Sify Technologies Limited (SIFY) Q4 2021 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Sify Technologies Financial Results for Fiscal Year 2021-2022 Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Praveen Krishna. Sir, the floor is yours.

Thank you, Holly. 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, our Chairman; Kamal Nath, Chief Executive Officer; and M. P. Vijay Kumar, Chief Financial Officer. 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 Grayling Global at (646)284-9400, and we will 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 Sify corporate website. Some of the financial measures referred to during this call and in the earnings release may include non-GAAP measures. Sify results for the year are according to the International Financial Reporting Standard, 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'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 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 reflect the complete list of all risks and uncertainties inherent to the company's business. I would now like to introduce you to my Chairman, Mr. Raju Vegesna. Chairman?

Thank you, Praveen. Good morning, everyone. Thank you for joining us on this call. I want to say, well, the past few years, the hyperscaler cloud providers invested significant amount in India, convinced about the growth of India regarding the IT. Second, the government of India initiative of digital transformation have turned India into a proving ground for the local start-up ecosystem considered to be the third largest in the world. And over the time -- the enterprises pent up demand for the automation post-pandemic has now stabilized into a long-term IT overall plan. They are now taking a comprehensive view of their overall IT architecture and aligning with the best [ suite ] of services for multi services and multiyear contracts. Sify, our position as a comprehensive ICT player and the integration of our service portfolio gives us an advantage for the emerging scenarios and the ability to cater multiple services. Now I will ask our CEO, Mr. Kamal Nath, to present the detailed analysis of our last year's accomplishments. Kamal, over to you.

Thank you, Raju. Enterprises across verticals are all actively pursuing digital initiatives, ranging from digitalization of existing processes, digital intelligence of customer preferences, enhancement of digital experience for their consumers and launch of new digital businesses. Towards that end, all enterprises are investing in upgrading and augmenting their current infrastructure, making it digital ready. Our cloud-ready data center and network infrastructures, related digital infrastructure services and core digital services provide a great choice to our customers in enabling their initiatives and meeting their digital ambitions. Our growth story will continue to be built on these 3 strategic pillars, be it asset-led or asset-independent engagement models with our customers. Let me now expand on the business highlights for the year 2021/'22. Revenue from data center colocation services for FY '21/'22 grew by 35% over last year. Revenue from digital services for FY '21/'22 fell by 1% over last year. Revenue from network-centric services for FY '21/'22 grew by 7% over last year. The revenue split between the businesses for the year was data center colocation services, 28%; digital services at 28%; and network-centric services at 44%. Through the year, Sify has invested a total of USD 350,000 in startups in the Silicon Valley area as part of our corporate venture capital initiative. Sify commissioned a total of 11 megawatt data center capacity across the country in the year. As on 31st March 2022, Sify provides services via 816 fiber nodes and more than 1,900 wireless base stations across the country, a 12% and 6% increase, respectively, over last year. A detailed list of our key wins is recorded in our press release, now live on our website. Let me bring in Vijay, our CFO, to elaborate on the financial highlights for the years. Vijay?

Thank you, Kamal. Good morning, everyone. Let me briefly sum up the financial performance for the financial year 2021/2022. Revenue was INR 27,026 million, an increase of 11% over last year. EBITDA was INR 6,034 million, an increase of 19% over last year. Profit before tax was INR 1,846 million, an increase of 15% over last year. Profit after tax was INR 1,353 million, which was a decrease of 12% over last year. During the previous financial year, the company has recognized deferred tax assets of INR 600 million based on assessment of reasonable certainty of future taxable income in the individual entities of the group. Capital expenditure during the fiscal which just ended was INR 7,144 million. 2021/2022 marked Sify's commitment to sustainable investing, starting with data center business. The adoption of renewable energy for powering up our data centers is proceeding along the stated time line. Following the trifurcation of the businesses into a separate legal entities, which are wholly owned subsidiaries of Sify Technologies Limited, they are now free to pursue partnerships for technology and capital to build operating effectiveness while leveraging the benefits of a unified sales and marketing team to execute the go-to-market strategy. Over the long term, it will help us build more operating effectiveness while retaining our identity as the only true converged ICT services player. We continue to make selective investments, in particular on people and tools to meet the customers' digital transformation demand. Our commitment to expand our data center footprint and network remains while staying disciplined on the fiscal health. Cash balance as at end of year was INR 4,591 million. I will now hand it over to our Chairman for his closing remarks. Chairman?

Thank you, Vijay Kumar. As I stated before, the government's initiative for a digital transformation of the country and our enterprise demand for a multi-services and multiyear contracts positioning us in a unique [indiscernible] to ICT players, integration of our services portfolio give an advantaged view of the emerging scenario and ability to cater to this demand. Thank you for joining us on this call. Now I will hand over to operator for questions. Operator?

[Operator Instructions] Your first question for today is coming from Greg Burns. Please announce your affiliation.

Greg Burns from Sidoti & Company. So I just wanted to start with this idea that your -- the fact that you have a multitude of services, the network, the data center services, that's an advantage for Sify in terms of capturing demand. Can you just talk maybe about an example of where you've had a customer that started with one service, how you've expanded there or how that's been an advantage for you? And maybe contrast that to the competitors that you have in India, how you differentiate yourself through that multitude of services?

Kamal, can you address? Kamal?

Yes. Yes. Yes, so there are quite a number of customers. One of the largest customers, which in fact happens to be the largest bank in India and one of the largest global banks, State Bank of India, we had network services initially with them. And after that, they became our data center customer with almost now INR 650 lakhs-plus, as well as we are doing the complete network managed services and network security managed services for them across all their branches as well as data centers and branches across the globe also. So this is one example where 3 towers, network, data center and services, such a large bank has partnered with Sify Technologies. But multiple other customers for whom we have done -- for example, for National Stock Exchange, we are managing the network, we provide them some network infrastructure services as well as cloud and cloud managed services. We have a whole lot of insurance companies who have partnered with us for entire data center and cloud transformation as they moved away from the erstwhile system integration model to cloud-based digital-ready model. And we have at least 4 to 5 of such life insurance and general insurance companies who have partnered with us, apart from a lot of other manufacturing companies. So to summarize, every network customer is an opportunity for Sify for data center and digital services opportunities. Every data center customer to start with is an opportunity for us for network and digital services. And in the mix of all these services, there are also engagements where we initially started with digital services, with complete operations outsourcing, but later on when the customer took their cloud transformation journey, they have subscribed to Sify's cloud services. So overall, I mean, the opportunities for us, irrespective of our landing zone, the first contract with the customer, is wide for us. I hope that answers your question.

That does. And could you just -- maybe discuss the competitive landscape, how differentiated is Sify in terms of the breadth of your services?

Yes. So in fact, our competition landscape is pretty spread out. I mean, in the data center space, we compete with NTT, STT, CtrlS, these kind of direct competition. In the network space, we compete with the likes of Airtel and Tata Communications and Jio. On the cloud transformation space, we compete with the likes of Kyndryl now, and NTT, to a [Audio Gap] Global India MNCs like TCS -- TCS, Wipro, HCL, Kyndryl, I mean, which is the spin-off division of IBM. In the digital transformation space, we compete with the likes of TCS, IBM and a whole lot of new age cloud services companies who are niche boutique [ firms ], maybe these are not very big names, but they are growing stronger in the market. So overall, we have multiple kinds of competition in multiple segments, but with our cloud at the core offering, ranging from data center, network, which are cloud aligned, as well as the services on top of this infrastructure which we own and we offer to our customers, and also on top of that, our partnership with the leading hyperscale cloud providers, make it a very compelling proposition for Sify from our side. And for customers, they did not go to multiple service providers or multiple technology providers to stitch up their entire digital ICT platform for themselves.

Okay. Perfect. I don't think you talked about the -- your data center capacity, how many megawatts do you currently have online and what the plans are for this coming fiscal year in terms of capacity additions?

Yes. Vijay, you might like to answer this?

So we have close to 100 megawatts in operations, and we are building 100 more megawatts in the project stage.

And that's over the next 12 to 18 months? Like, is there a time frame on kind of when that -- or is it multiple years? Like, what's the time frame on [indiscernible]?

Yes, that is next 18 months. 18 months.

Okay. Okay. And then you mentioned your cash position. Where did the debt balance stand at the end of the year?

Yes. So Greg, as far as the cash balance is concerned, we have about INR 4500 million of cash available, 4-5-0-0 million of cash available. And equally important, you are aware of both the partnership we have with an alternative investment fund for further capital for expansion. And we have done financial closure for all our greenfield projects which are currently underway. So we are well capitalized to execute all our expansion projects.

Okay. Did you -- I might have missed it, but the total debt or the -- where you are in terms of that at the end of the year?

As far as the total debt is concerned, the total debt is about INR 7,000 million. And on top of that, the recent investment from the alternate investment fund, which is convertible into equity at a later date, which is of another INR 2,000 million.

[Operator Instructions] You have a follow-up question coming from Greg Burns.

I just had one more if there's no one else. Can you just give us an update on the Indian economy? It sounds like from your comments you're pretty bullish and it seems like we've moved past kind of the depths of the pandemic. But could you just give us an update on what's happening on kind of a macro level in India?

So when I was traveling last 6, 7 weeks in India, and I am very bullish. The kind of the steps government is taking for the growth. And also, it's not only the government, enterprises also very bullish. So those are the 2 things I see is a lot of energy, positive energy growing in the country, and that's the way we believe there is a great potential for us as an ICT player.

[Operator Instructions] There are no further questions in queue. I would like to turn the floor back over to management for any closing comments.

Thank you for your time on this call. We look forward to interacting with you through the year. Stay safe, stay healthy, and have a good day. Thank you.

Thank you. Thank you, ladies and gentlemen. This does conclude today's event. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.