director reportDear Members, Your Directors are pleased to present the 27th annual report for the year ended 31March 2011. financial highlights Table 1 gives the financial highlights of the Company for the financial year 2010-11 ascompared to previous financial year on Indian GAAP standalone basis. DIVIDEND Your Directors are pleased to recommend a dividend of Rs 11.25 per equity share of Rs5/-each (225%) for the financial year 2010-11. The dividend, if approved at the ensuingAnnual General Meeting, will be paid to those shareholders whose names appear on theregister of members of the Company as on 5 July 2011. The dividend would be tax-free in the hands of the shareholders. SHARE CAPITAL The paid up share capital of your Company increased by Rs 2.04 millions in thefinancial year ended 31 March 2011, due to allotment of 407,347 equity shares on exerciseof stock options by the eligible employees under Dr. Reddy's Employees Stock OptionScheme, 2002 and Dr. Reddy's Employees ADR Stock Option Scheme, 2007. ISSUE OF UNSECURED, REDEEMABLE, NON-CONVERTIBLE BONUS DEBENTURES During the financial year, the Scheme of Arrangement between the Company and itsmembers for issuance of unsecured, redeemable, non-convertible, fully paid up debenturesof Rs 5/- each (Bonus Debentures) from the general reserve, was approved by the Hon'bleHigh Court of Judicature, Andhra Pradesh at Hyderabad vide order dated 19 July 2010. TheScheme came into effect on 1 February 2011. TABLE Financial highlights for the financial year ended 31 March | | (Rs MILLIONS) | | 2011 | 2010 | | Income | 54,241 | 47,246 | | Gross profit | 12,998 | 13,072 | | Depreciation | 2,479 | 2,224 | | Profit before tax | 10,519 | 10,848 | | Taxation | | | | — Current tax | (1,585) | (2,387) | | Net profit for the year | 8,934 | 8,461 | | Add: Profit and loss brought forward | 25,541 | 20,391 | | Add: Adjustment on merger of Perlecan Pharma Private Ltd. | — | (248) | | Add: Transfer from General Reserve | 5,972 | — | | Total available for appropriation | 40,447 | 28,604 | | Appropriations: | | | | Proposed dividend on equity shares | 1,904 | 1,900 | | Tax on proposed dividend | | 316 | | Dividend of previous years (including tax) | 4 | 1 | | Debenture Redemption Reserve | 19 | — | | Issuance of Bonus Debentures as per scheme | 5,078 | — | | Dividend Distribution Tax on distribution as per scheme | 843 | — | | Transfer to General Reserve | 893 | 846 | | Balance carried forward | 31,397 | 25,541 | Accordingly, 1,015,516,392 Bonus Debentures amounting to Rs 5,078 millions were issuedto the members, in the ratio of six debentures for every equity share held by them on therecord date i.e. 18 March 2011. These Bonus Debentures have since been listed on BombayStock Exchange and National Stock Exchange and rated LAA+ by ICRA. CORPORATE GOVERNANCE AND ADDITIONAL INFORMATION TO SHAREHOLDERS A detailed report on the corporate governance systems and practices of the Company aregiven in a separate section of the annual report 2010-11. Detailed information for theshareholders is given in Additional Shareholders' Information section. MANAGEMENT DISCUSSION AND ANALYSIS A detailed report on the Management Discussion and Analysis is provided as a separatesection in the annual report. SUBSIDIARY COMPANIES The Company has 45 subsidiaries as on 31 March 2011. During the year, Idea2Enterprises (India) Private Limited, Dr. Reddy's LaboratoriesRomania SRL, I-Ven Pharma Capital Limited, Dr. Reddy's Laboratories Tennessee LLC and Dr.Reddy's Venezuela C.A. became wholly-owned subsidiaries of the Company. Further, Dr.Reddy's Laboratories (Proprietary) Limited also became wholly-owned subsidiary by virtueof purchase of its balance 40% stake by the Company. During the year, Macred India Private Limited ceased to be a subsidiary of the Company. As per Section 212 of the Companies Act, 1956, we are required to attach the Directors'Report, Balance Sheet and Profit and Loss Account of our subsidiaries to our annualreport. The Ministry of Corporate Affairs, Government of India vide its circular no.2/2011 dated 8 February 2011 has provided an exemption to companies from complying withSection 212, provided such companies publish the audited consolidated financial statementsin the annual report. Accordingly, the annual report 2010-11 does not contain thefinancial statements of our subsidiaries. The audited annual accounts and relatedinformation of our subsidiaries, where applicable, will be made available for inspectionduring business hours at our registered office in Hyderabad, India. The same will also bepublished on our website, www.drreddys.com. The consolidated financial statements, in terms of Clause 32 of the Listing Agreementand prepared in accordance with Accounting Standard 21 as specified in Companies(Accounting Standards) Rules, 2006 also form part of this annual report. The members, if desire, may write to Company Secretary at Dr. Reddy's LaboratoriesLimited, 8-2-337, Road No. 3, Banjara Hills, Hyderabad - 500034 to obtain a copy of thefinancials of the subsidiary companies. FIXED DEPOSITS Your Company has not accepted any fixed deposit under Section 58A of the Companies Act,1956 from the public. However, pursuant to the provisions of Section 58A of the Companies Act, 1956, readwith Companies (Acceptance of Deposit) Rules, 1975, the unsecured, redeemable,non-convertible, fully paid-up bonus debentures amounting to Rs 5,078 millions, issued bythe Company pursuant to the Scheme of Arrangement, approved by the Hon'ble High Court ofJudicature, Andhra Pradesh, may be classified as deposit. No amount of principal orinterest on such debentures was due as at the Balance Sheet date. DIRECTORS As per Article 113 of the Articles of Association of the Company, Mr. Anupam Puri andDr. Bruce L A Carter retire by rotation at the forthcoming Annual General Meetingscheduled on 21 July 2011 and being eligible, seek re-appointment. The brief profiles ofMr. Anupam Puri and Dr. Bruce L A Carter are given in the Corporate Governance section ofthe annual report for reference of the members. The Board of Directors in their meeting held on 25 January 2011 had re-appointed Dr. KAnji Reddy as Whole Time Director designated as Chairman of the Company for a furtherperiod of five years effective 13 July 2011 and Mr. G V Prasad as Whole Time Directordesignated as Vice-Chairman and Chief Executive Officer of the Company for a furtherperiod of five years effective 30 January 2011. These re-appointments are subject to theshareholders' approval and the resolutions to this effect have accordingly been includedin the notice convening 27th Annual General Meeting scheduled on 21 July 2011. AUDITORS The Statutory Auditors of the Company M/s. B S R & Co., Chartered Accountants,retire at the ensuing Annual General Meeting and have confirmed their eligibility andwillingness to accept office of the Statutory Auditors, if reappointed. The AuditCommittee and the Board of Directors recommend the reappointment of M/s. B S R & Co.as Statutory Auditors of the Company for the financial year 2011-12 for shareholders'approval. COST AUDIT Pursuant to Section 233B of the Companies Act, 1956, the Central Government hasprescribed cost audit of the Company's bulk drug division and formulation division. Based on the recommendations of the Audit Committee, and subject to the approval of theCentral Government the Board of Directors had appointed M/s. Sagar & Associates asCost Auditors of the Company for the financial year 2010-11. The cost audit report wouldbe filed with the Central Government as per timeline. The relevant cost audit reports for the financial year 2009-10 for bulk drug divisionand formulation division were filed within the due date on September 16 and 17, 2010. Thedue date for filing these reports was 27 September 2010. DIRECTORS' RESPONSIBILITY STATEMENT In terms of Section 217 (2AA) of the Companies Act, 1956, your Directors confirm asunder: 1. In preparation of annual accounts, the applicable accounting standards have beenfollowed along with proper explanation relating to material departures; 2. Accounting policies have been selected and applied consistently and judgments andestimates made, are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company at the end of the financial year 2010-11 and of profit of theCompany for that period; 3. Proper and sufficient care has been taken to maintain adequate accounting records inaccordance with the provisions of this Act for safeguarding the assets of the Company andfor preventing and detecting fraud and other irregularities; 4. Annual accounts have been prepared on an ongoing concern basis. TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO IEPF Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the declareddividends, which remained unpaid or unclaimed for a period of seven years have beentransferred by the Company to the Investor Education and Protection Fund (IEPF)established by the Central Government pursuant to Section 205C of the said Act. EMPLOYEES STOCK OPTION SCHEMES Pursuant to the provisions of Guideline 12 of the Securities and Exchange Board ofIndia (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999,as amended, the details of stock options as on 31 March 2011 under the "Dr. Reddy'sEmployees Stock Option Scheme, 2002" and the "Dr. Reddy's Employees ADR StockOption Scheme, 2007" are set out in the Annexure - 1 to the Directors' Report. PARTICULARS OF EMPLOYEES Pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read withCompanies (Particulars of Employees) Rules, 1975, as amended, the names and otherparticulars of employees are set out in the Annexure - 2 to the Directors' Report. CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENTS, TECHNOLOGY ABSORPTION, FOREIGNEXCHANGE EARNING AND OUTGO The particulars as prescribed under Section 217(1)(e) of the Companies Act, 1956, readwith the Companies (Disclosure of Particulars in the Report of Board of Directors) Rule,1988 are set out in the Annexure - 3 to the Directors' Report. GROUP FOR INTER SE TRANSFER OF SHARES Based on the information received from the Promoters and as required under Clause3(1)(e)(i) of the Securities and Exchange Board of India (Substantial Acquisition ofShares and Takeover) Regulations, 1997, persons constituting 'Group' as defined in theMonopolies and Restrictive Trade Practices Act, 1969, for the purpose of Regulation3(1)(e)(i) of the aforesaid SEBI Takeover Regulations comprises: Dr. Reddy's Holdings Limited, Dr. Reddy's Investments and Advisory LLP, Dr. Reddy'sIncome Advisory LLP, APS Invest Advisory LLP, ASP Income Advisory LLP, APS Trust, Dr.Kallam Anji Reddy, Mr. Gunupati Venkateswara Prasad, Mr. Gunupati Venkateswara Prasad(HUF), Mr. Kallam Satish Reddy, Mr. Kallam Satish Reddy (HUF), Mrs. K Samrajyam, Mrs. GAnuradha, Mrs. K Deepti Reddy, Miss. G Vani Sanjana Reddy and Miss. G Mallika Reddy. ACKNOWLEDGEMENT Your Directors place on record their sincere appreciation for significant contributionmade by the employees through their dedication, hard work and commitment and the trustreposed on us by the medical fraternity and the patients. We also acknowledge the supportand wise counsel extended to us by the analysts, bankers, government agencies,shareholders and investors at large. We look forward to having the same support in ourendeavor to help people lead healthier lives. For Dr. Reddy's Laboratories Limited DR. K ANJI REDDY CHAIRMAN Place: Hyderabad Date: 13 May 2011 ANNEXURE TO THE DIRECTORS' REPORT ANNEXURE - 1 Pursuant to the provisions of Guideline 12 of the Securities and Exchange Board ofIndia (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999,as amended, the details of stock options as on 31 March 2011 under the Dr. Reddy'sEmployees Stock Option Scheme, 2002 and the Dr. Reddy's Employees ADR Stock Option Scheme,2007 are as under: | | | Details | | Sl. No | Description | Dr. Reddy's Employees stock Option scheme, 2002 | Dr. Reddy's Employees ADR stock Option scheme, 2007 | | 1 | Options granted | 5,995,106 | 414,478 | | 2 | The pricing formula | Dr. Reddy's Employees Stock Option Scheme, 2002 provides for the grant of options in two categories: | Dr. Reddy's Employees ADR Stock Option Scheme, 2007 provides for the grant of options in two categories: | | | Category A: 600,000 stock options out of the total of 4,590,956 reserved for grant of options having an exercise price equal to the fair market value of the underlying equity shares on the date of grant; and | Category A: 382,695 shall be available for grant of Stock Options at the fair market value; and | | | Category B: 3,990,956 stock options out of the total of 4,590,956 reserved for grant of options having an exercise price equal to the par value of the underlying equity shares (i.e., Rs 5 per option). | Category B: 1,148,084 Options shall be available for grant of Stock Options at par value of the shares i.e. Rs 5 per option. | | | The fair market value of a share on each grant date falling under Category A above is defined as the weighted average closing price for 30 days prior to the grant, in the stock exchange where there is highest trading volume during that period. | The fair market value of a share on each grant date falling under Category A above is defined as the closing price of the Company's equity shares on the trading day immediately preceding the date of grant, in the stock exchange where there is highest trading volume during that period. | | 3 | Options vested | 63,106 | 3,364 | | 4 | Options exercised | 1,730,202 | 190,634 | | 5 | The total number of shares arising as a result of exercise of option | 1,730,202 | 190,634 | | 6 | Options lapsed | 3,546,743 | 99,285 | | 7 | Variation of terms of Options | 1. Members of the Company approved the amendment in Dr. Reddy's Employees Stock Option Scheme, 2002 at the Annual General Meeting held on 28 July 2004. | Members of the Company approved the amendment in Dr. Reddy's Employees ADR Stock Option Scheme, 2007, at the Annual General Meeting held on 22 July 2008, to exercise the right to recover from the relevant employees, the fringe benefit tax, in respect of options granted to or vested or exercised by the eligible employees under provisions of the Income Tax Act, 1961. | | | The amendment enabled the Company to grant Stock Options in two categories as discussed below. Before this amendment Dr. Reddy's Employees Stock Option Scheme, 2002 provided for grant of options at fair market value only. | | | | 2. Category A: 1,721,700 stock options out of the total of 2,295,478 reserved for grant of options having an exercise price equal to the fair market value of the underlying equity shares on the date of grant; and | | | | Category B: 573,778 stock options out of the total of 2,295,478 reserved for grant of options having an exercise price equal to the par value of the underlying equity shares (i.e., Rs 5 per option). | | | | Members of the Company approved the amendment in Dr. Reddy's Employees Stock Option Scheme, 2002 at the Annual General Meeting held on 28 July 2004. The amendment enabled the Company to grant Stock Options in two categories as discussed in para 2 above. Before this amendment Dr. Reddy's Employees Stock Option Scheme, 2002 provided for grant of options at fair market value only. | | | | 3. Members of the Company approved the amendment in Dr. Reddy's Employees Stock Option Scheme, 2002, at the Annual General Meeting held on 22 July 2008, to exercise the right to recover from the relevant employees, the fringe benefit tax, in respect of options granted to or vested or exercised by the eligible employees under provisions of the Income Tax Act, 1961. Further, pursuant to changes in the work levels in the organization structure of the Company approved removing the grades and designations prescribed in the Scheme. | | | | During the last year the Government of India has abolished fringe benefit tax through the Finance Act 2009. Under this Act the fringe benefit tax payable by the employer as a result of share based payments would be replaced by an income tax payable by the employees as a "perquisite" (as defined in the Indian Income Tax Act, 1961) based on the value of the underlying share as on the date of exercise of the options. Consequent to this abolishment and in furtherance of the resolution passed by the Company on 22 July 2008, management resolved to absorb the consequent perquisite tax for the options granted on or prior to 18 May 2008. | | | 8 | Money realised by exercise of options | Rs 155,992,184 | Rs 953,170 | | 9 | Total number of options in force | 718,161 | 124,559 | | 10 | Employee wise details as on 31 March 2011 of options granted to | | | | (i) Senior Managerial Personnel | Name | Exercise price | No. of options | Name | Exercise price | No. of options | | | Mr. Abhijit Mukherjee | Par Value | 20,000 | Mr. Amit Patel | Par Value | 13,375 | | | Mr. K B Sankara Rao | Par Value | 11,250 | Dr. Raghav Chari | Par Value | 9,500 | | | Mr. Saumen Chakraborty | Par Value | 18,500 | | | | | | Mr. Umang Vohra | Par Value | 10,750 | | | | | | Dr. Cartikeya Reddy | Par Value | 11,750 | | | | | | Mr. Vilas Dholye | Par Value | 8,750 | | | | | (ii) Any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year. | Nil | | | | Nil | | | (iii) Identified employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant; | Nil | | | | Nil | | | 11 | Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 'Earnings Per Share' | Rs 52.51 | | | | | | | 12 | The difference between the employee compensation cost computed under Intrinsic Value Method and the employee compensation cost that shall have been recognized if the Company had used the Fair Value Method and its impact on profits and on EPS of the Company | The employee Compensation Cost on account of ESOP in the financial year 2010-11 based on Intrinsic Value Method is Rs 268 millions. Had the Company used the Fair Value Method, the ESOP cost in the financial year would have been Rs 265 millions, which would have a consequential impact on profit. | | | However, there would not have been any significant adverse effect on the Profit and EPS, on using fair value method of accounting. | | 13 | Weighted-average exercise prices and weighted-average fair values of options for options whose exercise price either equals or exceeds or is less than the market price of the stock | Weighted average exercise price of the outstanding Fair Market Value options as on 31 March 2011 was Rs 444.45 Weighted average exercise price of the outstanding Par Value options as on 31 March 2011 was Rs 5. The weighted average fair value of the outstanding options as on 31 March 2011 was Rs 193. | | 14 | Description of the method and significant assumptions used during the year to estimate the fair values of options: | The Company has opted Intrinsic Value Method for accounting of Compensation Cost arising out of ESOP. However for disclosures in para 12 above the following assumptions have been used: | | (i) Risk-free interest rate | 4.96% — 7.04% | | (ii) Expected life | 12 months to 48 months | | (iii) Expected volatility | 31.68% — 37.75% | | (iv) Expected dividends | 0.82% | | (v) The price of the underlying share in market at the time of option grant | Rs 612.95 | ANNEXURE - 2 Information required under Section 217(2A) of the Companies Act, 1956, read withCompanies (Particulars of Employees) Rules, 1976 and forming part of the Directors Reportfor the year ended 31 March 2011 | SI. No. | Name of the Employee | Age | Designation | Gross Remuneration | Qualification | Experience in years | Date of Commencement | Particulars of last employment | | Employed for the full year and in receipt of remuneration more than Rs 60 lacs per annum | | | | | | | | | 1 | Dr. K Anji Reddy | 72 | Chairman | 105,884,350 | B.Sc. (Tech.), Ph.D. | 41 | 24.02.1984 | Managing Director, Standard Organics Ltd. | | 2 | G V Prasad | 51 | Vice-Chairman and CEO | 64,815,225 | B. Sc. (Chem. Eng.), M.S. (Indl. Admn.) | 27 | 30.06.1990 | Promoter Director, Benzex Labs Pvt. Ltd. | | 3 | Satish Reddy | 44 | Managing Director and COO | 64,284,650 | B.Tech., M.S. (Medicinal Chemistry) | 19 | 18.01.1993 | Director, Globe Organics Ltd. | | 4 | Abhijit Mukherjee | 53 | President | 19,309,042 | B.Tech. (Chem.) | 31 | 15.01.2003 | President, Atul Ltd. | | 5 | Saumen Chakraborty | 50 | President | 17,316,234 | B.Sc. (H), MBA-IIM | 27 | 02.07.2001 | Vice President, Tecumseh Products India Pvt. Ltd. | | 6 | K B Sankara Rao | 57 | Executive Vice President | 12,015,788 | M.Pharm. | 33 | 29.09.1986 | Production Executive, Cipla Ltd. | | 7 | Vilas M Dholye | 62 | Executive Vice President | 10,799,483 | B.Tech. (Chem.) | 37 | 18.12.2000 | VP, Pidilite Industries Ltd. | | 8 | Dr. Cartikeya Reddy | 41 | Senior Vice President | 11,572,614 | B.Tech., M.S., Ph.D. | 20 | 20.07.2004 | Senior Engineer, Genetech Inc. | | 9 | Dr. Julius Anthony Vaz | 50 | Senior Vice President | 7,320,216 | M.B.B.S., M.D. | 21 | 01.07.2009 | Medical Director, Novo Nordisk Pharma India Ltd. | | 10 | Ritha Chandrachud | 47 | Senior Vice President | 8,601,105 | B.Sc, M.M.S. | 25 | 14.07.2003 | Sr. Director, Fulford (India) Ltd. | | 11 | Umang Vohra | 40 | Senior Vice President | 10,687,224 | B.E., M.B.A. | 16 | 18.02.2002 | Manager, Pepsico, India | | 12 | Dr. Darshan B Makhey | 44 | Vice President | 7,875,788 | M. Pharm., Ph.D. | 21 | 01.02.2008 | Vice President, Mayne Pharma (USA) Inc. | | 13 | Dr. Harshal P Bhagwatwar | 48 | Vice President | 6,012,466 | M.Pharm., M.S., Ph.D. | 18 | 02.08.2004 | Associate Director, Wockhardt Ltd. | | 14 | Dr. KVS Ram Rao | 48 | Vice President | 6,654,582 | B.Tech, M.E., Ph.D. | 18 | 03.04.2000 | Sr.Manager, Vam Organic Chemicals Ltd. | | 15 | K P Gopala Krishnan | 54 | Vice President | 6,786,522 | B.E., P.G.D.P.M. | 28 | 16.04.2003 | General Manager, Sanmar Speciality Chemicals Ltd. | | 16 | Singhai Sunil Chand | 56 | Vice President | 6,737,571 | M.Pharm. | 33 | 19.02.2001 | General Manager, Ranbaxy Laboratories Ltd. | | Employed for the part of the year and in receipt of average remuneration above Rs 5 lacs per month | | | | | | | | | 17 | Dr. R Ananthnarayanan | 46 | President | 9,136,573 | B. Pharm., Ph.D. | 23 | 06.08.2010 | President, Autosource, USA | | 18 | Dr. Sanjay Chaturvedi | 41 | Vice President | 6,351,048 | M.Sc, Ph.D. | 19 | 03.05.2010 | General Manager, Dow Advanced Materials Divn. | | 19 | V S Vasudevan | 60 | President | 32,281,381 | B.Com., ACA | 38 | 01.04.1984 | Finance Head, Standard Equity Fund Ltd. | | 20 | Prabir Kumar Jha | 44 | Senior Vice President | 6,869,048 | M.A., P.G.D.M. (XLRI) | 22 | 29.11.2002 | Regional Head HR, Mahindra British Telecom | | 21 | C V Narayan Rao | 56 | Vice President | 3,685,935 | B.Tech., P.G.D.M. | 33 | 07.01.1994 | Associate Director, Parke Davis (India) Ltd. | | 22 | Rajesh Kumar | 41 | Vice President | 4,054,926 | B.Tech., P.G.D.M.M. | 14 | 15.04.2002 | Country Manager, Ranbaxy Laboratories Ltd. | | 23 | Atul Dhavle | 41 | Senior Director | 3,723,015 | B.E., RG.C.B.M (XLRI) | 19 | 07.06.1999 | Deputy Manager, Du Pont Fibres Ltd. | | 24 | K V V Raju | 51 | Senior Director | 2,418,224 | M.Pharm., P.G.D.M.M. | 26 | 01.11.1994 | Deputy Manager, Biological E. | | 25 | Nikhil DilipShah | 34 | Senior Director | 2,793,022 | MBA, ACS | 12 | 20.09.1999 | - | Notes: 1) All the above employments are contractual. 2) Dr. KAnji Reddy, Mr. G V Prasad and Mr. Satish Reddy are relatives within themeaning of Section 6 of the Companies Act, 1956. 3) Dr. KAnji Reddy, Mr. G V Prasad and Mr. Satish Reddy are also eligible forcommission on the net profits of the Company. The commission has been included in theremuneration specified above. 4) No individual employee is holding equivalent to or more than 2% of the shareholdingof the Company as on 31 March 2011. 5) The remuneration ceiling for above disclosure have been revised to Rs 60 lacs perannum /Rs 5 lacs per month vide notification of the Ministry of Corporate Affairs,published in Gazzette of India vide GSR No. GSR 289(E) on 31 March 2011. annexure - 3 Form A Form for Disclosure of Particulars with respect to Conservation of Energy. A Power and fuel consumption | 1. Electricity | 2010-11 | 2009-10 | | Purchased | | | | Unit | 198,235,693 | 164,337,783 | | Total amount (?) | 781,856,344 | 570,867,152 | | Rate / unit (?) | 3.94 | 3.47 | | Own generation - through diesel generator set | | | | Unit | 20,325,433 | 20,1 19,308 | | Units per ltr. of diesel oil | 3.45 | 3.35 | | 2. Coal (used in boiler) | | | | Quantity (tonnes) | 64,612 | 48,326 | | Total Cost (?) | 266,439,286 | 167,494,337 | | Average rate (?) | 4,124 | 3,466 | | 3. Furnace Oil | | | | Quantity (K Lts.) | 6,838 | 5,392 | | Total Cost (?) | 202,897,905 | 142,533,434 | | Rate / unit (?) | 29,670 | 26,436 | Form B Research and development (R&D) 1. specific areas in which R&D activities were carried out by the Company are: Ourresearch and development activities can be classified into several categories, which runparallel to the activities in our principal areas of operations: • Global Generics, where our research and development activities are directed atthe development of product formulations, process validation, bioequivalence testing andother data needed to develop the drugs that are equivalent to brand name products for salein the emerging markets or whose patents and regulatory exclusivity periods have expiredor are nearing expiration in the highly regulated markets of the United States and Europe.Global Generics also include our biologics business, where research and developmentactivities are directed at the development of biologics products for the emerging as wellas highly regulated markets. Our new biologics research and development facility caters tothe highest development standards, including cGMP, Good Laboratory Practices andbio-safety level IIA. • Pharmaceutical services and Active Ingredients, where our research anddevelopment activities concentrate on development of chemical processes for the synthesisof active pharmaceutical ingredients and intermediates ("API") for use in ourGlobal Generics segment and for sales in the emerging and developed markets to thirdparties. Our research and development activities also support our custom pharmaceuticalline of business, where we continue to leverage the strength of our process chemistry andfinished dosage development expertise to target innovator as well as emergingpharmaceutical companies. The research and development is directed towards providing services to support theentire pharmaceutical value chain — from discovery all the way to the market. • Proprietary Products, where we are actively pursuing discovery and developmentof new molecules, sometimes referred to as "New Chemical Entity" or"NCEs" and Differentiated Formulations. Our research programs focus on thefollowing therapeutic areas: • Pain • Anti-infectives • Dermatology We are focusing on an integrated research strategy to build a coherent pipeline of NewChemical Entities and Differentiated Formulations with critical mass and demonstraterepeated success in the chosen therapeutic area. 2. Benefits derived as a result of the R&D • Commercial production of the new products. • Modification of existing manufacturing processes for some of the products andsignificant savings in cost of production. • Modification of existing manufacturing processes to reduce the time cycle. • Indian patents and US patents filings for protection of Intellectual Propertygenerated during R&D. 3. Future plan of action Commercialisation of new products for which the products are under trials atdevelopment stage. Several new products have been identified after a thorough study of themarket and the processes to manufacture these products will be developed in the R&Dlab. 4. Expenditure on R & D | For the year ended March 31 | 2011 | 2010 | | A Capital (Rs millions) | 790 | 254 | | B Recurring (Rs millions) | 5,128 | 3,643 | | C Total (Rs millions) | 5,918 | 3,897 | | Total R&D expenditure as a percentage of total turnover | 11.26% | 8.79% | | Technology absorption, adaptation and innovation | | | 1 Efforts, in brief, made towards technology absorption, adaptation and innovation | The Company has a full-fledged R&D Division continuously engaged in research on new products and on process development of existing products. The Company has developed indigenous technology in respect of the products manufactured by it. As soon as the technology is developed for a product, it is tested in Pilot Plant and thereafter commercial production is taken up. It is our philosophy to continuously upgrade the technology. | | 2 Benefits derived as a result of the above efforts, e.g., product improvement, cost reduction, product development, import substitution, etc. | Product quality improvements, cost reduction, product development, import substitution etc. The continuous up gradation and adoption of new technology has benefited the Company in the form of better production process, better yields, better quality of the end product and cost reduction. | | 3 In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year), following information may be furnished: | No Imported technology | | a) Technology imported | | | b) Year of import | | | c) Has technology been fully absorbed | | | d) If not fully absorbed, areas where this has not taken place, reasons therefore and future plans of action. | | FORM C FOREIGN EXCHANGE EARNINGS AND OUTGO Please refer information given in the note nos. 15 and 16 in Schedule 20 — Notes to the accounts.
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