管理層發言
Greetings, and welcome to the SIFI Technologies Financial Results for the second quarter of the fiscal year 2025-2026 conference call. Please note that this conference is being recorded. I will now turn the call over to your host, Mr. Praveen Krishna. You may begin.
Thank you, Ali. I'd like to extend a warm welcome to all our participants on behalf of SIFI Technologies Limited. I'm joined on the call today by Sir Raju Vegesna, Chairman; and Mr. M.P. Vijay Kumar, Executive Director and Group CFO of SIFI 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 Luri Group at 1 (646) 824-2856, 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. 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 SIFI corporate website. Some of the financial measures referred to during this call may include non-GAAP measures. Sify's results for the year are according to the International Financial Reporting Standard, or IFRS, and will defer some work 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 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 protection 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. Let me now introduce Mr. Raju Vegesna, Chairman of Sify Technologies Limited.
Thank you, Praveen. Good morning. Thank you for joining us on the call. As India's digital transformation is entering a decisive phase, redefining its role in the global technology ecosystem. The acceleration in the cloud adoption, AI integration, and data center expansion underscores India emerges as the next hub of digital infrastructure. Our focus remains on aligning with this momentum through sustained investments in hyperscale data centers, robust network expansion, and I release cell platforms. These initiatives are strengthening our position as a trusted enabler of enterprise transformation across both public and private sectors. We believe the next decade will see India set a global benchmark for digital innovation. Sify will continue to play a pivotal role in empowering the journey, building the infrastructure and platforms that will drive the country's growth in the AI-led economy. Let me now bring our Executive Director and Group CFO, Mr. Vijay Kumar, to explain both on the business and the financial highlights.
Yes. Thank you, Chairman. We remain steadfast in our commitment to fiscal discipline while continuing to invest strategically for long-term growth. The current phase of expansion across our data center, network, and digital platforms reflects deliberate choices to build future-ready capabilities. The network and data center businesses are scaling as per plan; the loss in our IT services business represents our continued investment to prepare ourselves for the opportunities ahead. Our liquidity position remains robust, underpinned by prudent cash flow management and operational efficiency. As we move ahead, our focus will be on sustaining agility in financial planning, embedding accountability and sustainability into every vision, and driving enduring value creation for all stakeholders. Let me now expand on the business highlights for the quarter. The revenue split between the three businesses for the quarter was Network services, 41%; data center services, 13%; and digital services 20%. During the quarter, Sify sold an additional 3-megawatt data center capacity. As of 30th September 2025, Sify provides services via 1,196 fiber nodes across the country, a 12% increase over the same quarter last year and has deployed 9,992 contracted SDWAN 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 Q2 for financial year '25, '26. Revenue was INR 10,533 million, an increase of 3% over the same quarter last year. EBITDA was INR 2,361 million, an increase of 20% over the same quarter last year. Loss before tax was INR 194 million, and loss after tax was INR 275 million. Capital expenditure during the quarter was INR 3,064 million. The cash balance at the end of the quarter was INR 4,149 million. I will now hand over to our Chairman for his closing remarks.
Thank you, Vijay Kumar. In the coming quarters, our focus will sharpen on empowering AI-led transformation and partnering with the new generation of enterprises that are ready to innovate and scale with our integrated infrastructure and mature suite of digital services. Sify stands poised to lead in this new era of intelligent computing. I extend my sincere thanks for your continued trust and belief in our future. Thank you for joining us. I will now hand over to the operator for questions.
分析師問答
Our first question is coming from Jonathan Atkin with RBC Capital.
A couple of questions, if I may, about the data center services segment. First of all, can you give us a flavor for the types of returns, financial returns that you are achieving when you do sort of like the 3-megawatt deal that you referred to, and just the range of financial returns that you're thinking about for enterprise as well as hyperscale deals? And if you could also remind us what you consider to be kind of your all-in cost of capital.
So as far as the 3-megawatt deal is concerned, it's a very small enterprise deal. Our data center business is both hyperscale and enterprise, approximately in the ratio of 2/3 and 1/3, and our project IRR historically have yielded IRRs north of 20%, which is in the late 20% range.
And then as you look at the opportunity set, given where India is in terms of hyperscale AI, but also enterprise AI adoption as we look over the next couple of years, what do you see the sales pipeline looking like that you could accommodate? And then any sort of general comments about other players in the market that are also building in some cases, larger scale projects compared to yourself and how you see the competitive environment?
Yes, please go ahead.
John, basically, as you know, we have big campuses in Mumbai, Noida, and Chennai. And we invested in what are the basic requirements as India scales up; we are getting ready. Like similarly, we are looking at multiple places. And we are capable of delivering big projects, and we are looking at this AI momentum taking off in India, and we are seeing some positivity both from hyperscalers and enterprises. In simple terms, we are ready to expand. And your point is there are other players. Yes, there are other players. But one other thing is being 25 years in the market in India, we are established as a brand, and I think we will get our own share here.
And then lastly, just in terms of the breadth of opportunity, you mentioned 3 markets where there's scale development and demand, but also a lot of activity around edge, like multiple double-digit number of cities where there are also data center opportunities that are recognized, and maybe comment about the edge opportunity as well as how that fits in with your network services business?
Yes. So yes, we are building edge data centers also. And one of the unique aspects of Sify is having a network business that positions us not only as a co-location player but also integrates with that. So we have a plan to expand into these Tier 2 and Tier 3 cities where edge is important. We are planning to build 10 to 12 sites over time based on the demand. So we are making headway into certain cities. Once they're live, we will be more than happy to share updates. And yes, you're right, we will play a role.
Our next question is coming from Greg Burns with Sidoti & Company.
Just wanted to ask about the proposed IPO of Infinite Spaces. Why was now the right time to consider that type of transaction?
Yes. So Greg, the tailwinds for the data center, colocation industry growth are very strong. It is important to have access to capital, and the listing will help us to continuously access capital to meet the demand forecast, which we see.
Okay. And what percent of the new entity will Sify retain ownership of?
We will retain ownership of a substantial percentage, but the exact percentage will be known after the book building process is completed. But we will be holding a very substantial percentage going forward.
Okay. Great. And Kotak, their investment is converting into Infinite Spaces equity? Or does it convert into Sify Technologies equity? And what percent or how much stock are there debentures converting into?
Yes. So their debentures will get converted into Sify Infinite Spaces equity. This conversion will happen after the draft prospectus is approved by the securities regulator in India. At that time, we'll publish the exact percentage of how much will be their holding. Kotak's interest is to remain invested in the company. A small portion of their holding will be offered for sale as part of the public offering to support the float on that stock.
Okay. And then you mentioned how your network business integrates or works with the data center operations. So once you split off the data center business, will they be signing long-term, like multiyear agreements with the networking operations, or are they free to contract elsewhere?
No. Even at present, the contracting happens separately for networking with the parent company, which carries the licenses for the networking business. And for co-location, there are separate contracts which are entered with the data center company. The customer relationships and the go-to-market strategy for the company will continue to remain the same. To our customers, we'll present an integrated offering where they'll consume network services, colocation services, and IT services which they would require.
Okay. Great. And then just lastly, you mentioned the 3 megawatts of new contracting capacity this quarter. Can you just give us the full complexion of the data center business? I know you have 14 operational. How much design capacity do you have in the market and versus what is currently operational?
We have about 188 megawatts of design capacity, which is ready for sale, out of which about 130 megawatts are built. What has now sold is a small requirement for one of our existing customers. The rest of it is ready for sale and at different stages of customer conversations for contracting.
Okay. And then what is the roadmap for the next 12 months in terms of data center builds? How much design capacity is in the pipeline to be built out?
Yes. So Greg, I have a little bit of a constraint. Generally, we don't make forward statements, and more importantly, having filed the draft prospectus with the securities regulator, I'm prohibited from making any forward statements. But I just want to suffice it to say that there is a substantial amount of new greenfield project construction happening in parallel.
Our next question is coming from Maher Saker with Prithvi.
I have a few detailed questions, and we'll take a bit of time for the Q&A. So my first question is regarding the IPO of the Sify Infinite Spaces, in which Sify Technologies directly holds equity. Given that Sify is NASDAQ listed, where about 84% is held by the Promoter Group and 16% by ADR holders. Could you please explain the rationale behind pursuing the IPO of Sify Infinite through a holding company structure rather than directly distributing ownership or demerger structure in Sify Infinite between promoters and ADR holders in the same 84-16 proportion? So basically, because of this holding company setup, both the promoter shareholders and ADR holders are currently unable to directly participate in the valuation upside of the data center business. What was the strategic rationale behind adopting this holding company model?
Prithvi, I think it's a very involved question. I think we have been guided largely by our bankers and advisers in terms of the best structure for raising capital. As you know, the data center business is completely India-focused and capital-intensive. Equally important, there is depth of capital market in India, which we have witnessed over the last few years. In terms of value realization, and to eventually reflect hopefully, in the parent company, our bankers have advised it is the best path.
If you had go through the demo structure, it would have been helpful to the minority holders to unlock the value. So is there any intent post IPO to simplify the structure?
It's difficult to respond to that now. We will see it as time passes by. Whatever best headways we get in terms of what is best for the shareholders, we will certainly see.
It would be helpful if you can keep this in mind for future perspectives. And my next question is regarding the network services business. If we look at the trend over the last decade, the operating margins have declined materially from 23-25% during FY 2016 to '20 to about 10-15% levels in the last 5 years, even though revenues have grown only at about 5-6% CAGR. While I noticed the recent improvement in margins in Q1 and Q2 at around 14-18%, could you please elaborate on what led to this sharp margin compression earlier? Is this margin behavior structural or cyclical? Can we expect this segment to gradually revert to the 20% plus range as utilization and demand improve?
Correct. It is structural, and it's by design. You have started witnessing the improvement in margin. What happens is as the network expansion happens, and more importantly, when you invest in new-age networks to support AI demand, you invest in new infrastructure, which will take time to monetize. These are important investments that must be made ahead of time, and they are done by design. The trend which you have observed should continue.
So should we assume the current 14-16% band as the new steady state?
No, no, no. It should get better.
So over the future period, we should be able to see 20% plus kind of range, right?
Yes, that's our expectation, and we are working towards that.
Okay. And my last question is on the digital services segment. The business has shown revenue growth periods of high growth like FY 2016 to '18, then FY '23, followed by flat or negative years with an overall CAGR of about 11%. Operating margins have steadily eroded from around 15-20% during FY '16-'18 to negative territory in '24-'25. The losses have continued in Q1 and Q2. Can you please help us understand the key factors behind this deterioration?
Yes. So there are two reasons, Prithvi. One is a complete change in the way IT is being consumed by enterprises post-COVID. Earlier, there were substantial IT projects delivered on a system integration model. Post-COVID, most are consumed as a service. So we have deliberately chosen to scale down project-based revenues. Second, over the last 3-4 years, as we've consistently shared in our communications, we are investing significantly in terms of people and building IP to be relevant for the way IT is consumed by large enterprises and the upper end of the medium enterprises. A lot of work is happening there. It'll take some time. But we are confident that we will be relevant to the market with the investments we are making now. We'll continue this for a few more quarters before we start hopefully seeing the results.
We have a question from Sri Tho, who is a private investor.
I have a couple of questions, pretty much in line with what other participants have asked. Correct me if I'm wrong, from whatever I have reviewed the published results. The network services have grown at 16%. Data Services is around 25%. The digital services have degrown around 30-35%. This quarter. Is that a fair statement?
Yes.
So related to digital services, I know we have spoken in the last few quarters, that the whole offering is being redesigned, and some non-value added services are being discontinued. The entire division is being revamped. I know the network services and data center are kind of related to each other that you could offer both. How much of digital services is stand-alone? And how much is it actually dependent on the other two businesses? So to reframe the question, a data center client might request the network services. How much of them are actually requesting digital services?
Yes. So as far as IT services are concerned, we broadly offer network managed services, cloud and managed services, then we have security-related services broadly at a high level. The network managed services are closely linked with our network infrastructure business. We manage the networks for enterprises, including banks and PSUs, irrespective of where they source from. The cloud services for customers require good networks to reach the cloud. We have solutions that help enterprises manage hybrid cloud consumption from both public and private clouds. Beyond this, the customer touchpoints are similar. We aim to maximize our share of engagement with our large enterprise customers. We've witnessed some success in that and will continue to put our efforts to get it better.
Okay. So the other question goes to the digital services. The loss in the Digital Services division has dragged the overall results. Otherwise, this quarter result is probably similar to last quarter, maybe growth had it not been for the loss in digital services?
Correct. Correct.
Obviously, this division is now in focus on everybody's radar, as you obviously don't want this to drag the results of other divisions within the group.
Correct. Correct. You're right. We are focused on that. But we don't want to stop investing because, unlike the network and data center where your investments are in balance sheet items, in the case of IT services business, your investment is in the P&L item. This loss reflects our investments for the future. Of course, we are focused on reducing this and monetizing it early. If some of our bets are not working, we will redesign our strategy. We are focused on that.
On the upcoming IPO, the fact that CPI Infinity spaces will be listed in India. Sify Technologies is the holding company, which is NASDAQ listed. We are indirectly shareholders in Sify Infinite Spaces, which will be listed in India. Have you considered doing any kind of private placement or some kind of opportunity for existing investors in Sify Technologies who have an appetite to probably participate in the proposed IPO other than just applying for it in the IPO?
Yes. We haven't done any specific work on this. But let me socialize with the bankers. We have been guided through the entire process by the bankers and advised on what is best for maximizing value for all existing shareholders.
No. Thank you very much for joining this call and for your continuous interest in Sify. Have a good day. Thank you.
Thank you, ladies and gentlemen. This does conclude today's call. You may disconnect your lines at this time, and we thank you for your participation.