27. Share-based payments

one

Category A

Category B

 

 

 

After the stock split effected in the form of a stock dividend issued by the Company in August 2006 and October 2024, the DRL 2002 Plan provides for stock option grants in the above two categories as follows:

 

 

The term of the DRL 2002 plan was extended for a period of 10 years effective as of January 29, 2012 by the shareholders at the Company’s Annual General Meeting held on July 20, 2012.

 

Stock option activity under the DRL 2002 Plan for the two categories of options during the years ended March 31, 2025 and 2024 is as follows:

There was no stock activity under this category during the years ended March 31, 2026 and 2025, and there were no stock options outstanding under this category as of March 31, 2026 and 2025.

Stock options activity under this category during the years ended March 31, 2026 and 2025 was as set forth in the below table after giving effect to the stock split in October 2024.

 

 

 

The weighted average share price on the date of allotment of options during the years ended March 31, 2026 and 2025 was Rs.1,283 and Rs.1,242 per share, respectively.

 

 

The Company instituted the DRL 2007 Plan for all eligible employees in pursuance of the special resolution approved by the shareholders in the Annual General Meeting held on July 27, 2005. The DRL 2007 Plan became effective upon its approval by the Board of Directors on January 22, 2007. The DRL 2007 Plan covers all employees and directors (excluding promoter directors) of DRL and its subsidiaries (collectively, “eligible employees”). The Committee administers the DRL 2007 Plan and grants stock options to eligible employees. The Committee determines which eligible employees will receive the options, the number of options to be granted, the exercise price, the vesting period and the exercise period. The vesting period is determined for all options issued on the date of grant. The options issued under the DRL 2007 Plan vest in periods ranging between and four years and generally have a maximum contractual term of five years from vesting date.

 

 

 

 

 

The DRL 2007 Plan provides for option grants in two categories:

: 1,913,475 stock options out of the total of 7,653,895 stock options reserved for grant having an exercise price equal to the fair market value of the underlying equity shares on the date of grant; and

: 5,740,420 stock options out of the total of 7,653,895 stock options reserved for grant having an exercise price equal to the par value of the underlying equity shares (i.e., Rs.1 per option).

 

Stock options activity under the DRL 2007 Plan for the above two categories of options during the years ended March 31, 2026 and 2025 was as follows after giving effect to the stock split in October 2024:

 

 

 

The weighted average grant date fair value of options granted during the years ended March 31, 2026 and 2025 was Rs.388 and Rs.455 per option, respectively. The weighted average share prices on the date of allotment of options during the years ended March 31, 2026 and 2025 was Rs.1,306 and Rs.1,383 per share, respectively.

 

 

 

 

 

The weighted average grant date fair value of options granted during the years ended March 31, 2026 and 2025 was Rs.0 and Rs.0, respectively. The weighted average share price on the date of allotment of options during the years ended March 31, 2026 and 2025 was Rs.1,329 and Rs.1,363 per share, respectively.

 

The Company instituted the DRL 2018 Plan for all eligible employees pursuant to the special resolution approved by the shareholders at the Annual General Meeting held on July 27, 2018. The DRL 2018 Plan covers all employees and directors (excluding independent and promoter directors) of the parent company and its subsidiaries (collectively, “eligible employees”). Upon the exercise of options granted under the DRL 2018 Plan, the applicable equity shares may be issued directly by the Company to the eligible employee or may be transferred from the Dr. Reddy’s Employees ESOS Trust (the “ESOS Trust”) to the eligible employee. The ESOS Trust may acquire such equity shares through primary issuances by the Company and/or by way of secondary market acquisitions funded through loans from the Company. The Nomination, Governance and Compensation Committee of the Board of the parent company (the “Compensation Committee”) administers the DRL 2018 Plan and grants stock options to eligible employees, but may delegate functions and powers relating to the administration of the DRL 2018 Plan to the ESOS Trust. The Compensation Committee determines which eligible employees will receive the options, the number of options to be granted, the exercise price, the vesting period and the exercise period. The vesting period is determined for all options issued on the date of grant. The options issued under the DRL 2018 Plan vest in periods ranging between the end of and five years, and generally have a maximum contractual term of five years from vesting date.

 

The DRL 2018 Plan provides for option grants having an exercise price equal to the fair market value of the underlying equity shares on the date of grant are as follows after giving effect of stock split in October 2024:

 

 

The outstanding shares purchased from secondary market as of March 31,2026 and 2025, are 1,965,575 and 2,452,260 shares for an aggregate consideration of Rs.1,815 and Rs.2,264, respectively.

 

Stock option activity under the DRL 2018 Plan during the years ended March 31, 2026 and 2025 was as follows:

 

 

 

 

 

 

 

The weighted average grant date fair value of options granted during the years ended March 31,2026 and 2025 was Rs.388 and Rs.454 per option, respectively. The weighted average share price on the date of allotment of options during the years ended March 31,2026 and 2025 was Rs.1,262 and Rs.1,290 per share, respectively.

 

The fair value of services received in return for stock options granted to employees is measured by reference to the fair value of stock options granted. The fair value of stock options granted under the DRL 2002 Plan, DRL 2007 Plan and the DRL 2018 Plan has been measured using the Black–Scholes-Merton model at the date of the grant.

 

The Black-Scholes-Merton model includes assumptions regarding dividend yields, expected volatility, expected terms and risk free interest rates. In respect of par value options granted, the expected term of an option (or “option life”) is estimated based on the vesting term and contractual term, as well as the expected exercise behavior of the employees receiving the option. In respect of fair market value options granted, the option life is estimated based on the simplified method. Expected volatility of the option is based on historical volatility, during a period equivalent to the option life, of the observed market prices of the Company’s publicly traded equity shares. Dividend yield of the options is based on recent dividend activity. Risk-free interest rates are based on the government securities yield in effect at the time of the grant. These assumptions reflect management’s best estimates, but these assumptions involve inherent market uncertainties based on market conditions generally outside of the Company’s control.

 

As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially impacted. Further, if management uses different assumptions in future periods, stock-based compensation expense could be materially impacted in future years.

 

The estimated fair value of stock options is recognized in the consolidated income statement on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.

 

The weighted average inputs used in computing the fair value of options granted were as follows:

 

 

 

 

Share-based payment expense