The Directors are pleased to present the 27th annual report for the year 
 ended 31 March 2011.
 
 FINANCIAL HIGHLIGHTS
 
 table 1 gives the financial highlights of the Company for the financial
 year 2010-11 as compared 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 Rs. 5/- each (225%) for the financial year 2010-11.  The
 dividend, if approved at the ensuing Annual General Meeting, will be
 paid to those shareholders whose names appear on the register 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 the financial year ended 31 March 2011, due to allotment of 407,347
 equity shares on exercise of stock options by the eligible employees
 under Dr. Reddys Employees Stock Option Scheme, 2002 and Dr. Reddys
 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 its members for issuance of unsecured, redeemable, non-convertible,
 fully paid up debentures of Rs. 5/- each (Bonus Debentures) from the
 general reserve, was approved by the Honble High Court of Judicature,
 Andhra Pradesh at Hyderabad vide order dated 19 July 2010. The Scheme
 came into effect on 1 February 2011.
 
 1
 
 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                        309           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 issued to the members, in the ratio of six debentures for
 every equity share held by them on the record date i.e.  18 March 2011.
 These Bonus Debentures have since been listed on Bombay Stock 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 are given in a separate section of the annual report
 2010-11.  Detailed information for the shareholders is given in
 Additional Shareholders Information section.
 
 MANAGEMENT DISCUSSION AND ANALYSIS
 
 A detailed report on the Management Discussion and Analysis is provided
 as a separate section in the annual report.
 
 SUBSIDIARY COMPANIES
 
 The Company has 45 subsidiaries as on 31 March 2011.
 
 During the year, Idea2Enterprises (India) Private Limited, Dr. Reddys
 Laboratories Romania SRL, I-Ven Pharma Capital Limited, Dr. Reddys
 Laboratories Tennessee LLC and Dr. Reddys Venezuela C.A. became
 wholly-owned subsidiaries of the Company. Further, Dr. Reddys
 Laboratories (Proprietary) Limited also became wholly-owned subsidiary
 by virtue of 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 annual report.  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
 with Section 212, provided such companies publish the audited
 consolidated financial statements in the annual report. Accordingly, the
 annual report 2010-11 does not contain the financial statements of our
 subsidiaries. The audited annual accounts and related information of
 our subsidiaries, where applicable, will be made available for
 inspection during business hours at our registered offce in Hyderabad,
 India. The same will also be published on our website,
 www.drreddys.com.
 
 The consolidated financial statements, in terms of Clause 32 of the
 Listing Agreement and prepared in accordance with Accounting Standard
 21 as specifed in Companies (Accounting Standards) Rules, 2006 also
 form part of this annual report.
 
 The members, if desire, may write to Company Secretary at Dr. Reddys
 Laboratories Limited, 8-2-337, Road No. 3, Banjara Hills, Hyderabad –
 500034 to obtain a copy of the financials 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, read with Companies (Acceptance of Deposit) Rules, 1975, the
 unsecured, redeemable, non-convertible, fully paid-up bonus debentures
 amounting to Rs. 5,078 millions, issued by the Company pursuant to the
 Scheme of Arrangement, approved by the Honble High Court of
 Judicature, Andhra Pradesh, may be classifed as deposit. No amount of
 principal or interest 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 and Dr. Bruce L A Carter retire by rotation at the
 forthcoming Annual General Meeting scheduled on 21 July 2011 and being
 eligible, seek re-appointment. The brief profles of Mr. Anupam Puri and
 Dr. Bruce L A Carter are given in the Corporate Governance section of
 the annual report for reference of the members.
 
 The Board of Directors in their meeting held on 25 January 2011 had
 re-appointed Dr. K Anji Reddy as Whole Time Director designated as
 Chairman of the Company for a further period of fve years effective 13
 July 2011 and Mr. G V Prasad as Whole Time Director designated as
 Vice-Chairman and Chief Executive Officer of the Company for a further
 period of fve years effective 30 January 2011. These re-appointments
 are subject to the shareholders approval and the resolutions to this
 effect have accordingly been included in 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
 confrmed their eligibility and willingness to accept offce of the
 Statutory Auditors, if reappointed. The Audit Committee 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 has prescribed cost audit of the Companys bulk drug
 division and formulation division.
 
 Based on the recommendations of the Audit Committee, and subject to the
 approval of the Central Government the Board of Directors had appointed
 M/s. Sagar & Associates as Cost Auditors of the Company for the
 financial year 2010-11. The cost audit report would be fled with the
 Central Government as per timeline.
 
 The relevant cost audit reports for the financial year 2009-10 for bulk
 drug division and formulation division were fled within the due date on
 September 16 and 17, 2010. The due date for fling these reports was 27
 September 2010.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 In terms of Section 217 (2AA) of the Companies Act, 1956, your
 Directors confrm as under:
 
 1. In preparation of annual accounts, the applicable accounting
 standards have been followed along with proper explanation relating to
 material departures;
 
 2. Accounting policies have been selected and applied consistently and
 judgments and estimates made, are reasonable and prudent so as to give
 a true and fair view of the state of affairs of the Company at the end
 of the financial year 2010-11 and of Profit of the Company for that
 period;
 
 3. Proper and suffcient care has been taken to maintain adequate
 accounting records in accordance with the provisions of this Act for
 safeguarding the assets of the Company and for preventing and detecting
 fraud and other irregularities;
 
 4. Annual accounts have been prepared on an on- going concern basis.
 
 TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO IEPF
 
 Pursuant to the provisions of Section 205A(5) of the Companies Act,
 1956, the declared dividends, which remained unpaid or unclaimed for a
 period of seven years have been transferred 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 of India (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. Reddys Employees
 Stock Option Scheme, 2002 and the Dr. Reddys Employees ADR Stock
 
 Option 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 with Companies (Particulars of Employees) Rules, 1975, as
 amended, the names and other particulars of employees are set out in
 the annexure – 2 to the Directors Report.
 
 CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENTS, TECHNOLOGY
 ABSORPTION, FOREIGN EXCHANGE EARNING AND OUTGO
 
 The particulars as prescribed under Section 217(1)(e) of the Companies
 Act, 1956, read with 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 Clause 3(1)(e)(i) of the Securities and Exchange Board of India
 (Substantial Acquisition of Shares and Takeover) Regulations, 1997,
 persons constituting Group as defned in the Monopolies and
 Restrictive Trade Practices Act, 1969, for the purpose of Regulation
 3(1)(e)(i) of the aforesaid SEBI Takeover Regulations comprises:
 
 Dr. Reddys Holdings Limited, Dr. Reddys Investments and Advisory LLP,
 Dr. Reddys Income 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. G
 Anuradha, 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 contribution made by the employees through their dedication,
 hard work and commitment and the trust reposed on us by the medical
 fraternity and the patients.  We also acknowledge the support and 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 our endeavor to help people lead healthier lives.
 
 For Dr. reddys Laboratories Limited
 
 DR. K AnJi REDDY
 
 CHAIRMAN
 
 Place: Hyderabad
 
 Date: 13 may 2011