Sify Technologies Ltd (SIFY) Q3 2026 Earnings Call Transcript

Good morning, everyone, and welcome to the CIFI Technologies Financial Results for the third quarter FY 2025 to 2026. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions following the presentation. If anyone should require operator assistance during this conference, please press star zero on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Praveen Krishna, Head of Investor Relations of SIFI Technology. Praveen, the floor is yours.

Thank you, Jenny. I'd like to extend a warm welcome to all our participants on behalf of SIFI Technologies Limited. I'm joined on the call today by Mr. Raju Veksenar, Chairman, and Mr. MP Vijay Kumar, Executive Director and Group CFO. Following our comments on the results, there will be an opportunity for questions. If you do not have a copy of our press release, please call Lurie Group at 1-646-82856 and we'll 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.sifitechnologies.com slash 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 web cards in the investor information section of the corporate website. Some of the financial measures referred to during this call and in the earnings release may include non-GAAP measures. CFI's results for the year are according to the International Financial Reporting Standards or IFRS and will differ somewhat from the GAAP announcement made in previous years. A presentation of the most directly comparable financial measures calculated and presented in accordance with the GAAP and a reconciliation of such non-GAAP measures and of the differences between such non-GAAP measures and the most comparable financial measures calculated will be made available on SIFI's website. Before we continue, I'd like to point out that certain statements contained in earnings release and on this call 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 ICC 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 altruists and uncertainties inherent to the company's business. I would now like to introduce Mr. Rajiviksuna, Chairman of Sifi Technologies.

Chairman. Thank you, Praveen. Good morning, everyone. and thank you for joining us on the call. India's growth story has moved decisively from promising to performance. Strong economic fundamentals, policy continuity, and accelerating digital adoption are positioning India as a central pillar in the global technology ecosystem. India IT is entering into new phase, one defined not only by scale, but by leadership. in digital infrastructure, cloud, and AI-led innovation. As enterprises and government intensify their focus on AI, cloud, and data-driven platforms, demand for the secure and high-performance and governance digital infrastructure is rising rapidly. At TIPI, our strategy is aligned with this inflection point through a sustained investment in hyperscalar data centers, resilient networks, and AI-driven platforms. Positioning us to enable the next decade of enterprise transformation in India, let me now bring in our Educator Director and Group CFO, Mr. MP Vijay Kumar, to explain both the business and financial highlights.

Thank you, Chairman. We continue to exercise physical discipline while making measured investments to strengthen our long-term capabilities. Our capital allocation across data centers, networks, and people for digital platforms remains guided by disciplined approach to risk and future readiness with a focus on long-term value creation. Let me now expand on the business highlights for the quarter. The revenue split between the businesses for the quarter was network services 37%, data center co-location services 40%, and digital services 23%. In this quarter, data center co-location capacity of 9.1 megawatt was sold. As of December 31, 2025, TIPI network services provides services via 1,214 fiber notes, a 9% increase over the same quarter last year, and as of the same date, we have so far deployed 9,695 SD-WAN service points across the country. 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 Q3 of financial year 2025-26. Revenue was INR $11596 million, an increase of 11% over the same quarter last year. EBITDA was INR $2470 million, an increase of 29% over the same quarter last year. Loss before tax was INR 257 million and after tax INR 329 million. Capital expenditure during the quarter was INR 3452 million and cash balance at the end of the quarter. 31 December 2025 was INR 3627 million. I will now hand over to our chairman for his closing remarks.

Thank you Vijay Kumar.

Chairman.

CP is committed to driving technology-led growth by enabling enterprises to modernize, expand, and capture new opportunities. Our resilient infrastructure and a comprehensive portfolio of services provide a strong foundation to deliver sustainable value and long-term returns as we execute on this roadmap I want to thank you for your continued confidence and support in our vision for the future thank you for joining us on this call I will now hand over to the operator for any questions.

Thank you very much. At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your phone keypad. A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For any participants using speaker equipment, it might be necessary to pick up your handset before you press the keys. Please wait a moment as we poll for questions. Thank you. Our first question is coming from Greg Burns of Sidoti and Company. Greg, your line is live.

Good morning. I just wanted to start off just asking about maybe an update on the timing for the IPO of Infinite Spaces. Are there any milestones that are upcoming, or how should we think about the major milestones that still need to be completed and the expected timing for that IPO?

Greg, good morning. We signed the brass prospectus in the middle of October 2025, and usually in a period of three to four months, we get the securities regulators' approval. We are expecting the approval of the draft prospectus this month and we will be guided by the bankers on the exact timing of opening the issue and getting listed. Once we get the CEDIS approval this month, there are additional processes in terms of updating the draft prospectus with the financials as of 31st December. And this is the banker's guidance. We will go to the market for listing.

Okay, thanks. And then I guess you mentioned that you had sold an additional, I think, nine megawatts of capacity this past quarter. Could you update us on maybe what your total design capacity currently is and how much of that in total has been sold? Yeah.

The total design capacity is 188 megawatts, out of which the capacity which is ready for service is 130 megawatts. And out of 130, the total sold capacity is about 127 megawatts.

Okay, great. And then, I don't know, maybe over the next 6 to 12 months, could you give us maybe an update on the roadmap for, you know, your new data center construction, how much, you know, maybe in terms of either DCs or capacity that you expect to bring online? Yeah.

There are two facilities in our Rabale data center campus, which will go live in this calendar year, for which we have contracted with the customer. And there are other two greenfield projects which are under construction, one of which should get delivered in the middle of this calendar year, and the other will get delivered in the middle of the next calendar year.

And the total capacity of those four facilities?

Okay. The aggregate capacity of all the four facilities at present is about 125 megawatts. But this is customer's actual deployment. The capacity could be a little higher because we are seeing customers bringing in air workloads into the country. It has just begun. So the densities are expected to increase.

All right. And then lastly, the digital service is still operating at a loss. How should we think about that part of the business longer term? At what point do you expect that to maybe either be at break-even or profitable? When are you going to start to get some operating leverage on the investments you're making there?

The next fiscal year, 26-27, later part of the year, we should hopefully become breakeven. And depending on how the services market scales up for the new offerings which we are investing, we will see profitability thereafter.

Okay. All right.

Thank you very much. Our next question is coming from Ramesh Vijaj of Stock HiFi. Ramesh, your line is live.

Sir, you mentioned that 12.16 megawatt capacity sold since June 2029.

How much of this is already revenue-generating? Out of that, the revenue-generating will be about 4 megawatt because a substantial part of the orders have come in December, which will generate revenue in the coming quarter.

What is the average contract and return on capital employed for Megawars?

For hyperscalers, the average contract...

Hello. Hello. Jenny, we are experiencing difficulties on the line.

Yeah, Ramesh, I'm going to just boost your line. Are you quite far away from your headset, handset?

No, we are able to speak. I hope you guys are able to hear us.

That's better.

Jenny, just for confirmation, I think we lost Vijay on this call.

Oh, okay. Bear with me one second. Vijay's line is still connected. Vijay, can you hear us? Vijay. Okay, the line is still connected. bear with me a second I'll try and try and pull the line just one second okay I'm trying to get Vijay back in the call so just bear with me while I try and do that okay one second yes please he's got dropped so he's asking to connect again okay for the moment we have we have lost Vijay and I'm not getting him back in at the moment I will keep trying and in the meantime, would you like me to carry on with any questions? We still have Ramesh on the line.

I would give it another. Could you hold for a minute, please? Could you hold for a minute?

Yes, certainly. All right, ladies and gentlemen, we'll just wait a moment to see if we can get the chairman back on the line.

I have Vijay on my phone, and he's listening in on this call, so he can take your question. okay so Ramesh if you would like to ask your question again thank you okay return on capital employed each megawatt per megawatt so this IPO which you're coming out with SIFI infinite is this proceed going to be used for debt reduction of parent level or is it going to be used for fresh network expansion so how is SIFI infinite structurally separated like board debt cash flow So everything, how exactly is it separated? Is the existing CFI shareholders ADR going to get any kind of a shareholder quota in the new IPO? Fine, I'll come back.

Thank you very much. Just a reminder there, if anyone has any remaining questions, you can still join the queue by pressing star 1 on your phone keypad. Our next question is coming from Prateek Singh of IIFL Capital. Prateek, your line is live.

Okay. Hi, and thanks for the opportunity. The first question is on the depreciation. So basically, I understand that the management estimates useful life for power equipment to be around eight years. Is it something, does it mean that after eight years we'll need to replace power equipment? I don't think so, right? It's just for accounting. The power equipment would be lasting for 15, 20 years. Is that not sounding correct? business for about 25 years for certain items like the ups and the batteries rest of them have a life north of 15 years north of 15 years one of the reasons the company took a depreciation policy of an average of 8 to 10 years is to go inside with the pricing model with the company adopts so our pricing model assumes 8 to 10 years capital recovery and hence the depreciation is Thank you. The next question is on margins. The data center business, which is kind of a steady state and growing very well for us. Margins, while I understand that they are stable, we saw a small dip in margin this quarter. So usually when we have to forecast numbers, how should we look at it? Is it like, you know, hyperscalers, are they driving pricing down or the situation is quite tight in India and that's not the case. It might be due to power costs going up. How should we look at margins and pricing environment going ahead?

44 to 45% operating expenses.

And sir, so like you said, like sir said earlier that design capacity is 188, installed is around 130, operational is 127. So did I hear it correctly, installed 130, right, or was it 150? Okay, so these are the same numbers as of June as per the DRHP. So does it mean that the KPEG that we are doing right now is going into capital work in process and we can see a step jump when a new facility is commissioned?

And now it's the same. A substantial amount of capacity is going to get added in this calendar year where we have Rabalei number 6 and 7 which will go live and Rabalei 11 also which is going to go live. So you'll have a substantial capacity getting added.

And what kind of time difference do we see? So I understand that design capacity is a bare shell, right, without UPS, gensets and all those things. And installed capacity has all those things. So what kind of time difference do we see between, you know, 130 going to 188? Is it more like 6-7 months or is it more like 12 months? So, basically, how long does it take for installed capacity to rise to the level of design capacity, in short?

It's undivided.

Take your line cut out for a second. Would you mind re-asking the question, please?

Sure. So, is my line clear now? Yes. So, on the related party disclosures in the DRHP, when we talk about expense transfer and revenue transfer with the technologies, I wanted to get more sense as to what these are and how should we look at it actually. One last clarification, when sir said that the capacity sold in December quarter will generate revenue in the upcoming quarter, by upcoming quarter do we mean March or June?

March, March, March, March, March, March, and what you have to reach out to us.

Thank you very much. Our next question is coming from Sarab Arya of Oak Lane Capital. Sarab, your line is live.

Yeah, hi. Am I audible? Yes, stay quiet. Yeah. Yeah, so my first question is actually on the network business. So why this business is flat in this quarter? So, does it mean this exercise will continue? And second, then, how should one look at the growth of this business? Because I was under the impression, ultimately, it should grow in line with the data center business.

Okay, yeah, yes.

And second was this continuous new flow on the WISAG and this Google partnership on the networking side. Can you explain that if it's like what exactly is happening and and and what kind of capex you know city would be doing because these are very large numbers which keep coming okay so so you will continue to benefit from this but not by one last question so you said that the new data centers the rabale the new towers they are the the capacity uh some 30s right per tower but you are seeing some AI investment if they can upgrade the capacity but if the so does it mean the capex per megawatt for some of these upgradation is far more than your traditional five six million dollar per megawatt investment which happens in normal scenario the other two We have the structure of the customer in substantial amount of AI into that facility.

This facility was originally designed for 52 whereas now it's going to be for 7 megawatts. And the incremental capacity, incremental capex cost for the AI is marginal for us and some of it is getting funded by the customers themselves because they are bringing some proprietary design. Second, coming to the other 52 MW, what I mentioned, other 52 MW will change.

Sure, this is helpful. Just very lastly, so when the normal DC is there, you have got air cooling. So does it mean, and as you are saying, the CAPEX would not increase much and it is done by the customer only. So does it mean none of these new capacities have some liquid cooling, etc., which are very, very expensive? And even if those are there, those would be borne by the customer.

Depends on contract to contract and cost is approximately 1.3 million per megawatt.

1.3 million dollars per megawatt, right? Okay, okay. That is helpful. And that is borne by the customer or by you. And you charge it. Perfect. And one last, if I can squeeze, is on the data services side. though you gave the guidance that you know maybe we will see some you know flat margin for break-even by next year next year second half but what kind of ramp up in this business is expected like because you've been building this business for quite some time now and what are the green shoes yeah which we

will see some focus on certain set of services okay perfect I think yeah this

is it from my side all the best thank you very much thank you very much our next questions coming from Ramesh Vijad of stop by Ramesh your line is here hello Ramesh can you hear us Ramesh it's quite hard to hear you hello are you able to hear me yep we can hear you now you can ask a question so there's a small thing that we would like to know how should we go forward with

this equity stability especially such as capex and debt going forward which is continuing to rise what kind of offloading has been or what kind of new equity is being issued how much percentage would be impacting for the the existing shareholders for the Cp infinite.

Great. Given the size is 2,500 from portion of their existing holding, 1,200 pros, so total issue size is 3,700 pros.

Fine. Thank you.

Thank you very much. And our next question is coming from Pratik Singh of IIFL Capital. Pratik, your line is live.

Just a clarification on an earlier answer. so when we said we have four capacities in line Rabale two brownfield and two greenfield so these two greenfield are in Rabale as well or they are in some other city or some other area? yeah all the four are greenfield. One of them are right adjacent to the existing facilities and the other is right opposite other two are right opposite the existing facilities they all constitute a single capital capital all the four are okay in Rabale itself yeah in Rabale itself right all four are in Rabale understood understood and when we sign these AI contracts do they have do we do we expect to maintain similar kind of return on capital employed in AI contracts like like cloud or would they be a bit higher it's the same set of returns and the andhra edge facility will be 50 megawatts is that the right understanding thanks a lot for patiently answering my questions all the best thank you and just to clarify on that andhra one apart from the 3.6 we have a land allotment of 50 acres probably your

50 megawatt context came there so we have a land allotment of 50 acres which is there in vishak partner, which is for the future capacity additions, depending on how the demand comes in.

Understood. Thank you very much. Well, we appear to have reached the end of our question and answer session. I will now hand back over to Raju for any closing comments.

Thank you for joining us on the call. Have a good day.

Thank you very much. This does conclude today's call. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.

Thank you, Jenny.

Thank you.