Ladies and gentlemen, good day and welcome to Syngene International's fourth 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. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone telephone. Please note that this conference is being recorded. I now hand the conference over to Ms. Divya Dhawan from EY. Thank you, and over to you, ma'am.
Thank you, Steve, good afternoon to everyone. Thank you for joining us on this call to discuss Syngene's fourth quarter and year-ended FY21 financial and business performance. We have on this call today Mr. Jonathan Hunt, Syngene's Managing Director and Chief Executive Officer, Mr. Sibaji Biswas, Chief Financial Officer, and Dr. Mahesh Bhalgat, the Chief Operating Officer. Other members of the executive team are also present on the call. After the opening remarks, Jonathan, Sibaji, 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 viewed 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. Good afternoon, everybody. Thanks for joining us on the call today to discuss Syngene's fourth quarter and full-year results for the year ending March 2021. I'll start with an overview of the fourth quarter financial performance and business highlights before summarizing the full-year financials. I'll close with a year-end wrap-up before handing over to Sibaji to give a more detailed account of the numbers and talk about the guidance for the year ahead. Syngene's fourth quarter revenue growth was driven by a steady performance across discovery services, manufacturing services, and our dedicated R&D centers. Revenue, excluding export incentives, grew 13% over the corresponding quarter last year. Despite the impact of the COVID-19 pandemic, we continued operating at near-normal levels, and careful management of costs and resources enabled us to improve profitability during the quarter.
EBITDA for the quarter was up four percent to INR 234 crore, while profit after tax, PAT, excluding the exceptional gains, was up 15% over the corresponding quarter last year. That took that to INR 138 crore. Turning to the business highlights for the quarter, I think a significant milestone is the extension of our strategic collaboration with Bristol Myers Squibb. That takes that out until 2030. This is the longest-standing collaboration for Syngene. It's been in place since 1998 and significantly evolved over the years. 2007, we set up the first dedicated R&D center with BMS. This is now their largest research facility outside of the United States.
We're proud of the role this dedicated center has played in BMS' research projects and the contract extension and it will take us into new areas of science and provide 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 would complete its qualification activities by the end of the year. The facility is now being audited by the Indian Regulatory Authority and is now GMP-certified. Really the focus now is in terms of both 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 two years.
In the meantime, we're in active discussion with clients regarding their commercial manufacturing projects, and here we've got multiple elements of the value chain now under one roof, and it offers clients tangible benefits in terms of technology transfer, removes the downtime involved in moving compounds between service providers, and that saves valuable time and increases speed to market. We do expect the number of projects in Mangalore to build steadily over the next two years, and we've captured that expectation in our overall guidance. We won't be giving specific guidance for the Mangalore plant, but we've included it in our overall outlook for the year ahead. Strategically, I think the key inflection point comes once we gain those key regulatory approvals, and that we see being the priority for the next two years.
During the course, we've also strengthened our small molecule development capability with the setting up of a new high-potency API lab. That will help us 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 of us. 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, the strong leadership shown by the exec team during the year, and that's been disrupted in many ways, the way we live 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've reported revenue growth excluding export incentives of 12% up to INR 2,180 crore and PAT, profit after tax, growth of four percent to INR 382 crore. Sibaji Biswas is going to give you much more details about this in a moment. Looking back over the year, after a flat first quarter, we built momentum in the subsequent quarters throughout the year, and we maintained strict financial discipline, I think good cost management, which really allowed 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 really 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, us opening that center at the beginning of last year. We've added new clients to our roster, and continue to invest and build on our digitization and automation initiatives. Talking about our integrated drug discovery portfolio, Synvent, that's the platform for executing these projects, provides an effective and efficient means to advance programs through target validation, translation interrogation, therapeutic discovery, and preclinical development, and that's for both large and small molecules. With projects like this, we take an end-to-end 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, really is around the benefits to the client include a faster, seamless R&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 five-year collaboration we announced with 3BC. That really is the scope there to collaborate on integrated drug discovery projects from target validation 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 also strengthened our position in the animal health sector. The discovery research team worked on a, I think, quite interesting integrated drug discovery project for potential treatment of inflammatory disorders in dogs.
The formulations and analytical development teams developed what's a first of its kind multi-drug combination product for companion animals. This is in the canine market, and that's a product with global potential. We're very proud that our scientists continue 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's made systematic investments in digitization and automation, to enhance productivity, improve quality, increase safety. In addition to improving speed of delivery and reducing turnaround time, these automations also reduce manual intervention and chance of errors and omissions.
Digitization initiatives now 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. To address this, we implemented Remote eye. This is a technology platform that allows an auditor to remotely view our facilities in real time, replicating really what they would do with a physical audit. Of the 47 client and regulatory audits that we had in the year, 36 of those were done virtually. Technology there really closing a gap in what otherwise would be a COVID-related challenge. We wanted to continue to build on our track record of successful accreditations, our operating units received ISO 27001 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 CAP accreditation of the Central Laboratory and Clinical Development. CAP's a globally recognized quality accreditation standard, that really assures adherence to a very defined set of operating parameters. Syngene's the first company in India to receive CAP accreditation. We were the first to receive it in 2002, since then, we've successfully renewed that accreditation every two years. Throughout the year, Syngene continued to play an active role in the fight against COVID-19, by really applying our scientific expertise to develop solutions and also bring some of our infrastructure to bear. We've collaborated closely with state government and various industry bodies to share knowledge and best practice. I think I mentioned these in previous quarters, just to give you a quick recap.
As an essential provider, we were allowed 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 by the second quarter, and that's continued through to today. As you know, we're manufacturing remdesivir under a voluntary license agreement with Gilead. To be clear, we don't really expect this to significantly boost profits, but I think it's a really important part that we can play in meeting the medical need that's so clear in India today. Now, our research scientists have developed various proteins, S1, RBD, and M proteins, that helps the diagnostic kit manufacturers. We're partnering with various organizations to fight COVID-19.
These include a collaboration with the Centre for Cellular and Molecular Biology to deliver high-throughput next-generation sequencing with the National Centre for Biological Sciences to develop a novel human ACE2 transgenic mouse, and with the Foundation for the Neglected Disease Research to facilitate SARS-CoV-2 in vitro and in vivo research, and that will help develop various monoclonal antibodies. With infection rates once again rapidly rising in India, we see that in other parts of the world, we continue to strictly implement safety protocols. Our campus-wide proactive employee testing exercise helps us maintain a low positivity rate. We've also started the process of vaccinating employees and their families.
As of last week, all over 45-year-olds in the company have been offered a vaccine, starting from the first of May, we'll be ready to go with a program to vaccinate all other staff, 18 and above, I think is the governmental guidance limit. We'll be very pleased to do that and for their immediate dependents. As we look forward to the new financial year, our focus first and foremost will be on the smooth running of campuses and operations, keeping our staff safe. Hopefully, the benefit of the widespread vaccination will bring a degree of normality, I think most people are expecting that to be very much in the latter half of this year, that the situation on the ground today is very fluid.
Operational excellence is a daily priority, and we're seeing the benefits of a restructured approach to continuous improvement across all of our operations. Two-thirds of our staff are now trained in lean process management tools. We've adopted the Japanese approach of Gemba walks to ensure that managers are really on top of the day-to-day operational detail. As you'll hear from Sibaji Biswas, we plan to continue to invest in new technology to keep pace with client requirements. We continue to believe that the IDD, the integrated drug discovery approach, adds value to both clients and our own company's research. We'll be working hard to ensure that the investments in Bangalore start to deliver as soon as possible, and we're also going to be investing in the expansion that we 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 physically, culturally, and being within arm's reach of them really will pay dividends. Before I end my address and hand over to Sibaji Biswas, let me summarize. We've been happy with the performance over the year, particularly given the volatile market conditions that are prevailing 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 Syngene's value proposition as a strategic research partner, not just a service provider, but also adding value intellectually, I think it's really been endorsed with the extension of our collaboration with BMS.
Our operations are backed by a strong balance sheet and P&L statement that will drive long-term growth and sustainability. With that, let me hand over to Sibaji.
Thanks, Jonathan, and a very good afternoon to you all. I'm happy to take you through our results for the fourth quarter and the full year ended 31st of 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 2020 and was providing guidance for FY 2021. We were hoping that the pandemic would be contained by the end of quarter one.
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 prudent management and disciplined implementation of COVID-appropriate protocols 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-19, and we will continue to do so as required. As of this month, we have restarted manufacturing of remdesivir to ensure that we contribute to the stock required by our country to fight the virus during the second wave of COVID-19.
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 two significant milestones. Firstly, we made a good start to our journey in integrated drug discovery services with our platform, Synvent, and the agreement with Diaped. 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&D solution. The second one, the 10-year extension of our contract with BMS, has obvious financial significance.
I am 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 revenue from operations, excluding export incentive, increased by 13% for the quarter compared to the previous year, and was also up by 13% compared to quarter three, 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 eight point five percent.
We have applied prudence and not accounted for any pending the government's clarification around the Service Export Incentive Scheme, although the export support policy announced by notification number 57, dated 31st March 2020, implied the 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 science. I'm also happy to announce that we started manufacturing certain stages of small molecule API for a client from our Mangalore manufacturing plant, which was part of a larger project that's being executed. We now have the plant GMP qualified and are working on a multipronged approach to obtain regulatory approvals for the plant.
Obtaining regulatory approval from key regulators such as US FDA or EMA would be an important step towards being able to manufacture high-value molecules in the Mangalore plant. Until the approvals are obtained, we will continue to manufacture products that suit the plant operations so that we are able to cover an increasing part of our cost base. We further expanded our laboratory capacity in Hyderabad, which went live recently. We now have close to 300 scientists working from Hyderabad. Additional expansion has been planned in Hyderabad in waves, and we will 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 the infrastructure needed to capture this growth. EBITDA margin for the quarter was close to 35% compared to 36% last year and 32% in quarter three.
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% of the revenue, compared to 31% in the same period last year and 30% in quarter three. Our raw material cost for the quarter has marginally increased from 25% of revenue to 26% due to a shift of mix of our business towards manufacturing, especially biologics. 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 in the P&L. During the quarter, staff costs increased by INR 19 crores to INR 183 crores as compared to INR 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 costs, and other general overheads. They are up by INR 7 crore year-on-year, compared to INR 89 crore in the same period last year. The rise in these expenses is primarily attributed to new way of doing business during the COVID-19 times and increase in costs associated with maintaining industry health and safety protocols. EBITDA was at INR 234 crore compared to INR 225 crore last year. Underlying EBITDA increased by 19% and was at INR 215 crore compared to INR 181 crore last year, reflecting strong operating leverage.
Depreciation stands at INR 70 crores, which is an INR 8 crore increase from INR 62 crores in the same period last year. The increase on a year-on-year basis is mainly due to the investments in the Hyderabad facility, expansion at our main Bangalore facility and depreciation for the full period for the Mangalore commercial API plant as against half of the period last year. Moving to the impact of our currency hedges. The company recorded an exchange gain of INR 5 crore in the quarter versus a loss of INR 1 crore last year. This reflects the difference between forward rates versus the prevailing spot rate. The hedge rate was at INR 74.80 as against the spot rate of INR 73.80 during the quarter.
Profit after tax before exceptional gain on insurance fee was up 15% to INR 138 crores as compared to INR 120 crores in the same period last year, reflecting an overall strong performance for the quarter. This momentum during the quarter with strong performance across dedicated 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. We have applied to them not to recognize any benefit from this in the current year. Continuing with the full-year performance before factoring the export incentives, revenue from operations for the full year was at INR 2,180 crores, 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 safety protocols and learned to adapt to the COVID-19 pandemic. Excluding Q1, which has seen flat year-on-year revenues, underlying revenues from operations in the last three quarters grew 14% year-on-year as compared to the similar period last year. For the full year, our EBITDA is up five point three percent to INR 736 crores, a reflection of the improved operating performance in the business.
If we exclude interest income and export incentive, 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 INR 219 crores in the same period last year.
Foreign exchange gain for the full year was at INR 17 crores versus INR 14 crores last year. Overall, for the year, our profit after tax was up four percent to INR 382 crores versus INR 366 crores last year before an exceptional gain from an insurance receipt. Let us move to some of the other items such as CapEx and cash flow. Our investments for the year were at $11.65 million as a part of the ongoing CapEx program, compared to our CapEx guidance of $100 million during the year. Lower CapEx spend during the year is partly due to COVID-19, but also due to the additional capacity released due to the introduction of multiple shifts, especially in the discovery services. We have rightfully delayed the CapEx spending to the next financial year, and the balance $11.35 million is included in our CapEx guidance for the next year.
Of the total CapEx for the year, $10 million pertains to the commercial API manufacturing facility, $20 million was invested in discovery services, $10 million in the biologics manufacturing facility, and the balance $25 million in dedicated centers, development services, and common methods. Our balance sheet position is healthy, and we have a strong liquidity position. As promised at the start of the year, FY21 was the year where we focused on preserving liquidity. I'm happy to report that despite the pandemic, we had the highest ever collection during the year and reduced the overall outstanding days of receivables by six days. This, along with carefully calibrated spending, has resulted in a strong net cash balance of INR 648 crores at the end of the year.
This gives us the 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. Moving on to the guidance for the financial year 2021/2022. 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 increase also in further with significant interest in the integrated drug discovery 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 outsourcing.
We believe Syngene is well-positioned to capture many of these market opportunities. As we enter the new financial year, we have extended and expanded our dedicated R&D centers through our collaboration with BMS, where we expect to increase R&D scientists by another 20% in a phased manner on top of the 20% expansion that happened by the fourth quarter. We have laid a strong foundation by extending our laboratory footprint beyond Bangalore with the ongoing expansion of capacity in Hyderabad. We have now launched phase three of our expansion, which will allow us to build additional capacity for another 300 scientists on top of 300 scientists 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 one additional 2,000-liter reactor.
Our new 500-liter microbial facility gets added to our microbial 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 anti-cancer to hormonal disorder therapies, and many others. We have already seen promising indications from customers that will drive up capacity utilization. This year, we'll also start investing in a viral vector development and manufacturing capability that will cater to clinical and commercial supplies of viral vectors to be used for cell and gene therapy. The manufacturing facility will have scale of operations up to 200 liter bioreactors, which can be further scaled up based on business needs. We are being supported by Biotechnology Industry Research Assistance Council, or BIRAC, under the National Biopharma Mission for this project.
BIRAC has provided us with a grant to pathfind 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 establish some really landmark scientific capability within India. The first phase of this plant will require around INR 200 crore of investment, and the plant will be ready for operations in two years. In the API manufacturing facility in Bangalore, as mentioned earlier, we have completed the qualification stage and started manufacturing. We are now working on a multi-pronged approach to obtain regulatory approvals for the plant while adding clients and projects to monetize the asset. As mentioned earlier, we expect an asset turnover of 1x for our manufacturing businesses over a period of around five years from investment.
One significant impact of the pandemic has been the relatively slower build-up of new plant orders in the past 12 months due to the lack of global travel, trade shows, and direct contact with customers. We are now seeing a rebound in demand, but with a six 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., U.K., and Europe, as we recognize the need to have senior sales capabilities in these markets. 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 you can put the guidance into context.
While the second wave in India is extremely intense, we believe that our existing COVID protocols and the employee vaccination program will help us to maintain near normal level of operations. If the second wave does not cause significant additional business disruption, for example, through lockdown, supply chain challenges, or significant employee absenteeism, the focus of FY 2022 is to drive a higher level of business growth. Even with a hangover of lower pipeline build up in the first part of last year, we would expect revenue from operations to be in the mid-teens in the financial year 2022. As the year, we 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 considering the impact of depreciation driven by additional CapEx. Our CapEx plan is expected to be between INR 750 crores and INR 900 crores for the financial year 2022, and this includes the unspent CapEx rollover from the previous year. The investment will primarily focus on expansion across the business, capacity additions, technology and automation, and hence a big part of this CapEx will lead to improved revenue generation in the future years. We are now entering a new investment cycle with a renewed confidence about growth opportunities, but in view of the ongoing pandemic, we'll take a calibrated, stage-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'll respond as the situation warrants.
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 for the company for this quarter. Despite the level of uncertainty created by the pandemic, we tracked well against our guidance on both revenue growth and PAT. Overall, the structural growth drivers for the industry remain very strong. We will 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 accrete in the coming years to justify 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 years. With this, I complete my commentary on the results. We can now open the floor for questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. A reminder to the participants, please limit your questions to two per participant. Should you have any follow-up, we would request you to rejoin the queue, please. The first question is from the line of Alankar Garude from Macquarie. Please go ahead.
Hi. Good afternoon, everyone. Sir, I wanted to understand your EBITDA margin guidance of around 30% a bit better. In the fourth quarter, even if you adjust for export incentives and other income, we were at more than 32% margin. Sir, firstly, is there some seasonality in the fourth quarter? Secondly, despite lower under recoveries in the Bangalore facility and also likely operating leverage from the CapEx we have done over the past two, three years, why do you think margins will be just around 30% in FY 2022?
Yeah, good question. I'll let Sibaji comment on that in a moment. I would sort of take a reflection. If you go back and look at our business over five years, 10 years, you've seen that the EBITDA margin has been pretty much dialed in a range of between 30 and 33, 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. That's a margin structure that when you put it in the context of our global peer group, looks good. It's peer group medium and above towards the upper quartile and has been on a sustainable basis. Thirdly, it creates shareholder value. It's a margin structure that allows us to actually create economic value on a sustainable basis.
I'm quite happy with operating in that range. I'll let Sibaji maybe comment on the quarter-by-quarter variance and why we think the year ahead is more 30% than where it was in the fourth quarter. You're right in that in the fourth quarter, there always is a little bit of seasonality, particularly around our more manufacturing and development-led businesses. The others tend to not be that seasonal, and you tend to see a spike at the year-end. Never quite sure why. There's no industrial logic for it, but it's been in our business forever, that the fourth quarter tends to be a biggie one. Anything you'd add beyond that, Sibaji.
Just second opinion, I think, Alankar, good question. If you see across our global 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 four has the strongest EBITDA margin. We have seen that last year. We have seen the same thing this year. That seasonality does exist from manufacturing development services being the main contributor for that. A bit of a dilution, I explained that in my commentary. This is a year where although we started with a bit of drag on the pipeline because we're coming out of a COVID-19 year, we still want to push growth. When you push growth, you are investing in expansion, you are investing in capabilities across different functions.
When you do that, there is some moderation of margins. It's not big moderations. We are still talking about staying in the range of 30% to 32%. We are talking 30% now. Last year has been 31%. It's actually investment for growth because we really want to now push for a higher 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 one year, and have you identified any areas of improvement?
Yeah. It's a little bit, I think everyone, 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. We'll see how much of that endures. I think quite a lot of it will, because I think in any industry all around the world, we've 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. I think that was one learning. We were really grateful that we'd invested in some of those mobility digital 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, YouTube, et cetera, you can now see a much clearer, stronger digital brand presence for Syngene. If you read a lot of the scientific trade press or a lot of scientific literature, magazines, publications, or websites, you'll see a much more visible digital presence. I think those would be some of my reflections. The other bit, of course, is being close to your customer, actually having a good connection local anywhere in the world, is a benefit. That's one of the areas where 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're close to the customers and part of those scientific communities.
Okay, sir. That's it from my side. Thanks. All the best.
Thank you.
Thank you.
Next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Thanks for the opportunity. Sir, just on this [audio distortion] where we had a partnership from pre-clinical to regulatory filings. First of all, just a clarity whether this partnership is going to get extended for the commercial manufacturing as well, as and when it gets approved.
Super question. Don't think we know the outcome of that because we don't know the regulatory outcome. Once it's seen, we can update you on as and when that happens. Really proud of the work we've done. The end-stage disease with 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 they can successfully get that approved into the market in various countries around the world, medically, we will have done something good. Scientifically, we'll have done something good in supporting them.
It's a good example of an integrated end-to-end sort of program over many years that is a sign of the sort of add value that Syngene can now add that maybe five or 10 years ago we wouldn't have done in the same way. Really good almost showcase example of some good work and some good science. On the specifics of manufacturing, don't know because we're still in conversations with the client, and we'll see how they get on with their regulatory approvals.
Got it. Because I presume the PDUFA date is quite near. I mean in July 2021.
I think that you'd have to direct that to their IR team.
Sure. Sorry. Secondly on this, while we restarted manufacturing of remdesivir, if I have to understand the core business guidance, maybe remdesivir could be just an FY 2022 opportunity. The overall guidance is for FY 2022. If I exclude remdesivir opportunity, then what could be the guidance on the core business?
Yeah. 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 Sibaji Biswas may have made one. remdesivir for us, there are seven companies that have got voluntary licenses that are supplying the market in India. I think all of them are responding to the urgent need today and doing whatever we can to step up. With all sort of, got to be pragmatic, Syngene's manufacturing capacity is amongst the smallest of those companies. We're doing everything we can. I think collectively the seven companies, plus Gilead, I'm sure you saw that, I think yesterday, announced that they were going to send some 500,000 vials to India. There is a response. We're at the smaller end of the manufacturing capacity. We are rest assured doing everything we can.
It's as much a scientific and CSR contribution as it is. It's not a main driver for our business, so I wouldn't parse 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. Thank you a lot.
Thank you. The next question is from the line of Prakash from Axis Capital. Please go ahead.
Yeah, good afternoon. Sir, my question is, you reported eight percent INR terms?
Mr. Prakash, if you can speak closer to the handset please, we are unable to hear you clearly.
Is that fine?
Yes, sir.
My question is, you reported eight percent year-over-year growth in INR terms. What is the constant currency term growth and what would be the guidance? Is the guidance in CC terms or it is INR terms guidance?
Sibaji Biswas. I think you got the premise of the question, Sibaji Biswas, split between reported constant currency.
Correct. Prakash, thanks for the question. If you are looking 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. Essentially, effectively, that's driving the 13% growth from operations. The eight percent 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, that's by design. We want to be conservative in our financial reporting and accounting practices. Take that part out, take the interest part out, we grew 13% quarter-on-quarter, of which 12% quarter-on-quarter is purely US dollar terms.
Okay. That is perfect. Your guidance is also in dollar terms
Our guidance is in rupee terms. Prakash, we have always rupee guidance. We are not changing that position.
Okay. One more clarification on the PAT guidance that you have given, that is on the reported PAT or the adjusted PAT excluding the one-offs?
That is on INR 382 crores, which is basically excluding the insurance receipts. Last year also we had insurance receipts, Prakash. This year also we had insurance receipts. We do not consider that as part of our core profit after tax. All our guidance is excluding.
Will grow high single digit.
We will grow single digit. That's what I said.
Oh, understood. Fair enough. Second one is on.
Sorry to interrupt, but for any follow-up, may we request you to rejoin the queue, please. The next question is from the line of Tarang 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 Syngene must have created with BMS over the last 22 years. The qualitative commentary on the various aspects of the business in the press release has been quite encouraging. It gives us a better pulse 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&D work to a player with strong vintage and credentials, versus say how they were looking at it maybe three to five years back? That's one. The second is, India seems to be gaining traction as a R&D destination for most of global pharma and active majors.
Are you witnessing any challenges in recruiting personnel with desired skill set at a desired pace? The last one would be, what proportion of your INR 300 million revenue will be from non-pharmaceutical customers, and what was this figure maybe in 2018?
Yeah, super set of questions. Sibaji, I'll leave the last one to you just to think about the pharm, biotech, non-pharm split and how that's evolved. On your first one, I'd broad naturally the question not just around the dedicated clients, but all of them. Oh, depends how much of a historical view you want. When I joined the pharma industry, which is now getting on to 30 years ago, it would've been anathema for any R&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. At the heart of it's a little bit like if you're a fund manager, you don't outsource your stock picking.
You have your own investment thesis, and I think the head of R&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 a sense, outsourcing, and India is well-known for this if you think about the IT services industry. For a long time, that industry grew because you outsource simple repeatable things for a scale or labor cost 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 as much or more than their customers. They are the expert you go to consult.
I think we've got that similar sort of dynamic going on in our industry and in a company like Syngene. 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 critiquing and challenging their scientific ideas. We bring our own to the table. 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 five, 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 as a business, with the nature of our foothold in India, get the talent?
I think India does scale talent fantastically. There are few places on the planet where you can hire the volume of master's and PhDs. Within that, you have to be ever 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. Again, I think India's got great potential. 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 that we're much more of a United Nations of scientific talent than we were five years ago or 10 years ago.
There are people that have, they may be Indian by birth, 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. We're much more global in that talent footprint. For now, I think we're getting the talent we need, but we're also going up business-wide, up that sophistication, integration curve. The comments that I made about Synvent, those 10 clients who are doing fully integrated drug discovery programs with us, are a good indicator of where the industry is going and where Syngene's going. Yeah, Sibaji Biswas, the last question.
Yeah. If I understood the question, how much is from large pharma and how much is from biotech?
The non-pharma bit, sorry.
Non-pharma bit. Yeah, non-pharma bit like institutions and biotech. Traditionally, we have been a trusted partner for large biopharma companies, and still, most of our revenues come from large pharma companies. Having said that, the non-large pharma part of our business is expanding pretty quickly because there's a lot of excitement over there. We have made good progress in the recent days, and we expect that part of our revenue to grow in the coming years. If you see, strategically, Synvent is also going to address a lot of that because that expectation is for integrated research from both companies, and we actively are strongly placed to address that. At this point, still, most of our revenues come from large pharma.
Sibaji, I don't know if you've got the number, but other sectors, if you added together things like animal health, chemicals, industrials, polymers, any of those others where we've got small footprints, but they occasionally want the sort of sophisticated science we do, what would that be?
Around 10%, sir. Around 10% of our revenue 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 one per participant. Next question is from the line of Milind Karmarkar from Dalal & Broacha. Please go ahead. Mr. Milind Karmarkar, your line is in talk mode. Please go ahead with the question. As there is no response from the current participant.
We move to the next question from the line of Arpit Shah from Stallion Asset. Please go ahead.
Hi,[audio distortion]
I have a couple of questions here. What is the order book looking like for the API plant in Mangalore facility?
Couldn't hear.
Hello?
Couldn't hear. Can you repeat, please?
What is our order book size?
Sorry, if I got the question, what would the order book look like for the API plant? As I tried to sort of cover in my comments, the key strategic pivot point for us actually is the regulatory pathway for key regulated market approvals gives me quite a good modeling assumption there, which is we think that'll happen over two years. Beyond that is the real value creation opportunity for that plant. An inflection point between now and then, we'll cover the API opportunity within the broader guidance we give. We've given a revenue growth outlook for the year of mid-teens. That includes the growth contribution from all businesses, including the operating unit in Mangalore. I wouldn't go beyond that and parse it out.
Thank you.
If you're reinvesting in your plant, in your facility, what would be your typical hurdle rate or typical ROICs that you're targeting from those plants?
Sibaji Biswas, did you capture that? The question is, when you invest as the CFO, what are the typical sort of hurdle rates or returns that we would look for? I wouldn't expect you to comment, we're, by philosophy, a company that looks at long-term returns versus cost of capital.
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. Has been the case in our Mangalore manufacturing plant. In terms of our guidance, we have always mentioned that over a period of five years and more, it will return asset turnover of one, but typically, the return generation period for an investment like that extends over 15, 20 years. That's how we have to look at this investment. Direct answer to your question, it's comfortably above cost of capital for us.
Okay. Today, Syngene is like an INR 2,200 crore company, right? We've pivoted from research to development to manufacturing. Where do we see ourselves in the next five years? We are an INR 2,200 crore revenue company. Can we move to, let's say, a billion-dollar revenue company in the next five years?
It's a fantastic question. I think you'll understand why I'm going to resist the temptation to give you a five-year earnings outlook. I was quite happy to give you a revenue guidance for the year ahead. I'm not sure if we've pivoted. I think we've integrated. I don't see the future potential in discovery services diminishing at all. It's not a reason to pivot away from it. It's not a notion of manufacturing is the future, discovery is 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 value chain. It 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.
It's not one part is old, one part is new. They all work together well in concert.
My question was pertaining to where are the new places where you want to expand, where are opportunities can expand over in the next five years?
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 then 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. Sibaji also gave some hints around where we are with our CapEx. Over the next two years, we're going to add a capability, which was the cell and gene therapy. That'll take us two years to build that. That's quite a breaking area. I think if you look into the discovery science space, PROTACs as an area, protein degradations as a scientific capability, one that is a hot area of science.
It's something that we're doing well and with 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% for quite a few years. The opportunity is quite large for Syngene and for other players as well. What is actually stopping us to hyperscale?
Yeah. I'm not sure if I fully agree with the premise of your question. I think you'll find that the Chinese peers are growing at 25% to 30%, at those high rates. They are aided in the fact that many of those are also manufacturing businesses with more scale. That tells you the strategic path we're going down has some opportunity, and they are supported by a phenomenal domestic market. The Chinese pharma market has now become the second 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's surpassed the Japanese domestic market, the German, French, Spanish, British, all of those that were traditionally the largest pharma markets in the world. You said you've seen a similar sort of growth in the European competitive rivals. I'm not sure that you have.
I think you might have seen it in one or two when they've made major acquisitions, so inorganic growth. In the main, the European peer group and the U.S. peer group is trucking along, when I look at it, in high single digits to low teens. On a five-year view or a 10-year view, Syngene comfortably outpaced that level of growth.
Thank you. Thank you so much. Good luck.
Thank you.
Thank you.
Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to Ms. Divya Dhawan for closing comments.
Thank you everybody for your time. If there are any further questions, please get in touch with us, we would be happy to answer them. Thank you once again, we look forward to engaging with you as we continue our journey. You may now disconnect your line.
Thank you.
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.