Sify Technologies Ltd (SIFY) 2009 Q4 法說會逐字稿

Greetings and welcome to the Sify Technologies Q4 2008 earnings results conference call and webcast. At this time all participants are in a listen-only mode. A question and answer session will follow the formal presentation. (Operator Instructions). As a reminder this conference is being recorded.

It is now my pleasure to introduce your host Mr. Christopher Chu, Director of Grayling Investor Relations. Thank you, Mr. Chu, you may begin.

Thank you, operator. I would like to extend a warm welcome to all of our participants today on behalf of Sify Technologies Limited. I'm joining -- I'm joined on the call today by Raju Vegesna, Chairman and CEO; C.V.S. Suri, Chief Operating Officer; and M.P. Vijay Kumar, Chief Financial Officer of Sify Technologies. 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 Grayling at 646-284-9426 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.sifycorp.com. 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 Standard or IFRS and will differ somewhat from the GAAP announcements made in preceding quarters. 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 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 like to introduce Mr. Ragu Vegesna, Chairman and CEO of Sify. Raju.

Thank you, Chris. I welcome everyone on the call and thank you for joining us today. I will comment with the opening remarks on our performance in the last fiscal year.

Our domestic enterprise business has grown despite a slowdown in IT investments and consequently in services. We expect continued growth in the Enterprise business going forward led by the demand of our data center and carrier voice service.

Our international business also continued to grow by identifying opportunities created by the current environment. Retail services, particularly access services, have proved a challenge in the past year. We are consolidating our position going forwards.

The new e-mail services from Sify.com launched during the last year continues to see traction. We now have a new content management system that enables multimedia content with greater efficiency, flexibility, scalability and user interactivity.

We continued to lead the market in video content across the entertainment and sports resulting in new users during the year. Antzill, our new initiative in online games also continued to attract new users.

We have had to expand the space available at our new data centers in Mumbai to meet demand. Our focus on the network is now on making individual points of presence which [becomes] profitable with revenue from multiple customers.

These are all challenging times for everyone. However we are bolstered by the Indian economy which continues to grow at about 6%. We have also new opportunities being created in international markets in the current environment.

Now I request Mr. Vijay Kumar, our Chief Financial Officer to take you through our financial performance for the quarter. Vijay.

Thank you, Raju, and hello, everyone. I shall now present the highlights of our financial performance for the fiscal year '08/'09.

Our revenues for the year ended March '09 were $121.62m, 3% higher than the previous year revenue of $117.88m.

The enterprise business registered growth of 13% over the previous year while the consumer business revenues were 26% lower than the previous year. The international business ended the year with an increase of 29% over the previous year.

Net loss for the year was $16.85m as against a net profit of $0.5m in the previous year.

Capital expenditure during the year was $29m on account of data center expansion and expansion of network reach over the first three quarters. This also increases our current operating costs whereas revenues will take time to scale across all the newly established locations.

Our cash balance on March 31, '09 was $7.2m after capital expenditure of $29m during the year. We ensured adequate funding for growth both in terms of debt as well as capital recovery by scaling back on earlier investment in facilities. This is reflected in our cash position at the end of last financial year while our SG&A for the year reflects increased costs due to expansion of infrastructure.

Our focus during the year under review was on greater efficiencies and consolidation to enable us to expand infrastructure to capitalize on future opportunities, while running a lean organization. We will continue to review costs on an ongoing basis across infrastructure, operations and people to return to profitability despite the challenging environment.

I will now hand over to Suri, who will take you through the challenges and initiatives during the last year. Suri.

Thank you, Vijay, and good morning, everyone. Our enterprise services drove Sify's growth with a larger percentage share of total revenues last year. Revenues during the year were from both new customer engagements as well as enhanced requirements from existing customers. However, we do face challenges in pricing as companies look to reduce costs as well as due to increasing competition.

We are now fully operational as a long distance operator for a wholesale voice with a steady increase in business. We are using our IT expertise effectively in offering and managing these services. We expect VoIP carrier services and our data center services to be the growth drivers for the enterprise business going forward.

Government investments in e-government services, both at the central and state levels, continues. Public sector enterprises investing in IT enablement and rural banks and cooperatives are driving demand for enterprise services in the current environment. Public sector banks are continuing to invest in IT infrastructure to gain efficiencies and improve customer services. The government continues to invest significant amounts in IT enablement across departments for greater efficiency in their operations. This is one key segment that Sify is focusing on.

Many large enterprises are also looking to outsource their network and hosting needs to specialists in the current environment. Office based security services are also in demand. The demand for systems integration across IT infrastructure is also growing with various corporates. We are working towards capitalizing on these opportunities to continue growing despite the challenging environment. This will also greatly strengthen our position as a complete managed services provider versus our competition.

Our international services revenues grew 29% over the previous year. Our infrastructure managed services saw the addition of new clients during the year with a number of prospects in the funnel as interest in this services grows in the Western markets in the current environment. Our sales force in the US and Europe has been strengthened to meet this opportunity and we're also looking at alliances to give us wider reach to penetrate the market more effectively.

Lead times however are longer as decision-making is now more layered. Interest is from across verticals including finance, high tech manufacturing and others.

Our e-learning business has identified opportunities in the current environment in the pharmaceutical, technology and education verticals. We are also targeting the federal, state and local government bodies as they look to IT enablement to drive efficiencies. We are working towards being empanelled to bid for such projects and also at alliances with empanelled agencies with complementary services.

We already have a strong presence in the pharmaceutical and high tech verticals where learning is either about products or is product linked. So the demand for these services continues as they develop new products and services or look at supporting existing product lines.

In education our focus is on higher learning and on skill-based vocational courses offered by community colleges. Here, too, the challenge is pricing pressure as clients look for support with reduced prices or greater value for the rates agreed upon. We are therefore focusing on delivery efficiencies to protect margins and contribution.

Some clients are also looking at simpler ways to make learning available such as videos of real life training programs. Here, too, we see the opportunity to make those videos into interactive formats where the learning can be done by accessing specific modules or subjects.

We continue to be a qualitative leader in this space with innovative learning solutions using virtual life, interactive 3D visuals and PDF, learning solutions for mobiles and handheld devices, etc. We have also developed our own learning management system which will now enable us to deploy this as a service to clients.

In the consumer services area we rationalized our broadband service products and reformulated them based on consumer usage trends and benefits. The challenge of churn was addressed with timely offers and renewals. Pricing has also been a challenge due to competitive pressures. Our strategy now is to hold our price but offer more value at times when the bandwidth utilization is low, such as during the night.

The broadband opportunity continues to be large despite a slowdown in uptake of home computers. The established base is about 10m home computers, of which about 25% are yet to be connected to the net. Computer sales continue albeit not in the earlier rate of about 30% to 35%. Today most new computer purchasers want a multimedia PC that will be connected to the net and we work in alliance with a number of PC manufacturers to bundle our service along with computer sales. The trend is also towards faster net connections with more promotion of broadband and better rich media content.

Our efforts to turn around the e-Port Cyber Cafe chain continue with a reversal from declining revenues to a slight increase in revenues in the month of March '09. A steep increase in rentals and very low prices charged by mom and pop cafes have made the franchised cafes difficult to sustain profitably. Our efforts have been to relocate, renew, rationalize and refocus the business to make the cafes a viable and paying proposition for franchisees. We have done this by closing cafes that were unviable, leveraging alliances for superior content and focusing on revenue earning opportunities.

Value-added services in alliance with content partners such as Microsoft and companies in the education, travel and utilities space in addition to search, e-mail and other functional uses such as for applications to universities abroad, matrimony and jobs will be the main sources of revenue in the future.

While the reversal of the decline in revenues is a beginning, our focus will be continuing to grow revenues with focused effort going forward. We are also consolidating our efforts in the cities which have strong e-Port representation so that promotions become more cost effective.

In our interactive services improvement of the content management system and delivery platform has resulted in greater automation and reduced costs for both content and people. The content management system allows for greater flexibility and scalability for future growth. It also is multimedia capable and enables greater focus on user related features.

Online advertising revenues have seen a decline with the downturn, with the large advertisers, the matrimony, job and travel sites, etc. all facing challenges of their own. This has been offset somewhat by new advertisers from areas such as lifestyle, automotive, telecom and other sectors. Online advertising has also moved to performance based or outcome based advertising rather than the earlier norm of per million impressions.

We continue to leverage alliances for content both for entertainment and sports and have had success with a number of hit reality shows and live streaming of international cricket matches. We have alliances with leading TV stations, world wrestling entertainment and other agencies for content.

We continue our alliance with Google to power our search as well as the new Sify Mail which is continuing to grow with registered users.

We lead in the entertainment area with video content on movies and music videos and are now seen as a specialist for video content online. We were able to do this cost effectively by leveraging our infrastructure of data centers and our network for hosting and delivery of this content. We are now offering video advertising successfully to our advertisers and gaining revenues from this new offering.

Antzill, our newly launched gaming site continues to attract many new users and is increasing in popularity. The focus on games, entertainment and sports in addition to news and lifestyle initiatives has led to new users coming onto the site in the last year and will also be part of our focus going forward for cost effective growth.

This brings to the end of this section. I will now hand over to Raju once again for his closing remarks. Raju.

Thank you, Suri. I would like to conclude by reaffirming our focus on cost effective growth and a return to profitability moving forwards despite this challenging environment. We will continue to make selective investments in expanding our infrastructure and service capabilities based on demand for our services.

I will now hand over to operator for questions. Operator.

Thank you. (Operator Instructions). Gentlemen, it appears we have no questions. I would like to turn the call back over to management for any closing comments.

Thank you, everyone, for joining us on the call. We look forward to interacting with you all through the quarter and around this time thereafter. Thank you and goodbye.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time and we thank you for your participation.