Earnings Call Transcript - SIFY Q4 2025

Operator, Operator

Greetings. Welcome to the Sify Technologies Financial Results for Full Year 2024-2025. At this time, all participants are in a listen-only mode. Please note this conference is being recorded. I will now turn the conference over to your host, Praveen Krishna. You may begin.

Praveen Krishna, Host

Thank you, Holly. I'd like to extend a warm welcome to all our participants on behalf of Sify Technologies Limited. I'm joined on the call today by my Chairman, Mr. Raju Vegesna; and my Executive Director and Group CFO, Mr. M.P. Vijay Kumar. 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 Weber Shandwick at +1(212) 546-8260, 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.sifytechnologies.com/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 Investor Information section of the Sify corporate website. Some of the financial measures referred to during this call and in the earnings release may include non-GAAP measures. Sify's results for the year are according to the International Financial Reporting Standards or 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 calculated and presented will be made available on Sify's website. Before we continue, I'd like to point out that certain statements contained in the earnings release and on this conference 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 protections afforded by the Private Securities Litigation Reform Act of 1995. These risks include a variety of factors, including competitive developments and risk factors listed from time-to-time in the company's SEC 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. Raju Vegesna. Chairman?

Raju Vegesna, Chairman

Thank you, Praveen. Good morning and thank you for joining us on this call. India's emergence as a global growth hub is no longer a forecast; it is a present-day reality. India is set to become the third largest economy by 2030-'31 with the projected annual growth of 6.7% according to S&P Global. This growth is underpinned by liberal economic reforms, a vibrant startup ecosystem, and a geographic dividend. With the second largest Internet user base globally, India is now an important testbed for emerging technologies such as AI, 5G, and cloud computing. Government initiatives like Digital India and Startup India have further accelerated tech innovation. With India now home to over 100 unicorns for global enterprises, the convergence of policy support, digital infrastructure, and deep talent positions India as a growth opportunity that is both immediate and immense. Let me now bring in our Executive Director and Group CFO, Mr. M.P. Vijay Kumar to explain both the business and financial highlights for the year. Vijay Kumar?

M.P. Vijay Kumar, CFO

Thank you, Chairman. We remain committed to cost efficiency and fiscal discipline, aligning our financial strategies with long-term value creation across each of our businesses. While we plan essential investments for future readiness, our current results face multiple headwinds from depreciation due to substantial capital expenditure for our network and data center infrastructure and a significant increase in manpower and upskilling demand to remain relevant for the IT services opportunities ahead. Our approach remains to invest to build resilience, enhance operational agility, and capture emerging opportunities. The income tax expense includes current and deferred tax of INR 539 million on profit from its data center subsidy. The cash balance at the end of the year was INR 6,836 million. Let me now expand on business highlights for the year. The revenue split between the businesses for the year was as follows: data center services 38%, network services 41%, and digital services 21%. As of March 31, 2025, Sify provides services on the network infrastructure via 1,137 fiber nodes across the country, a 10% increase over last year. As of March 31, 2025, Sify has deployed 1,870 contracted SDWAN 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 the year. Revenue for the year was INR 39,886 million, an increase of 12% over last year. EBITDA was INR 7,562 million, an increase of 12% over last year. Loss before tax was INR 286 million, and loss after tax was INR 785 million. Capital expenditure for the year was INR 12,745 million. I will now hand over to our Chairman for his closing remarks. Chairman?

Raju Vegesna, Chairman

Thank you, Vijay Kumar. Over the years in the business have given us a ringside view of how the ICT industry is evolving. Our combination of network, data center, and digital services and tools are our unique selling advantage. We intend to strengthen each of these over the coming year. Thank you for joining us on this call. I will now hand over to the operator for questions.

Operator, Operator

Thank you. Your first question for today is coming from Greg Burns with Sidoti & Company.

Greg Burns, Analyst

Morning. I'd like to just maybe dig into the quarterly dynamics of each of the segments, and just maybe if we could start with network services. What drove the decline there this quarter?

M.P. Vijay Kumar, CFO

On the revenue side, there is no decline, but on the expenses side, we had substantial expenses for some of our new capacities, which we had leased for the future business requirements.

Greg Burns, Analyst

Okay. And then, when we look at your data center services, I think it declined a little bit sequentially, still up nicely year-over-year, but maybe you could just talk about that dynamic a little bit. And also, if we could just talk about your data set or roadmap for this year, what is currently in the process of being brought live over the next 12 months, like what the roadmap for fiscal '26 looks like for your data centers?

M.P. Vijay Kumar, CFO

Yes, on the data center revenues, there has been a secular trend as far as the recurring revenues are concerned. There are some one-time revenues, which keep coming in select quarters depending on the new customers' specific requirements. Otherwise, it has a very secular growth trend. As far as the capacities for the future are concerned, two facilities, Greenfield facilities, have just gone live. One is in Delhi and another is in Chennai. These two facilities have gone live. And there is new capacity, which is under construction in Mumbai, which should go live sometime in the next 12 to 18 months.

Greg Burns, Analyst

Okay. Maybe you could frame that new capacity in terms of where you were in terms of the number of data centers and megawatts of capacity, and what those two that just came live plus what your third one that you expect over the next 12 months like what. How much incremental capacity those added?

M.P. Vijay Kumar, CFO

Yes, currently we have on-ground design capacity of about 130 megawatts, which is operational. These two new facilities, which have been designed for an overall capacity of 130 megawatts, each of which in Phase 1, each of them with a design capacity of 26 megawatts, have been made ready and made available for service.

Greg Burns, Analyst

Okay. So when we look at your CapEx expectations for fiscal '26, are they about in line with where you were for fiscal '25, or is it going to go up or down, by any meaningful amount?

M.P. Vijay Kumar, CFO

The capital expenditure will be marginally higher.

Greg Burns, Analyst

Okay. And then maybe we could just talk a little bit about the demand dynamics in India, particularly for data center colocation services. What are the primary factors driving the demand there? When you look at the supply in the market versus that demand where is the market in terms of the supply of capacity needed to meet that demand?

Raju Vegesna, Chairman

Yes. So at present the demand still continues to exceed the supply in the market, and the demand continues to be driven by the cloud consumption by Indian enterprises. The hyperscalers, who are currently operating in India, continue to expand their footprint in light of increasing cloud consumption. As far as AI-led demand is concerned, we are at the early stages of its growth. There are active conversations happening with the enterprises for their AI-led demand for the future. So the demand-supply gap continues to be favoring additional capacity creation at this point in time.

Greg Burns, Analyst

Okay. And then just lastly, in terms of maybe your operating leverage, I know you've been investing in the resources necessary to drive your future growth, but how should we think about potential operating leverage as revenue from some of these infrastructure investments start to scale?

Raju Vegesna, Chairman

Yes, the operating leverage for our network investment, network infrastructure business, and the data center infrastructure business, both of them are positive levers for us to drive as we build scale. On the data center infrastructure services side, while the increase in margins will be probably a few basis points, on the network side, we have the potential for increasing our margins substantially with higher capacity utilization in the foreseeable future.

Greg Burns, Analyst

I agree. Thank you very much.

Raju Vegesna, Chairman

Thank you.

Operator, Operator

Your next question is coming from Jonathan Atkin with RBC.

Jonathan Atkin, Analyst

Thanks. I wanted to follow-up on the last response. And just around demand and is the mix that you see going forward of demand on a megawatt basis more likely to be driven by Indian enterprise or as direct tenants of your data center platform, or is it more likely to be driven by international hyperscalers?

Raju Vegesna, Chairman

We expect in the short-term the demand to be driven by the international hyperscalers, but we are at the same time witnessing a good amount of Indian enterprises engaging in setting up private clouds, hybrid clouds, and also actively engaging in cloud repatriation as well. So in the short-term it will still be hyperscale driven, but over the medium and long-term, we should see more Indian enterprise consumption happening.

Jonathan Atkin, Analyst

And has the on the hyperscale side, has the demand broadened by the number of CSPs and other hyperscalers that are looking to grow into India, or is it generally the same group of companies that you were seeing in your sales pipeline a year ago?

Raju Vegesna, Chairman

It is generally the same. We are seeing one or two local cloud service providers emerging, but they're still too small to reckon with at the scale at which the hyperscalers are operating.

Jonathan Atkin, Analyst

No, my question was on the international hyperscalers then, is it the same group?

Raju Vegesna, Chairman

It is the same. It is the same.

Jonathan Atkin, Analyst

Okay. And then the there's a lot of. I mean, just given that India is believed to have faster build times and lower barriers to entry, there seems to be continuing interest in terms of foreign capital getting into that segment of the market. So what are you seeing in terms of availability of resources, whether it's electricians, contractors, power, land, and then just overall pricing environment? How would you characterize that?

Raju Vegesna, Chairman

It is pretty stable. The interest from capital providers continues to be there, and on the land, power, and pricing part of it, we aren't seeing any material changes. It's pretty stable at this point in time.

Jonathan Atkin, Analyst

And then finally the build times, construction timelines, has that changed notably in the past six to 12 months?

Raju Vegesna, Chairman

Yes, it has improved compared to when we all came back after COVID, where it took a substantial amount of time due to supply chain constraints, but those are now behind us and there is marginal improvement. But given the fact that there is substantial demand for creating capacity, the timelines haven't changed materially, but they have marginally improved.

Jonathan Atkin, Analyst

Thank you.

Operator, Operator

We have reached the end of the question-and-answer session, and I will now turn the call over to Raju for closing remarks.

Raju Vegesna, Chairman

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

Operator, Operator

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