Sify Technologies Ltd. Q2 FY2025 earnings call

• The enterprise landscape in India is undergoing transformation driven by regulatory, business model, and infrastructure developments. - Sify commissioned 6.5 megawatts of data center capacity in Mumbai. As of September 30, 2024, Sify provides services via 1,069 nodes across the country, a 12% increase from the same quarter last year. - Deployed 10,057 SDWAN service points across the country. - Revenue was INR 10,275 million, EBITDA INR 1,963 million, profit before tax INR 87 million, and profit after tax INR 49 million. - Focus on sustainability in data centers as part of long-term strategy.

For the second quarter of Fiscal Year 2024/'25, Sify Technologies reported revenue of INR 10,275 million, an increase of 17% compared to the same quarter last year. EBITDA was INR 1,963 million, a 29% increase. The revenue contribution by segments was data center colocation services at 32%, digital services at 32%, and network services at 36%. Capital expenditure during the quarter was INR 2,594 million, and the cash balance at the end of the quarter was INR 7,574 million.

• Investments in data centers are expected to positively impact net profit in the near future. - Ongoing scaling of sustainable practices across businesses, particularly in data centers, is part of forward-thinking strategy. - Expectations that efforts will positively impact net profit, though investments lead to increased depreciation and interest costs.

• Certain statements are forward-looking and subject to risks and uncertainties that could cause actual results to differ materially from those described. - Risks include competitive developments and factors listed in the company's SEC reports and public releases.

Q: Good morning. Just a question about the demand environment. Where are you seeing the most demand growth coming from? Is it from hyperscalers or is it from enterprise customers? And then can you just talk about maybe how AI, the growth of AI is maybe reshaping the demand environment?

A: So Greg, this is Raju. So as we grow always between hyperscale and enterprise, one of the thing is Sify is in unit, we are not just depending upon hyperscalers, we have a good footprint of enterprise customers in our data centers. That's the way we look at it in the same ratio of hyperscalers and the enterprises, we are continuously growing. To answer your second question, AI. So AI is just starting in India. So enterprises started looking AI, and we have a big submit going this week NVIDIA AI Submit. So we are part of the sponsors and we are getting ready our AI plans. As you already know, we are the first certified by NVIDIA for the air cooling and liquid cooling up to 130 kilowatts per rack. So we are very much excited and what is NVIDIA is doing and we see a lot more potential, not only for Indian consumption for a global consumption supplied by India with having a talent of IT resources to operate AI requirements. So we see a great potential possible for India and we are ready, and we are the first one ready with such kind of data centers ready data centers across three cities: Mumbai, Chennai, and Noida. Noida means Delhi.

Q: In the quarter, digital services was a lot stronger than we were modeling. Was there anything in particular driving that? Was it from project-based technology integration services work or more recurring cloud and managed services type growth?

A: This turnaround in quarter two is attributed to some project-based revenues in our network managed services business and that has contributed to the positive change in this quarter.

Q: What is your current data center, which is already on colocation and what is the future plan, which is coming on stream?

A: So, we cannot talk about much over the future. We have data centers in six markets in India. We have in Mumbai, Chennai, Bangalore, Hyderabad, Kolkata and Noida that is Delhi. So we are an established player. We are one of the top players of the data center and we are hosting some of the hyperscalers, we are hosting some of the enterprises. So we are an established player, more than 20 years in the data center business.

Q: Given that the interest as an expense and depreciation for a company, which is building a lot of capacities will always be proportionately growing along with the revenue. Can we consider that the numbers currently we are seeing this quarter, both for the depreciation and the interest expense kind of at the peak -- are these the peak levels or we have...

A: No, the depreciation will increase quite substantially. There are a couple of greenfield projects, which are expected to go live in the coming months. And once those facilities go live, the depreciation number will increase. And since the interest capitalization on the projects under construction will also see, there will be an impact on the interest as well.