Dr Reddy’s Q3 reports highlight 2.5% year-on-year growth amid NRT acquisition
Indian pharma leader Dr. Reddy’s Labs Q3 results for fiscal year 2024-25 have been released. The reports show high revenue and net profit growth. It is due to the company’s resilience and focus on adaptability in an increasingly competitive market.
Net Profit and Revenue Growth
The company’s consolidated net profit in Q3 FY25 was at ₹1,413.3 crore. Thus, representing a 2.5% year-on-year growth from ₹1,378.9 crore recorded in Q3 FY24. This marks a 12.6% jump from ₹1,255.3 crore reported in Q2 FY25. Consolidated revenue saw a strong growth of 15.85% year-on-year, at ₹8,358.6 crore against ₹7,214.8 crore in Q3 FY24. Sequentially, revenue rose by 4% from ₹8,016.2 crore.
EBITDA and Margin Performance
The company reported EBITDA of ₹2,298 crore, up 8.9% year on year for the same period last year. While this growth is encouraging, the EBITDA margin contracted to 27.5% from 29.3% in Q3 FY24. Thus indicating some pressure on profitability due to increasing operational expenses.
Impact of the NRT Acquisition
The NRT (Nicotine Replacement Therapy) business, acquired by Dr. Reddy’s Lab, became a major growth driver. This business segment added ₹605 crore to revenue and ₹124 crore to profit before tax. The NRT portfolio has helped the company increase its European market revenue, which witnessed a growth of 143% in Q3.
Even excluding the contribution of NRT, the underlying top-line growth at Dr. Reddy’s was at 7.5% year-on-year, with strong organic performance from its other businesses.
Segment Performance: Global Generics and North America
The Global Generics business recorded revenue of ₹73.8 billion with a YoY growth of 17% and a 3% QoQ rise. Although performance in the North American market remained subdued. The region’s revenue rose only 1% YoY while falling 9% QoQ. Challenges included price erosion and competition in the US generics market.
Increased Investment in R&D and SG&A
Dr. Reddy Labs has continued its commitment to innovation and long-term growth this year. The company demonstrated a 20% increase in R&D spending year-over-year. Thus totaling ₹6.7 billion and 8.0% of the company’s total revenues. Such investment only underscores the firm’s focus on complex generics and biosimilars.
The SG&A expense increased by 19%, primarily due to the additional costs of the NRT business as well as greater marketing efforts. These investments support growth but do squeeze profitability margins overall.
Market Response to Q3 Results
Despite strong financial metrics, the market reacted cautiously to the results. On January 23, 2025, Dr. Reddy’s shares closed at ₹1,289.35, down by 0.54% on the Bombay Stock Exchange. Analysts attributed this to concerns about declining margins and stiff competition in key markets like the United States.
Strategic Implications and Future Outlook
The acquisition of the NRT business is part of Dr. Reddy’s overall strategy to expand its product portfolio and strengthen its global market position. Though the acquisition greatly boosted revenue, the associated increase in SG&A expenses indicates the need for careful cost management in the coming quarters.
Looking forward, the company is set for long-term growth as its pipeline of biosimilars and complex generics continues to build momentum. However, it still faces challenges in the form of price erosion in the US market. However, Dr. Reddy’s Labs’ commitment to innovation and market expansion will likely make it well-positioned for the future.
