Jonathan Hunt - Chief Executive Officer and M.B. Chinappa - Chief Financial Officer of the company addressed the call:

Highlights of the call:

Q4 revenues grew 30% to Rs 555 crore driven mainly by Discovery and Development Services as well as some elements of catch up in Development Services as projects spilled over from the third quarter FY19.

Reported revenue crossed Rs 500 crore mark for the first time.

The company had a benefit of 6% from currency.

Q4 EBITDA grew 24% to Rs 181 crore.

PAT grew 19% to Rs100 crore.

EBITDA and PAT margins for the quarter were 33% and 18% respectively.

Margin performance for the quarter was absolutely in line with expectations with PAT margins at 18%, that is 200 basis points lower than last year and this really reflects the continued investments the company is making in business development as well as improving overall efficiencies which it sees as important enablers of future growth.

During the quarter, it recorded interest income of 21 crore, associated with this its finance charges of Rs 8 crore and income tax of Rs7 crore. Excluding this impact of interest income, the revenue growth for the quarter is at 31% and adjusted EBITDA margins for the quarter is 30% while PAT margins is 18%.

Material and power cost as a percentage of revenue dipped to 29% compared to 32% in Q4 last year. This is largely owing to the sales mix.

Employee cost as a percentage of revenue is at 24%, roughly in line with Q4 FY18.

Other expenses for the quarter has gone up marginally by 3%, and it is higher than Q3 reflecting higher consulting fees associated with some initiatives on safety, compliance and recruitment.

Its revenues are predominantly invoiced in US dollars, while reporting currency is INR. During Q4 it had 6% gain in revenues on account of the rupee depreciation while it booked a forex loss of Rs 8 crore.

Its hedge rate was at Rs 68 versus the prevailing rate of Rs 70 and the loss reflects the difference between the two. This loss of Rs 8 crores compares with the gain of Rs 31 crores in Q4 FY18.

In FY 2019 it registered revenues of Rs 1901 crore, up 28%. EBITDA was Rs 612 crore against Rs 527 crore, reflecting 32% EBITDA margin.

Profit after tax stood at Rs 332 crore compared to Rs 305 crore in FY18, reflecting 17% PAT margins.

In Q1 of FY 2019 the management had mentioned that the revenue was boosted by higher raw material pass-through billings of about Rs 40 crore. Excluding this item, EBITDA and PAT margins for the full year were at 33% and 18% respectively.

The effective tax rate increased to 20% in FY19 compared to 18% in FY18. This is due to the unwinding of the SEZ tax holiday benefits in some parts of business.

Cash generated from operating activities were largely utilized towards ongoing capex program, resulting in a net cash position of Rs 340 crore as at 31st March, 2019 as compared to Rs 320 crore as of 31st March 2018.

The company has spent approximately $85 million towards ongoing CAPEX programs in FY19, taking its total investment and fixed assets to around $350 million.

It expects to continue the investment in capex in a similar manner in FY20 and FY21 to take the overall asset base to about $550 million by the end of FY21. This includes the upcoming commercial API manufacturing facility at Mangalore which is scheduled to be operational by the end of fiscal FY20. The second phase of the upgraded S2 facility will also be operational by the end of FY 2020.

With regards to the insurance claim on the rebuild of S2 facility, the company has so far received Rs 81 crore and expects to receive the balance proceeds over the next 12 months.

During the quarter, the company entered into the collaboration with Government of India's Biotechnology Industry Research Assistance Council (BIRAC) to set up a Center for Advanced Protein Studies in its campus in Bangalore. The CAPS facility aims to support biotech start-ups by providing them access to world-class GLP certified facilities at discounted rates. This really has the potential to play a significant role in boosting the development of the biotechnology industry here in India.

In Q4 the company appointed Dr. Kenneth Barr, Senior Vice President - Discovery Services. Kenneth brings with him over two decades of experience in drug discovery, small molecules and has been associated with the range of global organizations including Abbott, Merck, and FORMA Therapeutics and ready in his new role, he will be responsible for bringing together Syngene's discovery services, delivering integrated drug discovery programs on behalf of clients and that's taking programs from target identification and validation all the way through to IND.

During the year, the company continues to invest in the business, strengthening the leadership team, expanding business development activities as well as making further improvements in quality and compliance system.

Its active client roaster grew to 331 active clients and added 15 new client relationships during the year. Alongside that it also continued to expand the scope of engagement with many of its existing clients.

The expansion of its ongoing strategic collaboration with Baxter Inc. led to the commissioning of additional infrastructure for Baxter.

Revenue contribution from the top-10 clients now stands at 66% down from 71% in FY15. This reflects the progress it is making on its strategy to continue to diversify client base and reduce any dependence it has on any single group of clients.

Its dedicated R&D center business continued to gain traction in FY 2019 with the expansion, extension of its collaboration with Baxter. Under this it commissioned additional lab space for them as well as extended the contract term out to 2024.

The company also extended its ongoing collaboration of 20 years with Merck until 2022 as well as signed of new collaborations with emerging biotechnology companies like Zumutor Biologics, Artelo Bioscience and others.

Its Discovery Services and its Development Services businesses continued to invest in building both new capacity and capabilities. Discovery research is really one of its key growth drivers and the company has invested in adding new competencies in both large and small molecule discovery. This includes things like yeast display platforms for antibody discovery, sophisticated immuno-oncology assays, CAR-T design and micro sampling PK studies. These investments in future-ready capabilities will enable Syngene to address the emerging client needs that it is seeing.

During the year, its investment in Biologics business helped strengthen its capabilities in process development. The company commissioned the additional high-end equipment like AMBR bioreactors. It also triggered the investment in two additional 2,000 litres disposable bioreactors and these should be fully operational by the end of the financial year.

Its upcoming API manufacturing facility in Mangalore is on track and the facility is scheduled for commissioning by the end of FY20. The projects crossed a significant safety milestone by achieving two million safe manhours of construction. This is really good reflection of the company-wide focus on safety and providing a very safe working environment.

Its dedicated R&D centers are making good progress on the back of the extension and expansion of key collaborations.

Discovery Services and Development Services delivered very solid performances with widened capabilities and increased capacity.

Its investments in increased marketing and business development activities helped it reach many new clients.

Its focus on safety, quality and operational efficiency is resulting in enhanced delivery across the business.

Revenue contribution is sort of one third, one third and one third of Dedicated Centers, Discovery Services and Development Services. So, it is nicely balanced and that was something over three or four years the management has talked about getting more balance in the distribution of revenue and also a little bit less concentration on key clients.

The company keeps growing with key clients and that is a collaborative relationship, but it is also adding new logos to what it is doing. So, it is a nice balance there.

Not only the company stands out in comparison to its competitors in the Asian part of the world but it also stands toe-to-toe with the best CROs anywhere in the world. Its investments in safety and in compliance and in process efficiencies, are something that resonates with the clients.

Its current balance sheet both from fixed assets capitalized and the capital work-in progress, sums up to about $350 million. The ongoing investments can take it up to about $550 million by the end of 2021.

Overall planned capex is of $550 million by FY21. It has invested $350 million as of FY19. Additional capex of $200 million is envisaged by FY21.

Capex is towards capacity expansions, capability additions and technology up-gradations.

Key facility additions during the last three years include dedicated facility for Baxter, Amgen, Herbalife , new formulation facility and new biologics plant.

94% of sales come from outside India.

It has around 4,000 qualified scientists.

It has world-class R&D and manufacturing infrastructure spread over 1.4 million sq. ft facility.

FY 2019 growth was driven by increase in sales from existing clients and acquisition of new clients.

In FY 2019 the company strengthened partnerships with key strategic clients such as Baxter, Merck KGaA, Bristol-Myers Squibb, Amgen and GSK as well as improved its position within the emerging biopharma segment.

CAPEX investment programme through the year has added capacity and new capability to drive future growth.

Its ongoing initiatives to improve service delivery, safety and quality are already beginning to have a positive impact.

Discovery Services delivered strong growth on the back of both contract renewals and new client wins.

The company invested in adding new competencies in small and large molecules, Antibody Drug Conjugates (ADCs), and Oligonucleotides that will enable it to address emerging client requirements.

The collaboration with GSK, entered into in FY18, was made fully operational during the year, while the collaboration with Merck KGaA was extended until 2022.

Within Discovery Services, its bioinformatics group entered into collaboration with a French biotech company to develop a novel tool that will enable better prediction of the toxic impact of drug candidates on the liver.

The Development and Manufacturing businesses completed development and clinical manufacturing of drug products for multiple clients during the year in both small and large molecules.

The refurbished S2 unit was re-commissioned bringing online 35,000 sq ft laboratory capacity that was earlier non-operational.

The company continued to make investments in the areas of improving safety and operational excellence as well as strengthening the leadership team.

Outlook

The management expects the good momentum to continue into FY20.

The expansion of its business with its strategic clients along with healthy demand in both discovery services and biologics, provide a strong platform for growth in FY20.

Overall, the management expects the underlying sales growth, stripped of currency and one-off pass-throughs, to be broadly in line with the underlying sales growth in FY19, perhaps even a notch higher.

The investment in new facilities will lead to higher depreciation and also reduce other income.

The company will also continue to invest in safety, compliance and business development.

All of this together will have a slight compression on margins which it expects to reverse overtime.