Rs 1 Cr Plus Earners in Firing Line as Dr Reddy's Targets 25% Cost Cut, May Shut Digital Unit
Hyderabad: In a strategic move to enhance operational efficiency, pharmaceutical giant Dr Reddy's Laboratories (DRL) has initiated a significant cost rationalisation programme, targeting a 25% reduction in manpower-related expenses. The drive is already impacting high-earning employees and select business divisions, as per a recent report by Business Standard(BS).
Citing individuals familiar with the development, Business Standard revealed that senior employees with substantial compensation packages have been asked to resign. “The internal directive is to reduce manpower-related expenses by around 25 per cent. Several high-salaried employees across various departments have been asked to resign. They include many earning over 1 crore annually,” a source told the publication.
The effort to streamline operations has extended to the company’s research and development (R&D) wing, where employees in the 50–55 age group have been offered voluntary retirement.
While DRL has not publicly commented on the development, internal sources suggest the measures are part of a broader reorganisation to align cost structures with strategic goals.
Headcount, Costs, and Strategic Shifts
According to the company’s FY24 annual report, DRL employed a global workforce of 26,343 as of March 31, 2024, with 21,757 permanent staff and 6,281 new hires in that financial year. The pharma major spent Rs 5,030 crore on employee benefits and another Rs 39.2 crore on training and development during FY24. Median remuneration across the workforce stood at Rs 6 lakh.
Notably, 92% of the employees underwent skill development during the year. Based on these numbers, BS estimates that a 25% reduction in manpower-related costs could potentially save DRL around Rs 1,300 crore annually.
The cost-cutting comes alongside DRL’s ongoing efforts to strengthen its core business and realign priorities in underperforming segments.
Also Read: Dr Reddys Labs gets CDSCO Panel nod to study Rabeprazole Sodium Modified Release Capsules
Innovation Meets Reassessment
In recent years, DRL has made forays into new healthcare verticals, including its August 2024 joint venture with Nestlé to enter the nutraceutical space. The company also launched digital therapeutics tools aimed at treating migraines and irritable bowel syndrome, betting on software-based interventions to support chronic condition management.
However, not all bets may be paying off.
Internal reviews have flagged concerns regarding the performance of these new verticals. Sources indicated that “the digital therapeutics division may be shut down entirely,” while the nutraceutical arm is likely to undergo restructuring. Overall, “an estimated 300–400 employees across the company may be impacted.”
"If these divisions are not doing as well as projected, there may be some downsizng of manpower, it seems," analysts told Business Standard.
Operational Focus: Growth and Profitability
DRL’s management has signalled a multi-pronged approach to maintain growth while improving profitability. As highlighted in previous analyses by Nirmal Bang, the company is leveraging four core strategies:
1. Strengthening its base generic and branded generics portfolio
2. Launching specialty drugs, including GLP-1 agonists and biosimilars
3. Exploring mergers, acquisitions, and collaborative partnerships
4. Streamlining costs across departments
DRL is aiming for double-digit revenue growth with a focus on achieving a 25% EBITDA margin in the coming quarters.
While the restructuring may bring short-term disruptions, analysts view it as a move to future-proof DRL’s competitive edge in a rapidly evolving pharma landscape.
