Sify Technologies Limited (NASDAQ:SIFY) Q4 2022 Earnings Conference Call April 18, 2022 8:30 AM ET
CompanyParticipants
Praveen Krishna – Investor Relations & Public Relations
Kamal Nath – Chief Executive Officer
M. P. Vijay Kumar – Chief Financial Officer
Raju Vegesna – Chairman & MD
Conference Call Participants
Greg Burns – Sidoti & Company
Operator
Good day, ladies and gentlemen and welcome to the Sify Technologies Financial Results for Fiscal Year 2021-2022 Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions-and-comments after the presentation.
It is now my pleasure to turn the floor over to your host, Praveen Krishna. Sir, the floor is yours.
Praveen Krishna
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?
Raju Vegesna
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 what were 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 breed 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 ability to cater multiple services.
Now I will ask our CEO, Mr. Kamal Nath, present the detailed analysis of our last year’s accomplishments. Kamal, over to you.
Kamal Nath
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 three 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 March 31, 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 year. Vijay?
M. P. Vijay Kumar
Thank you, Kamal. Good morning, everyone. Let me briefly sum up the financial performance for the financial year 2021-2022. Revenue was INR27,026 million, an increase of 11% over last year. EBITDA was INR6,034 million, an increase of 19% over last year. Profit before tax was INR1,846 million, an increase of 15% over last year. Profit after tax was INR1,353 million which was a decrease of 12% over last year.
During the previous financial year, the company has recognized deferred tax assets of INR600 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 INR7,144 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 the year was INR4,591 million.
I will now hand it over to our Chairman for his closing remarks. Chairman?
Raju Vegesna
Thank you, Vijay Kumar. As I stated before, the government of initiative for a digital transformation of the country and our enterprise demand for a multi-services and multiyear contracts, positioning us in a unique confidence 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?
Question-and-Answer Session
Operator
[Operator Instructions] Your first question for today is coming from Greg Burns. Please announce your affiliation, then pose your question.
Greg Burns
Yes. It’s Greg Burns from Sidoti & Company. Good morning. 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?
Raju Vegesna
Kamal, can you address? Kamal?
Kamal Nath
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 INR650 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 data centers and branches across the globe also. So this is one example where three 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 [indiscernible] system integration model to cloud-based digital-ready model. And we have at least four to five 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 who start with 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 contact with the customer, is wide for us. I hope that answers your question.
Greg Burns
That does. And could you just — I mean you discussed the competitive landscape, how differentiated is Sify in terms of the breadth of your services?
Kamal Nath
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 [indiscernible] 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 farms, 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 the entire digital ICT platform for themselves.
Greg Burns
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?
Raju Vegesna
Yes. Vijay, you might like to answer this?
M. P. Vijay Kumar
So we have close to 100 megawatts in operations and we are building 100 more megawatts in the project stage.
Greg Burns
And that’s over the next 12 to 18 months? I guess, there a time frame on kind of when that — or is it multiple years? Like, what’s the time frame on [ph]?
M. P. Vijay Kumar
Yes, that is next 18 months. 18 months.
Greg Burns
Okay. And then you mentioned your cash position. Where did the debt balance stand at the end of the year?
M. P. Vijay Kumar
Yes. So Greg, as far as the cash balance is concerned, we have about 450 million [ph] of cash available, 4-5-0 million [ph] 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.
Greg Burns
Okay. I think 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?
M. P. Vijay Kumar
As far as the total debt is concerned, the total debt is about INR7,000 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 INR2,000 million.
Greg Burns
Perfect. Okay, that’s all I have for now. I’ll hop back in the queue. Thank you.
M. P. Vijay Kumar
Thank you.
Operator
[Operator Instructions] You have a follow-up question coming from Greg Burns. Greg, your line is live.
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 a update on what’s happening on kind of a macro level in India?
Raju Vegesna
So no, I was traveling last six, seven weeks 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 two things, I see 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.
Greg Burns
Okay, great. Thanks. Thanks for the update.
Operator
[Operator Instructions] There are no further questions in queue. I would like to turn the floor back over to management for any closing comments.
Raju Vegesna
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.
Operator
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.
Be the first to comment