Message from our Chief Financial Officer

The Company reported 4% year-on-year growth in revenue from operations. Growth was primarily driven by large molecule development and manufacturing services which saw a solid uptick with its revenue share increasing to 25% in FY25 from 21% in FY24; driven by a ramp-up in commercial volumes and process development (PRD) projects leading to 22% year-on-year increase in revenue. PRD projects from other clients contributed to 40% of the growth of the Biologics business. Discovery services witnessed challenging demand in the first half followed by growth in the second half supported by conversion of pilot projects and demand from other clients. Dedicated centers delivered a stable performance contributing to a 2% increase for the Research Services division as compared with the previous year. On the other hand, small molecule CDMO contributed to 12% this year, down from 16% in the prior year. It was impacted due to declined projects led by clinical trial data changes, lower funding and project re‑prioritization by clients, partially offset by increase in number of PRD projects.

Cost and Margin Overview

We continued to manage costs and investments proactively with Operating EBITDA growing at 3% with a margin of around 29%, approximately the same as the previous year.

Raw material cost as a percentage of revenue improved in FY25 at 25.9% of revenue compared to 26.7% in FY24 driven by change in business mix and improved yield in biologics.

Employee costs grew by 11% year-on-year in FY25 leading to increase in staff costs as a percentage of revenue from 27.5% in FY24 to 29.6% in FY25. The increase is attributable to increments and investments in leadership and commercial teams.

Other direct costs which primarily include power and utility costs reduced by 8%. Throughout the year, the Company reaped the rewards of its investments in renewable energy, which not only positively impacted the cost of energy supply but also contributed significantly to advancing environmental commitments through the reduction of greenhouse gas emissions. In FY25, we generated 92% energy from renewable sources against 82% in FY24. Other operating expenses increased by 16% on account of increased repair and maintenance costs, administrative and selling expenses. We invested in commercial activities in response to increased customer interest. We also continued to invest in digitization, automation and technology advancements which we believe will give us the edge to operate at world‑class standards.

Depreciation and amortization expenses for the year increased by 2% reflecting capex additions. Finance costs increased by 13% led by interest component of lease rentals.

Operating EBITDA grew by 3% with a margin of around 29%, approximately the same as the previous year. Operating EBIT margin came in at 17% similar to previous year. Other income decreased by 21% during the year due to lower cash balance as a result of acquisition of biologics facility from Stelis Biopharma.

Reported profit after tax before exceptional items declined by 8% to Rs 475 Cr. PAT after adjusting for exceptional items decline 3% y-o-y. However, adjusted for one-offs relating to interest income on income tax refund, expenses related to the acquisition of the U.S. facility and reversal of income tax provision in FY24, the underlying PAT increased by 1% y-o-y. Adjusted for one offs, the underlying tax rate is around 22.8% for the year greater than 21.6% in FY24. Effective tax rate is expected to increase to approximately 26% in FY26.

Navigating currency volatility

The Company serves clients across multiple countries, with the majority of revenue generated in foreign currencies. In addition, the Company faces exposure to foreign exchange risks due to its various operations and transactions. As a result, hedging plays a crucial role in Syngene’s strategy to manage the risks stemming from exchange rate fluctuations. The Company implements hedging measures for receivables in accordance with the Board-approved foreign exchange policy.

The year was marked by depreciation of the Rupee against the Dollar. The average USD spot rate of Rs 84.9 was higher than the hedge rate at Rs 84.6. As a result, the Company booked hedge losses. During the year, the Company registered a foreign exchange loss of Rs 19 Mn compared with loss of Rs 558 Mn in the prior year.

Investing in the future

We executed a USD 48 Mn capex, and including the acquisition of the biologics facility in U.S., the spend was approximately USD 85 Mn during the year. About USD 24 Mn, i.e., almost 50% of the base capex, excluding the U.S. site, was invested in areas such as anti-body drug conjugates (ADCs), peptides and completion of new biology lab in Hyderabad and other contractual obligations that we have with our clients.

Around 25% was invested in biologics towards upgradation of Unit 3 and expansion of our PRD labs. Unit 3 is ready for operations, and we expect capitalization to be done in Q1 FY26. We invested nearly 15% in small molecule, primarily towards capability builds in animal health facility and expansion in PRD labs. The remaining capex includes investments in digitization and automation.

A strong balance sheet lies at the core of the Company’s financial strategy. As intended, the Company sustained a resilient balance sheet and upheld a solid liquidity position.

Our net cash flow generated from operating activities for the year was strong at Rs 1,168 Cr which fully funded the capex and acquisition of the U.S. Biologics manufacturing facility whereby our net cash in the business increased to Rs 1,279 Cr from Rs 934 Cr in the previous year. This reflects the underlying strength of our business as well as our ability to exert strong financial control.

Future ahead

Looking ahead into the next financial year, we expect the positive momentum to continue, with broad-based improved pipeline visibility and potential. The industry fundamentals remain strong and there is a growing trend in outsourcing of R&D activities with geopolitical factors influencing client supply chain preferences. Consequently, we remain optimistic about the long-term growth potential. We believe that our integrated business models and available capacity and investments in capabilities put us in a strong position to capture the growing CRDMO segment.

We expect FY26 to be a transient year with uncertain short-term macro environment building in the recovery of Biotech funding, Big Pharma restructuring and tempering of urgency on the Biosecure Act. However, our underlying business growth remains strong with revenue growth in the early teens, driven by performance across research and CDMO businesses.

Adjusted for the need to balance client inventory in the large molecule commercial manufacturing, our reported revenue growth is likely to be in the mid-single digits. We have invested in building capabilities both in India and the acquisition of the biologics facility in the U.S. to strengthen our leading position in the biologics market.

With the new facility coming online and the ramp-up over the couple of years, as guided, we expect margins to moderate in the near term. Operating EBITDA margins is expected to be around the mid-20s for FY26. Effective tax rate is expected to increase to 26% in FY26 as the SEZ units come out of tax holidays. With increase in depreciation and effective tax rates, we anticipate a year-on-year decline in PAT in FY26.

We will continue to strategically invest in areas that strengthen our position as a leading integrated provider of research, development and manufacturing services. We will continue to add new niche capabilities and capacities that position us as an integrated, differentiated and valued service provider for our clients.

In closing, I want to thank our shareholders for their ongoing support of the Company. We look forward to continuing to work together to build a successful future.