Sify Technologies Limited

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 development 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 a company's business. Let me now introduce Mr. Raju Exner, Chairman of CIFI Technologies Limited. Chairman.

Thank you, Praveen. Good morning. Thank you for joining us on the call. As India's digital transformation is entering a decisive phase, redefining its role in the global technology ecosystem, the acceleration in the cloud adoption, AI integration, and data center expansion underscores India's emergence as the next hub of digital infrastructure. At CIFI, our focus remains on aligning with this momentum through the sustained investments in the hyperscale data centers, robust network expansion, and AI-ready cell platforms. These initiatives are strengthening our position as a trusted enabler of enterprise transformation across both public and private sectors. We believe the next decade will see India's set global benchmark in digital innovation. CP will continue to play a pivotal role in empowering this journey, building the infrastructure and platforms that will drive the country's growth in the AI-led economy. Let me now bring our Executive Director and Group CFO, Mr. Vijay Kumar, to explain both on the business and the financial highlights. Vijay Kumar.

Thank you, Chairman. we remain steadfast in our commitment to fiscal discipline while continuing to invest strategically for long-term growth. The current phase of expansion across our data center, network, and digital platforms reflects deliberate choices to build future ready capabilities. The network and data center businesses are scaling as per plan, The loss in our IT services business represents our continued investment to prepare ourselves for the opportunities ahead. Our liquidity position remains robust, underpinned by prudent cash flow management and operational efficiency. As we move ahead, our focus will be on sustaining agility in financial planning, embedding accountability and sustainability into every decision, and driving enduring value creation for all stakeholders. Let me now expand on the business highlights for the quarter. The revenue split between the three businesses for the quarter was network services 41%, data center services 39%, and digital services 20%. During the quarter, SIFI sold three megawatt additional data center capacity. As of 30th September 2025, SIFI provides services via 1,196 fiber nodes across the country, a 12% increase over the same quarter last year, and has deployed 9,992 contracted SD-WAN 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 for Q2 for financial year 25-26. Revenue was INR 10533 million an increase of 3% over the same quarter last year. EBITDA was INR 2361 million, an increase of 20% over the same quarter last year. Loss before tax was INR 194 million and loss after tax was INR 275 million. Capital expenditure during the quarter was INR 3064 million. The cash balance at the end of the quarter was INR 4149 million. I will now hand over to our chairman for his closing remarks. Chairman.

Thank you, Vijay Kumar. In the coming quarters, Our focus will sharpen on empowering AI-led transformation and partnering with the new generation of enterprises that are ready to innovate and scale. With our integrated infrastructure and mature suit of digital services, CP stands poised to lead in this new era of intelligent computing. I extend my sincere thanks to your continued trust and believe in our vision. Thank you for joining on this. I will now hand over to the operator for questions.

Thank you. At this time we'll be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is coming from Jonathan Atkin with RBC Capital. Your line is live.

Thank you. A couple of questions, if I may, about the data center services segment. First of all, can you give us a flavor for the types of returns, financial returns that you are achieving when you do sort of like the three megawatt deal that you referred to and just the range of financial returns that you're thinking about for enterprise as well as hyperscale deals? And if you could also remind us what you consider to be kind of your all-in cost of capital. Thanks.

So as far as the three megawatt deal is concerned, it's a very small enterprise deal. Our data center business is both hyperscale and enterprise, approximately in the ratio of two-thirds, one-third. And our project IRRs historically have yielded IRRs north of 20%, which is a little late 20% kind of IRRs have been the returns which we have generated.

And then as you look at the opportunity set, given where India is in terms of hyperscale AI, but also enterprise AI adoption, as we look over the next couple of years, what do you see the sales pipeline looking like that you could accommodate? And then any sort of general comments about other players in the market that are also building, in some cases, larger scale projects compared to yourself and how you see the competitive environment?

The next couple of... Please, sir.

Please go ahead. John, basically, as you know that we have big campuses in Mumbai. and in Noida and Chennai. And we invested, you know, what are the basic requirements as India AI scales up. We are getting ready. Like, similarly, you know, we are looking at multiple places. And basically, we are capable of delivering big projects. And we are looking at, you know, this AI momentum takeoff in India. And which is, you know, we are seeing some positiveness, both hyperscalers and enterprises. So what is in a simple sentence, we are ready to expand. And, you know, your point is there are other people. Yes, there are other people. But I think one other thing is being 25 years in the market in India, and we are established as a brand. And I think we will get our own share, you know.

And then lastly, just in terms of the breadth of opportunity, you mentioned three markets where there's skill development and demand, but also a lot of activity around edge, like, you know, multiple double digit number of cities where there's also data center opportunities that are recognized and maybe comment about the edge opportunity, as well as maybe how that kind of fits in with your network services business.

Yeah. So, Yes, we are building edge data centers also. And one of the uniqueness of CPE is having a network business that possesses, you know, not only just a colo player, a network integrated with that. So we have a plan to expand this tier two, tier three cities where edge is important. And we have our own sites planning, you know, building 12 to, 10 to 12 edge sites over the time based on the demand. So there also we are making a head into certain cities. Once they are live, we will be more than happy to share with. And yes, you're right, edge also we are going to play a role. Thank you.

Thank you. Our next question is coming from Greg Burns with Sidoti & Company. Your line is live.

Good morning. I just wanted to ask about the proposed IPO of Infinite Spaces. Why was now the right time to consider that type of transaction?

Yeah, so Greg, the tailwinds for the data center co-location industry growth is very strong. And it is important to have access to capital. And the listing will help us to continuously access capital to meet the demand forecast which we see.

Okay. And what percent of the new entity will SIFI retain ownership of?

We will retain ownership of a substantial percentage, Greg. The exact percentage will be known after the book building process is completed. But what we will be holding is a very substantial percentage going forward.

Okay.

And Kotak... We will dilute.

Okay. Great. And Kotak, their investment is converting into Infinite Spaces equity, or does it convert into SIFI Technologies equity? And what percent or how much stock are their debentures converting into?

So their debentures will get converted into SIFI infinite spaces equity. And this conversion will happen after the draft prospectus is approved by this securities regulator in India. And at that time, we'll publish the exact percentage of how much will be their holding. And Kotex's interest is to remain invested in the company. A small portion of their holding they will be offering for sale as part of the public offering, essentially to support the float on that stock.

Okay. And then you mentioned kind of how your network business works. integrates or works with the data center operation. So once you split off the data center business, are they going to be signing long-term, like multi-year agreements with the networking operations, or are they free to kind of go contract elsewhere?

Even at present, the contracting happened separately for the networking with the parent company which carries the licenses for the networking business. And for co-location, there are separate contracts which are entered with the data center company. The customer relationships and the go-to-market strategy for the company will continue to remain the same. And to our customers, we'll present an integrated offering where they'll consume network services, co-location services, and IT services which they would require.

Okay, great. Thanks. And then just lastly, you mentioned the three megawatts of new contract and capacity this quarter. Could you just give us the full –

complexion of the the data center business I know you have 14 operational like how much design capacity do you have in the market and versus like what what is currently operational we have about 188 megawatt of design capacity which is ready for sale out of which about 130 megawatt is built and What is now sold is a small requirement for one of our existing customers. The rest of it is ready for sale and at different stages of customer conversations for contracting.

Okay. And then what is, I guess, the roadmap for the rest of the – or maybe the next 12 months in terms of data center builds? How much design capacity are you – How much design capacity, I guess, is in the pipeline to be built out?

Yeah. So, Greg, I have a little bit of a constraint. Generally, we don't make forward statements. And more importantly, having filed the draft prospectus with the securities regulator, I'm prohibited from making any forward statements. But I just want to say that there is a substantial amount of new greenfield project construction, which is happening in parallel.

Okay. All right. Great. Thank you.

Thanks, Nick.

Thank you. Our next question is coming from Mihir Thakur with Privsty. Your line is live.

Good evening, and thank you for the opportunity. I have a few detailed questions and will take a bit of a time for the Q&A. So my first question is regarding the IP of the CIFI infinite spaces in which CIFI technologies directly holds equity. Given that CIFI is NASDAQ listed entirely where about 84% is held by promoter group and 16% by ADR holders. Could you please explain the rationale behind pursuing the IPO of CFE Infinite through a holding company structure under STL rather than directly distributing ownership or demerger-based structure in CFE Infinite between promoters and ADR holders in the same 84-16 proportion? And then proceeding with the IPO. So basically because of this holding company setup, both the promoter shareholders and ADR holders are currently unable to directly participate in the valuation upside of the data center business. So what was the strategic regulatory or tax rationale behind adopting this holding company route?

Prithvi, I think it's a very involved question. I think we have got guided largely by our bankers and advisors in terms of the best structure for raising capital. And as you know, the data center business is completely India focused business and capital intensive business. And equally important, there is depth of capital market in India, which we have witnessed over the last few years. And in terms of value realization and to eventually reflect, hopefully, in the parent company, the bankers have advised this is the best path.

Actually, I also have limited knowledge. So if we had gone through the demand structure, it would have been helpful to the minority holders to unlock the value. So, like, is there any intent post-IPO to simplify the structure?

It's difficult to respond to that, Prithvi, now. We will see it as time passes by. Whatever best advice we get in terms of what is best for the shareholders, we will certainly do.

Yeah. It would be just helpful if you can keep this in mind for future perspective. My next question is regarding, I just wanted to get a sense of the roadmap. What is the expected timeline for the SIPI Infinite IPO from here?

The DRHP was filed last week and usually SIPI takes a time of three months for approval of the draft prospectus and thereafter we'll get guided by the anchors in terms of what is the appropriate timing to take to the market.

Okay, okay. My next question is regarding the network services business. So if we look at the trend over the last decade, the operating margins have declined materially from 23-25% during FY 2016 to 20 to about 10-15% levels between in last five years, even though revenues have grown only at about 5-6% CAGR. So, while I have noticed a decent improvement in margins in Q1 and Q2 at around 14-18%, could you please elaborate on what led to this sharp margin compression earlier? Is this margin behavior structural or cyclical? Can we expect this segment to gradually revert to the 20% plus range as utilization and demand improves?

Correct. It is structural and it's by design and you have started witnessing the improvement in margin. What happens is as the network expansion happens and more importantly when you invest in new age networks to support AI kind of demands, you invest in new infrastructure which will take time to monetize. And these are important investments which have to be done ahead of time. So, these are done by design and as a structure. And the trend which you have observed should continue.

Okay. So, like, should we assume, like, the current 14-16% band is the new steady state?

No, no, no, no. It should get better. It should get better.

Okay. So, like... Over the future period, we should be able to see 20% plus kind of range, right?

Yeah, that's our expectation, and we are working towards that.

Okay. Thank you so much. And my last question is on the digital services segment. So, like, similarly, over the last decade, the business has shown, like, uneven revenue growth. periods of high growth like FY 2016-18, then FY 23, followed by flat or negative years with an overall CAGR of about 11%. At the same time, operating margins have steadily eroded from around 15-20% during FY 16-18 to negative territory in 24-25. And the losses have also continued in Q1 and Q2. So can you please help me understand the key factors behind this deterioration?

So two reasons Prithvi. One is there's a complete change in the way IT is getting consumed by enterprises post-COVID. Earlier there used to be a substantial amount of IT projects which were delivered on a system integration model. But post-COVID most of it is getting consumed as a services. So project-based revenues by design as a company, we have chosen to scale it down. So unlike in the past, that's one reason. Second is also what's happening in the last three, four years. And we have consistently shared in all our communication. This is a business where we are investing significantly in terms of people and in terms of building IPs. to be very relevant for the way IT is going to be consumed by the large enterprises and the upper end of the medium enterprises. So there's a lot of work happening there. It will take some time. It will take some time. But we are confident that we will be relevant to the market with the investments which we are making now. And we'll continue to do this for a few more quarters before we start hopefully seeing the results.

Okay. Thank you so much. That's it from my side.

Thank you.

Thank you. As a reminder, ladies and gentlemen, if there will be any further questions or comments, please indicate so now by pressing star 1 on your telephone keypad.

Thank you.

We have a question from Sri Tho, who is a private investor. Your line is live.

Good evening. Good evening, Chairman, sir. Good evening, Mr. Vijay Kumar. I have a couple of questions, pretty much in line with what other participants have asked. Correct me if I'm wrong from whatever I have reviewed the published results. The network services has grown at 16%. Data services is around 25%. The digital services has de-grown at around 30%, 35% this quarter.

Is that a fair statement? Yep.

So related to this, the digital services, I know we have spoken in the last few quarters that whole offering is being redesigned. Maybe some non-value-added services are being discontinued. That entire division is being revamped, so to speak. I know the network services and data center are kind of related to each other. You could offer both. How much of digital services... is standalone and how much is it actually dependent on other two businesses? So to reframe the question, a data center client might request even the network services. How much of them are actually requesting for digital services?

Yeah, so Srikant, as far as the IT services are concerned, we broadly offer network managed services. Then we offer the cloud and managed services. Then we have security related services broadly at a high level. The network managed services is very closely linked with our network business, the network infrastructure business. So in the network managed services, we manage four enterprises, large and including the banks, PSUs and all. We manage the networks for them irrespective of where they are sourcing from. The whole network is managed by us. So there is a correlation there. And as far as the cloud and managed services are concerned, the cloud services ultimately for the customers, they require a good network to reach the cloud, whether it is clouds which We build for them in our facility or the public clouds. So we have solutions, including technology platforms, which help enterprises to manage hybrid cloud consumption, where they consume partly from public cloud and partly from the private cloud, which is set up on our data centers as a correlation. And our security solutions are again largely around the infrastructure-related security solution, whether it is security at the network layer or at the data center layer or at the cloud layer. And of course, we do some bit of security around applications as well. So there is a correlation. And beyond this, as far as our enterprise customers are concerned, the customer touchpoints are similar. So our effort is to ensure that in the large enterprises, we are able to maximize our share of engagement with them. So we have witnessed some amount of success in that. We'll continue to put our efforts to get it better.

Okay, okay. Thank you. So the other question, again, going on onto the digital services issue, So it's basically the loss in the digital services division has dragged the overall results. Otherwise, this quarter's results is probably similar to last quarter, maybe with a 3% or 5% of growth, had it not been for the loss in digital services?

Correct.

Okay. Okay. So... Obviously, I'm sure this division is on focus now on everybody's radar that you would obviously don't want this to drag the results of other divisions within the group.

Correct. You're right. We are focused on that, but we don't want to stop investing either because unlike the network and data center where your investments are in balance sheet items, In the case of IT services business, your investment is in the P&L item. So this loss sort of reflects our investments for the future. And of course, we are focused on reducing this, monetizing it early. And if some of our bets are not working, we will redesign our strategy and also we are focused on that.

Okay, and one last question, sir, on the upcoming IPO. The fact that SIPI Infinity Spaces will be listed in India, SIPI Technologies is the holding company which is in NASDAQ listed. So we are indirectly a shareholder in, not indirectly, directly shareholder in SIPI Infinity Spaces, which will be listed in India. Given that the existing CPU technology shareholders will not be able to directly participate other than any Indian resident who can apply in the IPO, have you considered doing any kind of, I mean, lack of better word, maybe private placement or some kind of opportunity for existing investors in CPU technologies who have an appetite to probably participate in the proposed IPO, other than just applying in the IPO, whoever is eligible.

Yeah, we haven't done any specific work on this, but let me socialize with the bankers. We have got guided on the entire process by the bankers on the regulatory process and what is best for maximizing the value to all the existing shareholders.

You know, it just may be a nice way of, you know, rewarding the existing shareholders.

I've understood your ask, but I think I need to be conscious of the regulatory framework as well.

Absolutely. Absolutely. So that's all from my side, sir. Praveen, thank you for the opportunity and everybody who was involved in this call. And thank you. Thank you for the opportunity.

Thank you. As we have no further questions on the lines at this time, I would like to turn the call back over to Mr. Raju Vijesna for any closing remarks.

No, thank you very much for joining this call and having continuous interest in CP and have a good day. Thank you.

Thank you, ladies and gentlemen. This does conclude today's call. You may disconnect your lines at this time and we thank you for your participation.