Sify Technologies Limited (NASDAQ:SIFY) Q1 2025 Earnings Call Transcript

Sify Technologies Limited (NASDAQ:SIFY) Q1 2025 Earnings Call Transcript July 23, 2024

Operator: Good morning everyone and welcome to Sify Technologies Financial Results for the First Quarter Fiscal Year 2024 to 2025. At this time, all participants are in a listen-only mode, and we will open for questions following the presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Praveen Krishna of Sify Technologies. Praveen, over to you.

Praveen Krishna: Thank you, Jenny. I would 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; M.P. Vijay Kumar, Executive Director and Group CFO; and Kamal Nath, Chief Executive Officer of Sify Technologies Limited. 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 over 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. A replay of today’s call may be accessed by dialing in on the numbers provided in the press release or the webcast in the Investor Information section.

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 IFRS and will differ somewhat from the GAAP announcements that were made in the 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 would 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 protection 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?

Raju Vegesna: Thank you, Praveen. Good morning and thank you for joining us on the call. India is currently in a remarkable phase of growth. The combination of pro-industry regulations, a supportive investment environment and a wealth of skilled talent positions our nation as a key destination for international businesses. This confidence is driving investments and building partnerships that benefit both enterprises and the broader economy. The advancement in regulatory and taxation norms should help accelerate investment in the network and data center landscape and enhance India’s status as a pivotal interconnect hub between Asia and the Middle East. Our robust infrastructure and comprehensive services portfolio uniquely position Sify to seize these opportunities.

As enterprises and government entities advance their digital transformation and automation initiatives, Sify stands ready to support them with our innovative digital tools and services. Now I would, our CEO, Kamal Nath, take from here. Kamal, on the business, yes. Kamal?

Kamal Nath: Thank you, Raju. As businesses embark on digital transformation, they are reconfiguring their IT frameworks to incorporate multiple transformative solutions. All of them with the common agenda of enhancing end-user satisfaction, ensuring operational resilience and protecting digital assets. Our significant capital allocations and extensive range of offerings are designed to effectively meet these ambitions. Our capability to provide innovative outcomes through our triad of infrastructure and managed services uniquely positions us to support them throughout their digital transformation journey. Let me now expand on the business highlights for the quarter. The Revenue split between the businesses for the quarter was Data Center colocation services at 36%, Digital services at 23% and Network services at 41%.

During the quarter, Sify commissioned 6.5 megawatt capacity in Mumbai. As of June 30, 2024, Sify provides services through 1,055 fiber nodes across the country, a 16% increase over the same quarter last year. The network connectivity service has now deployed 9,415 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 bring in Vijay, our Executive Director and Group CFO, to elaborate on the financial highlights for the quarter. Vijay?

M.P. Vijay Kumar: Thank you, Kamal. Good morning, everyone. The International Accounting Standard Board’s recently issued Accounting Standard IFRS 18 Presentation and Disclosure in Financial Statements replacing IAS 1 Presentation of Financial Statements. The new structure of the profit and loss statement require classification of income and expense into three categories: operating, investing and financing. And presentation of subtotals for operating profit or loss and profit or loss before financing and income tax. Although the International Accounting Standard Board set an effective date as January 1, 2027, our company will begin adhering to IFRS 18 beginning with its consolidated financial statements for the quarter ended June 30, 2024.

All prior periods presented in the press release which are currently live, have been presented in accordance with the new structure. There is no change in the total income or net profit. Let me briefly sum up the financial performance for quarter 1 of financial year 2024-2025. Revenue was INR9,421 million, an increase of 10% over the same quarter last year. EBITDA was INR1,784 million, an increase of 3% over the same quarter last year. Loss before tax was INR46 million and loss after tax was INR105 million. Capital expenditure during the quarter was INR2,656 million. We will continue to invest in expanding our network, both fiber in the metros and terrestrial long distance, data center capacity and also strengthen our Digital services team by adding people with the right skill sets and investing more in our learning and development initiatives.

Fiscal discipline will continue to be remain central to our focus and strategy. The cash balance at the end of the quarter was INR6,471 million. I will now hand over to the Chairman for his closing remarks. Chairman?

Raju Vegesna: Thank you, Vijay. In October this year, we will become the only Indian company to be continuously listed on the NASDAQ for 25 years. We have continuously invested in improved and broadened our scope of services and today enjoy the unique reputation of being the only converged ICG player in India. From retail to enterprise play, from infrastructure services provider to value partner, the journey has been very satisfying. Sify’s new version as a digital transformation partner puts us in partnership with the clients going forward. I assure you this is only the beginning. Thank you for joining us on this call. I will now hand over the operators for questions.

Q&A Session

Operator: [Operator Instructions] Your first question is coming from Greg Burns of Sidoti & Company.

Greg Burns: What are the primary drivers of data center demand within India? Are you seeing more demand from hyperscalers? And are you seeing any benefit from artificial intelligence yet?

Raju Vegesna: Let me answer that, Greg. So most of the demand is coming from hyperscalers and as usual, the enterprises. The AI, artificial intelligence in India is not yet taken off. But there are a lot of discussions are going and we see those are the things upcoming future — there is a lot of hopes are coming. But what is you see in the demand currently is still hyperscalers and our regular enterprise businesses. Long way, India is still a long way to go to move people from server rooms to the colocations.

Greg Burns: Okay. And you mentioned, I guess, you commissioned 6.5 megawatts in the quarter. Could you just give us an update on the road map for the year in terms of new data center capacity?

Raju Vegesna: I don’t think I can give a road map of the future but we build enough capacities are available and our Mumbai data centers, Noida data centers, Chennai data centers, Hyderabad data centers, we have a good pipeline we are building up. And until future, I cannot give you any numbers at this point. We are seeing a good trend of opportunities coming in.

Greg Burns: Okay. And then what is the outlook for CapEx for the full year? And with the rights offering completed, do you have this — do you have enough liquidity to fund your capital needs for the remainder of the year?

M.P. Vijay Kumar: Yes. So Greg, 2 points which you mentioned. One is, as far as the capital expenditure outlook is concerned, the quarter 1 which just went by, we spent about INR2,645 million [ph] which I mentioned. And the same trend of CapEx will continue for the foreseeable future. As far as the rights issue is concerned, it was successful, the capital raise has been done. And this capital also enhances our leveraging ability from the banking system. Together, they will help us meet the funding requirements of expansion of both data center as well as the network infrastructure.

Greg Burns: Okay. And then lastly, digital services declined in the quarter. Could you just maybe give us a little bit more color on what was driving the decline in that segment this quarter?

M.P. Vijay Kumar: As far as the digital services business is concerned, we are moving from project-based to annuity-based revenue model. And we are building skill sets. We started this initiative about 2 years back and will continue for the next couple of years to build an adequate capacity to meet the India enterprise digitalization requirement. We continue to add people and put them through a training process so that we will have adequate skill sets which will be relevant for supporting the digitalization initiatives of India enterprise.

Greg Burns: Okay. And then I’ll add one other one. The growth in the data center segment kind of accelerated a little bit this quarter. Was there anything onetime in the quarter or is that a good number to build our models off of?

M.P. Vijay Kumar: Yes. There is no one-time in this. It is recurring.

Operator: [Operator Instructions] Okay. I’m not seeing any other questions come into the queue. I can now hand back over to the management team for any closing remarks.

Raju Vegesna: Thank you. Thank you for your time on this call. We look forward to interacting with you through the year. Have a great day. Thank you.

Praveen Krishna: Thank you, Jenny.

Operator: Thank you very much. Thank you. This does conclude today’s call. You may now disconnect your phone lines and have a wonderful day. Thank you for your participation.