Earnings Call Transcript - SIFY Q3 2025

Operator, Operator

Good morning, everyone, and welcome to the Sify Technologies Financial Results for Third Quarter Fiscal Year 2024-2025. At this time, all participants have been placed on a listen-only mode. Please note this conference is being recorded. I will now turn the conference over to your host Praveen Krishna. Praveen, the floor is yours.

Praveen Krishna, Host

Thank you, Jen. I'd like to extend a warm welcome to all of our participants on behalf of Sify Technologies Limited. I'm joined on the call today by Raju Vegesna, Chairman; and Mr. M.P. 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 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 in accordance with GAAP 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 Mr. Raju Vegesna, Chairman of Sify Technologies Limited. Chairman, over to you.

Raju Vegesna, Chairman

Thank you, Praveen. Good morning and thank you for joining us on this call. India's growing prominence in the global marketplace is driven by its liberal policies, supportive business environment, and a wealth of skilled resources. These factors combined create a compelling growth opportunity for international companies, making India a critical destination in their global strategic expansion plans. India has a long-established reputation as an IT service provider for the world, and that narrative is now maturing to recognize that India can be an important AI test bed for the emerging digital economy. Multiple global leaders have also gone on record regarding the importance of the Indian market in their investment roadmap. Let me now bring our Executive Director and Group CFO, Mr. M.P. Vijay Kumar, to explain both the business and financial highlights. Vijay?

M.P. Vijay Kumar, Executive Director and Group CFO

Thank you, Chairman. Good morning to all, and wish you all a very happy new year. We stay focused on cost efficiency and fiscal discipline, ensuring our financial strategies are aligned with long-term value creation. Our current results are weighed down by investments in people, building capabilities with people for the AI opportunities, depreciation, and interest payouts for our expansion financing. Our strategic investments are guided by a forward-looking approach designed to anticipate evolving market dynamics and drive sustainable growth. Our pursuit of responsible and innovative growth will be strengthened through such sustainable practices. We draw your attention to Sify adopting the new standard of the International Accounting Standards Board, the recent issuance of IFRS 18, presentation, and disclosure in financial statements, starting with the last quarter ending June 30, 2024. By adopting the new standard, we seek to maintain clarity and consistency in our financial communications. Importantly, while our presentation may change, there is no alteration in total income or net profit. The December 2023 numbers are restated consequent to filing of amended Form 20-F/A with SEC on January 13, 2025. Let me now expand on the business highlights for the quarter. The revenue split between the businesses for the quarter was Network Infrastructure Services 41%, Data Center Colocation Services 36%, and Digital Services 23%. During the quarter, Sify commissioned five megawatts of additional data center capacity. As of December 31, 2024, Sify provides network infrastructure services via 1,109 fiber nodes across the country, a 14% increase over the same quarter last year. As of December 31, 2024, Sify has deployed 9,473 units of 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 third quarter of the financial year 2024-2025. Revenue was INR 10,491 million, an increase of 21% over the same quarter last year. EBITDA was INR 1,914 million, an increase of 13% over the same quarter last year. Loss before tax was INR 119 million. Loss after tax was INR 258 million. Capital expenditure during the quarter was INR 3,343 million. The cash balance at the end of the quarter was INR 5,327 million. I will now hand over to our Chairman for his closing remarks. Chairman?

Raju Vegesna, Chairman

Thank you, Vijay Kumar. Over the course of the next quarter, you will see Sify repositioning itself to cater to AI workloads that we are developing in the country. The maturity of our services should attract a new set of enterprise players who will seek our mature network, data center, and digital businesses. Thank you for joining us on the call. I will now hand over to the operator for questions.

Operator, Operator

Thank you. At this time we will be conducting our question-and-answer session. Your first question is coming from Greg Burns of Sidoti & Company. Greg, your line is live.

Greg Burns, Analyst

Good morning. Can you just give us maybe a little bit more color about your GPU as a service offering, how that maybe fits into your broader cloud services solutions and what kind of demand you are seeing for that service?

Raju Vegesna, Chairman

The way, Greg, is we already have a cloud platform called Cloud Infinite, which supports the CPUs. We have been doing this for more than a decade. So we are extending that support of our cloud platform to include the GPU as well. We just started, and we are doing a couple of proof of concepts for Indian enterprises. The market is still in a very nascent stage. I cannot assess how big the market is. But the market is starting to get interesting, and enterprise customers are showing some interest, especially in the BFSI and manufacturing sectors. I don't have any predictions for growth, but at least I am seeing some interest.

Greg Burns, Analyst

Okay. Great. Thanks. And then in terms of your data center capacity. Could you just give us an update on maybe the number of data centers that are currently operational? How much megawatt power has been commissioned? And what you are looking forward to over the next 12 months regarding either megawatt capacity or data center capacity? Thank you.

M.P. Vijay Kumar, Executive Director and Group CFO

Yes, Greg. We currently have capacity which is installed and commissioned for about 120 megawatts, of which 110 megawatts is already contracted with the customers who have already come into the facilities. We have about 12 facilities across six cities. In addition to this, there are capacities which are under development, which will go live within the next few months, with a designed capacity consisting of two facilities of 26 megawatts each, which are going live. Based on customer inflow, we will commission the needed capacity. Apart from that, there are four other facilities coming up in Mumbai, which are at a reasonably advanced stage of development. Hopefully, by the end of this calendar year or a little earlier, they should also go live. We will publish the details of their status maybe a couple of quarters down the line.

Greg Burns, Analyst

Okay. Great. Thanks. And then in terms of your SG&A, there was pretty significant growth this quarter. Was there anything one-time in there? Or is that a good number to build off of in terms of modeling?

M.P. Vijay Kumar, Executive Director and Group CFO

For the time being, it is a good number to model. What we have done is strengthen our leadership team across the businesses. So you will see the current level of SG&A remain for the forthcoming period as well.

Greg Burns, Analyst

Okay. Thanks for that. And Digital Services posted a loss this quarter. What was driving that?

M.P. Vijay Kumar, Executive Director and Group CFO

Yes. The particular business faced a revenue mix change, and most importantly, the loss is driven by our efforts to bring in more leadership teams within that business. As you know, the business requires a combination of upskilling and reskilling not just at the delivery organization level but also building the business team and technology leadership. We have started investing in that. We may invest a little more for a couple of quarters because we see opportunities coming in the foreseeable future, and we want to be ready for those opportunities.

Greg Burns, Analyst

Okay. Thanks for that. And then lastly, the growth in network services was stronger than we were expecting. Could you just detail what's driving the demand on that side of the business? And do you expect that kind of growth to continue?

M.P. Vijay Kumar, Executive Director and Group CFO

Yes. So between last year same quarter and this year, the growth is driven by the wired line infrastructure investment we have made over the last two years. That investment is now starting to pay off. We have established a fiber network in about 17 cities, and in these cities, we will continue to densify our wired line infrastructure, which should support the growth. An equally important factor is the increased digitalization that is happening and the potential AI workloads. Networks will also require substantial capacity for the enterprises to consume. This particular growth is driven by enterprises preparing for such consumption levels.

Greg Burns, Analyst

Okay, great. Thank you.

Raju Vegesna, Chairman

Thanks, Greg. Jennifer? Hello, you're not audible.

Operator, Operator

The next question is coming from indiscernible. Your line is live.

Raju Vegesna, Chairman

Jennifer, just a word of caution. The line is not clear. Could you have the question repeated, please?

M.P. Vijay Kumar, Executive Director and Group CFO

I think she's connecting somewhere inside.

Unidentified Analyst, Analyst

Hi, good evening, everybody. Can you hear me?

Raju Vegesna, Chairman

Yes. Yes. Yes.

M.P. Vijay Kumar, Executive Director and Group CFO

Loud and clear.

Unidentified Analyst, Analyst

Good evening team. First of all, congratulations on improving some of the metrics year-over-year. The company is in great shape with a great management team and is building the right infrastructure to address future demand. So once again, congratulations on a good set of numbers compared to year-on-year. I didn't go through the specifics. But without talking about any individual stock price movement or any forward-looking statements, eventually, the investors would be interested in wealth creation, right? So the first question would be what is being done to address that, to get wider participation from investors in a more widely held company and also generate some investor returns.

M.P. Vijay Kumar, Executive Director and Group CFO

Yes. Did I get your name right, Srikant?

Unidentified Analyst, Analyst

Correct.

M.P. Vijay Kumar, Executive Director and Group CFO

Yes. Thank you for your time on the call, and wish you and your family a very happy new year. As far as our effort is concerned in terms of wealth creation, we continue to stay focused on building the business to remain relevant with all the changes which are happening, particularly on the digital infrastructure side. Thanks to all the AI initiatives to which enterprises are gearing up. Regarding shareholding expansion, there are no specific initiatives at this point in time. However, our Investor Relations team continues to stay engaged with the IR community, particularly in the U.S., to see how there can be more active participation. We take note of your observation. Let’s think through if there is something to evaluate on that.

Unidentified Analyst, Analyst

One other question about the upcoming facilities. I know the Rabale facility is one of the largest in terms of growth. Is it already serving customers, or will there be an official announcement for the opening, or is it still in prelaunch, are you accepting any customers?

M.P. Vijay Kumar, Executive Director and Group CFO

Rabale has five facilities, all of which are operational. The last one was operational about nine months back. The first four facilities are fully occupied, and the last of the facilities is also almost fully contracted and occupied. There won't be any fresh market communication on that. When Rabale itself, there are four more facilities under construction, which will likely go live most likely by the end of this calendar year or around that time. Our communication on these facilities launch is limited to what we do on our website and in the investor conversations we conduct.

Unidentified Analyst, Analyst

Okay, excellent. That’s all from me. Thank you.

M.P. Vijay Kumar, Executive Director and Group CFO

Thank you, Srikant. And thanks for the discussion.

Operator, Operator

Thank you, Srikant. And thanks for the discussion.

M.P. Vijay Kumar, Executive Director and Group CFO

Sir, maybe you can give your concluding remarks. Jennifer's voice is cracking most of the time today.

Raju Vegesna, Chairman

Thank you. Thanks for your time. We will continuously update as we make the quarterly results. Have a good day. Thank you.

M.P. Vijay Kumar, Executive Director and Group CFO

Thank you very much.