Dr. Reddy's Laboratories Limited announced its consolidated financial results for the quarter and nine months ended December 31, 2025, demonstrating resilient performance amid challenging market conditions. The pharmaceutical giant reported consolidated revenues of ₹87,268 million for Q3FY26, marking a 4.4% year-over-year growth, though declining 0.9% quarter-over-quarter.

Financial Performance Overview

The company's financial metrics for Q3FY26 reflect a mixed performance across key indicators:

For the nine-month period ended December 31, 2025, the company achieved revenues of ₹260,771 million, representing an 8.4% increase compared to ₹240,475 million in the corresponding period of the previous year. Net profit attributable to equity holders for nine months stood at ₹40,649 million, remaining relatively flat at 0.1% growth year-over-year.

Segment-wise Performance

The Global Generics segment remained the primary revenue driver, contributing ₹79,113 million in Q3FY26, a 7% increase year-over-year. This segment includes operations across North America, Europe, India, and Emerging Markets, with varying performance across regions.

North America revenues declined 12% year-over-year to ₹29,644 million, primarily due to lower Lenalidomide sales and price erosion in key products. However, Europe showed strong growth of 20% year-over-year, reaching ₹14,476 million, driven by new generic product launches and growth in the Nicotine Replacement Therapy (NRT) portfolio.

Operational Highlights and Strategic Developments

During Q3FY26, Dr. Reddy's Laboratories achieved several significant milestones that strengthen its market position. The company entered into a strategic collaboration with Immutep for commercialization of Eftilagimod Alfa, a novel immunotherapy oncology drug, with an upfront payment of US$20 million and potential milestones of up to US$349.5 million.

The company launched Hevaxin®, a novel recombinant vaccine for Hepatitis-E virus prevention in India, and received marketing authorization for Semaglutide injection from the Drugs Controller General of India. Additionally, 85% integration of the acquired Consumer Healthcare business in NRT was completed by December 2025.

Financial Impact of Regulatory Changes

A significant factor affecting the quarter's performance was the implementation of India's New Labour Codes, effective November 21, 2025. The company recognized an incremental cost of ₹1,170 million towards employee benefits during Q3FY26 due to changes in wage definitions and employee benefit obligations under these new regulations.

Profitability and Margin Analysis

Gross margin for Q3FY26 stood at 53.6%, declining 505 basis points year-over-year, primarily due to reduced Lenalidomide sales, price erosion in generics businesses, and the one-time provision related to new Labour Codes. Excluding the one-off provision, gross margin would have been 54.1% of revenues.

EBITDA for the quarter was ₹20,493 million, representing 23.5% of revenues, compared to 27.5% in the corresponding quarter of the previous year. The company maintained its focus on disciplined execution of strategic priorities including base business growth, pipeline advancement, and operational efficiencies.

Outlook and Management Commentary

Co-Chairman & Managing Director G V Prasad commented on the results, stating that growth in Q3FY26 was supported by continued momentum in branded businesses, aided by favorable forex movements, thus offsetting the impact of lower Lenalidomide sales. The company continues to focus on disciplined execution of strategic priorities to create long-term value for stakeholders.

The company's strong balance sheet position is reflected in its net cash surplus of ₹30.7 billion as of December 31, 2025, with a negative net debt to equity ratio of (0.08), indicating a robust financial position for future growth investments and strategic initiatives.

Source:

Dr. Reddy's Laboratories has disclosed receiving five separate orders from the GST Authority imposing penalties totaling ₹8.38 crores for alleged tax violations spanning FY 2018-19 to FY 2022-23. The pharmaceutical company made this disclosure under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 on January 1, 2026.

GST Authority Orders Details

The Joint Commissioner, Office of Principal Commissioner of Central Tax, Visakhapatnam issued all five orders on December 31, 2025, which were received by the company on the same date. The orders seek demand including interest and levy penalties under the APGST Act 2017, alleging that Dr. Reddy's Laboratories availed excess input tax credit during the specified period.

Financial Year-wise Penalty Breakdown

The GST orders impose varying penalty amounts across the five financial years under scrutiny:

The highest penalty of ₹3.53 crores pertains to FY 2020-21, while the lowest penalty of ₹80.41 lakhs relates to FY 2019-20.

Company's Response and Impact Assessment

Dr. Reddy's Laboratories has stated that based on its evaluation, there is no material impact on the company's financials, operations, or other activities. The company indicated it will evaluate filing the necessary appeal with the appellate authority regarding these orders.

Regulatory Compliance

The disclosure was made in compliance with SEBI regulations, with the company providing detailed information about the nature of violations, receipt dates of orders, and financial implications. Company Secretary, Compliance Officer & Head-CSR K Randhir Singh signed the regulatory filing on behalf of Dr. Reddy's Laboratories Limited.

The orders represent the GST Authority's allegation that the company claimed excess input tax credit, though the company maintains its position that there will be no material adverse impact on its business operations.