Sify Technologies Ltd (SIFY) 2011 Q3 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to be Sify Technologies third quarter 2010-2011 financial results.

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, Christopher Chu, with Grayling. Thank you, Mr. Chu, you may begin.

Thank you, operator. I would like to extend a warm welcome to all of our participants on behalf of Sify Technologies Limited. I am 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 us at 646-284-9400 and we will 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 on Sify corporate website.

Some of the financial measures referred to during this call and in the earnings release may include GAAP -- 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 previous years.

A presentation of the most directly comparable financial measures calculated and presented in accordance with GAAP and reconciliation of such non-GAAP measures and the differences between such non-GAAP measures and a most comparable financial measures calculated collated 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 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 and CEO of Sify. Raju?

Thank you, Chris. Good morning, everybody. Thank you for joining on the call. I will commence with opening remarks on our performance for the third quarter ending December 31, 2010.

Improved EBITDA performance is the result of our relentless focus on cost measurement and revenue productivity. Even though we have seen a substantial challenge on the bandwidth prices in the market, our rental price business has shown resilience by taking a proactive approach to protect margins. That is important. Meanwhile, with the government of India turning into the biggest spender on IT development it was important for us to pursue this business segment.

The five sectors for bids in the state data centers have been complemented by our wins from our corporate and state (inaudible) and public sector units. At the Noida Data Center at Delhi [current section] -- this is the data center we are building in the northern part of our -- in India. The construction is progressing very well and we expect the data center to become operational in the next fiscal.

While Sify identified the data center practice as its major growth plan, it was predicated on the rich potential that this sector offer and the unique way it related to the Company's overall growth plan. It used -- the [rollout] benefit to our system integration business, especially our data center will practice, ties nicely with our connectivity business because it uses stability and durability in our relationships.

Our investments in the Indian -- this is EIG, Europe-India Gateway under-sea cable, and the cable landing Station for the GBI, Gulf Bridge International, under-sea cable are the parts of the same big picture. Managed services in our infrastructure management service business is witnessing satisfactory growth. The consumer business is transitioning into a more scalable model to support healthy revenues with emphasis on the (inaudible) value-add services on the cloud platform.

I now request Mr. Vijay Kumar, our Chief Financial Officer, to take you through our financial performance for the quarter in greater detail. Vijay?

Thank you, Raju, and hello, everyone. I shall now discuss our financial performance in a more detailed manner. Revenues for the quarter at $38.72 million is marginally higher than the same period last year and in the previous quarter. This is on account of a sharp fall in bandwidth prices and the changed business model in consumer business.

We are heartened by the growth over previous quarters in revenues of hosting business, our data center business by 15%, voice business by about 6%, which was offset by a drop in systems integration revenues by 23%. While consumer business was flat, international business revenues increased by 10%.

Gross margins for the quarter were 38%. EBITDA is at $2.13 million for this quarter vis-a-vis $1.21 million in the previous quarter. The EBITDA in third quarter of the last year was $1.17 million. Net loss for the quarter was $2.09 million as against $2.79 million over the previous quarter.

The promoters have, in response to this subscription to the capital of $86 million during the quarter have already infused capital of $21.7 million. The infusion of capital has improved our liquidity position and will help us to fund data center and network expansion.

Cash on hand at end of the quarter was at $7.14 million and the Company had undrawn lines of credit of about $20 million. Cash flow from operations for the nine months of 2010-11 was at $3.24 million due to increased efficiencies in collections and better supply side management. Capital expenditure for the nine months in this here was about $[4.78] million.

We are glad to announce that we have regained compliance with NASDAQ listing rules by filing our Form 20-F in November 2010. I will now hand over to Suri who will take you through the business initiatives during the third quarter. Suri?

Thank you, Vijay, and good morning, everyone. I will take you through some operational and business initiatives that we have focused on over the last few quarters. We see process improvements in revenue productivity making an impact on our bottom line and we are aligning all the teams in this endeavor.

We have rolled out a new performance management system and a new procurement system which enables us to leverage untapped potential within our system and accelerate realization of the benefits of cost optimization efforts underway. We have also aligned the organization structure to the needs of the market for better revenue growth.

Sify's enterprise business has successfully added large enterprise customers to all its business verticals. Riding on the back of growing demand for cloud and data center services and backed by alliances with some of the industry's leading players, Sify consolidated its position as a leading managed services provider. Network-to-network interface with new telephone service providers helped us in offering our bandwidth and RF last mile services to other telecom service providers for their customers.

The disaster recovery setup for the cloud services is ready now from Sify's Bangalore data center. This will help customers subscribe to the BCP/DR solution on Sify's cloud setup. In perhaps the first time in more than three years the number of cafes opting for Sify have registered a significant increase over the previous quarter. A 14% growth has been recorded over the previous quarter, up from 8% over the first quarter.

In the eLearning business, our customer base has increased and the dependence on large customers has reduced with the top two customers only accounting for 20% of the revenues now from an earlier level of 40%.

I will now hand over to Raju for his closing comments. Raju?

Thank you, Suri. I would like to reiterate that our focus will always be healthy revenue growth with a specific attention to cost management. This will be a continuous process.

And now I will hand over to the operator for any questions. Operator?

(Operator Instructions) [Neikur Malpani], Asian Century Quest Capital.

Hi, thank you for the opportunity. Can you tell me a little bit more about the enterprise segment, which parts are seeing demand in the segment and which are seeing less demand or are lackluster?

In fact, all the areas of enterprise business are seeing the demand, whether it be on the connectivity or Internet services or whether it be the MPLS, our virtual private network services, as well as our data center services. Alongside that you will be aware that we also have an application suite and our homegrown products, whether it be data management services or we have the Forum supply chain management or we had a testing engine, each one of these we find we are able to draw upon more customers.

As mentioned earlier in the call, the one concern has been the drop in pricing on bandwidth on account of which there is a fair amount of competition. But the way we are able to hold up on that front is in terms of acquiring a larger customer base.

And when do you think this growth in other segments will start showing up on the top line in the enterprise segment?

Well, what I would respond to you on that is as follows. Without making any forward-looking statement, you are aware that we have made significant investment in the network expansion [bid] as well as the data center services area as well as the recently introduced over the last few quarters' cloud services area. These investments have been made and we are now picking up the customers. So it's a question of the investment having already been written in and revenues coming in through the next few quarters.

And on the competitive dynamics in the segment, in the enterprise segment, can you talk a little bit about what the competition is doing and how the pricing trends are -- have been in the last few quarters?

Pricing trends are -- without getting into the numbers, the pricing trends on the Internet bandwidth segment are extremely competitive. That also enables us -- because we acquire our bandwidth on a wholesale pricing basis, it gives us certain advantages of which we then need to see how we pass on to the customer without losing too much off of margin by providing value addition out there. And that is pretty much common to all the operators.

What is happening us for us to note is that in terms of the investment decisions that we have made we find that there are more people, other operators, who are looking at what we are doing and they are trying to see how they can follow in our footsteps by providing similar service lines. That is one area. That is true whether it be in terms of cloud services or certain application areas.

And what about pricing and connectivity Internet and PLS?

I am not sure about the intent of the question, please?

Well, what about pricing [up] the other services that you provide? Are the pricing trends upwards, downwards in these? How has those been moving?

Apart from the connectivity services, we have reasonably good pricing on all the others that we have. And in fact, some of the areas that we have built up our capability in the last three quarters or thereabouts at the current pricing levels that we are in where the cost is already [sunk in], we find that we are able to hold that pricing and that is a good thing.

Okay. I will have a few more follow up questions later.

Sure. You are most welcome.

(Operator Instructions) Gentlemen, it seems we have no further questions. Do you have 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 again.

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