Ladies and gentlemen, good day, and welcome to Syngene International's Q1 ended June 2023 financial results conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Miss Avantika Mishra from EY. Thank you, and over to you, ma'am. Thank you, Neera. Good afternoon, everyone. Thank you for joining us on this call to discuss Syngene's Q1 FY24 financial and business performance. From the management side, we have Mr. Jonathan Hunt, MD and Chief Executive Officer, Mr. Sibaji Biswas, Chief Financial Officer, and Dr. Mahesh Bhalgat, Chief Operating Officer. Post opening remarks from the management side, we will open the line for Q&A, and we'll 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 the call will be available for the next few days, and this will be subsequently made available. With this, I hand over the call to Mr. Jonathan Hunt. Thank you, over to you, sir. Thank you, and good afternoon. Thank you to everybody for joining the call. I'll start by outlining the headline numbers, then move on to the key operational and strategic highlights, and then Sibaji will provide a more detailed insight into the financials in his remarks. Pleased to report a strong revenue performance in the Q1. The performance was led by our development and manufacturing services divisions as well, and was well supported by steady delivery from discovery services, as well as the dedicated centers delivering to plan. It puts us on track with our full-year guidance that we gave at the start of the year. Let me give you key headline numbers. Revenue from operations grew to INR 808 crore, up 25% over the corresponding quarter last year. Operating EBITDA was up 23% to INR 212 crore. Profit after tax was up 26% over the corresponding quarter to INR 93 crore. Sibaji will make more comments on the P&L in his remarks. The highlights, I think for me, the three important steps we took on our strategic priorities were the acquisition of additional biologics manufacturing capacity here in Bangalore, the regulatory approval by the FDA of the API manufacturing site in Mangalore, and the land acquisition in Hyderabad being the key events. Let me spend a moment on those. As you know from a strategic perspective, we took the decision some years ago to forward integrate, firstly into the development and then the manufacturing parts of the value chain. Initially, we did this on a small scale with clinical-stage development and clinical manufacturing of small molecules, and then more recently, we expanded this to include large molecules. Most recently, some two, three years ago, we took the decision to forward integrate a step further by entering into commercial scale manufacturing. This strategy of building our leadership position in research services, the CRO part of the business, and add to that by building out both the development and manufacturing services to become a leading CDMO, this gives us the ability to meet the full range of customer needs, to deliver greater speed to market to customers, and allows us to follow the molecule through its life cycle. It's a strategy we like, as it matches the value chain of our customers, and it's one that's well balanced and offers a good degree of synergy and resilience. It's a strategy I think that's seeing us both make progress, and it's delivering results. As you know, last year, we signed a 10-year contract to manufacture a biologic with a long-standing client, Zoetis. This deal, plus the contracts we have with a range of other clients, has moved us very quickly to near to 100% occupancy of our existing biologics capacity, and that triggered the decision to bring forward our expansion plans, which we've now addressed through the deal to acquire a multimodal biologics facility from Stelis. That adds an additional 20,000 liters of installed manufacturing capacity, got room for further expansion, and it also brings with it a high-speed fill-finish facility. This transaction brings forward and actually replaces our internal capacity plan and will give us the headroom we need for many, many more years of growth as a commercial-scale biologics manufacturer. On the small scale side, small molecule side of things, we hit an important enabling milestone in the quarter, having received regulatory approval from the US FDA for the API facility in Mangalore. This approval in hand will continue the work to build scale into the small molecule part of our manufacturing business. As these investments hit their stride in the years to come, we can expect manufacturing to play a more prominent role in the company, and this gives us what we think of as a twin-engine business strategy. Each with two growth drivers. The first engine, research services, is driven by discovery services in the dedicated centers, and the second engine is powered by our development and manufacturing services. Having noted the rising importance of development and manufacturing, it would be wrong to leave you with an impression that our research services are any less important. During the quarter, we saw a solid business performance, decent growth. The growth rates in the market are back to more normal levels than the unusually high rates we saw last year. You'll recall I made comments to you throughout last year about the additional demand we were seeing as clients tried to catch up on lost ground that they lost during the pandemic. We also took the decision to invest further in discovery services through the acquisition of 17 acres of land in Genome Valley in Hyderabad. Our first research center in Genome Valley was inaugurated in 2020, and over the last three years has grown to over 900 scientists. This acquisition will give us the space we need to continue this type of growth. Construction is scheduled to commence in 2024, once we've received the necessary statutory clearances and approvals. I'll be in a better position to guide you about that next year. Other noteworthy events in services during the quarter was the opening of our new centralized compound management facility, which will be the repository for all compounds discovered across the company. Before I hand over to Sibaji, let me try and summarize. This quarter, we made good progress on our strategy. The acquisition of additional biologics manufacturing capacity gives us headroom to keep growing two or three years quicker than our internal plan. The US FDA approval of the API facility in Bangalore gives us a positive endorsement and removes a barrier to building that business in earnest. The acquisition of more land in Hyderabad gives us the space we need to continue building our discovery services business there. The quarter delivered good revenue growth, led by a strong performance in development and manufacturing, supported by decent research services growth, and together, this keeps us firmly on track to deliver our full year guidance. Enough from me. Let me hand over to Sibaji. Thank you, Jonathan. Good afternoon to everyone. Let me begin by discussing revenue performance, followed by an overview of margins and profitability, and then I'll share the outlook for the remainder of the year. I will start with the key highlights for the Q1 performance. Revenue from operations for the quarter came in at 25% growth, a strong performance. At constant exchange rate, revenue from operations was up 19%, in line with the guidance given for the year. Looking at the various elements of growth, we saw growth in all four of our divisions, with the strongest performances in our development and manufacturing businesses. Development services is seeing steady demand, good repeat orders, and has maintained the high levels of operational delivery we have talked about in the recent quarters. Our biologics manufacturing services business is stepping up production as we fulfill the contract we signed with Zoetis. Here we had a positive quarter, progressing well in delivering our contractual commitments. The dedicated centers delivered a steady performance, and we also saw a decent growth in discovery services, which come from the top of the higher base of last year, as clients try to catch up on ground loss during the pandemic. Summarizing the market and divisional trends, it's a solid start to the year, and we are on track to achieve our guidance for the year. Turning now to the P&L, I'll start with EBITDA. EBITDA from operations grew by 23%, surpassing the constant currency growth in revenue. However, we experienced a 38% increase in raw material costs over the Q1 last year. This was shift in mix towards development and manufacturing services, which has high material costs attached to it. Material costs as a percentage of revenue for the quarter was at 27.6%, which was in the range we guided earlier. The staff cost rose by 16%, in line with our increased headcount and annual increments. That is primarily comprising of power and utility expenses declined by 3% year-on-year. This favorable development was attributed to strengthening of utility input costs and an increase in green energy consumption compared to the previous year. Other operating costs grew by 22% year-on-year, staying consistent with the run rate in the previous quarter. The year-over-year increase was mainly a result of increased expenditures on repairs, maintenance, and facility costs, which are incurred during the commissioning of new laboratories and installation of fresh equipment and infrastructure over the past 12 months, particularly in Hyderabad and Bengaluru. Other operating investments, including the expansion of the commercial team and the acceleration of digitization and automation across the business, contributed to higher costs compared to the previous year. Trade losses amounted to INR 15.5 crore as compared to INR 3.4 crore last year. This was influenced by an average spot rate of INR 87.2 per US dollar and a hedge rate of INR 80.3 per US dollar. Depreciation for the period was at INR 102 crore, compared to INR 86 crore in the same period last year. This increase of 18% on a year-on-year basis is mainly owing to new investments and lease accounting charges. Earnings from operations before interest and tax increased from INR 87 crores to INR 110 crores, registering a year-on-year growth of 27%. above the constant currency growth of 19% and recorded revenue growth of 25%. This positive development highlights effective operating leverage driven by the strong performance of the business and reflects the guidance given previously. Interest income for the quarter increased from INR 16 crores last year to INR 24 crores in the current year, with an increase in cash balance and improvement of interest yields. Finance costs increased from INR 9.4 crores to INR 10.5 crores, primarily due to the interest component in lease accounting. Profit before tax increased 32% year-on-year. Profit after tax increased by 26% to INR 93 crores compared to INR 74 crores last year. The difference in growth rate represents an increased effective tax rate of around 22% in the Q1 this year, as compared to 20.3% in the same quarter last year. This increase in the tax rate is due to some of our profit-generating units coming out of the deferred tax benefit this year. Moving on to CapEx, we recorded CapEx of around $13 million during the quarter, and another $13 million has already been released for projects underway at our businesses. This includes expansion in research services, much of that will happen in Hyderabad, the purchase of land for a new campus at Hyderabad Genome Valley, construction of a new multifunctional facility at Biocon Park, and investment in other development service capabilities. Before we move on to the guidance for the remaining year, let me briefly touch upon the financial implications of the recently announced acquisition of the biologics manufacturing facility from Stelis Biopharma Limited. The companies have entered into a binding term sheet. On completion of the transaction, Syngene will acquire Unit 3 of Stelis Biopharma on a lump sum basis for a gross value of INR 702 crores. Translated in U.S. dollar, it's $56 million. We plan to invest another INR 100 crores to refurbish and revalidate the facility. This acquisition, as mentioned by Jonathan, effectively replaces an internal CapEx investment program planned for the next three years and will be fully funded through internal accruals and cash. The company will continue to maintain a strong balance sheet, a low debt profile, and a good safety margin for debt cover governance even after paying for this acquisition. Other credit rating agencies, CRISIL and ICRA, have reaffirmed their AA+ rating for Syngene to successfully seal in acknowledgment of our ability to fund this acquisition through internal accruals without causing any undue stress to our balance sheet. As we ramp up utilization, we expect asset turnover to grow to 1X in less than five years, with EBITDA margin expected to be in line with the company average from the fiscal year 2039. The acquisition will not materially impact the financial guidance given for the current financial year. In the short term, we expect minor dilution of operating margins as a result of costs to be incurred in this facility. We expect this plan to start to contribute to the bottom line from the fiscal year 2027. The FDA approval of the Bengaluru plant is an important enabler to build a small molecule pipeline for commercial manufacturing. Business development in pharma manufacturing contract involves a long decision period, but with strong returns once the capability is proven and credibility is established. With this approval, we can now offer clients a complete range of small molecule capabilities from early stage discovery and development to clinical and commercial-scale GMP manufacturing. The manufacturing portfolio is built up over a period of time and is expected to generate returns above the cost of capital over the period. Coming to guidance. Looking ahead, I would like to reiterate our full year guidance given earlier. While we are maintaining our guidance, we anticipate a shift in the mix of revenue growth compared to our initial projections. The growth profile is balanced with a stronger contribution from the development and manufacturing services. We retain our high-teen revenue growth guidance on a constant currency basis. We expect EBITDA margin to remain around 30% on a hedge basis. That is, if the revenues are recognized at an average hedge rate of around INR 81 for the year. If the realized hedge rate is higher, the reported growth will be higher, which can equate lower margins due to booking of hedge losses in our P&L, very similar to what we have seen in the Q1. Our operating EBIT growth is expected to be in line with the revenue growth. We project the effective tax rate to be between 23%-24%, marginally higher than what was previously estimated at 22% due to the change in business mix. Consequently, we anticipate PAT growth to be around mid-teens. While the effective tax rate is going up, we have a net credit of INR 160 crores, which we'll utilize over the next few years, and this will enable us to maintain cash outflow for income tax at the minimum tax level. With the Stelis acquisition, the biologic expansion CapEx from mammalian facility will be largely avoided. We expect the overall CapEx spend for the year to be around $85 million, against the initial guidance of $100 million, and net capital guidance of $15 million during the year. To summarize, we had a good start for the year. We also made good progress in managing operating efficiencies and implementing some of our strategic initiatives. We affirm the guidance for the year, which was given in the last quarter. With that, I conclude my remarks and invite any questions from the audience. Thank you. 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 touch-tone 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. Participants, you may press star and one to ask a question. The first question is from the line of Tarang Agrawal from Old Bridge Capital. Please go ahead. Hi, good afternoon, and thank you for the opportunity. Just a couple of questions. One, does Librela's initial approval in U.S. in any way increase the potential for you to supply more products to Zoetis over and above the $500 million engagement? No. As a short answer you'll ever get. We are in fact supplying to the U.S. launch. That's what we're doing. That's what the deal was. Make sense? Okay. That's why the FDA approval of the biologics site was one of the key enablers. Okay. The second, for the Stelis acquisition, what kind of regulatory approvals are we seeking, and what is the timeline around that? We have to split it, I think, in two elements. Some of it's just the enabling stuff. We don't complete the deal, get the keys, as it were, until October. We want to put some CapEx in there, I think we said around $10 million, effectively to convert it to a very nicely built facility that was built to make vaccines at scale, but only to make one product. To turn it into a biologics facility that can make multiple products. We've got to move some walls around and rejig some things. We have to revalidate it, because it's a GMP facility. That's more what we were talking about, is those sort of enabling. Beyond that, you won't... You don't get the sort of product-based regulatory approval until a client gives you a product to manufacture, and then that triggers it. You've always got two levels of regulatory approval. Some are enabling, and then some are individual product specific. The first ones, I think we suggested, would be done by the beginning of the next financial year. The second group is entirely dependent on clients, so I couldn't guide you on that because it hasn't happened yet. Does that make sense? Yes. Just to follow up on that, in your interaction with your existing set of customers, for whom you would say involved in any part of, you know, phase one to phase three, how are they responding to this? Is there something, you know, They're not. They're not yet. No, they're not what I wouldn't expect them to. Like I said, we haven't got the keys yet, so. Okay. I don't own the facility. I've merely entered into a binding contract to buy it at a later date. It's way too soon. I couldn't show it to a client even if I wanted to. Understood. Understood. Does that make sense? The reason I'm pushing back on the, on the questions, I do want everybody to get, which I've just bought five to 10 years worth of growth capacity, as it were. I've bought a new site. That's the point. Not, it's not a revenue-making unit. It was designed to make COVID vaccines. It doesn't come with any revenue, it doesn't come with any product, nor is it intended to. If you wanted to interpret what we've done strategically, we have enough confidence in the demand for biologic CDMO, that we've accelerated an internal growth program by 3 years by doing this. After that, you can interpret that how you want. Does that make sense? Yes, absolutely. It's, for me, it's quite a, it's quite a positive step forward. Yeah. Absolutely. Absolutely. The last question, Sibaji, for the Mangalore API facility, are the fixed costs getting capitalized or they're being, you know, routed through the PNL? What would be the figure for this? Tarang, we have been routing all costs of Mangalore through the PNL. Mangalore, to be very clear, is not an idle facility. We are doing some small amount of manufacturing for the last few years. It was not FDA approved, and it was not getting used for the kind of manufacturing we want to do in the medium to long term. All fixed costs and some of, kind of, direct costs, like utility, is going through the PNL. Yeah, in the past, I have to, kind of, indicate it, I think the last call that it's like, depending on which quarter you are talking about, it's 100-150 basis point dilution in the EBITDA margin. It all comes on the top line, right? The cost is fixed, the top line is not, so it's your guess thereafter. Okay. Thank you. Thank you. Welcome. Next question is from the line of Surya Patra, from PhillipCapital. Please go ahead. Yeah. Okay. Thank you. Thanks for the presentation. My question is on the Mangalore facility. If you can tell, what is the kind of investment so far that we have made, what are the CapEx of that Mangalore facility currently? Also, if you can share the CapEx that we would have done so far in the biologics CDMO in the Bangalore site. Okay. I mean, it's awfully precise. We'll try and help you as we can, but I think that question may have been asked on multiple occasions every quarter for the last six years. Subhash, over to you to rephrase the answer that we've given on a quarterly basis, because nothing changes. I think every one of you has this number in your model. Go on. Let me touch the Mangalore question first. We have invested close to INR 550 crores in Mangalore for the API manufacturing facility, and that, at today's exchange rate, should be around around $65 million. I'm just converting as INR 80-83. The number is around close to INR 550 crores of CapEx in Mangalore. On the biologics, we had told last quarter, we had invested around $50 million. Thereafter, we haven't invested much because we are preparing ourselves for carrying out this facility. That number that we had, I had given in the last quarter still holds good. There's no incremental investment of significance in the current quarter of the reported quarter. Yeah. Wasn't it that, this, invested on the Mangalore facility was $80 million, $85 million? Because that is. Yeah, that was, as I said, you know, it's the exchange rate thing, right? If you are dividing by 72, it will be close to 80, right? If you are dividing by 83, it will be much lower. That's why I gave you the gross numbers and not the U.S. dollar, and then converted into the current. Okay. U.S. dollar current exchange rate. Uh- Yeah. My second question, in fact, about the acquisition what you have done, the Stelis biologics plant. Which is an integrated site, really interesting to see with this, you know, different existing plants immediately coming. This is all that is fine. What I wanted to understand is that you have indicated that commercialization of this plant can happen during fiscal 2024. The increased contribution in terms of earnings, that can come only in FY 27 onwards. The time gap between these two key years, what is the kind of activities or the kind of approvals, or what progress that we should between surprises the specific plant was concerned? Just to clarify what we said. You know, any plant of that size and nature would have a fixed cost attached to it, right? Okay. What we have said, it would give positive contribution from FY 2027. Which means between FY 2025 and FY 2027, we'll gradually grow our revenues. We saw a positive contribution on the bottom line from FY 2027. That's what we said. In between, obviously, we believe that there will be some production which will gradually scale up, and then that would lead to positive contribution from FY 2027 and a year positive from FY 2029. Okay. This is exactly what we mentioned in our press release as well. Okay. This facility is already having some regulatory clearances. May not be U.S., but emerging market as well as, I think, European approval right? Is that right? Whether it will lead to kind of incremental business immediately after the acquisition or no? No, I don't think so. I don't think it has. It was built for the pandemic, so it was built to make a pandemic COVID-19 vaccine. Which it didn't make because the pandemic ended. Okay. Just to add into this. Think of it as a greenfield build, as though we built it organically, but we didn't build it organically, we've acquired it in 1 step. It just brings forward the capacity availability by three years. Now, from an analyst questioning point of view, it gives you three more years to ask me when's, where's the revenue coming from, and can you give me revenue guidance? From a strategy point of view, it just gives us that headroom for growth much sooner. What we tried to indicate in some of our comments, we've done well enough, better than expected, over the last 18 months, two years, in our biologic CDMO business, that we're currently in danger of running out of capacity. If we complete this acquisition, then have lots of spare capacity to grow into. I wouldn't expect it all to be filled overnight. Okay. Since it is a kind of a ready facility that we are taking through this acquisition, may not be a kind of a greenfield kind of project. Here's, the asset turn, what you have indicated, that 1x kind of asset turn, that can be achieved within five years time period. Is it fair to believe that can be peak potential or, the peak potential is something different than the 1x asset turn? No, that's the potential of the installed capacity today, but it comes with a little bit of land, and if we wanted to put more CapEx on, we could make it bigger. As an approximation from an analyst sort of modeling perspective, if you started in FY 2025 and went out three or five years, you choose whether you're optimistic or conservative, and plugged in a number that was one-time asset value, sometime in that, you'd have a reasonable revenue glide path if you gifted it linearly. I'm not sure I could give you any more precision than that. I think that's quite helpful. Sorry, Patra Surya, I'll request that you join the queue again for the follow-up question. I request to all the participants, please restrict to two questions per participant. If time permit, please come back in the question queue for a follow-up question. Next question is from the line of Abhisar Jain from Monarch. Please go ahead. Yeah, thank you, sir, and, congratulations for the decision-. Abhisar, your voice is not coming through. It's coming very stable. Can you please speak a bit closer to the mic? Congratulations, sir, for receiving the FDA approval for the Mangalore API plant. It's been, I think, long overdue. Just wanted to know from you that now with the FDA approval in place, what is the visibility that we have from our clients, and for the, from the prospective clients on the small molecule space manufacturing from this facility? How would you now be expecting the ramp-up from this plant over the next couple few years? Yeah, I think I covered that earlier, which is that I'm not breaking it out with that level of granularity. It's an integrated manufacturing strategy. You've got all of the assumptions you need for you to form your own view, and we'll update you as and when we sign client contracts. I'm not gonna predict the rate at which they're going to come in. Sir, any timeline in terms of what utilization we can hit in the next three years? Now the approval is in place, and you had earlier indicated that once we have that approval, the client dialogues on the manufacturing and all those things can evolve and you will be able to clarify. No, but that's just the same question in a repackaged form. I'll give you the same answer. Okay, understood. Sir, on the biologics, we just wanted to know that what is the current capacity that Syngene has, based on the INR 50 million CapEx that we have done till now? What is the capacity that we currently have on, since you have indicated that you are almost close to running on full capacity? I just wanted to understand what are we adding? Secondly, when we go for this future expansion of 20,000 liters, which is an option in the Spain plant, what would be the CapEx which would be required? We've given you both of those in the opening comments. It's an acquisition price of the plant. What's it in dollars? $87 million, and then we said we'd add another $10 million... up to another $10 million of CapEx in the coming months to transfer it. You've got a total CapEx number, and then you've given guidance that said in the next three to five years, we think we do a one-time asset turn. Right? We've actually given you an implied revenue number, and you just have to choose whether you put it in three years, four years, or five years. Sir, I was asking- I think you're really clever. Additional. I'm not asking, I thought INR 10 million just to repurpose for that 20,000 liter existing. I maybe go back and rethink because I think you've asked, "What is the revenue capacity of the 20,000 liters that's already installed?" The answer is, one time the asset turn, 87 plus up to 10, in three to five years. That's for the existing 20,000 liters, right? Correct. Sure. For the future potential that is there for the expansion, which is mentioned in your release, I'm assuming that there'll be a further CapEx other than the disclosed one. I couldn't give you that because I've made no decision on when and if I'm triggering that further expansion. All the expansion beyond that in the unbuilt space, that's at the site. Understood, sir. Sir, just the previous question on the existing capacity that Syngene has, based on the $50 million that we have done till now, what is that capacity? I know, but, I'm not sure we're gonna disclose that on the basis that that's commercially sensitive when negotiating. We've given you the revenue number. I'm not sure what you would do with knowing how many liters of capacity we've got. Understood. Understood. Thank you so much, sir. That's all from my side. Thank you. Thank you. Next question is from the line of Srikanth, from Asian Markets Securities. Please go ahead. Thanks for the opportunity, good afternoon. Sibaji, I would have this question on the segment of business. If I want to take out the segment business revenue, biologics segment of business revenue for this quarter, what would have been the growth for the rest of the business in the constant currency terms? Srikanth, obviously, we are not breaking that up, otherwise I would have given that. Having said that, you know, what we are saying is, 19% overall growth in constant currency and 25% in reported currency. We are also saying the research business is growing in a different number attached to it, right? It's quite a different growth that we are seeing. The biologics is clearly leading the pack with a very, very strong growth year-on-year. Okay. Okay, I'm just combining two more questions, so that is related to the biologics. Just want to know on the current private funding environment, which we are reading, that there is some challenges in the small private funding. Do you see there was any impact on the CRO business services this quarter? The second question will be, now that we have acquired one large facility. How easy or difficult is this for you, to hire right set of people to fill in this facility? Or in fact, you are also building another center in Hyderabad. How do you ensure that you get right set of people to fill in these facilities? Well, that's two separate questions. The first one actually is really, very happy to give you a comment. I, 'cause I think you already know the answer, and the capital markets understand it quite well. If you zoom out and think about the last five years, coming into the pandemic, through the pandemic, we have seen a level of society's capital flow to healthcare, particularly in the U.S. and particularly in biotech, that I think is a once in a lifetime high. We've seen an enormous amount of investment. An underlying base, which is just some really good innovation going on. New technologies coming through. On a global basis, you have aging societies and an ever-growing set of demographics, that drive us to consume more healthcare and for more of society's wealth to go into it. If you're a bull on healthcare, you've got very good fundamental demographic and scientific reasons for that. At the same time, the pandemic, quite rightly, closed large tracks of the world's economy and sent capital flying towards healthcare. I also talked about all of last year with you, on a much, you know, narrower lens on that, which is services within, you know, CRO services. We saw not only good underlying demand, but also an awful lot of catch up. As Western clients, whether they be European or American, wherever they are in the world, came out of the pandemic, went back to work, got back in their labs. They took the decision last year to try and catch up on lost time. The economic driver of that's really clear. If you're in innovation-based science, you have got an asset that's patent protected, and the patent has a clock, and the clock is winding down every day. If during the pandemic you felt you were going at half speed, then you want to try and catch up. We saw some pretty healthy, above normal demand last year in CRO services. Oddly enough, at the same time as we saw the capital markets close to biotech funding and slowing down. Those two things are sort of working their way through. It's not the whole market, it's just a subsegment. U.S., VC, private equity funded, startup biotech. Good science is still getting funded, but it's down off a peak. The peak was a once in a generation high. Does that give you a sense of that? I think actually what we're seeing is a reversion to more normal demand levels, which are value creating and sustaining. Okay. Okay. The follow-up on that would be, if there will be any impact of the current funding challenges on your business going in rest of the quarters this year? You know what, I think there's an answer to that. Of course, there are impacts. There are some clients who are struggling to refund and refinance, so they're going to struggle to spend money with us. There are others that have got financing and are thinking, "Rather than try and refund finance in the capital markets, can I make my money go further?" One of the ways they can do that, is shift their buying point from spending their money with CROs in the West and moving it to India, because we can do the same quality of science for a lower price. It's the net of those two. I don't think that the biotech funding environment, and Wes, I'd love to hear your view. It's not closed forever, it's just a temporal slowdown. Funding around biotech has been cyclical around the mean, my entire career. Right. Okay. What's your perspective? Do you expect biotech funding to never, ever come back? No, I think it may take a little while, and it will come back, exactly as we have seen during the pandemic time. There you go. I think that, too. That means that any impact on our business is short term and temporary. That's your view. Right. Right. Other question I asked was about the hiring the right set of people in your biologics manufacturing and the new R&D center in Hyderabad. Yeah. Well, we're pretty good. I mean, one of the good things about India is it's not short of people and talent. I mean, I can't think of many places in the world where you get quite so many graduates. You've still got a societal predisposition for young Indians to go and study what, in the West, are increasingly considered to be difficult subjects, like chemistry and biology and engineering and computer programming. You, you've got a large young graduate workforce that comes out pretty well educated and in what are some of the tougher subjects in the world. That's a good place to be. We are quite lucky, I think, partly within sort of Syngene, but also within the broader Biocon group. I think we've got reputations in the Indian labor market, within science, of being an employer of choice. We hire some of the, you know, the largest number of young graduates and laterals. From that point of view, I think we do pretty well, getting our unfair share of the talent that's available in India. On the biologics, specifically, we're in a pretty good place. We've already got a reasonable size organization with some very experienced people in it. I don't think we'll have a problem staffing the Stelis facility once we take it over. Okay, thank you, Jonathan. Thank you, Sibaji. Thank you. Thank you. Next question is from the line of Utsav Mehta from Edelweiss Asset Management. Please go ahead. Hi, good afternoon, thank you for taking my questions. First one, quite a long one, apologies for that. If I strip out an approximate Zoetis number of around twelve and a half million dollars, I think I'm getting a growth rate of around mid-single digits year-over-year in the non-Zoetis business. I just wanted to understand, is that a function of the sluggishness that you've alluded to in the previous question? Or is it just a supply side issue in the sense that we're building infrastructure and that'll come in over the next few quarters, or it's just a timing thing basically, or something like that? Yeah. I'll actually maybe give a comment in a minute. I just first, I'm not sure that your backing out calculation is accurate, so don't take that any comment I make is an endorsement that your maths are the same as what my internal spreadsheet says. More than that, from a strategic point of view, our strategy delivered 25% revenue growth Q1. That's the strategy. The strategy is not to run a business minus Zoetis, plus Zoetis. It's an integrated strategy becoming both a CRO and a CDMO. We made that clear five or six years ago, and we're delivering on it. Sure. That's why I took the trouble in my prepared comments to go back and remind everybody that, and I think this is clear with our shareholders, they understand that the strategy is to be a fully integrated, broad CRO to CDMO, research through to development and manufacturing. That's the strength of the business. It gives you two engines, it also gives you resilience. From that point of view, I wouldn't disaggregate 25% hotline growth because that was the strategy. Anyway, with that, Sibaji, do you... Any comment? No, I just want to... I think. No, go on. Come make your comment. No, no, I was just saying. Go ahead. I was just trying to get some flavor of the rest of the business sort of environment from that number. It wasn't to say that the rest of the business is not growing fast enough or something. Yeah. No, no, I know. I, and maybe it's my English use of English. I was too coded in my last answer. What I think you're seeing on the research side is fairly healthy demand in pockets, down from an exuberant peak of last year, and the exuberance would have been good underlying demand, plus a lot of catch-up, and I think the catch-up has caught up. If you read the costs, read Charles River in the U.S., I'm trying to think, Lonza, one or two other companies have had results already. Their management has said very similar things, which is fundamentals are okay, but the extra peak of catching up last year is working its way through. If you are unusually exposed, which we're not, to just the U.S. biotech sector, then you've got an extra dimension going on at the moment, which is the funding environment is a little bit lower than it has been. It's not zero. The market, there are still good businesses financing, and getting new capital going to them. It's just not at the rate it was 18 months, two years ago. 18 months, two years ago, felt to me as like a once in a decade high. I think it's, again, that's a bit of a normalization. Neither of those things change the fundamentals. You can look at that strategically. If I thought there was a fundamental shift going on, I probably wouldn't have invested in 17 acres of land to de-risk our growth for the next five and 10 years in Hyderabad, and I wouldn't be going along on manufacturing capacity with the biologics acquisition. I think these are temporary things, and they're all in the wash. Does that help? Is that the sort of strategic sense that you're looking for in the question? Yes, Jonathan, much appreciated. I will add to those numbers, so that discussion, because I think, I clearly don't understand the calculation, but I think you are calling it a bit on the lower side. If I can separate it out in the development and services business in the small molecule development and clinical manufacturing business in the small molecule, which is not Zoetis, not biologics. I'll not like to call out Zoetis separately, but not biologics, it's also seeing very strong growth. The research service business consists of two parts. One is discovery services, one is dedicated centers. The dedicated center obviously grows incrementally with whatever little expansion has, but generally goes through the extension that we can take care of the inflationary adjustments that we need to do. Discovery Services is growing at a rate which is not as high as last year, as Jonathan mentioned, but it's growing at a rate which is nothing to be unhappy about. Obviously, biologics is doing very, very well, and Zoetis is. Please stay connected. Line for the management disconnected. Ladies and gentlemen, please stay connected while we rejoin the management back to the call. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Sir, you may go ahead. Oh, thank you. Sorry about that. We were cut off in our prime. I'm not sure who's got the honor of throwing out the next question. Yeah. This is me. Please go ahead. Yeah, squeezing my second question. Just a data point, guys. If you could just share the IRR or the hurdle rate that you guys are broadly using for your acquisition, would be really useful? Yeah, that's not something I think... Has any company disclosed that? Fair enough. I've never known any public company do it. Partly because if I tell you, I've told everybody I'm ever going to negotiate with in the future, what my hurdle rate is, and therefore, it really doesn't make it something of an asymmetric negotiation. Forgive me if we don't, but, we've got a pretty good discipline around thinking around returns beyond the cost of capital over the lifetime of the asset. Which is at least what our shareholders and long-term investors would want to hear. Great. Great. Thank you so much for your time, guys, and good luck. Thank you. Thank you very much. Ladies and gentlemen, due to time constraint, that was our last question. I now hand the conference to Miss Avantika Mishra for closing comments. Thank you everyone for joining today's call. We are sorry for the brief interruption in between. However, if you have any further queries, please do get in touch with our team, and we will be happy to get back to you. Have a good day, and thank you once again. Ladies and gentlemen, on behalf of Syngene International, that concludes this conference. Thank you for joining us. You may now disconnect your lines.