Sify Technologies Limited (SIFY) Q1 2017 Earnings Report, Transcript and Summary

Greetings and welcome to the Sify Technologies Financial Results for the First Quarter of Fiscal Year 2016-2017. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Shiwei Yin with Grayling. Thank you. You may begin.

Thank you, Melissa. 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 you to ask questions. If you do not have a copy of the press release, please call or email me, and I will share it with you. Alternatively, you may obtain the copy of the release at Investor Information section on 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 earnings release may include non-GAAP measures. Sify’s results for 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 calculated, 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 development 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. Sir?

Thank you, Shiwei. Good morning and thank you for joining us on the call. The market is continuing to see the merits of the complete information technology eco-system that Sify offers to both the large and small enterprises, including multinational companies. Additionally, the Government’s agenda of digital transformation of India is creating new opportunities to apply our comprehensive solutions portfolio. As these projects are successfully commissioned, they will serve to strengthen our credibility to provide similar solutions to larger multinational companies, as they are coming to India. We are also expanding our infrastructure footprint in line with the commitments to some of our key multinational customers. These will serve as a strong platform to support Sify’s continuous growth. To reflect on the past quarter performance, I would now ask Kamal, our CEO to expand on some of the business highlights. Kamal?

Thank you, Raju. For successive quarters, we have continuously grown our revenue, order book and profitability as well. We are happy to share that the diversity of our client base in multiple verticals is improving each quarter. We have seen a healthy mix of business from run rate deals and strategic large deals from Indian Enterprise, multinational companies, Government and public sector units. Let me now spend time on the business highlights for the quarter. I will start with the telecom business. The data business grew over 15% over the same quarter last year. The business has signed up more than 200 new clients during the quarter. Customer acquisition for the network managed services has accelerated, with over 100% growth over the last 12 months. Sify has signed contracts for wide area network transformation services with two ecommerce startups who were dealing with problems of scale and hyper growth. During the quarter, Sify also completed implementation of Phase 1 of its network upgrade, tripling both domestic and global capacity. This capacity announcement specifically targets the new generation of internet traffic generated by a combination of information from the socials, mobile, analytics and cloud ecosystem. During the quarter, Sify also commissioned more than 5,000 new sites for customers including successful project handovers for two wide area network transformation projects which were won earlier. The handover of these projects is a reflection of Sify’s commitment to deliver large complex transformational projects. Some of the clients added this quarter included the Central Governments’ digital enablement platform, the global services of one of India’s largest public sector banks, a public sector insurance major, another public sector bank, a new-age payment bank, an online share trading portal, and a leading consumer finance provider. Next comes the data centre services businesses unit. This business revenue grew over 17% over the same quarter last year. 12 new customer logos have been added during this quarter. The business has been awarded with contrast from both public sector and enterprise customers. Prominent among them was one to host the data centre and disaster recovery for the state run agricultural insurance institute. A leading private life insurance company has partnered with Sify for data centre migration and hosting. Sify also has signed a contract with National Internet Exchange to set up a new point of presence in India. Cloud and managed services business, the revenue from this business grew 25% over the same quarter last year. Customers from ecommerce, insurance, banking, manufacturing, healthcare, logistics, real Estate & government verticals have signed up with Sify for cloud and managed services. The business has signed up a leading real estate company for transformational IT and to build future ready IT infrastructure. The business has enabled a leading insurance company to launch new insurance products and create an online sales channel through Sify’s cloud services. Sify also signed up a leading FMCG company to host their new product campaigns and promotions. Government of India’s Nodal ICT Agency has contracted with Sify for acceleration services as a part of their transformational portfolio. Another arm of the Government of India has contracted with Sify to accelerate end-user services for the Digital India Project. Other clients signed this quarter were a mobile services provider, a heavy engineering major, a prominent player in transactional data analytics and a private power distribution player. As far as applications integration services deal is concerned, the business grew by over 30% over the same quarter last year. The business has signed up 16 new clients during the quarter. Sify partnered with the largest Government recruitment body in India to conduct computer-based examination for recruitment of police and paramilitary personnel for the first time. Sify conducted the examination smoothly for 345,000 candidates across 82 cities and 382 test centers. One of the India’s largest PSUs has signed up with Sify to migrate their messaging and collaboration services on Microsoft Exchange platform. Some of the other wins for Sify’s Microsoft line of business include a co-operative bank, a large healthcare chain, a leading third-party logistics company, the online media services of an English daily, two major distributors of Indian spices, and a banking financial applications service provider. The SAP line of business has signed up with a major player in the electricity transmission line business, a large mining company, and a steel producing major. For the technology integration services, the revenue of this business has grown 115% over the same quarter last year. The business has added 14 new clients across data center IT, network integration, security, and collaboration services. A large public sector insurance company has contracted with Sify to establish a wide area network across their 1000 plus branches. The business also won a large contract from a state Government to establish an end-to-end data center infrastructure, which includes design and setup of IT, network and security, and managed services platform. The business also won a large campus network infrastructure project to design, implement, and manage the campus network infrastructure for video and voice services for a state High Court. Sify has added seven new clients in security services and had two large wins in public sector banks. Sify also elevated its partnership with a leading security partner to gold partnership level. I will now hand you over to Vijay, our CFO, to expand on the financial highlights for the past quarter. Over to you, Vijay.

Thank you, Kamal and good morning everyone. I’ll now provide detailed financial results for the first quarter of financial year 2016-17. Revenue for the quarter was INR 4,170 million, an increase of 22% over the same quarter last year. EBITDA for the quarter was INR 622 million, an increase of approximately 7% over the same quarter last year. Net Profit for the quarter was INR 125 million, an increase of 47% over the same quarter last year. Capital expenditure during the quarter was INR 163 million. Our disciplined financial choices over the years, has enabled us in keeping our projects financially healthy. We continue our focus on cost efficiency in execution of projects and in our operations, while simultaneously investing in people and tools for future growth. Our infrastructure assets continue to appeal to global corporations would demand stringent standards. This has helped us increase asset utilization, and we plan to make future investment in line with commitment from clients. Cash balance at the end of the quarter was INR 2,330 million. I will now hand over to our Chairman for his closing remarks. Chairman?

Thank you, Vijay. Digital India is seeing increasing traction on the ground; most divisions of the Government are banking on automation as the differentiating factor to distance their services. This translating into transformation projects both for the government and Sify. As only [ph] comprehensive ICT solutions and services provider in India, we have been called in early to draw the roadmap on some of these prestigious projects for the government. Given the scope and the extents of these projects, when successfully commissioned, they will act as a reference point for global enterprises expanding into India. You will be hearing regularly from us on such progress. Thank you for joining on this call. I will now hand over to the operator for any questions. Operator?

Thank you, everyone for joining us on the call and we look forward to interacting with you through this coming year. Have a good day. Thank you.

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.