Earnings conference call (announced in 6-K)

Greetings. Welcome to the SIFI Technologies Financial Results for First Quarter FY 2026 and 2027. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to your host, Praveen Krishna. You may begin.

Thank you, Holly. I would like to extend a warm welcome to all our participants on behalf of SIFI Technologies Limited. I'm joined on the call today by my chairman, Mr. Rajiv Eksina, and my executive director and group CFO, Mr. MP Vijay Kumar. Following our comments on the results, there will be an opportunity for questions. If you do not have a copy of a press release, please call Lurie Group at 1-646-824-2856 and we will have one sent to you. Alternatively, you may obtain a copy of the release at the Investor Information section on the company's corporate website at www.siffetechnologies.com backslash investors. A replay of today's call may be accessed by dialing in on the numbers provided in the press release or by accessing the webcast in the information section of the SIFI corporate website. Some of the financial measures referred to during this call and in the earnings release may include non-GAAP measures. SIFI's results for the year are according to the IFRS and will differ somewhat from the GAAP announcements made in previous years. A presentation of the most directly comparable financial measures calculated and presented in accordance with GAAP and a reconciliation of such non-GAAP measures and of the differences between such non-GAAP measures and the most comparable financial measures is presented in accordance with GAAP will be made available on SIFI's website. Before we continue, I would like to point out that certain statements contained in the earnings release and on this conference called are forward-looking statements rather than historical facts. and are subject to risks and uncertainties that could cause actual results to differ materially from those described. With respect to such forward-looking statements, the company seeks protection afforded by the Private Securities Litigation Reform Act of 1995. These risks include a variety of factors including competitive development and risk factors listed from time to time in the company's RCC reports and public releases. Those lists are intended to identify certain principal factors that could cause actual results to differ materially from those described in the forward-looking statements, but are not intended to represent a complete list of all risks and uncertainties inherent to the company's business. I would now like to introduce my chairman, Mr. Rajiv Ekson.

Thank you, Praveen. Good morning, everyone. Thank you for joining us on the call. India's digital transformation is entering a phase of execution at scale. What was once a digital transformation agenda has now become a business imperative with organizations investing in technology to improve productivity, resilience, and customer experience. The country continues to benefit from a unique combination of progressive policy initiatives, expanding digital infrastructure, and a deep pool of technology talent. As AI adoption gathers face, the need for an interconnected digital infrastructure will become even more critical. This presents a significant opportunity for India to strengthen its position as a global technology and innovation lab. At SIFI, we continue to align our investments with these long-term trends. Our integrated portfolio of data centers, networks, and digital services enables us to support customers, modernize their technology environments, and prepare for an AI-enabled future. India is no longer preparing for the digital future. It is actively shaping it. SIFI remains committed in building the infrastructure and capabilities that will help power this next chapter of growth. Let me now bring our Educative Director and Group CFO, Mr. MP Vijay Kumar, to explain both the business and financial highlights of this quarter. Vijay?

Thank you, Chairman. During the quarter, we continued to strengthen the operational foundation of our business through disciplined execution, improved resource utilization, and targeted investments across each of our portfolios. We continue to invest in capacity expansion, network modernization, and technology platforms that position us to address emerging demand from AI, cloud, and data-intensive workloads. At the same time, we remain vigilant in managing costs, optimizing cash flows, and enhancing operational efficiency across the organization. While investment in infrastructure and talent continue to influence depreciation, interest, and people cost, these are aligned with our long supported by a prudent approach to risk management and financial planning. Our priority remains unchanged, maintaining a strong balance sheet, preserving financial flexibility and creating enduring value for shareholders through digital stewardship of capital. On business highlights, the three businesses for the quarter was network services 39%, data center co-location services 42% and IT digital services 19%. The data center subsidiary sold 5 MW of capacity in the quarter. On the date of 30th June 2026, SIFI provides network services via 1,238 fiber nodes across the country, a 7% increase over same quarter last year. A detailed list of our key wins is recorded in our press release now live on our website. Let me briefly sum up the financial performance for quarter 1 of financial year 26-27. 1, 2, 3, 5, 2 million, an increase of 15% over the same quarter last year. Adjusted EBITDA was INR 3005 million, an increase of 42% over the same quarter last year. Profit for the quarter was INR 65 million. Capital expenditure during the quarter was INR 6708. Cash balance at the end of the quarter, 4-5-9-7. I will now remark.

Our integrated portfolio of services, SIFI is well positioned to support enterprises as they build resilient, scalable and future-ready digital ecosystems. I would like to express my sincere gratitude to our customers, shareholders, partners, and employees, and all other stakeholders for their continued trust, support, and confidence in SIPI. Together, we remain committed to contributing to India's digital future and capturing the opportunities that lie ahead. Thank you for joining on this call. I go to the operator for questions.

At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question for today is from Greg Burns with Sidodian Company.

Good morning. Do you have an update on the potential timing for the Siffy Infinite Spaces IPO?

Yeah. As far as the IPO timing is concerned, the bankers are actively evaluating the right time where the market appetite will be good and will appreciate the quality of the asset we are. From the company's side, we stay ready once the bankers...

Thank you. And then you mentioned you sold five megawatts of capacity in the quarter. How much capacity is currently live and operational? and what is your current design capacity of existing data centers? And then maybe can you give us an update on what you expect to go live or how much capacity is currently under construction and I guess expected to become operational over the next 12 months?

So the capacity which is designed and ready is 188 megawatt. The operational live revenue generating capacity is 134 megawatts. And the capacity which will get delivered in this fiscal will be about 100 megawatts. And there is another capacity under construction.

Okay, so do you expect the CapEx to remain at the level you had this first quarter for the remainder of the year, or is it going to maybe ramp up from here?

The CapEx is likely to be higher for the remaining part of this year as we get ready to deliver capacity for the customers.

And can you just maybe give us your thoughts on what are the primary differentiators for SIFI? Why is SIFI winning in the market? I mean, what are the reasons that you think that SIFI differentiates itself and how you're driving success?

No, I think with our market presence for about the time of more than 20 years and existing hyperscalers and the enterprises, you know, that makes us different. and also our presence in all our key markets like Mumbai, Chennai, Noida, Hyderabad, Bangalore and small portion collector. That makes us a unique position and also our data centers, connectivity, availability. So it's not any one-time kind of thing because the way the SIPI portfolio has all these things and also we have cable landing stations we are building. So as an integrated player, you know, complete, having a data center's network and having a good power availability story, that will help that kind of data center deal, you know.

All right, thanks. And then I know you're in all the major hubs, but what is the opportunity for edge capacity, building up data centers in smaller markets? Is there an opportunity there for you, and is that currently on your roadmap?

Yeah, we have already opportunity there. We already completed two such data centers, HLUKNO and Chandigarh, and we are also constructing two more. We planned about building across India in Tier 2, Tier 3 cities about 10 to 12 H data centers over the next few years. So these opportunities, you know, because India, not only depending upon the six major metro cities, but these secondary cities are also very important. So our presence, you know, we are building statistically, you know, two, three edge data centers per year, you know. That's what we are looking at.

All right. Thank you very much.

Your next question for today is from Pateek Singh with IIFL Capital.

Hi, Prateek.

Hello. Hi, sir. Thanks for the opportunity. So I understand that the sold capacity has now gone to 134. The installed capacity, which was 140 end of FY26, what would that number be?

154.

Okay. And the design capacity has been at 188 megawatts for 4-5 quarters now. So I just want to understand how does it work? So, we first focus on completing the installed capacity and then build new capacity or both of these cannot be done parallelly?

Yeah, I was answering the previous speaker. There is another 100 megawatt of capacity, which coincidentally will be both design plus installed capacity, which will be delivered this year, and another 150 megawatt of capacity, which is under construction okay so can we assume that from a sold capacity of 134 right now revenue generating capacity next year would be somewhere in the range of 220 230 for the entire year yeah it should be north of that understood understood uh and my second question is uh by

when will this 81 megawatts that we signed last quarter by when will this start revenue to generate revenue?

It will start generating from end of quarter two, but it will reflect significantly in Q3 and Q4.

Understood. And about margins, so our revenue has risen on a quarter-on-quarter basis, but gross profit has come down. Seems to be driven by the data center business where revenue has risen 10% on a QOQ basis, but EBITDA is largely flat at around 2.292 million rupees. So margins there have fallen from 45%, EBITDA margin of 43%. So is this the new normal, any one-offs that we saw this quarter in data center business or how should we look at it?

It is essentially a one-off which is there in the context of some power tariff revision which has taken place for one of the facilities.

Okay, and it is something which we cannot pass it on to our customers?

We are working with the customers, so in case it happens, it will reflect later. But from a conservative and accounting requirement perspective, we have taken it into…

Understood. And just one last clarification. In the last results, press release, FY26 and equity was around 25 billion rupees. sorry yeah 25 24994 million rupees which has now changed to 18933 is it just a rectification or was there a reclassification or any kind of an equity debt conversion can you repeat equity figure yeah the equity figure that you gave in the end equity borrowings long term short term cash balance net debt so the equity number in April when you reported your March end results, the March end number at that point of time was 24994 in the press release, which has now changed to 18933. Wanted to check, is it just a rectification or any kind of reclassification which has happened?

Let me check on that. To my knowledge, it is a reclassification on the consolidated side. The CCDs which were there, which the compulsory convertible debentures which the parent company was holding in the subsidiary, we took the final accounting position that we will treat it as debt until the listing happens. So that's the difference between the two.

Understood. Thanks. And I'll join back with you.

Once again, if you would like to ask a question, please press star one. You have a follow-up question coming from Prateek Singh. Your line is live.

Thanks for the opportunity again. So any plans in the interim, like one of your nearest peers recently raised capital via a private round, any plans of that if the IPO proceedings get delayed or the IPO is our primary target right now and no plans for any kind of a private round as of now? no we have KOTEC supporting us on equity for the growth so we are pursuing the IPO path and any capital requirement in the unlikely situation of IPO getting delayed KOTEC will step in ok so given your CAPEX is quite high I mean it is short of almost double the quarterly rate that we used to see earlier because you are on a very strong growth path and as you said it would remain and they run it maybe even higher in the next three quarters. There might be a case where we may need funding if the IP does not happen by then. So in that case, you're saying that the Kotak will be happy to support.

Correct, correct, correct, correct. They have offered to stay committed to the growth of the company. So they will step in. But even otherwise, there are several other strategic investors who have shown keen interest.

Understood. And the final question on my side is on SIFI technologies. So how should we look at the digital services business this time? Also, it was a negative EBITDA. I understand that it may remain a negative EBITDA for quite some time. But in terms of revenue also, we saw a decline on a year-on-year basis and also on a QOQ basis. So what kind of a growth part do we see for digital? By when can we expect an EBITDA break-even there?

Yeah. So as far as the revenue growth is concerned, we may not see too much of a growth because we are focusing more on services revenue versus project-based revenue. But on the EBITDA side, we are all working for reduction of the losses quarter-on-quarter basis. There is active guidance from the board as well in terms of getting it to a path of profitability soon. So a lot of work is happening. I am not in a position to communicate to you the specific steps. But we continue to stay focused and you can actually see the result of our efforts in terms of the reduction in loss at EBITDA level vis-à-vis the previous year first quarter and also vis-à-vis the sequential previous quarter.

Understood. And similar comments on network services because it has been growing quite well. Can we expect similar kind of growth over the next few quarters in networks as well?

Yeah. Network revenue, it will grow organically. I think that's a reasonably mature market, so that growth should be reasonably good.

Understood. Understood. Thanks for your time to answer all my questions and all the best.

No, no. Thanks, Pratik, for staying engaged.

As a reminder, if you would like to ask a question, please press star 1. We have reached the end of the question-and-answer session, and I will now turn Nicole over to Raju for closing remarks.

Thank you for your time on this call. Have a good day. Thank you very much.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.