REGISTERED NUMBER: 01729064 (England and Wales)

Strategic Report, Report of the Directors and

Financial Statements

for the Year Ended 31st March 2018

for

Dr Reddy's Laboratories (UK) Limited

Page

Company Information

1

Strategic Report

2

Report of the Directors

4

Report of the Independent Auditors

6

Income Statement

8

Other Comprehensive Income

9

Balance Sheet

10

Statement of Changes in Equity

11

Notes to the Financial Statements

12

DIRECTORS:

K S Reddy

V N Mannam

C J Troche

S Kohli

D A Chaplin

SECRETARY:

R Sane

REGISTERED OFFICE:

6 Riverview Road

Beverley

East Yorkshire

HU17 0LD

REGISTERED NUMBER:

01729064 (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

SOLICITORS:

Taylor Vinters

Merlin Place

Milton Road

Cambridge

CB4 0DP

The directors present their strategic report for the year ended 31st March 2018.

REVIEW OF BUSINESS

The key financial highlights are as follows:

31/3/18

31/3/17

31/3/16

31/3/15

£

£

£

£

Turnover - United Kingdom

34,516,287

30,593,377

27,528,529

22,033,024

Turnover Growth - United Kingdom

12.8%

11.1%

24.9%

68.4%

Turnover - Europe and other countries

5,913,609

7,092,169

5,920,467

8,328,404

Turnover Growth - Europe and other countries

-16.6%

19.8%

-28.9%

-15.5%

Profit before tax

7,941,065

4,631,171

6,810,876

7,058,828

Profit before tax margin

19.6%

12.3%

20.4%

23.2%

2018 was a good year for Dr. Reddy's UK with and increase in turnover and profit margins. 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.

PRINCIPAL RISKS AND UNCERTAINTIES

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

Financial instrument risk

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

company from events that hinder the company'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 business is subject to various regulations and any tightening of these could have a negative impact on earnings.

Price risk

The company sells generic 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 on expiry of patents.

Foreign exchange risk

The company 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 company has little experience of material bad debts in general.

Liquidity risk

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

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

Interest rate and cash flow risk

The company 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 (UK) Limited finds itself in a good financial position at the close of the 2017/18

financial year with cash reserves of £942k although down on previous years the company continues to hold large cash

reserves. Sales have remained increased by 7.3%, and profitability before tax has increased from 12.3% to 19.6%.

These results are reflected in a healthy balance sheet showing Net Assets of £27.3m.

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.

ON BEHALF OF THE BOARD:

R Sane - Secretary

18th May 2018

The directors present their report with the financial statements of the company for the year ended 31st March 2018.

DIVIDENDS

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

FUTURE DEVELOPMENTS

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

DIRECTORS

The directors during the year under review were:

K S Reddy

V N Mannam

C J Troche

S Kohli

D A Chaplin

- appointed 20/2/18

The directors holding office at 31st March 2018 did not hold any beneficial interest in the issued share capital of the

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

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The company'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 company's operations.

Revenue maintenance

The company 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.

Principle risks and uncertainties

These have been provided in the strategic report of the company.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the 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 of the profit or loss of the company 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 transactions and disclose with reasonable accuracy at any time the financial position of the company 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 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 company'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 company'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:

R Sane - Secretary

18th May 2018

Opinion

We have audited the financial statements of Dr Reddy's Laboratories (UK) Limited (the 'company') for the year ended

31st March 2018 which comprise the Income Statement, Other Comprehensive Income, Balance Sheet, Statement of

Changes in Equity and 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 company's affairs as at 31st March 2018 and of its 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 company 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 company'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 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 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 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 company and its environment obtained in the course of the audit,

we have not identified material misstatements in the 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, or returns adequate for our audit have not been received from branches not visited by us; or

-	the 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 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 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

40,429,896

37,685,546

Cost of sales

24,006,291

25,900,801

GROSS PROFIT

16,423,605

11,784,745

Distribution costs

650,812

670,930

Administrative expenses

8,208,639

6,658,490

8,859,451

7,329,420

OPERATING PROFIT

5

7,564,154

4,455,325

Interest receivable and similar income

379,600

169,444

7,943,754

4,624,769

Interest payable and similar expenses

6

2,689

(6,402

)

PROFIT BEFORE TAXATION

7,941,065

4,631,171

Tax on profit

7

1,500,033

946,068

PROFIT FOR THE FINANCIAL YEAR

6,441,032

3,685,103

PROFIT FOR THE YEAR

6,441,032

3,685,103

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

6,442,974

3,694,641

FIXED ASSETS

Intangible assets

8

533,786

444,598

Tangible assets

9

2,810,564

2,704,168

3,344,350

3,148,766

CURRENT ASSETS

Stocks

10

2,930,113

8,344,048

Debtors

11

29,475,977

25,191,505

Cash at bank and in hand

942,740

2,669,279

33,348,830

36,204,832

CREDITORS

Amounts falling due within one year

12

9,380,882

18,484,274

NET CURRENT ASSETS

23,967,948

17,720,558

TOTAL ASSETS LESS CURRENT LIABILITIES

27,312,298

20,869,324

CAPITAL AND RESERVES

Called up share capital

13

1,000

1,000

Other reserves

14

879,443

877,501

Retained earnings

14

26,431,855

19,990,823

SHAREHOLDERS' FUNDS

27,312,298

20,869,324

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

S Kohli - Director

Called up

share

Retained

Other

Total

capital

earnings

reserves

equity

£

£

£

£

Balance at 1st April 2016

1,000

16,305,720

867,963

17,174,683

Changes in equity

Total comprehensive income

-

3,685,103

9,538

3,694,641

Balance at 31st March 2017

1,000

19,990,823

877,501

20,869,324

Changes in equity

Total comprehensive income

-

6,441,032

1,942

6,442,974

Balance at 31st March 2018

1,000

26,431,855

879,443

27,312,298

1.	STATUTORY INFORMATION

Dr Reddy's Laboratories (UK) Limited is a private company, limited by shares , registered in England and

Wales. The company's registered number and registered office address can be found on the Company

Information page.

The presentation currency of the financial statements is the Pound Sterling (£).

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

Financial Reporting Standard 102 - reduced disclosure exemptions

The company has taken advantage of the following disclosure exemptions in preparing these financial

statements, as permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of

Ireland":

•

the requirements of Section 7 Statement of Cash Flows;

•

the requirement of Section 33 Related Party Disclosures paragraph 33.7.

Turnover

Turnover represents invoiced sales of goods, excluding value added tax, less discounts and rebates.

Intangible assets

Intangible assets are initially measured at cost. After initial recognition, intangible assets are measured at cost

less any accumulated amortisation and any accumulated impairment losses.

Patents and licences are being amortised evenly over their estimated useful life of five years.

Intangible assets

Products using patents are capitalised at the date of the patent. The residual value of these patents are being

amortised evenly over their estimated useful lives.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful

life.

Freehold property

-

Straight line at 1%

Improvements to property

-

Over the period of the lease

Plant and machinery

-

10% to 20% on cost and

20% on reducing balance

Fixtures and fittings

-

Straight line over 3 years

Stocks

Raw materials, packing materials and work in progress are valued at cost. Finished goods are valued at the lower

of cost and net realisable value. Stock is valued after making due allowance for obsolete and slow moving stock.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Income Statement, except to

the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or

substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance

sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from

those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that

have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the

timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they

will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Research, regulatory and development cost

Expenditure on research, regulatory and development cost is written off in the year in which it is incurred.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the

balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at

the date of transaction. Exchange differences are taken into account in arriving at the operating result.

Hire purchase and leasing commitments

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the

lease.

Pension costs and other post-retirement benefits

The company makes contributions to the private pension funds of directors and staff. Contributions payable for

the year are charged in the profit and loss account.

Stock based compensation

The stock options taken up in the ultimate parent company, Dr Reddy's Laboratories Limited, by staff members

of subsidiary companies are accounted for in the accounts of the subsidiary company.

Regulatory and trade licence fees

Expenditure in respect of the renewal of trade licences has been charged to the profit and loss account when it

has been incurred.

Going concern

The company has the long term support from the group and as a consequence, the directors believe that the

company is well placed to manage its business risks successfully despite the uncertain economic outlook.

The directors have a reasonable expectation that the company has adequate resources to continue in operational

existence for the foreseeable future. Thus they continue to adopt the going concern basis in preparing the annual

financial statements.

Further information regarding the company's business activities, together with the factors likely to affect its

future development, performance and position is set out in the Directors Report.

3.

TURNOVER

The turnover and profit before taxation are attributable to the principal activities of the company.

An analysis of turnover by geographical market is given below:

2018

2017

£

£

United Kingdom

34,516,287

30,593,377

Europe and other countries

5,913,609

7,092,169

40,429,896

37,685,546

4.	EMPLOYEES AND DIRECTORS

2018

2017

£

£

Wages and salaries

2,789,775

2,820,566

Social security costs

311,341

303,562

Other pension costs

125,692

140,666

3,226,808

3,264,794

The average number of employees during the year was as follows:

2018

2017

Directors and administration

27

29

Production

55

51

82

80

2018

2017

£

£

Directors' remuneration

182,161

188,798

5.	OPERATING PROFIT

The operating profit is stated after charging/(crediting):

2018

2017

£

£

Hire of plant and machinery

12,827

11,313

Depreciation - owned assets

161,119

257,020

Profit on disposal of fixed assets

(5,158

)

-

Patents and licences amortisation

75,002

32,979

Auditors remuneration

5,500

5,500

Auditors remuneration for non audit work

2,000

2,000

Foreign exchange differences

2,196,133

(1,476,855

)

6.

INTEREST PAYABLE AND SIMILAR EXPENSES

2018

2017

£

£

Interest on corporation tax

-

(6,402

)

Disallowed interest and

penalties

2,689

-

2,689

(6,402

)

7.

TAXATION

Analysis of the tax charge

The tax charge on the profit for the year was as follows:

2018

2017

£

£

Current tax:

UK corporation tax

1,500,033

946,068

Tax on profit

1,500,033

946,068

UK corporation tax has been charged at 19% .

Reconciliation of total tax charge included in profit and loss

The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The difference is

explained below:

2018

2017

£

£

Profit before tax

7,941,065

4,631,171

Profit multiplied by the standard rate of corporation tax in the UK of 19% (2017 - 20%)

1,508,802

926,234

Effects of:

Depreciation for period in excess of capital allowances

2,803

24,900

Expenses not deductible for tax purposes

511

15,879

ESOP exercised in the year

(12,083

)

(20,945

)

Total tax charge

1,500,033

946,068

Tax effects relating to effects of other comprehensive income

2018

Gross

Tax

Net

£

£

£

Stock based compensation

1,942

-

1,942

2017

Gross

Tax

Net

£

£

£

Stock based compensation

9,538

-

9,538

8.	INTANGIBLE FIXED ASSETS

Patents

and

licences

£

COST

At 1st April 2017

700,141

Additions

371,892

Disposals

(207,702

)

At 31st March 2018

864,331

AMORTISATION

At 1st April 2017

255,543

Amortisation for year

75,002

At 31st March 2018

330,545

NET BOOK VALUE

At 31st March 2018

533,786

At 31st March 2017

444,598

9.	TANGIBLE FIXED ASSETS

Improvements

Fixtures

Freehold

to

Plant and

and

property

property

machinery

fittings

Totals

£

£

£

£

£

COST

At 1st April 2017

2,497,371

34,991

3,577,002

634,388

6,743,752

Additions

-

-

234,047

33,468

267,515

At 31st March 2018

2,497,371

34,991

3,811,049

667,856

7,011,267

DEPRECIATION

At 1st April 2017

252,701

34,630

3,151,811

600,442

4,039,584

Charge for year

40,288

-

93,736

27,095

161,119

At 31st March 2018

292,989

34,630

3,245,547

627,537

4,200,703

NET BOOK VALUE

At 31st March 2018

2,204,382

361

565,502

40,319

2,810,564

At 31st March 2017

2,244,670

361

425,191

33,946

2,704,168