DRIVIN G ROWTH - Dr. Reddy's

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schedule to the consolidated balance sheet and profit and loss account
Non-refundable up-front and milestone payments (“license fees”), are recognised as revenue when earned, in accordance
with the terms prescribed in the license agreements.
Revenue from the various profit sharing arrangements entered into by the Group is recognised when it is earned and is
measurable and when the ultimate collection is reasonably certain.
Dividend income is recognised when the right to receive the income is established. Income from interest on deposits and
interest bearing securities is recognised on the time proportionate method when the right to receive the income is established.
Export entitlements under the Duty Entitlement Pass Book (“DEPB”) scheme are recognised as revenue when the right to
receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant
uncertainty regarding the ultimate collection of the relevant export proceeds.
l) Income-tax expense
Current tax
The current charge for income taxes is calculated in accordance with the relevant tax regulations applicable to the Group.
Deferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for
the period. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the
tax rates that have been enacted or substantially enacted by the balance sheet date. Deferred tax assets are recognised only
to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed
depreciation or carry forward of losses, deferred tax assets are recognised only if there is a virtual certainty of realisation of
such assets. Deferred tax assets are reviewed as at each balance sheet date and written-down or written-up to reflect the
amount that is reasonably / virtually certain (as the case may be) to be realised.
The break-up of the major components of the deferred tax assets and liabilities as at March 31, 2002 have been arrived at
after setting off deferred tax assets and liabilities where the group has a legally enforceable right to set-off assets against
liabilities, and where such assets and liabilities relate to taxes on income levied by the same governing taxation laws.
m) Earnings per share
The basic earnings per share (“EPS”) is computed by dividing the net profit after tax for the year by the weighted average
number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, net profit after
tax for the year and the weighted average number of shares outstanding during the year are adjusted for the effects of all
dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless
they have been issued at a later date. The diluted potential equity shares have been adjusted for the proceeds receivable had
the shares been actually issued at fair value (i.e. the average market value of the outstanding shares).
n) Employee stock option schemes
In accordance with the Securities and Exchange Board of India guidelines, the excess of the market price of shares, at the date
of grant of options under the Employee stock option schemes, over the exercise price is treated as employee compensation
and amortised on a straight-line basis over the vesting period.
o) Contingencies
Loss contingencies arising from claims, litigation, assessments, fines, penalties etc. are provided for when it is probable that
a liability may be incurred, and the amount can be reasonably estimated.
2. DESCRIPTION OF THE GROUP
DRL is a leading pharmaceutical company, headquartered in Hyderabad, India. The Company’s principal areas of operation are
formulations, active pharmaceutical ingredients and intermediates, generics, diagnostics, critical care and biotechnology, custom
chemical synthesis and drug discovery. The Company’s principal research and development and manufacturing facilities are located
in India with marketing facilities in India, Russia, the United States of America, Brazil and France.
Dr. Reddy’s Laboratories Limited, the flagship company of the Group, is listed on the principal stock exchanges in India and on the
New York Stock Exchange (NYSE) in the United States of America.
CONSOLIDATED FINANCIALS | FINANCIALS | ANNUAL REPORT 2001-2002