Dr. Reddy’s Board approves bonus debentures issue

March 31, 2010, Hyderabad, India: The Board of directors of Dr. Reddy’s Laboratories Limited (NYSE: RDY) today approved a scheme for the issue of bonus debentures by restructuring the general reserves of the company. The scheme is, however, subject to the approval by the company’s shareholders, the Reserve Bank of India and the Andhra Pradesh High Court.

Formulated under Sections 391-394 of the Companies Act, the scheme entails issue and allotment of unsecured, non-convertible, redeemable, fully paid up bonus debentures of face value of Rs. 5 each, in the ratio of six bonus debentures for every one equity share of Rs. 5, held by equity shareholders whose name appears as members of the company in the register of members or in the records of the depository on the record date to be fixed by the Board after the scheme is sanctioned by the Andhra Pradesh High Court.

The debentures will carry a coupon rate to be determined by the Board of directors, payable annually and would be redeemable at the end of 36 months from the date of allotment. The company intends to have these debentures rated and listed on the Bombay Stock Exchange and/or the National Stock Exchange. With a view to providing additional liquidity to shareholders, the company is in discussions with a merchant banker regarding a limited period liquidity facility to provide shareholders with the option of tendering their bonus debentures for sale soon after allotment. The terms and conditions of the liquidity facility will be finalized later.

Commenting on the proposed bonus issue, Mr. G.V. Prasad, Vice Chairman and CEO, Dr. Reddy’s Laboratories, said: “We recently completed 25 years of operations and are keen to reward our shareholders for their support and belief in the company. Over the last few years, we have built significant reserves from retained profits, by transfer to general reserve. The capital represented by the general reserve exceeds the company’s current and anticipated operational needs, even taking into account foreseeable investments required for growth. The business is expected to continue on a high growth trajectory and generate incremental cash. In order to optimally utilize surplus reserves, the company intends to issue bonus debentures to its shareholders by restructuring the general reserve. These listed bonus debentures have the dual benefit of avoiding an upfront cash outflow for the company while offering shareholders the option of immediate liquidity.”

The issue and allotment of debentures will account for an amount not exceeding Rs. 520 crore. In addition, Dr. Reddy’s Laboratories will bear and pay dividend distribution tax at prevailing rates at the time of issue, since the issue will be considered a “deemed dividend” under the provisions of the Income Tax Act . The total amount of the issued and allotted debentures plus applicable dividend distribution tax, will be drawn from the company’s general reserves.

DSP Merrill Lynch Limited is acting as financial advisor and Amarchand & Mangaldas and Suresh A. Shroff & Company is the company’s legal advisor.

Disclaimer

This press release includes forward-looking statements, as defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future events. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such factors include, but are not limited to, changes in local and global economic conditions, our ability to successfully implement our strategy, the market acceptance of and demand for our products, our growth and expansion, technological change and our exposure to market risks. By their nature, these expectations and projections are only estimates and could be materially different from actual results in the future.

About Dr Reddy’s

Established in 1984, Dr. Reddy’s Laboratories (NYSE: RDY) is an emerging global pharmaceutical company. We fulfill our purpose of providing affordable and innovative medicines through three core businesses: Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products. Our products are marketed globally, with a focus on India, US, UK, Germany and Russia& CIS.

www.drreddys.com

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