Sify Technologies Limited

Good morning, everyone, and welcome to the CFE Technologies financial results for third quarter fiscal year 2024 to 2025. At this time, all conversations have been placed on a listen-only mode. If anyone should require operator assistance during this 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, Praveen Krishna. Praveen, the floor is yours.

Thank you, Jen. I'd like to extend a warm welcome to all of our participants on behalf of CIFI Technology Center. I'm joined on the call today by Rajiv Exner, Chairman, and Mr. M.P. Vijay Kumar, Executive Director of Group CFO. 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 Vibha Shanvik at 1-212-546-8260 and we'll have one sent to you. Alternatively, you may obtain a copy of the release of the investor information section on the company's corporate website at www.sifitechnologies.com slash investors. A replay of today's calls 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'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 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 the company's business. I would now like to introduce Mr. Raju Exena, Chairman of SIFI Technologies Limited. Chairman, over to you.

Thank you, Praveen. Good morning, and thank you for joining us on this call. India's growing prominence in the global marketplace is driven by its liberal policies, support to business environment, and a wealth of skilled resources. These factors combine to create a compelling growth opportunity for international companies, making India a critical destination in their global strategic expansion plans. India has long established a reputation being an IT service provider for the world, that narrative is now maturing to recognize that India can be an important AI testbed for the emerging digital economy. Multiple global leaders have also gone on the record regarding the importance of Indian market in their investment roadmap. Let me now bring our Educative Director and Group CFO, Mr. MP Vijay Kumar, to explain both the business and financial highlights. Vijay?

Thank you, Chairman. Good morning to all and wish you all a very happy new year. We stay focused on cost efficiency and fiscal discipline, ensuring our financial strategies align with long-term value creation. Our current results are weighed down by investment in people, building capabilities with people for the AI opportunities, depreciation, and for interest payouts for our expansion financing. Our strategic investments are guided by a forward-looking approach designed to anticipate evolving market dynamics and drive sustainable growth. Our pursuit of responsible and innovative growth will be strengthened through such sustainable practices. We draw your attention to SIFI adopting the new standard of International Accounting Standards Board, recent issuance of IFRS 18, presentation and disclosure in financial statements, starting with the last quarter ending June 30, 2024. By adopting the new standard, we seek to maintain clarity and consistency in our financial communications. Importantly, while our presentation may change, there is no alteration in total income or net profit. The December 2023 numbers are restated consequent to filing of amended Form 20F-A with SEC on January 13, 2025. Let me now expand on the business highlights for the quarter. The revenue split between the businesses for the quarter was network infrastructure services, 41%, data center co-location services, 36%, and digital services 23%. During the quarter, SIFI commissioned 5 MW of additional data center capacity. As of December 31, 2024, SIFI provides network infrastructure services via 1,109 fiber nodes across the country, a 14% increase over the same quarter last year. As of December 31, 2024, SIFI has deployed 9,473 units of contracted SDU and service points across the country. A detailed list of our key wins is recorded in our press release, now live on our website. Let me briefly sum up the financial performance Revenue was INR 10,491 million, an increase of 21% over the same quarter last year. EBITDA was INR 1,914 million, an increase of 13% over the same quarter last year. Loss before tax was INR 119 million Loss after tax was INR 258 million Capital expenditure during the quarter was INR 3343 million The cash balance at the end of the quarter was INR 5327 million. I will now hand over to our chairman for his closing remarks. Chairman.

Thank you, Vijay Kumar. Over the course of the next quarter, you will see CFE repositioning itself to cater to AI workloads that we are coming up in the country. The maturity of our services should draw a new set of enterprise players who will seek our mature network data center and digital businesses thank you for joining us on the call i will now hand out to the operator for questions operator thank you very much at this time we will be conducting our question and answer session if you would like to ask a question please press star 1 on your phone keypad now

Confirmation term will indicate that you're in the queue. You may press star two if you would like to remove your question from the queue. For anyone using speaker equipment, it might be necessary to pick up your key before you press the star key.

Whilst we poll for questions. Thank you very much.

Your first question is coming from Greg Burns of Sidoti and Company. Greg, your line is live.

Good morning. Could you just give us maybe a little bit more color about your GPU as a service offering, how that maybe fits into your broader cloud services solutions, and what kind of demand you're seeing for that service?

So the way, Greg, is we have already a cloud platform called Cloud Infinite, which supports the CPUs. We are doing this thing for more than a decade. So we are extending that support of cloud platform to extend it to the GPU also. So we just started and we are doing a couple of POCs for Indian enterprises. And the market is still in very nascent stage. I cannot assess how big the market, but market is getting starting interesting and enterprise customers showing some interest, especially in BFSI and manufacturing sector. And I don't have any prediction of the growth, but at least I'm seeing some interest. We are seeing some interest.

Okay, great. Thanks. And then in terms of your data set and capacity, could you just give us an update on maybe the number of data centers that are currently operational, how much megawatt of power, I guess, has been commissioned, and then maybe what you're looking forward over the next 12 months to maybe come online in terms of maybe either from a megawatt capacity or a data center capacity.

Thank you.

We currently have capacity which is installed and commissioned for about 120 megawatt, of which 110 megawatt is already contracted with the customers and who have already come into the facilities. We have about 12 facilities across six cities. And in addition to this, there are capacities which are under development, which will be going live within the next few months, which have a designed capacity, which are two facilities of 26 megawatt each, which are going live. And based on the customer's inflow, we will commission the needful capacity. Apart from that, there are four other facilities coming up in Mumbai. which are at a reasonably advanced stage of development. Hopefully by end of this calendar year or a little earlier, they should also go live. We will publish the details of their status maybe a couple of quarters down the line.

Okay, great. Thanks. And then in terms of your SG&A, This is a pretty significant growth this quarter. Is there anything one time in there, or is that a good number to build off of in terms of modeling?

For the time being, it's a good number to model. What we have done is we are strengthening our leadership team across the businesses. So you will see the current level of SG&A to remain for the forthcoming period as well.

Okay, thanks for that. And digital services posted a loss this quarter. What was driving that?

Yeah, so it is that particular business, we had a little bit of a revenue mix change. And most importantly, loss is driven by our efforts to get in more leadership team within that business. As you know, the business requires a combination of upskilling and reskilling, not just at the delivery organization level, but also building the business team and the technology leadership. So we have started investing in that. Maybe we'll invest a little more for a couple of quarters because we see opportunities coming in the foreseeable future and we want to be ready for those opportunities.

Okay, thanks for that. And then lastly, the growth in the network services was pretty – was strong, stronger than we were expecting. Could you just detail what's driving the demand on that side of the business, and do you expect that kind of growth to continue?

Yeah. So between last year, same quarter, and this year, the growth is driven by – by the wired line infrastructure investment we have done over the last two years. The last two years that investment is now starting to pay off. We have done fiber network in about 17 cities and in these cities we will continue to densify our wired line infrastructure and it should support the growth and equally important greg is with all the increased digitalization which is happening and also the potential ai workloads networks will also require substantial capacity for the enterprises to consume so this particular growth is driven by the enterprises preparing for such consumption levels.

Okay, great. Thank you. Thanks, Greg. Jennifer? Hello? Yeah. Hello? Hello?

Hello?

You're not audible.

Question. Press the one on the key right now. And the question is coming from

Jennifer, just a word of caution. The line is not clear. Could you have the question repeated, please? I think she's connecting somewhere inside.

Hi. Good evening, everybody. Can you hear me?

Yeah. Good evening, team. First of all, congratulations for improving some of the metrics year over year. The company is in a great shape and a great management team and building the right infrastructure to address the future demand. So once again, congratulations on a good set of numbers compared to year on year. I didn't go through the specifics, but without talking about any individual stock price movement or any forward-looking statements, eventually the investors would be interested in wealth creation. So the first question would be, what is being done to address that, to get a wider participation from investors, more widely held, and also generate some investor returns?

Srikant, did I get your name right, Srikant? Correct. Thank you for your time on the call and wish your family a very happy new year. As far as our effort is concerned in terms of wealth creation, we continue to stay focused to build the business to stay relevant with all the changes which are happening, particularly on the digital infrastructure side. thanks to all the AI kind of initiatives which enterprises are getting geared to. And regarding the shareholding expansion is concerned, there are no specific initiatives at this point in time. However, our investor relations team continues to stay engaged with the IR community, particularly in the U.S., to see how there can be more active participation. We take note of your observation, and let's think through if there is something to be evaluated on that.

Okay, okay. One other question on the upcoming facilities. I know the Rabale facility is like one of the largest in the group. Has it been, is it already taking customers or will it be, will there be any official announcement of an official opening? Or it's just pre-launch, are you taking any customers?

No, Rabale, all the facilities which are there, there are five facilities in the Rabale campus as of now which are operational. The last one operational about nine months back. And all the facilities are, the first four facilities are fully occupied. The last of the facilities is also almost fully contracted and occupied. So there won't be any fresh market communication on that. And in Rampalai itself, there are four more facilities which are under construction. which will go live most likely by end of this calendar year or around about there. And currently our communication on these facilities launch is limited to what we do in our website and in the investor conversation which we do.

Okay, excellent.

Excellent, that's all from me.

Thank you, Sikandar. Thank you.

Thank you. Thank you. Thank you.

If there will be any remaining questions, you can do so by pressing star one on your phone. Hello.

Hello?

Sir, maybe you can give your concluding remarks. Jennifer's voice is cracking most of the time today.

Thank you. Thanks for your time. And we are continuously going update as we are making the quarterly results. And have a good day. Thank you.

Thank you very much.