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spk00: Good morning and welcome to SIFI Technologies financial results for third quarter and fiscal year 2022 to 2023. At this time all participants are in a listen-only mode and there'll be a question and answer session to follow the formal presentation. If anyone should require operator assistance during the conference please press star zero on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host Mr. Praveen Krishna. Praveen, the floor is yours.
spk02: Thank you, Jenny. I'd like to extend a warm welcome to all our participants on behalf of CIFI Technologies Limited. I'm joined on the call today by Raju Vegsuna, Chairman, MP Vijay Kumar, Executive Director of Group CFO, and Kamal Nath, CEO. 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'll 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.siffitechnologies.com slash 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 SIFI corporate website. Some of the financial measures referred to during this call and in the earnings release may include non-GAAP measures. SIFI's results for the year 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 and presented in accordance with GAAP will be made available on CIFI'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 sees protection 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 represent a complete list of all risks and uncertainties inherent to companies' business. Let me now introduce Mr. Raju Vikshana, Chairman of SIPI Technologies. Chairman.
spk03: Thank you, Praveen. Good morning, everyone. And thank you for joining us on the call. India's resilience demonstrated post-COVID has formally established it has an economy, that is not easily disturbed by changes in the business environment. With an aggressive adoption of digital tools has worked well for the economy. The government's larger agenda of ensuring that social measures reach the intended beneficiaries is a work in progress. and will continue to drive the domestic IT demand. International demand is expected to continue due to the comparable attractiveness of the Indian market in spite of the tightening world economy. And viewed together, this worked well for an economy that is still at the early stages of realizing its potential. Let me now bring in Kamal, our CEO, to expand on some of the business highlights for the past quarter. Kamal? Thank you, Raju. Indian enterprises have fast-tracked their digital initiatives based on their success in navigating the pandemic and are now operationalizing pandemic-era innovations. Enterprise priorities are building business-aligned digital models, enhancing end-user experience, deploying resilient business continuity models, and mitigating security risks. Our data center and cloud services, digital and network services are all important building blocks to enable customers' business priorities, and we expect each of the businesses to grow with their related investments. Let me now expand on the business values for the quarter. Revenue from data center services grew approximately 19% over the same quarter last year. Revenue from digital services grew approximately 90% over the same quarter last year. Revenue from network services grew by 8% over the same quarter last year. The revenue split between the businesses for the quarter was data center co-location services at 27%, digital services at 35%, and network services at 38%. CFI commissioned incremental data center capacity of 4.1 megawatt in the quarter. As on December 31st, 2022, CFI provides services via 846 fiber nodes across the country, a 11% increase over the same quarter last year. The network connectivity service has now deployed 5,900 SD-WAN service points across the country. During the quarter, CFI has invested US dollars $482,500 in startups in the US dollars in the Silicon Valley area as part of our corporate venture capital initiative. To date, the cumulative investment stands at US dollars $4.69 million. A detailed list of our key wins is recorded in our press release, now live on our website. Let me bring in Vijay, our Executive Director and Group CFO to elaborate on the financial highlights for the quarter.
spk01: Vijay. Thank you, Kamal. Good morning, everyone. Let me briefly sum up the financial performance for the third quarter of financial year 2022-23. Revenue was INR an increase of 31% over the same quarter last year. EBITDA was INR 1619 million, an increase of 3% over the same quarter last year. Profit before tax was INR 227 million, a decrease of 52% over the same quarter last year. Profit after tax was INR 258 million, a decrease of 25% over the same quarter last year. The profit after tax is higher than the PBT profit before tax due to recognition of a deferred tax asset. Capital expenditure during the quarter was INR 4226 million. Our investment into the data center side of the business continues. with incoming demand from both retail and hyperscale customers. We have scaled up investments, both capital expenditure and operating expenditure in our fiber network in select metro cities to scale our network business and in people for our digital services business. Network connectivity, cloud interconnects, and the resultant investment in tools, processes, people will augment this demand. Fiscal discipline will be a constant, particularly in our investment process. Cash balance at the end of the quarter was INR 4256 million. I will now hand over to our chairman for his closing remarks.
spk03: Thank you, Vijay. Enterprises now view digital adoption as a business imperative. Based on the size of their investment and ambitions, it will require continuous engagement with service providers like us. Our aim is to become a constant in their considerable bracket, in their consideration bracket. Thank you for joining us on this call. I will now hand over to the operator for questions. Operator?
spk00: Thank you very much. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your phone keypad. Confirmation tone will indicate your line is in the queue. You may press star 2 if you would like to remove your question from the queue. One moment while we poll for questions. Thank you. Your first question is coming from Greg Burns of Sedotian Company. Greg, your line is live.
spk05: Morning. The EBITDA margin came in a little bit below what I was expecting. I think some of that's due to mix, but was there anything outside of the higher mix of digital services that led to the lower margin?
spk01: You're right. It is essentially due to our investments into people costs. for our digital services business. And as I mentioned, it is also due to operating expenses investment in our network fiber expansion in select metro cities.
spk05: Okay. Do you see the margin contracting further from here, or are you going to start to get some leverage on these investments? I guess, when will you start to see the revenue from these investments offsetting some of the incremental spend?
spk01: Correct. I think the incremental spend should help us to scale up our revenue and margins in the future. As you know, these infrastructure businesses require continuous investments for us to scale on both revenue and profitability. So these expenses are in that direction.
spk05: Okay. Maybe just to ask another way, do you expect to increase investments further from here? I mean, is this a good margin level to model out, or are we going to contract a little bit more before we grow them again?
spk01: I don't want to sound forward-looking, but... We believe that we have made investments over the last few quarters, and at current level, we should start monetizing the same in the future.
spk05: Okay, perfect. And then just to dig into what drove the strong growth on the digital service side of the business, what was the main driver of that?
spk04: Kamal? Yeah, sorry. I didn't know. Yeah.
spk03: So, uh, two, three reasons, uh, I will assign. So we had, we had, uh, all the books, uh, you know, for, uh, for some medium sized and large sized projects. So as in, when we have completed the projects, uh, we, we have been able to recognize the revenue. So, uh, there, there were some, seasonal aspect to it with respect to the completion of the project and the recognition of the revenue during the quarter. And of course, we are also seeing... Yeah, so the other aspect is that we are also seeing increase in business acquisition of the digital services space. And as Vijay was mentioning, we are continuously investing... in and around digital services. So those are the two primary reasons.
spk05: Okay, so some timing on projects on the technology integration services side of the business, and I guess that looking out, we would expect that to step back down maybe next quarter or maybe not if the pipeline is strong, but how should we think about that going forward?
spk03: Right. You know, these projects take a lot of time because these projects are very transformational in nature, which includes, of course, the technology integration services, as well as data managed services, as well as cloud services. The clients are expecting, as a part of the scope of work, transformational outcomes post which we get the sign-on. So even if the projects are great, but these are complex at the same time. So we may see, irrespective of the business acquired, we may see such seasonal revenue recognition increase based on the timeline of the project implementation. That's how I like to define these characteristics.
spk05: Okay, but you still feel good about the the pipeline of demand? Yes. Okay. And then in terms of the capital from Kotak, how much have you drawn from Kotak and how much remains outstanding?
spk01: In INR terms, in rupee terms, we have so far drawn... four zero zero zero million and we have a option to draw a further six zero zero zero million six thousand million yeah okay perfect and in terms of your data center capacity how much incremental
spk05: megawatts of capacity do you expect to come online this year?
spk01: In the fiscal year ending March 23, the incremental capacity will be small, but there are three greenfield projects which are presently under construction at three major cities, Mumbai, Delhi, which is Noida, and Chennai. All the three are expected to become operational end of calendar year 23. And they're all designed for an initial capacity of about 78 megawatt. But we will start delivering it in stages to our customers.
spk05: Okay, perfect. So those will start coming online throughout the calendar year?
spk01: Yeah, it's actually later part of the calendar year.
spk05: Okay, back half loaded. Okay, perfect. Okay, and the startup investments you're making in Silicon Valley, is that to acquire technology or is that purely just a financial investment you're making there?
spk01: These are basically to access technology, which we can take it to our enterprise customers in India in their journey for digital transformation.
spk05: Okay. All right. And then just lastly, the revenue, the data center revenue, the growth was a little bit lower recently. than I was expecting, and it was actually down a little bit, I think, sequentially. So what drives that? I would think of that business more as just kind of a secular steady grower, but maybe there's other things driving some fluctuation quarter to quarter there.
spk01: There's actually no fluctuation. As you rightly observed, it is a steady revenue. The last quarter, we had some one-time capacity delivery revenue which accrued to us. The recurring revenue continues to be stable, and the recurring revenue will start seeing a growth as and when new capacity gets operationalized.
spk05: Okay, perfect. All right, that's everything for me. I'll hop back in the queue. Thank you.
spk00: Thank you very much. As a reminder, if you do have any questions or comments, please press star one on your phone keypad. Okay, we don't appear to have any other questions. I will now hand back over to the management for any closing remarks.
spk03: Thank you for your time on this call. We look forward to interacting with you through the year. Thank you.
spk00: Thank you, everybody. This concludes today's conference. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.
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