Sify Technologies Limited (SIFY) Q2 2027 Earnings Report, Transcript and Summary

Good day, everyone. And welcome to the Sify Technologies financial results for second quarter fiscal year 2000 26 through 2027. At this time, all participants are placed on a listen-only mode. And we will open the floor for your questions and comments after the presentation. It is now my pleasure to hand the floor over to your host, Praveen Krishna. Sir, the floor is yours.

Thank you, Matthew. I would like to extend a warm welcome to all our participants on behalf of Sify Technologies Limited. I am 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 Lurie Group at +1 (646) 824-2.86 thousand. And we will have 1 sent to you. Alternatively, you may obtain a copy of the release on 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 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, 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 2000. 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 represent a complete list of all risks and uncertainties inherent to the company's business. Allow me to turn this over to 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 education at scale. What was once digital transformation agenda is now becoming a business imperative. With organizations investing in technology to improve productivity, 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 pace, and the need for secure scalable, and interconnected digital infrastructure will become even more critical. This presents a significant opportunity for India to strengthen its position as a global technology and innovation hub. At SIFI, 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. SIFI remains committed to building the infrastructure and capabilities that will help power this next chapter of India's growth. Let me now bring in our executive director and group CFO, 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 cost. We remain focused on ensuring that capital allocation is supported by sound financial planning, prudent 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 megawatt. And we have a contracted capacity of 113 megawatts scheduled for delivery. As of September 30, 2026, Sify provides services via 1.26 thousand 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 2026-2027. Revenue was INR 1.3 million an increase of 31%. Over the same quarter last year. Adjusted EBITDA was INR 3.13 thousand million an increase of 33% over the same quarter last year. Profit for the quarter was INR 14 million Capital expenditure during the quarter was INR 8.57 thousand million. Cash balance at the end of the quarter was INR 5.17 thousand million. I will now hand over to our chairman for his closing remarks.

Thank you, Vijay Kumar. SIFI 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 is 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?

Certainly. Everyone at this time will be conducting a question-and-answer session. If you have any questions or comments, please press 1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you are listening on a speakerphone to provide optimum sound quality. And once again, if you have any questions or comments, please press 1 on your phone. Please hold while we poll for questions. Thank you. Our first question comes from Greg Burns from Sidoti. Your line is live.

Good morning. I was just hoping to get an update on the status of the Sify Infinit Spaces IPO. Maybe the potential timing for that?

Yeah. 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 what are you looking to see in the market to complete the transaction?

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

Yes. Yes. Okay.

The operational capacity, that is a 136 megawatts, that is your revenue generating capacity? Is that right. What that number is?

Okay.

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

Yeah. 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 megawatts. Okay.

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

Yeah. At this point in time, as far as Sify is concerned, 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. Okay, Greg. All right.

Thank you very much.

Thank you.

Thank you. Your next question is coming from Prateek Singh from IIFL Capital. Your line is live.

Hi. Thanks for the opportunity. So just to get some clarity on this 3 megawatt number, So earlier when we said that 81 megawatts was deliverable in FY 2027, That is still on track, and that is part of this 3. Is that the current understanding?

You are right, Praveen. Okay.

And what is the current already commissioned build capacity? It used to be 88, I think, for 2 or 3 quarters.

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

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

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

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

Correct.

Understood. Understood. My next line of function is around the digital services with less I think after a long time, we saw this business turn a bit positive. Do you think this is something which can sustain or are there any 1-off elements in this quarter?

It should get better from here. Lot of work has gone in and continues to happen here. The idea is for us to make a digital service entity a 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. Understood. And my last question is based on your current footprint and land bank, what is the maximum design capacity with the ballpark range you can reach without the need for further acquiring any land? Does it cap out at 300 megawatts, or can we go higher.

No, no, no, no. That we have. Yep. 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 in the last few calls, or is it still too early for that?

No. 2 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.

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

You are right. We will first deliver on our existing commitments. Concurrently, we are working on the engineering part for the Visakhapatnam site. And, we will take it up at the appropriate time. Thanks. Thanks for answering the questions. All the best.

Thanks, Prateek.

Thank you. Your next question is coming from Sourabh Arya from Oak Lane. Your line is live.

Yeah. Hi, sir. Am I audible?

Yes. You are audible.

Yeah. Hi. You are audible, sir. Question.

Yeah. Yes, sir.

First question is why QoQ, there is a decline in data center revenue? I think we added 5-megawatt last quarter. Right?

Yeah. So last quarter, when you added the 5-megawatt, it was largely for the enterprise customers. And when you do it, there is an installation revenue which you actually get. Consequently to which there was a increase. And there is also a power revenue which scaled up in that particular from the existing customers.

But how does it explain the decline? I mean to say?

No. No. I was talking about why the previous was higher. To put it the other way around, the current quarter, we did not have any implementation revenue. Unlike the previous quarter. And the power consumption revenue was little lower than the last quarter. Power revenue, as you know, is a pass through. It does not impact the net generation. Am I clear, Sourabh, that.

Thank you. Your next question is coming from Greg Burns from Sidoti. Your line is live.

Hi. So I guess just to follow-up on that last question. So it is more of just a timing issue with the, you know, how the backlog getting deployed as opposed to maybe a change in the trajectory of the data center business. Correct?

Yeah. The backlog orders will get delivered beginning this quarter. Over the next 3 quarters, it will get delivered.

Okay. Greg. And then I had a last question about the network services growth this quarter. It was it was a lot higher than we expected and, you know, more than we have seen in recent quarters. Was there anything specifically driving that? And is that a good level to build off of? For our models?

Yes. Yes. As far as the network is concerned, you would recall that we started building our national long-distance fiber network on our own. And given the hyperscale data center growth happening in the country and the data center interconnect services as well. So this business is seeing upside. And we will continue to stay focused on that business growth as well.

Alright. Thank you.

Thank you.

Thank you. Your next question is coming from Sourabh Arya from Oak Lane. Your line is live.

Hello? Actually, I got dropped.

Yeah. Hi, Sourabh. So you were on and you dropped. I just. I was asking you whether I explained to you satisfactorily. Got it?

No. Actually, I got dropped from the call.

Okay. I will repeat, Sourabh. Unlike quarter 1, this quarter, we did not have any enterprise implementation services income, which typically is a 1-time income. that is 1 reason. The second is in the previous quarter, there was a higher power consumption from the existing customers. And the power revenue was higher. This quarter, it was relatively moderated, and hence, the power revenue, which is a pass-through,. Was lower. Those are the 2 reasons why between the 2 quarters, there is a revenue change.

Okay. But capacity was more in this quarter than last quarter. Correct. And then how should we think about then, you know, these capacities fanning out in the next 2 quarters? Because you said that most of the additions will happen in the second half.

Yeah. In fact, we have communicated that there is 113 megawatts of contracts which is capacity, which is scheduled for delivery. And it will get delivered beginning this quarter over the next 3 quarters.

Okay. Perfect. And since now network business has grown very strongly, while the Yeah. Margin declined. So is it-- how should 1 read this business in that case? In past, we have guided it to grow. Yeah.

So network business should continue to see some bit of growth. Corresponding to the data center growth as well, because as the hyperscale data centers grow in India, the network connectivity between the data centers and for enterprises to connect to those data centers. That business will also see growth. And as I mentioned during my address, the network expansion which is happening is largely now for enabling AI workloads to be carried. Across the length and breadth of the country. And that is 1 of the reasons why we are seeing growth.

So when India's capacity moves from 1.5 gigawatts to 10 gigawatts, that is what everybody is saying for next 5 years. Correct. Does it mean network business can grow in that line?

Yes. Because. Can it become 4-5x? Data. I am not too sure about 4-5x. Volume wise, probably, yes. But not revenue wise because the unit economics of that business is different.

Okay. So there is a pricing pressure always in the.

Pricing pressure. it is inherent for that, nature of business because as you scale the unit economics, the costs are significantly lower.

But can you put some context here if even if industry is going from 1.5 to 10 gigawatts? What does it mean for network opportunity? In terms of revenue? Multiple yeah.

There are multiple legs of a network. 1 is the subsea cables which come here because most of the data center capacities serving the global workloads which are there. So there will be a subsea revenue. We do not participate in the subsea revenue. And then connectivity between the data centers in India. So that business will see some growth for sure.

Okay. So I think the. Then maybe the better question would be, among your 3 businesses, so is it fair to say data center will grow highest and then network and then digital? Or do you expect in some other Yeah.

I do not want to make forward looking but if you look at the trend over the last few years and the way we have deployed capital, that is a reasonable conclusion you can arrive at. But there are businesses like the digital services, which has a potential to scale bigger. But let's wait and see as to when that will start delivering.

Okay. Perfect, sir. Thank you. Thank you very much. Thank you, sir. All the best.

Thank you.

Thank you.

Thank you. Your next question is coming from Prateek Singh from IIFL Capital. Your line is live.

Hi. Thanks for the opportunity again. 3 questions. First, what is the update on the Vizag cable landing station? Has work started there, or it is something which will be time?

Okay. So the Vizag cable landing station, we have got the DOT approval now. And we will start work on the same.

Okay. And just to understand a bit more about the network services business, it is something where there would be multiple peers and competitors as well. Right? Who can Yeah, take part in the growing demand. Yeah. Yeah. Yeah.

There are good peers. There are some 4 or 5 good peers who are there.

And the peers. Understood. Understood. And on the CapEx front, possible to quantify on the CapEx front. CapEx front on the first half spend or maybe this quarter spend how much is going into network, and how much is going into digital?

No. At this point of time, the amount of CapEx is on the data center. And then on the network side. Probably, we are about a 80-20 ratio.

So how does it work? I mean, to meet more network demand, is it like we are sitting on capacity and we do not need to do CapEx for that? Sorry if I did not understand the business really well on my network side. How does it work?

Yeah. On network side, we have a model of asset light delivery of services. And having said that, we will increase our spend on the network side over time. We are. We are currently focused on delivering our data center capacity, but we will continue to invest on network too. And you will see spend happening on that in due course.

Thanks. And my last question is, this 3 megawatts is entirely-- and if yes, which part of the country? It is in Mumbai.

And in Noida, the small capacity in Chennai as well. Sure. Okay. Thank you, Prateek.

Thank you. And once again, everyone, if you have any questions or comments, please press *1 on your phone. Please hold while we poll for questions. Thank you. That concludes our Q&A session. I will now hand the conference back to Raju Vegesna for closing remarks. Please go ahead.

Thank you. Thank you for your time on this call. Have a great day.

Thank you. Thank you. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.