Sify Technologies Limited (SIFY) Earnings Call Transcript & Summary

Good day, everyone, and welcome to the Sify Technologies Financial Results for Second Quarter Fiscal Year 2026 through 2027. [Operator Instructions] It is now my pleasure to hand the floor over to your host, Praveen Krishna. Sir, the floor is yours.

Thank you, Matthew. 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 Raju Vegesna, Chairman; and M.P. Vijay Kumar, Executive Director and Group CFO 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 Luri Group at 1 (646) 824-2856, and we will have one sent to you. Alternatively, you may obtain a copy of the release off 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. 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 and the quarter are according to the International Financial Reporting Standards, 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 a reconciliation of such non-GAAP measures and of the differences between such non-GAAP measures and the most comparable financial measures are presented -- that is 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 actually 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 documents. Those lists are intended to identify certain principal factors that would cause actual results to differ materially from those described in the forward-looking statements, but are not intended to present a complete list of all risks and uncertainties inherent to the company's business. Allow me to turn this over to Mr. Raju Vegesna, Chairman of Sify Technologies. Chairman?

Thank you, Praveen. Good morning, everyone, and thank you for joining on the call. India's digital transformation is entering into a new phase of execution at scale. What was once a digital transformation agenda is now becoming a business imperative, with organizations investing in technology to improve productivity, the resilience and the customer experience. India continues to benefit from unique combination of progressive policy initiatives, expanding digital infrastructure and a deep pool of technology talent. As AI adoption gathers space and the need of secure, scalable and interconnected digital infrastructure will become even more critical. This presents a significant opportunity for India to strengthen its position as the global technology and innovation hub. At Sify, we continue to align our investments with these long-term trends. Our integrated portfolio of data centers, network and digital services enables us to support customers as they modernize their technology environment and prepare for an AI-enabled future. India is no longer preparing for a digital future. It is actually actively shaping it. Sify remains committed to building the infrastructure and capabilities that will help power this next chapter of India's growth. Let me now bring Executive Director and Group CFO, Mr. M.P. Vijay Kumar, to explain both the business and financial highlights. Vijay Kumar?

Thank you, Chairman. We continue to strengthen our business through sustained investments in infrastructure, technology platforms and people aligned with the evolving needs of our customers and the long-term opportunities in India's digital economy. Our investment priorities remain focused on expanding our data center capacity, modernizing our network infrastructure for AI workloads, enhancing our cloud interconnect capabilities and strengthening the tools and platforms that support operational efficiency and customer delivery. Equally, we continue to invest in developing our people, building the skills and capabilities required to support emerging technologies and deliver consistent outcomes across our businesses. These investments are being pursued alongside a continued emphasis on cost competitiveness, resource optimization and cash flow management. While capacity expansion and capacity building have implications for depreciation, interest and manpower costs, we remain focused on ensuring that capital allocation is supported by sound financial planning, prudent risk management and long-term business objectives. Our priority is to maintain a strong balance sheet and adequate financial flexibility while investing for sustainable growth and creating enduring value for our shareholders. Let me now expand on the business highlights for the quarter. The revenue split between the businesses for the quarter was network services, 43%; data center services, 37%; and digital services, 20%. As of September 30, 2026, data center operational capacity stood at 136 megawatts. And we have a contracted capacity of 113 megawatts scheduled for delivery. As of 30th September 2026, Sify provides services via 1,254 fiber nodes across the country, a 6% increase over the same quarter last year. A detailed list of our wins is recorded in our press release, now live on our website. Let me briefly sum up the financial performance for Q2 of FY 2026-'27. Revenue was INR 13,798 million, an increase of 31% over the same quarter last year. Adjusted EBITDA was INR 3,131 million, an increase of 33% over the same quarter last year. Profit for the quarter was INR 40 million. Capital expenditure during the quarter was INR 8,573 million. Cash balance at the end of the quarter was INR 5,868 million. I will now hand over to our Chairman for his closing remarks. Chairman?

Thank you, Vijay Kumar. Sify is well positioned to support India's digital transformation and the opportunities emerging from an increasingly connected and AI-driven future. As India's digital transformation advances, we remain committed to enabling this journey through our technology capabilities, infrastructure and services while creating long-term value for all our stakeholders. I thank you all our stakeholders for their continued trust and confidence as we work towards this future. Thank you for joining us on the call. I now hand over to the operator for the questions. Operator?

[Operator Instructions] Our first question comes from Greg Burns from Sidoti.

I was hoping to get an update on the status of the Sify Infinit Spaces IPO, maybe the potential timing for that?

Yes. The bankers are advising us on the right time to do the IPO. We continue to be engaged with the bankers, and we will communicate once the dates are finalized.

Okay. Is it a market-related issue causing the delay? Like what is the -- what are you looking to see in the market to complete the transaction?

Yes, it is not strictly market related. The market in India is pretty good. You just saw the country's largest IPO happening very successfully. So the bankers would like to time the issue at the appropriate time. And also, there are -- we are adequately capitalized for the time being as well.

Okay. And I guess that was my next question. Like the -- does this, in any way, constrict your ability to grow? Do you have adequate access to capital to continue your growth plans at the current trajectory?

Yes. Yes.

Okay. Okay. The operational capacity that 136 megawatts, that is your revenue-generating capacity. Is that what that number is?

You are right. You're right.

Okay. What is the total design capacity of your current footprint, just so we know how much that can expand. And the 113 that's in backlog, the 113 megawatts, what is the timeline of bringing that online?

Yes. We will be delivering this beginning this quarter over the next 3 quarters. And the total design capacity after including the backlog to be delivered, we would be close to about 300-megawatt.

Okay. Great. And as you look at the competitive landscape within the market, obviously, there's a lot of investment going on in the data center space in India. How is pricing when we think about the ROI you're looking to get on these investments? Like, are you seeing any changes in pricing, your ability to rent that space or any factors that might impact the return on investment you're getting on the spending?

Yes. At this point in time, as far as Sify is concerned, and to my knowledge as far as the peers are concerned as well, the industry demand is in far excess of the supply, which is available. And the -- given this scenario, there is no pressure on pricing. In fact, the pricing is getting better and the returns are also improving.

Your next question is coming from Prateek Singh from IIFL Capital.

So just to get some clarity on this 113-megawatt number. So earlier when we said that 81 megawatts was deliverable in FY '27, that is still on track and that is part of this 113. Is that the correct understanding?

You're right, Prateek.

Okay. And what is the current already commissioned build capacity, which used to be 188 for 2, 3 quarters?

Yes. So that is increasing to about 300 megawatt. That's what is under construction now. So this 136 plus 113, which is 249 megawatt will become revenue generating over the next few quarters.

Understood. And regarding the IPO delays, is there any regulation as to one needs to do an IPO within so much so time of the RHP filing in India? Or there is no such strict timelines as such after which we have to restart the process?

There is a timeline available, which is up to January end. And beyond that, it is a restart process.

Okay. And sir, as you used to mention in the last calls, in the hypothetical scenario of IPO getting delayed further, you have -- you will be supported by Kotak. Is that understanding still correct?

Correct. Correct.

Understood. My next line of question is around the digital services business. I think after a long time, we saw this business turn EBITDA positive. Do you think this is something which can sustain? Or are there any one-off elements this quarter?

It should get better from here. A lot of work has gone in and continues to happen here. The idea is for us to make our digital service entity portfolio of services, largely AI-led ones. And as you know, this technology is scaling well. So hopefully, this should be a sustainable performance going forward.

Understood. And my last question is based on the current footprint and land bank. What is the maximum design capacity, very ballpark range, you can reach without the need for further acquiring any land? Does it cap out at 300 or can we go higher [indiscernible] that we have?

We should be able to do more than 1 gigawatt with the land bank, which we have -- land bank, which we have across 7 cities.

Okay. Any update on the edge data centers, which we alluded to over the last few calls? Or is it still too early for that?

No. Two edge data centers have gone live, which is in Lucknow and Mohali, so that is Chandigarh. There are other 2 edge data centers where work is happening as we speak.

And my last question is on the Andhra data center. Is there any progress there? Or that's something that we'll focus on after our current set of projects on current land parcels?

You are right. We will first deliver on our existing commitments. But parallelly, we are working on the engineering part for the Visakhapatnam site, and we will take it up at the appropriate time.

Your next question is coming from Sourabh Arya from Oaklane.

Yes, the first question, why Q-o-Q, there is decline in data center revenues? I think we added 5 megawatts last quarter, right?

Yes. So last quarter, when you added the 5 megawatts, it was largely for the enterprise customer. And when you do it, there is an installation revenue, which you actually get consequent to which there was an increase. And there is also power revenue, which scaled up in that particular period from the existing customers.

But how does it explain the decline, I meant to say?

No, no, I was talking about why the previous quarter was higher. Yes. So put the other way around, the current quarter, we did not have any implementation revenue, unlike the previous quarter and the power consumption revenue was a little lower than the last quarter. And power revenue, as you know, is the pass-through. It doesn't impact the net generation.