with our purpose of accelerating access to affordable and innovative medicines, we will continue to leverage our diversified geographical presence, robust product pipeline across generics and biosimilars, and our commitment to a sustainable tomorrow to deliver sustained growth momentum and financial outcomes as well as long-term value for our stakeholders.

In FY2024, beyond our core businesses, we have made strategic moves towards providing innovative, patient-centric healthcare solutions to our patients, with the intent of addressing unmet needs and improving their lives (See Figure 5). While we will to track our progress and agree on metrics to evaluate our performance. To better report on the linkages between our strategy, governance, and financial performance in an

ESG context, we have produced our second publication of the integrated report in FY2024.

To read more about our detailed ESG performance and initiatives, please refer to pages 30 to 59 and page 108 of this Integrated Report. focus on integrating these efforts with our existing business, we will also continue to collaborate and partner to build the businesses within our identified new areas of growth – novel assets, consumer health/ OTC and digital therapeutics.

We will continue to exercise financial prudence and drive operating efficiency and productivity, while also investing in quality systems, strengthening our R&D efforts, and invest in talent and digital initiatives. Powered by a strong balance sheet and robust cash generation in FY2024, we will continue to complement our organic growth efforts with pragmatic inorganic initiatives.

Cautionary Statement

The management of Dr. Reddys has prepared and is responsible for the financial statements that appear in this report. These are in conformity with IFRS, as issued by the International Accounting Standards Board, and accounting principles generally accepted in India and, therefore, include amounts based on informed judgements and estimates. The management also accepts responsibility for the preparation of other financial information that is included in this report. This write-up includes some forward-looking statements, within the meaning of section 27A of the U.S. Securities Act of 1933, as amended and section 21E of the U.S. Securities Exchange Act of 1934, as amended.

The management has based these forward-looking statements on its current expectations and projections about future events. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. These factors include, but are not limited to, changes in local and global economic conditions, changes in government regulations, ability to successfully implement the strategy, manufacturing or quality control outcomes, ability to achieve expected results from investments in our product pipeline, change in market dynamics, technological change, currency fluctuations, and exposure to various market risks. By their nature, these expectations and projections are only estimates and could be materially different from actual results in the future.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect managements analysis and assumptions only as of the date hereof. In addition, readers should carefully review the other information in this annual report and in our periodic reports and other documents filed with all the stock exchanges.

Boards Report

Dear Member,

Your Directors are pleased to present the 40th Annual Report of the Company for the year ended March 31, 2024.

FINANCIAL HIGHLIGHTS AND COMPANY AFFAIRS

Table 1 gives the consolidated and standalone financial highlights of the Company based on Indian Accounting

Standards (Ind AS) for FY2024 (i.e. from April 1, 2023 to March 31, 2024) compared to the previous financial year.

The Companys consolidated total income for the year was

Rs 289.1 bn, which was up by 12% over the previous year.

Profit before tax (PBT) wasRs 72.0 bn, representing an increase of 19% over the previous year.

The Companys standalone total income for the year was Rs 203.5 bn, which was up by 16% over the previous year. PBT was Rs 57.9 bn, which was higher by 50% over the previous year.

Revenues from lines of business and geographies given below are from the Companys IFRS results.

Revenues from Global Generics were up by 15% and stood at Rs 245.5 bn. There was growth across businesses of North America, Europe and Emerging Markets.

Revenues from North America stood at Rs 129.9 bn, registering a strong year on year growth of 28%. This was largely on account of increase in volumes for some of our existing products and revenue contribution from acquisitions during the year, partly offset by price erosions in some of our products. During the year, the Company filed 17 Abbreviated

New Drug Applications (ANDAs) in the United States (US).

As of March 31, 2024, there were 86 generic filings awaiting approval with the US Food and Drug Administration (USFDA), comprising 81 ANDAs and 5 NDAs filed under Section 505(b) (2) of the Federal Food, Drug and Cosmetic Act.

Revenues from Emerging Markets were Rs 48.6 bn, showing a year-on-year growth of 7%.

Revenues from India stood at Rs 46.4 bn, a year-on-year decline of 5%. Excluding the income from divestment of non-core brands in the previous year, on a re-based comparator, India growth is in mid-single digit.

Revenues from Europe were Rs 20.5 bn, a year-on-year growth of 17%.

Revenues from Pharmaceutical Services and Active Ingredients (PSAI) stood at Rs 29.8 bn, which was higher by 3% compared to previous year. During the year, the Company filed 133 Drug Master Files (DMFs) worldwide, including 11 filings in the US.

TABLE 1 FINANCIAL HIGHLIGHTS ( mn)

PARTICULARS	CONSOLIDATED		STANDALONE
	FY2024	FY2023	FY2024	FY2023
Total Income	289,054	257,252	203,461	175,538
Profit before depreciation, amortization,impairment tax and	86,566	73,316	67,929	47,943
Depreciation and amortization	14,700	12,502	9,756	9,232
Impairment of non-current assets	3	699	260	51
Profit before tax and before share of equity accounted investees	38,660	71,863	60,115	57,913
Share of profit of equity accounted investees, net of tax	147	370	-	-
Profit before tax	72,010	60,485	57,913	38,660
Tax Expense	16,231	15,412	14,493	12,532
Net Profit for the year	55,779	45,073	43,420	26,128
Opening balance of retained earnings	200,228	160,341	175,048	154,030
Net profit for the year	55,779	45,073	43,420	26,128
Other comprehensive income/(loss)	-	-	1	-
Dividend paid during the year	(6,648)	(4,979)	(6,648)	(4,979)
Transfer to SEZ re-investment Reserve, net	-	(131)	-	(131)
Transfer from SEZ re-investment Reserve, net	233	-	233
Transfer to Debenture Redemption Reserve	-	(76)	-	-
Transfer from Debenture Redemption Reserve	380	-	-
Closing balance of retained earnings	249,972	200,228	212,054	175,048

DIVIDEND

Your Directors are pleased to recommend a dividend of

Rs 40 (800%) on every equity share of Rs 5/-, for FY2024. As per the Dividend Distribution Policy of the Company, the amount of maximum dividend pay-out (including interim dividend) can be up to 20% of the cash profit under consolidated financial statement prepared under Indian

Accounting Standards (IND-AS). The recommended dividend is in line with the provision of the said policy.

The dividend, if approved at the 40th Annual General Meeting ("AGM") will be paid to those members whose names appear on the register of members of the Company as of end of the day on July 16, 2024. The total dividend pay-out will be approximately Rs 667 cr, resulting in a pay-out of 9.5% of the consolidated cash profit for the financial year ended March 31, 2024. Such dividend will be taxable in the hands of the members in terms of the provisions of the Income Tax Act, 1961.

In terms of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations"), the Dividend Distribution Policy, is available on the Companys website on https://www.drreddys.com/cms/cms/sites/default/ files/2021-12/htmlCode%20%284%29.pdf

TRANSFER TO RESERVE

The Company has not proposed to transfer any amount to the general reserve for the year ended March 31, 2024.

SHARE CAPITAL

The paid-up share capital of your Company increased by

Rs 1.45 mn from Rs 832.64 mn to Rs 834.09 mn in FY2024 due to allotment of 290,390 equity shares of Rs 5 each, on exercise of stock options by eligible employees through the Dr. Reddys Employees Stock Option Scheme, 2002 and Dr. Reddys Employees ADR Stock Option Scheme, 2007. The equity shares issued pursuant to the above Employee Stock Option Schemes rank pari-passu with the existing equity shares of the Company

PUBLIC DEPOSIT

The Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013 (the "Act").

CHANGE IN THE NATURE OF BUSINESS, IF ANY

During the year, there was no change in the nature of business of the Company. Further there was no significant change in the nature of business carried on by its subsidiaries.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION BETWEEN THE END OF THE FINANCIAL YEAR AND DATE OF THE REPORT

There have been no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this report.

SUBSIDIARIES AND ASSOCIATES

The Company has forty-one overseas subsidiaries companies (including step down subsidiaries), ten subsidiary companies (including step-down subsidiary) in India and two joint venture company as on March 31, 2024.

During the FY2024, Dr. Reddys Laboratories SA, in

Switzerland, a wholly-owned subsidiary of the Company, has incorporated a wholly-owned subsidiary in Jamaica, named "Dr. Reddys Laboratories Jamaica Limited". Accordingly, Dr. Reddys Laboratories Jamaica Limited is a step-down wholly-owned subsidiary of the Company w.e.f. September 25, 2023. Dr. Reddys Nutraceuticals Limited has been incorporated as wholly-owned subsidiary of the Company in India on March 14, 2024.

Section 129(3) of the Act, states that where the Company has one or more subsidiaries or associate companies, it shall, in addition to its financial statements, prepare a consolidated financial statements of the Company and of all subsidiaries and associate companies in the same form and manner as that of its own and also attach along with its financial statements, a separate statement containing the salient features of the financial statements of its subsidiaries and associates.

Hence, the consolidated financial statements of the

Company and all its subsidiaries and associates, prepared in accordance with Ind AS 110 and 111 as specified in the

Companies (Indian Accounting Standards) Rules, 2015, forms part of the Integrated Annual Report. Moreover, a statement containing the salient features of the financial statements of the Companys subsidiaries and joint ventures in the prescribed Form AOC-1, is attached as Annexure I to this Boards Report. This statement also provides details of the performance and financial position of each subsidiary and joint venture.

In accordance with Section 136 of the Act, the audited financial statements and related information of the Company and its subsidiaries, wherever applicable, are available on the Companys website: www.drreddys.com. These are also available for inspection during regular business hours at our registered office in Hyderabad, India and/or in electronic mode.

MATERIAL SUBSIDIARIES

In terms of Regulation 16(1)(c) of the SEBI Listing Regulations, Material Subsidiary shall mean a subsidiary, whose income or net worth exceeds ten percent of the consolidated income or net worth, respectively, of the Company and its subsidiaries in the immediately preceding accounting year. Accordingly, the Company has four material overseas subsidiary companies as on March 31, 2024, namely, Dr. Reddys Laboratories Inc. (USA), Dr. Reddys Laboratories SA (Switzerland), Dr. Reddys Laboratories LLC (Russia) and Reddy Holding GmbH (Germany).

Further, in terms of Regulation 24(1) of the SEBI Listing

Regulations, at least one Independent Director on the Board of the Company shall be a Director on the Board of an unlisted material subsidiary, i.e. a subsidiary, whose income or net worth exceeds twenty percent of the consolidated income or net worth respectively, of the Company and its subsidiaries in the immediately preceding accounting year. In compliance with the said provisions, Mr. Arun M Kumar (DIN: 09665138), Independent Director of the Company, was appointed as a Director on the Board of Dr. Reddys Laboratories Inc. (USA) w.e.f. September 21, 2022.

Dr. Claudio Albrecht (DIN: 10109819), Independent Director of the Company, has been appointed as a Director on the Board of Dr. Reddys Laboratories SA (Switzerland) on July 6, 2023. Mr. Sridar Iyengar (DIN: 00278512), ceased as the Director of Dr. Reddys Laboratories SA (Switzerland) on July 30, 2023, consequent to his retirement as an Independent Director of the Company.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The Company makes investments or extends loans/ guarantees to its wholly-owned subsidiaries for their business purposes.

Details of loans, guarantees and investments covered under Section 186 of the Act, along with the purpose for which such loan or guarantee was proposed to be utilised by the recipient, form part of the notes to the financial statements provided in this Integrated Annual Report.

CORPORATE GOVERNANCE AND ADDITIONAL SHAREHOLDERS INFORMATION

A detailed report on the Corporate Governance systems and practices of the Company is given in a separate chapter of this Integrated Annual Report. Similarly, other information for shareholders is provided in the chapter on Additional Shareholders Information. The Company has also formulated a Group Governance Policy to monitor governance of its unlisted subsidiaries across the globe.

A certificate from M/s. S.R. Batliboi & Associates LLP, Statutory Auditors of the Company, confirming compliance with the conditions of corporate governance is attached to the chapter on Corporate Governance.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed report on the Management Discussion and Analysis in terms of Regulation 34 of the SEBI Listing Regulations is provided as a separate chapter in the Integrated Annual Report.

BOARD OF DIRECTORS AND KEY MANAGERIAL

PERSONNEL

APPOINTMENTS

During the year, the appointment of Dr. Claudio Albrecht (DIN: 10109819), as an Independent Director of the

Company, with effect from May 10, 2023, was approved at the Annual General Meeting held on July 27, 2023.

Further, the appointment of Dr. Alpna Seth (DIN: 01183914) and Mr. Sanjiv Mehta (DIN: 06699923), as an Independent

Director of the Company, with effect from September 19,

2023 and December 29, 2023 respectively, were approved by the members through Postal Ballot, on November 15, 2023 and February 14, 2024 respectively.

The Board opined that the above Independent Director possessed requisite experience and expertise (including the proficiency).

RETIREMENT AND RESIGNATION

Mr. Sridar Iyengar (DIN: 00278512) has retired as an

Independent Directors of the Company with effect from close of business hours on July 30, 2023, after completion of his second term of directorship which was from July 31, 2019 to July 30, 2023.

The Board placed on record its sense of deep appreciation for the services rendered by the above Independent Director to the Company.

RETIREMENT BY ROTATION

Mr. K Satish Reddy (DIN: 00129701), Chairman, is liable to retire by rotation at the forthcoming 40th AGM and being eligible, seeks re-appointment. For reference of members, a brief profile of Mr. K Satish Reddy DIN: 00129701) is given in the Chapter on Corporate Governance and in the Notice convening the 40th AGM.

RE-APPOINTMENT OF WHOLE TIME DIRECTOR

During the year, the members of the Company at its AGM held on July 27, 2023, approved the re-appointment of Mr. G V Prasad, a director retire by rotation, designated as Co-Chairman and Managing Director of the Company.

None of the Directors is disqualified under Section 164 of the Act. They are not debarred from holding the office of Director pursuant to any order of SEBI or any other authority. Further details are provided in the chapter on

Corporate Governance.

CHANGES IN KEY MANAGERIAL PERSONNEL (KMP)

During the year under review, there were no changes in the Key Managerial Personnel of the Company. As on the date of this report, the Company has the following Key Managerial Personnel as per Section 2(51) and Section 203 of the Act:

SL.	NAME OF KMP	DESIGNATION
NO.
1	Mr. G V Prasad	Co-Chairman and Managing Director
2	Mr. Erez Israeli	Chief Executive Officer
3	Mr. Parag Agarwal	Chief Financial Officer
4	Mr. K Randhir Singh	Company Secretary, Compliance
		Officer & Head-CSR

The Board at its meeting held on May 7, 2024 took note of the retirement of Mr. Parag Agarwal as the Chief Financial Officer of the Company, effective from close of working hours on July 31, 2024, consequent to his decision to expand his involvement in philanthropy for the cause of making a meaningful difference to the lives of the most vulnerable segment of the society– the voiceless animals. The Board also approved the appointment of Mr. M V Narasimham, as the Chief Financial Officer of the Company with effect from

August 1, 2024.

DECLARATION BY INDEPENDENT DIRECTORS

In accordance with Section 149(7) of the Act, each

Independent Director has confirmed to the Company that he or she meets the criteria of independence laid down in Section 149(6) of the Act, and is in compliance with Rule

6(3) of the Companies (Appointment and Qualifications of

Directors) Rules, 2014 and Regulation 16(1)(b) of the SEBI

Listing Regulations. Further, each Independent Director has affirmed compliance to the Code of Conduct for Independent

Directors as prescribed in Schedule IV of the Act. The Board has taken on record such declarations after due assessment of their veracity.

BOARD EVALUATION

Pursuant to the provisions of the Act, and the SEBI Listing Regulations, the Board has carried out performance evaluation of its own performance, the Directors (including the Chairman) individually, as well as the evaluation of the working of the Committees. The recommendations were discussed with the Board and individual feedback was provided. The Board evaluation process was completed for

FY2024. Further details of Board evaluation are given in the chapter on Corporate Governance.

APPOINTMENT OF DIRECTORS AND REMUNERATION POLICY

Assessment and appointment of members to the Board are based on a combination of criteria that includes ethics, personal and professional stature, domain expertise, gender diversity and specific qualifications required for position. For appointment of an Independent Director, the independence criteria defined in Section 149(6) of the Act, and Regulation 16(1)(b) of the SEBI Listing Regulations are also considered.

In accordance with Section 178(3) of the Act, Regulation 19(4) of the SEBI Listing Regulations and on recommendation of the Companys Nomination, Governance and Compensation Committee, the Board adopted a Remuneration Policy for Directors, KMP, senior management and other employees that outlines the guidelines related to performance evaluation of Directors, remuneration principles and Board diversity. The Policy forms part of the chapter on Corporate Governance.

EXECUTIVE REMUNERATION

OVERVIEW AND PHILOSOPHY

Our executive compensation programme supports attracting, motivating, and encouraging continuity of relevant leaders who advance our critical business objectives and promote the creation of shareholders value over the long-term. The key tenets are: a) Attract highly talented individuals from within and across industries drawing from a diverse pool of global talent. b) Provide long term and short-term incentives that advance the interests of shareholders and deliver levels of pay commensurate with performance.

APPROACH TO PAY BENCHMARKING

The three principal components of the compensation package include, base salary, annual cash-based variable pay, and equity-based long-term incentives. In making decisions with respect to each element of compensation, the competitive market for executives and compensation levels of the comparable companies are considered.

Pay practices at companies with which Dr. Reddys competes for talent, including those engaged in similar activities are reviewed from time to time. Our approach is to be market aware and not market driven. We believe that information regarding pay practices at other companies is useful to assess the reasonableness and competitiveness of our own.

We generally target executive pay to be within range of 75th percentile of pay packages for executives in similar positions, responsibilities and/or experience in similar companies of comparable size.

We identify certain roles that are fungible across multiple industries where our comparative pool is not limited to peer generic pharmaceutical organisations. In such cases – a wider sample is selected comprising of non-pharma marquee organisations operating in the country with whom Dr. Reddys competes for talent.

REVIEW AND INCREMENTS

Executive compensation is reviewed annually.

Executive increment percentages approach is lesser than the Company average, while the frontline receiving the highest increase. A higher increase may be made in the event of a role change, promotion. The Companys performance, affordability, individual performance and compensation history are other considerations, while deciding on compensation.

EXECUTIVE DIRECTOR COMPENSATION

Our executive directors compensation comprises of a fixed monthly component and a profit based annual commission based on standalone net profits of the Company. The total remuneration to be paid to the executive directors is within the limits prescribed under the provisions of the Companies Act, 2013.

While recommending such a commission, the NGCC also takes into account the overall corporate performance in a given year and the Key Performance Indicators (KPIs).

The considerations include but are not limited to: Financial metrics covering growth in return on capital employed (RoCE) and profitability, non-financial metrics covering aspects such as health, brand building, compliance, quality and sustainability of operations of the organisation, as may be agreed upon from time to time with the Company.

Perquisites and retirement benefits are paid in accordance with the Companys compensation policies, as applicable to all employees. The Company, in compliance with Section 197 of the Act and the SEBI Listing Regulations, does not grant any stock options to the Executive Directors. No severance fee is payable to them.

In terms of the approval given by the members of the Company, each of the Executive Directors was entitled to get

0.75% of the net profits of the Company, i.e. Rs 43.97 cr each. However, the Board, on the recommendation of the NGCC approved a fair commission for the Executive Directors, i.e. Rs 9 cr and Rs 16 cr for Mr. K Satish Reddy and Mr. G V Prasad, respectively.

CEO COMPENSATION

Our CEO compensation comprises of guaranteed cash, short term incentives in the form of variable pay, long-term incentives, retirals, and perquisites. 75% of our CEO pay is at risk and linked with the Companys performance in terms of balanced scorecard achievement against plan and Company stock performance.

Short Term incentives are tied to the Company performance against the balanced scorecard and individual performance of the CEO as determined by the Board of Directors.

In FY2024, Mr. Erez Israeli, Chief Executive Officer, has received an increment of 2.4% on fixed compensation. His fixed salary wasRs 6.27 cr, with a target variable pay of 100%, and long term incentives of value Rs 13.77 cr vesting at the end of 3 years.

PERFORMANCE MANAGEMENT

Our current performance management follows a balanced scorecard approach comprising of current business performance, future business performance, ESG, digital, people, compliance and safety related metrics.

The Board of Directors uses a stringent process to set ambitious financial targets in line with the strategy of the Company. In addition to the financial targets, the scorecard also has ambitious strategic objectives across key priority areas, including targets related to ESG matters. The scorecard is proposed by management council to the Board of Directors for approval before the start of the financial year.

Each parameter is devised into a metric, financial or otherwise and is measured quarterly. Non-financial parameters have a cap of 100% achievement while financial parameters are scored based on a predetermined grid.

Additional considerations such as wind-falls, impairments and one-offs are measured separately.

Our performance management process is specifically adapted to different employee cohorts based on their specific needs, the overall principles remain the same across all the models.

Performance evaluation of Management Council ("MC") members focuses on achievement of their Business Unit Scorecard. Individual MC evaluation focusses on achievement of a) The BU (Business Unit) scorecard for the year that contributes to the delivery of the overall Companys strategy.

b) Demonstration of desired leadership behaviours and aligned to the overall Company values

Balanced scorecard performance is measured in constant currencies to reflect operational performance that can be influenced.

COMPANY PERFORMANCE FOR FY2024

In FY2024, we achieved robust financial performance.

Our revenue grew by 14%, with EBITDA margins reaching 29.7% for the year. Additionally, our ROCE exceeded 36%. These impressive results were primarily fueled by our strong performance in USA. Our record financial performance in the last two years has been led by a blockbuster product in the U.S. We are working hard to ensure that our current investments and diversified business model approach help us maintain sustained growth in the upcoming years.

In our identified future growth spaces of access to novel molecules, digital therapeutics, and consumer healthcare, once again strategic partnerships have been important. We have taken early steps in the area of digital therapeutics, starting with the launch of the drug-free migraine management device Nerivio? in partnership with Theranica. Our all-time readiness approach stood us in good stead but we continue our state of constant vigilance in Quality compliance.

We also continue our efforts to be viewed as the partner of choice for our commercial strengths and footprint, our governance, ESG and progressive practices, and our discipline. While our people put in every effort to ensure we meet our business targets and ESG goals, there are always challenges along the way.

A brief snapshot of our scorecard performance for FY2024 is given below.

Pillar	Wt	Achievement
Current Business Financial	45%	Above Plan
Performance
Future Business Readiness	24%	Below Plan
Business Enablers People and Digital	14%	Below Plan
Compliance and Sustainability	17%	Below Plan

Overall Evaluation – Met Performance Expectations

VARIABLE PAY FOR CEO

Variable Pay is paid based on annual performance target achievements as cash in the first quarter of the next year. The payout range for individual performance is between 0% to 150%. Overall payout is capped at 300% of target.

The FY2023 balanced scorecard showed good financial results, including sales and operating income performance at target and most strategic objectives were achieved or exceeded. Based on the overall assessment, the Board of Directors decided on an Annual Incentive payout for the CEO amounting to Rs 13.4 cr.

LONG TERM INCENTIVE PLAN FOR CEO

Majority of the grants are ESOPs granted at fair market value, a small portion is in the form of Performance modified phantom shares that allows for multiplicative upside basis performance against defined metrics. Grants are made annually and they cliff Vesting at the of 3 years. ESOPs are exercisable at fair market value (at the time of grant) and the Phantom Shares are payable in cash upon vesting.

MALUS AND CLAWBACK

Any performance linked compensation paid to Management Committee members is subject to malus and clawback rules. This means that the NGCC may decide – subject to applicable law – to retain any unpaid or unvested incentive compensation (malus), or to recover incentive compensation that has been paid or vested in the past (clawback).

This applies in cases where the payout has resulted from a violation of laws or conflicts with internal management standards, including Company and accounting policies. This principle applies to both the short-term Annual Incentive and Long-Term Incentive (LTI) plans.

NUMBER OF BOARD MEETINGS

The Board of Directors met six times during the year. In addition, an annual Board retreat was held to discuss strategic matters. The intervening gap between the meetings was within the period prescribed under the Act and the SEBI Listing Regulations. Details of Board meetings and the Board retreat are given in the chapter on Corporate Governance.

SEPARATE MEETING OF INDEPENDENT DIRECTORS

In terms of requirements under Schedule IV of the Act and Regulation 25(3) of the SEBI Listing Regulations, four separate meetings of the Independent Directors were held during FY2024. Further details are mentioned in the chapter on Corporate Governance.

COMMITTEES OF THE BOARD

As on March 31, 2024, the Board has the following Committees: i) Audit Committee; ii) Stakeholders Relationship Committee; iii) Nomination, Governance and Compensation Committee; iv) Sustainability and Corporate Social Responsibility Committee; v) Risk Management Committee; vi) Science, Technology and Operations Committee; and vii) Banking and Authorisations Committee

All the recommendations made by the Board committees, including the Audit Committee, were accepted by the Board. The details of the above Committees are given in the Chapter on Corporate Governance.