148 Corporate Finance
Dr Reddy’s Laboratories (DRL) was incorporated in February 1984, by promoters Dr Anji Reddy and Mr
M.P. Chary.^2 Since inception, DRL has pioneered reverse engineering of many popular under-patent drugs,
broad basing its therapeutic presence. Production of bulk drug Methyldopa (for cardiac patients) commenced
at its Hyderabad plant in July 1985. Within a year DRL became the first Indian company to export the drug
to Europe. DRL was converted into a public limited company in 1985 and had an IPO of equity linked
debentures aggregating Rs 24.6 million in May 1986. In 1986, the company acquired Benzex Labs, a bulk
drug company in Hyderabad. This factory was modernized and is now DRL’s unit II. In the same year, DRL
started manufacturing formulations. FDA approval was received in 1987 and exports to the US commenced.
In 1993, it purchased facilities of Krishna Alchemy in Hyderabad—upgraded it and made it unit III. During
the late-1980s, DRL took up production of quinolone antibiotics and stopped earlier lesser profitable drugs.
After launching Norfloxacin (its first quinolone drug) in 1988, DRL increased presence in this segment—
Ciprofloxacin in 1989, Pefloxacin in 1991, etc. In FY94, 70 percent of sales were quinolones. Mounting
competition led to steep price decline over 20–25 percent per annum in quinolones since FY94. Also, DPCO
1995 included Ciprofloxacin and Norfloxacin, increasing DRL’s coverage from 5 percent to 50 percent. But,
DRL’s overdependence on quinolones continued in the absence of major new launches till FY96. DRL plans
to strengthen its position in the domestic formulations market, including the OTC segment. In FY2001, the
company merged with Cheminor Drugs to become a broad based pharmaceutical giant.
In 2001, Dr Reddy’s became the first Asian company outside of Japan to be listed on the New York Stock
Exchange (NYSE). More details of the company can be accessed at http://www.drreddys.com.
Exhibits 7.3–7.7 present the financial statements and relevant financial data of these companies.
Exhibit 7.3 Pharmaceutical firms—balance sheet
(Rs crore)
Glaxo Ranbaxy Cipla Sun DRL
2001 2000 2001 2000 2001 2000 2001 2000 2001 2000Assets
Net fixed assets 125.5 87.05 580.29 644.37 187.18 161.75 158.78 140.9 327.85 189.49
Cash in bank 56.74 16.26 59.38 15.15 5.82 4.27 10.56 4.35 19.44 21.91
Receivables 217.84 182.33 853.79 894.59 352.8 257.15 165.49 171.46 384.39 199.7
Inventory 180.75 171.32 459.67 417.42 275.36 212.19 147.97 72.38 157.61 69.83
Deferred tax 41.33 4.15 27.25 0 0 0 0 0 0 0
Investments 151.69 124.87 343.55 291.07 222.93 194.99 64.45 50.12 79.45 141.27
Intangible/misc. 12.61 14.33 198.02 127.31 0.23 0.3 39.42 42.01 97.73 55.7
Total 786.46 600.31 2,521.95 2,389.91 1,044.32 830.65 586.67 481.22 1,066.47 677.9
Liabilities
Total borrowing 9.71 34.85 125.99 255.83 24.01 19.47 35.71 48.62 383.31 174.65
Sundry creditors 138.47 99.91 338.61 339.26 109.01 79.71 32.14 35.9 95.03 45.01
Other current liabilities 13.24 14.99 85.16 66.44 57.81 26.92 27.71 25.13 11.06 11.19
Provisions 51.26 56.1 209.43 145.73 128.83 129.04 25.76 6.85 23.8 11.89
Deferred tax 13.21 0 160.57 0 0 0 0 0 0 0
Share capital 74.48 59.78 115.89 115.89 59.97 59.97 79.49 64.98 31.65 26.49
Reserves & surplus 486.09 334.68 1,486.3 1,466.76 664.69 515.54 385.86 299.74 521.62 408.67
Total 786.46 600.31 2,521.95 2,389.91 1,044.32 830.65 586.67 481.22 1,066.47 677.9
(^2) This section is based on a report by India Infoline.