Kedar Upadhye - Head, Global Generics Finance and IR and Senior Director Saumen Chakraborty - President, CFO, Global Head, Information Technology & Business Process Excellence Abhijit Mukherjee - COO.

Manoj Garg - Healthco Nimish Mehta - Research Delta Advisors Neha Manpuria - JPMorgan Anubhav Aggarwal - Credit Suisse Surya Patra - PhillipCapital Girish Bakhru - HSBC Ranjit Kapadia - Centrum Broking Nitin Agarwal - IDFC Securities Chirag Talati - Kotak Securities Sameer Baisiwala - Morgan Stanley Arvind Bothra - Motilal Oswal Securities Abhishek Sharma - IIFL Saion Mukherjee - Nomura Securities.

Ladies and gentlemen, good day and welcome to the Dr. Reddy’s Laboratories Limited Q4 and FY15 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes.

[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kedar Upadhye. Thank you and over to you, sir..

Thank you, Saema. Good morning and good evening to all of you. Thank you for joining us today for Dr. Reddy’s Q4 FY15 earnings call. Earlier during the day, we have released our results and the same are also posted on our Web site. We are conducting a live webcast of this call and a transcript shall be available on our Web site soon.

Just a reminder, the discussion and analysis in this call will be based on IFRS consolidated financial statements. To discuss the business performance and outlook, we have the leadership team of Dr.

Reddy's comprising Saumen Chakraborty, our Chief Financial Officer; and Abhijit Mukherjee, our Chief Operating Officer; along with the Investor Relations team. Please note that today's call is copyrighted material of Dr. Reddy's and cannot be rebroadcasted or attributed in press or media outlets without the Company's expressed written consent.

Before we proceed with the call, I would like to remind everyone that the Safe Harbor language contained in today's press release also pertains to this conference call and the webcast. After the end of the call, in case of any additional clarifications required, please feel free to get in touch with the Investor Relations team.

Now I would like to turn the call over to Saumen Chakraborty, our CFO..

Thank you, Kedar, greetings to everyone. Let me begin with the key financial highlights. For this section, all the amounts are translated to U.S. dollars at a convenient translation rate of INR 62.31, which is the rate as on March 31, 2015. Consolidated revenues for the year are at INR 14,819 crores or $2.38 billion and grew by 12%.

Consolidated revenues for the quarter $621 million and grew by 11% this was a relatively moderate quarter considering currency volatility in emerging markets and seasonal moderation post the high Q3 uptick in U.S. and Russia. The revenues from our Global Generics segment for the quarter are $497 million and grew by 13% year-on-year.

This growth is primarily a factor of full year benefit of injectable launches in the U.S., coupled with significantly higher contribution from Venezuela market. We have seen the impact of sharp currency movement in emerging market, though the currencies seem to have stabilized recently.

Our India business delivered above market sales growth, which was in line with our expectations. Revenues from our PSAI segment are $119 million and grew 12% year-on-year. Consolidated gross profit margin for the quarter is 54.8% and declined by 240 basis points over that of the previous year.

The gross margins for Global Generics and PSAI are 62.8% and 23.1% respectively. These margin declines captured impact of unfavorable currency situation in emerging market territories. SG&A spend including amortization for the quarter is $162 million and decreased marginally over the previous year.

As alluded in the earlier call, this reflects all the benefit of the operating leverage and steps taken by us in optimizing various cost cycles. R&D expenses for the quarter are at $83 million at 13.3% revenue versus 11.4% in the previous year. R&D spend and the increase versus sequential quarter is in line with our planned scale up in activity.

In February 2015, the Government of Venezuela introduced a three tier currency system, we determined that it is appropriate to use the SIMADI rate which is bolivars 193 per U.S. dollar. To translate the net monitory asset other than those, which qualify for the CENCOEX rate of 6.3 bolivars per U.S. dollar.

Accordingly the foreign exchange loss on translation of such mixed monitory asset of $14 million as on March 31, 2015 is recorded in the financial statement. EBITDA for the quarter stands at $129 million, which is 21% of the revenues, tax rate for the quarter is 13 however the annual effective tax rate is 21.2% within our guided range.

Key balance sheet highlights are as follows. Our net operating working capital decreased by $21 million during this quarter. The credit period for customers in various markets as well the days sale outstanding ratios have remained largely same, compared to the second and third quarter. Capital expenditure for the quarter was at $39 million.

Our net debt to equity ratio is at 0.03. Foreign currency cash flow hedges for the next 18 months in the form of derivatives and loans for U.S. dollar are approximately $440 million, largely hedged around INR 60 to INR 64.5 to a dollar. In addition, we have balance sheet hedges of $291 million.

We also have foreign currency cash flow hedges of RUB 1,760 million at the rate of 1.16 to a ruble maturing over next 12 months. We are maintaining a close watch on the macroeconomic situation in various emerging markets and wherever appropriate we are calibrating the scale of our business and working capital investment.

With this, I now request Abhijit to take us through the key business highlights..

Thank you, Saumen. Greetings to everybody and I extend a warm welcome to you all on this earnings call. FY15 has been a mix year for us in our biggest market, which is U.S. Generics we have built strong market position for high margin injectable franchise.

We also enhanced our OTC portfolio by acquiring and launching Habitrol the transdermal nicotine patch. In addition increase in market shares across key molecules was a notable accomplishment. Initiatives like these help offset impact of delay in new product approvals and the price erosion on base business.

On the emerging market front, while we delivered strong performance in key countries in terms of local currencies, we continue to track the macroeconomic situation. For the India business, you noticed the trends of predictable and sustained performance.

At the company level we increased R&D spend by design across verticals and entered into a number of synergistic deals across markets. The recent announcement of the acquisition of UCB brand for India business is a step in the same direction. Now let me take you through the key highlights for each of our key markets for this quarter.

Please note that in the section all references to numbers are in respective local currencies. Let me start with North America Generics. We crossed the important mark of a billion dollar of sales in fiscal 2015.

The team continues to improve market shares for products such as Atorvastatin, Amlodipine/Atorvastatin, Divalproex SPR, Lamotrigine XL, Metoprolol ER, Sumatriptan Auto-Injector and Ziprasidone. As per analysts we are ranked 9th in terms of total prescription for the quarter ended 31st March 2015.

During the year, we continued to strengthen our supply chain which benefitted in the form of market share gains that I referred earlier. For the quarter sales performance is sequentially flat at 279 million continuing the seasonal purchasing uptick in Q3, the Q4 performance was stable on the back of sales of Valganciclovir and Sirolimus.

Also we had a full quarter sales of Habitrol brands. On the emerging market front Russia revenues are 42 million for the quarter and grew by 3% Y-o-Y in constant currency. Q4 performance is moderate considering large seasonal sales in the previous quarter on an annual basis Russia revenues are 244 million and grew by 13% in local currency.

Our team continues to explore the opportunities for portfolio expansion as per IMS YTD March 2015 our OTC business grew by 17% versus market growth of 12% in constant currency. Out of the other emerging markets vis-à-vis Venezuela delivered better than expected growth on the back of continuing volume upside.

The contribution from Venezuela has been quite meaningful throughout this year. We are ranked 20th in value term and 12th in unit term. This clearly highlights our endeavor to provide affordable medicines to patients. Our actions continue to be guided by the long-term strategic view of this market.

However we continue to watch currency and funds repatriation situation very closely. India formulations business posted revenues of 474 crores for the quarter and grew 16% by year-on-year. On an annual basis India revenues are INR 787 crores and grew by healthy 14%. Our growth and ranking in prescription terms is improving.

We believe that steps taken over the last two years and portfolio training and expansion of field teams, new launch productivity and the focus on mega brands have started benefiting us. The year has also seen key BD deals culminating to closures which will now potentially lead to value generation in coming years.

We continue to work with UCB team in closing the earlier signed definitive agreement and soon start the integration efforts. PSAI business posted revenues of 120 million and grew 9% year-on-year and 19% on a sequential basis. Considerable efforts are being put to achieve the twin objective of sales growth and healthy margins.

We are also looking at newer technologies and platforms to revamp our product offering and move higher on the innovation scale.

Our development engine continues to prioritize on complex generic effects across identified dosage forms and therapies we are also investing aggressively to build best in class manufacturing infrastructure to service future demand across the markets.

You’d have noted the announcement of filing of three NDAs by our proprietary product team is a key milestone towards commercialization of the differentiated products or formulation pipeline.

The interaction with our senior team during scheduled Investor Day on 18th May at Hyderabad will further help in clarifying on the commercialization potential of our pipeline. Thanks. And with this I now open the call for question-and-answer..

Thank you very much sir. Participants we will now begin with the question-and-answer session. [Operator Instructions] All the participants are requested to limit their questions to two at a time. Should you have more questions, kindly come back to the queue again. We have the first question from the line of Manoj Garg from Healthco. Please go ahead..

So a couple of questions on facilities updates, one is can you provide an update on the lowest communication between yourself and the FDA on your API facility?.

So we have the audit during the middle of November we respond this we have sent the first update probably in January if I recall right and then in March or April we sent the second update as well.

So we are continuing to send updates to FDA beyond that we can’t provide any further this thing but by and large the commitment which we had made in our first response are on the verge of getting closed..

Okay and it’s my understanding that you started the site transfer process for Esomeprazole so can you confirm for us whether new bioequivalent studies are necessary for the site transfer?.

We have completed the site transfer we have validated and submitted our update to FDA from a new API site. As far as bioequivalents is concerned we have no idea whether this would be required or not. This is as a transfer like-to-like same process, same raw material, similar equipment into another plant..

And then last question so you mentioned that the FDA had provided an update.

Just wondering have you responded I am sorry I mean have the FDA responded to your update?.

Not yet..

Is there any general timeline on that?.

There is well we have submitted and we are in fact there is one or two things which they have asked which also is being responded to as we speak..

Thank you. Our next question is from the line of [Pratik Balsariya] from Capital Metrics. Please go ahead. Sir, there seems to be some problem with his line. He’s out of the queue. We’ll proceed with the next question that’s from the line of Nimish Mehta of Research Delta Advisors. Please go ahead..

Sir, on the Srikakulam update, so based on that if you can give us any color on how many products you expect to launch in this financial year. And like if it is again cleared let's say in the first half then how many and if not, or if in the second half then how many that kind of would be very helpful..

So, in Generics business the total numbers wouldn't matter.

I mean first of all it will be it will not be fair on my thoughts to give you a number of products which we will launched because we don't know how many will get approval, but more what is important is which one of goals are going to get approval and probably few maybe four or five which are meaningfully important meaningfully and to an both scale and whether we get approval of those and one rejected cost in the previous question and few of others of we wouldn't like to go into specifics named to it, few are in litigation, which you can take a look, but otherwise we wouldn't like to give further details on this..

I see. I understand. So we were expecting to launch Nexium as for the last quarter, so that color would be helpful.

I mean, I know you don't --?.

We just explain that we filed in March from another site after tech transfer similar process, similar movement, similar raw materials on that we don't know how this will progress this is completely for FDA to decide how they view it and how quickly they sort of update it..

So next question on -- in the press release today you also mentioned that you had realized or recognized some revenue from Curis deal with Aurigene. So that has mentioned as about $23.5 million, but will be recognized upon Aurigene's realization of the work.

So how much is it for the quarter and how can we forecast it?.

Yes.

For the Curis deal there was an equity participation in Curis it for the takes that we have given to them and there have been some appreciation of the Curis stock, but whatever mark to market valuation of that will normally fit in the other comprehensive income in the balance sheet, unless and until you decide to dispose of that and then only it can come in P&L otherwise it remains in the balance sheet and if there are other milestones then those then it comes under revenue recognition consideration, but that also doesn't come straight away it will be recognized over the period of time, that this services are to be performed by Aurigene..

No, I'm talking about the equity that is given to Aurigene because of the deal and that has been -- as per one of the notes in today's result it is mentioned as being recognized and that's worth about $23.5 million, but I couldn't understand how and will it be recognized.

I'm referring to that?.

The past has been written in the law is it a fair value of this equity shares on the date of the agreement was $23.5 million..

And it has also been recognized as a part of revenue also written there..

You mean this is note in the [indiscernible] that you are referring to, it talks about the fact that we have bought the equity under the deal, there is no recognition in this quarter. Typically this upfront payments are recognized in the time you have a continuing manager involvement with the partner, which is a period as long as eight to 10 years.

So, in this specific quarter there is no recognition of income from this deal..

So, I think it is written and they are not very clearly that over the period in which origin has continuing performance obligations..

And that would be about 8 to 10 years over the period of --?.

It's not specific timeframe that yes you will [indiscernible]..

Thank you. Our next question is from the line of Neha Manpuria from JPMorgan. Please go ahead..

My first question is on Russia. We had mentioned in the last quarter that we have taken price hike there.

Now with the currency situation stabilizing, have we seen market share in existing product given some of our peers mentioned that they haven't taken price hike to avoid market share erosion, just wanted to get some color on underlying growth in terms of volume versus value share?.

So, this impact of economy has certainly had a bearing on the way of purchasing with patients they are purchasing medicine and there is a certainly some erosion in terms of moving from brands to generics and stuff like that which has some impact not just us but other companies as well.

But this -- the reversal of currency and its impact of economy I mean it’s yet to play out it is just sort of recovering simply let’s see how things go. We restate both in the geography confidence and Russia I think the major part of the turbulence is hopefully behind..

My second question is on the R&D spend side. I've noticed that nowhere have you mentioned how should we look at R&D.

Is it still 11%-plus or would you take that up further? And second, housekeeping question on R&D, what percentage of the R&D in FY 2015 was genetics versus innovative and biophramacueticals?.

So the proportion remain almost same I mean 60% of our R&D spend is still for Global Generics including API and 40% is towards proprietary products and biology.

Our ballpark figure of R&D spend is around 12% so this year we and in that we delivered 0.8 so it can fluctuate a bit because this year this particular quarter is going up relatively because of also we did three NDA filing right at the end of the quarter..

So it's fair to assume that it would be close to the average that we have done for the year?.

Yes..

And my last housekeeping question, the FX loss related to Venezuela, the translation loss, is that across various lines above the EBITDA or is this below the EBITDA in the other interest income line?.

EBITDA got impacted, otherwise our EBITDA would have been 890 crores this quarter..

And this is across the lines in above the EBITDA?.

Yes, in the ForEx line..

Thank you. Our next question is from the line of Anubhav Aggarwal from Credit Suisse. Please go ahead..

One question on the European market, your presentation mentions that you launched some new products and the sales seems to be going up.

Can you talk more about the launches and which geographies this launches has happened?.

So we are present in two countries the launches are there in these two countries and these are CNS drugs which went off patent very specifically Esomeprazole and [indiscernible].

Having said that this is certainly a good sort of beginning of we look forward to a much more [indiscernible] outcome from Europe but main the part of the strategy would hinge on some of the similar products, injectable, et cetera which we are filing for U.S. to come to in due course in Europe as well and will be not as lucrative as U.S.

but certainly would provide a better and more sustainable picture..

So this was largely UK? Is it or….

And Germany, UK and Germany both..

Germany, and this was outside the insurance contract.

This was in Germany outside the insurance contract, right?.

Yes they obviously [Multiple Speakers] that outside the tenders [indiscernible]. In currencies people will have insurance you asked outside the tender, you asked..

And just one question on this margin decline sequentially for global generics segment, you mentioned the currencies had a role to play. I completely agree with that. But the extent of margin decline does suggest that it cannot be that -- like 300 basis point decline sequentially cannot happen unless your US margin gets impacted as well.

So anything particularly in US got impacted, some of the key products or anything more than the usual inventory write-offs, something?.

There will some inventory write off and those are there. But the thing comes from the Russia and CIA there is a major one and then of course these have a product position has also had some impact..

So you are saying that Habitrol margins are significantly lower than the average gross margin?.

Gross margins are lower Anubhav but net margins are....

And, one more clarity on Venezuela, so your last repartition was in December, 2014. It's been almost five months.

What's your strategy here, how long do you wait for [indiscernible]?.

Last quarter we’ve received about 10, 12 days back, so we have started again..

Started again….

And between there was a period for weeks we’re not making..

And, sir, what will be your exposure which is outstanding? When you received 10 to 12 days back what's the exposure which is outstanding now?.

So around $730 million-$738 million..

Thank you. Next question is from the line of Mehul Sheikh from PhillipCapital. Please go ahead..

This is Surya and thanks for this opportunity.

Just wanted to know about this -- Venezuela again what was the ForEx loss that we have booked? Whether this is relating to this particular quarter or this is for the entire year?.

So this is add on a particular date they were balance sheet that you will have Venezuela subsidiary in terms of transmitting to the consolidated result of the company we have decided to take a SIMADI rate instead of the official exchange rate of 6.3. So this has been our decision to take as an abundant precaution can see you have taken that..

On the ForEx thing, again one clarification. For the full year there is in the note also you have mentioned FY 2015, there is an incremental ForEx gain of something like $1,430 million and ForEx loss relating to Venezuela $843 million. So all total -- and you are saying this Venezuela split is in there in the above the EBITDA line..

There is a ForEx thing that are multiple things that you do. One is the tax litigate that we do another is the balance sheet hedge that we do and balance sheet hedging is done more dynamically there is a far different markets so you have different kind of policy U.S.

dollar we do up to a maximum 18 months kind of thing you can 40% to 60% forecast sales cash flow and for the [indiscernible] we have taken in view that we will go up to a maximum 30% of forecast or a maximum period of 12 months but the balance sheet one seems to be dynamically managed then what's going out for the end of the month so there is the lot of ForEx gain we have been sort out [indiscernible] that you take at the end of the month..

So is it fair to say that, okay, the net of these two amount is the kind of net impact of a ForEx swing in the numbers for the full year?.

Yes..

And regards injectable, I must say that, okay, congratulations for attaining top 10 position in US during calendar 2014 as per IMS data, but whether it is the three lead product injectables that is [indiscernible] these three are real contributors towards this or some other meaningful injectables are also there from our side?.

So I think we refer to the overall prescription is to include pretty much everything..

And may I know what is the kind of revenue that we have booked from the Habitrol this quarter?.

No. Specifically it's this is for 3 months but broadly we aligned with broadly we are in line with overall yearly projection which we had given..

$60 million annually is the number what we had given that is in line..

That's right we are in on-track..

Okay.

And the margins here EBITDA level it would be similar to the kind of a blended margin that how we are indicating?.

Yes. So, we won't disclose that but quite effective margins and quite lower pay back period that's what we clarified last time, Surya..

Okay. Just last one question..

Can you please join the queue, Surya..

Thank you. We have the next question from the line of Girish Bakhru from HSBC. Please go ahead..

Just on SG&A, I know you have commented this control has come from various efforts, but how much, say, benefit would you have got from Ruble movement, particularly from Russian territory and where do you see this particular SG&A movement going with UCB absorption?.

So, overall this year there is many but the organization has been well controlled I must say partly there is a consideration of the currency in the emerging market but beyond that I've been personally as a CFO I feel that our control on SG&A has been better. We need to sustain it..

But would you be able to quantify like how much of the costs are in Rubles in terms --?.

Girish we can share that on an offline basis..

And from UCB have you added more people in India?.

UCB not yet closed so we are hoping to close during the first quarter..

And just lastly on the Srikakulam ANDAs would you be able to quantify number of pending ANDAs, of 68 how many are from that site?.

We won't disclose that Girish..

Thank you. [Operator Instructions] Next question is from the line of Ranjit Kapadia from Centrum Broking. Please go ahead..

My question relates to European market. We have seen a very good growth in both global generics as well as in PSAI businesses.

Is there any dramatic change in the situation or is this because of the new product introduction only?.

No. Entirely due to new products and Europe BCI always use to be well in between and that's come back to an extent but otherwise the other uptick in the Generic side is couple of introductory as I mentioned..

And in PSAI we have introduced any new products?.

Ongoing basis we do that, on an ongoing basis the business model is on continuous sort of renewal of products so we keep filing BMS and as and when we get transaction we keep adding. But I think the uptick around is some of the CPS billings actually..

Thank you. Next question is from the line of Nitin Agarwal from IDFC Securities. Please go ahead..

Sir, my question is on the R&D costs. Given the fact that right now we have an uncertainty on our US growth given the issues around the new product launches.

I mean, how are you viewing R&D cost calibration going forward?.

So, I don’t think we will calibrate that because this is the future that we’ll have to invest into R&D, we’ll have to crack the high entry barrier product so that’s the future. And these uncertainties we’ll have to get over with, actually. So count on our business based on uncertainty will calibrate R&D cost.

I don’t think that’s the right way to look at the business..

But just purely from a mathematical perspective, if during the year our U.S.

business, the new approval don't come through are we looking at a potential case where R&D cost can shoot much beyond the 12%, 12.5% that we have been guiding to?.

So why should it not come to, I mean are you referring to factories we have our other all referring to FDA in general [indiscernible] for a slowdown of approach which one, which is….

I was referring to I guess for the last six months post the inspection and issues coming in through Srikakulam, we haven't had any new ANDA approvals. So just wondering, if it is having an impact in terms of overall approval procedure, I mean, from an overall approval scenario for us as far as any fresh ANDA is concerned..

So the biggest I think the hit in form of the delays Nexium as I have -- we spoke about it we did the transfer. Beyond that it is very, very significant the answer is no. Of course we are assuming that reasonable time spend we’ll be able to sort of get back..

My second question is on the Venezuela.

So when we're booking revenues now, at what dollar rate are we booking these revenues at and what dollar to bolivar rate?.

It will be in the office salary if we have exporting our products from India to Venezuela it will be transferred into the official exchanges. So, it will bring at VEF6.3 per USD there have been adjustments that we have done on the balance sheet position as on 31st March..

So we’ll bring at VEF6.3 per UDS?.

Yes, yes..

And so you don't see a risk to this revenue assumption, revenue booking assumption?.

No, it should have -- we have seen at Eastern Europe picking appropriate measures. We have proactively taken appropriate measures for the balance sheet. Here we are getting delayed repatriation but we are getting money..

On this last one, on the -- so you have -- if I remember in the December call, we mentioned our exposure in terms of repatriation was $20 million, it's gone up to $37 million, $38 million now in terms of the amount which is at risk.

What is essentially our tolerance? I mean, can we go far higher than this, quote-unquote value at risk which is there in the market or money at risk?.

We are in a very profitable market. So normally the way we celebrate is our inflow from that market to cover up the cost of goods that we are sending to that market..

So let me also add here, so there of course would be, it will be a little more dynamic decision no doubt about it.

But having said that if you recall I just mentioned that in terms of our rankings, we are 20th in value but 12th in units and in our discussions with health industry which is very, very -- going on an ongoing basis this is noted that while as many other companies are taking price increases in terms of units, they are -- some of them are flat or declining and yet growing in revenue all this is not the case probably the only in the IMS list of first to top 20.

So those are no paid and we have that and putting in a lot of efforts we are extremely hopeful and bullish that our dominance in the market will be retained and this will not come in the way. Finally it’s human medicine..

Thank you. Our next question is from the line of Chirag Talati from Kotak Securities. Please go ahead..

First question, similar to Venezuela given the sharp devaluation in Russia on a Y-o-Y basis and year rates, why is there no impact on foreign exchange?.

No, you will have to understand Russia. There is no confusion about the exchange rate as on a particular date. There is only single exchange rate. In Venezuela there are multiple exchange rates and there is also a black market rate..

I understand that, sir.

My question is there a translation loss on Russia given the sharp devaluation on an annual basis because you've never seen that in any of the quarters?.

Chirag, the receivables are hedged if you are talking about the balance sheet translation loss ruble receivables are head towards defect loans so you won't get it because it will get opted in the P&L..

I see yes..

And the P&L the value of the ruble being lower and reflected in the lower sales and lower profits anywhere so are you referring to that balance sheet asset translation or to the P&L. As I explained since it is hedged..

Fair enough.

Secondly on Venezuela again, are you hearing any chatter of a full conversion to SIMADI or given the kind of economic situation there in terms of ForEx reserves, how long do you think it is before there can be a full-blown currency crisis or this VEF6.3 can really go down to any rate?.

The beyond 6.3 there is a rate which is a 12.

So one can fly and get an auction that rate as well subject to approval, but we have taken the SIMADI as again I've said as an environment precaution to reflect the balance rate so what will happen to Venezuela it will all depend on what stand government take in terms of official exchange rate devaluation whenever they would like to do it and off course the entire Venezuela economy is primarily the dependent on the crude oil types moment.

So, that way so far we have not being Venezuela government departed on any loans or anything they have taken from anywhere, but yes there has been a delay in sudden repatriation that there were a few months where we didn't get anything but we have again started getting some. I clarified in a previous question..

If I understand correctly this $14 million-odd of ForEx loss that you have booked, this is on -- what does this pertain to? So is it net current asset exposure or is it just cash that was left in Venezuela that you're no longer able to repatriate and hence this conversion or it's just the net current asset situation that has been translated?.

So it will be net monetary FX which is inclusive of inventory minus so I think so that way we had completed..

But no receivables..

It's about import export Chirag it's net monitory asset like what Saumen said cash was receivable minus third-party and payables..

But then if you are confident of getting your receivables converted at the VEF6.3 rate why this translation and why this -- the point I'm getting to is why is there a disparity between the P&L rate and the balance sheet rate if you are so confident on getting your money back at VEF6.3?.

There is any input that is happening to Venezuela is as per the approvals and they are obligated to give up and now if it has exchange rate but any profit that you are on which actually will be in the retain on the in the balance sheet that enough communal obligation and that's why it calls two different set of accounted treatment..

Thank you. Our next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead..

Abhijit, just a quick clarification, if I heard you correct in the context of Srikakulam, did you say that you will be able to get back in a reasonable time frame? And I guess you were referring to the product approval starting back again..

Yes. I said we hope to get back hope meaning it's all endeavor's in place we are putting you heard me that response first update, second update broadly the commitment are getting to a closure there is likely hold that they may like awarded but beyond that if anyone cares so I've just putting it there..

And when you say reasonable time frame, you are referring to, let's say, three to four months that kind of order of time?.

Yes Sameer I don't know so all we are doing is whatever we can do we are doing from our side everything what we can do is we are doing from our side or we will hear back I guess I mean I'm sure will hear back we are doing whatever we can do..

Abhijit, you also mentioned that there are four to five meaningful product approvals which you expect this year subject to the FDA clearances.

So all four of five of them are contingent on Srikakulam or a couple of them may not be?.

Mostly not be. But no in general approvals are I'm sure I don't what you are hearing from others as well it' still yet to fully pick up totally for us so not everything is almost by the next-gen is probably the biggest from out of the list..

But are all of them from Srikakulam..

No I said it no..

Okay. .

I said most are not considered..

Anyways Sameer we just cannot give a definite timeframe and all but most likely there would be an inspection or something which can happen..

So the last question, go ahead..

Go ahead, ask me question, please..

Sir, one last question, sir, on Venezuela if my math is correct you probably sold about $135 million-odd in fiscal 2015.

What could this number be next year, just directionally, if you can?.

As I’ve told you earlier Sameer that are calibrating. If you would ask listed to the local marketing and team, the growth potential is very high there. And so we are calibrating against in other repatriates and flows if you have any and what kind of exposure we should have.

And so we definitely want to grow, grow well, but at this point of time I cannot give any guidance..

I’ve a few more questions. I’ll get back in the queue..

Thank you. Our next question is from the line of Arvind Bothra from Motilal Oswal Securities. Please go ahead..

I just wanted to pick your brains on your M&A strategy. You've done a couple of small deals in the recent past, but your balance sheet is far much healthier than you've ever been.

Are you looking at big ticket transactions, particularly in US that you have a high focus on or any other particular markets?.

When you say big ticket….

$500 million, plus….

Okay, so we cannot rollout. There are multiple diligence that we do at any point of time, but everywhere we may not be successful. But definitely we have M&A as a priority in our agenda, and we have the capability to fund sustain in a minute..

Second thing on the same line, just wanted to understand on the U.S.

market with a significant buyer consolidation and now we are also seeing possible consolidation in the supplier side, Teva, Mylan and the like, how do you think the market is evolving in terms of Generic pricing environment? How has it been, how do you think it may evolve with bigger players having bigger market share?.

So the markets are paid off request for proposal this year and we were and this will keep coming probably on a yearly basis or 18 month basis. So good question, we were apprehensive. We seem to have weathered it reasonably well. So we’ll see how it goes. I would be very pessimistic, initially we were probably very apprehensive but we would watch.

But is it going to sort of be very, very detrimental to the business, probably not. Having said that, nothing can replace good products eventually if you are in commodities you are in commodities, if you can crack products which are not fully for all, then I think the stickiness is much more..

And finally just a small one, on the proprietary products, anything particular in this quarter, also in the full year that we've seen slowing traction?.

In terms of the current sales out of the acquired brands in [indiscernible] there have been some adjustment due to some self returns and all which had affected..

And you think pick up from here to a meaningful level in the coming quarter?.

Yes, quite confident on that..

Thank you. Next question is from the line of Abhishek Sharma from IIFL. Please go ahead..

I just had one. So, on a sequential basis, the US -- North America generics seems to have grown only by $4 million. This is despite Habitrol coming in for the entire quarter and Valganciclovir launch late last quarter.

So just wanted to understand, has there been some impact on one of your key products or is it just broad based price erosion which has led to this on the base business?.

That are now Q-o-Q..

Yes, right..

What happens is and we’ve mentioned this, during Valganciclovir closing, the injectables pool is high from the customers, and which make some difference. It happened last year. If you look at Q3 and Q4, or North America last year, it will provide you actually we declined to a resemblance in last year.

The decline was made up because partly habitual partly Valganciclovir. But otherwise, if you see Q3, Q4 last year that’ll provide you last of the seasonality of the injectables..

Just one more.

How many products have you transferred out of Srikakulam?.

Only 80 to 1, one is doing that, you don’t do it already each and everything..

So the number would be around, four or five, or?.

Yes, less obviously maybe three..

And these are all CB 30s that you are attempting?.

Our interpretation is that, but let's see I can't say whether it's CB 30s or what but we seeking the same process similar equipment and other plant we are trying to do put it that way and so I interview beyond that I think [indiscernible]..

Thank you. Our next question is from the line of Saion Mukherjee from Nomura. Please go ahead..

Yes. Thanks for taking my questions. Sir, on my earlier question you talked about M&A as a priority I think after some time we are hearing from you on the M&A side so can you just through some light how should we think about from a next 2 tier perspective which are the geographies which area what are the board thought process around the M&A. .

So we are on the lookout in the branded markets emerging markets from two angles one is acquisition of and two is one to two select geographies value are thinking of trying to make inventory will try and look at if anything is meaningful I mean anything is available so that would be one stream off activity on the Generics market it would be opportunistic and capability driven so we will not just sort of take off turn over to do our large deal would probably not the philosophy on the company but if there is good assets coming there is intelligent way to look at product if that is being spotted you will certainly be as in case of other payables companies we will be more keen to look at those..

Okay so my second question related to Venezuela just one clarification further just you talked about this contract rate.

How easy it is to take an increase on that just to ensure that just to ensure that we kind of keep most of the profits here to transfer pricing?.

So, you would definitely need to get because it's how then you would be able to exploit in that specific rate and will give you some wall pasting in a ER maybe you can do it three or four times..

Three or four times and how much would be the increase?.

It depends it cannot be like you cannot double that something like that if there is a even a reasonable percentage increase it is fine..

Because I would understand the end market prices would have gone up significantly right. So I think is that does that facilitate increase in terms of transfer prices..

But I would just clarify that our major growth has been the unit growth not by too much but at the same time there has been some types increase and there has been even in the transfer price also there has been the increase but we are doing little bit possible way but [indiscernible] how many times you can do it..

So one final question if I may just on Copaxone anything more you can share from where we were in the last quarter you have seen the response citizen petition there so how do you feel about it and anytime line that you can share?.

So, it's work in progress in terms of we have citizens petition may not be the biggest hurdle we have some work to do which we are doing the work so there is we are working against the specific timelines wouldn't like to give you or but it is certainly not going to be within the quarter or two..

But do you think it's possible by end of this fiscal?.

You mean approval..

Yes..

No. .

Okay..

Unlikely..

Thank you. Participants we will now take the last two questions. Next question is from the line of [Pratik Balsariya] from Capital Metrics. Please go ahead. .

Hi. Good evening. Thank you very much for taking my call. On the U.S. FDA front on overall Dr. Reddy's point of view and the overall Indian companies point of view. How is the thing going far because there is a general feeling that you are U.S.

FDA is slowing down approval for Indian company?.

That's not full and fair perception, I think in general that we sub setting into the new way of looking at the through thought process which has being outline and it has a slow rate down because they are up commitment and there are anti-barriers and there are specifics conditions laid out so that settling that down is taking some bit of time and that is taking a total on the earlier fillings.

As of since the new filings at least the acceptance or initial quick queries on that towards acceptance is coming as per pretty much as per the new commitment and also just to catch up with the new filings I think the total or the impact is coming on the earlier filings and let me put it that way..

Okay.

And there is a same case put in the any other big filings as well?.

Yes. I guess so and but more and more we will see that the approvals or the review process would be based on the healthcare system there. And not just based on, filings based and numbers, et cetera, so which would definitely would prioritized..

And the last question, on the pricing front, in U.S. as well as in Europe, in the Generics business, how is the scenario working out for the bigger products which Dr.

Reddy has? And like the scenarios for last two-three years, and the scenarios you can guide something for future?.

So, two things, overall injectables we are doing okay. As far as RSPs are concerned in the earlier part of the discussion, I mentioned that we have, by enlarge weathered okay, there is of course erosion thing will get iteration you cannot avoid into it.

But percentage erosion but otherwise life moving on this will be part of Generics business we’ll keep launching to grow there..

And only small question if I may sir on the USFDA front only, sir, is there any way or the anything you can you give a color on the like the next approval spending, like the rate of approval the faster rate of approval coming from USFDA?.

Difficult, I just don’t understand your question. I mean I mentioned how it impact your business..

Correct, but you think can you see of dynamics changing in the future?.

The full efforts are on the other side, so the new filing as we said is we are getting response as quickly the old fillings are getting impacted. So what will happen probably is important older files will get again more prioritized..

Thank you. We’ll take the last question, which is a follow up from Sameer Baisiwala from Morgan Stanley. Please go ahead..

Saumen, a quick one on Venezuela.

What is the total net monetary assets lying then off which how much did you take through the SIMADI rate?.

So definitely in the rate monetary asset, there is just around 15 million or so. So, that’s why when we have converted so that is what is that impact..

So you have converted the entire net monetary asset?.

Net monetary assets we have converted..

After taking out the payable filed [SMEs]..

So when you take the cash with tier ones and….

Payable to and that is the receivable from there, right? I don’t know how you define payable..

It’s a subsidiary operation..

Right..

It’s a subsidiary, so whatever we are supposed to pay to India, gets reduced….

So let me clarify this way. This is a translation loss of the balance sheet items from bolivar to INS, we felt it may not be appropriate to convert everything at 6.3 rate of bolivar to dollar get it into the current currency level.

So we decided that whatever the net monetary asset spending, basically one way to look at it will be whatever is in earnings that you’re having in your subsidiary you reduce that to the extent there is working capital and [indiscernible] cut increase that you will have and then you take CAT as a [indiscernible] that is what we are applying.

Does that clarify?.

Well, it does but I think I’ll take it offline to get more clarity. And the second question is just a general commentary if you can that excluding Nexium for fiscal ’16 outlook for a company, both the growth rate as well as the margins? Some other business trends….

It will definitely depend a lot in terms of what kind of currency stabilizations happens in Russia, CIS. And at the moment it looks good at almost 1.26 how honorable to Indian rupee. But if it goes back less than one, then definitely to that extent growing in emerging markets will be very tough.

And otherwise in India is one market where one can very fairly much bigger and where we definitely feel we’ll be growing above the market growth. So, whatever market growth can happen, we can grow a few 100 basis point more growth.

And we last trying to revise when the PSAI part as well so overall as we do not give guidance, but we definitely are going to grow but at what is the rate of growth that we’ll have to see..

Thank you. I now hand the floor back to Mr. Kedar Upadhye for any closing comments. Thank you, and over to you sir..

Thank you, all for joining Dr. Reddy’s senior management for the Q4 FY15 earnings call. In case of any additional clarification, please feel free to get in touch with Investor Relations team. Thank you and good-day..

Thank you, sir. Ladies and gentlemen, thank for joining us. You may now disconnect your lines. Thank you..