REGISTERED NUMBER: 02177715 (England and Wales)

Group Strategic Report,

Report of the Directors and

Consolidated Financial Statements

for the Year Ended 31st March 2018

for

Dr Reddy's Laboratories (EU) Limited

Page

Company Information

1

Group Strategic Report

2

Report of the Directors

5

Report of the Independent Auditors

7

Consolidated Statement of Comprehensive Income

9

Consolidated Balance Sheet

10

Company Balance Sheet

11

Consolidated Statement of Changes in Equity

12

Company Statement of Changes in Equity

13

Consolidated Cash Flow Statement

14

Notes to the Consolidated Cash Flow Statement

15

Notes to the Consolidated Financial Statements

16

DIRECTORS:

K S Reddy

D A Chaplin

S Kohli

V Mannam

C J Troche

SECRETARY:

P Chakrapani

REGISTERED OFFICE:

Riverview Road

Beverley

East Yorkshire

HU17 0LD

REGISTERED NUMBER:

02177715 (England and Wales)

AUDITORS:

cbaSadofskys

Statutory Auditors

Princes House

Wright Street

Hull

East Yorkshire

HU2 8HX

BANKERS:

Bank of Scotland

Aldgate House

1/4 Market Place

Hull

HU1 1RA

The directors present their strategic report of the company and the group for the year ended 31st March 2018.

REVIEW OF BUSINESS

The key financial highlights are as follows:

31/3/18

31/3/17

£

£

Turnover - United Kingdom

35,435,797

32,316,940

Turnover growth - United Kingdom

9.7%

11.6%

Turnover - Europe and other countries

36,545,275

36,587,528

Turnover growth - Europe and other countries

(0.1%

)

7.9%

Profit before tax

16,576,738

18,684,176

Profit before tax margin

23.0%

27.1%

The sales of Dr Reddy's Laboratories (EU) Limited have increased significantly during the current financial year from

£68,904,468 to £71,981,072. This was driven largely by the growth of our CCG (Clinical Commissioning Group)

channel, led by our flagship brand product Alzain® and other opportunities in the UK retail market. However, the

second half of the financial year was muted as Alzain® witnessed severe price erosion due to intense generic

competition and constraints on supply as one of our key manufacturing sites, was deemed non-compliant. The concerned

manufacturing site was re-audited in Jan 2018 and certified as GMP compliant. This site has now recommenced supplies

to the UK in the current year.

Revenue for projects from external customers has remained in line with previous years with good profitability from the

particular mix of products. The majority of R&D projects have been performed for Dr Reddy's Laboratories (EU)

Limited's ultimate parent company, Dr Reddy's Laboratories Limited. The revenue from these projects is a positive

contributor to the turnover and profitability.

There have been no significant changes in the infrastructure of the business as a result of the business transfer of

Chirotech to Dr Reddys Laboratories ( EU) Limited on the 1st April 2017, with the combined number of employees

across the three main sites remaining stable with the average number of employees being 200 and 199 last year when

taking into account both companies employees.

The UK pharmaceutical market continues to be challenging, as has been over the past few years. There are several

factors contributing to this, such as increased pharmaceutical regulations, increased compliance, greater pricing pressure

on existing portfolio because of new entrants in the market etc.

Successful execution of customer projects will be key in capturing future commercial opportunity.

PRINCIPAL RISKS AND UNCERTAINTIES

The group has identified the principal areas of risk that it faces as:

Financial instrument risk

The group has established a risk and financial management framework whose primary objectives are to protect the group

from events that hinder the group's performance objectives. The objectives aim to ensure sufficient working capital

exists and monitor the management of risk at a business unit level.

Impact of pharmaceutical regulations

The group is subject to various regulations and any tightening of these could have a negative impact on earnings.

Price risk

The group sells active pharmaceutical products. The prices of such products tend to reduce on account of severe pricing

pressure and competition. This risk is managed by maintaining adequate levels of stock and introducing new products.

Foreign exchange risk

The group sells and purchases some products in foreign currencies. The risk is mitigated by monitoring foreign

exchange rates on a daily basis and taking foreign exchange cover, if required.

Credit risk

Credit checks are carried out on all customers. Amounts outstanding for both time and credit limits are regularly

monitored. The group has little experience of material bad debts in general.

Liquidity risk

Liquidity is the risk that the group will encounter difficulty in meeting obligations associated with financial liabilities.

The group manages its cash flow to ensure that sufficient liquid resources are available to meet its operating needs.

Interest rate and cash flow risk

The group had a favourable cash balance during the year and therefore does not consider that interest rates or cash flow

pose a significant risk.

REVIEW OF CLOSING POSITION

Overall, Dr Reddy's Laboratories (EU) Limited finds itself in a good financial position at the close of the 2017/18

financial year with cash reserves of £1.7m although down on previous years the company continues to hold large cash

reserves. Sales have remained strong and profitability before tax has increased by 11.1% after taking into account the

goodwill impairment.. These results are reflected in a healthy balance sheet showing Net Assets of £70.1m.

FUTURE DEVELOPMENTS

Looking forward into 2019, the Board and the management team at Dr. Reddy's are continuing to progress with the

strategy of delivering growth in turnover and profit, through portfolio expansion and further deepening our presence

across all 3 channels - Retail, Hospital and CCG's (Clinical Commissioning Groups). By middle of year, we expect to be

in full production from the site impacted by the GMP compliance. Additionally, there are some exciting launches in the

Hospital segment in 2019 in the areas of HIV, Anitinfectives and Oncology. We continue to grow our CCG channel in

terms of gaining deeper penetration and market share of the existing brands. Finally, the Retail channel has seen further

consolidation in the customer base, but we continue to deepen our relationships with the key wholesalers and national

pharmacy chains in the UK.

The manufacturing side has a portfolio of good stable products. There are also products in development that are

progressing well towards commercialisation. The primary activity of the R&D site is to undertake work on internal

projects for its parent. These projects are typically complex and underpinned by in-house expertise and technology.

Future manufacture of some of these products will be in its own manufacturing facilities and for others it will be within

its parent company's assets. The company has continued to invest in development of new technology both through its

own internal resources and through collaborations. This technology will be utilised in new internal projects.

ON BEHALF OF THE BOARD:

P Chakrapani - Secretary

18th May 2018

The directors present their report with the financial statements of the company and the group for the year ended

31st March 2018.

PRINCIPAL ACTIVITY

The principal activity of the group in the year under review was that of manufacturing and distributing pharmaceutical

products.

DIVIDENDS

No dividends will be distributed for the year ended 31st March 2018.

RESEARCH AND DEVELOPMENT

The group is currently involved in the research and development of routes to manufacture active pharmaceutical

ingredients, in particular complex and chiral products.

FUTURE DEVELOPMENTS

Details of the group's future developments have been provided in the strategic report.

DIRECTORS

The directors set out in the table below have held office during the whole of the period from 1st April 2017 to the date of

this report unless otherwise stated.

Other changes in directors holding office are as follows:

C J Troche - appointed 20/2/18

The directors shown below were in office at 31st March 2018 but did not hold any interest in the Ordinary shares of £1

each at 1st April 2017 (or date of appointment if later) or 31st March 2018.

K S Reddy

D A Chaplin

S Kohli

V Mannam

C J Troche

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The group's principal financial instruments comprise bank balances, trade debtors and trade creditors. The main purpose

of these instruments is to raise funds and finance the group's operations.

Revenue maintenance

The group actively markets and manages its portfolio of products to focus on revenue building and maintenance which,

over the life cycle of the products can contribute to the future profits of the business.

Risks and uncertainties

These details have been provided in the group's strategic report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Group Strategic Report, the Report of the Directors and the financial

statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors

have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting

Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not

approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the

company and the group and of the profit or loss of the group for that period. In preparing these financial statements, the

directors are required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the

company's and the group's transactions and disclose with reasonable accuracy at any time the financial position of the

company and the group and enable them to ensure that the financial statements comply with the Companies Act 2006.

They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable

steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on

the company's website.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act

2006) of which the group's auditors are unaware, and each director has taken all the steps that he ought to have taken as

a director in order to make himself aware of any relevant audit information and to establish that the group's auditors are

aware of that information.

AUDITORS

The auditors, cbaSadofskys, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

P Chakrapani - Secretary

18th May 2018

Opinion

We have audited the financial statements of Dr Reddy's Laboratories (EU) Limited (the 'parent company') and its

subsidiaries (the 'group') for the year ended 31st March 2018 which comprise the Consolidated Statement of

Comprehensive Income, Consolidated Balance Sheet, Company Balance Sheet, Consolidated Statement of Changes in

Equity, Company Statement of Changes in Equity, Consolidated Cash Flow Statement and Notes to the Consolidated

Cash Flow Statement, Notes to the Financial Statements, including a summary of significant accounting policies. The

financial reporting framework that has been applied in their preparation is applicable law and United Kingdom

Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the

UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the

Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those

matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent

permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's

members as a body, for our audit work, for this report, or for the opinions we have formed.

In our opinion the financial statements:

-	give a true and fair view of the state of the group's and of the parent company affairs as at 31st March 2018 and of the group's profit for the year then ended;

-	have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

-	have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.

Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the

financial statements section of our report. We are independent of the group in accordance with the ethical requirements

that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have

fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we

have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to

you where:

-	the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

-

the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The directors are responsible for the other information. The other information comprises the information in the Group

Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the

Auditors thereon.

Our opinion on the 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 financial statements, our responsibility is to read the other information and, in doing

so, consider whether the 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.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

-	the information given in the Group Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Group Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and its environment obtained in

the course of the audit, we have not identified material misstatements in the Group Strategic Report or the Report of the

Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you

if, in our opinion:

-	adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

-	the parent company financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities, the directors are responsible for the preparation

of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the

directors determine necessary to enable the preparation of financial statements that are free from material misstatement,

whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group's and the parent 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 the directors either intend to liquidate the group or the parent company or to cease

operations, or have no realistic alternative but to do so.

Our responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to issue a Report of the Auditors that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs

(UK) 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 financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting

Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Alan Brocklehurst (Senior Statutory Auditor)

for and on behalf of cbaSadofskys

Statutory Auditors

Princes House

Wright Street

Hull

East Yorkshire

HU2 8HX

18th May 2018

TURNOVER

3

71,981,072

68,904,468

Cost of sales

37,581,427

36,142,419

GROSS PROFIT

34,399,645

32,762,049

Distribution costs

742,763

722,706

Administrative expenses

18,217,696

14,735,785

18,960,459

15,458,491

15,439,186

17,303,558

Other operating income

454,222

1,110,113

OPERATING PROFIT

5

15,893,408

18,413,671

Interest receivable and similar income

6

686,019

264,103

16,579,427

18,677,774

Interest payable and similar expenses

7

2,689

(6,402

)

PROFIT BEFORE TAXATION

16,576,738

18,684,176

Tax on profit

8

3,724,690

3,791,327

PROFIT FOR THE FINANCIAL YEAR

12,852,048

14,892,849

OTHER COMPREHENSIVE INCOME

Stock based compensation

1,942

9,538

Income tax relating to other comprehensive income

-

-

OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX

1,942

9,538

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

12,853,990

14,902,387

Profit attributable to:

Owners of the parent

12,852,048

14,892,849

Total comprehensive income attributable to:

Owners of the parent

12,853,990

14,902,387

FIXED ASSETS

Intangible assets

10

899,008

5,345,100

Tangible assets

11

9,780,397

9,483,430

Investments

12

-

-

10,679,405

14,828,530

CURRENT ASSETS

Stocks

13

5,415,895

10,833,009

Debtors

14

66,778,644

52,545,922

Cash at bank and in hand

1,756,354

3,949,157

73,950,893

67,328,088

CREDITORS

Amounts falling due within one year

15

14,178,240

24,262,079

NET CURRENT ASSETS

59,772,653

43,066,009

TOTAL ASSETS LESS CURRENT LIABILITIES

70,452,058

57,894,539

PROVISIONS FOR LIABILITIES

18

273,826

570,297

NET ASSETS

70,178,232

57,324,242

CAPITAL AND RESERVES

Called up share capital

19

9,131,928

9,131,928

Capital redemption reserve

20

1,362

1,362

Other reserves

20

879,443

877,501

Retained earnings

20

60,165,499

47,313,451

SHAREHOLDERS' FUNDS

70,178,232

57,324,242

The financial statements were approved by the Board of Directors on 18th May 2018 and were signed on its behalf by:

D A Chaplin - Director

FIXED ASSETS

Intangible assets

10

365,222

727,283

Tangible assets

11

6,969,833

5,302,160

Investments

12

10,907,444

13,816,932

18,242,499

19,846,375

CURRENT ASSETS

Stocks

13

2,485,782

2,442,228

Debtors

14

36,758,892

21,369,591

Cash at bank and in hand

778,193

959,447

40,022,867

24,771,266

CREDITORS

Amounts falling due within one year

15

15,124,606

8,779,132

NET CURRENT ASSETS

24,898,261

15,992,134

TOTAL ASSETS LESS CURRENT LIABILITIES

43,140,760

35,838,509

PROVISIONS FOR LIABILITIES

18

273,826

305,593

NET ASSETS

42,866,934

35,532,916

CAPITAL AND RESERVES

Called up share capital

19

9,131,928

9,131,928

Capital redemption reserve

20

1,362

1,362

Retained earnings

20

33,733,644

26,399,626

SHAREHOLDERS' FUNDS

42,866,934

35,532,916

Company's profit for the financial year

7,334,018

8,636,929

The financial statements were approved by the Board of Directors on 18th May 2018 and were signed on its behalf by:

D A Chaplin - Director

Called up

Capital

share

Retained

redemption

Other

Total

capital

earnings

reserve

reserves

equity

£

£

£

£

£

Balance at 1st April 2016

9,131,928

32,420,602

1,362

867,963

42,421,855

Changes in equity

Total comprehensive income

-

14,892,849

-

9,538

14,902,387

Balance at 31st March 2017

9,131,928

47,313,451

1,362

877,501

57,324,242

Changes in equity

Total comprehensive income

-

12,852,048

-

1,942

12,853,990

Balance at 31st March 2018

9,131,928

60,165,499

1,362

879,443

70,178,232

Called up

Capital

share

Retained

redemption

Total

capital

earnings

reserve

equity

£

£

£

£

Balance at 1st April 2016

9,131,928

17,762,697

1,362

26,895,987

Changes in equity

Total comprehensive income

-

8,636,929

-

8,636,929

Balance at 31st March 2017

9,131,928

26,399,626

1,362

35,532,916

Changes in equity

Total comprehensive income

-

7,334,018

-

7,334,018

Balance at 31st March 2018

9,131,928

33,733,644

1,362

42,866,934

Cash flows from operating activities

Cash generated from operations

1

9,110,567

20,814,662

Interest paid

(2,689

)

6,402

Tax paid

(4,806,415

)

(3,568,603

)

Net cash from operating activities

4,301,463

17,252,461

Cash flows from investing activities

Purchase of intangible fixed assets

(371,892

)

(477,577

)

Purchase of tangible fixed assets

(1,574,040

)

(2,075,775

)

Sale of intangible fixed assets

207,702

84,893

Sale of tangible fixed assets

43,375

765,229

Interest received

686,019

264,103

Net cash from investing activities

(1,008,836

)

(1,439,127

)

Cash flows from financing activities

New loans in year to immediate parent

-

(26,330,520

)

New loans in year from

155,745

-

Loan repayments to ultimate parent

(6,849,704

)

-

Loan repayments from immediate parent

1,206,587

-

Stock based compensation

1,942

9,538

Net cash from financing activities

(5,485,430

)

(26,320,982

)

Decrease in cash and cash equivalents

(2,192,803

)

(10,507,648

)

Cash and cash equivalents at beginning of year

2

3,949,157

14,456,805

Cash and cash equivalents at end of year

2

1,756,354

3,949,157

1.	RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

2018

2017

£

£

Profit before taxation

16,576,738

18,684,176

Depreciation charges

1,676,252

1,546,524

Profit on disposal of fixed assets

(5,491

)

(1,425

)

Impairment loss on goodwill

4,173,219

-

Finance costs

2,689

(6,402

)

Finance income

(686,019

)

(264,103

)

21,737,388

19,958,770

Decrease/(increase) in stocks

5,417,114

(3,415,639

)

Increase in trade and other debtors

(15,439,309

)

(7,911,326

)

(Decrease)/increase in trade and other creditors

(2,604,626

)

12,182,857

Cash generated from operations

9,110,567

20,814,662

2.	CASH AND CASH EQUIVALENTS

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these

Balance Sheet amounts:

Year ended 31st March 2018

31/3/18

1/4/17

£

£

Cash and cash equivalents

1,756,354

3,949,157

Year ended 31st March 2017

31/3/17

1/4/16

£

£

Cash and cash equivalents

3,949,157

14,456,805