Syngene International Ltd. plans to spend Rs 900 crore on capital expenditure in the ongoing financial year as it focuses on growth.
“Capex and opex investments are a sign of confidence in the business and the business model,” Jonathan Hunt, the company’s managing director and chief executive officer told BloombergQuint’s Niraj Shah in an interaction, adding the investments aren’t costs but essential for growth.
The contract researcher’s net profit after tax rose 33% year-on-year to Rs 1,606 crore in the quarter ended March. Hunt said capex incurred over the last five years helped them achieve a profit margin of over 30%.
For FY22, Syngene expects to operate at near-normal levels, with its business being categorised as an essential service. As a result, the company expects to report similar margins and revenue growth in the mid-teens in the ongoing fiscal and over the longer term.
The recent renewal of the long-standing partnership with Bristol-Myers Squibb for another decade is a real “bellwether event” for Syngene, Hunt said as it provides them with long-term business visibility. The relationship, he said, will undergo “strong expansion” than in the past decade, and could result in a 40% upside in revenue.
“We’re an upper-quartile performer from a margin point of view on a globalised basis,” the CEO said, adding many of his peers have lower margins. This could be attributed to the sophistication of the services and our ability to integrate, he said.
Syngene expects its clients in the biotech or pharmaceutical industry to look at building business models that are a combination of in-house and outsourcing partnerships.
The outsourcing, he said, wouldn’t just aim for labour-cost arbitrage but will look at increasing sophistication and value addition. Hunt said Syngene’s ability to integrate and add intellectual value and not just get the work done on an operating cost arbitrage will make a difference.