Dr. Reddy's Signs Definitive Agreement with 3i for the Strategic Acquisition of betapharm

-- betapharm is the fourth-largest generics company in Germany and the fastest growing company in the top 10(1)

-- Combination of Dr. Reddy's and betapharm offers an excellent opportunity to build on the unique strengths of each company to emerge as a leading generics player in Europe in the long- term

Dr. Reddy's and 3i, Europe's leading private equity house, jointlyannounced today that they have entered into a definitive agreementproviding for the strategic investment by Dr. Reddy's to acquire 100%of betapharm Group, the fourth-largest generic pharmaceuticals companyin Germany, for a total enterprise value of EUR 480 million in cash.The transaction will be funded using a combination of Dr. Reddy'sinternal cash reserves and committed credit facilities.

Commenting on the acquisition, Dr Anji Reddy, Chairman, Dr.Reddy's Laboratories, said, "Today is truly an exciting day for Dr.Reddy's. We see our investment in betapharm as a key strategicinitiative towards becoming a mid-sized global pharmaceutical companywith strong presence in all key pharmaceutical markets. betapharm hascreated a strong growth platform and is well positioned for the futureand we are looking forward to partner with them in building astrategic presence in Europe."

Founded in 1993, betapharm is the fourth-largest generics companyin Germany with a market share of circa 3.5%. betapharm marketshigh-quality generic drugs with focus on long-term therapy productswith high prescription rates. betapharm is the fastest growinggenerics company over the past 5 years in the top 10 in Germany(1)with a strong track record of successful product launches. betapharm'scurrent portfolio comprises about 145 marketed products. Located inAugsburg, Germany, betapharm currently employs about 370 peopleincluding a sales force of about 250 with gross turnover of EUR 164million in 2005(2).

Commenting on the strategic initiative, G V Prasad, Vice-Chairmanand CEO, Dr. Reddy's Laboratories, said, "We are very excited with ourstrategic investment in betapharm. betapharm with its differentiatedbusiness model has all the key elements for achieving success in thefast growing generics market in Germany. We strongly believe that thisstrategic investment will generate substantial opportunities forlong-term value creation for both the companies. The combination ofthese two companies will enable betapharm to continue to expand itsgrowth trajectory and at the same time provide a strong foundation toleverage Dr. Reddy's global product development and marketinginfrastructure to build a significant generics business in Europe inthe long-term. We are excited to partner with the highly dedicated andmotivated team at betapharm to build a future of growth and leadershipfor Dr. Reddy's as well as betapharm."

Commenting on the strategic partnership with Dr. Reddy's, Dr.Wolfgang Niedermaier, CEO of betapharm said, "Dr. Reddy`s impressivepipeline of generic and innovative products and its high qualitystandards combined with competitive manufacturing infrastructure willhelp further develop our position in the German market and offer anentry platform for the European market. It's extensive and wellrecognized corporate social responsibility activities perfectly fitwith our successful corporate philosophy and business model. We seeDr. Reddy`s as our partner of choice to build a successful jointfuture and continue betapharm`s growth and success story."

Commenting on today's sale, Bernie Schuler, a partner in 3i'sEuropean buyouts business based in Frankfurt said: "3i has workedclosely with management in the past two years to position the businessfor international growth and expansion. Today's sale to Dr. Reddy's isan exciting logical step for betapharm's next phase of development.Dr. Reddy's broader product range and high quality production base atcompetitive cost levels will enable the business to growexponentially."

Further financial terms and conditions of the transaction will notbe disclosed. The transaction is subject to customary closingconditions and is expected to close in the first week of March 2006.

Rothschild acted as financial advisors and Freshfields BruckhausDeringer acted as external legal counsel to Dr. Reddy's in thistransaction.

(1) INSIGHT Health - NPI-Gx over the past 5 years

(2) As per audited accounts for 2005 including value added taxes

About Dr. Reddy's

Established in 1984, Dr. Reddy's Laboratories (NYSE: RDY) is anemerging global pharmaceutical company with proven researchcapabilities. The Company is vertically integrated with a presenceacross the pharmaceutical value chain. It produces finished dosageforms, active pharmaceutical ingredients and biotechnology productsand markets them globally, with focus on India, US, Europe and Russia.The Company conducts research in the areas of diabetes,cardiovascular, anti-infectives, inflammation and cancer.

About betapharm

Founded in 1993, betapharm provides generic drugs (non-patented).betapharm covers all important medical indications ranging from acommon cold to severe cardiovascular diseases offering an assortmentof 145 active ingredients in 871 different commercial sizes andpackings. The company employs about 370 people and had a turnover ofEUR 164 million in 2005 (as per financials for 2005). The non-profitbeta Institut, part of betapharm Group, was founded in 1999 andfocuses on applied health management. Its core services aresocial-medical research, advanced training, consulting, projectdevelopment as well as information services. The institute's majorstrength is its ability to independently develop and practicallyvaluate innovative concepts while scientifically evaluating them inconjunction with universities. Results of this research are innovativesolutions for today's healthcare system.

About 3i

3i is a world leader in private equity and venture capital. Wefocus on Buyouts, Growth Capital and Venture Capital and invest acrossEurope, in the United States and in Asia Pacific. Our competitiveadvantage comes from our international network and the strength andbreadth of our relationships in business. These underpin the valuethat we deliver to our portfolio and to our shareholders. www.3i.com

Disclaimer

This press release includes forward-looking statements, as definedin the U.S. Private Securities Litigation Reform Act of 1995. We havebased these forward-looking statements on our current expectations andprojections about future events. Such statements involve known andunknown risks, uncertainties and other factors that may cause actualresults to differ materially. Such factors include, but are notlimited to, changes in local and global economic conditions, ourability to successfully implement our strategy, the market acceptanceof and demand for our products, our growth and expansion,technological change and our exposure to market risks. By theirnature, these expectations and projections are only estimates andcould be materially different from actual results in the future.