Sify Technologies Ltd (SIFY) 2026 Q3 法說會逐字稿

Ladies and gentlemen, thank you for your patience. This call will begin shortly. Once again, thank you for your patience, and this call will begin shortly.

Good morning, everyone, and welcome to the Sify Technologies financial results for the third-quarter FY 2025 to 2026. (Operator Instructions) Please note, this conference is being recorded.

I will now turn the conference over to your host, Praveen Krishna, Head of Investor Relations of Sify Technologies. Praveen, the floor is yours.

Thank you, Jenny. I'd like to extend a warm welcome to all our participants on behalf of Sify Technologies Limited. I'm joined on the call today by Mr. Raju Vegesna, Chairman; and Mr. M. P. Vijay Kumar, Executive Director and Group CFO.

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 Luri Group at 164682856, 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.

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 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 announcement made in previous years. A presentation of the most directly comparable financial measures calculated and presented in accordance with the 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 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 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. Chairman.

Thank you, Praveen. Good morning, everyone, and thank you for joining us on the call. India's growth story has moved decisively from promising to performance, strong economic fundamentals, policy continuity, and accelerating digital adoption are positioning India as a central pillar in the global technology ecosystem. India IT is entering into a new phase, one defined not only by scale, but by leadership in digital infrastructure, cloud and AI-led innovations.

As enterprises and government intensify their focus on AI, cloud and data-driven platforms, demand for the secure and high-performance and severance digital infrastructure is rising rapidly. At Sify, our strategy is aligned with this inflection point through a sustained investment in hyperscaler data centers, resilient networks, and AI-driven platforms, positioning us to enable the next decade of enterprise transformation in India.

Let me now bring in our Executive Director and Group CFO. Mr. M. P. Vijay Kumar to explain both the business and financial highlights. Vijay Kumar.

Yeah. Thank you, Chairman. We continue to exercise fiscal discipline while making measured investments to strengthen our long-term capabilities. Our capital allocation across data centers, networks, and people for digital platforms remains guided by a disciplined approach to risk and future readiness with a focus on long-term value creation.

Let me now expand on the business highlights for the quarter. The revenue split between the businesses for the quarter was Network Services, 37%; Data Center Colocation Services, 40%; and Digital Services, 23%. In this quarter, data center colocation capacity of 9.1 megawatts was sold. As of December 31, 2025, Sify Network Services provides services via 1,214 fiber notes, a 9% increase over the same quarter last year.

And as in the same day, we have so far deployed 9,695 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 Q3 of financial year 2025, '26. Revenue was INR11,596 million, an increase of 11% over the same quarter last year. EBITDA was INR2,470 million, an increase of 29% over the same quarter last year. Loss before tax was INR257 million, and after tax, INR329 million. Capital expenditures during the quarter was INR3,452 million. And cash balance at the end of the quarter December 31, 2025, was INR 3,627 million.

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

Thank you, Vijay Kumar. Sify is committed to driving technology-led growth by enabling enterprises to modernize, expand, and capture new opportunities. Our resilient infrastructure and comprehensive portfolio of services provide a strong foundation to deliver sustainable value and long-term returns. As we execute on this roadmap, I want to thank you for your continued confidence and support in our vision for the future.

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

(Operator Instructions) Greg Burns, Sidoti & Company.

Good morning. I just wanted to start off just asking about maybe an update on the timing for the IPO of Infinite spaces. Are there any milestones that are upcoming -- or how should we think about the major milestones that still need to be completed in the timing, the expected timing, for that IPO?

Yeah, Greg, good morning. We filed the draft prospectus middle of October 2025. And usually in the period of three to four months, we get the securities regulators approval. We are expecting the approval of the draft prospectus this month. And we will be guided by the bankers on the exact timing of opening the issue and getting listed. Once we get the SIBI's approval this month, there are additional processes in terms of updating the draft prospect with the financials as of December 31. And basis the banker's guidance, we will go to the market for listing.

Okay. And I guess you mentioned that you had sold an additional, I think, 9 megawatts of capacity this past quarter. Could you update us on maybe what your total design capacity currently is and how much of that in total has been sold?

Yes. The total design capacity is 188 megawatts, out of which the capacity, which is ready for service is 130 megawatts and out of 130, the total sold capacity is about 127 megawatts.

Okay. Great. And then of I don't know, maybe over the next 6 to 12 months. Could you give us maybe an update on the roadmap for your new data center construction, maybe in terms of either DCs or capacity that you expect to bring online?

Yes. There are two facilities in our Rabale data center campus, which will go live in this calendar year for which we have contracted with the customer. And there are other two greenfield projects, which are under construction. One of which will get delivered middle of this calendar year. and the other will get delivered middle of the next calendar year..

And the total capacity of those four facilities?

Okay. The aggregate capacity of all the 4 facilities at present is about 125 megawatts, but basis customers' actual deployment, the capacity could be a little higher because we are seeing customers bringing in AI workloads into the country. It has just begun, so the densities are expected to increase.

All right, thanks. And then lastly, the Digital Services, still operating at a loss. How should we think about that part of the business longer term? At what point do you expect that to maybe either be at breakeven or profitable? When are you going to start to get some operating leverage on the investments you're making there?

Yes, to breakeven, I don't want to sound forward-looking. Let me give a little guidance to an extent I can. The next fiscal year, '26, '27, latter part of the year, we should hopefully become breakeven. And depending on how the services market scales up for the new offerings, which we are investing, we will see profitability thereafter.

Okay. Perfect, thank you.

Ramesh Vijaj, Stockhifi.

So you mentioned the 12.16 megawatt technicity sold since June 2025. How much of this is already revenue generating?.

Out of that, the revenue generating will be about 4 megawatts because a substantial part of the orders have come in December, which will generate revenue in the coming quarter.

What is the average contract tenure and return on capital employed per megawatt?

For hyperscaler, the average (technical difficulty). Hello. Hello, Jenny. Maybe we are experiencing difficulties on the line?

Yeah, Ramesh, I'm going to just boost your line. Are you quite far away from your headset -- handset?

No, we are able to speak. I hope you guys are able to hear us.

That's better.

Jenny, just a confirmation, I think we lost Vijay on this call.

Oh, okay. Bear with me one second. Vijay's line is still connected. Vijay, can hear us?

Vijay -- okay, the line is still connected. Just bear with me a second, I'll try and put the line, just one second.

Okay. I'm trying to get Vijay back in the call, so just bear with you while I try and do that. Okay, one second.

Yes, please. He got dropped, so he's asking to connect again.

Okay. For the moment, we have lost Vijay, and I'm not getting him back in at the moment. I will keep trying. In the meantime, if -- would you like me to carry on with any questions? We still have Ramesh on the line.

I would -- could you wait another -- could you hold for a minute, please? Could you hold for a minute?

Yes, certainly.

Yes.

Ladies and gentlemen, we'll just wait a moment to see if we can get the Chairman back on the line.

I have Vijay on my phone, and he is listening in on this call, so we can take your questions.

Okay. So, Ramesh, if you would like to ask your question again.

The question was regarding the tender of (inaudible). Yeah, the hyperscale contracts are all for a tenure of seven years and with renewal for two further terms of a similar period. And for enterprise contracts, it is five years and which usually tend to get renewed for similar periods.

Okay. Return on capital employed each megawatt?

Return on capital employed, we measure it essentially for the stabilized facilities, which is facilities when they get fully populated. And for the fully populated facilities, the return on capital employed is in high teens.

So this IPO, which you're coming out with Sify Infinite, is this proceed going to be used for debt reduction of parent level? Or is it going to be used for fresh network expansion?

The IPO primary portion of it is going to go for data center expansion A portion of the funds will go towards retiring the existing loans, and we will replace those loans with lower cost and longer-term infrastructure debt subsequently.

So how is Sify Infinite structurally supported like more debt, cash flow, everything -- how exactly is it separated?

Yes. It Sify Infinite Spaces is the 100% subsidiary of Sify Technologies Limited, separate legal entity and its separate financial statements are available on our website. They are also available in the IP world documents which we have presented. It's also availability, MCA portal, the separate financial statements are available. And since our debt is listed in the Bombay Stock Exchange, the quarterly results are also updated in the Bombay Stock Exchange portal.

Okay. is the existing Sify shareholders ADR going to get any kind of a shareholder quota in the new IPO?

We have been advised by the bankers that the existing ADR shareholders are holders of American Securities and the legal framework does not allow any priority to be given. However, the US shareholders who have -- if you are in US, you can -- and you have a nonresident account in India, you could participate through the NRE account which you have here.

(Operator Instructions) Prateek Singh, IIFL Capital.

The first question is on the depreciation. So basically, I understand that the management estimates useful life for power equipment to be around 8 years. Is it something -- does it mean that after 8 years, we'll need to replace power equipment? I don't think so, right? It's just for accounting, the power equipment would be lasting for 15 to 20 years, is this understanding correct?

Exactly. You're right, Pratik. In fact, we have been in business for about 25 years. And except for certain items like the UPS and the batteries, rest of them have a life north of 15 years, north of 15 years. One of the reasons the company took a depreciation policy of an average of 8 to 10 years is to coincide with the pricing model which the company adopts. So our pricing model assumes 8 to 10 years' capital recovery. And hence, the depreciation is synced to that.

The next question is on margins of the data center business, which is kind of a steady state and growing very well for us. Margins, while I understand that they are stable, we saw a small dip in margin this quarter. So usually, when we have to forecast numbers, how should we look at it? Is it like hyperscalers? Are they driving pricing down or the institution is quite tight in India.

That's not the case. It might be due to power costs going up. How should we look at margins and pricing environment going ahead?

Okay. The EBITDA margins are consistent between 44% to 45%, 100 basis points difference at times arises between quarters, depending on the customers ramping up their IT power consumption. So when, for example, Rabale Tower went live in the last 9 months, and those equipments have come in, which have contributed to capacity revenue, but the power revenues start scaling up over a period of time. And similarly, whenever new large capacities come live, there are -- there is that period of ramping up for about 6 to 9 months where you have some operating expenses, which later give us the operating leverage to reduce the same. So it generally fluctuates between 100 to 200 basis points. Otherwise, it's close to 45%.

Understood. And sir, so like sir said earlier that our design capacity is 188, installed is around 130, operational is 127. So did I hear it correctly install is 130, right? Or was 150.

130.

Okay. So these are the same numbers as of June as per the DRHP. So does it mean that the CapEx that we are doing right now is going into capital work in process and we can see a step jump when a new facility is commissioned.

Correct. Correct. You're right. The design capacity of 180 between the DRHP of June and now is the same. A substantial amount of capacity is going to get added in this calendar year, where we have Rabale Tower 6 and 7, which will go live and Rabale 11 also, which is going to go live. So you'll have a substantial capacity getting added.

And what kind of time difference do we see? Like -- so I understand that design capacity is bare shell, right, without UPS, gen sets and all those things and installed capacity has all those things. So what kind of time difference do we see between 130 going to 188? Is it more like 6, 7 months, or is it more like 12 months? So basically, how long does it take for installed capacity to rise to the level of design capacity in short?

Yes. So the markets are divided as Mumbai and other cities. In Mumbai, the recent experience is any capacity you add, the design capacity getting fully populated is approximately about 15 months -- 15 months, whereas in other cities, where you build on a tower concept, where you build a core and shell meet the future demand because when customers come in, they see whether the capacity is scalable, that becomes one of the important requirements. So in other markets, experiences, it takes about 3 to 4 years to get fully populated. But at times, if a hyperscale customer comes in, then it gets populated earlier.

The second question you had on pricing. We are not seeing any pricing challenges, whether it is hyperscale customers or the enterprise customers. The pricing -- the return on capital is fairly consistent. The for customers to look at it is availability of capacity on time. And the service providers quality of product and operations and maintenance is a key criteria for the customers and it continues to be so now.

Understood.

Your line cut out for a second. Would you mind reasking the question, please?

Sure. So is my line clear now?

Yes.

Better.

Yes. So on the related party disclosures in the DRHP, when we talk about expense transfer and revenue transfer with the Sify Technologies. I wanted to get more sense as to what these are and how should we look at it?

Yes. Yes. So the related party transactions are broadly 2 things. The revenue transfer and the expense transfer, which you see there is actually in the context of some of the contracts which were signed by the parent company before the data center business was carved out. So those customer contracts have remained with the parent company because they are largely with the public sector companies, so those contracts, whatever revenue comes, we pass it on as it is to the data center entity as per the business transfer agreement.

So parent company does not have any margin. It's just a simple revenue and expense transfer, which is -- that's point number one. Second is there are 3 data center assets, which are owned by the parent company. Those assets have been given on lease to the subsidiary because when we did the business transfer in 2020, it was tax efficient to retain the asset in the parent company and give it a long-term lease to the subsidiary.

The third point is, as far as the go-to-market of the company is concerned, the go-to-market, we have for hyperscale business and dedicated go-to-market team within the data center entity. But for the domestic enterprise business, we leverage on the go-to-market capabilities, which are there in the parent company, where we have about 5,000 enterprise customers. So that go-to-market cost and the marketing costs are a portion or an actual cost basis to the data center.

Understood. And just one last clarification, when sir said that December quarter -- the capacity sold in December quarter will generate revenue in the upcoming quarter. by upcoming quarter, do we mean March or June?

March, March, March. (inaudible) interact anytime at your comment, please feel free to reach out to us --

Sourabh Arya, Oaklane Capital.

Am I audible?

Yes, you are. Yes.

Sir, my first question is actually on the network business. So why this business is flat in this quarter?

Yes. As far as the network business is concerned, during this quarter, we had some bit of price corrections for our existing customers. Second is there is also a small shift of customers moving from MPLS to Internet and when the customers move from MPLS to Internet because of the new technologies like SD-WAN and SASE, the price realization comes up. But at the same time, we manage our costs also to protect our margin. So volume-wise, we would have grown -- volume wise would have grown, but the revenue numbers would look a little flattish.

So does that mean this exercise will continue? And second then, how should one look at the growth of this business? Because I was under the impression, ultimately, it should grow in line with the data center business.

Correct. Correct. And that's actually what will happen. The network business will grow similar to the data center business, but probably not at the same pace because data center growth momentum is significantly higher, but network will also grow alongside the data center business.

Okay. And second was there's continuous new (inaudible) this Google partnership on the networking side. Can you explain that if like what exactly is happening? And what kind of CapEx Sify would be doing because these are very large numbers that keep coming.

Yes, yes. So as far as Sify Network business is concerned, you might be aware, we are a carrier-neutral cable landing station operator in the country. We have one operating cable landing station in Mumbai for over a decade where there are 3 cable systems, which are landing and those cable systems may take them into the city to the various data centers.

Now some of the hyperscalers as part of their overall strategy are looking at landing capacities in other cities in India, which (inaudible) happens to be on a chosen location. So Google for their cable landing system, which is coming on the eastern side has chosen Sify as the partner for setting up the cable landing station where their cable will come and land.

So this cable will land in a data center, which we are setting up in Visakhapatnam, which we call as an edge data center, where we'll have some anchor customers as well. And this cable will land there. And this cable from the data center. And the cable landing stage investment is not a material investment. It's a very strategic investment, though.

The material investment will be carrying the capacity from the cable landing station to Google's own data center, which they are putting up in Visakhapatnam, which is not too much of a distance. So that will be a capital investment to be done. At this point in time, we don't have a real estimate of how much is that. But typically, those investments are largely funded by the customer themselves. So they would not be balance sheet heavy for Sify Technologies.

Okay. That is fine. So you will continue to benefit from this but not by putting too much of capital.

Correct. Correct. It's a very strategic investment. What it actually helps us in the long term is carrying the traffic which comes to the subsea cable systems, into the data centers, length and breadth of the country. So that's the kind of strategic position it comes.

It's similar to an international -- cable and station is similar to an international airport where the traffic comes in. And from there, you carry the traffic to your network into the domestic cities. So that's a simpler way of understanding the cable administration investment.

Okay. Okay. And one last question. So you said that the new data centers, the Rabale, the new towers, there the capacity is some 30s, right, per tower. But you are seeing some AI investments if they can upgrade the capacity. But is the -- so does it mean the CapEx per megawatt for some of these upgradation is far more than your traditional $5 million, $6 million per megawatt investment, which happens in normal scenario?.

Yes. So currently, what is happening Saurab is the 4 data centers, 2 of them are 77 megawatts, the other 55-megawatt. The 77 megawatts we are going to host AI infrastructure of the customer. So a customer is bringing in substantial amount of AI into that facility. This facility was originally designed for 52, whereas now it's going to be 47 megawatts.

And the incremental capacity, incremental CapEx cost for the AI is marginal for us, and some of it is getting funded by the customers themselves because they are bringing some proprietary design. Second, coming to 152 megawatt what I mentioned?

Yes.

The other 52 megawatts, which I mentioned, has been originally designed for cloud workloads. But if the customer is coming with AI workloads, we have the opportunity of increasing that 52-megawatt to a higher capacity. So it depends eventually on what kind of workloads the customer is bringing in.

Sure. This is helpful. Just very lastly. So when the normal DCs there, you have got air cooling. So does it mean -- and as you are saying, the CapEx would not increase much and it is done by the customer only. So does it mean none of these new capacities have some liquid cooling, et cetera, which are very, very expensive? And even if those are there, those would be borne by the customer.

No, no, that's not the right way to understand. All our data centers, which have gone live since 2024, are NVIDIA certified and capable of hosting liquid cooling systems. They're all designed for that. And our new facility Rabale 6 and 7, which is coming right from day 1, we'll have liquid cooling system. And the commercial engagement with the customers where it is from customer to customer, contract to contract.

Some contracts we incur the whole MO and it gets added to the capacity charges, some customers, some customers the customer invest in that for which we enable the AC. So it depends on contract to contract and customer-wise. And whenever you have the liquid cooling system coming in, the incremental cost is approximately $1.3 million per megawatt.

$1.3 million per megawatt, right?.

Correct. Correct. Correct.

Okay. Okay. That is helpful, and that is borne by the customer or by you?.

(inaudible) the customer does it. Sometimes we do it and charge from the customers.

Perfect. And one last if I can squeeze is on the data services side, though you gave the guidance that maybe we will see some flat margins for breakeven by next year, second half. But what kind of ramp-up in this business is expected, like some time now? And what are the green shoots?

We are expecting a combination of actions to help us get to breakeven. One is from our portfolio of services. We will look at focusing on two or three services more for revenue ramp-up like we have the cloud and managed services, (inaudible) managed services and the security managed services. So those are a portfolio, which we will see some revenue growth to help us get to breakeven, where we are actually developing capabilities around AI ops to bring the differentiation to the customers. That's part one.

Stick -- some of the portfolios where the scale of opportunity is limited, we might decide to repurpose those resources and get them to businesses which are productive. So we are looking at that carefully, and we will do it in a calibrated manner over the next three to four quarters. We have good quality resources engineers, very young engineers, whom we have traded good quality people. So we would like to monetize their capabilities by increasing the focus on certain set of services.

Ramesh Vijaj, Stockhifi.

Ramesh, can you hear us? Ramesh. It's quite hard to hear you.

Are you able to hear me?

Yes, we can hear you now. You can ask a question.

There is a small thing that we would like to know. How should we go forward with this equity stability, especially such as CapEx and debt going forward, which is continuing to rise.

Yes. As the capital requirements is substantially for the data center business, and our initiative now to do an IPO helps us to create the stock as a currency. The initial primary capital which you are raising should take care of the demand growth for the next two to three years. And thereafter, we should be able to do a combination of rights and (inaudible) to raise capital to meet the incremental capital requirements.

In fact, this listing is essentially to fund the growth for the future, given the fact that the business has very good prospects over the next decade.

What kind of offloading has been -- or what kind of new equity is being issued? How much percentage would be impacting for the existing shareholders? For the Sify Intimate?

The DRHP has been filed and it is in the company's domain. I would encourage given the fact that these are all subject to capital market regulations, I encourage you to read the same. The primary capital which we are raising is INR2,500 crore, and there's an offer for sale from our capital partner, Kotak, where we have Aria and GIC LPs, where they'll be liquidating a small portion of their existing holding for INR1,200 crore. So total issue size is INR3,700 crore.

Prateek Singh, IIFL Capital.

Hey, just a clarification on an earlier answer, so when we said we have four capacities in line Rabale, two brownfield and two greenfields. So these two greenfield are in Rabale as well or they are in some other city or some of the area?

Yes, all the four are greenfield. All the four are greenfield. two of them are right adjacent to the existing facilities. And the other is right opposite other two are right opposite the existing facilities. They all constitute a single CapEx. All the four are greenfield projects.

Okay, in Rabale itself? Yes. In Rabale itself, right? All four in Rabale?

In Rabale. They're all part of the same campus and all before on green shoot projects.

Understood. Understood. And when we signed these AI contracts -- do they have -- do we expect to maintain similar kind of return on capital employed in AI contracts like cloud, or would they be a bit higher?

At present, we are seeing same kind of returns. In early stages, particularly how it increases in the future. But at present, it's the same set of returns.

Okay. And the Andra Edge facility will be 50 megawatts. Is that the right understanding?

No, no, no. Andra in it is on a land parcel of 3.6 acres. The initial design could be for 5 acres, but it's early stages. Once everything is firmed up, we will communicate, it's early stages. But typically, all the sites, we are designing it for 5 megawatts.

Understood.

And just to clarify on the Andra one, apart from the 3.6, we have a land allotment of 50 acres, probably your 50-megawatt context came there. So we have a land development of 50 acres, which is there in Visakhapatnam, which is for the future capacity additions depending on how the demand comes in.

Well, we're appeared to have reached the end of our question-and-answer session. I will now hand back over to Raju for any closing comments.

Thank you for joining us on the call. Have a good day. Thank you.

Thank you very much. This does conclude today's call. You may disconnect your phone lines at this time, and have a wonderful day. We thank you for your participation.

Thank you, Jenny.

Thank you.