@Rajneesh_Vashisht

Few years back I had started to learn DCF but a learned friend pointed out the negatives related to that method and I gave up. There are too many suppositions and gazing in to future, and these days things change too quickly for most businesses. So I like to look at the trajectory of the business, rather than put an exact value to it.

We are now debt-free and focusing more on profits: Ramco Systems CEO

Anyone has a good view on the valuation of the subsiaderies?

Given the PAT runrate of the kotak investment, kotak amc and kotak securities has exploded all which deserve valuation twice standalone bank. Also kotak life has superior margin and return profile vis a vis industry.

my back of envelope calculations show subsidaires after 20% holding discount should be valued at 700-770 Rs/share. So core standalone bank is trading a 2x book value cheapest of all the banks.

I think it would be critical for kotak to get back to 20% growth runrate or also to look at good acquisitions as current leverage is low and the CAR is too high for it to do 16-18% ROE, even after being best on NIMs and ROA.

Kotak given its 100% control over subsidiaries is probably quite antifragile as most of its subsidiaries dont carry balance sheet risk and would aid core bank to drive higher growth without diluting equity

Well said – The shares are ‘effectively’ pledged (both of Dystar and Kiri) as it is litigation financing and the Private Creditor of Singapore would not lend money without the ability to sell the shares in case the loan is not repaid by Dec 2025. RBI does not allow pledging to foreign lenders so ‘encumbrance’ is used but effectively it is pledged. This makes it very risky now if money does not come by Dec 2025. Then Kiri is at the mercy of the Private Creditor to allow extension and not invoke the shares. It is a high risk gamble on part of the promoter to borrow now vs patiently wait for a year!

Very low likelihood but nonetheless, what if court case is extended beyond Dec 2025 due to some gimmickery of Senda (and say Private Creditor is working with Senda/LongSheng) Private Creditor invokes the Dystar shares and passes it on to Senda – black swan event but a risk nonetheless)

I don’t intend to FearMonger but just adding a remote possibility esp. as this case has taken so long already that anything looks possible here and so market will not believe this situation unless money comes in the bank account.

Disclaimer – Invested small % of pf and understand this is almost binary event now esp after this latest aggressive financing event!

Key Highlights on Growth drivers:

Strategic Collaborations, Partnerships and Joint Ventures

• Nestlé JV: Dr. Reddy’s and Nestlé formed a joint venture (JV) to bring nutraceutical products to the Indian market, leveraging Nestlé’s trusted brands and Dr. Reddy’s well-established commercial capabilities. DRL holds 51% of the JV’s share capital, with Nestlé holding the remaining 49%. The company expects to receive royalty payments from the JV as part of its consumer healthcare strategy.

• Agreement with Junshi Biosciences: The company signed an agreement with Junshi Biosciences to introduce their novel oncology molecule, Toripalimab, in India and select emerging markets. Recently, the Subject Expert Committee recommended the approval to import and market Toripalimab in India, with a waiver for Phase III clinical trials. The final approvals are expected in the coming months.

• Collaboration with the Bill and Melinda Gates Foundation: Dr. Reddy’s has partnered with the Bill and Melinda Gates Foundation (BMGF) to manufacture and supply DMPA-SC, a long-acting, self-administered contraceptive injection. This product will empower women by providing more control over their reproductive health, aligning with the company’s goal to make healthcare more accessible and affordable for vulnerable populations. This initiative also supports the UN Sustainable Development Goals (SDGs) for 2030.

• Sanofi Partnership: An exclusive partnership with Sanofi to market and distribute their vaccine brands in India has elevated DRL to the second-largest player in the vaccine segment.

• Bayer Collaboration: Dr. Reddy’s partnered with Bayer to distribute Vericiguat, a heart failure management drug, in India. This partnership helps the company expand into Tier-I and Tier-II cities, strengthening its presence in the chronic segment.

• Pharmazz Collaboration: Dr. Reddy’s signed an agreement with Pharmazz to market Centhaquine (Lyfaquin®) in India, a promising treatment for hypovolemic shock.

• Amgen Partnership: Strengthening its collaboration with Amgen, Dr. Reddy’s will bring romosozumab (Evenity®), an osteoporosis treatment, to India.

• MenoLabs Acquisition: Dr. Reddy’s acquired MenoLabs, a women’s dietary supplement brand in the U.S., enhancing its self-care and wellness business.

• Nerivio Expansion: Following the successful launch of Nerivio®, a drug-free migraine management device, in India, Dr. Reddy’s extended the product to Europe (Germany) and South Africa and is now available in five countries: India, Germany, Spain, the UK, and South Africa.

• China Market Growth: The company is actively expanding its presence in China, consistently submitting 14-15 products annually, with several interesting approvals.

• Takeda Partnership: Licensed Takeda’s novel gastrointestinal drug, Vonoprazan, for commercialization in India.

• Novartis Pharma: Partnered with Novartis to distribute two of their leading anti-diabetes brands, Galvus® and Galvus Met®, in the Russian retail market.

• Ingenus Pharmaceuticals: Obtained exclusive rights to commercialize Cyclophosphamide Injection in the US.

• Alvotech Collaboration: DRL is collaborating with Alvotech for the commercialization of their denosumab biosimilar in the US, as well as in Europe and the UK.

Driving Growth Through Innovation and Partnerships

• U.S. Product Portfolio Integration:
  The U.S. generic prescription product portfolio acquired from Mayne Pharma was successfully integrated into Dr. Reddy’s operations this year.

• COYA 302 Partnership:
  Dr. Reddy’s entered an exclusive agreement with Coya Therapeutics, a U.S.-based biotech company, for the development and commercialization of COYA 302, an investigational combination biologic for the treatment of Amyotrophic Lateral Sclerosis (ALS).

• Biosimilars and Biologics Pipeline:
  Dr. Reddy’s is working on a robust pipeline of biosimilar products, including Abatacept and Rituximab. Although their Rituximab biosimilar candidate received a Complete Response Letter (CRL) from the USFDA due to outstanding issues, the company is actively addressing these and expects approval in the next fiscal year.

• Innovative Treatments in Development:
  Dr. Reddy’s has launched new products in the U.S., including Treprostinil and Regadenoson Injections, as well as multiple other drugs acquired from Mayne Pharma. Additionally, the company is advancing oncology and autoimmune disease treatments.

Expanding Consumer Health and OTC Businesses

• Global OTC Expansion:
  Dr. Reddy’s is expanding its presence in the OTC wellness space with the relaunch of Premama® in the U.S. and the acquisition of MenoLabs®. Additionally, they entered the UK consumer health market with Histallay®, an anti-hay fever medicine.

• Nicotine Replacement and Pain Relief:
  Dr. Reddy’s continues to build on its global consumer healthcare portfolio, with a focus on nicotine replacement therapy, pain relief, and women’s health products. Dr. Reddy’s is acquiring a leading brand in Nicotine Replacement Therapy (NRT), Nicotinell®, along with three other brands: Nicabate®, Habitrol®, and Thrive®, covering multiple global markets. These acquisitions provide a strong presence in Europe, Canada, Australia, and Japan, while also offering expansion opportunities in emerging markets. Dr. Reddy’s NRT business won a major tender from Brazilian health authorities, marking significant growth in the region. which has a strong presence in over 30 countries.

• Strategic Licensing Agreements:
  The company entered into various strategic agreements, including a deal with Tenshi Kaizen to launch Loratadine for the private label OTC business and a collaboration with Mark Cuban Cost Plus Drug Company to provide access to essential medications for Wilson disease patients.

Dr. Reddy’s remains focused on limited competition drugs, with a particular emphasis on injectables and biosimilars, which are expected to drive performance in key markets. The company’s Active Pharmaceutical Ingredients (API) business continues to play a vital role, not only supplying external partners but also supporting its own generic business. This backward integration presents a cost advantage, helping DRL maintain a strong margin profile. The company is further enhancing its backward integration efforts to continue supporting margins.

Dr. Reddy’s is yet to resolve the anti-trust division investigation by the US DoJ concerning price-fixing allegations. Additionally, the company is involved in antitrust lawsuits related to the settlement of patent litigations for Revlimid, which are still being monitored, and the outcomes remain uncertain.

Dr. Reddy’s growth in the US market will continue to be driven by its ability to launch new products and expand its specialty and complex generics portfolio. R&D spending has increased, with 8.2% of sales allocated to research and development in FY24, up from 7.9% the previous year. The increase is primarily due to a higher number of filings and ongoing development efforts in complex products, biosimilars, and small molecules across various markets.

R&D Spending: Approximately 60% of R&D expenditure is allocated to small molecules, with 20% directed to biosimilars and the remaining 20% supporting APIs and other strategic initiatives like in-licensing.

Capex: DRL’s Capex spending focuses 75% on expansion, while the remainder supports maintenance and digital investments.

Dr. Reddy’s remains focused on limited competition drugs, with a particular emphasis on injectables and biosimilars, which are expected to drive performance in key markets. The company’s Active Pharmaceutical Ingredients (API) business continues to play a vital role, not only supplying external partners but also supporting its own generic business. This backward integration presents a cost advantage, helping DRL maintain a strong margin profile. The company is further enhancing its backward integration efforts to continue supporting margins.

DRL’s Aurigene Pharmaceutical Services has inaugurated a state-of-the-art biologics facility in Genome Valley, Hyderabad, dedicated to Contract Development and Manufacturing Organization (CDMO) services. This facility will primarily focus on R&D activities, which aligns with the company’s broader strategy of developing biologics and specialty drugs. Aurigene Oncology Limited achieved promising results in its Phase 1 study for India’s first novel autologous CAR-T cell therapy for multiple myeloma. The Drugs Controller General of India (DCGI) has approved moving to Phase 2 of the trial.

Chirotech Technology Limited, UK: The company dissolved its step-down wholly-owned subsidiary, Chirotech, which had no material impact on the business or financials.
Licensing Agreement with Gilead: DRL signed a voluntary licensing agreement with Gilead Sciences to manufacture and commercialize Lenacapavir in India and other countries.
New Subsidiary in Denmark: Dr. Reddy’s Denmark ApS was incorporated as a wholly-owned subsidiary, marking further international expansion.
Aurigene Oncology Limited (AOL): The company invested ₹2,08,62,912 in Clean Renewable Energy KK 2A Private Limited (CREL), acquiring 26.99% equity in the company.
Rituximab Biosimilar: DRL received a positive opinion from the European Medicines Agency (EMA) for its proposed Rituximab biosimilar. Applications for the biosimilar are also under review by the USFDA, EMA, and MHRA
Bevacizumab (Versavo®): Earlier this year, DRL launched Versavo®, its first biosimilar product in the UK, marking a milestone for the company’s presence in biosimilars.

Product Launches and Pipeline Expansion

In Q1 FY25, DRL made significant progress in expanding its product portfolio:

• NA Generics Business: Launched three new products.
• European Markets: Introduced 12 new products.
• Emerging Markets: Launched 17 new products.
• Indian Market: Brought 13 new products to market.
• Global Filings: Completed 22 global generic filings, including one ANDA in the US.

While the company will rely less on mergers and acquisitions, it will focus more on collaborations, licensing, and acquiring assets or rights to specific assets when needed. DRL is actively building its growth strategy for the years 2026 and beyond, leveraging its strong financial position to make long-term investments in innovation and growth.

This holistic approach is expected to provide DRL with the diversification needed to offset the eventual decline in Revlimid revenues and support the company’s continued growth across geographies and product lines.