Symbiotec Pharmalab IPO: Anil Satwani on ‘Symbiotec 2.0’, new growth engines; promoter, PE exit & more

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Symbiotec Pharmalab is entering what Chairman and Managing Director Anil Satwani described as its "Symbiotec 2.0" phase, with investments in complex injectables and large-scale fermentation for contract development and manufacturing organisation, or CDMO, opportunities expected to drive its next phase of growth. In an interaction with Business Today ahead of the company’s IPO, Satwani said Symbiotec had spent the last four to five years making significant capital expenditure in both businesses and was now nearing the revenue-generating stage.

Satwani and Chief Financial Officer Raghavender Ramachandran said the company’s established steroidal and hormonal API business would remain central to Symbiotec even as the revenue mix changes when the new verticals begin contributing. They also addressed the large offer-for-sale component in the IPO, with Satwani saying the private equity sale should be seen as a partial exit after years of capital support for the business.

Satwani said Symbiotec had made significant capex in what he called its two growth engines: forward integration and lateral integration. He said the forward integration initiative was focused on complex injectables, while the lateral integration business was centred on large-scale fermentation for CDMO opportunities. According to him, these investments involved substantial gestation time and risk, but the company was now positioned to begin seeing revenues and profits from them. "These are the new growth engines that will come up... with its new revenues, new profits in the coming years," he said.

On the offer-for-sale portion of the IPO, Satwani said private equity capital had helped Symbiotec invest in science and technology, large-scale global manufacturing facilities and regulatory capabilities over the past two decades, even as it diluted his own ownership. He said private equity investors were required to return capital to their limited partners as fund cycles matured, and described the current transaction as a "partial exit". He added that investors including Motilal Oswal and Invescent continued to remain partners in the company. "Because we use their capital, we are obliged to return their capital in some way, but this is a partial exit," he said.

Satwani said Symbiotec’s traditional business in steroidal and hormonal APIs remained central to the company. He estimated the addressable market for the segment at close to $1 billion and said Symbiotec had already generated more than $100 million in revenue from it, implying an estimated 10-15 per cent share of the market. He said the share was significantly higher in individual products where the company held global leadership. He added that the business still had room to grow as pharmaceutical manufacturing shifted from Western countries towards Asia, including India. According to him, the company’s vertically integrated manufacturing model gave it an advantage because it could process soybean-derived phytosterols through fermentation and chemical processes to produce steroidal products.

Ramachandran said the company’s business mix could change substantially as the new verticals scaled up. "Traditionally, we’ve been in this steroids and hormones business for the last 20-25 years, and that’s been our bread and butter," he said. He noted that about 96 per cent of Symbiotec’s business currently came from the established API segment, but said this share was expected to change significantly as revenues from injectables and CDMO began contributing. He said the investments in the two new businesses were made over the last three to four years, with revenues expected to start from the next financial year.

Ramachandran said Symbiotec supplied to more than 40-50 countries and manufactured more than 60 APIs. While the company had a broad international presence, he said the US and Europe remained its key markets in terms of both market share and growth. He added that their contribution was expected to rise, which could support better gross-margin realisation. He also cautioned that direct exports did not fully capture Symbiotec’s exposure to those markets, as the company also supplied APIs to formulation companies that later sold finished products in the US and Europe.

Satwani said Symbiotec had invested more than Rs 870 crore over the last four to five years to build these new capabilities and believed the company was now moving beyond much of the investment and gestation phase. Referring to the complex injectable and CDMO platforms, he said, "These are not me-too areas," and added that the company had invested significantly in R&D and capabilities in both businesses. He said the next one to three years would be important as Symbiotec looked to convert these investments into new revenue streams and profits while continuing to build on its established leadership in steroidal APIs.