Sify Technologies Limited (SIFY) Q3 2015 Earnings Report, Transcript and Summary

Good morning and welcome to the Sify Technologies Limited Conference Call following the earnings announcement for the quarter ended December 31, 2014. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for the conference, Truc Nguyen, Investor Relations for Sify Technologies Limited. Please go ahead, Ms. Nguyen.

Thank you, Rob. Good morning. I would 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; Kamal Nath, Chief Executive 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 me at 646-284-9400 and I’ll have one emailed to you. Alternatively, you may obtain a copy of the release at the Investor Information section of 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 of the Sify 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 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 calculated 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. With that I would now like to introduce Mr. Raju Vegesna, Chairman of Sify Technologies Limited, Raju?

Thank you, Trúc. Good morning everyone. Thank you for joining us on the call. As we closed 2014, all indicators point to cautious optimism in investment climate within in India. While there is increasing confidence that economy is poised for a long-term growth, it will still be some time before the business community commits itself to the significant new investments. Our proven mix of services and solutions are being viewed as a viable alternative given the constraints on capital, balanced by the pressure to go-to market more quickly. Sify’s flexibility and comprehensive ICT portfolio, combined with our OPEX-based service provider approach, is attractive to both emerging and established companies looking to revamp their legacy systems. Our success in delivering the pan-India network integration project for the DoPhas earned us the acknowledgment of our peers. Some of the India’s best IT companies are now our consistent partners, ensuring that our clients will receive both the best-of-breed technology and faster response times. To reflect on our past quarter, I would now ask Kamal, our CEO, to expand some of the business highlights. Kamal?

Yes, thank you, Raju. During the year 2014-2015, we had launched various initiatives and offerings focused on transformation of the IT infrastructure of our clients. We’re very happy to share that these initiatives are resulting into multi-year transformation engagements with existing customers and new clients as well. These engagements are mostly around our Managed Network Services and Data Centre centric IT services. We are increasingly being recognized as new age IT Service Providers vis-à-vis the traditional IT Services Companies. We would definitely like to expand on this positioning in the coming quarters. Let me spend some time on the business highlights for the quarter, business wise. As far as the Telecom business is concerned that the data business continued to grow in revenue terms by 13% over the same quarter last year and over 3% over last quarter. Order Book has grown by 12% over last quarter. During the quarter, Sify won a large multi-year contract from a Public Sector Insurance company to provide connectivity to over more than 1,000 branches. Sify also won a WAN outsourcing contract from a global auto-major as it seeks to expand its distribution obtained in India. The continued focus on providing greater value through managing the customer networks is gaining traction with the links under Advanced Network Management having gone up to by 7.6% during the quarter. During the quarter, we have actually handed over more than 4,900 circuits to various customers. Coming to the Data Centre Services business, Data Centre business continues to grow in revenue terms by 5% over the same quarter last year, and by over 4% over last quarter. The business has singed up a total of 17 new customers in the last quarter. The business also signed up a leading pharmaceutical company and a multinational consumer products company for hosting the mission critical setup. India’s number one Cables and Wires Company also signed up to host their IT infrastructure in all Data Centres. We migrated the production setup for a leading global integrated security company to one of our Data Centres. Other key wins came from across the verticals like a leading IT distribution company, couple of Agricultural Chemicals organizations, a web-based vehicle tracking company and a leader in copyediting, proofreading, translation and research space. We have also expanded the capacity of our Chennai Data Centre and I’m very glad to share with you that we have received the prestigious CIO Choice award for our Integrated Data Centre solutions. For Cloud and Managed Services, the business has grown by 51% over last quarter and 62% over the same quarter last year. Order Book has grown by 40% over last quarter. The business has signed up a Shipping and Chemicals conglomerate, a Tobacco major and a Media house in multi-year deals. Other large engagements were with a Cement major, an Agricultural Chemical organization, a School stationary player, an upcoming Retail chain and one of India’s oldest Mobile service providers. Other clients who have enhanced their engagements with us include a Health care chain, a Logistics player and a Retail brand. Coming to Applications Integration Services; this business has grown over 27% quarter-on-quarter this year. Order Book has grown by 12% over the last quarter. The business signed up two large orders from a Nodal agency for a State Government and a private education player. For the Shipping and Chemicals conglomerate mentioned above, in addition to the Managed Services signup, we have also been entrusted SAP application support. One of our multinational Pharmaceutical clients has renewed their eLearning contract with us. As far as Technology Integration Services is concerned, this business has added 27 new customers in this quarter. We have won a contract for Network rollout and deployment of Network Infrastructure from a Large Public sector Insurance Company. A public sector bank contracted with us to setup and maintain their Security Operation center in a multi-year engagement. A Mega Power plant engaged us to set up their Data Centre and Data Recovery centers in two different states. A large multinational company belonging with a healthcare group contracted us to setup a network infrastructure and a data centre. A Public Sector Bank signed Sify as their Security Integrator to run their security operations. We also signed a large private financial services company to deploy Web Security services. And this business was accorded the Government Partner of the Year commendation by a one of the technology leading OEMs. With this, I will now hand over to you Vijay, our CFO, to expand on the financial highlights for the quarter, over to you Vijay.

Thank you, Kamal, and good morning everyone. I will now provide detailed financial results for the third quarter of financial year 2014-2015. Revenue for the quarter ended December 31, 2014 was INR 3,147 million, an increase of approximately 17% over the same quarter last year. EBITDA for the quarter was INR 537 million, an increase of 30% over the same quarter last year. Net Profit for the quarter was INR 83 million, an increase of approximately 32% over the same quarter last year. Capital expenditure during the quarter was INR 201 million and cash balance as of the end of the quarter was INR 1,558 million. This quarter, both revenue and EBITDA showed healthy growth, over the last year, despite increase in operating costs. Our net profit remains under some pressure due to increase in depreciation. This was anticipated based on the significant investment deployed in our new Data Centres, which are still in the early phases of operations. Depreciation and other costs associated with the Network Integration project for the Government have also increased as we approach the complete handover phase. I will now hand you over to the Chairman for his closing remarks. Chairman?

Thank you, Vijay Kumar. As a long-term player, I am confident that our current portfolio of services answers, the client need for a single point service provider of all their services. The scalability across our entire service range ensures all types of clients are cater to and as of more OEMs come onboard, the quality of the end product has only be get better. Bottom line is that our clients will benefit from our cost effectiveness of our product portfolio and our knowledge of practices. Thank you for joining us on this call. I will now hand over to operator for questions. Operator?

Thank you. We’ll now be conducting the question-and-answer session. [Operator Instructions] Thank you. At this time, I will turn back to management for additional comments.

Thank you for everyone joining us on the call and we look forward to interacting with you in the coming quarter. Thank you and have a good day.

Thank you. This concludes today’s teleconference.

Thank you.