Pharmaceutical Services and Active Ingredients (PSAI)

   -- Q2FY25 revenues at 8.4 billion, YoY growth of 20% and QoQ growth of 10%. 
      YoY and QoQ growth was mainly driven by momentum in base business volumes, 
      growth in services business and revenues from new products. 
 
   -- H1FY25 revenues at 16.1 billion, with a growth of 17% YoY. The growth was 
      mainly driven by market share expansion, growth in services business and 
      revenues from new products. 
 
   -- During the quarter, we filed 22 Drug Master Files (DMFs) globally, taking 
      the year-to-date count to 36. 

Income Statement Highlights:

Gross Margin

   -- Q2FY25 at 59.6% (GG: 63.1%, PSAI: 30.0%), a YoY increase of 92 basis 
      points (bps) and a QoQ decline of 81 bps. The YoY increase was on account 
      of improvement in product mix and overhead leverage, partly offset by 
      price erosion. On a sequential basis, the decline was primarily on 
      account of change in mix. H1FY25 at 60.0% (GG: 63.9%, PSAI: 26.7%), a YoY 
      increase by 130 bps YoY. The expansion in margin was on account of 
      favourable product mix and productivity cost savings, partially offset by 
      price erosion in select markets. 

Selling, General & Administrative (SG&A) Expenses

   -- Q2FY25 at 23.0 billion, YoY increase of 22% and QoQ increase of 1%. We 
      incurred one-time acquisition related costs towards NRT portfolio. 
      Excluding the same, SG&A spend was at 28% of sales. H1FY25 at 45.7 
      billion, YoY increase of 25%. The increase is largely on account of 
      higher investments in sales & marketing activities to strengthen our 
      existing brands, new business initiatives, including scaling up 
      'Over-the-Counter' (OTC) and consumer health businesses, as well as 
      higher personnel and freight expenses. 

Research & Development (R&D) Expenses

   -- Q2FY25 at 7.3 billion. As % to Revenues -- Q2FY25: 9.1% | Q2FY24: 7.9% | 
      Q1FY25: 8.1%. H1FY25 at 13.5 billion. As % to Revenues -- H1FY25: 8.6% | 
      H1FY24: 7.7%. R&D investments is related to our ongoing development 
      efforts across generics, biosimilars, as well as our novel oncology 
      assets. 

Other Operating Income

   -- Q2FY25 at 1.0 billion as compared to 1.8 billion in Q2FY24. H1FY25 at 1.5 
      billion as compared to 2.6 billion in H1FY24. 

Net Finance Income

   -- Q2FY25 at 1.6 billion compared to 1.2 billion in Q2FY24. H1FY25 at 2.4 
      billion as compared to 2.0 billion in H1FY24. 

Profit before Tax

   -- Q2FY25 at 19.2 billion, flat YoY and a QoQ growth of 2%. As % to Revenues 
      -- Q2FY25: 23.9% | Q2FY24: 27.8% | Q1FY25: 24.5%. Excluding the impact of 
      aforesaid mentioned one-time acquisition related cost and impairment 
      charge on non-current assets; underlying profit before tax stood at 25.7% 
      of revenues. H1FY25 at 38.0 billion, a YoY increase of 1%. As % to 
      Revenues -- H1FY25: 24.2% | H1FY24: 27.6%. 

Income Tax

   -- Q2FY25 at 5.8 billion. As % to PBT -- Q2FY25: 30% | Q2FY24: 22.7% | 
      Q1FY25: 26%. The higher tax for the quarter is on account of reversal of 
      a Deferred Tax Asset of Rs. 0.48 billion, created in earlier period on 
      land, pursuant to the amendment in the Finance Act 2024, resulting in 
      withdrawal of indexation benefit. Excluding the impact of this one-time 
      reversal, adjusted effective tax rate for the quarter on the underlying 
      PBT is 25.9%. H1FY25: The ETR was 28.0% as compared to 23.3% in H1FY24. 

Profit after Tax before Non-Controlling Interests

   -- Q2FY25 at 13.4 billion, a YoY decline of 9% and a QoQ decline of 4%. As % 
      to Revenues -- Q2FY25: 16.7% | Q2FY24: 21.5% | Q1FY25: 18.1%. Excluding 
      the impact of one-time acquisition related cost, impairment charge on 
      non-current assets, one-time tax expense, underlying profit after tax 
      before non-controlling interests stood at 18.0% of revenues. H1FY25 at 
      27.3 billion, a YoY decline of 5%. As % to Revenues -- H1FY25: 17.4% | 
      H1FY24: 21.2%. 

Non-Controlling Interests $(NCI)$

   -- Q2FY25 at 0.9 billion. This primarily includes the share in a one-time 
      deferred tax asset recognized in the subsidiary books (Dr. Reddy's and 
      Nestlé Health Science Limited) on account of transfer of Dr. Reddy's 
      nutraceuticals business to the subsidiary and consequently allocated to 
      NCI. 

Profit attributable to Equity Holders of Parent Company

   -- Q2FY25 at 12.6 billion, a YoY decline of 15% and a QoQ decline of 10%. As 
      % to Revenues -- Q2FY25: 15.7% | Q2FY24: 21.5% | Q1FY25: 18.1%. Excluding 
      the impact of one-time acquisition related cost, impairment charge on 
      non-current assets, one-time tax expense, underlying profit after tax 
      attributable to equity holders of parent company stood at 19% of 
      revenues. H1FY25 at 26.5 billion, a YoY decline of 8%. As % to Revenues 
      -- H1FY25: 16.9% | H1FY24: 21.2%. 

Diluted Earnings per Share (EPS)

   -- Q2FY25 is 15.04. H1FY25 is 31.73. The Earnings per share has been arrived 
      at on the increased number of shares pursuant to the stock split of one 
      fully paid-up equity share of Rupees five each into five fully paid-up 
      equity share of Rupee one each. 

Other Highlights:

Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)

   -- Q2FY25 at 22.8 billion, YoY growth of 5% and QoQ growth of 6%. As % to 
      Revenues -- Q2FY25: 28.4% | Q2FY24: 31.7% | Q1FY25: 28.2%. Excluding the 
      impact of one-time acquisition related cost, EBITDA stood at 29.1% of 
      sales. 
   -- H1FY25 at 44.4 billion, a YoY growth of 3%. As % to Revenues -- H1FY25: 
      28.3% | H1FY24: 31.7%. 

Others:

   -- Operating Working Capital: As on 30th September 2024 at 120.7 billion. 
   -- Capital Expenditure: Q2FY25 at 7.4 billion. 
   -- Free Cash Flow: Q2FY25 at 2.0 billion. 
   -- Net Cash Surplus: As on 30th September 2024 at 18.9 billion 
   -- Debt to Equity: As on 30th September 2024 is (0.06) 
   -- ROCE: Q2FY25 at 28.5% (Annualized) 

About key metrics and non-GAAP Financial Measures

This press release contains non-GAAP financial measures within the meaning of Regulation G and Item 10(e) of Regulation S-K. Such non-GAAP financial measures are measures of our historical performance, financial position or cash flows that are adjusted to exclude or include amounts from the most directly comparable financial measure calculated and presented in accordance with IFRS.

The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with IFRS. Our non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. These measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business.

For more information on our non-GAAP financial measures and a reconciliation of GAAP to non-GAAP measures, please refer to "Reconciliation of GAAP to Non-GAAP Results" table in this press release.

All amounts in millions, except EPS

Reconciliation of GAAP Measures to Non-GAAP Measures

Operating Working Capital

 
Particulars                 As on 30(th) Sep 2024 
                                     ( ) 
Inventories                        72,039 
Trade Receivables                  84,398 
Less: 
   Trade Payables                  35,776 
Operating Working Capital          120,661 
 
 

Free Cash Flow

 
                                                            Three months ended 
Particulars                                                   30(th) Sep 2024 
                                                                   ( ) 
Net cash generated from operating activities                      16,538 
Less: 
   Taxes                                                         (7,223) 
   Investments in Property, Plant & Equipment, and 
    Intangibles                                                  (7,279) 
Free Cash Flow before Acquisitions                                2,036 
Less: 
   Acquisitions related Pay-out                                  (51,442) 
Free Cash Flow                                                   (49,406) 
 
 

Net Cash Surplus and Debt to Equity

 
Particulars                                              As on 30(th) Sep 2024 
                                                                  ( ) 
Cash and Cash Equivalents                                       11,330 
Investments                                                     52,944 
Short-term Borrowings                                          (40,021) 
Long-term Borrowings, Non-Current                               (7,361) 
Less: 
   Restricted Cash Balance -- Unclaimed Dividend and 
    others                                                        177 
   Lease liabilities (included in Long-term Borrowings, 
    Non-Current)                                                (3,561) 
   Equity Investments (Included in Investments)                  1,388 
Net Cash Surplus                                                18,888 
Equity                                                          309,283 
Net Debt/Equity                                                 (0.06) 
 
 

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November 05, 2024 09:59 ET (14:59 GMT)