Q4 20/21

Apr 28, 2021

Ladies and gentlemen, good day, and welcome to Syngene International 4th Quarter and Full Year FY 2021 Financial Results Conference Call. As a reminder, all participant lines will be in listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Ms. Divya Davan from Thank you, and over to you, ma'am. Thank you, Steve, and good afternoon to everyone. Thank you for joining us on this call to discuss Xinjiang's 4th quarter and year ended FY 'twenty one financial and business performance. We have on this call today Mr. Jonathan Hunt, Syngene's Managing Director and Chief Executive Officer Mr. Shidaju Bipa, Chief Financial Officer and Doctor. Mahesh Bhargat, the Chief Operating Officer. Other members of the executive team are also present on the call. After the opening remarks, Jonathan, Subachi and the rest of the team will be happy to answer any questions you may have. Before we begin, I would like to caution that comments made during this conference call today will contain certain forward looking statements and must be used in relation to the risks pertaining to the business. The Safe Harbor clause indicated in the investor presentation also applies to this conference call. The replay of this call will be available over the next few days after this call is over, and the transcript will also be made available. With this, I would now hand over the call to Mr. Jonathan Hunt for his opening remarks. Over to you, sir. Thank you, and good afternoon, everybody. Thanks for joining us on the call today to discuss Syngene's 4th quarter and full year results for the year ending March 2021. I'll start with an overview of the Q4 financial performance and business highlights before summarizing the full year financials. And then I'll close with a year end wrap up before handing over to Subhaji to give a more detailed account of the numbers and talk about the guidance for the year ahead. So SynGen's 4th quarter revenue growth was driven by a steady performance across discovery services, manufacturing services and our dedicated R and D centers. Revenue, excluding export incentives grew 13% over the corresponding quarter last year. Despite the impact of the COVID-nineteen pandemic, We continued operating at new normal levels and careful management constantly delivered us to improve profitability during the quarter. EBITDA for the quarter was up 4% to INR234 crores, while profit after tax, PAT, Excluding the exceptional gains, we've up 15% over the corresponding quarter last year, and that took that to 138 core Turning to the business highlights for the quarter. I think a significant milestone is the extension of our strategic collaboration with Bristol Myers split, and that takes us out until 2,030. This is the longest standing collaboration for SynGen. It's been in place since 1998 and significantly evolved over the years. 2,007, we set up the 1st dedicated R and D centers with BMX, and that is now their largest research facility outside of the United States. We're proud of this dedicated to the role this dedicated center has played in BMS's research projects. In contract extension, I think it will take us into new areas of science and provides for a 40% increase in the number of dedicated scientists as well as adding some additional lab space. We previously guided you to expect that our API manufacturing plant in Mangalore will complete its qualification activities by the end of the year. The facility is now being audited by the Indian regulatory authority and is ex EMP certified. The only focus now is and tangible engaging with clients to showcase the new facility as well as to start charting a clear pathway to key regulated market approvals. As explained previously, the next phase of the plan will take some time, and our current planning assumption is to trigger key market regulatory approvals over the next 2 years. In the meantime, we're in discussion with clients regarding their commercial manufacturing projects. I think we've got multiple elements of the value chain now under one roof, And it offers clients tangible benefits in terms of technology transfer. We believe the downtime involved in moving compounds between service providers and that saves valuable time and increase of speed to market. We do expect the number of projects in Bangalore to build steadily over the next 2 years. We captured that expectation in our overall guidance. So we won't be giving specific guidance for the Mangalore plant, We expect we're improving our overall outlook for the year ahead. Strategically, I think the key inflection point comes once we gain those key regulated market regulatory approvals, and that we see being the priority for the next 2 years. During the course, we also strengthened our small molecule development capability with the setting up of a new high potency API lab, and that will help up in scaling up projects to the manufacturing phase. Let me now spend a few moments reflecting on the full year. I think it's fair to say that an exceptional year in very many ways for many others, one in which, as an organization, I think we've really tested our resilience in the face of great trying times. And I'm enormously grateful for the commitment of our employees, strong leadership shown by the exec team during the year. And that's been disrupted in many ways, the way we did as well as challenging supply chains, our ability to go to work, to get to work and engagement with clients, all of which were also creating new demand for research. On the financial side for the full year, We reported revenue growth, excluding export incentives, of 12% to INR 2,180 crores and PAT profit after tax growth of 4% to CHF382. So Bhakti is going to give you much more details about this in a moment. So looking back over the year, it's a flat Q1. We built momentum in the subsequent quarters throughout the year, and we maintained strict financial discipline, I think good cost management, which really allows us to safeguard profitability. After the initial lockdown, Significant resources were dedicated really to finding effective solutions to combat coronavirus, to resume our operations and keep our employees safe. We assured our clients that we were working at normal operating levels and we managed to get projects back on track quite quickly in that middle part of last year. We've extended a number of ongoing collaborations in the year, strengthened the integrated drug discovery portfolio. We expanded our footprint in Hyderabad, if you recall, as opening that sensor at the beginning of last year. And we've added new clients to our loss check and continue to invest and build on our digitization and automation initiatives. Talking about iron to related drug discovery portfolio, Syngene, that's the platform for executing these projects, provides an effective and efficient means to advance programs through target validation, translation and interrogation, therapeutic discovery and preclinical development, and that's for both large and small molecules. With projects like this, we think it's a blended approach, starting with our client relationship by designing the research strategy and then leveraging our discovery, development and manufacturing capabilities over the entire value chain. I think the benefits of that are quite obvious. The benefits of the client include a fast and seamless R and D process, and it allows us to really bring together the full breadth of our resources. We've got 10 clients now working with us on IDD projects. I think one of the earliest was the strategic 5 year collaboration we announced with 3BC. And that really the scope there is to collaborate on integrated drug discovery projects from Target Valuation to Preclinical Evaluation. During the year, we continued to advance molecules and compounds focused on oncology, cardiology, liver disease, Parkinson's, inflammatory disorders and also some orphan diseases as well. We hope to strengthen our position in the animal health sector. The discovery research team worked on a quite interesting integrated drug discovery project for potential treatment of inflammatory disorders in dogs. And the formulations and analytical development teams developed what's a first of its kind multidrug combination product for companion animals. Again, this is in the canine market, and that's a product with global potential. We're very proud that our clients have continued to deliver novel science, which our clients have recognized by citing them as authors in scientific publications and recognizing them on the patents. In the last quarter alone, 10 of our scientists were cited in globally renowned publications. Over the last few years, Syngene has made Systematic investments in digitization and automation to enhance productivity, improve quality, increase safety. And in addition to improving speed of delivery and reducing turnaround time, this lead automation did also reduce manual intervention in terms of errors and emissions. The digitization initiatives, may have completed include a complete upgrade of our quality management system, a sophisticated document management system as well as more widespread use of laboratory information management systems. The lockdown and the associated travel restrictions really have impacted the physical audits of our facilities, both by clients and regulatory authorities. And to address this, we implemented remote side. This is a technology platform that allows us an order to remotely view our facilities in real time, replicating really what we would do with a physical order. And of the 47 client and regulatory orders that we had in the year, 36 of those were done virtually. So technology there really closing the gap in what otherwise would be a COVID related challenge. We wanted to continue to build on our track record of successful accreditations, and our operating units received ISO 27,001 accreditation. That reflects the robustness of information security management systems that we've implemented across the organization. Separately, the College of American Pathologists renewed the CNP Accreditation of the Central Laboratory in Clinical Development, CAPS is a globally recognized quality accreditation standard and that we assure the deals with a very defined set of operating parameters. Singe Gener is the 1st company in India to receive cap accreditation. We were the 1st company to receive it in 2,002. And since then, we've successfully renewed that accreditation every few years. Throughout the year, Cinqing has continued to play an active role in the fight against COVID-nineteen by reapplying our scientific expertise to develop solutions and also and some of our infrastructure today. We collaborated closely with the state government and various industry bodies to share knowledge and best practice. I think I mentioned these in previous quarter, but just to give you a quick recap. As an essential provider, We would like to resume operations quickly after the initial lockdown last year. That continues today. We've implemented a series of safety measures to keep Our employees safe. We're operating at near normal capacity. We were operating at near normal capacity And by the Q2, let's continue through to today. As you know, we're manufacturing Lindenody under a voluntary license agreement with Gilead. To be clear, we don't really expect us to significantly boost profits, but I think it's a really, really important part that we can play in meeting the medical need that's so clear in India today. Our lead to have scientists developed various proteins, S1 RBD and N proteins that helps the diagnostic kit manufacturers. And we're partnering with various organizations to fight COVID-nineteen. We will include a collaboration with the Scientific and Cellular Molecular Biology to develop high throughput next generation sequencing with the National Center for Biological Sciences to develop a novel human ACE2 transgenic mice and with the Foundation for Molecular Disease Research to facilitate SARS COVID-nineteen in vitro and in vivo research, and that will help develop various monoclonal antibodies. With infection rates once again rapidly rising in India, and we see that in other parts of the world, we continue to strictly implement safety protocols, Our campus wide proactive employee testing exercise helps you maintain a low positivity rate. And we've also started the process of vaccinating employees and their families. As of last week, all over 45 year olds in the company I've been offered a vaccine. And starting from the 1st May, we'll be ready to go with a program to vaccinate all other staff, 18 and above, I think it's the government and guidance limit. So we'll be very pleased to do that and to their immediate dependence. So So we look forward to the new financial year. Our focus, 1st and foremost, will be on the smooth running of our campuses and operations, keeping our staff safe. Hopefully, the benefit of the widespread vaccination will bring a degree of normality. But I think most people are expecting Glad to be very much in the latter half of this year and that the situation on the ground today is very, very fluid. Operation excellence is a daily priority and we're seeing the benefits of a very structured approach to continuous improvement across all of our operations. 2 days with our staff and our trades in lean process management tools. With regard to the Japanese approach of gender walks to ensure that Managers are really on top of the day to day operational detail. And as you'll hear from Subhadji, we plan to continue to invest in new technology To keep pace of client requirements, we continue to believe that the IDD, the integrated drug discovery approach, and value to both clients and our own company's research. We'll be working hard to ensure that the investments in manual Start to deliver as soon as possible. And we're also going to be investing in the expansion that we've signaled with the long term expansion of the BMS contract. An important strategic addition in the coming year will be The expansion in our overseas sales force. I think getting ever closer to your customers Finically, culturally and being within arms with each of them, we will pay dividends. So before I end my address and hand over to Subhadji, let me summarize. We've been happy with the performance over the year, particularly given the volatile market conditions in the Codining Globally. Our business divisions are performing steadily and I think well at the moment. That puts us in a strong position for long term growth. We continue to invest in capability and capacity building. And SynGen's value proposition as a strategic research partner, Not just a service provider, but also adding value intellectually, I think Sweden did endorse with the extension of our collaboration with BMS. And our operations are backed by a strong balance sheet and P and L statement that will drive long term growth and sustainability. So with that, let me hand over to Subhakar. Thanks, Jonathan, and a very good afternoon to you all. I'm happy to take you through our results for the Q4 and the full year ended 31st March 2021. This has been an unprecedented year for all of us. I remember when last year at the same time, I was explaining the results of FY 'twenty and was providing guidance for FY 'twenty one. We are hoping that the pandemic will be contained by the end of quarter 1. Today, as we reflect on a year that turned out differently than what we expected, We have certainly faced challenges, but our results show that we have built the resilience to continue our operations through a combination of student management and disciplined implementation of COVID appropriate for the policy in our campuses. Starting the new financial year, we'll keep in place all protocols and necessary precautions that Jonathan mentioned to ensure the safety of our employees at work, which remains our topmost priority to ensure business continuity. We have used our scientific expertise to support and contribute to the fight against COVID-nineteen, and we will continue to do so as required. As of this month, we have restarted manufacturing of 10 decidase to ensure that we contribute to the stock required by our country to fight the virus during the 2nd wave of COVID-nineteen. The financial impact of this has been factored into the guidance, which I'll talk about shortly. During the year, we continued our efforts to strengthen our existing relationships with clients and added about 40 new clients, taking the total counts of customers to more than 400. We also achieved 2 significant milestones. Firstly, we made a good start to our journey in integrated drug discovery services with our platform, Xinvent, and the agreement with ViaSat. Secondly, we signed the extension of our agreement with BMS until 2030. These are strategically important developments and pave the way for our future. The first of these is significant because it demonstrates a new way of thinking about the value that we can offer to our customers who need a fully integrated R and D solution. The second one, the 10 year extension of our contract with CMS has obvious financial significance. I'm sure that I don't need to explain to you that having such a long runway as the basis of our relationship provides opportunities to plan together and invest in a fully different manner. Let me now run you through the performance for the quarter first and then the full year. The performance for the quarter has been good. Our revenues from operations, excluding export incentives, increased by 13% for the quarter compared to previous year and was also up by 13% compared to quarter 3, reflecting a strong momentum in the quarter. Growth was driven by steady performance across discovery services, manufacturing services and the dedicated centers. After accounting for export incentives received in the prior year, our reported revenue from operations increased by 8.5%. We have applied students and not accounted for any pending the government's clarification around the service export incentive scheme. Also, the export support policy announced by notification number 57 dated 31st March 2020 implies a continuation of this scheme. The BMS contract extension provided for 40% expansion of BMS scientists. This quarter saw part of the BMS expansion materializing, and we expect this expansion to continue during 2021 and continue giving next year. The BMS dedicated center now has more than 600 scientists actively engaged in cutting edge discovery times. I'm also happy to announce that we started manufacturing certain series of small molecule API for a client from our Mangalore manufacturing plant, which was part of the larger project that's been executed. We now have the plant GMP qualified and are working on a multi formed approach to obtain regulatory approvals for the plant. Obtaining regulatory approval from key regulators such as US NDA or EMA would be an important step towards being able to manufacture high double molecules in the Mangalore plant. Until the activities are obtained, we will continue to manufacture products that suits the plant operations so that we are able to cover an increasing part of our cost base. We further expanded our laboratory target in Hyderabad, which went live recently. We now have close to 300 scientists working from Hyderabad. Additional expansion has been planned in Hyderabad in West, and we'll be adding new capacity almost every quarter from now. We are seeing encouraging trends in business growth, and the proposed expansion in Hyderabad will provide infrastructure needed to capture this growth. EBITDA margin for the quarter was up close to 35% compared to 36% last year and 32% in quarter 3. The marginal drop in reported EBITDA margin is again due to the absence of export incentives which in the past has benefited the margin. The underlying EBITDA margin adjusted for export incentive and other income is 33% compared to 31% in the same period last year and 30% in quarterly. Our raw material cost for the quarter has marginally increased from 25% of revenues to 26% due to a shift of mix of our business towards manufacturing, especially Pylorics. However, various efficiency measures improved the underlying material cost effectiveness, as you can see from the annual figures. Let me now take a moment to explain the movement in other cost lines and the P and L. During the quarter, staff cost increased by INR 19 crores to INR183 crores as compared to its 164 crores in the same period last year. The increase in headcount in our existing and new facilities that went live in the last 12 months has driven the majority of the 11% increase. Currently, we have about 5,400 employees in Syngene against 4,900 employees a year ago. Turning now to other expenses, which comprises of selling expenses, IT cost and other general load. They are up by INR 7 crores year on year compared to be INR 89 crores in the same period last year. The rise in these expenses is primarily attributed to new oil business during the COVID-nineteen times and increase in costs associated with major industry health and safety protocols. EBITDA was at INR234 crores 100 and 81 crores last year, reflecting strong operating leverage. Depreciation stands at INR 70 crores, which is an 8 Through increased from INR 62 crores in the same period last year. The increase on a year on year basis is mainly owing to the investments in the hyper gas facilities, expansion at our main Bangalore facility and depreciation for the full period for the Bangalore commercial API plant as against part of the period last year. Now looking to the impact of our currency hedges. The company recorded an exchange gain of RUB5 crore in the quarter versus a loss of 1 core last year. This reflects the difference between forward rates versus the prevailing stock rates. The hedge rate while that is the $74 per USD as against the stock rate that would be $73 per USD during the quarter. Profit after tax before exceptional gain on insurance fee were up 15% to INR 1.38 crores as compared with its 1.20 growth in the same period last year, reflecting an overall strong performance for the quarter. The momentum during the quarter with strong performance across dairy care centers, Discovery Services and Manufacturing has helped us meet our stated guidance of low double digit growth in sales and revenue from operations for the year. As mentioned before, the government has not notified service export incentive scheme for the financial year 2021, though the export incentive policy was extended. So we are applied to them not to recognize any benefit from this year from this in the first half. Continuing with the full year performance Before factoring the export incentives, revenue from operations for the full year was at INR 2,000,000,000, up 12% against last year. As you recall, Q1 was a tough quarter as we saw the impact of the temporary suspension of operations while we established our COVID-nineteen protocols and learn to adapt to the COVID-nineteen pandemic. Excluding C1, which has been flat year on year revenues, Underlying revenues from operations in the last three quarters grew 14% year on year as compared to a similar period last year. For the full year, our EBITDA is up 5.3% to RMB7.36 crore, a reflection of the operating improved operating performance in the business. If we exclude interest income and export incentives, our EBITDA has improved 21% year on year as we have made significant changes to our operating model, keeping costs down while benefiting from the increased scale of operations. On a full year basis, the increased value of our fixed assets has resulted in a 25% increase in depreciation to INR 274 crores versus INR219 crores in the same period last year. Foreign exchange gain for the full year was 17 crores versus 14 crores last year. Overall, for the year, our profit after tax was up 4% to INR 3.82 crores versus rupees 3.6 percent Excluding last year before an exceptional gain from an insurance visit. Let us move to some of the other items, such as CapEx and cash Our investments for the year were at $65,000,000 as a part of our ongoing CapEx program compared to our CapEx guidance of $100,000,000 during the year. Lower CapEx spend during the year is partly due to COVID-nineteen but also due to the additional capacity released due to the introduction of multiple chips, especially in the discovery services. We have rightfully delayed the CapEx spending to the next financial year, and the balance was $35,000,000 included and our CapEx guidance for the next year. Of the total CapEx for the year, dollars 10,000,000 pertains to the commercial API manufacturing facility, $20,000,000 was invested in customer services, dollars 10,000,000 in the biologics manufacturing facility and the balance $25,000,000 in dedicated center development services and common address. Our balance sheet position is healthy, and we have a strong liquidity position. As promised at the start of the year. FY 'twenty one was a year where we focused on preserving activity. I'm happy to report that despite the pandemic, we had the highest paper collection during the year and reduced the overall outstanding data receivables by 6 days. This, along with carefully calculated spending, has resulted in a strong net cash balance of INR648 crores at the end of the year. This gives us a confidence as we move into a new financial year with a plan to drive higher growth of our business in the future, taking advantage of the attractive growth opportunities that our industry currently offers. Now moving on to the guidance for the financial year 'twenty one, 'twenty two. The fundamentals of the global biopharma industry remain strong. There is good momentum of new chemical entity and new biological entity approvals by the regulators, underpinned by a strong pipeline of drugs under early stage discovery and development. The continuing drive to reduce cost of drug discovery and the increased productivity is expected to Cinq's outsourcing further with significant interest in the integrated dry fit study and development model. On the manufacturing side, growing demand for biologics, the capital intensive nature of the business and the complexity involved in pharmaceutical manufacturing is further driving demand for our solutions. We believe Syngene is well positioned to capture many of these market opportunities. As we entered the new financial year, we have extended and expanded our dedicated R and D centers through our collaboration with BMS where we We expect Linde's R and D signed fees by another 20% in a phased manner on top of the 20% expansion that happened by the Q4. We have made a strong foundation by expanding our legacy footprint beyond Bangalore with the ongoing expansion of capacity in Hyderabad. We have now launched Phase III of our expansion, which will allow us to build additional capacity for another 300 scientists on top of 300 scientists who are actively who are already working there. We expect the expansion to be fully utilized within a year. In Biologics Manufacturing, we have added capacity to our mammalian capabilities with 1 additional 2,000 liter reactor. Our new 500 meter microBL facility gets added to our microBL technology platform, further enhancing our suite of offerings. This will help us cater to the production of a wide variety of biologic drugs ranging from anticancer to hormonal disorder health, with order therapies and many others. We have already seen promising indications from customers that we cite our capacity utilization. This year, we'll also start investing in a viral vector development and manufacturing capability that will cater to clinical and commercial slide of viral vectors to be used for cell and gene therapy. The manufacturing facility will have scale of operations up to 200 beta bioreactors, which can be further scaled up based on business names. We have been supported by Biotechnology Industry Research Assistant Council or BIRAC under the National Biopharma Mission for this project. BIRAC has provided us with a grant to fast fund this project to support our endeavor to be at the cutting edge of manufacturing technologies for products in the area of cell and gene therapy and established some really landmark scientific capabilities in India. The first phase of this plant will require around INR 200 crores of investment, and the plant will be ready for operations in 2 years. In the APM manufacturing facility in Mangalore, As mentioned earlier, we have completed the qualification stage and started manufacturing. We are now working on a multi pronged approach to operate the activity activity for the clients while adding clients and projects to monetize the assets. As mentioned earlier, we expect an asset turnover of 1x for our manufacturing businesses over a period of around 5 years from investment. One significant impact of the pandemic has been the relatively slower buildup of new client orders in the past 12 months due to the lack of global travel trade flows and direct contact with customers. We are now seeing a rebound in demand, but with a 6 to 12 month sales cycle, it will take a couple of quarters for this demand to reflect in sales. We are also in the process of strengthening our on ground sales presence in certain key markets like U. S, East and Europe as we recognize the need to have senior sales capabilities in this market. We believe this will lay a foundation for being closer to our clients, driving stronger client relationships and helping us gain market share. Let me now share our planning assumptions so that we can put the guidance into context. With the 2nd wave in India, while the 2nd wave in India is extremely intense, we believe that our existing COVID protocols and the employee vaccination program, which help us to maintain near normal level of operations. If the 2nd wave does not caused significant additional business disruption, for example, through lockdown, supply chain challenges or significant employee absenteeism. The purpose of FY 2022 is to drive a higher level of business growth. Even with the hangover of lower pipeline build up In the 1st part of last year, we would expect revenues from operations to be in the mid-2s in the financial year 2022. As the year will focus on investment led growth with expansion and capacity additions across core businesses and building our sales presence in key markets, The margins are likely to get moderated during the year but expected to stay around 30%. We expect profit after tax growth to be in single digits, following the impact of depreciation driven by additional CapEx. Our CapEx plan is expected to be between INR 750 INR900 crores for the financial year 2022, and this includes the unspent CapEx rollover from the previous year. The investment will temporarily be focused on expansion across business across the business, capability addition, technology and automation. And hence a big part of this CapEx will be to improve revenue generation in the future years. We are now entering our new investment cycle with a renewed confidence about growth opportunities. But in geothermal pandemic, we'll take a calibrated scale gated view on investment as has been the case in the past 12 months. Our guidance assumes a moderate pandemic intensity, as I explained. We are closely monitoring the situation, and if circumstances change, we respond as the situation warrants. However, this would mean that we'll come back to you with an update on our guidance every quarter based on the pandemic situation on ground and in our key markets. This brings me to the end of my remarks. So let me summarize the results of that company for this quarter. Despite the level of uncertainty created by the pandemic, we tracked wins against our guidance on both revenue growth and PAT. Overall, the structural growth drivers for the industry remain very strong. We'll continue to invest for expansion across our core businesses and to strengthen our capabilities. As an organization, we have invested in new technology and embarked on some transformative projects across digitization, commercial and sales. The benefits of this should happen in the coming years, which justifies the regular investments that we have been making. Our balance sheet is healthy, and we have a strong liquidity position to support us. This should help us as we invest for growth in the coming year. With this, I complete my commentary on the letter. We can now open the floor for questions. Thank you very much. We will now begin the question and answer session. SynQ Assembles. Should you have any follow-up, we would request you to rejoin the queue, please. The first question is from the line of Alankar Garrudin from Macquarie. Please go ahead. Hi, good afternoon everyone. Sir, I wanted to understand your EBITDA margin guidance of around 30% a bit better. So in the Q4, even if you adjust for export incentives and other income, we were at more than 32% margin. So Firstly, is there some seasonality in the Q4? And secondly, despite lower under recoveries in the Mangalore facility and also likely operating leverage from the CapEx we have done over the past 2, 3 years. Why do you think margins will be just around 30% in FY 'twenty two? Yes. Good question. I'll let Subhaji comment on that in a moment. I would sort of take a reflection. If you go back and look at our business over 5 years, 10 years. You've seen that EBITDA margin has been pretty much dialed in a range of between Cinqian 33,000,000,000, that lower 30s range. Certainly, we've always commented that that's the sort of range that we're comfortable in. It varies a little bit depending on business mix and the sort of rate of investment in the business. Secondly, that's a margin structure. When you put it in the context of our global peer group, it looks good. It's Peer group medium and above towards the upper quartile and have been on a sustainable basis. And thirdly, it creates shareholder value. So it's a margin structure that allows us to actually create economic value on a sustainable basis. So I'm quite happy with what he's operating in that range. I'll let Subhadji maybe comment on the Quarter versus quarter variance, why we think the year ahead is more 30% than what it was in the 4th quarter. You're right. And in the Q4, there's always been a little bit of seasonality, particularly around our more manufacturing and development led businesses. The others tend to not be that seasonal, and we tend to see a spike at the year end. Never quite sure why. There's no industrial logic for it, but it's Still in our business forever. The 4th quarter tends to be a busy one. Anything you'd add beyond, Subashu? And Steph, secondary opinion, I think, Alankar, good question. But if you see across the Total peer group, 30% is a very respectable upper quartile kind of margin from the business we are in. In terms of seasonality, yes, we have seen this trend. Generally, quarter 4 has the strongest EBITDA margin. We have seen that last year. We have seen this Seeing the same thing this year. And so that presumably it does exist from Manufacturing Development Services is the main contributor for that. A bit of a dilution, I explained that in my commentary. This is a year, although it started with a A bit of a drag on the pipeline because of we're coming out of COVID here, we still want to push growth. And when you look, you are investing in expansion, you are investing in capabilities across different functions. And when you do that, There is some moderation of margins. Now it's not big moderation. We are still talking about staying in the range of 30% to 32 So we are talking 30% now last year this year last year has been 31%. But it's actually investment on growth because we didn't want to now push for a high level of growth in the business. Fair enough, sir. My second question is in terms of Client behavior, commissioning of new projects and your own sales pitches, what have been the key learnings for the past 1 year and have you identified any areas of improvement? Yes, I do. It's a little bit. I think everybody go digital. I think you've seen the whole world adapt to life on a Zoom call or a Teams call, whatever your favorite platform is. And we'll see how much of that endures. I think quite a lot of it will because I think in any industry We found out that lots of things can now be done very effectively, Either working from home or remotely or using digital and maybe not quite so much travel as needed. That's probably a good thing for the planet long term. So I think that was one, Roni. We were really grateful that we've invested in some of those mobility physical Technologies earlier. Where we've added, you've seen us switch some of our advertising marketing budget away from plane tickets, as it were, to the digital channels. I don't know if you follow the company on LinkedIn and other social media platforms, You too, that's actually you can now see a much clearer, stronger digital brand presence for CinJin. If you follow if you read a lot of the scientific trade press or whether it's scientific literature, magazines, publications Our website should see a much more visible digital presence. So I think those would be some of our reflections. The other bit, of course, is Being close to your customers, you have a good connection local anywhere in the world is a benefit, and that's one of the areas You'll see us invest a little bit more in the year ahead. It's where some of that margin compression is coming from as we're going to hire a few more scientific and sales people in the U. S, in Europe and other countries so that they are close to the customers and part of those scientific communities. Okay, sir. That's it from my side. Thanks and all the best. Thank you. Next question is from the line of Tushar Manu Danian from Motilal Oswal Financial Services. Please go ahead. Thanks for the opportunity. Sir, just on this So we will see that where we had a partnership from preclinical to regulatory filings. Is this first of all, just a clarity whether this Actually, we're going to get extended for the commercial manufacturing as well as and when it gets approved? Yes. Super question. Don't think we know the outcome of that because they don't know the regulatory outcome. So what we'd say, and we can update you on as and when that happens. But really proud of the work we've done. I mean, with the end state disease that that particular Drug and that partner is focused on PFIC is quite a challenging disease in children. There are no medical treatments for it Today, I think that if we can if they can successfully get that approved into the market in various countries around the world, Many people would have done something good. Scientifically, we would have done something good in supporting them. And it's a good example of integrated end to end sort of program over many years that is a sign of the sort of value that Syngene can now add It may be 5 or 10 years ago, we wouldn't have done in the same way. So really good, almost showcase example of and some good work and some good signs. On specific to manufacturing, I don't know because we're still in conversations with the client, And we'll see how they get on with our regulatory approvals. Got it. Because I presume the producer date is Quite clear. So I mean in July 21. So I think that you have to direct that to the IR team. Sure. Sorry. And secondly on this, while we restarted manufacturing of Randeswil, so if I have to understand the core business guidance, Maybe Rameshwar could be just an FY 'twenty two opportunity. And so the overall guidance is for FY 'twenty two. But if I exclude Rameshwar opportunity, then what could Yes. We won't break that out, but I think we gave you quite a hint in My comments, and I'm not sure, I think Subanjit may have made one. Rent as is here for us, there are 7 companies that have got Voluntary license services are supplying the market in India. I think all of them, all of us are responding to the urgent need today and doing whatever we can to Stephane, with all sort of data in pragmatic, Syngene's manufacturing capacity is amongst the smallest of those companies. We're doing everything we can, I think, collectively, with 7 companies? Plus Gilead, I'm sure you saw this, I think, yesterday. And then they were going to send some 500,000 vials to India. So there is a response. We were at the smaller end of the manufacturing capacity. We are, let's assume, doing everything we can. It is not a Scientific and CSR contribution is it's not a main driver for our business. So I wouldn't pass A difference on the guidance. Mid teens revenue for the year, but that's very much a reflection of our core business, which is early stage discovery, research, development and then into some manufacturing. Got it. That's it. Thanks a lot. Thank you. The next question is from the line of Prakash from Axis Capital. Please go ahead. Yes. Good afternoon. Sir, my question is on the so you reported 8% rupee terms. So Mr. Prakash, if you can speak closer to the answer, please. We are unable to hear you clearly. Is that fine? Yes, sir. Yes. So my question is like we reported 8% Y o Y growth in rupee terms. So what is the constant currency term growth and what would be the guidance? Is the guidance in CNG terms, auditing rupee terms guidance. So I think your premise of the question, Syngene, split between reported constant currency. So, Patash, if you are thanks for the question. If you are for Dollar terms growth of sales because when we talk dollar growth, we are talking essentially sales and not the other operating income or interest income. That grew by 12% year on year. So essentially, Effectively, that's driving the 13% growth from operations. So 8% that you are talking about is more optics because Last year, we accounted for export incentive. This year, we did not account for export incentive, and that's why we buy because we want to be conservative in our financial reporting and account Take that part out. Take the interest part out. We grew 13% quarter on quarter, of which 12% quarter on quarter is purely in the dollar terms. Okay. That is perfect. And your guidance is also in rupee terms? Our guidance is in rupee terms. Prakash, we have always rupee guidance. So we are not seeing our best position. Okay. And one more clarification on the PAD guidance that you have given, that is on the reported PAD or the adjusted PAD excluding the one off? That's on that is on INR382 crores, which is basically excluding the insurance receipts. So last year also, we had insurance receipts. For last year also, we had insurance receipts. So Yes. We do not consider that as part of our COVID-nineteen tax, so all our guidance is below. High single digit. We did gross single digit. That's what he said. Okay, understood. Fair enough. And second one is on Takash. So sorry to interrupt, but for any follow-up, may be requested to rejoin the queue, please. The next question is from the line of Taran from Old Bridge Capital. Please go ahead. Hi, Jonathan and team. Good afternoon. Congratulations on the extension of your collaboration with BMS. It really gives us a sense of value that Cinqian must have created with BMS over the last 22 years. Also, the qualitative commentary on the various aspects of the business in the press release has been quite encouraging. Give us a better balance of where Syngene is headed. I have three questions. One, Jonathan, in your conversations With your dedicated research customers, would you say you're witnessing a material positive change in their attitude and Perhaps more willingness to outsource more R and D work to a player with strong vintage and credentials versus say how they were looking at it maybe 3 to 4 years back. That's 1. The second is India seems to be gaining traction as a R and B. Balaji:] As a R and D destination for post of global pharma and ad chem majors. Are you witnessing any challenges in recruiting personnel with desired still set at a desired pace. And the last one would be, what proportion of your $300,000,000 revenue will be from non pharmaceutical customers. And what was this figure maybe in 2018? Yes, super set of questions. Subakji, I'll leave the last one to you just to think about the pharm, biotech, nonfarm slate, now let's evolve. On your first one, a broad match The question, not just around the dedicated country, but all of them. Oh, depends how much of a historical view you want. When I joined the pharma industry, which is then getting on to 30 years ago, it would have been anathema. It would have For any R and D head to consider doing any science other than in their own labs, the philosophy globally was that's what a pharma company does. We do science. Everything else you could maybe partner or outsource. But at the heart of it, I don't know if you're a fund manager, you don't outsource your stock picking. You have your own investment thesis. I think the head of R and D felt like that 20, 30 years ago. Today, They're much more likely to take a view that they have to control the value chain and the decision making about the science, but they can use partnerships. I don't even think they think of it as outsourcing anymore. That's got an sense. Outsourcing and India is well known, but if you think about the IT services industry. For a long time, that industry grew because you outsourced simple repeatable bins for a scale or laser cut arbitrage. Today, they partner around sophisticated end to end solutions that add value. And in many ways, The IT services sector is starting to know much or more than their customers. They are the expert you go to, to consult. And I think we've got a little bit back similar sort of dynamic going on in our industry and in a company like CinJin. The marginal customer today wants to know not that we can do it, I. E. We can follow instructions if they tell us how to do some science, But they want to know what we think and that we add value by continuing and challenging their scientific ideas. We bring our own to the table. So I think that's the opportunity, and it's also the marginal driver of why I'm optimistic that there's lots of opportunity for long term growth, 5, 10, even 20 years out because it's about the intellectual added value that you can bring, which segues perfectly, I think, into your second question, which is, can we have a business The major of our foothold in India, get the talent. And I think India does Scale talent fantastically. There are a few places on the planet where you can hire the volume of masters and PhDs. But within that, you have to be getting more selective. It's not just about a university sort of education. It's about The intellect that comes with that and the added value. And again, I think India has got great potential. But it also allows us to cast our net that much wider. If you look at the leadership team, if you could see inside within the organization more, you'd see We are much more of the United Nations of scientific talent than we were 5 years ago, 10 years ago. There are people that have Yes, there may be an earlier by both, but have been educated in India, done postdocs or education in the U. S, Maybe spend some time in the U. S. Or the European industry and then come back to India. So we're much more global in that talent footprint. For now, I think we're getting the current we need, but we're also going up business wise up that sophistication integration So the comments that I made about Syngene, the 10 clients that are doing fully integrated drug discovery programs with us A good indicator of where the industry is going and where Syngene is going. Subhaji, the last question. Yes. So if I understood the question, how much is from large pharma and how much is from biotech? So it's a non pharma bit, Sumeet. Non pharma bit, yes, non pharma bit like institutions and biotech. So Traditionally, we have been a trusted partner for large biopharma companies, and still most of our revenues comes from large pharma companies. Having said that, the non large pharma Part of our business is expanding very quickly because there's a lot of excitement over there. We have made good progress in the recent days. And we expect that part to grow that part of our revenue to grow in the coming years. If you see, strategically, Xinvent is also going to address a lot of that because that expectation is for integrated Research from both companies and we I think we are strongly pleased to address that. But at this point, still most of our revenues come from large pharma. Subhadji, I don't know if you've got the number, but other sectors, if you add it together things like animal health, chemicals, industrials, Polymers, any of those others, we've got small footprints, but they're catering to what the sort of sophisticated size we did. What would that be as Around 8%, around 10% of our revenues come from that. Okay. Hopefully, that gets to the premise of your question. Yes, it does. Thank you so much. All the best. Thank you. Before we take the next question, a reminder to the participants, Please limit your questions to 1 per participant. Next question is from the line of Milim Tarmakar from Dalaland Brochure. Please go ahead. Mr. Milim Karmarkar, your line is in talk mode. Please go ahead with your question. As there is no response from the current participant, we move to the next question from the line of Arpit Shah from Stalyen Asset. Please go ahead. Hi, management. I have a couple of questions here. What is the quality looking like for the APIs and Manbux services? Good day. Good day. Can you repeat, please? What is our order book size? Sorry, if I got the question, what was the order book look like for the API plan? As I tried to sort of cover in my comments, the key strategic pivot point for us actually is the regulatory pathway for The regulated pathway for your key regulated market approval has given me quite a good modeling assumption there, which is We don't think we think that has happened over 2 years. And beyond that is the real value creation opportunity for that plant And an inflection point. Between now and then, we'll cover the API opportunity within the broader guidance we gave. So we've given a lending growth outlook for the year, mid teens. That includes the growth contribution From all businesses, including the operating unit in Mangalore. So I wouldn't go beyond that and pass away. Thank you. So if you're reinvesting in the newer plant and the newer facilities, what will be your typical Total rate of typical ROICs that we are targeting from those points? Subhadji, did you catch that? The question is, when you invest with the CFO, what are the typical sort of hurdle rates or returns that we would look for. I mean, and I wouldn't have yet to comment. I mean, we're by philosophy a company that looks at long term returns versus cost of capital. So essentially, every project that we invest in, we are Very disciplined about our investment approach, and we do not invest unless we see a return, which is comfortably above the cost of capital, so has been the case in our Mangalore manufacturing plant. In terms of Our guidance, we have always mentioned that over a period of 5 years or more, it will return an asset turnover of 1, but typically the return generation period for an investment like that extends over 15, 20 years. So that's how we have to look at this investment. But it's a direct answer to your question. It's comfortably about cost of capital costs. Okay. Okay. And today like Syngene is like a 21 crore company, right? And we have pivoted from research to development to manufacturing. So when do we see ourselves in the next 5 years? We are the 21 crore revenue company. Can we move to like say $1,000,000,000 revenue company in the next 5 years? It's a fantastic question. I think you'll understand that I'm going to resist the temptation to give you a 5 year earnings outlook. I was quite happy to give you a revenue guidance for the year ahead. I'm not sure if we pivoted. I think we've integrated. I don't see the future potential in Delivery service is diminishing at all. It's not a reason to pivot away from it. So it's not a notion of manufacturing is the future. Discovery was the past quite the opposite. I think the discovery part of our business is growing fantastically well. We've differentiated And had some real runway, then development and then manufacturing. Together, they create an integrated battery chain and that allows you to match actually the way our customers in biotech and pharma operate, integrating those pieces So you can serve them end to end. So it's not one part is old, one part is new. They all work to work together well in concert. So my question was pertaining to where are the new places where you want to expand, Where opportunities can expand over the next 5 years. Okay. But I sort of thought I answered that in the Discovery Research, integrated drug discovery, the combination of chemistry, biology, research informatics, finding new molecules, taking those new molecules into the development space, finding and identifying formulations, manufacturing processes And I'm ultimately then going all the way through to making the drug at a clinical stage to support clinical trials and potentially being an API manufacturer or biologics manufacturer to support the commercialization. It's a full offering. Subanjit also gave some hints around where we are with our CapEx. Over the next 2 years, we're going to add a capability, which was the cell and gene therapy. That will take us 2 years to build that. That's quite a breaking area. Thank you. If you look into the discovery science space, pro tax as an area of protein degradation So the scientific capability, one that is a hot area of science, something that we're doing the other way some good experience in. Thank you. This is just one last question that I have for you. Some of your peers, let's say in China or some places like in Europe, they're growing at around 30%, 40%, 50 So quite a few years, opportunity is quite large for Syngene and for other places as well. What is actually stopping us to hyperschool. Yes. I'm not sure if I get if I fully agree with the premise of your question. I think you'll find that The Chinese peers are growing at 25%, 30%. That lowers high rates. They are aided and invested. Many of those Also manufacturing businesses with more scale, so that tells you the strategic path we're going then has some opportunity and they are supported by a phenomenal domestic market. The Chinese pharma market has now become the 2nd largest in the world, and I think it's on a trajectory to Close that gap with the value of the U. S. Market. It surpassed the Japanese domestic market, where German, French, Spanish, British, All of those that were traditionally the largest pharma markets in the world. You said you've seen a tremendous growth in the European So competitive buyers, I'm not sure that you have. I think you might have seen that you want to do when they've made major acquisitions, so inorganic And then the main European peer group and the U. S. Peer group is trucking along when I look at it in high single digits to low teens. And on a 5 year view or 10 year view, Syngene's comfortably outpaced that level of growth. Thank you. Thank you so much. Good luck. Thank you. Ladies and gentlemen, due to time constraint, that was the last question. I'll now hand the conference over to Ms. Digiadavan for closing comments. Thank you, everybody, for your time. If there are any further questions, please get in touch with us and we will be happy to answer them. Thank you once again and look forward to engaging with you as we continue our journey. You may now disconnect your lines. Thank you. Ladies and gentlemen, on behalf of Syngene International, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.