Sify Technologies Ltd (SIFY) 2024 Q3 法說會逐字稿

Greetings and welcome to the Sify Technologies' financial results for third quarter fiscal year 2023 to 2024. (Operator Instructions) Please note this conference is being recorded. I will now turn the conference over to your host, Praveen Krishna. You may begin.

Thank you, Oli. On behalf of Sify Technologies, allow me to wish you a very happy new year. I'm joined on the call today by Raju Vegesna, Chairman; M. P. Vijay Kumar, Executive Director and Group CFO; and Kamal Nath, CEO. 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 Global at 646-284-9400 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. The 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 other financial measures referred to during this call and in the earnings release may include non-GAAP measures. The 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. The presentation of the most directly comparable financial measures calculated and presented in accordance with GAAP and a reconciliation of such GAAP measures and other differences between such 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. This does 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. Chairman?

Thank you, Praveen. Good morning, everyone. Thank you for joining us on the call.

In combination of growing industry regulatory initiated in India and increasing investment climate and lot of skilled human capital are the factors that continues to dominate enterprise business strategies for the year. Business leaders are united in their view that India is essential to their growth plans and are aggressively ramping up their local investments.

Let me bring Kamal out for you to expand our some of the business highlights for the last past quarter. Kamal?

Thank you, Raju.

As enterprises pursue their digital transformation and digitalization objectives, they are also recalibrating their digital infrastructure across hybrid cloud, network, security, and IT infrastructures. Customer experience, business continuity, cyber security, application modernization, and overall adoption of AI models are the prime drivers for this recalibration. Our infrastructure investments and services portfolio are fundamentally aligned to meet the customer goals.

Simultaneously, we are continuously engaged with our customers to identify their specific needs and selectively recalibrating our propositions to support the same.

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 32%, digital services at 28%, and network services at 40%. As on December 31, 2023, Sify has deployed is 6,920 contracted SD-WAN service points across the country. Sify provide services via 974 fiber nodes across the country, a 15% increase respectively over the same quarter last year.

This quarter, Sify invested USD0.15 million in startups in the Silicon Valley area as part of our corporate venture capital initiative. To date, the cumulative investment stands at USD7.22 million.

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?

Thank you, Kamal. Wish you all are very happy 2024. Let me briefly present to you the financial performance for the third quarter of financial year 2023, '24.

Revenue was INR8,659 million, a decrease of 3% over the same quarter last year. EBITDA was INR1,689 million, an increase of 4% over the same quarter last year. Loss before tax was INR20 million. And after tax was INR14 million. These are compared to a net profit in the same quarter last year, with substantially higher depreciation on account of ongoing infrastructure expansion projects and interest cost.

Capital expenditure during the quarter was INR1,087 million. We continue to invest in adding more data center capacity, extending our network footprint, and scaling our people on new tools. These investments are being made ahead of the curve, and we'll reflect on our net profit for the near future.

The interest on compulsorily convertible debentures raised in our data center subsidiary for data center expansion has been accounted partly as equity in accordance to the GAAP and is recognized as expense in the statement of income. The cash balance at the end of quarter was INR6,037 million.

I will now hand over to our Chairman for his closing remarks. Chairman?

Thank you, Vijay Kumar.

As you can see, our investments, both in capital and resources, are backed by our belief that the market is just warming up to our services. There is still a lot of runways, and we have the right portfolio of services. We just have to accelerate our engagements.

Thank you for joining us on this call. I will now hand over to the operator for any questions. Operator?

(Operator Instructions) Greg Burns, Sidoti & Company.

Good morning. Can you just give us an update on your current data center capacity? How much -- how many megawatts of capacity you might have been added in the quarter and what your roadmap is for the rest of 2024? Thank you.

We have a data center operational capacity across 6 cities and 11 facilities of about 100 megawatt. And this quarter that is January 2024, we will be making another 38-megawatt facility operational. Apart from this, there are two other greenfield data center projects at Delhi and Chennai, which will go live in quarter one of fiscal '24, '25. In Phase 1, both of them will have a design capacity of about 26 megawatt each.

Okay. So the 38 megawatts in -- is that in Mumbai that's going to go -- that will go online in this fiscal fourth quarter?

It's going live, January 2024. This month.

Okay. Okay. And I guess with this capacity coming live, do you expect to see a little bit better operating or earnings leverage next year now that you're going to start generating some revenue off of some of these investments you're making?

Yeah, you're right. It should happen.

Okay. Great. And then the decline in digital services this quarter, was that mainly driven by the technology integration services or was it just timing of projects? Is there anything else going on there that we should take note of?

Two things. One is it is a timing of the existing projects in terms of effective handover to the customer. And second is a change in -- a conscious change in the profile of the technology integration services projects where the focus is largely on projects where there is services component, which is significant.

Okay. Okay. So given that, that change is -- are you just being coming more selective? Should we -- how that, I guess, translate into the P&L? Just lower growth, more selective higher margin projects. Is that we're looking for now?

Yeah. So it would basically mean less of a pass-through projects and more of services projects, which should be higher margin projects.

Okay, great. And then with the Kotak investment, how much have you drawn down on that and how much remains available to you?

We have drawn down a total of INR1,000 crores. Out of which, INR400 crores has been deployed for projects we have executed in the last couple of years. INR600 crores is meant for new projects, which we are picking up. And as per the arrangement, we are entitled to draw under INR600 crores any time up to October 2026.

2026. Okay, perfect. And then you mentioned some industry regulations, positive industry regulations for you. I think one of those was the data security or data privacy regulation. Could you give us an update on that? Maybe some other -- any other from pro-industry regulations that you might have been referencing in your prepared remarks? Thanks.

Yeah. So it is essentially the Data Protection Act, which is a material development. Apart from that, all the regulators have been encouraging enterprises to post the data within the country. And there is also an encouragement towards hosting these in cloud, which are set up outside of their premises. So most of the banks or insurance companies are developing their digital transformation strategies to host in a cloud, which are largely private cloud, hosted with data center providers like us.

Okay. What is the status of the Data Protection Act? Is it near the point of getting passed? Or is it -- no, I guess -- sorry. Where is it in the process of being passed?

The law is live. The law is live as we speak. What is pending is the regulations relating to the implementation of the law, which should hopefully come in the coming months.

Okay, perfect. All right. And that's everything from me. Thank you.

Thank you.

(Operator Instructions) There are no questions in queue.

Thank you for your time on this call. Looking forward to interacting with you through the year. Thank you very much.

Thank you. Thank you, Oli.

Thank you.

Thank you.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.