Sify Technologies - Earnings Call - Q3 2025

Transcript

Praveen Krishna (Head of Investor Relations)

Thank you, Jen. I'd like to extend a warm welcome to all of our participants on behalf of Sify Technologies in the room. 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'll be an opportunity for questions. If you do not have a copy of our press release, please call Vibha Shanbhag at 1212-546-8260, and we'll have one sent to you. Alternatively, you may obtain a copy of the release of the investor information section on the company's corporate website at www.sifytechnologies.com/investors. A replay of today's calls 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 combine to create a compelling growth opportunity for international companies, making India a critical destination in their global strategic expansion plans. India has long established a reputation as being an IT service provider for the world. That narrative is now maturing to recognize that India can be an important AI testbed for the emerging digital economy. Multiple global leaders have also gone on the 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 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 align with long-term value creation. Our current results are weighed down by investment in people, building capabilities with people for the AI opportunities, depreciation, and for 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 International Accounting Standards Board, recent issuance of IFRS 18, presentation and disclosure in financial statements, starting with the last quarter ending June 30th, 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 5 MW 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 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 quarter three of 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 quarters, you will see Sify repositioning itself to cater to AI workloads that we are coming up in the country. The maturity of our services should draw 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 (participant)

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 one on your phone keypad now. Confirmation tone will indicate that your name is in the queue. You may press star two if you would like to remove your question from the queue. For anyone using speaker equipment, it might be necessary to pick up your keys before you press the star key. We will hold whilst we poll for questions. Thank you very much. Your first question is coming from Greg Burns of Sidoti & Company. Greg, your line is live.

Greg Burns (Analyst)

Good morning. Could 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're seeing for that service?

Raju Vegesna (Chairman)

So the way, Greg, is we have already a cloud platform called CloudInfinite, which supports the CPUs. We are doing this thing for more than a decade. So we are extending that support of cloud platform to extend it to the GPU also. So we just started, and we are doing a couple of POCs for Indian enterprises. And the market is still in a very nascent stage. I cannot assess how big the market, but the market is getting starting interesting, and enterprise customers are showing some interest, especially in BFSI and manufacturing sector. And I don't have any prediction of the growth, but at least I'm seeing some interest. We are seeing some interest.

Greg Burns (Analyst)

All right. 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 of power, I guess, has been commissioned, and then maybe what you're looking forward to over the next 12 months to maybe come online in terms of maybe either from a megawatt capacity or a data center capacity? Thank you.

M.P. Vijay Kumar (Executive Director and CFO)

Yeah. Greg, we currently have capacity which is installed and commissioned for about 120 MW, of which 110 MW is already contracted with the customers who have already come into the facilities. We have about 12 facilities across six cities, and in addition to this, there are capacities which are under development, which will be going live within the next few months, which have a designed capacity, which are two facilities of 26 MW each, which are going live. Based on the customer's inflow, we will commission the needful 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, this is pretty significant growth this quarter. Is 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 CFO)

For the time being, it's a good number to model. What we have done is we are strengthening our leadership team across the businesses. So you will see the current level of SG&A to 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 CFO)

Yeah. So it is that particular business. We had a little bit of a revenue mix change. And most importantly, the loss is driven by our efforts to get in more leadership team 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 the technology leadership. So we have started investing in that. Maybe we will 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 the network services was pretty strong, 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 CFO)

Yeah. So between last year, same quarter, and this year, the growth is driven by the wireline infrastructure investment we have done over the last two years. The last two years, that investment is now starting to pay off, starting to pay off. We have done fiber network in about 17 cities. And in these cities, we will continue to densify our wireline infrastructure, and it should support the growth. And equally important, Greg, is with all the increased digitalization which is happening and also the potential AI workloads, networks will also require substantial capacity for the enterprises to consume. So this particular growth is driven by the enterprises preparing for such consumption levels.

Greg Burns (Analyst)

Okay. Great. Thank you.

M.P. Vijay Kumar (Executive Director and CFO)

Thanks, Greg. Jennifer?

Hello?

Yeah. Hello?

Praveen Krishna (Head of Investor Relations)

Hello.

You're not audible.

Operator (participant)

Question one is on the queue. And the question is coming from a private investor. Shrikant, your line is live.

Praveen Krishna (Head of Investor Relations)

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

Raju Vegesna (Chairman)

I think she's connecting someone inside.

Operator (participant)

No problem. She is a private investor.

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

M.P. Vijay Kumar (Executive Director and CFO)

Yeah. Yeah. Loud and clear.

Raju Vegesna (Chairman)

Yeah. Yeah. Yeah.

Good evening, team. First of all, congratulations for improving some of the metrics year over year. The company is in a great shape and a great management team and building the right infrastructure to address the 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 a wider participation from investors in a more widely held and also generate some investor returns? Yeah.

Shrikant, did I get your name right, Shrikant?

Correct.

Yeah. So thank you for your time on the call, and wish you and family a very happy New Year.

As far as our effort is concerned in terms of wealth creation, we continue to stay focused to build the business, to stay relevant with all the changes which are happening, particularly on the digital infrastructure side, thanks to all the AI kind of initiatives which enterprises are getting geared to. And regarding the shareholding expansion is concerned, 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, and let's think through if there is something to be evaluated on that.

Okay. Okay. One other question on the upcoming facilities. I know the Rabale facility is one of the largest in the group. Has it been? Is it already taking customers, or will there be any official announcement of an official opening, or it's just pre-launch? Are you taking any customers?

M.P. Vijay Kumar (Executive Director and CFO)

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

Okay. Excellent. Excellent. That's all from me.

Raju Vegesna (Chairman)

Thank you, Shrikant. Thank you.

Thank you.

Thank you. Thank you, Shrikant, and thanks for the discussion.

Thank you, Shrikant. Thank you.

Operator (participant)

If there will be any remaining questions, you can do so by pressing star one on your phone. If there's a question in.

Raju Vegesna (Chairman)

Hello? Hello?

M.P. Vijay Kumar (Executive Director and 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 are continuously going to update as we are making the quarterly results. Have a good day. Thank you.