As we start the new fiscal year, we have seen early indications of recovery in US biotech funding. 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 puts us in a strong position to capture our share of the upturn in biotech spending and expanding demand in due course.
In the past year, the growth was primarily driven by a strong development and manufacturing services performance which grew 26% year-on-year. We made good progress on our long‑term partnership with Zoetis and achieved the run rate of USD 50 Mn per annum which is the basis for our manufacturing contract for the drug substance for Librela. The dedicated centers delivered a steady performance contributing to a flat result for the Research Services division as compared with the previous year. Overall, the share of development and manufacturing services has increased from 35% in the previous year to approximately 40%.
We continued investments in our capabilities and infrastructure to build a strong base for the future. Notable amongst these was the acquisition of biologics manufacturing facility from Stelis Biopharma Ltd. Anticipating continuing growth in Research Services, we acquired 17 acres of land in Genome Valley, Hyderabad, in proximity to our existing campus.
Overall, we had a strong start to the year which moderated in the third and fourth quarters resulting in a slower second half of the fiscal year. However, we continued to manage costs and investments proactively with Operating EBITDA growing at 9% with a margin of around 29%, approximately the same as the previous year.
The cost of raw materials increased by 8% for the full year in line with the growth of the business. The overall material cost-to-revenue ratio now stands at around 27% of revenue from operations (similar to last year). With our CDMO business generating an increasing share of our revenue, our material cost-to-revenue ratio increased. However, as we mature as a CDMO business, we have driven more efficiency and material cost utilization. These factors offset each other and material costs to revenue remain broadly at the same level as the previous year.
Employment costs for the year increased by 8% on account of annual increments. Overall employee cost-to-revenue ratio stands at around 28% of revenue from operations in line with the previous year. During the year, we slowed down our recruitment to take account of the overall slowdown in discovery research and recruited only for the specialist roles. As a consequence, we ended the year with a lower headcount compared to the previous year resulting in lower costs, partially offset by the annual salary increments.
Other direct costs which primarily include power and utility costs reduced by 5%. 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 FY24, we generated 82% power from renewable sources against 75% in FY23. Other operating expenses increased by 18% on account of increased repair and maintenance costs, administrative and selling expenses. We invested behind 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 16% reflecting capex additions. Finance costs increased by 4% reflecting higher interest rates in the year as well as the interest component of lease rentals, partially offset by reduced interest expense due to repayment of external commercial borrowings (ECB) debt during the year.
Operating EBITDA grew by 9% with a margin of around 29%, approximately the same as the previous year. Operating EBIT margin came in at 17% versus 18% in the previous year. Other income increased by 28% during the year. This is partly attributed to the Rs 16 Cr interest received from an income tax refund and partially offset by lower interest income as our cash balance reduced due to the Stelis acquisition and repayment of debt.
Reported profit after tax growth before exceptional items was 12%. Adjusted for the two tax-related one-offs: the tax provision reversal in the fourth quarter; and interest income tax refunds, the profit after tax grew by 4%. PAT after the exceptional item relating to the acquisition of the biologics manufacturing site, expenses grew 10% year-on-year.
The effective tax rate for the year was at 17.9% compared to 21.8% in the previous year benefiting from the tax provision reversal of Rs 23 Cr on account of a favorable tax assessment received during the year. Adjusted for that, the underlying tax rate for the year is around 21.5% for the year. Going forward, the tax rate is expected to increase as more units come out of SEZ tax benefits in the coming years.
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 to Rs conversion rate realized during the year was Rs 82.91 – higher than the hedge rate at Rs 81.56. As a result, the Company booked hedge losses. During the year, the Company registered a foreign exchange loss of Rs 558 Mn as compared to a loss of Rs 418 Mn in the prior year.
We executed USD 55 Mn of capex during the year, primarily directed towards adding new capabilities and capacity in our research business. Around 60% of this was invested in research services including buying the land in Hyderabad as well as the investment made in an automated compound management facility and the DMPK biology lab for integrated small molecule studies.
Around 30% was invested into development and manufacturing including support infrastructure such as a quality control lab and a testing laboratory for biologics manufacturing and additional capabilities for the small molecule business. The remaining 10% was invested in common infrastructure including digital technological advancements.
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 1,042 Cr which fully funded the capex and acquisition of the biologics manufacturing plant whereby our net cash in the business was maintained at about Rs 900 Cr, a similar level to the previous year. This reflects the underlying strength of our business as well as our ability to exert strong financial control.
We expect stronger growth in the new fiscal year from both the research and CDMO segments of the business. The return of US biotech funding along with our investments in capacity and capability will provide the momentum for growth. Moreover, the current macro scenario, increased outsourcing of research & development, shifting geopolitics and strong fundamentals will drive the growth in the long term. Given the nature of the model of dedicated centers, we expect them to deliver at a sustained pace.
In development and manufacturing, we will focus on building pilot projects as these hold the key to future contracts. Overall, we expect revenue growth in fiscal year 2025 with the second half being stronger than the first half. We expect the EBITDA margin to be similar to the level delivered in fiscal year 2024 and PAT growth in single digits.
As demand picks up in the year ahead, 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 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 are proud of what we have accomplished and we look forward to continuing to work together to build a successful future.
